TGS reported its first quarter highlights.
- Consolidated net revenues were USD 148.2 million, up 109% from USD 70.8 million in Q1 2009.
- Gross late sales from the multi-client library totaled USD 96.1 million, up 132% from USD 41.5 million in Q1 2009. Net late sales of USD 73.4 million were 145% up from Q1 2009
- Net pre-funding revenues of USD 69.6 million increased 102% compared to Q1 2009 and funded 72% of the Company's operational investments into new multi-client products (USD 96.2 million).
- Operating profit (EBIT) was USD 58.8 million (40% of Net Revenues), up 197% from USD 19.8 million in Q1 2009.
- Cash flow from operations after taxes but before investments was USD 106.3 million, versus USD 95.9 million in Q1 2009.
- Earnings per share (fully diluted) were USD 0.40 versus USD 0.13 in Q1 2009.
"Our strong results in Q1 have further confirmed our view that our customers have returned to investing in high-quality data after a very challenging year for our industry in 2009," stated TGS' CEO Robert Hobbs. "Strong interest in our modern 3D and WAZ data in established plays such as the Gulf of Mexico has been augmented with increased interest in our new 2D and 3D data off West Africa as E&P companies continue to be drawn to this exciting new play."
Vessels under TGS' control through charter during all or parts of Q1 included three 2D vessels, two 3D vessels, and one 3D wide
Seismic acquisition was initiated on the Justice Wide Azimuth (WAZ) 3D project in the Gulf of Mexico during the first quarter. The
Justice project is a northeast expansion of the existing and contiguous Freedom and Liberty WAZ projects. The survey adds more
than 7,800 km2 of WAZ coverage to the TGS portfolio and covers portions of the hydrocarbon rich areas of Mississippi Canyon,
Viosca Knoll, and De Soto Canyon. On April 20, 2010 the Deepwater Horizon Drilling rig, located in the central portion of the Justice
survey caught fire. The WAZ seismic crew, operated by WesternGeco under charter to TGS were some of the first vessels on the
scene of the incident to render assistance. Within 24 hours after the incident, the vessels were released to return to work on the
Justice project. On April 30, 2010, the WAZ crew were advised to leave the area of the project due to concerns regarding the
application of chemical dispersants on the water surface. The crew has mobilized to an area adjacent to TGS' previously acquired
WAZ surveys to collect data for a project that has attracted significant customer interest and was planned for later acquisition. The
WAZ crew will return to Justice and resume acquisition on that project as soon as conditions warrant. Upon completion of Justice,
TGS will have more than 27,000 km2 of WAZ 3D in its data library. These wide azimuth projects provide the industry with modern
seismic imaging covering the most productive oil producing area of the deepwater Gulf of Mexico. Justice is owned 100% by TGS.
The Freedom and Liberty projects are jointly owned on a 50/50 basis with WesternGeco.
The Hernando Phase 1 3D time and depth migration, a jointly owned TGS/PGS project in the Central Gulf of Mexico, was completed
and delivered to customers during the quarter. Processing of Phase 2 of this project will be completed in Q2.
The final phase of the Southern Brazil 2D pre-stack depth migration reprocessing project was completed during Q2. This modern 2D
depth migrated survey includes over 127,500 km of data over one of the most prolific basins of offshore Brazil. This is a jointly
owned TGS/WesternGeco project. TGS continues to innovate in its processing business to deliver the highest quality seismic imaging
to our customers. The company completed a major upgrade of its Houston computing facility during Q1 and saw the number of
proprietary WAZ processing jobs increase to record levels during the quarter as customers increasingly recognize TGS’ top-tier
In addition to adding over 39,000 LAS well logs to the North American library, the TGS Geological Products and Services Division
commenced an expansion of its successful Facies Map Browser interpretation product by launching new work in the Browse Basin of
Australia. This product is the first of its type in the Asia Pacific region and is supported by industry funding.
During Q1, data processing was completed on a number of new European surveys including approximately 40,000 km long offset 2D
in Norway, 15,000 km of 2D in Baffin Bay of West Greenland, 10,000 km of reprocessed 2D data in the West of Shetlands region and
2,600 km2 of 3D from Hoop Fault Complex in the Barents Sea off Norway. Projects acquired as part of a joint venture between TGS
and PGS including 1,600 km2 of 3D from East Shetland Basin in the UK and 660 km2 of 3D from Northern Viking Graben in
Norwegian North Sea were delivered to customers during the quarter.
During the quarter, a large data reprocessing project was launched including 50,000 km long offset 2D data from both UK and
Norwegian Atlantic margin areas. Up to 20,000 km of this reprocessed data will be available to the industry to assist in the
evaluation of blocks to be included in the Norwegian 21st license round.
In the first quarter of 2010, TGS remained extremely active in the transform margin region offshore West Africa. Acquisition of the
15,000 km Liberia Ultra Deep survey was completed in March. In addition, a 1,200 km 2D survey that extends TGS' coverage in
Ghana was completed and another 4,900 km Ghana/Togo infill program was initiated. TGS has now acquired one of industry’s most
comprehensive regional 2D programs in Ghana and neighboring countries. In Liberia, the 1900 km2 Block 14 3D survey was
completed and 3D acquisition continues on Blocks 8 and 9 (5,200 km2). With the completion of Blocks 8 and 9 in Q2, TGS will have
acquired approximately 17,000 km2 in Upper Liberia.
In the Asia Pacific region, acquisition of two 2D surveys was completed in Indonesia: the 2,300 km South Sulawati and the 640 km
Halmahera programs. These surveys are part of an Indonesia 2D acquisition season that will involve five projects in total. The 3,700
km South Java reconnaissance survey is currently underway and will be completed in the second quarter of 2010. All of the
Indonesian projects will be processed out of TGS' Perth office at its new data imaging center.
TGS' performance during Q1 indicates that the market for multi-client data is in recovery. Our high level of investment in Q1,
supported by high levels of pre-funding, was reinforced by late sales that were much improved over one year ago. The company will
continue to be able to take advantage of vessels chartered under attractive rates. As communicated in the Q4 earnings release,
current committed 3D capacity will be utilized to fulfill the company's guided investments for the year, and TGS' flexible asset light
business model will continue to allow the company to take advantage of significant newbuild vessel capacity expected to come out in
The temporary interruption of the Justice WAZ survey due to the Deepwater Horizon incident will delay the recognition of revenue
associated with the Justice survey until TGS is able to return the crew back to the project. Management is monitoring the situation
very closely and will issue updates on the situation as warranted. As of this date, management and the Board do not expect that the
incident will change the annual guidance issued to the market in February. As such, TGS management's expectations for the full
year 2010 remain as follows: multi-client library investments of USD 270–300 million, average pre-funding in the range of 50-60%
of investments, an average annualized multi-client amortization rate in the range of 37-43% of net revenues, net revenues in the
range of USD 560–600 million, and proprietary contract revenues of approximately 5% of total net revenues. The Company will
continue to evaluate opportunities to increase multi-client investments and grow its market share during the year based on client
interest and other economic indicators.