PGS to Move Forward with Mandatory Share Acquisition of Arrow

Petroleum Geo-Services acquires 91% of Arrow Seismic for NOK 2,050 million Oslo, Norway; Petroleum Geo-Services announced an extended notification regarding the acquisition of Arrow Seismic.

PGS announced November 12th that it had acquired 21,359,070 of the shares in Arrow Seismic at a price of NOK 96 per share, corresponding to approximately 91% of all the issued and outstanding shares and votes in Arrow. PGS also announced that it in accordance with the provisions of Chapter 4 of the Norwegian Securities Trading Act expects to proceed with a mandatory offer and a compulsory acquisition for the remaining shares in Arrow, at the same price (NOK 96) as the acquired shares. The price represents a premium of 50% compared to the closing price on November 9, 2007 of NOK 64 per share and a premium of 37 % compared to the price in the IPO in May 2007 of NOK 70 per share.

An offer document, setting out the terms of the Offer and the compulsory acquisition, is expected as soon as practically possible, and no later than 10 December 2007, as required. PGS reserves the right to acquire additional shares in Arrow in the market, both before and during the offer period for the mandatory Offer.

The mandatory Offer implies a total value of the share capital of Arrow of approximately NOK 2,256 million. Arrow owns and operates two 3D vessels and has three vessels under conversion to 2D/source vessels, including one vessel with possibilities for upgrade to 6-streamer operation. Further, Arrow has four purpose-built high capacity seismic new buildings on order for delivery in 2008 and 2009. Of these nine vessels, four are currently chartered to other seismic companies, while the intention is to include the remaining five vessels in PGS' operations, including the last two high capacity newbuildings with delivery in Q2 and Q4 2009 and the three 2D/source vessels.

Arrow has one employee, which is Irene Waage Basili (CEO). The board consists of five members; Sven Rong (Chairman), Jan Svein Krokeide (Vice Chairman), Arne Birkeland, Eva Løkeland Lerøy and Anne Marit Steen. There has not been, and is not intended to be, awarded any special benefits by agreement or otherwise to key employees or board members of Arrow.

For the nine months ending September 30, 2007, Arrow had revenues of US$16.9 million, EBITDA of US$10.3 million and a net profit (loss) of US$(7.9) million. As of September 30, 2007, total non-current assets amounted to US$248.0 million; total equity amounted to US$156.6 million, while total assets amounted to US$307.4 million.

In 2006, Arrow had revenues of US$9.6 million, EBITDA of US$3.6 million and a net profit (loss) of US$(6.6) million. As of December 31, 2006, total non-current assets amounted to US$134.5 million; total equity amounted to US$90.4 million, while total assets amounted to US$162.4 million.

In 2005 (from inception October 27, 2005), Arrow had revenues of US$0.5 million, EBITDA of US$0.4 million and a net profit (loss) of US$0.0 million. As of December 31, 2005, total non-current assets amounted to US$48.1 million; total equity amounted to US$46.6 million, while total assets amounted to US$83.0 million.

To PGS' knowledge, there exist no material assets or obligations, which are not included in Arrow's balance sheet, except for remaining capital expenditure related to the completion of new builds and conversions. Net debt in Arrow and the net present value of remaining capital expenditure to complete new builds and conversions is estimated to approximately US$442 million in total.

The acquisition of Arrow is in line with PGS' strategy of growth in the high-end segment of the seismic acquisition market. PGS will gain access to two state of the art 10-12 streamer new build vessels at cost and delivery times, which is substantially more attractive compared to alternative new build projects. PGS will also gain access to capable source/2D vessels at a reasonable cost. With the increased activity on wide azimuth, these vessels can be effectively utilized by PGS.

After considering the value of existing charter contracts and the value of the 2D/source vessels, PGS estimates the implicit price of the last two state of the art 3D new build vessels, which will be delivered already in Q2 and Q4 2009, to approx. US$ 150 million.

Settlement for the Arrow shares acquired on 12 November 2007 will take place on 15 November 2007 in the form of cash. The transaction is fully debt financed through an unsecured MUS$ 450 facility with 6 months maturity.

PGS has filed a standard notification to the Norwegian Competition Authority in relation to the acquisition.