PGS Increases Revenues, Lauds 3Q '08 As 'Best Quarter Ever'
PGS has announced its best quarter ever with an increase in revenues and earnings before interest and tax ("EBIT") of 15% and 12% respectively from previous records. The order book increased in the quarter to $1,193 million.
- Record order book: Order book at the end of Q3 2008 was $933 million for Marine and $260 million for Onshore, up a total of 10% from Q2 2008.
- Strong Group performance: Revenues of $534.3 million, up $95.2 million (22%) from Q3 2007 and $69.2 million from previous record set in Q2 2008. EBIT of $187.8 million, up $20.4 million (12%) compared to the record set in Q3 2007.
- Marine: EBIT of $202.4 million in Q3 2008, up $20.0 million (11%) from Q3 2007, driven primarily by good operations and a slight net increase in capacity as a result of Ramform Sovereign entering the fleet in March 2008 and Ramform Victory exiting the fleet going to "METI" late January 2008.
- Onshore: EBIT was $4.2 million in Q3 2008, up $8.4 million from Q3 2007, caused primarily by a higher activity level in Latin America, redeploying a crew in Alaska and higher MultiClient prefunding sales.
Jon Erik Reinhardsen, President and Chief Executive Officer of PGS, commented, "We delivered the strongest quarterly operating profit ever. Our order book of approximately $1.2 billion, combined with our sound profitability and competitive operations, provide a strong platform going forward. In addition, we have robust financing in place with very attractive terms and mainly fixed interest rates."
PGS has arranged its business into two segments:
- Marine, which consists of streamer seismic data acquisition, marine MultiClient library, data processing, technology and reservoir consulting, and
- Onshore, which consists of all seismic operations on land, in shallow water and transition zones, including onshore MultiClient library.
In Q3 2008 consolidated revenues were $534.3 million, an increase of $95.2 million, or 22% from $439.1 million in Q3 2007. The increase is primarily attributable to a strong increase in Marine and Onshore contract
revenues and higher revenues from Data Processing. Consolidated EBIT was $187.8 million in Q3 2008, compared to $167.4 million in Q3 2007, an increase of $20.4 million, or 12%.
Income before income tax expense (benefit) in Q3 2008 was $157.7 million, up $11.2 million, or 8% from Q3 2007.
Net income to equity holders was $124.4 million in Q3 2008, down $118.1 million from Q3 2007. Net income to equity holders in Q3 2007 was positively impacted by a tax benefit from recognition of $150 million of previously
unrecognized deferred tax assets during the quarter.
Total revenues increased by $73.8 million, or 19%, from $386.6 million in Q3 2007 to $460.4 million in Q3 2008. Contract revenues increased by $72.2 million, or 31%, from $234.8 million in Q3 2007 to $307.0 million in Q3 2008 reflecting a larger fleet and increased prices. The Company used 63% of its total 3D capacity to acquire marine contract seismic in Q3 2008, compared to 64% in Q3 2007. The vessel statistics for the third
quarter 2008 includes Ramform Sovereign.
The vessel statistics excludes Ramform Victory from mid October 2007. Ramform Victory was delivered to the Japanese Ministry of Economy, Trade and Industry ("METI") January 31, 2008 and the revenues under the
service agreement, which are reported as contract revenues, took full effect from the date of delivery. Vessel steaming, standby and yard time made up 16%, 3% and 0% respectively of total 3D capacity in Q3 2008 compared to 8%, 3% and 0% respectively in Q3 2007. The higher steaming activity is driven by capacity moving out of the North Sea after high activity in the region. The EBIT margin on marine contract acquisition was around 53% in Q3 2008.
MultiClient late sales were $48.2 million in Q3 2008 compared to $47.7 million in Q3 2007, an increase of $0.5 million, or 1%, primarily reflecting increased sales in Brazil and West Africa, offset by lower sales in Gulf of Mexico and Europe. MultiClient pre-funding revenues decreased by $15.3 million, or 18%, from $87.2 million
in Q3 2007 to $71.9 million in Q3 2008, driven by a reduction of 3D capacity used for MultiClient acquisition and lower pre-funding in GOM, where Crystal I was ongoing in Q3 2007, partly offset by strong pre-funding in Europe and strong percentage increase in Asia Pacific and Brazil. Lower pre-funding revenues are also driven by a shift towards more 2D and reprocessing investments which typically have lower pre-funding levels than
Total MultiClient revenues (pre-funding and late sales revenues combined) were $120.1 million in Q3 2008, down $14.9 million, or 11% from Q3 2007.
External data processing (“DP”) revenues increased by $5.7 million, or 40% from $14.1 million in Q3 2007 to $19.8 million in Q3 2008. The increase is driven by growth in activity in line with PGS’ strategy to grow its
DP activity and the acquisition of AGS in October 2007, which added business volume, but also increasingly contributes to improving the depth imaging capabilities of the whole DP organization.
Capitalized cash investments in MultiClient library increased to $71.4 million in Q3 2008 compared to $52.7 million in Q3 2007. Higher capitalized cash investments are due to PGS Third Quarter 2008 Results Page 4
increase in project based hired-in vessel capacity used to acquire MultiClient surveys.
Cost increases are partially offset by a decrease in own capacity used to acquire 3D surveys. In Q3 2008, 18% of total 3D capacity was used for MultiClient acquisition, compared to 25% in Q3 2007.
Pre-funding revenues were 101% of MultiClient cash investments in Q3 2008, compared to 165% in Q3 2007, primarily driven by the hired in (2D) vessel capacity, which has less pre-funding than 3D MultiClient work. Q3 2007 had unusually strong pre-funding as a result of high prefunding on North Sea projects as well as high
pre-funding on the Crystal I project.
Marine reported an EBIT of $202.4 million in Q3 2008, compared to $182.4 million in Q3 2007. The improvement was driven primarily by increased marine contract prices and a net increase in capacity as a result of Ramform Sovereign entering the fleet late March 2008, while Ramform Victory was delivered to METI late January.
The order book totaled $933 million at September 30, 2008, including $106 million of committed pre-funding on scheduled MultiClient projects, compared to $968 million at June 30, 2008. Operating expenses (before depreciation, amortization and other operating income) increased by $48.5 million compared to Q3 2007. The increase is due to (i) crew, maritime costs and fuel; (ii) Ramform Sovereign placed in operation March 31, 2008; (iii) resources and capacity increases as a result of the acquisition of Applied Geophysical Services, Inc. (“AGS”) and Arrow Seismic ASA (“Arrow”); (iv) increases in project related variable costs including hired-in vessels and support vessels; and (v) a decrease in own 3D fleet cash costs capitalized to the MultiClient library reflecting the decrease in own 3D capacity allocated to MultiClient activity. As a consequence of a strong market, we believe that the industry is experiencing year-on-year aggregate cost inflation of approximately 10% primarily related to fuel, personnel and third party costs, including chartered-in vessels and yard/maintenance.
In Q3 2008 total revenues increased by $19.4 million (37%), from $52.8 million in Q3 2007 to $72.2 million in Q3 2008. Contract revenues increased by $19.3 million, from $34.6 million in Q3 2007 to $53.9 million in Q3 2008, primarily driven by improved scheduling and timing for relocation of crews.
Total MultiClient revenues increased $0.3 million, from $18.1 million in Q3 2007 to $18.4 million in Q3 2008 reflecting increased pre-funding, partly offset by lower late sales. Capitalized cash investments in MultiClient library totaled $12.1 million in Q3 2008 compared to $14.3 million in Q3 2007.
Onshore reported an EBIT of $4.2 million in Q3 2008, compared to a negative EBIT of $4.2 million in Q3 2007. The increase in EBIT is primarily attributable to increased activity in Latin America, redeployment of operation in
Alaska, stronger prefunding and lower amortization rate. The order book was $260 million at September 30, 2008 compared to $113 million at June 30, 2008. Most of the increase in the order book relates to the large four-year contract with PEMEX in Mexico announced in the second half of August 2008.
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