In 2008, PGS delivered the best full year revenues and EBIT in the history of the Company and the highest Marine contract EBIT-margin ever recorded.
Revenues in USD million
Adjusted eBitdA in USD million
Business Headlines 2008
Strong full-year operating cash flow of USD 914.6 million, an increase of 27% from the previous record set in 2007 and an EBITDA of USD 967.8 million, up 21% from 2007.
Marine seismic contract operating profit margin of 49%, the highest ever recorded for PGS.
High total pre-funding levels (105% of capitalized MultiClient investments, excluding capitalized interest).
Strong total MultiClient late sales of USD 202.5 million.
Delivery of Ramform Victory to the Japanese Ministry of Economy, Trade and Industry (METI), after the agreement was finalized in 2007. On delivery PGS recorded a gain of USD 71.6 million and will continue to provide licenses as well as opera- tional services and support under a long-term agreement.
Appointment of a new Chief Execu- tive Officer. Jon Erik Reinhardsen started in the position on April 1,
Listing of the USD 400 million convertible notes due 2012 on the Oslo Stock Exchange.The notes were used to secure permanent financing of the Arrow acquisition in November 2007 at favorable terms, while increasing financial flexibility.
Delivery of the new Ramform Sov- ereign in March.The performance of the vessel has been excellent and has set several industry records. Ramform Sovereign contributes towards improving productivity, ef- ficiency and flexibility of PGS' fleet even further.
Award of several large contracts, for both the Marine and the Onshore
Debt repayments of USD 133.1 mil- lion, net.
Experienced a weaker market for electromagnetic surveying and recognized an impairment charge of USD 99.1 million relating to MTEM which was acquired in 2007.
Delays on Arrow new-build program in Spain. Impairment charge of USD
million is primarily related to the vessels Polar Sea and Southern Explorer.
Qualified for the Norwegian ton- nage tax (NTT) regime.The 2009 Norwegian state budget included amendments required for PGS' sub- sidiaries owning vessels to qualify. Annual tax savings are expected to be USD 30-40 million.
Commercialization of the propri- etary GeoStreamer® technology by acquiring approximately 30,000 line kilometers of 2D data worldwide with excellent productivity and data quality.
GeoStreamer® installation on the Atlantic Explorer, the first 3D vessel to be equipped with GeoStreamer®, and commenced a MultiClient Geo- Streamer® survey in DeSoto Canyon in the Gulf of Mexico late 2008.
Processing of Crystal II Wide Azi- muth survey finalized with excellent results.The data was ready for the Central Gulf of Mexico lease sale in March 2009.
No share repurchases are planned in 2009. PGS has an authorization to re- purchase up to 10% of the outstanding shares. As of December 31, 2008 the Company owned 2.11% of the issued shares.
PGS ANNUAL REVIEW 2008 36
markets and main Businesses marine PGS is one of the three major global participants in the marine 3D market, with a market share of approximately 28%, measured by acquired square kilometers of 3D seismic. When measured by the number of stream- ers at year-end 2008, the Company's market share was 22%, reflecting the efficiency of PGS' fleet. By year-end 2008, PGS' 3D acquisition fleet totaled eleven vessels. Six Ramform vessels in the high-end segment make the fleet one of the most efficient in the industry. After delivery of Ramform Victory (now renamed Shigen) to METI in late January 2008, PGS took delivery of the new Ramform Sover- eign at the beginning of March 2008. The second vessel in the Ramform S-class series, Ramform Sterling, is scheduled for delivery in June 2009 and work on the vessel is currently progressing according to plan at STX Europe's facility inTomrefjord.
The marine 3D market experienced further growth in 2008 driven by increased demand for seismic from oil and gas companies.The EBIT- margin achieved on contract seismic improved further compared to 2007 and ended at 49%. At December 31, 2008, the order book for Marine was USD 871 million, compared to USD 843 million at December 31, 2007.
Contract seismic work continued to dominate the Company's activity in 2008, although investments in new MultiClient increased compared to 2007. Pre-funding of new MultiClient investments continued at high levels.
data Processing & technology Growing and repositioning the data processing business is an important part of the strategy.The acquisition of Applied Geophysical Services Inc. (AGS) in 2007 significantly enhances PGS depth imaging capabilities, and the Company has capitalized on this acquisition throughout 2008.The AGS Beam Migration has been a key vehicle for lifting us to a leading position in high-end data processing imaging. In a recent PGS customer survey, almost 90% of customers said PGS is at industry standard or above and as much as 60% of clients said the Company is above industry standard
when it comes to data processing.
External data processing is becoming an increasingly important revenue contributor. External data processing revenues increased by USD 21.9 mil- lion (34%) from USD 64.1 million to USD 86.0 million in 2008.
GeoStreamer®, the first ever dual sen- sor streamer and a proprietary PGS technology, represents a step change in streamer technology with enhanced resolution, better penetration and improved operational efficiency. In 2008, PGS commercialized the Geo- Streamer® technology by acquiring approximately 30,000 line kilometers of 2D data worldwide with excellent productivity and data quality.
GeoStreamer® was installed on the At- lantic Explorer in fourth quarter 2008, the first 3D vessel to be equipped with GeoStreamer®.The vessel com- menced on a MultiClient GeoStreamer® survey in DeSoto Canyon in the Gulf of Mexico and will follow on with GeoStreamer® surveys in the North Sea. Endorsement of this technology is demonstrated by direct awards and the Company has experienced signifi- cant price uplifts on GeoStreamer® projects compared to conventional surveys. PGS intends to equip another 3D vessel with GeoStreamer® during 2009.
As a result of a weaker seismic market outlook, the Company adjusts its ambitions and cost structure for the new OptoSeis® reservoir surveillance technology.This technology utilizes fiber optic cables installed on the seabed of existing and producing oil fields. OptoSeis® enables seismic data “on demand” in order to monitor changes over time to optimize reser- voir production.There were two pilot projects performed during 2008.
onshore PGS is a significant worldwide opera- tor in the onshore seismic services market. As a result of increased com- petition over the last couple of years, the onshore segment remains a lower margin business compared to the Marine segment.
As of December 31, 2008, eleven onshore crews were in operation;
five in North America, three in the Latin American region and three in the Eastern Hemisphere.Throughout 2008 PGS Onshore operated up to 12 crews.
Mexico is currently the most active market for PGS, primarily driven by a large 3D contract awarded by PEMEX in second half of 2008.The contract will be carried out from 2008 to 2012 and the area to be surveyed is more than 2,000 square kilometers.The total contract value amounts to ap- proximately USD 165 million. During 2008, Onshore continued to invest in its MultiClient library located entirely in the US. However, investments in MultiClient decreased substantially in the fourth quarter 2008 compared to the fourth quarter 2007 as a result of the financial crisis and cut in capital expenditures among some clients. During this quarter, the number of crews in the US was adjusted from four to three. At the end of 2008, the order book for Onshore was USD 194 million, compared to USD 144 million at December 31, 2007.
other Activities Revenues from the EM segment have been lower and the overall market development has been slower than expected, as reflected in the impair- ment charges made in 2008. However, the Company still believes in the EM technology and will continue to develop EM solutions. By the end of 2008, PGS had conducted a success- ful field trial of the towed EM system and the evolution of cost effective EM solutions for the marine environment are progressing. Furthermore, the Company will continue to refine the EM processing and inversion methods and support clients' growing accept- ance of EM benefits and its place in the oil companies' value chain. PGS has decided to align resources and reduce costs of the EM segment, but will retain critical operational and engineering expertise within the organization to enable us to mobilize marine EM operations for key selected clients and the general market when it is ready.
Financial Results Total revenues for 2008 were USD 1,917.5 million compared to USD 1,519.9 million in 2007, an increase of 26%.
PGS ANNUAL REVIEW 2008 37