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Dear Fellow Shareholder

2008 was the strongest year ever in PGS' history. We saw the price of oil at record levels and exploration activity peaked.

PGS delivered great margins and end- ed the year with a strong order book and robust financing in place. We have the world’s most productive and cost efficient fleet, competitive returns on MultiClient investments, leading edge data processing capabilities, and several unique technologies and, most importantly, a very experienced and dedicated staff known for quality of execution, flexibility and innova- tion. We are well positioned to meet a more challenging market.

PGS is committed to manage its busi- ness in such a way that it minimizes the risk to the health and safety of its employees. Despite a systematic approach to continuously improve our performance in HSEQ, in 2008 we experienced a tragic fatality in our 50% held joint venture in Russia, PGS Khazar.This incident was fully inves- tigated, root cause established and action taken to prevent reoccurrence. We will work hard to reach our goal of having the best HSEQ perform- ance in our industry. Our LostTime Incident frequency for 2008 was 0.63 per million man hours and ourTotal Recordable Case Frequency was 1.94 per million man hours.

During 2008, our Marine operations increased in both revenue and operat- ing profit.The launch of Ramform Sovereign in March 2008 contributed to a more efficient, automated and standardized fleet.This summer we will take delivery of another Ramform S-class, the Ramform Sterling. Quality of assets has been a trademark of PGS. As the size and complexity of surveys continue to increase in today’s

market, the productivity of the PGS fleet becomes an even more important differentiator allowing the customers quicker access to seismic data and contributing to the profitability of the Company. Likewise our MultiClient business has once again demon- strated its industry leading return on invested capital as well as the highest pre-funding levels in the industry.

Our Onshore operations performed in line with 2007 with decreased activ- ity in the Eastern Hemisphere being offset by higher activity levels in Latin and North America. An important milestone for securing our position in Latin America was a large multi-year contract (approximately USD 165 mil- lion) signed with PEMEX in Mexico. Increased MultiClient investments in Onshore have proved to be a prudent strategy. Our focus on high channel counts and high density has once again delivered margins comparable to the best of our peers.

2008 represents the year we caught up and in some areas surpassed our peers in data processing capability. Following the acquisition of Applied Geophysical Services (AGS) in 2007, we spent last year rolling out the AGS Beam Migration technology to all parts of the PGS organization.This combined with other new technolo- gies has brought PGS to a top tier position in high-end data processing imaging. In a recent PGS customer survey as many as 60% say PGS is above industry standard in data processing quality and almost 90% of clients say the Company is industry standard or above.

PGS has 3,000 staff and another 3,000 temporary employees and contractors engaged around the world. We have 45 offices, including 21 data process- ing centers, in 31 countries. Our employee base is truly international.

GeoStreamer® - Commercial Break- through 2008 represented the commercial breakthrough for PGS’ new and proprietary GeoStreamer® technol- ogy. During the year PGS acquired more than 30,000 line kilometers of 2D GeoStreamer® data with excel- lent results. When the GeoStreamer® was launched in June 2007 it was heralded as the biggest breakthrough in streamer technology for 60 years. It is the first ever dual sensor streamer, giving better depth penetration, en- hanced resolution and improved op- erational efficiency.The GeoStreamer® technology is unique in its ability to generate a better image beneath salt, basalt and other complex geological structures. As the world’s future oil and gas reserves become increas- ingly more difficult to find, we expect the GeoStreamer® to play a key role in locating these valuable resources. In the fourth quarter of 2008, the GeoStreamer® was installed on the first 3D vessel and successful opera- tions commenced before year-end.

PGS technology is among the best in the market, and in some areas unparalleled. Our marine fleet is the most efficient. We are industry leading in cost, productivity and returns from the MultiClient library and are well positioned to generate healthy cash flows even in a weak market.



«2008 was the strongest year ever in PGS' history.»

Entering 2009, PGS has an order book of more than one billion dol- lars, forming a strong foundation for expected revenues. Our customer base is very solid with predominantly super majors, national oil companies and larger independent oil companies as clients.The seismic market has been characterized by relatively short term contracts and order books. PGS saw its order book duration increase from an average of approximately five months in 2007 to eight months in 2008.

age of easy oil is over. We strongly believe this will continue to grow the demand for advanced Higher Density (HD) seismic. Our customers require more pixels in the subsurface images we produce. In addition, we have seen and continue to see a strong growth in the less cyclical production seismic, so called HD4D, where the aim is through regularly repeated surveys to improve production from producing fields. Our advanced fleet is uniquely positioned to compete and harvest good margins from both these HD markets in the years to come.

outlook Still, the year ahead represents a very different set of prospects and chal- lenges.The low oil price has resulted in fewer bids from our customers. This, combined with added streamer capacity coming to the market, will put pressure on margins, in particular towards the fourth quarter. We are, however, well positioned to meet this market given our competitive services, leading technologies and long-term financing and we believe for the same reasons we will come strengthened out of this period rela- tive to our competitors.

I feel confident that PGS will come out of the current challenging cycle as a stronger player, taking a larger share of the most profitable, high-end part of the market for seismic services. PGS is competitively positioned to get through a downturn, with a robust financial position, state-of-the-art fleet with a leading edge cost posi- tion, attractive and commercialized technology and a significant share of the HD market.Thanks to our strategy of building a strong order book, 2009 will be another good year for PGS.

The world will need to find and put into production another six times Saudi Arabia’s oil production capac- ity over the next 20 years to meet predicted demand, according to the IEA World Energy Outlook 2008 report. The long term prospects for our industry are great.

We are searching for oil in increasing- ly more complex areas, water depths, reservoir depths and geologies.The

Jon erik Reinhardsen Chief Executive Officer and President


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