TGS Revenue Plunges
Seismic player TGS saw its revenue severely dented by weak market conditions in the fourth quarter and expects its multi-client survey investments to be more than halved this year on lower activity.
Based on a preliminary review of sales and investments, TGS provides the following update on Q4 2015:
* Q4 2015 net operating revenues of approximately 131 MUSD, down 56% from Q4 2014
* Expected 2015 full year revenues of approximately 612 MUSD, down 33% from 2014
* Q4 2015 operational multi-client investments of approximately 84 MUSD to reach full year investments of 497 MUSD
Cash balance of 162 MUSD at year-end
* Final Q4 2015 results to be reported on 02 February 2016
The weak market conditions are expected to continue in 2016. Consequently, TGS is planning for a lower activity level, which results in the following guidance for 2016:
* TGS expects multi-client investments of approximately 220 MUSD
* Multi-client investments are expected to be prefunded 45 to 50%
As announced on 4 December 2015, the accounting practice with respect to amortization of the multi-client library will change with effect from 1 January 2016. In accordance with the new policy TGS estimates multi-client amortization of close to 290 MUSD in 2016. An expected impact of the new accounting practice will be more predictable and less volatile quarterly normal amortization of the data library.
"TGS' 2016 operational multi-client investments will be reduced by more than 50% compared to 2015. This is partly a result of lower cost of acquiring seismic data as average vessel day rates will be substantially lower than in 2015. Furthermore, the activity level will be reduced as oil companies have become less willing to prefund new surveys" commented Robert Hobbs, CEO, TGS."As a result of the weak market conditions there is higher uncertainty than usual with respect to late sales of seismic data. Late sales are normally heavily dependent on oil companies' E&P spending. This relationship will continue in 2016 and as a result, TGS expects late sales to move in line with or slightly better than general E&P spending trends. However, the significant reduction in investments combined with the effect from the cost cutting measures implemented last year should support positive cash flow development despite the challenging environment."