Earnings call transcript: TGS NOPEC Q2 2025 sees revenue drop, maintains dividend

TGS NOPEC Geophysical Company ASA, with a market capitalization of $3.89 billion, reported a 19% year-over-year decline in total revenues to $380 million for Q2 2025. Despite the revenue drop, the company maintained its dividend and improved its EBITDA margin, building on its impressive trailing twelve-month EBITDA of $653.52 million. The stock price saw a slight decrease, falling by 0.77% to $82.38, reflecting investor caution amidst a challenging market environment. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with a strong Financial Health Score of 3.48 (rated as GREAT).

Key Takeaways

• Total revenues declined by 19% year-over-year to $380 million.
• EBITDA margins improved despite lower revenue.
• Maintained a dividend of NOK 0.155 per share.
• Reduced vessel capacity and operational costs in response to market conditions.
• Stock price fell by 0.77% post-earnings.

Company Performance

TGS NOPEC’s overall performance this quarter was marked by a significant revenue decline, attributed to a challenging market environment and reduced demand. The company’s strong fundamentals, including a healthy current ratio of 2.97 and an impressive Altman Z-Score of 9.38, support its financial stability. The company managed to improve its EBITDA margin, indicating effective cost management, while maintaining an attractive P/E ratio of 12.56. The decision to maintain its dividend signals confidence in its long-term strategy despite current headwinds. For deeper insights into TGS NOPEC’s financial health and growth potential, InvestingPro subscribers can access comprehensive analysis and expert ProTips.

Financial Highlights

• Total revenues: $380 million, down 19% year-over-year.
• EBITDA: $153 million, with improved margins from the previous year.
• Positive free cash flow: $11 million.
• Net debt: Just below $480 million.
• Dividend: Maintained at NOK 0.155 per share.

Outlook & Guidance

TGS NOPEC projects MultiClient investments between $425 million and $475 million and CapEx guidance at $135 million. With a robust gross profit margin of 56.33% and year-over-year revenue growth of 16.31%, the company demonstrates strong operational efficiency. The company expects improved 3D streamer fleet utilization and higher contract work in Q4 2025. Additionally, potential transfer fees from a Chevron-Hess transaction could impact Q3 and Q4 results positively. InvestingPro subscribers can access detailed financial forecasts and expert analysis through the comprehensive Pro Research Report, available for over 1,400 US equities.

Executive Commentary

Christian Johansen, CEO, emphasized the company’s focus on business optimization and market adaptation. "We’re continuing to do business optimization. I think the key highlight of this quarter is that we’re adjusting vessel capacity to the market," Johansen stated. He also highlighted the sensitivity of short-term market development to oil prices, while maintaining a positive long-term outlook.

Risks and Challenges

• Declining oil reserve life, currently around 9 years, poses a long-term challenge.
• Reserve replacement ratio remains low at 40%.
• Volume decline in the OBN market expected between 2024 and 2025.
• Market sensitivity to oil price fluctuations could impact future performance.
• The consolidation of the streamer contract market may limit growth opportunities.

Q&A

During the earnings call, analysts focused on the rationale behind vessel sales and market discipline. Questions also addressed the potential growth of the OBN market through cost reductions and efficiency improvements. The company reiterated its long-term positive market outlook despite short-term challenges.

TGS NOPEC’s strategic adjustments and disciplined approach aim to navigate current market challenges while positioning for future growth.

Full transcript - TGS NOPEC Geophysical Company ASA (TGS) Q2 2025:

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Good morning, and welcome to TGS Q2 2025 results presentation. My name is Bart Stenberg, Vice President, Investor Relations and Business Intelligence in TGS. Today’s presentation will be given by CEO, Christian Johansen and CFO, Sven Bediro Larsen. I would also like to draw your attention to the cautionary statement showing on the screen and also available in today’s presentation and earnings release. You can start typing in questions during the presentation, and we will address your questions after management’s concluding remarks.

So with that, I give the word to you, Christian.

Christian Johansen, CEO, TGS: Thank you, Borg, and, welcome everyone to TGS’, q two two thousand twenty five earnings release. I’m gonna hit the highlights, right away, and I’m gonna start with two bullet points that probably are in the categories of of, explanations rather than excuses for what we would consider a relatively weak quarter. So the first one is, we had multiclient revenues below expectations due to low library sales. And, if you remember back to the end of of q two of two thousand twenty five, we had a rather weak and volatile macro environment where the oil price dropped from about 76 to 66 during the last ten days of the quarter. That may have had an impact on our end of end of, quarter sales.

Again, it shouldn’t be used as an excuse, but we definitely had lower than expected library sales. And, as you all know, we typically make a lot of our library data licensing over the past, or over the last seven to ten days of of any given quarter. In addition to that, we had contract revenues negatively impacted by operational challenges on one of our projects in Asia. And then we also had lower contribution from JV partners on multiclient projects where we typically have a fifty-fifty split between our JV partners. Altogether, we had total revenues of $3.00 $8,000,000 that compared to $381,000,000 in Q2 of last year.

We had an EBITDA of 153,000,000 compared to NOK 175,000,000 in the same quarter of last year, and that means that we actually had an improved EBITDA margin in Q2 this year compared to last year. It improved from NOK 46,000,000 in 2024 to 50% this quarter. We also had a positive free cash flow, free cash flow of, $11,000,000 before dividend. And, we’re also continuing to do business optimization, which means that we see lower cost. So we have cost cutting initiatives on top of our synergy plan that we launched last year.

And in addition to that, we’re announcing today that we’re also adjusting the vessel capacity to how we see the market right now, which means that we go down from seven to six vessels. And in addition to that, we’re selling two of the stacked vessels. I will come back to that later in the presentation. Last but not least, we’re maintaining a dividend of NOK 0.155 per share, as you’ve seen in previous quarters as well. If we go to the business update and start with the data acquisition activity that we had in Q2, I’m not going to touch on every project here.

I’m just going to conclude that we continue to have a diversified activity level in terms of both new energy operations, operations, OBN contracts and MultiClient and the same on the streamer side. It ranges from California and West and all the way to India in East. And you see a lot of activity this quarter, particularly in Norway and Northern Europe. And then you see activity in Brazil, Argentina and Gulf Of America. I’ll touch on some of these projects and start with the financials and start with MultiClient.

So we had MultiClient sales of $137,000,000 that compares to 191,000,000 in Q2 of last year. And again, not a great quarter for MultiClient. And I think both we the market were surprised by the low activity level that we saw in the last ten days of the quarter. Again, of that could be explained by lower or more volatility in the market overall with an oil price that dropped by 15%, 20%. But again, shouldn’t be used as an excuse.

We’re clearly disappointed about our library sales in Q2. MultiClient investments were SEK 114,000,000 versus SEK 92,000,000 last year, came in slightly higher than we expected. And again, this is due to partners and JV partners who elected not to take their 50% ownership. So as a result, TGS took advantage of that, and we get a higher equity in some of these JV partner projects where typically we would have 50%. Now in the projects that we’re doing in Q2, we have between 70100%, which again may bode well for future earnings, but it hits our investments in Q2.

So investments are higher, and then contract revenues are obviously lower because typically, we record these revenues from partners as contract revenues or contribution to contract revenues. As you see, sale to investment last twelve months is still very healthy. We’re at two point zero, which is in line with our historical average, actually slightly better. And you see that it’s also an improvement from Q2 of twenty twenty four. So what that tells you is that, this quarter was not great, but if you look at the last four quarters, combined, we have strong performance on the MultiClient side.

And again, I think we’ve beaten our own expectations and market expectations on MultiClient for the past three quarters, but this quarter, we clearly didn’t. In terms of key projects and announcements in q two, we completed the amendment four OBN project in the Gulf Of America. This is an ultra long offset over legacy streamer data, and this is a 100% TGS project. In the past, you’ve seen a lot of projects together with Western G Core SLB, where we each have 50%, But this, again, is a 100% TGS project. Then we commenced a project also in the Gulf Of America called Laconia Phase three.

This is in collaboration with Veridian. Normally, that would also be a fifty-fifty joint venture. In this particular case, it’s 70% TGS and 30% Viridian. So again, TGS taking advantage of a rather strong balance sheet and ability to take a higher equity in some of these projects in basins where we have, proven success such as Gulf Of America and Brazil. And then we move to Argentina and Malvinas, where we had a, phase three of the Malvinas campaign that completed.

We have now 25,000 square kilometers of data coverage in the Malvinas Basin of Argentina. And Argentina is a country where I’m actually quite optimistic for the future. We’ve seen high above surface risk in the past or political risk. That has come down and the geology is very promising. And obviously, our clients are quite excited about our database in Argentina going forward.

We’re expanding Equatorial Margin Campaign Offshore Brazil. This is another area where we have had a successful licensing round happening in the quarter. We saw great interest. We even saw some of the big super majors from The U. S.

Now paying big fees to get into the equatorial margin together with Petrobras. So this is an area where TGS has jump started and where we already have built a significant database. And this is one of the last big frontier basins of the world, and both we and our clients are very excited about what we’re doing there right now. And again, this is an area that TGS has permits to do more, and we will continue to be rather busy in the equatorial margin for the next twelve to eighteen months. We also had a licensing round in Gulf Of America announced this quarter.

So a lot of people have been waiting for that, and obviously, it’s a great testament to the current government that they want to get back to oil and gas, and they want to increase domestic production of oil and gas. And that obviously starts with both onshore Lower 48, but also with the Gulf Of America. If we move on and look at the historical MultiClient performance, so you see that, it’s been quite steady in terms of sales to investments. And, yes, it was slightly lower in Q2 this year, but again, there’s nothing in the market where we see that this shouldn’t continue to be relatively strong over time. We continue to set a target of 2x on our MultiClient projects.

And I think as you see for the last four quarters, we’re just in line with our targets. We also look at the I talked about the oil price development in the latter part of Q2, and you clearly see here that the oil price is dropping from a level of SEK 76,000,000 to SEK 78,000,000 and all the way down to the mid-60s during the past or last ten days of the quarter, which is obviously not a great background for doing big data purchases. Again, we were caught by surprise that we had lower sales than we expected, but we don’t think this is a permanent issue. We think it’s more of a temporary issue. And obviously, I’m not going to stand here promising that it’s going to come back next quarter or the quarter after that.

But again, we don’t see any long term permanent changes in appetite for data rather than rather the opposite. If we move on to contract, again, we had OBN contract revenues of about 88,000,000 in q two, and that compares to $93,000,000 so pretty much flat from last year. Streamer contract revenues dropped from $128,000,000 to $115,000,000 And again, the utilization of the streamer fleet was quite good this quarter, but we had relatively low revenues, which means that we had operational issues and low productivity on one of our projects in Asia, which I have already talked about and which I will come back to. Overall, gross revenues of NOK $2.00 3,000,000 versus NOK $221,000,000 in the same quarter of last year and an EBITDA margin of about 25%, and that’s slightly up from Q2 of twenty twenty four. We’ve been awarded a shallow water OBN contract in Trinidad, that commenced acquisition in Q2.

And then we have several, four d contracts offshore Norway that has commenced during the quarter, and we’ve also been awarded and commenced a four d contract offshore Egypt. So again, we have encountered challenging operational conditions and high standby time on a streamer contract in Asia. As a result of that, we have decided to take that vessel out of the area and the bad weather, and it will probably be out for between two and three months, and then we will come back and finish that survey. So again, some of the backlog, which I will come back to, will move from or shift from q three to to q four as a result of that, but it’s not gonna change. The overall project is gonna have the same size, but hopefully, and most likely, much stronger, productivity when we get back there.

On the new energy solutions side, relatively flat numbers. So contract revenues, 16 last quarter and then of of last year and then 15 in q two of two thousand twenty five. We had slightly better multiclient revenues, up from three to four, which is driven by our one of our acquired companies, where revenues are recognized as MultiClient. Total revenue is flat at 18% and a quite significant improvement of the EBITDA margin from 20% to 31% due to very good cost control and taking some actions on the cost base based on the weakness that we’ve seen in the market, particularly in The U. S.

We’ve been awarded an ultra high resolution contract in offshore Norway. That commenced acquisition in July, successful completion of a similar project in The UK in the quarter. And then we’ve also entered into a collaboration with a big client to drive digital transformation in CCS operations, so quite exciting collaboration with Equinor in that regard. If we move to probably the most positive this quarter in terms of the business unit performance, our Imaging and Technology division had a very strong quarter. We have gross Imaging revenues now of 32%, which is up from 25% in the same quarter of last year.

And we’ve almost doubled our external Imaging revenues from 10% to 19%. I think I said that last quarter that our goal is to get somewhere north of NOK 75,000,000 on annual revenues for our Imaging business. And as you see, we have a run rate now that more than takes us to NOK 75,000,000, and our goal is to continue to grow this business quite significantly going forward. And we’re going to grow that business with strong margins. We had 40% EBITDA margin in Q2 of 25%, and that compares to minus 7% in Q2 of last year.

So a lot of positives now on the Imaging and Technology side. Partly because we’ve seen very positive market reactions to the introduction of our eFWI, and we’ve seen a significant reduction at the same time of HPC cost from added scale and renegotiation with some of our big suppliers in that area. Our EBITDA again, $12,700,000 so it starts to to really pay off also in terms of profitability on the Imaging side. I’ll hand it over to Sven now, who’s going to cover the financials, and then I will be back talking about the outlook after Sven has completed his part. Thank you very much.

Sven Bediro Larsen, CFO, TGS: Thank you for that, Christian, and good morning to everyone. I’ll go through the revenue first on the top left hand chart on this page as Christian had gone through all the categories of revenue already. I’ll do that rather quickly. We had $3.00 $8,000,000 of total produced revenue in Q2 of twenty twenty five. That is significantly down, obviously, both compared to Q1 twenty twenty five and also 19% down compared to the same quarter of last year on a pro form a basis, which was at $381,000,000 Then looking at the operating expenses, we had net operating expenses of $155,000,000 booked in this quarter.

This consisted of $236,000,000 of gross operating expenses, and then we capitalized 81,000,000 of that to our MultiClient library mostly, which led to this net operating expenses of $155,000,000 In the same quarter of last year, the pro form a gross operating expenses were up at two sixty eight million dollars and we capitalized 62,000,000 which led to $2.00 6,000,000 in net operating expenses in the same quarter of last year. So we’re significantly down on both gross operating expenses and also net operating expenses compared to the same quarter of last year. If we’re then looking at our depreciation and amortization chart on the bottom left hand side, you see that we had amortization of $109 in this quarter compared to 115,000,000 in the same quarter of last year. This consisted of straight line amortization of 63,000,000 and the remaining balance was accelerated amortization. We then had net depreciation of $65,000,000 This consisted of gross depreciation of $75,000,000 and then we capitalized $10,000,000 of depreciation on our vessels to the MultiClient library.

So that gave us this $65,000,000 of net depreciation in the quarter. All in all, this gave us a negative EBIT of $22,000,000 in the quarter compared to 8,000,000 positive in the same quarter of last year on a pro form a basis. This shows the produced P and L, already gone through most of the details, $3.00 8,000,000 of revenues, cost of sales, 76,000,000, personnel cost, 57,000,000 and other operational cost, 22 on a net basis, which gave us an EBITDA of $153,000,000 subtracting amortization and depreciation, gave us this EBIT of negative $22,000,000 in this quarter. Then to the cash flow, showing here the cash flow on a produced basis. The produced EBIT was, as we as I’ve said, 153,000,000, and then we subtract paid taxes of $23,000,000 Taxes paid taxes was relatively high in Q2 and was also relatively high in Q3, which means that we are up at $50,000,000 on a year to date basis.

The paid taxes is quite difficult to estimate from quarter to quarter and period to period because it depends heavily on our revenue mix. We do not pay any corporate taxes in Norway due to the tax losses or the losses carried forward, But we do still pay withholding taxes and certain local taxes in some of the countries where we operate. So when we generate revenue in these countries, we will typically pay more. And when we generate revenues in certain other countries, we will typically pay less in tax. So we do expect to pay less tax in the second half of the year.

But as I said, it’s a somewhat uncertain number. So this led to after adjusting for changes in balance sheet items, this led to cash flow from operations of $179,000,000 We invested 115,000,000 or $114,000,000 in our MultiClient library this quarter, adjusting for the noncash capitalization of MultiClient investments, which is related to the depreciation of vessels and also adjusting for the MultiClient investments that were paid in other periods, we ended up with paid MultiClient investments of $104,000,000 We had CapEx of 24,000,000 and then we received a bit of interest leading to total cash flow from investment activities of $126,000,000 We had net change in interest bearing debt and leasing of $10,000,000 negative in the quarter. We paid interest of $7,000,000 and dividend payments of $30,000,000 which gave us cash flow from financing activities of $48,000,000 negative. So all in all, this led to a fairly neutral net cash flow while also adjusting for currency movements, and we had a cash balance of $167,000,000 at the end of the quarter, which was more or less unchanged from the situation at March 31. We’re showing here some expectations for our cash flow, excluding net working capital and excluding dividends at the current run rate or for 2025, essentially.

So we’ve guided for gross OpEx of SEK $950,000,000, which we reduced this quarter from previously approximately SEK 1,000,000,000. And then we’ve said that we are going to invest SEK $425,000,000 to $475,000,000 into our MultiClient library. So the midpoint of that is $450,000,000 And then we’ve said that the internal portion of this should be approximately 70%. So if you take $315,000,000 then 70% of $450,000,000 as capitalization of gross OpEx and depreciation. And then add on CapEx of SEK 135,000,000, which is in line with what we have guided for.

And then we have expected total lease payments of $120,000,000 This this means that it will be lower in the second half than it was in the first half given the current plans that we have for renewals of leases. Then we have interest payments of roughly $45,000,000 and then tax payments, which here is listed at $65,000,000 But as I alluded to, it’s a quite uncertain number and dependent on the revenue mix. So this means that we have a total cash flow cash outflow before any net working capital movements and also before dividends of roughly or less than $1,500,000,000 $1,450,000,000 So then, of course, the net cash flow will depend on where we end up with revenues, which, as you know, can be quite volatile and somewhat unpredictable. The balance sheet remains strong. We had, as I said, cash of $167,000,000 at the end of the quarter, and we had net debt, which was just below $480,000,000 This means that we continue to pay a dividend of $0.155 per share in the quarter.

The ex date is a week from now on the July 24 and the payment date will be three weeks from now on the August 7. This means that we have now returned more than $1,600,000,000 to our shareholders through dividends and buybacks since we started to pay dividend back in 2010. And by that, I’ll leave the word back to you, Christian.

Christian Johansen, CEO, TGS: Thank you, Sven. And my first outlook slide is quite familiar to all of you. It shows the declining reserve life and low historical reserve replacement ratios. So again, as you see here, the reserve life for oil is gradually coming down for the past ten years, actually coming down from a level of north of 13, and we’re just sitting at at around nine right now. But if you go behind the numbers, several IOCs have reserve life of about seven years.

And at the same time, the average three year rolling reserve replacement ratio is only 40%. So that means that with the current exploration success that these guys have had, you only have twelve years until you run out of oil and gas unless you either spend more or you have more success on your exploration campaigns. And when you look at the valuation of some of these players, I mean, the DCF model obviously goes much further than 02/1937. And I also think that most of us will now finally agree that there will still be a significant need for oil and gas in 02/1937. But at current, some of the IOCs, with the current level of reserve replacement and the current level of production, will run out of oil in about twelve-thirteen years.

So exploration will have to increase to secure sufficient energy reserves for the future, and we strongly believe Frontier and Deepwater are proven to offer the highest exploration upside. And as we all know, success in deepwater exploration require high quality seismic, and TGS fortunately has around 60% or north of 60% of all that seismic measured by our library size. If we move on to the three d streamer contract tender statistics, it doesn’t look great. You see a quite sharp decline from what we saw last quarter, but the trend line is still slightly positive, and, we expect the trend line to continue to be positive. We think Q2 normally marks some kind of a low point in terms of contract tender activity.

We saw that last year. A lot of you were concerned when we presented the merger with PGS and the fact that PGS had very low order inflow in Q2 of last year. We see the same this year. And then if you remember last year, we saw a sharp increase in q three and early q four. And without promising that that’s gonna happen this year, what I can say is that we have a lot of discussions with clients.

It’s a combination of new contracts, converted contracts, long term contracts and a mix of all three. So overall, we think that this will gradually improve. And the dotted line you see here, which is a trend line going all the way back to January 2019, we continue to believe that that will be increasing or show a positive outlook going forward. What is important in a market like that is obviously discipline, price discipline, and what we see is relatively stable streamer margins for the last twenty four months. And we obviously believe that the integrated business model that we have enable us to be very competitive in terms of winning new work and winning some of that work in where we combine both OBN capacity, streamer capacity with, obviously, MultiClient.

If we move on to the OBN market, so again, 2025 is probably gonna be and this is the overall market size. We think 2025 is gonna be more similar to 02/2023. It’s gonna be down from 02/2024. It’s too early to say how 2026 is gonna play out. But, obviously, the OBN market is is driven by a a rather fragmented supply side.

So where where we see the biggest difference on streamer and OBN is that on the OBN side, it’s a very fragmented supply. On the streamer side, we only have two players. And on the OBN market, we see a very variable degree of discipline. We obviously see some of the work that has been won in Brazil at at very low pricing. Some of that work hasn’t even started yet.

So in the meantime, you may have had some inflationary pressure too. So again, we’re we’re following some of that very closely. And in in the meantime, TGS is doing whatever it takes in terms of staying competitive, reducing our our cost base and making sure that we can be competitive with the four crews that we have. And I will come back to some of the actions that we’re taking in that regard as well. So we’re reducing vessel capacity, and we’re addressing the market conditions, and we’re doing this pretty much as we speak.

So number one, we have reached an agreement for selling the Ramform Explorer and the Valiant. These are two vessels that have been stacked for quite some time, but obviously, there is stacking costs related to this. And obviously, we don’t give them away, so there is a purchase price behind this, although it’s relatively low. And more importantly, the sales contract prohibits a buyer to use this vessel for the seismic market, so they will be out of competition for the future. In addition to that, we’re stacking the Ramform Vanguard.

This is a vessel that has been used for a combination of oil and gas and and streamer seismic, but also for for the offshore wind markets. We see a weakness in both markets, and as a result, we take out or we stack the Vanguard, and then if there is a need, we will serve that need from one of the other vessels. So TGS will now go down and reduce capacity from seven to six vessels, sending a message to the overall market that we are going to be disciplined. If clients are not willing to commit to our seismic vessels, we don’t see a purpose of just keeping this and keeping that cost base just for while we’re waiting for for commitments. So we’ll take out that capacity and, obviously, are are very clear and sending a very clear message to the market that our intention is to be disciplined going forward, in both the seismic market for oil and gas, but also for offshore wind.

On the OBN side, all the OBN vessels are chartered, but these are chartered as a combination of long term and short term. And, with the current outlook for the OBN market, we are gonna let some of these charters expire. And, there’s quite a few charters coming up over the next six to twelve months, and you can probably expect that TGS will let these charters go and reduce the leasing cost going forward, reduce the number of chartered vessels, and then we will be in the spot market because we think that spot market is gonna improve quite significantly because we see weakness in in that market going forward as well. At the same time, we’re working intensively with new technologies on the OBN side. It’s not necessarily technologies on the OBN itself, but there are different ways to be more efficient, both on the source side and the ROV side.

So we’re looking at electrical ROVs. We’re looking at new source technologies that can be far more efficient than we’ve done in the past. And we’re looking at far fewer people on the vessels than what you’ve seen in the past, and we’re looking at different types of vessels that we’re going to use in the OBN market going forward compared to what we’ve done in the past. So it may not be great news for the suppliers of source and ROV vessels, but again, for our cost base going forward and our competitiveness in the OBN market, you will see TGS take the necessary actions to be profitable going forward. So a summary of the market segment development.

So if you look at all the five different segments, and we start with MultiClient, again, q two was not great. I’m the first one to admit that. But we actually continue to see a positive trend in terms of frontier interest. And, again, that was behind my my, comment initially that we were surprised because we had quite a few deals in the making. We had very interesting and good discussions with some of our clients towards the end of q two, which didn’t play out in terms of getting deals signed, but we still have very positive discussions with clients who wants to get back to Frontier and wants to spend more now on Frontier because they see the macro slides that I’ve just been referring to in terms of reserve life and, lack of exploration success in the past.

There is encouraging news flow in terms of licensing rounds both in the Gulf Of America and Brazil. Short term licensing activities, of course, vulnerable to oil price volatility. I think we got a sharp reminder of that in in q two. And again, it’s just the fact that we have fewer and larger clients, versus ten years ago, and that may play out in bigger deals. So fewer and bigger deals with fewer and bigger companies.

It’s it’s quite obvious. And what happens then is that you get some volatility in the quarterly results, but overall, you should continue to see strong profitability, and our target remains 2x on our multiclient projects. On the streamer contract market, again, very consolidated supply side. Pricing remains stable. We’re being disciplined.

We’re stacking vessels that are not being fully utilized, and we’re capitalizing on the integrated model to build strategic relationships, win long term contracts and obviously bid very selectively on work. On the OBN contract side, again, a more fragmented supply side, variable degree of discipline is probably fair to say. We see a volume decline in the market from 2024 to 2025. Again, I touched on some of the initiatives that we will obviously have to come back to the market with in terms of making a shift in terms of technology, making sure that our source efforts and the ROV efforts can be more efficient in the future, testing out new concepts in that regard. And of course, that also means that we’re going to reduce the current leasing costs and let some of these long term agreements go when they expire.

On the imaging side, a very competitive market for low end imaging solutions, but fortunately, we don’t really compete in that market. We’re actually talking to clients who are seeking a more, competition in the high end segments, where there are fewer players, and TGS has now finally established itself in that market, proven by significant growth in the proprietary market and combined with strong margins. On the new energy solutions side, again, revenues were flat year on year. We see a continued positive development of the acquired businesses, and then we see some lumpiness in terms of ultra high resolution work, which is mainly seasonal, and it’s mainly around the North Sea rather than Western Hemisphere where we see lower activity. If we move to 2025 guidance, so our MultiClient investment is still going to be around NOK $425,000,000 to $475,000,000.

It’s unchanged from last quarter, and approximately 70% of the investment is expected to be acquired with TGS’ own capacity. On the CapEx side, we’re guiding about $135,000,000 It’s unchanged. And in addition to that, there is an approximately $10,000,000 of integration related CapEx. What I can say is that we turn every stone in terms of how where we can see efficiency gains and where we can see savings, whether it’s CapEx or OpEx. We’re not ready to change our guidance on CapEx, but I can guarantee you that we’re looking very carefully at every single cost item in terms of CapEx.

On the gross operating costs, on the OpEx side, we’re actually announcing a further reduction on the operating costs. Our target is now $950,000,000 of gross cost for the year, which is down from about $1,000,000,000 in the previous guidance. So that continues to come down, and I’m extremely pleased about the team in terms of what we’ve done in terms of getting more efficient, getting cost out of the system and making sure that our margins are safeguarded in that regard. On the utilization side, we expect improved utilization of three d streamer fleets. Q two wasn’t or Q2 was good in terms of utilization.

Q3 doesn’t look as good, and then we’re still hopeful that Q4 will come back at a higher level than Q3, such that the full year, we expect improved utilization for our three d streamer fleets. On the OBN side, we expect lower acquisition activity compared to 02/2024, both for the entire market, but also for TGS specifically. And again, we don’t have any intention to be undisciplined and and fight for work with negative margins or or extremely low margins. That’s not the recipe for success in the size seismic market. So on the order backlog and inflow side, if we start with the inflow, you see the inflow

It’s at $133,000,000 for the quarter, and you see how that compares to previous q twos. You also see that q two is usually a seasonal low. So although I’m not very pleased with 133 for q two, what you’ve seen through history is that we have a tendency to have higher inflow both in q three and q four than what we have in q two. You hope to see the same this year. And if you look at the overall backlog, it’s reduced from 600 to 425.

Again, some of you may be a bit nervous about that number, and you may even expect that to be, coming further down. Again, I think some of that is seasonality. I think I’ve touched on that in terms of we were also a bit concerned at the same moment last year, and then we had a very nice buildup of backlog during the fall season. In terms of what we have in the, where we have line of sight right now, there’s there are some big multi client projects, some projects that we have even started and, where we expect, obviously, prefunding to be signed quite imminent and where we expect that, obviously, to have a quite significant impact on total backlog. In addition to that, we see long term contracts.

I heard one of our competitors were talking about quite a few long term contracts that are out in the market. Of course, we are invited to compete for that, and we’re looking very carefully at that in terms of securing some of that stuff that goes over many calendar years, both on the OBN side, but also on the on the streamer side, and and that’s obviously where where TGS is is very competitive. If you look at the expected timing of the contract backlog, you see that on the right hand side on the pie chart, but I think the next slide will probably give you an even better picture of that. This shows the booked streamer work and the booked OBN work respectively. And given the sales cycles that we have where streamer work typically has a sales cycle of two and a half to to four months and OBN work probably probably twice that, four to to seven months of of a sales cycle.

You wouldn’t expect to see a significant change to q three. So so q three is pretty much what it is. It’s not great on on the streamer side and neither on the on the OBM side. And then q four, we expect it to be quite significantly better when we get three months into the future. Obviously, this is where sales cycles, we still have time to sign up work for q four, and obviously, we have a long list of opportunities that we are pursuing as we speak.

So at current, we expect the streamer, work to be, you know, in line with or or probably higher. We expect it to be higher in q four than we than we show in q three. And on the OBN work, there’s not a whole lot of upside to what we’re showing here. But, again, there may be some multiclient work that we will start in q four that is not reflected in the bar chart to the left here. Overall, the Q3, streamer markets, we see contract work in Norway and Egypt.

We’ve taken a two to three months pause in the acquisition activity on a project in Asia. So again, that backlog is moved from q three to q four, and then we’re doing MultiClient in Brazil. On the OBN side, contract work in Gulf Of America, Norway and Trinidad and then MultiClient work in the Gulf Of America. We expect multiclient investments for q three to come slightly down from q two, where we had 114. In q three, it’s probably gonna be around $90,000,000 as it looks right now.

And then the utilization expectation, 65% -ish for vessels in q three and then a normalized OBM crew count of about 2.5 for q three. If we move on to the summary, so again, we had total revenues of $3.00 $8,000,000. Again, we’re not pleased about the revenues this quarter, and I think I have addressed the the key reasons for that and and obviously some initiatives that we are taking in terms of of turning that negative trend. And EBITDA is actually pretty good. It’s $153,000,000, and it’s an EBITDA margin that has improved from Q2 of twenty twenty four, and this is has improved because of sharp cost cutting and an organization who’s been extremely cost conscious since early April when we had the combination of tariffs hitting the demand side and obviously the OPEC plus decision to increase production hitting the supply side.

Cash flow of about $11,000,000 so positive cash flow despite a very disappointing quarter on the revenue side. We’re continuing to do business optimization. I think the key highlight of this quarter is that we’re adjusting vessel capacity to the market. We’re staying disciplined. We’re sending a signal to the market that we remain disciplined, and we want to make sure that we stack capacity that no one is using.

Short term market development is sensitive to oil price. The long term market outlook remains positive, and nothing has changed in our belief in the long term outlook for the market despite a dip in in q two. And last but not least, we’re maintaining the dividend of 0.155 per share. So with that, I’m gonna ask Sven to come up and help me with responding to questions, and then Bor is gonna read the questions to us, which we will address simultaneously. Thank you very much.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Yes, we have a couple of questions from the people on the webcast. First one is from Jorgen Lande in Danske Bank. Can you elaborate on the timing of the vessel sale and also the stacking of the Vanguard?

Christian Johansen, CEO, TGS: Yeah. I mean, the the sale of the vessels will happen pretty much over the next couple of weeks. I mean, the contracts are are pretty much agreed on, and and there may be some final signatures to be done, but that’s gonna happen over the next few weeks. And in terms of Vanguard, she’s working as we speak, but only for weeks. So we’ll take her out as soon as the summer season is over in Europe.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Very good. Next question is from Lukas Dahl in Arctic Securities, and that’s for you, Svanberg. You are above your net interest bearing debt target. How does that stack against your dividend strategy?

Sven Bediro Larsen, CFO, TGS: Yes. What we said is that our intention is to maintain the current dividend level stable until we are down at that level. Of course, with the weak Q2, it will obviously push the time when we potentially get down there a bit out in time, but our goal remain intact.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Lucas Dahl has another question, and that’s more for you, Christian. What’s driving the demand decline in the OBN market? And he assumes that the OBN market should be tied to production in the oil and gas industry.

Christian Johansen, CEO, TGS: Yes. I mean, the overall weakness we see right now is probably more timing than it is a permanent weakness in the market. I think that as Lucas rightly point out, I mean, this is very much related to production, and it’s related to production optimization, and that market is relatively stable. So some of that work has been pushed into 2026. There are big projects in Brazil, for example, that has been delayed.

And we’re not overly concerned about demand in the OBN market. We also think there is some hidden demand out there is that overall, you will see that OBN costs will continue to come down, and we will be more competitive also on exploration projects. So that’s going to be a key driver for the future, driving growth in that market. Personally, I’m probably more concerned about supply in that market. There is probably oversupply given the current level of demand.

And even if you see growth in demand going forward, which we expect to see, I think, I think there’s there’s supply is is probably there’s too much fragmentation in that market and too low discipline. But overall, we think the long term trend for OBN continues to be positive and probably driven by a relatively stable four d market and then driven by production and then increase the exploration part of that market going forward as cost is coming down.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Then we have a series of questions from Jono Dyson in ABG. Who are are you selling the Ram from Valiant and Ram from Explorer to? And can you indicate the price you get for the vessels?

Christian Johansen, CEO, TGS: Yeah. We can’t disclose who the who the buyer is. What we can say is that the vessels are gonna be used outside the seismic market, there is a restriction in that regard. In terms of purchase price, I mean, we’re talking low single digit millions. So we’re not doing this to strengthen our balance sheet.

We’re doing this to strengthen the overall market and making sure that we get the right balance between supply and demand in the market.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Yes. And then in terms of synergies, he is wondering if you can provide an update on the synergy effects of the 110,000,000 to $130,000,000 that we have indicated. What’s the status?

Sven Bediro Larsen, CFO, TGS: Yes. The status is that we’re pretty close to being there. We still have some work to do in terms of particularly, there are some integration tasks that take longer time, typically related to systems and software alignment. So we’re pretty close to that range as we speak. And the last bit will take a bit of time until we have full alignment on things like ERP systems and HPC in the cloud and stuff like that.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Next question is for you, Christian, in terms of MultiClient. Is it natural to expect a jump in Q3 late sales as a result of The U. S. Gulf licensing round? And also in terms of transfer fees in the second half of the year, what do you expect?

Christian Johansen, CEO, TGS: Yes. I’m not going to be standing here and predicting or promising higher late sales because I was wrong as we were all in Q2. We thought Q2 was going to be far better than it was. And then we got a painful reminder that this market has low visibility and is very vulnerable to changes in the overall market environment. So I think when you look into, I would rather say second half rather than quarterly specific.

In the second half, yes, there’s a couple of transfer fees out there. One of them is is probably quite quite sizable, and and it’s related obviously to the Chevron Hess transaction, which we still don’t know whether it’s gonna happen. If it’s gonna happen, it may actually happen in in the second half of this year rather than next year. Other than that, there’s a couple of transfer fees in the category of probably 0 to $10,000,000 for TGS, which is also probably going to trigger some sales in Q3 and or Q4. Overall, I mean, typically, when we have a bad late sales quarter, we have a tendency to come back.

If this is driven by the oil price and driven by macro, obviously, we need to cross fingers and hope that the overall environment will improve in Q3 and Q4. Again, as I’ve said multiple times, our long term view of the market hasn’t changed. There’s significant opportunities out there, both on the contract side and on the multiclient side, but of course, Q2 was a big disappointment in terms of getting that closed towards the end of the quarter for multiple reasons.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: And then continuing on Mr. Leissen’s list of questions. On the OBN side, you mentioned that you will let some capacity go. Does that mean that you will reduce the number of crews, which currently stands at four?

Christian Johansen, CEO, TGS: Not necessarily. But when we look into the amount of work that we have right now and what we’re planning to do for 2024 to 2026, it will probably be more of a shift in terms of we’re trying to get more efficient, trying to use source and ROV vessels across multiple projects rather than getting two for every single project and following the projects. We’re looking at efficiency gains. We see that a lot of these kind of long term contracts, we may not need them for the future. We may see different types of vessels in the future.

We may see vessels that are not necessarily unmanned, but they’re definitely more light in terms of what needs to be, or the the human resources that you need on the vessels. So obviously, looking at ways to get more efficient and and particularly to drive that innovation in the exploration market, so to add growth on top of of the four d market. So we need to get more efficient, and, the way to get more efficient is probably not the node in itself, it’s more about the way you do it and the way you perform your operations, and that’s where we see some benefits. So again, we’ll come back and talk about this when we’ve run some of these pilots that we are working on right now.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Next question comes from Ole Martin Reddlan in Pareto Securities. Partners withdrawing from the MultiClient JV projects, was it your decision to continue as you still expected these to be good projects? Or had costs already incurred, so effects of postponing was limited?

Christian Johansen, CEO, TGS: No, it’s an interesting point you’re bringing up. So number one, I mean, TGS has a history of investing countercyclically and taking risk when no one else is willing to take that and share that with us. I think that’s part of the reason to our success. So that continues to be part of our DNA. When you add the fact that we’re becoming more asset heavy to that, which means that, you know, sometimes it may make a lot of sense to continue a project in Brazil, despite the fact that your partner doesn’t want to be part of it or that despite the fact that you may not have the final signature in place in terms of prefunding.

We’re still happy to do that kind of stuff and to capitalize on that situation rather than showing weakness and and pausing stuff stuff like that. So I think this is a great example of of TGS kind of combining our our DNA from from the multi client side over forty years of successful operations with being more asset heavy and making sure that we can utilize assets at the same time and taking advantage of a strong balance sheet to be able to do that when no one else has a willingness or a capacity to do it.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: And following up on that, in terms of the expected returns on these surveys, do we expect a similar sales to investment target of two times at these surveys? And also, will you rethink the collaboration with the partners in the future in terms of the experience from Q2?

Christian Johansen, CEO, TGS: In terms of the overall return, yes, absolutely. I mean, we’re talking about we wouldn’t do this in areas where we don’t have a proven success. But the areas we’re talking about here and projects that we were impacted by the fact that partners said we don’t want to be part of this right now is there are two regions. Number one is Brazil, the Equatorial Margin, where we are very happy to continue to acquire Seismic, where the licensing round that was announced quite recently or held quite recently were a great success, where Chevron and Exxon paid big fees to get into some of that acreage where we have been operating now for about a year. So again, we have no hesitations to carry on a higher with a higher equity in those projects, because of the proven success that we have in Brazil.

At Gulf Of America, same thing. You know, percent equity.

Bart Stenberg, Vice President, Investor Relations and Business Intelligence, TGS: Okay. We are coming to an end on the questions on the web. So unless there is any last minute questions from anyone, I’ll leave the word to you, Christian, for your concluding remarks.

Christian Johansen, CEO, TGS: Thank you, Board, and thank you, Sven, and thank you for everyone who followed our earnings release on the web. Overall, again, we’re not pleased about Q2, and it came in lower than we expected. But the good thing here is that we’re taking actions. We’re taking actions pretty much immediately in terms of getting our cost base down, getting control of vessel capacity, showing a very disciplined approach in terms of stacking and selling vessels, also new strategies on the OBN side in terms of reducing the leasing costs going forward and making sure that we can introduce even more efficient ways to do that for the future. I wanna wish you all, a great summer.

I think for the first time in in many years, Norway has a temperature that is quite similar to Houston. So great to be here, and, I wish you all, a great great summer vacation, and, hope to see you back when we report our q three presentation later this fall. So thank you very much.

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