• TGS submits a conditional offer for the multi-client data library of PGS for a cash consideration of USD 600 million
  • The offer values the multi-client data library in excess of the full reported book value and secures PGS liquidity to repay the USD 135 million revolving credit facility due September 2020
  • TGS proposes a post-closing collaboration agreement for future PGS multi-client projects and preferential rights for PGS to offer their 3D-fleet for future TGS data acquisition
  • A successful offer will broaden TGS´ multi-client geophysical data offering in all major mature and frontier basins world-wide
  • The offer will be financed by on-balance cash, a new term loan facility and new equity

 

OSLO, NORWAY (6 August 2020) – TGS-NOPEC Geophysical Company ASA ("TGS" or the "Company", OSE: TGS) announced today that it has submitted a conditional offer for the purchase of the multi-client data library of PGS ASA (“PGS”) (the “Offer”). Under the Offer, PGS would, upon consummation of the sale, receive a cash consideration of USD 600 million. In addition, TGS has proposed that the parties enter into a post-closing collaboration agreement for future PGS multi-client projects, which also would include certain preferential rights for PGS to offer their 3D-fleet for future TGS data acquisition.

The proposed transaction presents an opportunity for PGS and its stakeholders to monetize its multi-client data library in excess of its full reported value, delivering substantial funds to PGS in what are challenging times for the entire seismic industry. The Offer will secure the liquidity required to repay PGS’ USD 135 million revolving credit facility due September 2020 and will further significantly deleverage the company to support its continued operations and enhance the ability to service the remaining debt.

For TGS, the acquisition of PGS' multi-client data library would broaden the Company's offering as a multi-client geophysical data provider in all major mature and frontier basins world-wide.

Commenting on the Offer, Kristian Johansen, CEO of TGS said:

“We see a strong complement between our existing business and the PGS data library and the opportunity to leverage our expertise and scale to improve returns. Concurrently, a refocused and refinanced PGS will be a world-leading and highly innovative provider of acquisition technology and marine acquisition capacity, providing a strong platform for creating long-term value for the company´s stakeholders. The proposed transaction is thus aimed at safeguarding customers’ access to leading acquisition technology, high-quality data acquisition capacity and top tier data processing capabilities, whether they choose to purchase data through the contract model or the multi-client model. We believe the consolidation and further partnership between our two companies carries a strong industry logic and we look forward to initiate the dialogue with the management and board of PGS.”

Background for the Offer

Over the past years the seismic industry has seen a sharp drop in aggregate return on capital caused by a combination of a lower oil price, a more consolidated customer base and over-capacity on the supply side. As a result, industry players have changed their strategy towards specialization such that most companies have become either pure vessel operators or pure multi-client providers. TGS has since its inception focused on an asset light multi-client operation and has grown to become a leading global multi-client seismic company.

PGS has built a significant multi-client library and is a key player in the seismic industry. As opposed to TGS, PGS has been an integrated operator, and is today the only remaining player in the industry pursuing both data acquisition and multi-client seismic strategies.

Following recent market developments, TGS is of the view that a combination of the TGS and PGS multi-client businesses will improve the ability of the industry to deliver best in class services to its customers while creating value for its owners and other stakeholders. TGS strongly believes that the combination contemplated under the Offer will deliver more scale, better data and increased efficiencies in the seismic industry. At the same time, the transaction would position PGS credibly as one of the most solid in the seismic vessel and acquisition industry, supported by a robust balance sheet and strong technologies.

Key terms and financing of the Offer

The Offer comprises the entirety of the multi-client data library of PGS, including all existing data and work-in-process, as well as the contractual arrangements associated with the foregoing (the “PGS MC Library”). The Offer assumes an effective date of 1 July 2020.

  • The Offer values the PGS MC Library at USD 600 million, with full consideration in cash on completion, representing a meaningful premium to the USD 565m book value (as reported by PGS in its financial report for the 2nd quarter of 2020).
  • The transaction contemplates a post-closing collaboration between the parties that comprises a framework arrangement for future acquisition services by PGS to TGS as well as the opportunity for TGS to participate in future multi-client opportunities pursued by PGS.
  • The Offer is subject to a customary, limited scope, confirmatory due diligence and entering into definitive agreements for the transaction, and completion will be conditional upon any required approvals by an extraordinary general meeting in TGS in respect of the equity financing of the transaction, and other customary closing conditions, including relevant regulatory approvals.

 

The Offer will be financed by on-balance cash, a new term loan facility of USD 200 million and new equity. TGS, with its very robust balance sheet, has seen strong support for the debt financing of the Offer and is in the position to execute on such in a timely basis to secure the completion of the Offer. As for the equity financing, TGS will revert with further details of the structure of such financing in due course. TGS remains committed to maintaining a strong financial position and its existing dividend policy.

The Offer as presented to PGS is non-binding at this juncture and may be withdrawn by TGS at its sole discretion at any time until definitive agreements in respect of the Offer are entered into.

Timeline

The Offer presented to PGS is valid until 16 August 2020. The transaction contemplated by the Offer is subject to transaction documentation being finalized and executed, and TGS is prepared to swiftly enter into discussions with PGS with the aim of securing a definitive agreement in an expeditious manner. While the timeline is not under the full control of TGS, the Company believes that, with a mutual commitment to a process, a definitive agreement could be entered into by the end of August. Closing of a transaction is subject to satisfaction of all relevant closing conditions, including the receipt of necessary regulatory approvals or expiration of statutory waiting periods, and would occur as soon as possible thereafter. Although a full analysis has not yet been completed, TGS foresees no material issues in relation to the securing of regulatory approvals, i.a. in view of the moderate size of acquired annual sales relative to the USD 4+ billion total seismic market, and is confident that all conditions for completion would be satisfied. TGS expects that completion of the transaction could take place in 60-90 days after the signing, subject to timing of regulatory approvals.

 Advisors

ABG Sundal Collier ASA is engaged as financial advisor and Advokatfirmaet Thommessen AS is acting as legal counsel to the Company in connection with the Offer.

Kristian Johansen, CEO of TGS, will host a conference call to discuss the Offer at 15:00 (CEST) on 7 August.

Dial-in details:

PIN Code for all countries: 938720

Norway:     + 47-21-956342
Sweden:     +46-8-1241-0952
Denmark:  +45 7876 8490
UK:             +44-203-7696819
USA:           +1 646-787-0157

Please dial in 5-10 minutes prior to the call to ensure that you will be connected in time.

For further information, please contact:

Sven Børre Larsen, Head of Business Development and M&A, Tel: +47 909 43 673, E-mail: sven.larsen@tgs.com

Fredrik Amundsen, CFO, Tel: +47 995 89 882, E-mail: fredrik.amundsen@tgs.com

About TGS

TGS-NOPEC Geophysical Company ASA (TGS) provides multi-client geoscience data to oil and gas Exploration and Production companies worldwide. In addition to extensive global geophysical and geological data libraries that include multi-client seismic data, magnetic and gravity data, digital well logs, production data and directional surveys, TGS also offers advanced processing and imaging services, interpretation products, and data integration solutions.

For more information visit TGS online at www.tgs.com.

Important Notice

This announcement is not and does not form a part of any offer to sell, or a solicitation of an offer to purchase, any securities of the Company.

Neither this announcement nor any copy of it may be made or transmitted into the United States, or distributed, directly or indirectly, in the United States. Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan, Hong Kong, New Zealand or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of national securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute, or form part of, an offer to sell, or a solicitation of an offer to purchase, any securities in Australia, Canada, Japan, South Africa, Hong Kong, New Zealand or the United States or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or any securities laws of any state or other jurisdiction of the United States and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with applicable state law. There will be no public offer of the securities in the United States.

This announcement is an advertisement and does not constitute a prospectus for the purposes of the Prospectus Regulation (EU) 2017/1129 (as amended, together with any applicable implementing measures in any Member State, the "Prospectus Regulation"). In any EEA Member State that has implemented the Prospectus Regulation, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Regulation. In addition, in the United Kingdom, this announcement is not being distributed, nor has it been approved for the purposes of Section 21 of the Financial Services and Markets Act 2000 ("FSMA"), by a person authorized under FSMA and is directed only at persons who (i) are outside the United Kingdom, (ii) are investment professionals falling within Article 19(5) of the U.K. Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be engaged with, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as “relevant persons”). Under no circumstances should persons who are not relevant persons rely or act upon the contents of this announcement. Any investment or investment activity to which this announcement relates in the United Kingdom is available only to, and will be engaged only with, relevant persons.

Matters discussed in this announcement may constitute forward- looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "strategy", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements.

The information, opinions and forward-looking statements contained in this announcement speak only as at its date, and are subject to change without notice. The Company does not undertake any obligation to review, update, confirm, or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this announcement.

The distribution of this announcement and other information may be restricted by law in certain jurisdictions. Persons into whose possession this announcement or such other information should come are required to inform themselves about and to observe any such restrictions.