Transportadora de Gas del Sur SA TGS

Good morning and welcome to TGS Q1 2025 results presentation. My name is Bart Steinberg, Vice President of Investor Relations and Business Intelligence in TGS. Today's presentation will be given by CEO Christian Johansen and CFO Svendberg Larsen. Before we start, I would like to give some practical information. For those of you on the webcast, you can type in your questions during the presentation and we will address those after management's concluding remarks. For those of you in Oslo, there's no need for a microphone, so the sound feeds automatically into the system. I would also like to draw your attention to the forward-looking statement showing on the screen and available in today's earnings release and presentation. Please study that carefully. So with that, it's my pleasure to give the word to you, Christian.

Thank you, Bård. And let's hit the Q1 highlights right away. So we had total revenues of about $451 million. That compares to $433 million in the same quarter of last year. And those numbers obviously pro forma for PGS and TGS. EBITDA of $258 million compared to $239 million in Q1 of 2024. And these numbers are driven by strong multi-client performance. We had particularly strong sales and high interest for data in frontier areas, which is great to see that our clients are finally coming back to frontier areas in their exploration efforts. Significant year-over-year improvement in asset utilization also helped on the numbers, which means that we had a net cash flow of $78 million in the quarter, which means that our net debt is now down to a level of about $450 million. So again, a solid balance sheet, which allows for stable dividends of US dollar 0.155 per share. I'll give you a brief business update and look at the acquisition activity in Q1 of 2025 as well. And I think this map shows the diversity of our activities and our businesses based on some of the strategic actions we've made over the past few years. Starting with OBN, we had three OBN operations, all in the US Gulf of America. Two of these were 4D surveys for contract clients, and then one was a contract with a multi-client player doing exploration seismic. In terms of NES operations, so new energies operations, you see one dot in California. So we had a LiDAR boy campaign for offshore wind in California. We had another one in Germany. And then we had a site characterization project in the UK that started very late in the quarter. So we hardly had any revenues recognized from that in Q1. Going further down the line, we have onshore projects. We had an onshore project in the lower 48 in the US. And then we had MCs, or multi-client vessel operations, two in Brazil, in the equatorial margin of Brazil. We had one in Angola as well. And then we had a third-party vessel working for us on a multi-client project in Argentina, as you see from the map. Finally, on the contract vessel operations, we had one vessel in Brazil in the quarter. We had one vessel in Namibia and one in India. So a very busy quarter. And I think the map really makes a good job in showing where most of our activities these days in terms of the South Atlantic area that you see with Africa and Latin America dominated by Brazil are. gulf of america of course europe and then some activity in asia as well if we move on to the different business units we had a very strong quarter for our multi-client business it's driven by high client commitment to ongoing service and as i said strong sales of vintage library in frontier areas which is of course very positive in terms of the outlook for the market but we see Some of our clients are finally going back to frontier exploration and realize that they haven't really filled up their data needs over the past few years. And as a result, there's a little bit of a catch up there. We had multi-client investments of about $130 million in the quarter. And as you see, the last 12 months sales to investment is about 2.2, which is higher than the average for TGS going 30 years back. So 2.2 is a very, very strong figure and compares really well with last year's last 12 months, which was about 1.6, as you see from the table below the picture. In terms of key projects, we have announced a new multi-client project in the Barents Sea. Barents Sea is obviously seeing a little bit of an upswing based on the need for or increased need for gas in Europe. This is scheduled to start early August. I already touched on the Palma phase one project in the equatorial margin of Brazil, where we actually had two vessels. So we switched vessel during the course of the survey. And then we had the Malvinas phase three survey offshore Argentina, but we now have a data library of about 25,000 square kilometers in the Malvinas basin. And this was a project where we actually used a third party vessel, as I said previously. talking about the strong performance in multi-client, this one shows our performance over time in terms of sales to investment. And it also shows the market share that we have in the multi-client market. And, um, Starting with the market shares, about 63% of all the global investments since 2018 has been carried out by TGS. And obviously, this is a pro forma number. So it includes TGS, PGS, Spectrum, Ion. I may have forgotten someone, but definitely a very, very strong market share in multi-client. And I can't say how much of a strategic advantage it is to have such a big multi-client library, because it means that in all these areas where we have acquired data since 2018, obviously we still have the underlying data, which is a great advantage in terms of understanding the geology. You already have built in relationships with your clients because they're already there. And last but not least, you have a phenomenal position with the governments. Back in the days when you acquired the first survey, you obviously had a permit to do that. So whenever you're going to come back, whether you're going to shoot an OBM or you're going to shoot streamer seismic, whether it's multi-client or it's contract, you're very likely to get the permit before anyone else. So it's a fantastic advantage that I think a lot of people underestimate with TGS. So 63% of all the multi-client data shot globally since 2018 is TGS. Moving on to contract, we had a significant uptick in utilization, solid OBM activity in a seasonally low quarter. I mean, usually Q1 is the worst quarter for our OBM business, but we had a good quarter with... $90 million in contract revenues from OBM versus 70 million in Q1 of 2024. We had about 51% of our active vessel time used for streamer contract acquisition. It means that we had revenues in the streamer contract side of 130, and that's slightly down from 158 in Q1 of 2024. Gross revenues pretty much at the same level as we had in 24. And you see our EBITDA margin stays or remains relatively strong. Margins are still slightly higher for the streamer business and the OBM business. And this is mainly driven by more competition or what I would call slightly unhealthy competition on the OBM side. In terms of contract awards, we had a 4D campaign offshore Norway announced. We have been actually awarded seven 4D contracts for the summer of 2025, which is record high in terms of 4D activity on the Norwegian continental shelf. These projects have a duration of about 280 acquisition days. In addition to that, we also announced an OBN contract award offshore Trinidad. This is scheduled to commence in early Q3. And this has a duration of 80 days. So it's a relatively sizable contract in Trinidad. And then on the new energy solutions side, we had a significant drop in contract revenues. I touched on this. We had the site characterization project that we started very late in Q1. But except for that, we didn't have any site characterization, so no vessel activity related to our new energy business. And you're going to continue to see that this business is going to be very volatile in terms of revenue development quarter by quarter. And this is due to, you know, these projects are quite big. So when you do them, they're going to have a significant impact on revenue. And when you have quarters where you have no acquisition activity. then all we have is a LIDAR boy activity, which you will see on the multi clients and obviously our intelligence revenues that are reported under the company foreseen. Overall, the business is going well. 4C is developing as planned. And according to business case, it's been a good acquisition for TGS. The CCS business is slowly growing, but it's still going to take some time before that business gets sizable. And then obviously offshore wind in the US has seen a bit of headwind lately. And as a result, we're putting less efforts and less money into that. And we've even scaled down that business since April 2nd. We move on to imaging and technology. We've seen very healthy growth in terms of external imaging revenues. You see that from the table. They grow from $9 million in Q1 of last year to $14 million in Q1 of 2025. And if you multiply 14 by 4, you get close to $60 million for the year. I would say the ambition is significantly higher than that based on the very strong backlog we have in imaging right now. Not only that, but we've been able to turn a negative profit margin into a very strong EBITDA margin of 26% this quarter. And again, I'm very positive to the development on the imaging side now where we've seen a combination of strong growth and better profitability. We also see a strong inflow of people. This is a people business. It's really about having the right people. We've seen a lot of competitors and people from competitors knocking on our doors, applying for positions with TGS. So this is a business where you will see continuous growth in the future. talked about a couple of the new contracts or, or, um, projects adding to the backlog. We have announced a mega 3d reprocessing project in India. As you see, this is about 17,000 square kilometers. And then we have completed the reprocessing of a multi-client 3d, uh, geostreamer data offshore, uh, the lower Congo basin. So our activities range all over the world and, um, from processing centers in UK, Norway, Houston, and Cairo. And again, I'm very optimistic about the future of this business. So with that, I'm going to hand it over to Sven Börre, who's going to go through the financials, and then I will come back and talk about the outlook. Thank you very much.

Thanks, Christian, and good morning to you all. Since Christian has already talked a little bit about the different segments, I'll go fairly quickly through the headline numbers. Net revenues for the quarter were $451 million. That was made up by $268 million of multi-client revenues and $183 million of contract revenue. And this 451, as you can see, it compares to 433 in the same quarter of last year. So a little bit of growth compared to last year as well. These are pro forma numbers that we are comparing with here, of course. Net operating expenses were $193 million. This was based on a gross operating cost, total gross operating cost of $252 million. And then, of course, we capitalized a bit of that cost, mostly to our multi-client library. As Christian will talk more about later, we have reduced our guidance for the full year gross cost down to $1 billion. So as such, we were pretty much spot on the average you should expect for the remaining three quarters in Q1. Then to depreciation and amortization. Depreciation amounted to $57 million in this quarter. So as you can see, that number is reasonably stable, goes a little bit up and down. This includes, of course, also the, yeah, it depends a little bit on the investments that we do in each of the quarters. And then on amortization, we came in at $134 million. This number will vary a little bit from quarter to quarter. The straight line amortization part is fairly stable, whereas the accelerated amortization part, which is more linked to the investment levels and the activity we have on... new multi-client projects is a bit higher in this quarter than you've seen in some of the preceding quarters. Then we ended up with an EBIT of $67 million, which corresponds to an EBIT margin of 15% in the quarter. This compares to $62 million in the same quarter of 2020. last year and then we had an EBIT margin of 14% as you can see from the chart. Looking at the profit and loss accounts as I said we had 268 million dollars of multi-client revenues 183 million dollars of contract revenues 451 in total subtracting the different cost elements we ended up with 258 million dollars of EBITDA And then you can see the split here on straight line amortization and accelerated amortization. Straight line amortization, as I said, is reasonably stable. And accelerated amortization will vary a little bit. And this gave us this operating profit of $67 million. Cash flow was quite decent in the quarter. Things to note here is that the pay tax is a bit on the high side. That has to do with withholding tax, both withholding tax generated by the relatively high library sales that we had in Q4. As you know, Q4 is high season for library sales from our multi-client library. And depending on the geographical mix, that will also come with some withholding taxes. And also we had some withholding taxes related to sales in this quarter. Again, depending a little bit on the geographical mix, it varies a bit from the different places where we operate, what kind of tax regimes they run. So a little bit high in this quarter compared to what you normally should expect. And then we got $31 million of help from changes in balance sheet item, mostly working capital elements. And that is, if you look at the revenues we had in Q4, that was $492 million and compare it to the revenues we had in 2020. In Q1, which was $451 million, it means that we had a difference of $40 million roughly. And here we are collecting, say, $31 million of that difference in Q1. So all in all, we have cash flow from operations of $261 million. And then we subtract the investments. You can see the split between the booked or capitalized multi client investments and how much of that is non cash. capitalizations and how much that was paid in in other quarters which means that we ended up with a paid uh paid multi-client investments of 119 million dollars in in this quarter and we subtract capex and and and and add interest received we ended up with cash flow from investment activities of 145 million dollars negative in this quarter and then we had uh We paid $32 million of lease cost in the quarter related to the leased vessels we have in our OBN activity mostly. And we also settled the last part of the refinancing that we did in Q4. So we paid down the export credit facility in this quarter and replaced it with a $45 million term loan that had a net... negative effect on financing cash flow of $8 million, which is also included in that number. Then we paid interest of $6 million, which is fairly low compared to the interest charge in the P&L. And that has to do with the fact that we pay interest semi-annually on the bond loan. So you should expect to see a significantly higher interest payments later in the year. And then we had dividend payments of $30 million, which gave us cash flow from financing activities negative by $77 million. And all in all, this meant that we had $39 million of an increase in the cash balance in the quarter. On the balance sheet, these are IFRS numbers, by the way. You should note that the right of use assets has gone significantly up because we have extended a couple of the charters on these vessels that we use for our OBN activity. And you also see that the lease liability has gone up by a similar amount. Our balance sheet, of course, remains very strong. We have $622 million of gross debt in the quarter, and this includes accrued revenues on the bond loan. And we had net debt of $453 million at the end of the quarter compared to roughly $500 million at the end of the previous quarter. This means that we can continue to pay the dividend of 15.5 cents per share due to the fairly significant drop in the share price lately. It means that the yield go up and we're far above the historical average at 7.4 now in dividend yield. By that, I will hand the word back to Christian, who will take you through the outlook.