Tgs Asa S/Adr

Good morning and welcome to TGS Q3 2026. Results presentation. My name is Bård Stenberg, Vice President in Master Relations and Business Intelligence in TGS. Today's presentation will be given by CEO Kristian Johansen and CFO Sven Børre Larsen. Before we start, I would like to draw your attention to the cautionary statement showing on the screen and available in today's earnings release and presentation. You can start typing in questions on the webcast platform during the presentation, and we will address those after management's concluding remarks. So with that, I give the word to you, Kristian.

Thank you, Bård. So I'll start with the highlights of Q3 of 2026. So we had revenues of about $397 million. That's up 2% compared to the same quarter of last year. And we had a Q3 EBITDA of $222 million reported. That includes, however, a $41 million gain from the sale of our well data business that we did early in the quarter. That also impacts our EBIT. So reported EBIT this quarter is $86 million. And as you see on bullet point number four, we had operating costs in the quarter impacted by operational challenges or accidents, if you like, and that impacts our profitability this quarter. We had a strong order inflow of $356 million, and that means that our overall total backlog stays at $679 million at Q3 of 2026. Last but not least, we're maintaining our quarterly dividend of USD 0.155 per share. I'll touch on that business update as well before I move it, give the word over to our CFO to cover the financials. So in terms of data acquisition activity, again, a very active quarter for TGS. If you start on the western side or the western hemisphere, we had an OBN contract in the US Gulf of America in Q3. We also had two vessels in the Pelotas space in Brazil. And then we had one vessel in Angola, as you see from the map. We had two vessels actively acquiring data in Norway. And we also had an OBN crew in Norway during the quarter. We had a site characterization survey in the Irish Sea as you can see. Another vessel working in the Mediterranean and then we had one in Indonesia this quarter. Let me start by multi-client. And in multi-client, we had a good quarter. External revenues, $195 million. That's down from 219 in the same quarter of last year. But keep in mind that in Q3 of 2025, we had a quite substantial transfer fee. We didn't have this quarter, so in that regard, I think the numbers stack up really well compared to last year. So very pleased about the multi-client results in Q3. You see we had much lower investments and very much in line with our plans to be forward or investing more in the first half of the year than we do in the second half and you see we invested 64 million dollars versus 86 in the same quarter of last year. Our last 12 months sales to investment ratio is about 1.7. But if you just look at this quarter itself, it's more than three. So very strong sales to investment in Q3. And again, driven by strong multi-client activity, strong late sales from existing library and overall a good quarter. In terms of activity, we had Two projects completed in Brazil. We've completed the Pelotas Sul Phase 1 and also Pelotas Norte in offshore Brazil. This is a highly prospective area, undrilled and very frontier, but very exciting in terms of client interest these days. We also commenced the Osta Graben multi-client 3D streamer survey in the North Sea during Q3 and this is one of the programs, one of two programs where we had significant operational issues and things that happen every once in a while and unfortunately it doesn't happen Very often, but this time it happened on two different surveys where we had operation challenges that hit our numbers quite poorly in terms of profitability. So this survey, for example, was halted due to operational challenges, which means that we will come back in 2027 and complete that. In terms of new announcements, we're going back to Sarawak. We have announced a phase four of our survey offshore Malaysia. We're also doing reprocessing of a big data set in Newfoundland and Labrador. This is an area where we've seen significant pickup of interest and particularly related to Equinor's Beta Nor development. So very exciting that Canada is finally back on the agenda and we see Significant interest for data there, which is great, of course, given that both TGS and PGS had a lot of data acquired in Canada in the period of 2013 to 2020. They were also doing a reprocessing of an Atlantic margin south data set in the Norwegian seas. Again, another area where we see higher interest now and higher interest from mainly Norwegian companies. Going to marine data acquisition, so external revenues are 180 million dollars. That's significantly up from the 135 that we had in Q3 of 2025. You see we had lower internal production, so lower multi-client investments, higher contract and this is very much in line with how we plan the year but also in terms of how we see the market develop so a much better demand for contracts now and as I will talk about later in the presentation where we're basically sold out of vessels for the next five months now so that's a situation that we haven't been in since the acquisition of PGS. You see we had total revenues on the marine data acquisition side that are in line with what we had in Q3 of 2025 and then again you see the EBITDA margin being about half of what it was in Q3 last year and again quite substantially impacted by two incidents that we had in Q3 and obviously both incidents that we hopefully can put behind us and move on to Q4 and 2027. On the streamer side, we had two 4D contracts in the North Sea. We also had a 3D contract in Angola, Indonesia and the Mediterranean. On the OBN side, we completed a large contract in the Gulf of America and we also completed a node on a rope contract in the North Sea during the quarter. We've announced contract awards in Australia. This is a 4D streamer contract, another streamer contract in the Mediterranean, and then we also announced a one-month extension to a contract in Indonesia as well as an OBN contract in AME. Moving on to imaging and technology, you see external revenues pretty much in line with the same quarter of last year and then you see a substantial increase in internal production. So on the imaging side, we did more internal work, more multi-client processing and reprocessing and slightly less external. But what you see here is that we're running at full capacity in our imaging centers with total revenues of $41 million in Q3 of 26 versus 32 in the same quarter of last year. So significant growth in terms of the total activity level for imaging at TGS. EBITDA margin slightly down, but I mean, if you adjust for the fact that we have zero margin on the internal production, then the external margin is actually quite good in Q3 and it stacks up well with what we had in Q3 of last year. In terms of technology developments, we have announced a multi-year contract for development and delivery of our AI powered seismic foundation model. This is probably the first commercialization of an AI model that we've seen in our industry and very, very pleased to work closely with one of the big super majors on developing the next generation of AI being used for big seismic data sets. In addition to that, we also launched something called Gemini X. This is an operational combination of our Gemini source that we acquired from or we got from the acquisition of Ion a few years back and the newly acquired operation technology. And by merging these two technologies, we can increase efficiency and reduce costs, particularly on the OBM projects. So lots of exciting stuff happening also on the technology side. So before I come back and talk about the outlook, I will hand it over to Sven who's going to go through our financial summary for the quarter. Thank you very much.

Thank you for that Kristian and good morning to you all. I'll first go through our revenues in the quarter. So this slide here shows the revenue by nature. On the left hand side we have our multi-client revenues and how that has been built up by the contribution from each of our business units. So as always multi-client revenue stands for or the multi-client division stand for almost all the multi-client revenues 184 million dollars in this quarter and then we got multi-client revenues from other businesses of two which gave us 185 million dollars in total in multi-client revenues in the quarter. If we then look at our contract revenues on the right hand side we see that we had 11 million dollars in the multi-client business unit. This is related to joint venture projects that multi-client is doing together with partners where we are behind the data acquisition. So 11 million dollars related to that and then our marine data acquisition business unit had $180 million, imaging $18 million, and other businesses $3 million, which gave us $211 million in net contract revenues in the quarter in total. Then looking at the different segments in more detail starting with multi-client on the top of this page. We had as I said 184 million dollars in the multi-client business of multi-client licensing or licensing of multi-client data and 11 million dollars of joint venture related contract revenue which gave us 195 million dollars in revenue in In total compared to 226 million dollars in the same quarter of last year. The EBTA margin continues obviously to be really really strong in multi-client, 175 million dollars of EBTA in multi-client compared to 203 in the same quarter of last year. As Kristian alluded to, in line with our plans, multi-client investments were much lower in Q3 compared to what we had in the run rate in the first half of the year, 64 million dollars. We expect it to be somewhat higher in Q4, but considerably lower than the run rate that we had in Q1 and Q2. Kristian will come back and talk a bit more about the guidance for Q4 later in the presentation. Looking at marine data acquisitions on the bottom left, we see that we had 180 80 million dollars of external revenue in this quarter which is significantly up from the 135 we had in the same quarter of last year. Due to lower multi-client activity we had less internal production, 39 million dollars in this quarter compared to 96 The EBTA margin remains fairly low here, 40 million dollars of EBTA in MDA in this quarter and the low margin is obviously a Result of some cost challenges that we have had, operational challenges that we have had in the quarter combined with continued pressure on contract pricing in this segment. Then imaging, $18 million of external revenue in this quarter. And as you see, we continue to do a lot of imaging on behalf of our own multi-client department, $23 million of internal production in the quarter. And this obviously has to do with the fact that we have invested much more earlier in the year. So really high utilization of our imaging people and our imaging assets during this quarter. This gave an EBTA of 10 million dollars for the imaging segment compared to 9 million dollars in the same quarter of last year. Then looking at the total group financials, you see the revenue, $397 million in total in the quarter, split in $185 million of multi-client revenue and $211 million of contract revenue. This is 2% up compared to the same quarter of last year, which had $388 million of total revenue. Then looking at operating expenses, as I already partially alluded to, pretty high in the quarter for different reasons that I will come back to in a later slide. But it's roughly or close to $30 million higher than what it should have been in the quarter, mainly due to operational challenges. But I'll give some more details on that on the next page. and also you see that the elimination is lower in this quarter so we capitalise less of our gross cost and that of course is linked to the lower multi-client investments. Looking at depreciation and amortisation you see depreciation of 49 million dollars in the quarter it's significantly lower than we had in the same quarter of and many more. Straight line amortization amounted to 48 million dollars in this quarter and accelerated amortization amounted to 39 million dollars All in all, this gave us an EBIT of $86 million in this quarter. Included in that EBIT is an extraordinary gain related to the sale of the well data business of $49 million. So adjusted for that, the EBIT was $46 million compared to $94 million in the same quarter of last year. And then a bit more details on the operating cost development. So in the very beginning of the year, we expected a gross operating cost to be roughly $950 million for the year. This is obviously a Fairly complex exercise to estimate or forecast the gross cost exactly because the mix of different projects and different things that we do with asset will change during the year compared to the expectations you had in the beginning of the year. But nevertheless we expected around 950 million dollars of gross cost for the full year when we Guided to the market in February. And then since then, and as you've noted also on our utilization numbers, we have had significantly higher activity than what we anticipated. So that has added roughly 50 million dollars to the cost base in 2026. This is obviously cost that's associated with higher revenue as well. So this is covered by higher revenue. And then we have had project cost increases of another 50 million dollars and this is This is related to fuel prices and also to some operational challenges we have had on certain projects. And a lot of this, of course, a significant part of this hit our accounts in Q3. So all in all it means that we now expect the gross cost to end up at around 1 billion 50 million for the full year which means that we will expect to be at roughly 250 million dollars in Q4. All right, let's go through the P&L, the produced P&L for the quarter. I've covered revenue already, $396.5 million in this quarter. Then we had other income, and this is the profit from the sale of the well data business, $40.6 million. Subtracting the different cost categories, we ended up at an EBITDA of $222 million. And then subtracting depreciation and amortization, we had an operating profit of $86.1 million for the quarter. Financial income amounted to $6.9 million. Financial expenses or interest expenses amounted to $17.4 million. And then we had a small gain related to exchange rates of $1.4 million, which gave us a result before taxes of $77.2 million for this quarter compared to $75.3 million in the same quarter of last year. Then to cash flow. The cash flow was reasonably weak in the quarter. We had cash flow for operation of $124.8 million in this quarter. If you note that line called change in balance sheet items, this is essentially working capital movements, it's negative by $40 million in this quarter. And if you recall Q2, it was negative by $78 million, and then it was positive by $80 million in Q1. So year to date we are negative in terms of working capital contribution of roughly 40 million dollars. Working capital over time of course is some zero game and it means that you have some quarters with negative contribution. and they typically will be followed by some quarters with positive contributions. So we do expect a positive contribution from working capital both in Q4 and Q1 which should substantially improve our cash flow from operations in the coming quarters. Then we had capitalized multi-client investment of 64 million dollars and we removed the non-cash elements of this of 88.1 million dollars. And then some periodization impacts of negative of $8.5 million. We had paid multi-client investment of $64.3 million in the quarter. And as you know also in the first half we invested significantly more than we did in Q3. So of course on a year-to-date basis the high multi-client investments has also had a negative impact on our cash flow. Although multi-client investments in Q4 will be higher than it was in Q3, you will see significantly lower investments in the second half compared to the first half, which also should be quite helpful for the total second half. Subtracting capex of 27.6 million dollars and then adding on the net proceeds from the sale of the Veldata products business of 96.3 million dollars and an interest of 2.6 we had total cash flow from investments activities of 6.9. And then we paid down some net interest-bearing debt in the quarter, or interest-bearing debt in the quarter, $51.9 million. We paid interest of $28 million. We pay interest on our bond loan semi-annually, so we pay it in Q1 and Q3 every quarter. During the year so 28 million dollars in Q3 and then we had our regular dividend payments of 30.5 million dollars which gave us a cash flow from financing activities of 110.4 million dollars which all in all gave us a net change in cash and cash equivalents of 21.4 million dollars positive in the quarter. But as I said, we expect adjusting obviously for the sale of the well data business, we expect significantly better cash flow in Q4 and Q1. All right, then to the balance sheet. And here you should note that we have done a restatement of historical accounts. This relates to a dialogue we have had with Finanstilsynet, the Norwegian FSA related to their periodic review of our 2024 accounts and as you may recall we acquired PGS in 2024 so we have had some discussions with them with respect to the PPA and the numbers that went into that to the PPA so what this has resulted in is that we have moved the value of multi-client data from PGS that had zero book value at the time of the acquisition, which obviously would have some sort of fair value. We put that value at 81 million dollars when we did the transaction. This has been moved from from Goodwill to Multi Client Library. So you'll see that all other things equal, Goodwill has been reduced by 81 million dollars. In addition to that obviously the opening balance of Q3, so the 30th of June 2026 balance also included a reduction related to the sale of well data of 23 million dollars. As I said, Goodwill has been reduced by $61 million related to the restatement. Multi-client library has gone up by $81 million. And then we have had a $20 million increase of deferred taxes related to this restatement. In terms of the P&L impacts, it does not impact our Q3 accounts whatsoever and will neither affect our P&L going forward. So it's a pure change to historical numbers. But if you look at our historical quarters from Q3 2024 to Q2 2026, You will see that amortization has been increased by $10.1 million per quarter and then the tax cost has been reduced by $2.5 million. So it's been a net impact on those accounts of $7.6 million per quarter. You'll find more details about this in the Note 12 in the quarterly statement. All right and this brings me to my last page and that is about dividends so we continue to pay a dividend of 15.5 cents per share. The X date is set to 29 October 2026 so a week from now and the payment date will be three weeks from now on the 12th of November 2026. As you know our capital allocation strategy is to get our net debt down to below 350 million dollars and as I indicated we expect much better cash flow in Q4 and Q1 so we expect to be within that range in the relatively near term and at that stage we will revisit our shareholder distribution All right, by that I'll hand the word back to you, Kristian.