TGS-NOPEC Geophysical Company ASA has announced that it has submitted a conditional offer for the purchase of the multi-client data library of PGS ASA. 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 monetise 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 says, “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,” continues Johansen.
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 specialisation 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.
The offer presented to PGS is valid until 16 August 2020. The transaction contemplated by the offer is subject to transaction documentation being finalised 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 2020.