TGS Reports Q3 2023 Financials

TGS (Ticker: TGS), a leading provider of geoscience data for exploration & production (E&P) companies, reported revenue of $501 million for the third quarter, an increase from $455 million year-over-year. EBITDA rose to $280 million, compared to $268 million in Q3 of 2022. After adjusting for one-time merger-related costs, EBITDA would stand at $296 million. CEO Kristian Johansen noted progress in surpassing merger synergy targets and expressed optimism for growth in all business units.

Key Takeaways

• TGS's Q3 2023 revenue increased to $501 million, with an EBITDA of $280 million.
• Adjusted EBITDA, excluding non-recurring costs, would be $296 million.
• The company is ahead of its $70 million annual synergy targets by year-end.
• Strong performance in multi-client sales and OBN contract revenues contributed to revenue growth.
• Significant growth in the New Energy Solutions segment with upgraded credit ratings.
• A dividend of $0.14 per share was declared.

Company Outlook

• TGS anticipates modest single-digit growth in seismic spending from clients next year.
• Optimistic about capturing substantial tender activity.
• Expects strong sales in the winter season with an improved backlog for early 2024.

Bearish Highlights

• Imaging & Technology segment reported flat revenues with marginal losses.
• Net debt reached $425 million, over the target range, needing refinancing.
• Adjusted multi-client investment guidance for the year due to permitting delays.

Bullish Highlights

• Surge in multi-client sales and OBN revenues positively affected growth.
• Growth in the New Energy Solutions segment indicates expanding market potential.
• Active in offshore wind and seismic operations globally.

Challenges

• Raised net debt due to the PGS merger.
• Imaging revenues remain low-margin, though profit improvements are planned.

Q&A Insights

• CEO Kristian Johansen discussed integration synergies from ERP and sales systems.
• Plans for refinancing the PGS-related debt contingent on market conditions.
• The company holds space for vessel operational flexibility.

TGS demonstrated resilience amid industry volatility, reporting a 10% YoY revenue increase and exceeding merger synergy targets post-acquisition. The focus on diversifying offerings and participation in global projects positions the company favorably for future performance.

Full transcript – None (TGSNF) Q3 2024

Presentation Highlights

Bard Stenberg, VP of Investor Relations, commenced the presentation with a forward-looking statement reminder, followed by CEO Kristian Johansen summarizing the strong Q3 results amid geopolitical tensions affecting oil prices. The total revenue of $501 million and an EBITDA of $280 million were achieved, with notable merger-related costs included.

Key operational projects across various regions like Norway, the US Gulf of Mexico, Brazil, and Africa pointed to TGS's expanding footprint. Robust performance in the multi-client sector, including projects in Brazil and Indonesia, was reported.

Financial Overview

• Significant improvements in profitability led to an EBIT margin of 24%.
• OBN business benefitted from external activity alongside robust contract revenues.
• Expected multi-client investment reductions anticipated due to permitting issues.

Closing Remarks

Strengthened credit ratings from S&P and Moody's reflect TGS's improved outlook, essential for upcoming refinancing initiatives. While the company cautions against volatility in discretionary spending, Johansen remains optimistic about contract activity in 2025.

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