TGS - Nordic IR Conference Consistent approach - in a favorable environment Copenhagen 20 September 2012
Content Introduction to the oil services industry and TGS Our approach to investor relations Challenges when economic climate changes IR development objectives 2
This is TGS Leading provider of multi-client seismic data and related geoscientific products to the oil & gas industry Main offices: Houston and Oslo Regional offices: London, Stavanger, Perth, Calgary and Rio de Janeiro Calgary Houston TGS Main Offices Stavanger Oslo London Fundamental values: Unmatched Quality and Service, Growth for Stakeholders Approximately 800 employees Rio de Janeiro Perth Traded on Oslo Stock Exchange, in OBX Index (25 most liquid shares at the OSE) Market Cap: ~$3 billion Leading and global provider of multi-client seismic data 3
Oil service industry overview Oil services cover multiple activities from the manufacturing of components used in well construction, to the operation of offshore platforms, to the engineering of refineries The major segments relevant for the stock market are: Oil Services Seismic Drilling Drilling services Equipment manufacturing Offshore & Subsea Onshore construction 4
Oil service industry key drivers E&P* Spending Oil Price Source: 2003-2012 Barclays Capital E&P Spending Outlook * Exploration and production 5
Oil service a cyclical play Oil services tend to underperform in bear markets and outperform in bull markets 6
TGS performs in all cycles ROCE vs. Seismic Peers EBIT Margins vs. Seismic Peers 100% 80% 80% 60% 60% 40% 20% 0% -20% 40% 20% 0% -20% -40% -40% -60% -80% -100% -120% 2007 2008 2009 2010 2011 TGS Peer Range Peer Average -60% -80% -100% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TGS Peer Range Peer Average ROCE consistently outperforming peers Average EBIT margin above 40% Stable EBIT performance through the cycles * ROCE is based on EBIT divided by average capital employed. Peer group includes CGG Veritas, Fugro, Geokinetics, ION Geophysical, PGS, Western Geco, and GGS Source Platou Markets and TGS 7
TGS business model has a proven track record Pure play multi-client seismic company Focusing on what we do best while maximizing shareholder returns Developing the best projects is key across the industry <5% proprietary projects that usually carry lower margins Asset light No vessel ownership, chartering vessels only when we see a good investment Take advantage of industry s historical spare capacity in down markets to maximize return in periods of demand Not R&D intensive Allowing to focus R&D where it carries the highest impact and return for TGS Peers find themselves having to invest across a much broader area to be current on vessel and streamer technology developments Technology neutral Selecting technology based on project needs, not a company specific portfolio Competitive advantage through new technology tends to be short lived client values end product over production process 8
Content Introduction to the oil services industry and TGS Our approach to investor relations Challenges when economic climate changes IR development objectives 9
IR awards to TGS 2006: Best company Norway 2011: Best company Norway Stockman- Prize 2000: Best company Oslo Børs (small-mid cap) 2012: Best company Oslo Børs (large cap) 2012: TGS rated number one company in Norway in European survey by CE Capital Management 10
Top company or top investor relations? Strong fundamentals in jittery market Focused strategy Consistent delivery at or above expectations Conservative guidance Solid share price performance last two years combined with strong dividend payout Corporate governance policy and compliance Share price performance Cash distribution to shareholders 2007-2011 150 USD Millions 100 50 0 2007 2008 2009 2010 2011 Dividend * Share buy backs 11
TGS IR strengths according to Regi s survey Regi-IR top-ranking TGS priorities Top management trustworthiness Uniform approach to IR / Shared IR focus in top management Consistent communication and aligned message to market Education of analysts, investors and media Individual meetings Top management availability Balancing need to meet quarterly expectations with longer term performance Consistency (message, presentation materials) Enthusiasm (we like to tell the story) Every investor is important no screening IR is high on the agenda for top management CEO, CFO and IRO spends 10%-50% of total time on IR activities Quarterly reports Consistent and transparent Quality of materials through top management attention Corporate governance (focus on rules and regulations) 12
Key commandments ensuring consistency Dual headquarters means limited day-to-day contact between IRcommunicators Framework to ensure trust between top management, consistent messages and open dialog with the market despite two headquarters Key commandments : Educate investor base (understand our business model) Focus on long-term performance rather than next quarter Focus on TGS rather than competitors Avoid discussions about pricing Presentation of facts Correction of estimates only when they are based on misunderstandings 13
Focus on openness and availability requires a time consuming IR schedule Availability of management for one-on-one meetings with investors and analysts Presentation at approx 10-15 investor conferences annually More than 100 1-on-1 meetings annually +10 cities in Europe and North America covered on a regular basis Roadshow following each quarter organised by different brokers Covering all main markets Capital markets day 2011 Attracting 100 analysts and investors to Oslo 14
Why a sell-recommendation is OK? Who is that idiot who doesn t understand our business model? IR s role to help TGS organisation understand market dynamics, rational and triggers Investors sometimes focus on the paper rather than the company Being overvalued could also be seen as a an acknowledgment to management... 15
Content Introduction to the oil services industry and TGS Our approach to investor relations Challenges when economic climate changes IR development objectives 16
IR in turbulent times Oil Services considered to be a very cyclical industry Focus on long-term fundamentals rather than short-term fluctuations in the oil price The easy oil has been found and the world will demand more... Deepwater Horizon - a serious setback for the industry Focus on geographic and product diversification and long-term outlook Conference call immediately after accident to inform market about consequences for TGS Open and forthcoming 17
Content 18 Introduction to the oil services industry and TGS Our approach to investor relations Challenges when economic climate changes IR development objectives
IR development objectives Small organisation compared to market cap Investors want top management attention Target the right investor group rather than please investment banks Keeping a close eye on beneficial owners and making sure that we target the right ones Expanding our shareholder base in the US and Asia Increasing liquidity in a market under pressure 19
Investor targeting key to increasing trading volume Knowing the owners is key to understand expectations Significant number of shareholders are hidden behind nominee accounts Identify owners but also the ones who are not owners OSE-trading volume 2006-2011 20 TGS volume as a % of total OSE-trading
Summary Oil services considered a cyclical play TGS business model has performed through the cycles IR performance highly correlated to financial performance Consistency is critical both in good and bad times Investors want to meet top management let them! Know your owners and identify the potential ones 21
Questions? 22