TGS Presentation of the 4 th Quarter 2005 Results February 9 th 2006 Arne Helland Chief Financial Officer Hank Hamilton Chief Executive Officer TGS-NOPEC Geophysical Company
Forward-Looking Statements All statements is this presentation other than statements of historical fact, are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. These factors include TGS reliance on a cyclical industry and principle customers, TGS ability to continue to expand markets for licensing of data, and TGS ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected in the forward-looking statements. TGS undertakes no responsibility or obligation to update or alter forward-looking statements for any reason. 2
Q4 2005 Financial Highlights Net Revenues 89.3 MUSD 30.8 MUSD (53%) up from Q4 2004 MC Investments 35,5 MUSD up 229% from 10,7 MUSD in Q4 2004 Prefunding 40% of Operational Investments (33.9 MUSD) Multi-Client Amortization Rate 36% Vs. 41% Q4 2004 EBIT 41.7 MUSD Up 86% from Q4 2004 and is 47% of Net Revenues (38% in Q4 2004) EPS (fully Diluted): 1.05 USD, up 78% from Q4 2004 3
Q4 Actuals vs. Analysts Expectations Actual Actual Actual Average vs vs (MUSD) Q4 2005 Analysts Consensus Consensus High Low Median Net Revenue 89.3 89.4-0.1 0% 91.1 88.9 89.3 EBIT 41.7 38.5 3.2 8% 41.5 34.5 39.1 Pre-tax Profit 42.2 38.4 3.8 10% 41.4 34.7 38.6 Net Income 28.5 26.2 2.3 9% 29.3 23.8 26.4 Earnings per Share * 1.09 1.01 0.09 9% 1.13 0.91 1.01 *Avg. number of shares (undiluted) 26044 Source: Reuters 4
Q4 2005 Profit & Loss (MUSD) Q4 2005 Q4 2004 Change % Gross Sales 97.7 65.7 32.0 49% Income sharing & Royalties -8.4-7.2-1.1 16% Net Operating Revenues 89.3 58.5 30.8 53% Materials 0.1 1.5-1.4-92% MCS Amortization 36% 31.3 22.8 8.4 37% Gross Margin 57.9 34.1 23.8 70% Other operating expenses 14.5 11.3 3.2 29% Cost of Stock Options 0.7 0.4 0.3 58% Depreciation 1.0-0.1 1.1-1801% Operating Profit 47% 41.7 22.5 19.2 86% Net Financial items 0.5 0.0 0.5-2127% Pre-tax Profit 47% 42.2 22.5 19.8 88% Taxes 13.7 6.5 7.2 111% Net Income 32% 28.5 15.9 12.5 79% EPS, undiluted 1.09 0.63 0.5 73% EPS, fully diluted 1.05 0.59 0.5 78% 5
Q4 2005 Cash Flow Statement Payments From Sales Received Payments for acquired seismic and well logs Operational Cost Paid Taxes Paid Operational Cash Flow Q4 2005 56.2-28.7-12.3-4.4 10.9 Q4 2004 38.0-10.8-11.3-2.2 13.6 Investments Fixed Assets Investments through Mergers and Acquisitions Net Change in Long-term Receivables 0.2 0.0 0.9-0.1 0.0 0.0 Net Change in Loans Purchase of own Shares Paid in Equity -0.3 0.0 0.2 0.2 0.0 3.0 Change in Cash Balance 12.0 16.7 6
Year-To-Date Results TGS-NOPEC Geophysical Company
Full Year 2005 Financial Highlights Net Revenues 254.4 MUSD up 48% (82.8 MUSD) from 2004 Net Late Sales 204.8 MUSD Increased 65% from 123.9 MUSD 2004 MC Investments 105,5 MUSD up 22% from 86,6 MUSD in 2004 Prefunding 40% of Operational Investments (103,8 MUSD) Multi-Client Amortization Rate 38% Vs. 43% 2004 Cash Flow from Operations positive 64.0 MUSD Vs. 15.9 MUSD during 2004 EBIT 108.5 MUSD Up 89% from 2004 and is 43% of Net Revenues (33% in 2004) EPS (fully Diluted): 2.71 USD, up 90% from 2004 8
YTD 2005 Profit & Loss (MUSD) Gross Sales Income sharing & Royalties Net Operating Revenues Materials MCS Amortization Gross Margin Other operating expenses Cost of Stock Options Depreciation Operating Profit Net Financial items Pre-tax Profit Taxes Net Income EPS, undiluted EPS, fully diluted 38% 43% 43% 29% 12 Months 2005 278.0-23.6 254.4 0.8 94.4 159.2 45.9 2.0 2.8 108.5 1.2 109.7 36.4 73.3 2.84 2.71 12 Months 2004 190.3-18.7 171.6 4.0 70.3 97.3 36.2 1.5 2.4 57.2-0.8 56.4 18.1 38.4 1.53 1.43 Change 87.7-4.9 82.8-3.2 24.0 61.9 9.8 0.5 0.4 51.2 2.0 53.2 18.4 34.9 1.3 1.3 % 46% 26% 48% -79% 34% 64% 27% 35% 16% 89% -251% 94% 102% 91% 86% 90% 9
TGS Revenue, EBIT, Net Income 300 250 MUSD 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 YEAR Revenue EBIT Net Income 10
EBIT Margin vs Peer Group 60 40 TGS EBIT MARGIN, % 20 0-20 -40-60 1999 2000 2001 2002 2003 2004 9M-05 2005-80 -100 TGS Comp A Comp B Comp C Comp D 11
Balance Sheet - Key Figures Dec-05 % Sep-05 % Dec-04 % Assets Cash 134.1 29% 122.0 29% 62.4 18% Other Current Assets 129.9 28% 96.8 23% 91.4 26% MC Library 160.6 35% 156.3 37% 149.5 43% Total Current Assets 424.5 91% 375.2 90% 303.3 88% Goodwill & Long Receiv. 21.1 5% 23.6 6% 28.5 8% Fixed Assets 18.7 4% 19.1 5% 13.6 4% Total Assets 464.3 100% 417.9 100% 345.3 100% Liabilities Short-term debt 0.0 0% 0.0 0% 0.1 0% Current Liabilities 60.9 13% 46.3 11% 45.1 13% Long-term Loans 45.1 10% 46.8 11% 51.4 15% Deferred Tax 29.4 6% 25.3 6% 9.1 3% Equity 328.9 71% 299.5 72% 239.5 69% Cash in excess of interest bearing debt 89.0 MUSD 12
Multi-Client Library TGS-NOPEC Geophysical Company
Multi-Client Library NBV in % of Investment Seismic Segment - December 31, 2005 MUSD 550 500 450 400 350 Net Book Values are far below the max. NBV criterias in accounting principles 300 25% vs. 45% 250 200 59% vs. 100% 150 100 50 0 0% 0% 9% vs. 20% 17% vs. 40% 32% vs. 60% Pre-2001 2001 2002 2003 2004 2005/WIP Total Total Project Investments Net Book Value Allowed NBV at year end 1% 14
Q4 2005 Multi-Client Revenue & ending NBV Seismic Segment 80% 75% 70% 60% 50% 47% 40% 30% 20% 10% 7% 0% 18% 0% 4% 3% 4% 8% 19% 14% 0% Pre-2001 2001 2002 2003 2004 2005/WIP Q4 Net Revenue Net Book Value 15
Multi-Client Library Revenue vs. Ending NBV 250 225 200 175 150 125 100 75 50 25 0 2000 2001 2002 2003 2004 2005 Net Book Value Net MC Revenues 16
Operations & Outlook Hank Hamilton Chief Executive Officer TGS-NOPEC Geophysical Company
Net Revenue Breakdown Q4 2005 Contract 3% Prefunding 15% Late Sales 82% Quarterly Record of $72.8 M up 46%! Q4 2004 Contract 6% Prefunding 9% Late Sales 85% 18
Net Revenues by Product Type Q4 2005 Well Logs 6% 3D 55% 2D 39% Q4 2004 Well Logs 7% 3D 53% 2D 40% 19
Q4 Geographical Net Revenue Distribution 100% 80% 60% 40% 71% 77% Q4 2005 Q4 2004 20% 29% 23% 0% Eastern Hemisphere Western Hemisphere 20
Operational Highlights Continued acquisition of Sophie s Link 3D in GoM Completed acquisition of 2D projects in North Sea, Greenland, Sakhalin, and Celtic Sea Launched new 2D project offshore Madagascar A2D earned record quarterly revenues and identified an additional 400,000 logs in the Riley inventory to be converted Purchased exclusive rights to 131,000 kms reprocessed 2D seismic offshore Norway from Tokking 21
Gulf of Mexico 3D Activity 22
Gulf of Mexico 3D Activity 23
Morondava Basin Survey ~2,200 km 2D seismic, gravity and magnetic data acquired in 2001 ~10,000 km 2D seismic, gravity and magnetic data launched in Q4-2005 Supported with pre-funding from multiple oil companies Data will be available ~ 6 months prior to a late 2006 concession round 24
Merger & Acquisition Milestones TGS-NOPEC merger June 1998 BiPS acquisition October 1998 Symtronix acquisition March 2001 Partner buyouts (GoM 2D & 3D) December 2001 A2D acquisition June 2002 Riley acquisition December 2003 NuTec acquisition July 2004 Aceca acquisition January 2006 25
Aceca Primary business is creating multi-client integrated interpretation studies Focus has been NW Europe Product packages include wellbore based stratigraphy correlated with seismic in a unique facies map browser (FMB) viewer. 26
Aceca Multi-Client Products 27
28 Backlog 19.1 10.1 15.3 9.8 13.5 9.4 20.8 8.6 17.3 10.3 19.7 11.4 27.4 11.2 22.8 13.5 23.8 15.4 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 MUSD Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Seismic A2D
Backlog MUSD 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 19.1 Q4-03 10.1 15.3 Q1-04 9.8 13.5 Q2-04 9.4 20.8 8.6 17.3 10.3 19.7 11.4 27.4 Q3- Q4-04 04 Seismic Q1-05 A2D Q2-05 11.2 13.5 22.8 Q3-05 23.8 Q4-05 15.4 Have experienced positive development in backlog since year end 29
License Rounds - 2006 30
Scheduled Lease Expirations - GOM 600 500 #Blocks Expiring 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year TX Shelf TX Deep LA Shelf LA Deep Circa 12/31/2005 31
Market Conditions & Outlook Replacement of reserves is a priority! Most industry surveys point to an increase in E & P expenditures of 15-20%. Exploration spending increases should keep pace with total E & P spending. Seismic companies have excellent backlog with most marine crews booked at attractive rates for 2006. Most seismic companies plan to increase MC investments in 2006-07. 32
Market Situation for Vessels Supply for 2006 is tight New and existing players are bringing significant new capacity to the market: 3D vessel count: 36 in spring 2005 to 50 in mid 2007, 39% growth 3D streamer count: ~50% growth over same period 2D vessel count: 25 in early 2005 to 30 in mid 2006, 20% growth 33
TGS Vessel Situation Two 3D crews under contract for portions of 2006, one more secured by LOI for portions of 2006 Five 2D crews secured for portions of 2006 Pricing: Majority of crews secured at same rates as 2005, others at moderate price increases In summary, TGS is well-positioned to execute its 2006 investment plan 34
TGS 2006 Expectations Multi-client library investments of USD 125-135 million 35
Investments in Multi-Client Library 130 120 110 100 90 80 70 60 50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006E Investments in new projects Multi-client data purchased from third parties 36
TGS 2006 Expectations Multi-client library investments of USD 125-135 million Average annual pre-funding of 40 50 % of investments Average annual amortization rate of 37 42 % of net multi-client revenues 25 30 % increase in Net Revenues over 2005 37