Record Year – Strong 2008 Outlook
2007 was another excellent year for PGS with substantial increase in revenues, operating profit and cash flow.
We built further momentum in executing our strategy of technology-oriented growth both organically and through acquisitions. The 2008 outlook is strong.
2007 proved the strengths of PGS as a dedicated geophysical services company. We improved our Marine contract EBIT margin further despite strong industry wide cost inflation and extensive yard stays in the fourth quarter. The longer term cooperation and support agreement with the Japanese Ministry of Economy, Trade and Industry (METI) represents a recognition of PGS’ unique capabilities. Our reentry into the Gulf of Mexico with the Crystal I wide-azimuth survey was executed faster, at lower cost and higher prefunding than expected, confirming the effective rebuilding of our strengths in multi-client.
Our Onshore operation performed below expectations in 2007 due to lower activity and weak project continuity in Africa and adverse weather conditions in the US.
Enhanced focus on multi-client activity in North America proved successful and will continue.
PGS launched several new step changing technologies in 2007. A milestone in streamer technology is our new GeoStreamer® – the first ever dual sensor streamer, which gives better penetration, enhanced resolution and improved operational efficiency. Demand for this technology has surpassed all expectations and all planned acquisition capacity in 2008 is already sold out. We continued to build our position in fiber optics/permanent monitoring making the ambition of two pilot installations this year a realistic one.
Our organic growth strategy also builds on our current areas of strengths – a leadership in 3D marine acquisition through the Ramform vessel fleet and proven operational capabilities. In an industry where delays and cost overruns are prevalent it is gratifying for PGS to get delivery of Ramform Sovereign on time and budget in March this year and to see the Ramform Sterling on schedule for Q2 2009 delivery.
We completed four strategic acquisitions during 2007. Arrow Seismic provides an important supplement to our high-end seismic fleet. PGS will gain access to two state of the art 10-12 streamer new-build vessels at attractive cost and delivery times. The acquisition of MTEM accelerates our entry into the EM market and with a technology highly complimentary to PGS’ own development of towed EM. Data processing is a business arena where PGS has unproven potential compared to its strongest competitors. We have a strong ambition to improve our data processing capabilities both organically and through acquisitions. In 2007 we executed on this strategy organically and through acquiring Applied Geophysical Services (AGS), enhancing our depth imaging capabilities. We also further boosted our strengths and expanded our multi-client MegaSurvey product through the acquisition of Roxicon Geogrids.
The seismic industry will continue to be positively impacted by a strong rise in E&P spending. There are to date no indications that oil companies are having decisive success in breaking the downward trend in reserve replacement ratios and more advanced seismic technologies take on increased importance in the effort to get more out of mature areas while reducing the added risk from rapidly climbing drilling cost.
This is good news and positive drivers for an advanced seismic operator like PGS.
Chief Executive Officer*
*Svein Rennemo retired from his position April 1, 2008, replaced by Jon Erik Reinhardsen.