Board of Directors’ Report

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The overall offshore seismic market was weaker in 2021 than in 2020. The market started to recover from the impact of the COVID-19 pandemic during 2021, but remains challenging.

PGS achieved higher revenues in 2021, adjusted for COVID-19 related government grants, primarily due to an improvement of contract revenues from increased activity levels and price recovery in the second half of the year. In addition, MultiClient late sales revenues increased by 32% compared to 2020.

PGS returned to generating positive net cash flow after debt service in 2021. However, the market recovery has been slower than assumed in the business plan used for the debt rescheduling in 2020. As a result, the maturity profile of interest-bearing debt may become challenging and PGS will need to address this in 2022.

PGS is a fully integrated marine geophysical company that provides a broad range of seismic and reservoir services, including data acquisition, imaging, interpretation, and field evaluation. The Company’s services are provided to the oil and gas industry, as well as to the broader and emerging new energy industries, including carbon storage and offshore wind. The Company operates on a worldwide basis with headquarters in Oslo, Norway.

PGS is organized in four primary business units: Sales & Services, New Energy, Operations and Technology & Digitalization.

  • Sales & Services promotes and sells all PGS’products and services to energy companies
  • New Energy assesses and develops business opportunities within the energy transition markets where PGS can diversify its service portfolio and generate revenues
  • Technology & Digitalization manages research and development, PGS digital transformation projects and Enterprise IT Operations manages vessel operations and marine seismic acquisition projects\

2021 Business Highlights

PGS increased revenues in 2021, compared to 2020, when adjusted for COVID-19 related government grants. Cash flow before financing activities ended at $155 million, an increase of 38% from 2020.

In early 2021, PGS established the New Energy business to diversify its product portfolio and build a position in the provision of subsurface data for the offshore renewables’ domain or related to the ongoing energy transition. PGS identified carbon storage (“CS”), offshore wind, and marine minerals as markets where there is potential to build a profitable business. PGS made several MultiClient data sales in 2021 and has been awarded seismic acquisitions surveys relating to carbon storage late 2021 and early 2022.

Evidencing its strong position in the 4D market, PGS was awarded a multi-year 4D framework agreement by Equinor.

PGS completed its first simultaneous node and streamer seismic survey, in a contract for Lundin Energy Norway in the Barents Sea. During the survey PGS set several acquisition records.

To expand on the Company’s node capabilities, PGS entered a strategic collaboration with Magseis Fairfield to address the market for seismic surveys which combines towed streamer and Ocean Bottom Node (“OBN”) acquisition. The strategic collaboration has a global scope with initial focus on the North Sea, and a one-year duration with options to extend by two plus two years.

PGS completed a sale of the assets associated with its towed electromagnetic system to Ocean Floor Geophysics (“OFG”). Following the transaction, PGS owns 46% of OFG and collaborates closely with the company, especially in developing the New Energy business.

PGS, TGS and CGG launched Versal – a unified seismic data ecosystem giving access to the MultiClient products offered by the three companies, who hold three of the world’s largest MultiClient libraries, via a single log-in.

Cloud enablement of its MultiClient subsurface data library is an integral part of PGS’ digital transformation journey, enabling new services and business models that generate new revenue streams. In December, PGS announced a milestone Data Management as a Service (“DMaaS”) agreement with a major customer. DMaaS allows clients to easily access all their PGS data and entitlements by access to the Cloud.


PGS is a fully integrated marine seismic acquisition and imaging company, offering a full range of towed streamer acquisition and imaging services through both the proprietary Contract and MultiClient business models. Being in control of seismic acquisition vessels, imaging and technology, positions PGS to deliver the best and most flexible solutions to clients under any contract type.

Capital expenditures relating to the Ramform Titan-class new build program, followed by a prolonged industry downturn from 2014 to 2018 and a severe impact from the COVID-19 pandemic, has led to a level of interest-bearing debt which is higher than targeted. The Company has over this period raised equity and extended debt maturities on several occasions to manage its debt obligations. The Company’s financial strategy is to prioritize cash flow and debt reduction before growth. Debt reduction will be given priority until PGS reaches a capital structure that is sustainable considering company size and market cyclicality. Net interest-bearing debt (excluding lease liabilities) was $936.4 million at year-end 2021 and, while PGS has significantly adjusted its cost base and capital expenditures to mitigate the impact of lower revenues, the Company depends on a market recovery to carry out significant debt repayments and achieve the target of a net-debt level not exceeding $500-600 million, excluding lease liabilities.

The PGS business strategy comprises the following key priorities:

  • Leverage integration across the PGS value chain
    PGS aims to fully utilize the contract and the MultiClient market in combination with integrated commercial models to build vessel campaigns maximizing fleet utilization. The Company intends to capitalize on selling joint acquisition and imaging services as a complete solution to optimize margins and MultiClient pre-funding and sales.
  • Leading provider of near-field exploration and production (4D) seismic
    The energy transition drives increasing focus towards near-field exploration and production seismic. PGS is well positioned in these market segments with the Ramform acquisition platform and GeoStreamer technology. PGS intends to improve exposure and profitability further by creating geologically driven geophysical workflows and solutions tailored towards infrastructure lead exploration, appraisal, and development. Rich azimuth illumination of GeoStreamer data, GeoStreamer X, targets exploration in mature hydrocarbon basins is being rolled out in Europe with success. PGS intends to industrialize the technology further and launch it into other core markets. PGS believes there are untapped opportunities in the hybrid streamer and OBN market and is positioned to take advantage of that.
  • Develop New Energy into a significant business unit
    PGS has an ambition to build a substantial and recognized presence in markets within the offshore renewables’ domain or related to the ongoing energy transition. PGS intends to build a business with growing revenues as fast as these opportunities materialize. PGS has identified carbon storage, offshore wind and marine minerals as domains where the Company can match its assets, competence, and capabilities to address industry challenges. Already in 2021, the Company made several MultiClient data sales related to carbon storage and secured awards of two acquisition contracts for development of the Endurance and Northern Lights CCS projects. Within offshore wind and marine minerals, PGS has commenced a process to create and potentially execute on a market entry.
  • Increase speed and penetration of digitalization
    PGS started on its digital transformation process in 2019 by establishing a dedicated digitalization team. Scope and speed of digitalization is accelerating and PGS is working on three main digitalization projects:

    • PGS Digital Factory - Includes a suite of initiatives to deliver on the PGS strategy and create tangible value by enabling machine learning and artificial intelligence to optimize costs, tracking trends, improving predictability and performance, reducing project execution time, and revealing commercial opportunities.
    • PGS Solis - A cloud-based MultiClient sales platform that enables new sales models and allows clients to collaborate on high-quality data and achieve faster decisions and subsurface insights
    • PGS Eos - Enabling faster processing and imaging of seismic data, using automated workflows and cloud scalability
  • Reduce operating cost and increase efficiency
    Fleet operations are a dominant part of the Company’s cost base. PGS intends to optimize fleet cost and improve efficiency by developing and implementing new and more flexible crewing models, without negatively impacting safety. Further, the Company is increasingly taking advantage of its digital toolbox to improve operational efficiency.
  • Reduce environmental footprint from our operations
    PGS works towards an environmental transformation of the Company’s operations by delivering services with the smallest environmental footprint possible. Delivering on PGS Environment, Social and Governance
    (“ESG”) goals is the Company’s license to operate. PGS continues to develop towards its goal of a 50% reduction in CO2 per Common Mid-Point (“CMP”) kilometers by 2030. Further, PGS is targeting 100% renewable energy for the compute capacity used and power to the offices. For the seismic acquisition, PGS aims at minimal acoustic impact with maximum efficiency in acquisition projects, and no conflicts with fisheries or local communities where the Company operates. PGS intends to minimize waste, and targets 100% reuse or recycle.

Market Development and Main Businesses

PGS is one of the largest players in the global marine 3D seismic market.

The oil price has increased substantially since the low levels in 2020. However, despite encouraging fundamentals, the overall seismic market declined by approximately 6% in 2021, compared to 2020, measured by revenues for the three major seismic companies with publicly reported numbers.

With the evolving energy transition, energy companies in 2021 focused resources on near-field exploration, exploration in licensed acreage and 4D reservoir optimization. The seismic Contract business model normally serves these market segments, and the contract market benefited from the higher activity level and a recovery of pricing in the second half of 2021. PGS has a solid market share in the 4D segment with its GeoStreamer offering, as well as steerable streamers and sources, enabling high data quality and precise replication of earlier 3D surveys and baseline 4D surveys.

The MultiClient market did not show the same level of recovery and experienced a year-over-year decline in investments in new MultiClient surveys and revenues. However, companies with more MultiClient data in proven hydrocarbon basins generally experienced a better sales development than companies with an exploration oriented MultiClient portfolio.

The energy transition presents new opportunities for the seismic industry. During 2021, several seismic companies made MultiClient data sales for CCS purposes. Towards the second half of the year, the industry progressed further with several bids for acquisition of new seismic data to develop CCS projects. Two of the bids relate to the Northern Endurance and the Northern Lights projects, which were both awarded to PGS.

The average operated 3D vessel capacity in the seismic industry decreased by almost 25% in 2021 compared to 2020 and is now at levels similar to the mid-1990s. With the exception of the summer season (second and third quarter), fleet utilization was generally low in 2021, primarily since the winter-seasons have had low project activity levels for the last two years.


PGS is concentrating its research and development efforts on areas of technology differentiation from seismic acquisition to subsurface and reservoir imaging. The Company is capitalizing on digitalization to improve its operational efficiency, reduce capital expenditures and develop new digital service offerings.

GeoStreamer, the first-ever multisensor streamer and a proprietary PGS technology, was a game changer in streamer technology and a premier example of PGS’ ability to differentiate through technology innovation. GeoStreamer has affected the way marine streamer data has been used across the entire E&P life cycle, helping PGS customers to reduce exploration risk, improve the delineation of reservoir details, enable accurate reservoir characterization and facilitate better production monitoring and management. The unique design of GeoStreamer has helped PGS customers to solve some of their long-standing problems, such as creating high resolution images of the very near surface.

Separated Wavefield Imaging (“SWIM”) is a technology that uniquely uses the recordings of the two complementary GeoStreamer sensors to create images with unseen resolution that significantly improve E&P companies understanding of shallow geology and drilling hazards whilst simultaneously enabling improvements in survey efficiency – an undertaking previously viewed as contradictory. With the increased focus on the very shallow overburden for wind farm site evaluations or deep-sea mineral location, techniques such as SWIM will continue to provide a critical competitive advantage to PGS.

In 2021, the Company launched PGS Ultima, a new imaging tool to provide better images faster and address another of PGS’ customers long-standing challenges to have access to subsurface images for quicker decision making. PGS Ultima moves away from the traditional sequential processing to a fast simultaneous inversion process, combining velocity model building and high-end imaging in a single step. The imaging tool has the potential to reduce the time it takes from acquisition to the final image on the customer’s workstation by approximately 50%.

PGS is also making significant R&D progress with seismic sources. The Company has the industry leading source steering technology, and through new technology and improved towing configurations, PGS can deliver improved acquisition efficiency by leveraging wide source separation. 

Financial Results

Following implementation of the accounting standard for revenues, IFRS 15, in 2018, MultiClient pre-funding revenues are recognized at delivery of the final process data, which is typically significantly later than the acquisition of the seismic data.

For internal management purposes PGS continues to use the revenue recognition principle applied in previous years before implementation of IFRS 15, which is based on percentage of completion and uses this for purposes of Segment Reporting. See Note 4 in the annual financial statements
for description.

The comments below relate to both the Company’s primary financial statements with the adoption of IFRS 15 from January 1, 2018 (“As Reported”) and segment financial information “Segment” unless otherwise stated.

In 2021, As Reported revenues and Other Income amounted to $703.8 million, compared to $512.0 million in 2020, an increase of $191.8 million, or 37%. The increase is driven by completion of processing and delivery of final data for several significant MultiClient projects (where acquisition of data for the most part was completed before 2021) and increased contract revenues from allocating more vessel capacity to contract and improved rates.

2021 Segment Revenues and Other Income were $590.0 million, compared to $595.9 million in 2020, a decrease of $5.9 million, or 1%. Excluding government grants received in 2020 and 2021 (see “Other Income” below) the full year 2021 Segment revenues increased by $26.9 million, or 5%, compared to the full year 2020. The increase is driven by increased activity in the contract market at improving rates and higher MultiClient late sales, partially offset by lower investment in new MultiClient surveys and therefore lower pre-funding revenues despite increased pre-funding percentage.

Contract revenues ended at $207.8 million, compared to $146.7 million in 2020, an increase of $61.1 million, or 42%, primarily due to an improving seismic contract market with rates gradually improving and significantly more capacity allocated to contract work.

As Reported MultiClient pre-funding revenues for the full year 2021 amounted to $247.7 million, predominantly relating to completion of surveys in Africa. This was an increase of $113.0 million, or 84%, compared to the full year 2020. The increase is a result of more surveys completed and delivered to customers in the period.

Segment MultiClient pre-funding revenues in 2021 were $133.9 million, compared to $218.6 million in 2020, a decrease of $84.7 million, or 39%. The decrease is primarily driven by significantly less capacity allocated to MultiClient, as the Company experienced a reduced demand for new MultiClient surveys. Segment MultiClient pre-funding revenues for the full year 2021 were highest in North America and Africa.

Segment MultiClient pre-funding revenues as a percentage of capitalized cash investment (excluding capitalized interest) was 105% in 2021, inside the Company’s targeted range of 80-120%, compared to 98% in 2020. Cash investment in the MultiClient library ended at $127.2 million in 2021, compared to $222.3 million in 2020, a decrease of $95.1 million, or 43%. The lower MultiClient cash investment is mainly due to fewer vessel days allocated to MultiClient projects.

MultiClient late sales in 2021 were $220.4 million, compared to $167.3 million in 2020, an increase of $53.1 million, or 32%. The increase is due to a recovery of demand for MultiClient data library in mature areas, while the market for MultiClient data library in frontier areas is still characterized by cautious spending and deferral of purchases by some customers. The Company has a diversified MultiClient library with most of the data in the world’s main offshore producing hydrocarbon regions. Late sales for the full year 2021 were highest in Europe.

Total Segment MultiClient revenues (pre-funding and late sales combined) decreased by $31.6 million or 8%, compared to 2020 and ended at $354.3 million.

Other Income was $6.2 million in 2021, compared to $39,7 million in 2020, a decrease of $33.5 million, or 84%. PGS received COVID-19 related government grants from the Norwegian State of $38.8 million during 2020 and $6.0 million from the US Government in 2021, which explains the lower Other Income in 2021, compared to 2020.

The fleet allocation ratio, active 3D vessel time for marine contract versus MultiClient data acquisition, was 59:41 in 2021, compared to 29:71 in 2020.

The Company closely monitors its gross cash costs. Gross cash costs are defined as the sum of reported net operating expenses (excluding depreciation, amortization, impairments, deferred steaming, net and other charges, net), the cash operating costs capitalized as investments in the MultiClient library, and capitalized development costs. In 2021 gross cash costs ended at $401.8 million, a reduction of $24.4 million, or 6%, compared to 2020.

During 2020 PGS, as a response to the dramatically lower revenues and activity levels caused by the COVID-19 pandemic, implemented substantial measures to reduce the annualized gross cash cost run rate by more than $200 million. The Company stacked PGS Apollo, Sanco Swift and Ramform Vanguard. Further, in Q3 2020 PGS completed a comprehensive reorganization to reduce office-based personnel by approximately 40% compared to the start of the year, renegotiated terms with suppliers and implemented several other initiatives. Cost levels through most of 2020 also benefited from a weak Norwegian kroner and lower fuel prices, which have reversed in 2021. In addition, during 2021, Ramform Vanguard and Sanco Swift (source operation) were reactivated for parts of the year, adding to the gross cash cost of the Company.

Net operating expenses, which include cost of sales, expensed research and development costs, and selling, general and administrative costs, totaled $269.8 million in 2021, compared to $198.2 million in 2020, an increase of $71.6 million, or 36%. The increase is primarily a result of more capacity allocated to contract work and less cost capitalized as MultiClient investment.

Full year 2021, gross research and development (“R&D”) costs decreased by $2.7 million, or 16%, compared to 2020. Capitalized development cost decreased by $0.5 million, or 6%, compared to 2020, resulting in overall R&D net expense in 2021 being 25% lower than in 2020. The Company’s R&D costs are mainly incurred to support and develop core business activities of marine seismic acquisition and imaging.

In 2021, total MultiClient amortization, As Reported, was 78% of MultiClient revenues, compared to 76% in 2020. The Company recognized accelerated amortization of $214.2 million on projects completed in 2021.

The Company recorded impairments on the MultiClient library of $13.6 million in 2021, compared to $34.9 million in 2020. The impairments in 2021 primarily relate to projects in North America, Europe and Asia. There is a risk that the current weakness in the discretionary MultiClient market may negatively impact the timing of expected future cash flows, and further impairment may arise in future periods.

Segment MultiClient amortization for 2021 decreased by $22.1 million, or 7%, to $274.2 million, compared to 2020. Segment MultiClient amortization as a percentage of total Segment MultiClient revenues was 77% in both 2021 and 2020.

2021 gross depreciation was $142.4 million, a decrease of $33.8 million, or 19%, compared to 2020. The decrease is primarily due to a generally lower investment level over recent years and impairment charges.

For Property and Equipment, the Company recorded impairments amounting to $15.0 million in 2021, compared to $108.4 million in 2020. The impairment in 2021 relates to two Ramform Titan-class vessels and primarily reflects a change in assumptions related to the impact of the energy transition. The impairment in 2020 reflected lower estimated recoverable value of vessels due to vessel stacking, an increased discount rate used when calculating value in use (WACC) and a downward adjustment to future expected cash flows.

The As Reported operating loss in 2021 was $66.2 million, compared to an operating loss of $188.0 million in 2020.
According to Segment Reporting the operation loss, excluding impairment and other charges net, in 2021 was $54.6 million, compared to an operating profit of $12.2 million in 2020.

For the full year 2021, the share of results from associated companies amounted to $1.2 million, compared to a loss of $30.0 million in 2020. The result in 2021 was primarily related to reversal of earlier impairment charges in the Azimuth Group, where PGS as of December 31, 2021 has an ownership of approximately 35%. PGS has a right, but no obligation to provide further funding or the Azimuth Group and has no guarantees outstanding.

Gross interest expense amounted to $98.0 million in 2021, compared to $80.5 million in 2020, an increase of $17.5 million, or 22%, primarily because of a mix of imputed interest costs,higher amortization of deferred loan cost and cash interest.

Other financial expense, net, of $0.6 million in 2021 includes a gain related to extinguishment of debt of $13.5 million and $4.1 million of deferred debt issuance cost charged to expense. For more information on debt that has been accounted for as modification and extinguishment, see description under the section Cash Flow, Financial Position and Financing.

Income tax expense, which consists of current and deferred tax expense, was $15.6 million in 2021, compared to $15.1 million in 2020. There was no deferred tax expense in 2021 or in 2020. Current tax expense relates to foreign withholding tax and corporate tax on activities primarily in Africa.

PGS is subject to taxation in many jurisdictions around the world with increasingly complex tax laws. PGS has identified issues in several jurisdictions that could eventually make the Company liable to pay taxes relating to prior years in excess of the provision recognized in financial statements. Reference is made to Note 12 and 23 of this annual report for a description of significant tax contingencies.

Loss to equity holders of PGS ASA was $179.4 million in 2021, compared to a loss of $321.5 million in 2020. 

Cash Flow, Financial Position and Financing

Net cash provided by operating activities totaled $326.6 million in 2021, compared to $366.5 million in 2020. The decrease is primarily due to the significant change of activity mix from MultiClient to contract with less cash outflow classified as MultiClient investments (investment activity), partially offset by lower gross cash cost. Cash flow before financing activities was $154.7 million in 2021, compared to $111.9 million in 2020.

Cash and cash equivalents totaled $170.0 million as of December 31, 2021, compared to $156.7 million as of December 31, 2020.

On February 9, 2021, the PGS financing transaction to re-schedule debt maturities and amortization became effective and all interest-bearing debt, excluding lease liabilities, was re-classified from current to long-term debt, see Rescheduling of Debt below for details.

During Q1 2021, the Company issued a NOK 116.2 million 3-year 5% unsecured convertible bond (“CB”). The right to convert the bond into shares is treated as a separate derivative financial instrument and accounted for as a liability measured at fair value. The equity conversion option was at inception on February 9, 2021, valued at $9.9 million and the debt component valued at $3.5 million.

The difference between the initial value of the debt component and the nominal value of the CB is expensed over the life of the CB as imputed interest adjusted for conversions taking place before maturity. As of December 31, 2021, the remaining nominal amount of the CB is approximately $8.6 million. As of December 31, 2021, the derivative financial instrument (relating to the conversion option) is valued at $4.1 million. For further information on accounting for a conversion right in a different currency (NOK), see Note 2.

The rescheduling of the $135 million Revolving Credit Facility (“RCF”) originally due in September 2020 has been accounted for as an extinguishment due to substantially different terms. The rescheduled debt has consequently been accounted for at fair value at time of extinguishment, resulting in a gain of $13.5 million as of February 9, 2021. The amount will be reversed over the life of the debt and in 2021 $4.2 million was reversed as imputed interest expense included in interest on debt, gross. The other parts of the rescheduled debt have been accounted for as modification of existing agreements, resulting in a loss of $7.7 million from the modification in Q1 2021.

There is a decrease in restricted cash from December 31, 2020, to December 31, 2021. This is caused by a revaluation to the legal deposit in Brazil related to an ongoing tax dispute for charter of vessels into Brazil, see Note 14 and 23, an increase of cash collateral on guarantees and bonds, and a decrease in retention account balances. Restricted cash of $73.7 million includes $39.4 million held in debt service reserve and retention accounts related to the export credit financing (“ECF”) of Ramform Titan, Ramform Atlas, Ramform Tethys and Ramform Hyperion. The amounts in the retention accounts will be used for interest payments on the ECF debt in the amortization deferral period (see below).

On December 31, 2021, the Company had approximately 51% of its net debt (excluding lease liabilities) at fixed interest rates. The weighted average cash interest rate was approximately 6.78%, including credit margins paid on the debt as of December 31, 2021, compared to 6.40 % as of December 31, 2020.

The main credit agreements are subject to a Minimum Consolidated Liquidity and a Maximum Total Net Leverage Ratio covenant. The liquidity covenant requires that the consolidated unrestricted cash and cash equivalents shall not be less than $75 million. The Maximum Total Net Leverage covenant establishes a maximum Total Net Leverage Ratio of 4.25:1 on December 31, 2021 reducing to 3.25:1 from March 31, 2022, through December 31, 2022, and 2.75x thereafter. On December 31, 2021, the Total Net Leverage Ratio was 3.27:1. 

Financing status

Due to the dramatic negative market change caused by the COVID-19 pandemic, PGS in 2020 renegotiated its main credit agreements. The rescheduling of debt was sanctioned in February 2021 and enabled PGS to extend its near-term maturity and amortization profile by approximately two years. Together with the implemented cost saving initiatives, the debt rescheduling strengthened PGS’s liquidity profile in a challenging operating environment.

PGS remains highly leveraged and may become financially challenged should it not comply with the applicable financial maintenance covenants or ultimately fail to generate sufficient cash flow and/or refinance to address the amended amortization and maturity profiles.

The seismic market recovery in 2021 has been slower than assumed in the debt rescheduling business plan from 2020. As a result, there is a risk that the Company will not generate sufficient liquidity to repay the 2022 maturities whilst also meeting the other requirements of the main credit agreements, including the Minimum Consolidated Liquidity covenant. The Company has started preparations for assessing alternative ways to address upcoming debt maturities, including engaging advisors to assist the Company in this respect. The Company has earlier announced that there is also a risk that the required Maximum Total Net Leverage Ratio covenant in the main credit agreements would not be met in Q1 2022 when the Maximum Total Net Leverage Ratio on March 31, 2022, steps down from 4.25:1 to 3.25:1. As of the date of this report, the Company believes however that the risk of not meeting the Total Net Leverage Ratio covenant in Q1 2022 is lower.

The Company expects to be able to manage the above-mentioned risks. However, if unsuccessful, the Company may become unable to settle maturities or amortization on the agreed payment dates or breach a financial covenant in the main credit agreements. This would represent a default under the relevant agreements. In such a case, the Company may be able to continue without repayment or acceleration if it achieves a standstill agreement (or, in the case of a financial covenant breach, a waiver) from the relevant lenders, agent or lender group. Should a payment default or financial covenant breach continue without a standstill agreement or waiver, this would be an event of default under the relevant agreements. An event of default in one facility may represent an event of default in other facilities and agreements. Upon an event of default, there is a risk that the Term Loan B lenders inter alia having a pledge over the shares in PGS Holding II Ltd (a holding company that indirectly owns and controls all material subsidiaries of the group), by 50% majority can accelerate and enforce this and other pledges over all major assets. Such enforcement would likely imply continued operations for the operating companies in the group, but there is a risk PGS ASA, as a company left without its’ material subsidiaries, will then enter insolvency. The ECF lenders may also enforce their pledges, including those over the four Titan class vessels. 


In 2021, total MultiClient cash investment, excluding capitalized interest, amounted to $127.2 million, compared to $222.3 million in 2020, a decrease of $95.1 million, or 43%. The decrease is primarily due to fewer vessel days allocated to MultiClient projects.

Capital expenditures, whether paid or not, totaled $33.4 million in 2021, compared to $36.1 million in 2020, a decrease of $2.7 million, or 7%. The decrease is primarily a result of measures taken to reduce capital expenditures in a weaker seismic market.

Financial Market Risk

The Company is exposed to market risks such as interest rate risk, currency exchange risk, credit risk, liquidity risk and commodity price risk, as discussed below. The Company’s risk management policies are approved by the Board of Directors. The treasury function reports regularly to Company management and any breach of limits set in the policy is reported to the Board of Directors.

Interest Rate Risk

PGS has a mixture of fixed and floating interest rate debt combined with financial instruments, such as interest rate swaps, to manage the impact of interest rate fluctuations.

As of December 31, 2021, the debt structure of PGS included $914.9 million of floating interest rate debt, with interest rates based on up to six-month LIBOR rates, plus a margin. $225.0 million of this floating interest debt is swapped into fixed interest by use of interest rate swaps. Fixed interest rate debt amounted to $265.1 million. Taking the interest rate swaps into account, $689.9 million of the Company’s debt is exposed to floating interest rates while $490.1 million has fixed interest rates. For every (hypothetical) one percentage point increase in LIBOR, the annual net interest expense of the PGS’ net debt, including finance leases, would increase (with some delay) by approximately $4.8 million.

Currency Exchange Risk

PGS conducts business primarily in US dollars (“$” or “USD”), but also in several other currencies, including British pounds (“GBP”), Norwegian kroner (“NOK”), Brazilian real (“BRL”), euro (“EUR”), and occasionally currencies like Egyptian Pounds (“EGP”) and Nigerian Naira (“NGN”). PGS is subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing, and investment transactions in currencies other than the US dollar.

PGS predominantly sells products and services in US dollars, and to a limited extent in other currencies. In addition to USD, a significant proportion of PGS’ operating expenses are incurred in NOK and GBP. Less substantial amounts are incurred in various other currencies. Thus, regarding expenses and revenues in currencies other than US dollars, such expenses will typically exceed revenues.

A stronger US dollar reduces PGS’ operating expenses as reported in US dollars. It is estimated that a 10% change of the US dollar against the two most significant non-USD currencies, NOK and GBP, would have an annual impact on gross cash cost of $10-12 million, and $4-5 million before currency hedging.

The Company did not have any open forward contracts as of December 31, 2020 or 2021.

All interest-bearing debts are denominated in US dollars, except a convertible bond denominated in NOK.

Credit Risk

PGS’ accounts receivable is primarily from multinational, integrated oil companies and independent oil and natural gas companies, including companies that are owned in whole or in part by governments. PGS manages the exposure to credit risk through ongoing credit evaluations of customers. Due to the nature of PGS’ customer base, a low level of losses on accounts receivable has been incurred over the years. Due to the current market circumstances, where requests for extended credit terms may be more frequent, PGS has implemented additional processes to monitor and follow up on credit risk.

PGS has a structured approach to monitor the credit risk of the Company’s banking partners, including derivatives counterparties and the institutions in which cash is held on deposit.

Liquidity Risk

As of December 31, 2021, PGS had cash and cash equivalents totaling $170.0 million, compared to $156.7 million as of December 31, 2020.

Based on available liquidity resources and the structure and terms of the Company’s debt after implementation of the debt rescheduling in 2020 (see more details in the section “Cash Flow, Financial Position and Financing”), it is the Board’s opinion that PGS remains highly leveraged and may become financially challenged should it not comply with the applicable financial maintenance covenants or ultimately fail to generate sufficient cash flow and/or refinance to address the amended amortization and maturity profiles.

The seismic market recovery in 2021 has been slower than assumed in the debt rescheduling business plan from 2020. As a result, there is a risk that the Company will not generate sufficient liquidity to repay the 2022 maturities whilst also meeting the other requirements of the main credit agreements, including the Minimum Consolidated Liquidity covenant. The Company has started preparations for assessing the Company’s options in this respect. See the description of risks above under the section “Financing status”. 

Commodity Risk

Operation of seismic vessels requires substantial fuel purchases, thus PGS is exposed to fuel price fluctuations. Based on the Company’s fuel consumption in 2021, a 10% increase in fuel prices would increase the total annual fuel costs by approximately $5 million. The Company seeks to pass fuel price risk to customers on a majority of contract work.

Climate Risk

PGS is exposed to both transition risk and physical risks associated with climate change. The Company has a structured approach to monitoring the development of the of the seismic exploration market and opportunities created by the transition to renewable energy sources globally. The Company’s strategy is based market scenario analysis and positioning of the Company for the energy transition by establishing the ‘New Energy’ business unit is a core component of the strategy. The physical risks associated with climate change may directly affect both our onshore and offshore operations through increased occurrence of extreme weather conditions. The Company mitigates this risk through reducing the dependency of on-premise computing by shifting data and processing to the cloud, careful planning of our projects, and by leveraging the inherent weather resilience of our Ramform fleet and GeoStreamer technology.

Operational and Other Risks

Demand for the Company’s products and services depends on the level of spending by energy companies on hydrocarbon-resource exploration, field development, and production. Spending levels are heavily influenced by oil and gas prices and energy companies’ focus areas. The COVID-19 pandemic caused a major disruption in the oil market and a significant short-term reduction of the oil price. Energy companies responded by cutting their investment plans to protect cash flow, which had an immediate negative effect on seismic spending and PGS’ ability to generate revenues. In addition, the ongoing energy transition may cause structural changes in demand, e.g. related to frontier exploration.

The Company is subject to many risk factors including, but not limited to the demand for seismic services, the demand for data from the Company’s MultiClient library, increased competition, the attractiveness of technology, changes in governmental regulations affecting the markets, the speed and impact of the energy transition and its effect on customer behavior, technical downtime, licenses and permits, currency and fuel price fluctuations, potential COVID-19 outbreaks on the vessels causing project delays, and operational hazards such as weather conditions.

Contracts for services are occasionally modified by mutual consent and in certain instances may be cancelled by customers on short notice without compensation. Consequently, the order book as of any particular date may not be indicative of actual operating results for any succeeding period.

Shares, Share Capital and Dividend

As of December 31, 2021 PGS had 400,667,697 shares issued and outstanding, all of which are of the same class and carry equal voting and dividend rights. Each share has a par value of NOK 3. PGS’ ordinary shares are listed on the Oslo Stock Exchange (ticker: PGS) and denominated in Norwegian kroner.

As of December 31, 2021, the Company held 590 treasury shares.

During Q1 2021 PGS issued a NOK 116.2 million 3-year 5% unsecured convertible bond (CB), which can be converted into new PGS shares at NOK 3 per share, corresponding to 38,720,699 shares, equalling 10% of the currently outstanding PGS shares. PGS will be able to require that bondholders convert the CB into shares if the PGS share price exceeds NOK 6 for 30 consecutive trading days.

As of December 31, 2021, the remaining principal outstanding amount of the CB was to NOK 75,779,994, corresponding to 25,259,998 shares if ultimately converted.

Environment, Social and Governance (“ESG”) PGS has adopted a Code of Conduct that reflects the Company’s commitment to its shareholders, customers, employees, and other stakeholder to carry out business with the utmost integrity. The Code of Conduct outlines both what stakeholders.

Environment, Social and Governance (“ESG”)

PGS has adopted a Code of Conduct that reflects the Company’s commitment to its shareholders, customers, employees, and other stakeholder to carry out business with the utmost integrity. The Code of Conduct outlines both what stakeholders can expect from PGS, and what PGS expects from employees and anyone working for PGS. Employees of PGS are also guided by the Company’s Core Values and Leadership Principles that drive desired behavior and culture. The Code of Conduct, Core Values and Leadership Principles are available in full on During 2021, PGS updated the Code of Conduct, launched a Supplier Code of Conduct, amended the Core Values, and implemented the Leadership Principles.

PGS is committed to the ten principles of the United Nations Global Compact in the areas of human rights, labor, environment, and anti-corruption. The Board of Directors and the CEO actively ensure that the Company properly responds to sustainability and ESG challenges. To identify and assess actual and potential sustainability risks and opportunities for PGS, the Board of Directors and the CEO are actively involved in the Company’s assessment of material topics and the development of our strategic objectives and goals to manage them.

To identify and report on risks and opportunities associated with climate change and the energy transition PGS uses the frameworks developed by the Carbon Disclosure Project (“CDP”) and the Task Force on Climate Related Disclosures (“TCFD”).

Since 2011 PGS has published a separate sustainability and ESG report, which communicates the Company’s progress in alignment with the recommendations of the Global Reporting Initiative (“GRI”). PGS has an ambition to promote the UN Sustainable Development Goals (“SDGs”) through concrete actions and goals that are relevant for the Company’s activities and global presence. From the materiality assessment PGS has identified 6 of the 15 SDGs where the Company contributes, which are number, 4-Quality Education, 7-Affordable and clean energy, 9-Industry, Innovation and Infrastructure, 13-Climate Action, 14-Life Below Water and 16-Peace Justice and Strong Institutions.

A more detailed account of how PGS manages sustainability risks and opportunities can be found in our annual sustainability and ESG reports. 


PGS had 839 and 862 regular active employees as of December 31, 2021, and 2020, respectively.

As of December 31, 2021, PGS employees represented 51 nationalities; 29% of the office-based employees are women (2% of offshore employees are women). Among staff working in Norway, 32% are women. The Board of Directors has three male and two female shareholder elected directors and one male and two female employee-elected directors.

At the headquarters in Oslo, 26% of management positions are held by women, and 3% of women working for the Norwegian organization of PGS work part-time. PGS consciously strives to improve the gender diversity of staff through reporting and actively encouraging development and promotion of women to management roles. The primary development processes are the Performance Management, Potential Assessment and Mentoring program.

Being a global company, PGS has long-standing practice of embracing cultural diversity, and cultural sensitivity training is offered to employees.

The average monthly salary of all active regular employees as of December 2021 was $8,525 ($7,466 for female employees and $8,784 for male employees) based on February 1, 2022 exchange rates. 

Board of Directors and Corporate Governance

As of December 31, 2021, the Board of Directors has the following members: Walter Qvam (chairperson), Anne Grethe Dalane, Trond Brandsrud, Richard Herbert, Marianne Kah, Anette Valbø, Gunhild Myhr and Eivind Vesterås. The latter three are employee elected Board members.

The Board has established two sub-committees: an Audit Committee that as of December 31, 2021 is comprised of Anne Grethe Dalane (chairperson), Trond Brandsrud, Marianne Kah, Anette Valbø and Eivind Vesterås, and the Remuneration and Corporate Governance Committee, that as of December 31, 2021 is consisting of Walter Qvam (chairperson), Richard Herbert and Gunhild Myhr. The committees predominantly act as preparatory bodies for the Board of Directors and assist the Directors in exercising their responsibilities.

PGS also has a Nomination Committee elected by the shareholders. As of December 31, 2021, this committee consists of Harald Norvik (chairperson), Terje Valebjørg, Alexandra Herger and Ole Jacob Hundstad.

PGS’ corporate governance principles are adopted by the Board of Directors. The Board periodically reviews these principles. Statements of the corporate governance structure are described in more detail in the corporate governance section of this annual report. The Company’s articles of association, in addition to full versions of the rules of procedures for the Board of Directors, the Audit Committee charter, the Remuneration and Corporate Governance Committee charter, the Nomination Committee charter, and PGS’ Code of Conduct are available on the Company’s website (follow the links: “About us” –
“Corporate Governance”).

Since 2004, PGS has maintained a compliance hotline operated by an external service provider in order to facilitate reporting of any concerns regarding inappropriate business conduct. The Company encourages use of the hotline by anyone who has concerns relating to compliance with laws and regulations, breaches of the code of conduct, fair treatment, or any other matter. Concerns can also be raised directly with the General Counsel or any Board member.

The Board of Directors and the Executive Management team of PGS Group are covered by PGS ASA’s Directors and Officers Liability Insurance (D&O) placed in the international insurance market on market standard terms and conditions. The insurance comprises the directors’ and officers’ personal legal liabilities, including defense- and legal costs. The cover also includes employees in managerial positions or employees who become named in a claim or investigation, or is named co-defendant, and is extended to include members of the Company’s steering committee, audit committee, compensation committee, litigation committee, advisory committee or other management or board committees.


The demand for fossil fuel and oil and gas prices has significantly recovered post the disruptions caused by the COVID-19 pandemic. In any future energy scenario, demand for oil and gas will be significant. Despite a material decline in exploration and production spending from 2014 to 2020, energy companies remained cautious in 2021 with an approximately unchanged investment level compared to the previous year. With low investment levels the discovery of new resources has decreased significantly. We believe there is a significant need for increased exploration as well as sanctioning and developing new fields. Almost all projections for 2022 estimate a meaningful increase in capital expenditures among energy companies compared to 2021.

In the marine seismic market, there is a significant volume of contract leads and tenders for 2022. Order books and industry visibility are likely to benefit from the high tendering activity. There is a record number of 4D projects planned for 2022, which will be supportive for seismic market development.

The Board expects support for a continued recovery of the offshore seismic market with the continued importance of oil and gas in all future energy scenarios combined with a period of high oil prices due to significant under-investments in the oil and gas industry over many years. The seismic market is also likely to benefit from a significantly reduced supply side.

Russia’s invasion of Ukraine is deeply concerning with severe humanitarian consequences. The war is likely to significantly impact the political and security situation, as well as energy and financial markets. At this stage it is impossible to estimate what impact the conflict could have on PGS’ markets or operations. PGS has very limited direct business activity in Russia or Ukraine.

The Board emphasizes that valuations in the financial statements and forward-looking statements contained in this report are based on various assumptions made by management and the Board, depend on factors beyond our control, and are subject to risks and uncertainties. Accordingly, actual results may differ materially.

Pursuant to section 3-3a of the Norwegian Accounting Act, the Board confirms that the 2021 financial statements have been prepared based on the going concern basis which, the Directors believe to be appropriate. As described in the “Financing status” section above there is a risk that the Company might not generate sufficient liquidity to repay the 2022 maturities whilst also meeting the other requirements of the main credit agreement. Whilst the Company expects to be able to manage the above-mentioned risks and that PGS continued operations should not be impacted, the Directors concluded that the current situation constitutes a material uncertainty related to going concern. Reference is made to the description of risk in the “Financing status” section for further information.

Allocation of Parent Company’s result for 2021

The financial statements of the parent company, PGS ASA, are prepared and presented in accordance with generally accepted accounting principles in Norway (“NGAAP”). PGS ASA reported a net gain of NOK 81.3 million for 2021, compared to a net loss of NOK 3,054.9 million in 2020. PGS ASA is a holding company with no material operating activities.

The Board proposes that the net gain for 2021 of NOK 81,300,000 is transferred to other equity. Total shareholders’ equity in PGS ASA as of December 31, 2021 was NOK 2,431,500,000 corresponding to 95% of total assets.