TGS Reports Robust Third Quarter Growth and an Optimistic Outlook for the Future

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TGS Reports Robust Third Quarter Growth and an Optimistic Outlook for the Future

TGS (Symbol: TGS), a leading provider of geoscience data for exploration and production (E&P) companies, reported that its third-quarter revenue increased from $455 million in the same period last year to $501 million. The company’s EBITDA also reached $280 million compared to $268 million in the third quarter of 2022. Excluding one-time merger-related costs, the adjusted EBITDA would be $296 million. CEO Kristian Johansen emphasized the company's progress in exceeding merger synergy targets and expressed optimism about growth across all business units.

Key Points

  • TGS's revenue for the third quarter of 2023 rose to $501 million, with EBITDA at $280 million.
  • Adjusted EBITDA, excluding recurring costs, would be $296 million.
  • The company is progressing ahead of its post-merger synergy targets, aiming for an annual synergy of $70 million by the end of the year.
  • Strong multi-client sales and OBN contract revenues contributed to revenue growth.
  • The New Energy Solutions segment saw significant growth and credit ratings were upgraded.
  • The company declared a dividend of $0.14 per share.

Company Outlook

  • TGS anticipates modest single-digit growth in seismic spending from its clients for the upcoming year.
  • The company is optimistic about capturing significant market share from increased bidding activities.
  • TGS expects strong sales during the winter season and an improved order book for early 2024.

Negative Highlights

  • The Imaging and Technology segment experienced flat revenues with slightly negative margins.
  • Net debt remained above the target range at $425 million, with plans to refinance the acquired debt.
  • The multi-client investment guidance for the year has been adjusted due to permitting delays.

Positive Highlights

  • Strong multi-client sales and OBN contract revenues were the main drivers of revenue growth.
  • The New Energy Solutions segment reported significant growth, indicating potential in new markets.
  • The company is actively engaged in offshore wind research and seismic operations globally.

Shortcomings

  • The company's net debt exceeded the target range due to the PGS merger.
  • Imaging revenues were low margin, but there are plans in place to improve profitability.

Q&A Highlights

  • CEO Kristian Johansen discussed the integration of different ERP and sales systems to realize synergies.
  • Refinancing of the acquired PGS debt is being prepared based on market conditions.
  • The company has not reserved full capacity, maintaining optionality for vessel utilization.

TGS demonstrated resilience against industry challenges with a 10% revenue increase year-on-year and exceeded its post-merger synergy targets. The company's strategic focus on diversifying its offerings, particularly in New Energy Solutions, and its involvement in global projects are positive indicators for future performance. With strong cash flow and a solid order book, TGS is well-positioned to manage market volatility. Despite the current debt levels and the need for refinancing plans, the management remains focused on long-term growth and margin improvement. Investors may closely watch TGS's efforts to maintain operational efficiency and market opportunities as the company enters the winter season and beyond.