Release Date: July 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TGS ASA (TGSGY, Financial) reported an improved EBITDA margin of 50% in Q2 2025, up from 46% in the same quarter last year.
- The company maintained a positive free cash flow of $11 million before dividends.
- TGS ASA (TGSGY) is continuing business optimization efforts, resulting in lower costs and a reduction in vessel capacity from 7 to 6 vessels.
- The imaging and technology division had a strong quarter, with gross imaging revenues increasing from $25 million to $32 million year-over-year.
- The company is maintaining a stable dividend of $0.155 per share, consistent with previous quarters.
Negative Points
- TGS ASA (TGSGY) experienced a decline in total revenues to $308 million, down from $381 million in Q2 of the previous year.
- Multi-client revenues were below expectations due to low library sales, impacted by a volatile macro environment and a drop in oil prices.
- Contract revenues were negatively affected by operational challenges in Asia and lower contributions from JV partners.
- The company reported a negative EBIT of $22 million for the quarter, compared to a positive $8 million in the same quarter last year.
- Order backlog decreased from $600 million to $425 million, raising concerns about future revenue visibility.
Q & A Highlights
Q: Can you elaborate on the timing of the vessel sale and the stacking of the Vanguard?
A: The sale of the vessels will occur over the next few weeks, with contracts nearly finalized. The Vanguard will be taken out of service after the summer season in Europe. - Kristian Johansen, CEO
Q: You are above your net interest-bearing debt target. How does that affect your dividend strategy?
A: Our intention is to maintain the current dividend level until we reach our debt target. The weak Q2 results may delay this timeline, but our goal remains unchanged. - Sven Larsen, CFO
Q: What's driving the demand decline in the OBN market, and how is it related to oil and gas production?
A: The current weakness is more about timing than a permanent market issue. Some projects, like those in Brazil, have been delayed to 2026. We expect demand to grow as OBN costs decrease, making exploration projects more competitive. - Kristian Johansen, CEO
Q: Who are you selling the Ramform Explorer and Valiant to, and can you indicate the price?
A: We can't disclose the buyer, but the vessels will be used outside the seismic market. The sale price is in the low single-digit millions, aimed at balancing market supply and demand rather than strengthening our balance sheet. - Kristian Johansen, CEO
Q: Can you provide an update on the synergy effects of the $110 million to $130 million target?
A: We are close to achieving this range, with some integration tasks like systems and software alignment still in progress. Full alignment on ERP systems and HPC in the cloud will take more time. - Sven Larsen, CFO
Q: Is it natural to expect a jump in Q3 late sales due to the US Gulf licensing round, and what about transfer fees in the second half?
A: While we can't promise higher late sales, there are potential transfer fees, including a sizable one related to the Chevron Hess transaction, which could occur in the second half. - Kristian Johansen, CEO
Q: Will you reduce the number of OBN crews, currently at four?
A: Not necessarily. We aim to increase efficiency by using source and ROV vessels across multiple projects and exploring new vessel types with fewer human resources. - Kristian Johansen, CEO
Q: Regarding partners withdrawing from multi-client JV projects, was it your decision to continue, and what are the expected returns?
A: TGS has a history of investing countercyclically. We continue projects in proven successful areas like Brazil and the Gulf of America, expecting similar returns with a sales-to-investment target of 2 times. - Kristian Johansen, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
