Annual Report 2001 Contents the Key Figures
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ANNUAL REPORT 2001 CONTENTS THE KEY FIGURES (In MNOK apart from EPS and ratios) The Key Figures ................................................................ 3 YEAR 2001 2000 1999 1998 1997 Net Operating Revenues 1 155,6 773,6 587,5 558,6 603,7 The Products ..................................................................... 4 Operating Profit 523,1 349,1 237,2 267,2 273,2 The Company .................................................................... 5 Write down of Vessels 29,6 Pre-tax Profit 515,8 330,4 193,1 273,9 268,8 Letter to Shareholders ................................................ 6-7 Net Income 341,8 214,9 119,2 176,9 180,4 Quest for Hydrocarbons Worldwide ...................... 8-15 EBITDA 934,7622,6 436,5 410,0 362,0 EBITDA Margin 81% 80% 74% 73% 60% Report from the Board of Directors .................... 16-20 EBIT 523,1 349,1 207,6 267,2 273,2 Profit and Loss Account ................................................ 21 EBIT Margin 45% 45% 35% 48% 45% Balance Sheet .......................................................... 22-23 Return on average Capital employed (ROCE) (pretax) 45% 41% 31% 54% Cashflow Statement ................................................ 24-25 Earnings per Share 13,99 8,85 4,97 7,46 7,92 General Accounting Policies .................................. 26-28 Earnings per Share fully diluted 13,23 8,45 4,92 7,46 7,92 Notes to the Financial Statements ...................... 29-36 Total Assets 1 897,2 1 304,9 948,7 871,7 Shareholders Equity 1 179,8 806,3 547,6 415,1 Statement from Independent Accountants ............. 37 Equity Ratio 62% 62% 58% 48% Investor Relations ................................................... 38-40 Multi-Client Library Addresses ........................................................................ 41 Opening Balance 439,1 324,0 203,0 129,3 Investment 819,5 370,8 300,8 192,2 Amortization -393,3 -255,8 -179,8 -118,5 Net Book Value Ended 865,3 439,1 324,0 203,0 Line Km 2D in Library 1,68 mill 1,55 mill 1,38 mill 1,18 mill Square Km 3D in Library 77 100 82 100 78 400 65 400 TOTAL ASSETS EQUITY NET REVENUES EBITDA OPERATING PROFIT 2000 MNOK 1200 MNOK 1800 1000 1600 1400 800 1200 1000 600 800 400 600 400 200 200 0 0 98 99 00 01 98 99 00 01 97 98 99 00 01 97 98 99 00 01 97 98 99 00 01 3 TGS-NOPEC • ANNUAL REPORT 2001 TGS-NOPEC • ANNUAL REPORT 2001 3 THE PRODUCTS THE COMPANY TGS-NOPEC is a leading global provider of non-exclusive seismic data and associated products to the oil and gas industry. Oil companies use this seismic data to explore for and develop oil and gas deposits. TGS-NOPEC spe- cializes in the planning, acquisition, processing, interpretation, and marketing of marine non-exclusive surveys worldwide. With 166 employees located at offices in Oslo, Houston, London, and Perth, the Company places a strong emphasis on providing high quality seismic data and the highest level of service to the industry. 2D SEISMIC DATA A WORLDWIDE PLAYER 2D seismic is the most widely used exploration tool. With a library of approximately 1,7 million kms, offering multi-client 2D data to the industry is a core business of TGS-NOPEC. 3D SEISMIC DATA 3D seismic is a more expensive exploration tool used selectively in mature exploration areas. Investment in multi-client 3D surveys requires careful planning and an extensive seismic 2D data base to pick the right place at the right time. Seismic library Office locations TGS-NOPEC’s existing seismic library contains approximately 1,7 million line kms of 2D data and over 77 000 square kms of 3D data. 2D SEISMIC NET REVENUES BY SEGMENT 3D SEISMIC GRAVITY AND MAGNETIC DATA TGS-NOPEC offers magnetic and gravity products and services. Used for initial investigation among oil companies in frontier 2D 51% 3D 49% areas and ideal for TGS-NOPEC when planning 2D programs. TGS-NOPEC 3D net revenues grew dramatically in 2001 as a result of the company’s 3D investment strategy. For 2001, 3D net revenues represented 49% of all net revenues. TGS-NOPEC’S MULTI-CLIENT MODEL INCREASES THE PROFIT POTENTIAL The TGS-NOPEC business model emphasizes investing directly into multi-client data as opposed to the capital intensive tools and equipment used to generate the data. As such, the Company is a net user of existing industry VALUE ADDED PRODUCTS capacity, making investment decisions based on the merits of each individual multi-client project instead of the Integration of gravity/magnetic and seismic data into a geophysical atlas is one of the TGS-NOPEC value added products. In addition, these products serve as excellent marketing tools. need to keep costly assets utilized. The model continues to yield superior financial results for TGS-NOPEC. 4 TGS-NOPEC • ANNUAL REPORT 2001 TGS-NOPEC • ANNUAL REPORT 2001 5 LETTER TO SHAREHOLDERS in 2001 how tumultuous this environment can be. The completed until December, their effect, when com- global economy slowed significantly over the first bined with increased investments in new 3D surveys three quarters of the year, and the events of Sep- was dramatic; annual 3D net revenues more than tember 11 created even more uncertainty. OPEC’s tripled, representing 49% of total net revenues in ability to control world oil prices was severely tested, 2001, compared to 24% of net revenues in 2000. and natural gas markets in North America responded sharply to the shifts in local supply and demand. As a In March 2001, we completed the purchase of Sym- result, WTI crude oil prices fell from over $32 per bar- tronix, a privately held Houston-based company found- rel during January to below $18 in November. North ed in 1993. The Symtronix expertise in seismic data American natural gas prices fell from historical highs loading and format conversions has enabled us to broad- of $10 per mcf in February to around $2,50 at year’s en our service offerings to customers and grow the end. These price swings forced our customers to once revenue stream from previous investments in our data again closely examine costs and re-prioritize explora- library. Efficiencies in the process of putting our seis- tion and production projects. mic data in the hands of the ultimate user are clearly adding value for our shareholders and our customers. Although the cyclical and uncertain nature of energy markets creates tremendous challenges to companies Uncertainties in near term oil and gas prices lead us in our industry, the TGS-NOPEC strategy is uniquely to believe that 2002 exploration and production designed to encompass all phases of the inevitable spending is not likely to increase significantly above HENRY H. HAMILTON CEO ups and downs, thereby producing superior returns DAVID W. WORTHINGTON Chairman 2001 levels. In fact, industry analysts expect declines Henry H.(Hank) Hamilton III has 21 years of experience in over the long term. We depend upon a close service David W. Worthington was one of the original founders of in domestic U.S. spending to be somewhat offset by the industry and has held employment with Shell Oil TGS in the early 80’s. Prior to that, he spent 13 years with Company and Schlumberger. He joined TGS in 1995. relationship with our customers, an expert knowledge Shell Oil Company. increases in the international sector. Nonetheless, we of the drivers in the seismic business, and a long his- have consistently demonstrated the ability to increase tory of educated risk-taking to make discretionary market share, and with our track record of generating DEAR FELLOW SHAREHOLDER: investments in our data library. We do not aspire to imately NOK 333 million during 2001 to purchase our outstanding returns on investment, we see excellent During 2001, TGS-NOPEC solidified its position as per- dominate every sector of the global seismic market- partner’s interest in 23 400 square kilometers of 3D opportunity to do so again in 2002. We plan to con- haps the most successful seismic company in the busi- place. Instead we focus on capturing the most prof- and 435 000 kilometers of 2D seismic data, all located tinue organic growth by increasing investments in ness, clearly outperforming the industry in all key mea- itable opportunities within our core business and exe- in the Gulf of Mexico. Prior to these transactions, we new seismic data while targeting specific merger and sures of growth and profitability. Our net revenues grew cuting those projects with precision. There is no doubt had roughly a 20% interest in the 3D surveys and a acquisition opportunities that will add breadth to our by 49%, our net income 59%, our equity 46%, and our today that our business model is working. 50% interest in the 2D surveys. Today we have 100% product and service offerings. Perhaps the most com- return on average capital employed (ROCE) increased ownership of these projects and full control to develop pelling case for growth comes from the trend among to an astonishing 45%, up from 41% in 2000. In a nut- We invested a record NOK 487 million into new proj- additional derivative products from the data. Capi- major oil companies to outsource activity, creating shell, our company continued to deliver true profitable ects for our data library in 2001, up approximately talizing on these opportunities represented a giant an accelerating demand for services from companies growth, without sacrificing margins or increasing debt 31% from 2000 levels. As planned, most of this in- leap forward, especially with respect to our 3D growth like TGS-NOPEC. We remain committed to delivering levels. Our share price appreciated 18% over the course crease occurred in the 3D sector, where we actively strategy. Although two of the transactions were not results. of the year, in sharp contrast with most stocks in our pursued the strategy developed early in 1999 to steadily sector that lost value during the same period.