Annual
Report
A Clearer Image | www.pgs.com
2021
| PGS Annual Report 20212
PGS ASA and its subsidiaries (“PGS” or “the Company”)* 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. Our 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.
3 CEO Letter
5 Business Highlights 2021
6 Key Figures
8 Executive Team
10 Digital Transformation
14 PGS New Energy
17 Integrated Service Offering
21 PGS Product Portfolio
25 Utilizing the Capabilities of the
PGS Fleet
27 The PGS Share
29 History of PGS
31 Corporate Governance
39 Board of Directors
42 Board of Directors’ Report
54 Responsibility Statement
55 Financial Statements
CONTENTS
* When the terms “PGS” and “the Company” are used in this report, these will as a
main rule include both PGS ASA and its subsidiaries. However, in certain sections and
paragraphs hereof, these references will only include PGS ASA as context indicates.
The seismic market declined in 2021 compared to 2020, impacted by the
ongoing energy transition leading to changing behaviors among energy
companies and negative effects from a persistent pandemic. PGS has
competences and assets that may be of significant value in the energy
transition, in which we aim to play a role. We therefore established a New
Energy business unit with clear mandates to pursue technologies and
opportunities in this segment. Our fully integrated service offering enabled
us to improve our competitive position. We took advantage of a recovering
contract market and enhanced our MultiClient performance relative to our
peers. Overall, we are progressing as the leading geophysical company,
while assessing and developing new business opportunities. However, the
declining seismic market in 2021 has increased the risk that we will not be
able to generate sufficient cash flow to repay our 2022 debt maturities as
they fall due, and we will have to address this challenge during 2022. I still
believe our achievements in 2021 have positioned us well for opportunities
in a recovering seismic market going forward.
Total industry MultiClient revenues and investments declined in 2021, compared
to 2020 and explains the weaker overall performance for our industry. However,
we managed to secure acceptable pre-funding on our new MultiClient acquisition
projects, and generally experienced higher interest for our geographically
diversified MultiClient data library than peers. Until the third quarter we had the
highest MultiClient revenues in the industry for five consecutive quarters. We
benefitted from the normal seasonal MultiClient late sales upswing in the fourth
quarter, but volumes disappointed compared to the opportunity basket
we worked on.
A priority shift among energy companies towards more near-field exploration and
4D reservoir optimization positively impacted demand for proprietary contract
work. In 2021, this came at the expense of traditional exploration activities, and
we experienced a shift of capacity allocation from MultiClient to significantly
more contract work. Higher demand for contract work enabled us to increase
prices significantly in the second half of the year, but pricing is still at a relatively
low level. More near-field exploration and 4D reservoir optimization strengthens
our competitive position and we are increasingly taking advantage of our
high-capacity Ramform acquisition vessels and the proprietary GeoStreamer
technology. The contract market recovery in 2021 is unusual considering the
more muted MultiClient market. Historically, market recoveries have started with
improving MultiClient sales before contract activity and rates increase. With the
generally projected increase in exploration and production spending for 2022 and
feedback form our clients, we expect a stronger MultiClient market going forward.
There are two mega-trends which impacted us in 2021 and will continue to do so
in the years to come, the energy transition and digitalization. We have adjusted
Dear PGS Shareholder
Rune Olav Pedersen
President and CEO
| PGS Annual Report 20213
our strategy to make sure our core geophysical
business is positioned for these mega-trends. We
intend to maintain and develop our position as
the leading provider of near-field exploration and
production (4D) seismic. Further we are developing
hybrid towed streamer and OBN solutions to include
it as a part of PGS core oering. This summer we
completed a combined towed streamer and node
seismic survey for Lundin Energy Norway in the
Barents Sea with great success, including several
acquisitions records. To improve our capabilities
beyond the learnings from the Lundin-survey we
entered a strategic collaboration with Magseis
Fairfield to position us for a growing hybrid towed
streamer and OBN seismic market.
Our strategy was further adjusted to include New
Energy, which defines PGS’ position in the energy
transition markets. We used significant time to
assess where we can use our expertise and assets to
oer value to clients. Carbon storage (“CS”), oshore
wind and marine minerals are arenas where we expect
to contribute and build business. We have already
made several MultiClient data sales for CS purposes,
and we are awarded two acquisition contracts for
execution in 2022 for development of the Endurance
and the Northern Lights CCS projects. We have an
ambition of developing New Energy into a significant
business unit for PGS.
We are making good progress with our digital
transformation process. It is embedded as a core part
of our adjusted strategy, and we intend to increase
speed and penetration. During 2021 we reached an
important milestone when we entered a multi-year
Data Management as a Service (“DMaaS”) agreement
with a major customer. Under the agreement PGS will
provide a Cloud based digital data asset management
solution allowing the client to store, manage and
access subsurface data they have licensed from
PGS. Further we continue to develop, enhance,
and implement results from our core digitalization
projects. PGS Solis is our Cloud based MultiClient data
sales platform enabling easier and quicker access to
MultiClient data for our customers. Our scalable Cloud
enabled imaging platform, PGS Eos, is advancing
and we are already using the cloud for key processing
sequences on significant surveys. We have also
established PGS Digital Factory as a companywide
digitalization initiative to execute on our strategy
more eciently.
Despite all the logistical complexities the pandemic
has thrown at us, we have managed to operate our
vessels without material disruptions. Once again, our
oshore crews have put in an extraordinary eort
to make this possible. Our oce employees have
worked from home for extensive periods of the year
and managed their tasks in an admirable way. I am
impressed by the PGS organization and how it has
delivered in another dierent and challenging year.
We continue to focus on costs and are constantly
looking for new areas of cost improvements. This
work continued through 2021 despite of the upward
cost pressure created by the global pandemic. Our
2021 financial performance did not meet our internal
forecast, mainly due to weak vessel utilization and
disappointing MultiClient late sales in the fourth
quarter. As a result, there is a risk that we will not
be able to generate sucient cash flow to repay our
2022 debt maturities and at the same time remain
with an adequate liquidity reserve. We are working
on how to address the possible liquidity shortfall. See
“Financing status” section of the Board of Directors
report for more details.
During 2021 the oil price has increased more than
50% and it is evident that hydrocarbons will be an
important part of the energy mix as the global energy
transition evolves. Oshore reserves will be vital for
future supply and support demand for our marine
seismic services. Listening to what our clients say
regarding capital expenditure plans, including seismic
spending, they expect to increase spending in 2022.
Combining higher investments with our favorable
position in the near-field exploration and 4D reservoir
markets and the progress we are making within New
Energy and digitalization to become an even better
geophysical company, makes me confident that 2022
will be better than 2021.
Russia’s invasion of Ukraine in late February is
deeply concerning to us, with severe humanitarian
consequences, and significant impact to the world’s
political environment and security situation. It is
impossible to estimate what impact this could have
on our markets and activities going forward.
Rune Olav Pedersen
President and CEO
| PGS Annual Report 20214
| PGS Annual Report 20215
Established New Energy business early 2021 to diversify PGS product
portfolio and build a substantial market presence in the provision of
subsurface data for the oshore renewables’ domain or related to the
ongoing energy transition
Awarded a multi-year 4D framework agreement by Equinor, evidencing PGS
strong position in the 4D market
Completed the first simultaneous node and streamer acquisition contract
in the Barents Sea in mid-August. During the survey PGS set several
acquisition records
Completed a sale of the assets associated with PGS towed electro
magnetic system to Ocean Floor Geophysics (“OFG”)
Entered into a strategic collaboration with Magseis Fairfield to address the
growing hybrid towed streamer and Ocean Bottom Node (“OBN”) seismic
market
PGS, TGS and CGG launched Versal – a unified seismic data ecosystem
giving access to three of the world’s largest MultiClient libraries, via
a single log-in
Signed a milestone MultiClient Data Management as a Service (“DMaaS”)
agreement with a major customer
BUSINESS
HIGHLIGHTS
2021
FINANCIAL CALENDAR
Annual General Meeting April 27, 2022
Q1 2022 Revenue Update April 11, 2022
Q1 2022 Earnings Release April 29, 2022
Q2 2022 Revenue Update July 11, 2022
Q2 2022 Earnings Release July 21, 2022
Q3 2022 Revenue Update October 11, 2022
Q3 2022 Earnings Release October 20, 2022
Q4 2022 Revenue Update January 10, 2023
Q4 2022 Earnings Release January 26, 2023
Key Financial Figures
In USD million 2021 2020 2019
Profit and loss numbers Segment Reporting
Segment Revenues and Other Income 590.0 595.9 880.1
Segment EBITDA ex. other charges, net 320.2 397.7 556.1
Segment EBIT ex. impairment and other charges, net (54.6) 12.2 96.4
Profit and loss numbers As Reported
Revenues and Other Income 703.8 512.0 930.8
EBIT (66.2) (188.0) 54.6
Net financial items (97. 6 ) (118.4) (92.2)
Income (loss) before income tax expense (163.8) (306.4) ( 37. 6 )
Income tax expense (15.6) (15.1) (34.1)
Net income (loss) to equity holders (179.4) (321.5) (71.7)
Basic earnings per share ($ per share) (0.45) (0.85) (0.21)
Other key numbers As Reported by IFRS
Net cash provided by operating activities 326.6 366.5 474.3
Cash investment in MultiClient library 127.2 222.3 244.8
Capital expenditures (whether paid or not) 33.4 36.1 59.1
Total assets 1 792.8 2 093.8 2 301.7
Cash and cash equivalents 170.0 156.7 40.6
Net interest-bearing debt 936.4 9 37. 6 1 007.5
Net interest-bearing debt, including lease liabilities
following IFRS 16 1 051.3 1 096.2 1 204.6
Gross Cash Cost
USD millions
20212018 2019 2020
401.8
601.6
579.8
426.2
149.5
318.8
146.7
207.8
2018 2019 2020 2021
Contract
USD millions
25.8
29.1
23.6
21.7
2018 2019 2020 2021
External Imaging
USD millions
2018 2019 2020 2021
654.3
529.6
385.9
354.3
MultiClient
USD millions
Segment Revenues by Business Activity
KEY FIGURES
834.5
880.1
595.9
590.0
Total Segment
Revenues and
Other income
USD millions
2018 2019 2020 2021
2021 Segment Revenue Split
35% Contract
60% MultiClient
4% Imaging
1% Other
| PGS Annual Report 20216
Headquartered in Oslo, Norway, PGS has oces in 12 countries
around the world as of year-end 2021 and operates regional
centres in Weybridge, UK and Houston, USA.
Luanda, Angola | Perth, Australia | Rio de Janeiro, Brazil | Cairo, Egypt | Accra, Ghana
Tokyo, Japan | Almaty, Kazakhstan | Kuala Lumpur, Malaysia | Lagos, Nigeria |
Oslo & Stavanger, Norway | Weybridge, UK | Austin & Houston, USA
KEY FIGURES
1 247
1 248
862
839
Number of Employees
by Year-end
2018 2019 2020 2021
People & Places
| PGS Annual Report 20217
Rune Olav Pedersen (1970)
President & CEO
Rune joined PGS in October 2010 and became President and
CEO in 2017. Previously, he combined the roles of PGS General
Counsel and Head of Legal, with responsibility for communication,
strategic customer relations, marketing, and corporate
development. Prior to joining PGS, he served for four years as a
partner in the law firm Arntzen de Besche, specializing in oil and
gas, and before that worked as an attorney and associate in the
same firm. He started his career as a junior research fellow at the
University of Oslo and has served as a deputy judge at district
court level, in Norway. He serves as a board member of the E&P
company, OKEA. Rune has a law degree from the University of
Oslo, a post-graduate diploma in European competition law from
Kings College London, and an MBA from London Business School.
EXECUTIVE TEAM
Gottfred Langseth (1966)
Executive Vice President & CFO
Gottfred joined the Company in November 2003 and was
appointed Executive Vice President and Chief Financial Ocer in
January, 2004. Before joining PGS he was Chief Financial Ocer of
the information technology company Ementor ASA from 2000 to
2003. Gottfred was Senior Vice President of Finance and Control
at the oshore engineering and construction company Aker
Maritime ASA from 1997 to 2000. He worked at Arthur Andersen
Norway from 1991 to 1997. Gottfred was certified as a Norwegian
state authorized public accountant in 1993 and holds a Master of
Business Administration degree from the Norwegian School of
Economics and Business Administration.
| PGS Annual Report 20218
Nathan Oliver (1966)
Executive Vice President, Sales & Services
Nathan joined PGS in 1993 and was appointed EVP Sales and
Services in September 2020. He has served PGS globally in various
locations, managing international teams in London, Houston,
Singapore and KL, with regional responsibilities for Europe, West
Africa, North and South America, and Asia Pacific, running a range
of PGS activities from advanced imaging to MultiClient. Prior to
joining PGS he worked at Digicon Geophysical. Nathan holds an MSc
Geoscience from the University of Sheeld, and a BSc in Geology
from Kingston University.
Berit Osnes (1964)
Executive Vice President, New Energy
Berit joined PGS in 2006 and assumed her current position in April
2021. She has served in various MultiClient sales management
roles, including Vice President Geophysics Europe, Africa and
Middle East, Vice President MultiClient Europe, Senior Vice
President MultiClient, SVP Strategic Projects and SVP Eurasia.
She was also an employee-elected member of the PGS Board of
Directors in 2015 and 2016. Before joining PGS she held technical
management positions with Geoteam AS and Veritas DGC Ltd.
Prior to this, she spent 11 years with Norsk Hydro working within
field development, exploration and geophysical operations. Berit
holds an MSc Geophysics from the Norwegian University of Science
and Technology (NTNU).
Rob Adams (1976)
Executive Vice President, Operations
Rob joined PGS in 1998, becoming EVP Operations in January 2020.
He has experience from all PGS business areas, including oshore,
and has carried regional responsibility for projects and teams running
acquisition and processing activities in Europe, Africa, and Asia
Pacific. As SVP New Ventures (2018 – 2020) he was responsible
for new MultiClient projects across all continents. Rob has been
involved in framing PGS initiatives for reducing turnaround and
future visioning. Rob holds a BSc in Geology and Geophysics from the
University of Durham.
EXECUTIVE TEAM
| PGS Annual Report 20219
Digital Transformation
Accelerates Strategy Execution
A cloud-based sales platform
that enables new sales models
and allow clients to collaborate
on high-quality data and
achieve faster decisions and
subsurface insights.
PGS began its digital transformation in 2019. First steps were to establish a digital
transformation team responsible for overseeing and advising on the digital transformation
processes and electing Google Cloud as its preferred cloud provider. The Company identified
a set of target areas and initiatives for digital transformation to enable change across the
business, improve sustainability, reduce costs and increase efficiency, including:
Enabling faster processing and
imaging of seismic data, using
automated workflows and
cloud scalability. Project focus
can vary from cost, or carbon
footprint to project turnaround
targets, and harnesses
machine learning and artificial
intelligence.
A suite of initiatives to deliver
on the PGS strategy and create
tangible value by enabling
Machine Learning / Artificial
Intelligence to optimize
costs, track trends, improve
predictability and performance,
reduce project turnaround
time, and reveal commercial
opportunities.
PGS Solis
MultiClient Data
in the Cloud
Scalable Cloud-
native Imaging
Platform
PGS Eos
Companywide
Production-scale
Data Analytics
PGS Digital Factory
| PGS Annual Report 202110
MultiClient Data in
the Cloud
PGS Solis
Access and act on data in the cloud
Data management as a service
(DMaaS)
Flexible subscription models
PGS has developed a cloud-based data
delivery and access system, where
clients can view samples and license
MultiClient data. PGS Solis also enables
new business opportunities such as
services to manage client data in the
cloud platform. In December 2021, PGS
signed its first milestone multi-year
Data Management as a Service (DMaaS)
agreement with a major customer. Under
the agreement PGS will provide a cloud-
based digital data asset management
solution allowing the client to store,
manage and access subsurface data
they have licensed from PGS. The DMaaS
service seamlessly connects the end user
to seismic data, with anytime access to
view and download entitled data into
their work environments.
PGS Solis builds and expands on Versal, a
cross-industry collaboration that provides
a unified ecosystem for accessing
MultiClient seismic data from PGS, TGS
and CGG, thereby giving access to three
of the world’s largest MultiClient libraries
via a single log-in. In 2022 PGS will
continue to develop PGS Solis further,
capitalizing on customer feedback from
Versal. Ultimately, these initiatives
will open new commercial models and
opportunities, such as applying machine
learnings and artificial intelligence for
deeper subsurface insights.
PGS Solis
Digital Transformation Milestones
| PGS Annual Report 202111
Imaging in the Cloud
PGS Eos
Scalable cloud-native
seismic imaging
Managing infinite resources
Faster when it counts
PGS Eos
PGS started the process of imaging
seismic data in the Cloud in 2019 and
ran its first commercial processing
job in 2020. Cloud compute oers
access to almost unlimited virtual-CPU
capacity and the latest technology.
With a platform that fully utilizes these
benefits, PGS will have flexible and
cost-ecient compute capacity to image
advanced seismic measurements, with
reduced capital expenditures and without
capacity bottlenecks. During 2021, PGS
has run several imaging jobs in the Cloud
with great success.
Machine Learning &
Artificial Intelligence
Analysis of subsurface information
and metadata using machine learning
and artificial intelligence is about
accelerating turnaround for PGS and
its clients through automation of
mundane tasks. The PGS Imaging team
has carried out a proof-of-concept to
identify patterns in historical processing
flows that can minimize testing and
accelerate data delivery. Going forward,
PGS will increasingly focus on the digital
transformation processes to execute on
the Company’s strategy.
Digital Transformation Milestones
| PGS Annual Report 202112
Companywide
Production-scale Data
Analytics
PGS Digital Factory
Standardize, analyze, automate
Enabling change and improving
sustainability
Improving cost and eciency
PGS Digital Factory
PGS Digital Factory delivers solutions
to execute on many of the Company’s
strategic goals. Governance is organized
by a portfolio board, responsible for
aligning development of digital use-
cases with PGS strategy, to deliver
tangible value to the Company.
During 2020 and 2021, the Digital
Factory has focused on improving
vessel operations: data from across
the PGS fleet are contextualized and
analyzed. Improvement areas include
energy eciency, optimal vessel speed,
preventive streamer maintenance,
preventive eBird maintenance,
and improved HSEQ for small-boat
operations and use of personal
protection equipment. The project has
delivered tangible results that have been
implemented across the fleet. In the
second half of 2021, the Digital Factory
expanded its footprint companywide,
initiating improvement use-cases in
commercial and other functions.
Digital Transformation Milestones
| PGS Annual Report 202113
PGS New Energy
New energy used the initial period to assess commercial opportunities within
emerging markets related to the ongoing energy transition and identify where PGS
could match its assets, competence and capabilities to address industry challenges.
The Company has now defined carbon storage (“CS”), oshore wind and marine
minerals as markets where there is potential to build a profitable business.
PGS established the New Energy business area early 2021 to diversify its product portfolio
and build a substantial market presence in the provision of subsurface data for emerging
markets related to the ongoing energy transition.
| PGS Annual Report 202114
CS will be essential to reduce global emissions of carbon dioxide
from industrial processes. There is broad consensus that there
is an abundance of geological storage in the form of depleted
oil and gas fields and saline aquifers. Reliable geophysical data
is fundamental in the selection of specific sites for CS. The
three key attributes of safe and ecient CS developments are
capacity, containment, and injectivity.
PGS has a comprehensive MultiClient data library, which can
provide useful insights to geological properties over many
prospective storage sites. PGS GeoStreamer data in combination
with quantitative measures of reservoir quality can provide
robust estimates of geological constraints and control on
containment and injectivity. Reliable characterization of the
overburden is required to ensure the distribution of geological
faults in each area is well understood and does not present an
undue containment risk.
The MultiClient data library will not cover all potential storage
sites. Where new acquisition is required, PGS’ modern broadband
3D GeoStreamer seismic data is especially well-suited to
reliably determine subsurface properties, even in the absence
of well-data. Seismic data, combined with PGS expertise
in characterizing the subsurface can be used to minimize
uncertainty and failure risk when selecting CS sites. Once the
storage site is selected PGS’ integrated business model have the
capacity and capability to monitor carbon injection, storage and
ensure containment over time.
During 2021 PGS made several MultiClient data sales for
development of carbon storage projects. The business expanded
further when the Company announced contract awards for new
acquisition of seismic data for development of the Endurance
and Northern Lights carbon storage projects.
Judging by the CS needs prognosed in many Carbon, Capture and
Storage (“CCS”) market reports, there is a significant potential
for a market for new seismic acquisition and subsequent repeat
4D monitoring within the carbon storage domain to reach the net
zero target set by the United Nations. PGS aims to be a leading
provider of subsurface data for carbon storage applications. To
get there the Company will partner with the industry to help
lowering technical risks of CS developments through existing and
new business models.
Carbon Storage
| PGS Annual Report 202115
One of the challenges for oshore wind is the growing
geographical size of windfarm licenses and leases that could
increase the time and cost of wind energy development projects.
Many of the new license areas will be close to (or are larger
than) 1,000 square kilometers. At this scale, detailed seabed
and shallow subsurface modeling will be required over areas
comparable to those found in hydrocarbon exploration. Today,
even the highest resolution windfarm site surveys typically
use 2D profiles, limiting severely the reliability of subsurface
information to plan and profile the location. In the oil and gas
industry, PGS pioneered ecient solutions for subsurface
mapping with the introduction of large-scale 3D broadband
seismic. Oshore wind energy projects will benefit greatly from
similar eciency gains, using proven broadband seismic such as
PGS’ GeoStreamer and its ultra-high-resolution modifications.
Offshore Wind
The need for critical minerals from several industries and
the energy sector is likely to grow significantly according to
published reports. To get sucient access to resources it will be
important to extract marine minerals. PGS is participating in an
industry consortium in Norway, under the research organization
SINTEF, which is working to define best practices to characterize,
quantify, and understand uncertainty for seabed mineral
resource exploration. Seismic acquisition tests may include data
to establish an environmental baseline for exploration for marine
minerals. Marine minerals constitute a potential market for PGS;
however, it will take time before it is commercially developed.
Marine Minerals
In addition to the three identified areas CS, oshore wind and
marine minerals, PGS is also evaluating opportunities within
geothermal, which is regarded by many as the most reliable
source of renewable energy, as well as one of the least exploited.
PGS is also assessing possible business opportunities within
nuclear waste disposal and environmental and oceanographic
data management. These markets require expertise beyond
current core skills and are considered longer-term opportunities.
Other
Opportunities
| PGS Annual Report 202116
Integrated Service Offering
MultiClient | Contract | New Energy | Acquisition Fleet | Imaging
PGS is the only integrated marine seismic data acquisition and imaging company,
offering a full range of towed streamer acquisition and imaging services through both
the Contract and MultiClient business models. By controlling the fleet, the imaging
process and technology development, PGS can tailor technology and commercial
solutions to address client challenges.
Energy Security
Energy Transition
Hydrocarbon production
Carbon storage, wind and
marine minerals
MultiClient data library
Data acquisition
Technology & digitalization
Geophysical expertise & imaging
| PGS Annual Report 202117
The ongoing energy transition drives energy companies to focus
on producing fields and proven hydrocarbon basins. Demand for
seismic services is increasingly aimed at near-field exploration
and 4D reservoir optimization to get quick returns on the energy
companies’ investments. Access to high-capacity vessels and
dierentiating technology is fundamental in the growing 4D
reservoir and near-field exploration market, a market which favors
the Contract business model. PGS has enjoyed an increasingly
strong presence in these markets, as the PGS data library is strong
on mature areas which are ideal for infrastructure lead exploration,
while the Ramform acquisition platform and GeoStreamer
technology are the preferred technology solution for 4D.
Ensuring
Energy Security
Supporting Energy
Transition
PGS established the New Energy business area early 2021 with
the ambition to build a substantial and recognized presence in
the oshore renewables’ domain or related to the ongoing energy
transition. PGS has identified carbon storage, oshore wind
and marine minerals as domains where the Company’s assets,
competence and capabilities are a good match for current industry
challenges. During 2021 PGS made several MultiClient data sales
for development of carbon storage projects. The Company has
announced awards of seismic data acquisition contracts for
development of two flagship European projects within this area:
Northern Endurance (UK) and Northern Lights (Norway) projects.
Flexible Business
Models
The benefits of PGS’ integrated services oering go beyond
improving the Company’s position in the ongoing energy
transition. PGS has a portfolio of MultiClient acquisition
agreements with host nations and can acquire data using either
the MultiClient or the Contract business model. As a result, PGS
is involved in more client dialogues and able to design bespoke
solutions that provide the best commercial value for clients and
for PGS. If a client requests proprietary data in an area where they
have recently been awarded acreage, and PGS has a permit to
acquire MultiClient data, acquisition can start early. This enables
the client to spend more time analyzing the data, which generally
results in better well-placement and improves their chances of
making a discovery. PGS’ access to MultiClient agreements in
many countries has made it possible to accelerate our delivery of
quality seismic to energy companies.
Commercial flexibility also allows for innovative acquisition
arrangements. In mature areas, smaller contract jobs can be
incorporated in larger regional MultiClient surveys. Benefits to the
client include access to cost ecient data and the opportunity
to license seismic beyond their block boundary to get a better
regional understanding of the geological structures, while PGS
benefits from economies of scale and secures pre-funding for its
MultiClient survey.
Integrated Service Offering
| PGS Annual Report 202118
Integration strengthens PGS’ control of all aspects of the seismic
acquisition and imaging processes. This positively impacts
everything from identification of new projects to building close
client relationships, securing financial commitment and ensuring
projects proceed according to plan and quality objectives.
PGS project execution is done with less need to balance the
commercial drivers of third parties and subcontractors. Playing
in all acquisition and imaging markets enables PGS to build order
book continuity for vessels more eectively through the cycles and
especially in a challenging market.
Controlling the
Value Chain
PGS is known for its unique technology. By targeting R&D
expertise on vessel operations and seismic imaging challenges,
the Company improves the eciency of in-house design,
development, testing and implementation of new solutions and
technologies.
Focusing Research
and Development
Reducing Cycle Time
An integrated approach allows PGS to conduct several tasks in
parallel, such as data acquisition and processing, thereby enabling
eciencies that allow the Company to decrease the time required
from planning to data delivery.
Operating a fleet of industry leading 3D seismic acquisition vessels
with standardized seismic equipment, including GeoStreamer
technology, provides a reliable platform and flexible oering
to clients. Interchangeable capacity enables PGS to eectively
manage timing and permit constraints, changes of project timing
and almost any survey specification. PGS vessels and streamer
technology deliver reliable, timely and consistent quality of
services and data, which are highly valued by many clients.
Integrated Service Offering
Interchangeable
Assets
| PGS Annual Report 202119
Moving from Frontier Exploration
to Reservoir Optimization
Importance of vessel
& technology
Energy companies are focusing on proven
hydrocarbon basins and energy transition needs.
Subsurface
resolution
High-capacity vessels and
dierentiating technology
are fundamental to achieving
energy security and energy
transition goals.
Field development,
monitoring and
optimization
Frontier exploration
Targeted exploration
Near-field exploration
Integrated Service Offering
| PGS Annual Report 202120
Contract Acquisition Services
Contract work is seismic data acquisition under
exclusive contracts directly with customers, were
the client owns the acquired data. PGS delivers
fast and ecient acquisition of high-quality
seismic data with safe and environmentally
sound operations.
Production seismic, or 4D, is a growing
segment of the seismic contract market
that enables energy companies to optimize
resource extraction from producing fields.
Operational precision, data resolution and
survey repeatability are essential, and are areas
where PGS excels. The value of using 4D seismic
is increasingly acknowledged outside of the
traditional areas of the North Sea, Brazil, and
Angola. High-resolution 3D surveys are repeated
at regular intervals during a producing field’s life
cycle, and those first acquired with GeoStreamer
multisensor technology are generally repeated
with multisensor. During down-cycles in
the oil and gas industry, energy companies
may temporarily reduce the frequency of 4D
surveying to save cost and protect cash flow.
Despite this, production seismic and
near-field exploration deliver short-cycle return
on investment and these markets tend to be
more resilient than pure exploration projects.
The ongoing energy transition drives seismic
demand towards infrastructure lead exploration
and production as the energy companies extract
more value from producing fields and existing
portfolio acreage. PGS expects 4D acquisition
activity to grow further.
PGS New Energy has secured several 4D baseline
surveys for development of Carbon Capture and
Storage (“CCS”) projects. Carbon storage plays
a significant role in all net zero scenarios and
identification, characterization and monitoring
of carbon storage sites could constitute a
significant new seismic acquisition market.
MultiClient
MultiClient data is acquired, imaged, and owned
by PGS. Energy companies buy a license from
PGS to use a specific data set, and a single
survey is typically licensed to multiple energy
companies. To build and maintain the MultiClient
data library, PGS makes significant investments
in developing, acquiring, and imaging new
surveys. By continuously investing in the
MultiClient data library the Company expands
PGS provides seismic data that describes the geology beneath the ocean floor, which
energy companies rely on to find oil and gas reserves worldwide. Since establishing PGS
New Energy in early 2021 the Company is assessing how its expertise and assets can be
used to address energy transition business opportunities.
PGS’ main products and services include:
PGS Product Portfolio
Seismic data acquisition • MultiClient data library
Seismic imaging • Geoscience data integration and analysis
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| PGS Annual Report 202121
its footprint in proven hydrocarbon basins and
selective frontier areas.
The ability to identify and initiate new
MultiClient programs with solid economics over
the life of the data library asset is a key success
criterion for the MultiClient business model. PGS
de-risks new programs by securing prefunding
commitments from energy companies, with
a targeted prefunding level for the combined
portfolio in the range of 80-120% of the
capitalized MultiClient cash investment.
Initiation of New MultiClient Surveys
The MultiClient business is about having the
right data, in the right place, at the right time.
PGS initiates attractive new MultiClient projects
by capitalizing on its existing data library, in
combination with applying in-house imaging
and reservoir expertise, and feedback from
customers regarding exploration and production
areas of interest. The PGS MultiClient data
library provides information about the geology
in all the world’s major hydrocarbon basins. By
analyzing these data, including available public
or ‘open file’ data, PGS imaging and reservoir
experts can propose extensions to the existing
library and new areas of hydrocarbon resource
potential that have a high likelihood of being of
interest to energy companies. These findings are
assessed against feedback from clients on where
they see hydrocarbon potential and would like
more seismic data to support their exploration
and production activity.
The information is combined with an overall
risk analysis of the area, such as geological
prospectivity, geophysical imaging challenges,
political risks, past performance of surveys in
the region, and the likelihood of future license
rounds or other sales trigger events to ensure
the business model is robust.
A key part of the MultiClient business involves
assisting governments to explore and promote
their resource potential in the best way possible,
noting that every country and basin requires a
slightly dierent approach. PGS has supported
many governments by providing high-quality
data and advice on how to promote interest and
optimize oshore hydrocarbon opportunities.
MultiClient Data Library Sales
PGS has a modern and diverse global MultiClient
data library focused in largely mature areas of
high oil and gas prospectivity. By accessing PGS’
data library, customers can evaluate hydrocarbon
potential faster, compared to acquiring and
processing a new seismic survey on a proprietary
basis. The rapid access to high-quality seismic
data enables oil companies to assess the
subsurface risks before applying for acreage
in licensing rounds, guides exploration eorts,
and evaluations of farm-in opportunities.
License rounds serve as important sales
triggers for the PGS MultiClient data library and
guide long-term investment decisions for new
MultiClient data acquisition. The geographical
diversity and strategic positioning of PGS global
MultiClient library enables the Company to
benefit from license rounds around the globe.
A large MultiClient library with continuous
coverage has obvious benefits. Geology is
broad scale in nature, and it is dicult to
understand and predict the characteristics of a
local area if it is not set in context of the larger
geological system. By re-imaging existing data
in the MultiClient library, PGS creates regional
data sets, which make it possible to interpret
and analyze a whole basin in a consistent
manner. Santos Vision in Brazil, Flex Vision
in the Gulf of Mexico and GeoStreamer PURE
in Norway, are three such examples of re-
imaged regional data sets. PGS also employs
geological expertise, which is used to plan
and market MultiClient projects and advise
governments how to maximize the value of
their subsurface acreage, from licensing and
exploration through to appraisal, development
and production, and now also carbon storage.
PGS MultiClient data library is orientated
towards 3D, with a total 3D footprint of
more than 1 100 000 square kilometers (sq.
km). This is comprised of several hundred
individual 3D surveys that fall into the following
categories: GeoStreamer 3D acquired using
multisensor technology (577 000 sq. km),
Conventional 3D (329 000 sq. km) and surveys
that have been combined and reprocessed
which include Vision 3D (107 000 sq. km)
and MegaSurveyPlus (103 000 sq. km).
PGS Product Portfolio
| PGS Annual Report 202122
PGS’ MultiClient 2D library comprise
approximately 590 000-line kilometers, of
which approximately 70% are GeoStreamer
data. In addition, the Company has more than
875 000 square kilometers of MegaSurvey, built
by integration of available public data together
with PGS-owned 3D data to produce large-scale
geologically continuous regional 3D datasets.
PGS GeoStreamer MultiClient data can also
be used to minimize uncertainty and failure
risk when selecting carbon storage sites. In
addition to new seismic data acquisition for
development of CCS projects, PGS has made
several MultiClient sales for the same purpose.
Ramform Advantage
PGS is currently operating a core acquisition
fleet of Ramform vessels, comprising four
Ramform Titan-class vessels, one Ramform
S-class vessel and one Ramform V-class vessel.
Ramform vessels have delta-shaped hulls and
uniquely wide back decks, enabling safe and
highly ecient seismic acquisition. The breadth
of the Ramform back decks, 40 meters on
the Ramform S-class and the V-class, while
it is 70 meters on the Ramform Titan-class,
which provides unparalleled streamer handling
capabilities. The PGS fleet delivers industry
leading performance in deployment, acquisition,
and streamer recovery.
PGS leads the industry in HSEQ performance and
aims to sustain and improve this, with a culture
based on operational excellence and safety.
GeoStreamer Technology
PGS launched GeoStreamer in 2007 and has
equipped all vessels with this multisensor
streamer technology. Benefits of the technology
include subsurface images of greater resolution,
accuracy, and reliability. The streamer is towed
deep, increasing the low-frequency signal
content and its multisensor recording allows
the accurate removal of unwanted noise that
interferes with the seismic signal. The Company
is evolving the technology to increase durability,
while maintaining data quality. The useful life
of the streamer has been increased from seven
years, for the earlier design, to more than ten
years for the latest version.
In 2019 PGS launched GeoStreamer X, which
capitalizes on the GeoStreamer technology with
an innovative acquisition configuration. Adding
new azimuths to existing data oers a highly
cost-ecient alternative to improve illumination
and subsurface understanding versus ocean
bottom node systems.
Imaging Services
PGS has the capability to run several of its
imaging algorithms in the Cloud, which oers
unconstrained scalability and eciency on an
almost unlimited virtual-CPU capacity. All of
the Company’s imaging centers globally, where
the Company images all new MultiClient data
acquired and provides proprietary imaging
services, have the capability of using Cloud-
compute. In addition, PGS uses its state-of-
the-art imaging technology and innovative
workflows to rejuvenate existing MultiClient
library data. The Company’s external imaging
activities supply bespoke high-end, high-value
services to a wide range of energy companies.
Imaging services comprise GeoStreamer-based
imaging technology, reservoir characterization,
4D processing solutions, and advanced imaging
of ocean bottom node data.
Geoscience data integration and analysis
PGS’ modern, broadband 3D GeoStreamer
seismic data is especially well-suited to
reliably determine subsurface properties, even
in the absence of well-data. Seismic data in
combination with PGS’ highly experienced
geoscientists can help clients to maximize the
value of their subsurface assets, ranging from
licensing and exploration through to appraisal
development, production and carbon reinjection.
PGS Product Portfolio
| PGS Annual Report 202123
Building a MultiClient Data Library
for the Future
The PGS MultiClient data library contains
advanced images of the subsurface that energy
companies use to explore for hydrocarbons.
Better data enables more effective exploration
and increases the chances of success.
The library focuses on areas of high prospectivity,
where clients have good potential for accessing
acreage. A range of commercial models for data
licensing is available, designed to suit the exploration
objectives and ambitions of any oil company.
PGS MultiClient 3D
Has a total 3D footprint of more
than 1 100 000 sq. km.
Premium comprises approximately
52% GeoStreamer 3D data and 10%
3D Vision.
PGS has the highest
MultiClient revenues
since Q2 2020 and the
lowest investment level.
Most of PGS MultiClient
library is in mature and
producing basins.
PGS MultiClient 2D
Comprising approximately 590 000
line kilometers, of which 70% is
GeoStreamer 2D data.
62%
Premium
70%
GeoStreamer
PGS MultiClient
revenues during
the pandemic
PGS Product Portfolio
200
400
600
800
USD million
PGS Company A Company B
LTM* Q2 20 LTM Q4* 20 LTM* Q2 21LTM* Q3 20 LTM* Q1 21 LTM* Q3 21 LTM* Q4 21
*Last Twelve Months (“LTM”)
| PGS Annual Report 202124
Utilizing the
Capabilities of
the PGS Fleet
PGS has a unique advantage in being the
only seismic operator to use vessels of
the Ramform design. The ability to tow
large, dense streamer spreads, as well as
rapid streamer deployment and retrieval,
are critical factors for high productivity.
The capability to complete large surveys
in short time spans is a significant PGS
advantage.
| PGS Annual Report 202125
Ramform
Hyperion
4
16
Age and Streamer Count* in PGS Core Active Fleet
Normal Streamer Count Vessel Age (years)
Ramform
Tethys
5
16
Ramform
Atlas
7
16
Ramform
Sovereign
13
14
Ramform
Vanguard
23
12
Ramform
Titan
8
16
*All available streamers are GeoStreamer
Utilizing the Capabilities of the Fleet
Total Recordable Case
Frequency (“TRCF”)*
*Per million man-hours.
20212018 2019 2020
1.15
0.84
0.86
0.65
Lost Time Incident
Frequency (“LTIF”)*
*Per million man-hours.
20212018 2019 2020
0.19
0.28
0.52
0.65
Active Vessel Time
in 2021
59% Contract
41% MultiClient
71% Vessel Utilization
in 2021
42% Contract
29% MultiClient
13% Steaming
5% Yard
13% Standby
| PGS Annual Report 202126
The PGS share is listed the Oslo Stock Exchange in Norway. Approximately 33% of the
Company is owned by Norwegian investors, while UK and US based investors own 25%
and 18% respectively. The rest is owned by investors mainly located in other Western
European countries.
Share Facts
As of December 31, 2021 PGS, had 400 667 697
shares outstanding. Each share has a par value
of NOK 3. The ticker code for PGS at the Oslo
Stock Exchange is “PGS” and the shares are
denominated in Norwegian kroner (“NOK”). On
average, approximately 5.0 million PGS shares
were traded daily on the Oslo Stock Exchange
in 2021.
PGS has since it was de-listed from the New
York Stock Exchange in 2007 issued and oered
for trade share instruments being American
Depositary Shares (“ADS”). As there has been
low ADS trading volumes during recent years,
the Company decided in 2021 to terminate the
ADS program with eect from November 5,
2021. ADS holders will need to surrender their
ADS for delivery of underlying PGS shares by
May 5, 2022.
Shareholders
PGS had 8 926 shareholders on record as of
December 31, 2021, according to the Norwegian
Central Securities Depository (“VPS”). As of
December 31, 2021, Coltrane Asset Management
was the largest PGS shareholder, owning 63.9
million shares or 16.0% of the Company. As of
year-end 2021, PGS held 590 of its own shares.
Distribution of Information and IR Activities
All Company information considered material
to the capital markets is published via the Oslo
Stock Exchange’s news service: www.newsweb.
no and posted on the Company’s website. PGS
holds public presentations in connection with
quarterly earnings releases, and management
has a frequent dialog with investors and
participates at investor conferences.
Analyst Coverage
As of December 31, 2021, there were 9 sell-side
analysts with research coverage of PGS. An
updated list of analyst coverage is published on
the Company’s website.
2022 Annual General Meeting
PGS’ 2022 Annual General Meeting is scheduled
for April 27. Each PGS share is entitled to one
vote. Please note that Norwegian regulations
stipulate that, shares must be registered in the
name of a specific owner for that person (or
duly authorized agent) to be allowed to vote.
Shareholders who wish to attend the Annual
General Meeting are requested to pre-register
via the Company’s registrar. The registrar’s
contact information follows:
DNB Bank ASA
Registrar Services
PO Box 1600 Sentrum
NO-0021 Oslo, Norway
Phone: +47 23 26 80 20
Email: kua@dnb.no
Corporate Credit Rating
Moody’s has a ‘Caa1’ corporate rating on PGS
with Negative Outlook, and S&P has a CCC+
corporate rating also with Negative Outlook.
The PGS Share
| PGS Annual Report 202127
The PGS Share
20 Largest PGS Shareholders*
December 31, 2021
Total shares Ownership percent
Coltrane Asset Management LP 63 914 900 16.0
DNB Asset Management AS 29 024 749 7.2
M&G Investment Management Limited 26 931 374 6.7
Dimensional Fund Advisors LP 12 977 624 3.2
The Boeing Company Employee Retirement Plans Master Trust 12 885 165 3.2
Barclays Capital Inc. 7 951 764 2.0
Susquehanna International Group Ltd. 5 528 848 1.4
Monaco Asset Management SAM 5 187 082 13
Mats Geo AB 4 900 000 1.2
Credit Andorra 4 616 595 1.2
Andbank Wealth Management SGIIC SAU 4 311 590 1.1
Legal & General Investment Management Limited 4 213 000 1.1
Charles Schwab Investment Management, Inc. 4 171 008 1.0
Trefoil Capital Advisers 4 012 445 1.0
MH Capital A/S 3 983 490 1.0
Saxo Capital Markets UK Ltd 3 546 948 0.9
City of New York Group Trust 2 931 262 0.7
SPB A/S 2 811 435 0.7
UBS Switzerland AG (Investment Management) 2 622 999 0.7
American Century Investment Management Inc. 2 438 622 0.6
Other 191 706 797 47.8
Total 400 667 697 100.00
67% Norway
11% UK
22% France
PGS Sell-side Analyst Location
33% Norway
25% UK
18% USA
24% Other
Citizenship of Shareholders
*The data is provided by Q4 Inc. and is obtained through an analysis of beneficial ownership and fund manager information provided in replies to
disclosure of ownership notices issued to all custodians in relation to the PGS share register provided by the Norwegian Central Securities Depository
(VPS). Every reasonable eort has been made to verify the data, however neither PGS nor Q4 Inc. can guarantee the accuracy of the analysis.
| PGS Annual Report 202128
2021
Established New Energy to
leverage PGS expertise and assets,
to assess market needs and develop
business opportunities in the evolving
energy transition. Entered a strategic
collaboration with Magseis Fairfield
to serve the hybrid towed streamer
and OBN market. Celebrated 30 years
anniversary.
2020
The COVID-19 pandemic had a
severe negative impact on the seismic
industry and PGS reduced cost and
capital expenditures significantly as a
response. Rejected a non-binding bid
from TGS to acquire PGS MultiClient
data library.
2019
Sold the Ramform Sterling to
JOGMEC in Japan and entered into a
related service agreement of up to 10
years with annual renewals. Changed
name from Petroleum Geo-Services
ASA to PGS ASA.
2018
Sold OptoSeis to GeoSpace as a
part of the strategy to divest non-core
assets.
2017
Took delivery of Ramform
Hyperion. Launched initiative to
centralize, simplify and streamline the
organization.
2016
Ramform Tethys was
delivered, improving fleet capabilities
further with excellent operational
performance.
2015
In an uncertain market
environment PGS focused on cash flow
and increased its liquidity reserve.
// History of PGS
2014
Ramform Atlas, the second
Ramform Titan-class vessel was
delivered.
2013
PGS took delivery of the
Ramform Titan, the first vessel in a series
of four Ramform Titan-class ships.
2012
PGS exercised options to build
another two Ramform Titan-class
vessels and launched Separated
Wavefield Imaging (“SWIM”).
2011
PGS orders two new Ramform
Titan-class vessels from Mitsubishi
Heavy Industries Shipbuilding Co Ltd. in
Japan, with options for additionally
two vessels.
2010
Following sale of its Onshore
business, PGS emerged as a focused
marine geophysical company. PGS was
reorganized into global product lines.
PGS Apollo joined the fleet.
2009
PGS took delivery of the
Ramform Sterling.
2008
PGS took delivery of the
Ramform Sovereign and the vessel sets
new industry record with deployment
of 17 streamers.
2007
PGS introduced the
GeoStreamer, the first ever dual sensor
streamer. The Company sells Ramform
Victory to the Japanese Ministry of
Economy Trade and Industry (“METI”).
PGS acquired Arrow Seismic, Multi
Transient Electro Magnetics (“MTEM”)
and Applied Geophysical Services
(“AGS”). The first dividend in PGS
history was paid.
History of PGS
| PGS Annual Report 202129
2006
PGS demerged its floating
production by listing and distributing
to shareholders the company Petrojarl
ASA. PGS announces plan to build two
Ramform S-class vessels.
2005
Pertra was sold to Talisman,
and PGS became a dedicated oil
services company. In December the
same year a full refinancing of the
Company was completed.
2003
PGS sold Atlantis to Sinochem.
An inability to meet debt obligations
made PGS file for Chapter 11 under
the US Bankruptcy code in July. PGS
emerged from Chapter 11 in November
the same year.
2002
PGS bought into in the Varg
field in the North Sea from Norsk
Hydro and Statoil and established the
exploration and production company
Pertra.
2001
The Company’s data
management business was sold
to Landmark Graphics Corporation.
Ramform Victory tows the world’s first
16 streamer spread.
2000
PGS sold its subsidiary
Spinnaker Exploration.
1999
A fourth FPSO, the Petrojarl
Varg, was bought from Saga Petroleum.
1998
The production services
business Atlantic Power was acquired.
PGS added the Ramform Ban to the
fleet of FPSO vessels.
1997
PGS was listed on the New York
Stock Exchange. PGS Production is
conceived with the acquisition of
Golar-Nor and the FPSOs Petrojarl I
and Petrojarl Foinaven
1995
Ramform seismic vessel
technology was introduced with
delivery of the Ramform Explorer. From
1995 to 1999, PGS designed, built, and
deployed six proprietary Ramform
survey vessels and grew to become a
worldwide leader in the development
and industrialization of 3D marine
seismic acquisition.
1994
Acquisition of ERC – a reservoir
consultancy group.
1993
Initial public oering on
NASDAQ in the United States. With the
acquisition of Tensor Inc., specialists in
3D processing and depth imaging, PGS’
expanded into the data processing field.
1992
PGS was incorporated as
a public limited liability company,
Petroleum Geo-Services ASA, and
listed on Oslo Stock Exchange.
1991
Geoteam and Precision Seismic
merge to form Petroleum Geo-Services
(“PGS”). Later the Company merged
with Nopec. PGS’ vision was to provide
the most ecient acquisition of 3D
marine seismic data.
History of PGS
| PGS Annual Report 202130
In accordance with the Norwegian Accounting Act section
3-3b, PGS’ Board of Directors (the “Board”) are required to
annually give a statement of PGS’ corporate governance.
This Corporate Governance Report 2021 is referred to in
the Board’s statement and complies with section 3-3b.
In accordance with the Norwegian Public Limited Liability
Companies Act section 5-6 (5), this report is also presented
to the shareholders at the 2022 Annual General Meeting
(“AGM”) for discussion as a non-voting item.
1. Our Governance Model
PGS ASA is registered in Norway as a public limited liability
company, and our corporate governance model is based
on Norwegian corporate law, the Oslo Stock Exchange’s
Issuer Rules (available on www.euronext.com/nb/markets/
oslo), and the Norwegian Code of Practice for Corporate
Governance available on www.nues.com (the “NUES
Recommendations”). Our governance model is suited to our
Company and the industry in which we operate.
Our corporate governance principles have been adopted by
our Board and are summarized below. Our website provides
full versions of our basic corporate governance documents
and an overview of our governance structure. These items
include the Company’s Articles of Association, the Board’
Rules of Procedure, and the charters for the Company’s
Audit Committee, Remuneration and Corporate Governance
Committee (“Remco”), and Nomination Committee. The
documents can be downloaded from www.pgs.com.
2. Our Commitments – Sustainability and ESG
We have adopted a Code of Conduct that reflects our
commitment to our shareholders, customers, employees,
and other stakeholder to carry out our business with the
utmost integrity. The Code of Conduct outlines both what
stakeholders can expect from PGS, and what PGS expects
from our employees and anyone working for PGS. PGS
and its employees are also guided by our Core Values and
Leadership Principles that drive desired behavior and culture.
Our Code of Conduct, Core Values and Leadership Principles
are available in full on www.pgs.com. During 2021, we
updated our 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 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 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 six of the 15
SDGs where the Company contributes. These identified
goals are number 04 Quality Education, 07 Aordable and
clean energy, 09 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 and other ESG documents
available at www.pgs.com.
Corporate Governance
PGS ASA and its subsidiaries (“PGS” or the “Company”) is committed to maintaining high standards of
corporate governance. We believe that effective corporate governance is essential to our Company’s success and
establishes the framework by which we conduct ourselves in creating value for our shareholders and delivering
services to our customers.
| PGS Annual Report 202131
3. Our Business
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. Our services are provided to the oil and
gas industry, as well as to the broader and emerging new
energy industries, including carbon storage and oshore
wind. The Company operates on a worldwide basis with
headquarters in Oslo, Norway.
Our business purpose, as presented in the Company’s
Articles of Association, is as follows: “The business of the
Company is to provide services to and participate and invest
in energy related businesses.”
Our business operations and product portfolio are presented
in greater detail in this Annual Report.
4. Equity and Dividends
The shareholders’ equity as of December 31, 2021 was $245.1
million, corresponding to 14% of total assets.
As a result of a weak market over several years and the
latest downturn following the outbreak of COVID-19 in 2020,
combined with substantial investments in fleet renewal, Net
Interest Bearing Debt excluding lease liabilities, currently
at $936.4 million, is higher than what the Board sees as
beneficial for stakeholders over time. Considering experience
from the downcycle and with a view that the Company’s
markets will continue to be cyclical in the future, the
Company has adopted a strategic target to over time reduce
Net Interest Bearing Debt to a level not exceeding $500 to
600 million, assuming the current size and composition of
business activities. As a result, the Company will continue
to give higher priority to cash flow generation and debt
reduction than business growth until it reaches a lower debt
level. Early 2021, the Company successfully completed a
re-negotiation of amortization and maturity profiles for its
main credit facilities. The negotiated result was completed
by a UK Scheme of Arrangement (the “Scheme”) sanctioned
by an English court and having support of almost all the
Company’s lenders. The agreements included the issuance
of a convertible loan of NOK 116,162,097 (c. $13 million). Per
December 31, 2021, NOK 75,779,994 (c. $8.6 million) of this
loan remain outstanding, while NOK 40,382,103 had been
converted into 13,460,701 new shares.
With the substantial cost reductions during 2020, the re-
scheduling of amortization and maturity on interest bearing
debt in 2021 and increasing revenues, the Company has
been positioned to manage its debt obligations. However,
due to the seismic market recovery in 2021 being slower
than assumed in the debt rescheduling business plan from
2020, the Company has seen a risk that it will not generate
sucient liquidity to repay the 2022 maturities whilst also
meeting other requirements of the main credit agreements.
The Company has therefore started preparations for
assessing the Company’s options in this respect. See
“Financing status” section of the Board of Directors report
for more details.
During 2021, the Company decreased its Net Interest Bearing
Debt by $ 1.2 million.
The Board continually monitors the adequacy of the
Company’s capital structure in light of its objectives,
strategy, risk profile and outlook.
The alternative performance measure “Net Interest Bearing
Debt” as used above, excludes lease liabilities recognized
in accordance with IFRS 16 and is further defined in the
Annual Report.
The Board has adopted a dividend policy whereby it is
the intention to distribute 25 to 50 percent of annual net
income as dividends over time. The Board has no general
authorization to distribute dividends. Each year’s dividend is
decided by the AGM after a proposal from the Board.
The Company has not distributed dividends in recent
years due to a weak market, operating losses and a need
to maintain an adequate liquidity reserve. Going forward,
the Company’s capacity to pay dividend will be assessed
by the Board in light of, among other things, the market
outlook and the Company’s equity and funding positions.
Since the Company currently has Net Interest Bearing Debt
which is above the targeted level, priority is given to debt
reduction before resuming dividend payments. In addition,
the Company is restricted in its main credit facility from
proposing a dividend for 2021 and these agreements require
certain conditions to be fulfilled before the Company may
propose a dividend payment.
The Board is authorized to buy back up to 10 percent of
the Company’s share capital (treasury shares). The current
authorization expires on June 30, 2022. However, a new
authorization will, in line with past practice, be proposed at
the next AGM. Purchase of treasury shares are subject to
restrictions in the Company’s main credit facility identical to
those applicable for distribution of dividends.
It has been an ongoing practice of PGS shareholders to
grant authorizations to the Board permitting it to increase
the Company’s share capital or issue convertible loans for
up to 10 percent of the Company’s share capital for certain
defined purposes. The authorization given in 2020 was used
to issue a convertible note related to the debt re-scheduling
process completed in early 2021. Per December 31, 2021,
the authorization given in 2021 remains unused. A new
authorization in line with past practice will be proposed at
the next AGM.
Corporate Governance
| PGS Annual Report 202132
Separate General Meeting votes are held for (a)
authorizations to increase the share capital for certain
business purposes, (b) authorization to issue convertible
loans and (c) authorization to acquire treasury shares.
When a proposed resolution encompasses share capital
increases and/or the issuance of convertible loans and/
or acquisition of treasury shares for various purposes,
the Company does not find it practical to hold separate
votes on each element of the proposals. This is a
deviation from the NUES Recommendation No. 3 where
it is recommended that when the General Meeting is to
consider mandates to the Board for the issue of shares for
dierent purposes and each mandate should be considered
separately by the shareholders.
5. Equal Treatment of Shareholders - Transactions with
Closely Related Parties
PGS has a single share class and all shares carry the same
rights. At our General Meetings, each share carries one vote.
Our Board is committed to equal treatment of shareholders
in all respects.
When applicable, transactions involving the Company’s
own shares are carried out through a stock exchange, or
at prevailing stock-exchange prices if carried out in an
alternative manner.
Transactions between the Company on the one hand, and
shareholders, a shareholder’s parent company, members of
the Board, executive ocers, or closely related parties of
any such party (referred to as “Closely Related Parties”) on
the other hand shall be conducted at arm’s length distance
and at market terms. Material transactions between the
Company and Closely Related Parties will be subject to
independent valuation by third parties.
According to PGS’ Code of Conduct, our employees shall not
have any personal or financial interest that might conflict
with those of PGS nor influence, or appear to influence
judgments or actions in carrying out their responsibilities
on behalf of the Company. According to the Board’s Rules
of Procedure, a member of our Board may not participate
in discussions or decision-making as to issues in which the
Director or any of its Closely Related Parties have a material
personal or financial interest. The Code of Conduct and Rules
of Procedure are available on www.pgs.com.
6. Shares and Negotiability
The Company’s shares are freely transferable and there are
no restrictions imposed by the Company on ownership of or
voting for shares.
The Company has since it was de-listed from the New York
Stock Exchange in 2007 issued and oered for trade share
instruments being American Depositary Shares (“ADS”). As
there has been low ADS trading volumes during recent years,
the Company decided in 2021 to terminate the ADS program
with eect from November 5, 2021. ADS holders will need to
surrender their ADS for delivery of underlying PGS shares by
May 5, 2022.
7. General Meeting
Through participation in General Meetings, our shareholders
exercise ultimate authority over the Company and, with
exception of the employee elected Directors, elect the
members of its Board and the chairperson of the Board.
Pursuant to the Company’s Articles of Association, the notice
of an AGM is distributed at least four weeks in advance of
the meeting to shareholders. A copy of the calling notice
with appendices will be posted on www.pgs.com.
Notices convening Extraordinary General Meetings (“EGM”)
must be distributed at least three weeks ahead of the
meeting. The Board is to call shareholders to an EGM upon
a written demand by the Company’s independent auditor or
shareholders representing at least five percent of the share
capital, or for other purposes.
Shareholders who wish to attend a General Meeting must
notify the Company’s registrar or PGS by the deadline
stated in the meeting notice, which must be at least two
working days before the General Meeting.
According to the Company’s Articles of Association,
documents to be considered at the General Meeting
may be published on our website. The same applies to
documents that, due to statutory requirements must be
attached to, or included in the notice calling the General
Meeting. If the documents are published in such a manner,
the statutory requirements for distribution shall not apply.
Nevertheless, shareholders are entitled to request that
documents to be considered by the General Meeting are
sent to them via regular mail.
To vote at General Meetings, in person or by proxy, a
shareholder must be registered with the Norwegian Central
Securities Depository (“VPS”).
An owner with shares registered through a custodian has
voting rights equivalent to the number of shares covered
by the custodial arrangement, provided that the owner of
the shares, within two working days ahead of the General
Meeting, provides PGS with his or her name and address
Corporate Governance
| PGS Annual Report 202133
together with written confirmation from the custodian
to the eect that he or she is the beneficial owner of the
shares held in custody.
Written and/or electronic voting in accordance with the
Norwegian Public Limited Liability Companies Act, cf.
sections 5-8 to 5-8b, shall be allowed for meetings where
such method of voting is arranged by the Board. The
Company will for the 2022 AGM call for a virtual meeting and
will arrange for electronic voting.
Generally, all Directors normally attend the AGM together
with the chairperson of the Nomination Committee and
the auditor. In accordance with the Company’s Articles
of Association, the chairperson of the Board chairs
General Meetings. This is a deviation from the NUES
Recommendation No. 6 for making arrangements to ensure
an independent chairperson for the General Meetings. The
reason for this deviation is that the Company has found this
more practical and that PGS wishes to ensure that General
Meetings are chaired by a competent person having proper
insight into PGS’ overall operations
8. Nomination Committee
In line with our Articles of Association, the Company has
currently a Nomination Committee comprised of four
members to be elected by our shareholders at the AGM.
The majority of Nomination Committee members shall
qualify as independent parties, pursuant to the NUES
Recommendations. The term of service shall be two years
unless the General Meeting determines that the period
shall be shorter.
The Nomination Committee’s main responsibilities, which
are set out in the Nomination Committee Mandate and
Charter, are to propose nominees for election as members
and chairperson of the Board and the Nomination
Committee. Further, the Nomination Committee proposes
remuneration to be paid to members of the Board and its
committees and Nomination Committee. The remuneration
is approved by the General Meeting. Annually, the
Nomination Committee produces a written report containing
its nominations and proposals, which is distributed in
advance of each AGM.
Once a year, the Nomination Committee meets with each
Director individually and discusses how the Board and
its committees function and whether there is a need for
changes to the Board. The Nomination Committee also
keeps contact with shareholders and the Company’s
President & CEO (“CEO”) as part of its work.
As of December 31, 2021, the Nomination Committee
comprises Harald Norvik (chairperson), Terje Valebjørg,
Alex Herger and Ole Jakob Hundstad. Mr. Norvik was a first
time electee at the 2017 AGM as chairperson, whereas Mr.
Valebjørg was a first time electee on the 2016 AGM as a
member, and Ms. Herger and Mr. Hundstad were first time
electees as members at the 2019 AGM. These four individuals
were all re-elected at the 2021 AGM, all for a service period
ending with the 2022 AGM. The current Nomination
Committee members are presented more in detail www.
pgs.com. Any adjustments to the Nomination Committee
proposed for approval at the 2022 AGM is presented in detail
in Appendix II to the 2022 AGM Calling Notice.
Shareholders who wish to propose new Board members or
new members of the Nomination Committee may do so by
submitting a candidate’s name to PGS’ investor relations
sta via www.pgs.com by following the link, “Nominate
a Board Member.” The deadline for submissions each year
is January 31. Alternatively, candidates can be proposed by
letter to PGS attn. General Counsel or via email to ir@pgs.
com. PGS does not employ any Nomination Committee
members, none is a member of the Board and all proposed
members to the Nomination Committee are considered to
be independent from the Board and the management of
the Company.
In 2021, the Nomination Committee held six physical and
virtual meetings. The Nomination Committee’s report on its
work and recommendations is set out in Appendix II to the
2022 AGM Calling Notice.
9. Board – Composition and Independence
According to the Company’s Articles of Association, our
Board shall have from three to thirteen Directors. The period
of service for members of the Board shall be one year. The
Board has adopted its own Rules of Procedure that establish
in more detail its roles and responsibilities, including:
Directors’ qualifications
Requirement that a majority of the shareholder elected
Directors in the Board, a majority of the shareholder
elected Directors being members of the Remco, and all
shareholder elected Directors being members of the Audit
Committee, are considered to be independent Directors
Annual review and determination of the independence of
each Director
The composition of the Board is a reflection of the
Company’s commitment to protect the common interests
of all shareholders and the Company’s need for expertise,
capacity and diversity.
As of December 31, 2021, the Board comprised five
shareholder elected and three employee elected Directors.
The current shareholder elected Directors are Walter Qvam
(chairperson), Anne Grete Dalane, Richard Herbert, Marianne
Kah and Trond Brandsrud, whilst the current employee elected
Directors are Anette Valbø, Gunhild Myhr and Eivind Vesterås.
The current Directors are presented more in detail www.
Corporate Governance
| PGS Annual Report 202134
pgs.com and in the Annual Report. Any adjustments to the
Board proposed for approval at the 2022 AGM is presented in
detail in Appendix II to the 2022 AGM Calling Notice.
As of December 31, 2021, all shareholder elected Directors
are independent of the Company’s management, its major
business relations, and major shareholders. No shareholder
elected Director may be an executive of PGS and are not
permitted to perform paid consultancy work for PGS. As of
December 31, 2021, all Directors, directly or indirectly, own
PGS shares.
Shareholders and other interested parties may communicate
directly with our shareholder elected Directors by written
correspondence addressed to PGS ASA, Board (shareholder
elected members), Secretary of the Board or to the
Company’s General Counsel Lars Ragnar van der Bijl Mysen,
PO Box 251, NO-0216 Oslo, Norway. Further, the Company
has on www.pgs.com posted an invitation to shareholders
for discussing corporate governance or corporate
responsibility matters by contacting Mr. Mysen by phone or
arranging a meeting with him.
10. The work of the Board
In accordance with Norwegian corporate law, our Board has
overall responsibility for management of the Company, while
the CEO is responsible for day-to-day management.
The Board provides oversight of the CEO’s day-to-day
management and company activities in general. The
Board is also responsible for ensuring that appropriate
management, guidelines, and control systems are in place
and are followed. In cooperation with the CEO, the Board
also develops clear goals, strategies and risk profile for the
Company such that it generates value for its shareholders
in a sustainable manner taking economic, social and
environmental, aspects into consideration.
The CEO, as agreed with the chairperson of the Board,
annually submits a schedule of the meetings of the Board
of Directors in the upcoming calendar year. The schedule
is subject to Board approval. In 2021, the Board held
eight physical and virtual meetings. Due to the COVID-19
situation, most meetings were held using MS Teams or
held as a hybrid of MS Teams/physical meeting. During
2021, all the shareholder-elected Directors participated in all
prescheduled board meetings.
Key elements of the Rules of Procedure cover the Board’’
responsibilities to determine the Company’s financial
targets, set strategy along with the CEO and executive
committees, and approve business plans, budgets, and
budgetary and risk frameworks. The Board reviews at least
annually the objectives, strategy and risk profile for the
Company. In its supervision of the Company’s business
activities, the Board will seek to ensure that satisfactory
procedures are in place for monitoring and follow-up
of Board-approved corporate principles and guidelines
covering areas such as ethical conduct; adherence to laws,
rules, and regulations; health, safety and environment; and
corporate responsibility.
The Rules of Procedure also require an annual self-evaluation
to determine whether the Board and its committees are
functioning eectively. The annual self-evaluation is prepared
and facilitated by the Remco. An anonymous survey is carried
out and the findings are discussed by the Board. The survey’s
findings are made available to the Nomination Committee.
The chairperson of the Nomination Committee also shares
with the Board relevant information for improvement of
Board processes that may come up in their annual interviews
with individual Directors.
Each scheduled Board meeting includes a separate session
at which issues may be discussed without the presence of
the Company’s management.
The tasks and duties of the CEO vis-à-vis the Company’s
Board are also outlined in the Rules of Procedure, along with
the tasks and duties of the chairperson of the Board. The
CEO participates in all board meetings other than closed
sessions. The Board elects a vice chairperson to chair board
meetings in the chairperson’s absence. The full text of the
Board’s Rules of Procedure is available at www.pgs.com. Our
governance structure is organized as described below.
Our Board is responsible for the supervision of our business
activities. The Board has established an Audit Committee
and a Remco to assist in organizing and carrying out its
responsibilities. The mandate and charter for the Audit
Committee and Remco are available at www.pgs.com
The Board’s Responsibilities
Board responsibilities include:
to appoint the Company’s CEO
to, together with the CEO operate PGS in an eective and
ethical manner in order to create value for the Company’s
shareholders. Our Code of Conduct requires management
to maintain an awareness of the risks involved in carrying
out our business strategies. Personal interests must not
override or conflict with the interests of PGS.
The CEO’s Responsibilities
The responsibilities of the CEO include:
Managing the day-to-day activities of the Company
Organizing PGS’ Executive Committees and the Disclosure
Committee to further assist the CEO
Under the guidance and supervision of the Board and
the Audit Committee, ensuring that the Company’s
financial statements in all material respects fairly present
Corporate Governance
| PGS Annual Report 202135
the Company’s financial condition and the results of
its operations. Timely disclosure of issues to the Board
is also essential to the assessment of the Company’s
financial condition, business performance and risks.
Board Committees
As of December 31, 2021, our Audit Committee comprises
Directors Anne Grethe Dalane (chairperson), Trond
Brandsrud, Marianne Kah, Anette Valbø and Eivind Vesterås.
All shareholder elected Director’s being members of the
committee are considered independent of the Company.
The committee’s functions are to assist the Board in its
supervision of the integrity of PGS’ financial statements;
to monitor the independent auditor’s qualifications,
independence and performance; to monitor the performance
of the internal audit function; and to promote and review
compliance with laws and regulatory requirements.
As of December 31, 2021, Remco comprises Directors Walter
Qvam (chairperson), Richard Herbert, and Gunhild Myhr.
All shareholder elected Director’s being members of this
committee are considered independent of the Company’s
senior management. The function of the committee is to
assist in matters relating to compensation, benefits, and
perquisites of the CEO and other senior executives. Review
and modification of the Company’s corporate governance
implemented in the Company are also committee
responsibilities.
During 2021, all the shareholder-elected Directors
participated in all prescheduled regular committee meetings.
In 2021, the Board also mandated one ad-hoc committee
comprised by Mr. Qvam, Ms. Dalane and Mr. Brandsrud
to – together with the PGS management and advisors –
oversee the Company’s process for managing its debt and
assess options.
11. Risk Management and Internal Control
The Board is responsible for ensuring that appropriate
guidelines, monitoring, and internal control systems are in
place. These are to include embedding risk management,
designating risk ownership, and implementing risk
responses and controls.
The Board has systems in place to assess that the CEO
exercises appropriate and eective management. The
Board’s Audit Committee assesses the integrity of PGS’
accounts. It also enquires about, on behalf of the Board,
issues related to financial review and external audit of PGS’
accounts. Further, the Board and the Audit Committee
supervise and verify that eective internal control systems
are in place, including systems for risk management and
financial reporting.
The Board and the Audit Committee take steps to ensure
that the Company’s internal control functions are working
as intended and that necessary measures are taken to
reduce extraordinary risk exposure. Furthermore, the Board
makes certain that the Company is creating value for the
shareholders in a sustainable manner whilst taking ethical
conduct; compliance with laws, rules and regulations; health,
safety and working environment; and other environmental,
social and governance (ESG) issues into account.
The Company’s anti-corruption program includes a policy,
manual and work instructions as to several ethical issues,
periodic training, high risk area assessment and monitoring,
compulsory contract wording, etc. The policy and procedures
are available at www.pgs.com. The program is evaluated on
a regular basis by the Audit Committee.
Management maintains and regularly reviews a risk matrix
setting out the main risks for the Company. These risk
factors and the Company’s risk mitigating activities are
subject to discussion in the Board at least once a year.
Management conducts day-to-day follow-up of financial
management and reporting. Management has established a
structured approach to ensure that the system for Internal
Control over Financial Reporting (“ICFR”) is eective. ICFR
includes identification and assessment of all material
financial reporting risks, identifying and documenting
relevant controls to address these risks, and monitoring that
controls are implemented and performed. For controls that
are not operationally eective at year-end, their potential
financial exposure and impact on the consolidated financial
statements are evaluated.
Internal Audit Department
PGS has an Internal Audit Department reporting directly to
the Audit Committee on its audit planning and audit reports.
The purpose of the Internal Audit Department is to perform
independent, objective assurance and consulting activities
that add value and improve the Company’s initiatives in
financial, operational and compliance areas.
The scope of work for the Internal Audit Department includes
determining whether the Company’s risk management,
control, and governance, as designed and represented by
management, are adequate and well-functioning.
The audit reports are issued to the Audit Committee. In
addition, the Internal Audit Department regularly monitors
and reports status of management’s actions to respond to
identified risks or weaknesses.
Corporate Governance
| PGS Annual Report 202136
12. Remuneration of the Board and Executive Management
Remuneration of shareholder elected Directors is not
linked to performance but is based on an annual fee and
is subject to annual approval by the General Meeting.
Shareholder elected Directors shall not solicit or accept
specific assignments for PGS beyond their role as Directors.
Shareholder elected Directors neither hold any PGS share
options, restricted stock units nor performance based
restricted stock units.
For details on compensation to individual Directors, please see
Note 30 to the consolidated financial statements of PGS.
Remuneration payable to both employee elected and
shareholder elected Directors will be proposed by the
Nomination Committee according to its Mandate and
Charter, and is submitted to the AGM for approval.
Executive remuneration is one of the primary tasks
of Remco. The committee annually reviews the total
compensation level, the mix between fixed and performance
related compensation and the mix between short and
long-term compensation. Remco has developed an annual
schedule in order to ensure and facilitate a structured
approach to the annual review of executive compensation.
Remco has with the help of an external advisor identified
a specific peer group of comparable companies across
relevant markets. The advisor has collected and combined
information related to total compensation level and
structure amongst these companies. As of Remco’s latest
review, the peer group consisted of 15 companies from
Norway and Europe. These companies are of comparable
size and have international operations in the oil & gas and
oil services sectors. The peer group is subject to regular
review. The Board and Remco uses this information, among
other tools, to benchmark and decide on an appropriate total
compensation structure for the CEO and other executives.
Compensation for the CEO adheres to the same process as
that used for other executives, but is also subject to approval
by the Board.
The current remuneration package for our CEO and other
executives includes fixed elements and variable elements.
The fixed elements consist of a base salary and other
benefits such as car allowance, phone, internet and similar.
The fixed elements also include a defined contribution
pension scheme and an individual pension scheme. The
variable elements consist of Short Term Incentive Plans
which is our annual bonus scheme, and Long Term Incentive
Plans which are composed of Performance Restricted Stock
Units. Features of these programs include an absolute
ceiling on performance-related remuneration.
For further details on the compensation structure and total
compensation to the CEO and executive team members,
please see Note 30 to the consolidated financial statement
of PGS, and also the Board’s Senior Executive Remuneration
Policy approved by the 2021 AGM available on www.pgs.com,
and the Board’s Senior Executive Remuneration Report for
2021 set forth as Appendix VI to the 2022 AGM Calling Notice.
13. Information and Communications
The Board is committed to reporting financial results and
other relevant information based on openness and the
requirement of equal treatment of all shareholders and
securities market participants. The Company complies with
relevant disclosure rules and regulations. Announcements
are released through a platform provided by Notified and
posted on the Oslo Stock Exchange’s NewsWeb service.
In addition, all announcements are on www.pgs.com. The
Company’s policy of accessibility for shareholders is also
presented on the Company’s website.
The Company has an investor relations function to ensure
that requests for information from shareholders, analysts
and other interested parties are satisfied. The Company has
an active investor communication program which includes
senior management attending roadshows in connection
with reporting of financial results, presentations at relevant
investor conferences, and availability for one-on-one
meetings, both virtual and as physical meetings.
The Board and the Nomination Committee once a year invites
shareholders to join in a dialog on corporate governance
and corporate responsibility matters. The invitation is
posted on www.pgs.com and any shareholder may initiate
communication with the Company on these matters.
14. Takeover Bids
The Board has established guiding principles for how it will
act in the event of a takeover bid. The Board will ensure that
all shareholders are treated equally and seek to prevent
disruptions to, or interference with, Company operations
to the extent possible. In the event of a takeover bid, the
Board will, in accordance with its overall responsibilities
and good corporate governance, act in the best interest
of shareholders and ensure that they are given sucient
information in the matter. If a takeover bid is made, the
Board will issue a statement containing a recommendation
as to whether the shareholders should accept or reject
the oer, including an independent valuation of the oer.
The Company’s Articles of Association do not contain any
restrictions, limitations, or defense mechanisms against
acquisition of its shares.
15. Auditor
The Audit Committee shall support the Board in the
administration and exercise of its responsibility for
supervision of the work of the independent auditor, who
shall keep the Board informed of all aspects of its work for
Corporate Governance
| PGS Annual Report 202137
PGS. This duty includes submission of an annual plan for
the audit of PGS. The auditor attends all Audit Committee
meetings and, at least twice a year, meets with the Audit
Committee without the presence of management. In-house
policies govern the use of the auditor’s services. Use of the
auditor for services other than the audit of PGS requires pre-
approval by the Audit Committee.
The independent auditor meets with the full Board at least
once a year in connection with the preparation of the annual
financial statements and, at least once a year, presents
a review of PGS’ financial reporting and internal control
procedures for financial reporting. At least once a year, the
independent auditor meets with the Board without the
presence of any member of the executive management.
Remuneration paid to the auditor for mandatory and other
audit services will be reported to the AGM for approval.
16. Diversity, Equality and Inclusion
The Company has clear commitments regarding Responsible
Business Conduct, Equality and Diversity & Inclusion for
our work force. These commitments are embedded in the
Company policies and goals, which include (a) respecting
fundamental human and labor rights, (b) preventing
discrimination and harassment, (c) recruiting, promoting
and developing individuals based on qualifications, value
and potential, and (d) fostering and supporting diversity
including age, nationality, gender and qualifications.
At the Board level, the Nomination Committee actively
works for ensuring that there is proper diversity on gender,
age, background, experience and qualifications. The
Company complies with the requirements in the Norwegian
Public Limited Liabilities Act section 6-11a on gender balance.
At the management level and below, the CEO, the SVP Global
HR and the Executive Vice Presidents are all actively pursuing
similar goals as regards equality, diversity & inclusion among
the PGS management and the entire work force.
The Company’s ESG Report 2021 available on www.pgs.com
identifies the more precise goals and how they have been
met during the reporting period.
17. Compliance with Laws, Rules,
Regulations and Recommendations
As part of PGS’ Code of Conduct available on www.pgs.com,
PGS is inter alia committed to comply with relevant laws,
rules, and regulations, as well as the Oslo Stock Exchange’s
Issuer Rules. In addition, PGS complies with the current
recommendations set forth in the NUES Recommendations,
subject only to deviations identified and justified in this
report.
The Board further conducts periodic reviews of PGS’
corporate governance policies and procedures, including
the Board’s Rules of Procedure. This process is conducted
regularly and managed by Remco. Any changes to policies or
procedures are presented to the Board for approval.
| PGS Annual Report 202138
Board of Directors
The Board of Directors is responsible for the administration, development, and supervision
of PGS business activities.
Walter Qvam
Chairperson (Elected 2016) | Board Member since 2013 |
Remuneration and Corporate Governance Committee Chairperson |
Shareholding: 35 000
Mr. Qvam was the president and chief executive ocer of
Kongsberg Group ASA, and he has held leading positions in various
prominent Norwegian and international businesses in a variety
of fields, including oil and gas, and shipping, (Det Norske Veritas),
IT (Capgemini), transportation (the Norwegian state railway) and
consultancy (Gemini Consulting). In addition to his role as chairperson
of PGS, Mr. Qvam chairs the boards of the research organization
SINTEF, cyber-security company mnemonic, robotics company wheel.
me and the digital innovation hub DigitalNorway. He is also a board
member in the energy & infrastructure company CapeOmega. Mr.
Qvam graduated Master of Science from the Norwegian University of
Science and Technology (NTNU).
Anne Grethe Dalane
Vice Chairperson (Elected 2018) | Board Member since 2013 | Audit
Committee Chairperson | Shareholding: 48 000
Ms. Dalane is a senior leader at Yara International and previously
held a number of senior positions at Norsk Hydro. She is currently
VP Finance Data & Development. Her previous experience covers
a range of fields including human resources as well as oil and gas.
She has been the chief financial ocer for Crop Nutrition, region
director Latin America, and country manager of Argentina at Yara.
She serves as a director of BW LPG. Ms. Dalane’s background is in
economics, and she holds a business degree from the Norwegian
School of Economics NHH.
| PGS Annual Report 202139
Board of Directors
Richard Herbert
Board Member since 2017 | Audit Committee Member |
Shareholding: 9 500
Mr. Herbert is a petroleum geologist with 40 years of experience in the
global upstream industry. His career started with Phillips Petroleum. He
spent 19 years at BP, in senior international exploration and development
positions in southeast Asia, Latin America, the USA, and Angola, as well
as the UK North Sea. From 2003-2008 he worked for TNK-BP in Russia,
as the exploration vice president and subsequently as executive vice
president of technology. From 2009-13, he was exploration vice president
of Talisman Energy in Canada. He returned to BP from 2013 until the end
of 2016, as the chief operating ocer for exploration. In 2017, he joined the
board of Frontera Energy Corporation, then from 2018 until March 2021
became their chief executive ocer, based in Bogota, Colombia. Richard
Herbert holds a BSc in Geology from the University of Bristol in the UK.
Marianne Kah
Board Member since 2018 | Audit Committee Member |
Shareholding: 28 589
Ms. Kah was the Chief Economist of ConocoPhillips for 25 years retiring
in November 2017. She was a member of the strategy committee of
ConocoPhillips and was responsible for oil and gas market outlooks,
scenario planning, and assessing disruptive risks to the company. She
was also involved with planning and participating in strategy meetings
with ConocoPhillips’ Board of Directors. She currently serves on the
Advisory Board of the University of Texas Energy Institute, and she is
an adjunct senior research scholar and member of the Advisory Board
of Columbia University’s Center on Global Energy Policy. In 2019, Kah
joined the Board of Directors in Allegheny Technologies Inc. She was past
President of the U.S. Association for Energy Economics for the calendar
year 2019, and currently co-chairs the Energy Roundtable for the National
Association for Business Economics.
Trond Brandsrud
Board Member since 2019 | Audit Committee Member |
Shareholding: 60 000
Mr. Brandsrud is an advisor as well as a board member and non-executive
director of several listed and private-equity-owned companies. These
include Aker BP, where he chairs the audit and risk committee, and Lowell,
where he chairs the Audit Committee as well as the Risk Committee
and serves as a member of the audit and remuneration committees.
Brandsrud has 30 years of experience in the oil and gas industry. He has
served as group chief financial ocer (CFO) at both Aker and Seadrill and
has held a wide range of senior financial positions in Royal Dutch Shell.
Recently, he has also held group CFO and CEO positions in privately-
owned companies Lindor and Lowell, in the financial services sector. He
currently serves as an interim CFO of Waterise on a part-time basis. Trond
Brandsrud is a Norwegian citizen and holds a master’s degree from the
Norwegian School of Economics (NHH).
| PGS Annual Report 202140
Board of Directors
Anette Valbø
Employee Elected Board Member since 2015 | Audit Committee
Member | Shareholding: 7 142
Ms. Valbø joined PGS in 2002. Her current position is Bid
Manager. She has previously held various business controller
positions within Marine Contract and Operations business area.
Prior to joining the Company, Ms. Valbø served in various positions
within auditing and accounting in Frontline Ltd. and DNB. Ms.
Valbø holds a bachelor’s degree in accounting and auditing from
Molde University College, Norway.
Gunhild Myhr
Employee Elected Board Member since 2021 | Remuneration and
Corporate Governance Committee Member
Ms. Myhr joined PGS in 1992 and is Business Development
Manager Europe/New Energy, tasked with finding opportunities
for our fleet of seismic vessels, both in the external contract
market and as assets in integrated PGS initiatives. She also works
with government liaison and in developing growth and value
potential using PGS seismic and operational technology. She has
previously served in a variety of senior sales roles. Earlier, she was
stationed oshore, processing seismic data on PGS vessels, and
has also managed our seismic imaging center in Oslo. Gunhild
holds an M.Sc. in Geophysics from the Norwegian University of
Science and Technology.
Eivind Versterås
Employee Elected Board Member since 2021 | Audit Committee
Member | Shareholding: 103 500
Mr. Versterås joined PGS in 2008 as a geophysicist, first
oshore and then based in Oslo, analyzing both seismic and
electromagnetic data. He is currently a Special Projects Manager
in our Operations division. He has worked in research, operations,
and sales support roles, with experience that spans from the
development of technical solutions through to their introduction
to the market. Since 2018, he has been the chief union
representative of Tekna in our Oslo oce. Eivind holds an M.Sc.
in applied physics from the Norwegian University of Science and
Technology.
| PGS Annual Report 202141
Board of Directors’ Report
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 oshore 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 oshore renewables’ domain or related to the
ongoing energy transition. PGS identified carbon
storage (“CS”), oshore 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
| PGS Annual Report 202142
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 oered 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.
Strategy
PGS is a fully integrated marine seismic acquisition
and imaging company, oering 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 oshore 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, oshore 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 oshore wind and
marine minerals, PGS has commenced a process
Board of Directors’ Report
| PGS Annual Report 202143
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 eciency
Fleet operations are a dominant part of the
Company’s cost base. PGS intends to optimize
fleet cost and improve eciency 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 eciency.
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
oces. For the seismic acquisition, PGS aims
at minimal acoustic impact with maximum
eciency 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 oering, 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.
Board of Directors’ Report
| PGS Annual Report 202144
Technology
PGS is concentrating its research and
development eorts on areas of technology
dierentiation from seismic acquisition to
subsurface and reservoir imaging. The Company
is capitalizing on digitalization to improve its
operational eciency, reduce capital expenditures
and develop new digital service oerings.
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 dierentiate through
technology innovation. GeoStreamer has aected
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 eciency – 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
eciency 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 oset 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.
Board of Directors’ Report
| PGS Annual Report 202145
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 oshore 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 oce-
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
Board of Directors’ Report
| PGS Annual Report 202146
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
for 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 oset 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 amortizations
Board of Directors’ Report
| PGS Annual Report 202147
became eective 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 dierence 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 dierent 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 dierent 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 sucient 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 sucient
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
Board of Directors’ Report
| PGS Annual Report 202148
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.
Investments
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.
Board of Directors’ Report
| PGS Annual Report 202149
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 sucient
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 sucient
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 aect both our
onshore and oshore 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
eect on seismic spending and PGS’ ability to
generate revenues. In addition, the ongoing
Board of Directors’ Report
| PGS Annual Report 202150
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 aecting
the markets, the speed and impact of the energy
transition and its eect 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
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 www.pgs.com. 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-Aordable
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.
Organization
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 oce-
based employees are women (2% of oshore
Board of Directors’ Report
| PGS Annual Report 202151
employees are women). Among sta 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 sta 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 oered 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
www.pgs.com (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 Ocers Liability Insurance
(D&O) placed in the international insurance market
on market standard terms and conditions. The
insurance comprises the directors’ and ocers’
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.
Outlook
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
Board of Directors’ Report
| PGS Annual Report 202152
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 oshore 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 dier 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 sucient 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 loss of NOK 3,054.9 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 loss for 2021 of
NOK 3,054,900,000 is transferred from other
equity. Total shareholders’ equity in PGS ASA as
of December 31, 2021 was NOK 2,273,800,000
corresponding to 20% of total assets.
Board of Directors’ Report
Oslo, March 2, 2022
Board of Directors
PGS ASA
Walter Qvam
Chairperson
Anne Grethe Dalane
Vice Chairperson Board Member
Marianne Kah Richard Herbert
Board Member
Trond Brandsrud
Board Member
Rune Olav Pedersen
President & Chief Executive Ocer
Board Member
Anette Valbø
Board Member
Eivind Vesterås
Board Member
Gunhild Myhr
| PGS Annual Report 202153
Responsibility Statement
Today, the Board of Directors and the Chief Executive Officer reviewed and approved the
Board of Directors’ report and the consolidated and separate annual financial statements for
PGS ASA, for the year ending and as of December 31, 2021.
PGS ASA’s consolidated financial statements
have been prepared and presented in accordance
with IFRSs and IFRICs as adopted by the EU
and additional disclosure requirements in the
Norwegian Accounting Act, and that should
be used as of December 31, 2021. The separate
financial statements for PGS ASA have been
prepared in accordance with the Norwegian
Accounting Act and Norwegian accounting
standards as of December 31, 2021. The Board
of Directors report for the group and the parent
company is in accordance with the requirements
of the Norwegian Accounting Act and Norwegian
accounting standard 16, as of December 31, 2021.
To the best of our knowledge:
The consolidated and separate annual
financial statements for 2021 have been
prepared in accordance with applicable
accounting standards.
The consolidated and separate annual
financial statements give a true and fair view
of the assets, liabilities, financial position,
and result of operations as a whole as of
December 31, 2021, for the group and the
parent company.
The Board of Directors’ report for the group
and the parent company include a true and
fair review of:
- The development and performance of the
business and the position of the group and
the parent company.
- The principal risks and uncertainties the
group and the parent company face.
Oslo, March 2, 2022
Board of Directors
PGS ASA
Walter Qvam
Chairperson
Anne Grethe Dalane
Vice Chairperson Board Member
Marianne Kah Richard Herbert
Board Member
Trond Brandsrud
Board Member
Rune Olav Pedersen
President & Chief Executive Ocer
Board Member
Anette Valbø
Board Member
Eivind Vesterås
Board Member
Gunhild Myhr
| PGS Annual Report 202154
Financial
Statements
A Clearer Image | www.pgs.com
2021
| PGS Annual Report 202156
Segment EBITDA, excluding other charges
Segment EBITDA, when used by the Company, means
Segment EBIT excluding other charges, impairments and
loss on sale of non-current assets and depreciation and
amortization. Segment EBITDA may not be comparable
to other similarly titled measures from other companies.
The Company has included EBITDA as a supplemental
disclosure because PGS believes that the measure provides
useful information regarding the Company’s ability to
service debt and to fund capital expenditures and provides
a helpful measure for comparing its operating performance
with that of other companies.
Segment EBIT, excluding impairments and other charges
PGS believes that Segment EBIT, excluding impairments
and other charges, is a useful measure in that the
measures provide an indication of the profitability of the
Company’s operating activities for the period without
regard to significant events and/or decisions in the period
that are expected to occur less frequently.
MultiClient pre-funding level
The MultiClient pre-funding level is calculated by dividing
the MultiClient pre-funding revenues, as per segment
reporting, by the cash investment in MultiClient library, as
reported in the Statements of Cash Flows. PGS believes
that the MultiClient pre-funding percentage is a useful
measure in that it provides some indication of the extent
to which the Company’s financial risk is reduced on new
MultiClient investments.
Net interest-bearing debt
Net interest-bearing debt is defined as the sum of non-
current and current interest-bearing debt, less cash and
cash equivalents and restricted cash. PGS believes that
Net Interest-Bearing Debt (“NIBD”) is a useful measure
because it provides an indication of the hypothetical
minimum necessary debt financing to which the Company
is subject at balance sheet date. The Company present
NIBD including and excluding lease liabilities.
Liquidity reserve
Liquidity reserve is defined as the sum of cash and cash
equivalents and the un-drawn part of the Revolving Credit
Facility. Management believes that liquidity reserve is a
useful measure because it provides an indication of the
amount of funds readily available to the Company in the
very short term at balance sheet date.
Cash flow before financing activities
Cash flow before financing activities is defined as the sum
of net cash provided by operating activities and net cash
used in investing activities, in the consolidated financial
statements of cash flows
Segment revenues
In accordance with the accounting standard for revenues,
IFRS 15 MultiClient pre-funding revenues are generally
recognized at delivery of the final processed data, which
is typically later than the acquisition of the seismic data.
For the purpose of its internal reporting PGS recognize
MultiClient pre-funding revenue on a percentage of
completion basis, and the related amortization of
MultiClient library based upon the ratio of aggregate
capitalized survey costs to forecasted sales.
PGS will apply IFRS 15 for its internal reporting from
January 1st, 2022, and consequently pre-funding revenue
on a percentage of completion basis will not be presented
as segment information going forward.
Alternative Performance Measures
As required by the European Securities and Markets Authority (“ESMA”) guidelines,
the Company has defined and explained the purpose of its Alternative Performance
Measures (“APMs”) in the paragraphs below.
| PGS Annual Report 202157
Gross cash costs and net operating expenses
Gross cash costs are defined as the sum of reported net
operating expenses (excluding depreciation, amortization,
impairments, deferred steaming, net and other charges,
net) and the cash operating costs capitalized as
investments in the MultiClient library as well as capitalized
development costs. PGS believes that the gross cash costs
figure is a useful measure because it provides an indication
of the level of cash costs incurred by the Company
irrespective of the extent to which the fleet is working
on MultiClient projects or the extent to which its R&D
expenditures qualify for capitalization.
Net operating expenses are defined as gross cash costs (as
per above) less capitalized investments in the MultiClient
library and capitalized development costs. PGS believes
this figure is a useful measure because it provides an
indication of the level of net cash costs incurred by the
Company in running current period commercial activities
that are not devoted to investment.
Order book
Order book is defined as the aggregate estimated value of
future Segment Revenues on signed customer contracts,
letters of award or where all major contract terms are agreed.
For long term contracted service agreements, the order book
includes estimated revenues for the nearest 12- month period.
PGS believes that the Order book figure is a useful measure
in that it provides an indication of the amount of customer
backlog and committed activity in the coming periods.
Capital expenditures, whether paid or not
Capital expenditures means investments in property and
equipment irrespective of whether paid in the period but
excluding capitalized interest cost.
Alternative Performance Measures
| PGS Annual Report 202158
APM Reconciliations
Segment Reporting, Total Revenues and Other Income by service type is reconciled as follows: Year ended December 31,
(In millions of US dollars) 2021 2020
Contract seismic 207.8 146.7
MultiClient pre-funding 247.7 134.7
MultiClient late sales 220.4 1 67. 3
Imaging 21.7 23.6
Other Income 6.2 39.7
Total Revenues and Other Income as reported 703.8 512.0
Segment MultiClient revenue for projects not yet delivered 82.3 191.5
Segment MultiClient revenue from previous years, projects delivered (196.1) (107.6)
Segment Total Revenues and Other Income 590.0 595.9
Segment EBITDA ex. other charges, net is reconciled as follows: Year ended December 31,
(In millions of US dollars) 2021 2020
Operating profit (loss) as reported (66.2) (188.0)
Segment adjustment to revenues as reported (113.8) 83.9
Other charges, net 5.6 38.7
Amortization and impairment of MultiClient library 379.0 265.5
Depreciation and amortization of non-current assets (excl. MultiClient library) 100.6 89.2
Impairment and loss on sale of non-current assets (excl. MultiClient library) 15.0 108.4
Segment EBITDA ex other charges, net 320.2 397.7
Segment EBIT ex. impairment and other charges, net is reconciled as follows: Year ended December 31,
(In millions of US dollars) 2021 2020
Operating profit (loss) as reported (66.2) (188.0)
Segment adjustment to revenues reported (113.8) 83.9
Other charges, net 5.6 38.7
Segment adjustment to amortization as reported 91.2 (65.7)
Impairment of MultiClient library 13.6 34.9
Impairment and loss on sale of non-current assets (excl. MultiClient library) 15.0 108.4
EBIT ex. impairment and other charges, net (54.6) 12.2
Net interest bearing debt is reconciled as follows: December 31,
(In millions of US dollars) 2021 2020
Cash and cash equivalents 170.0 156.7
Restricted cash (current and non-current) 73.7 76.6
Current debt and current portion of non-current debt (162.6) (1 150.4)
Non-current debt (1,017.5) -
Adjustment for deferred loan costs - (20.5)
Net interest bearing debt, excluding lease liabilities (936.4) (937.6)
Lease liabilities current (35.9) (40.1)
Lease liabilities non-current (79.0) (118.5)
Net interest bearing debt, including lease liabilities (1,051.3) (1 096.2)
Total capital expenditures, whether paid or not is reconciled as follows: Year ended December 31,
(In millions of US dollars) 2021 2020
Seismic equipment 19.2 13.8
Vessel upgrades/yard 12.1 12.5
Compute infrastructure/ technology 1.5 8.7
Other 0.6 1.1
Total capital expenditures, whether paid or not 33.4 36.1
Change in working capital and capital leases 2.0 (3.3)
Investment in property and equipment 35.4 32.8
| PGS Annual Report 202159
Cash cost, gross and Net operating expenses are reconciled as follows: Year ended December 31,
(In millions of US dollars) 2021 2020
Cost of sales before investment in MultiClient library (351.2) (369.8)
Research and development costs before capitalized development costs (14.5) (17.2)
Sellling, general and administrative costs (36.1) (39.2)
Cash costs, gross (401.8) (426.2)
Steaming deferral, net (3.2) (2.8)
Cash investment in MultiClient library 127.2 222.3
Capitalized development costs 8.0 8.5
Net operating expenses (269.8) (198.2)
| PGS Annual Report 202160
PGS Consolidated
Consolidated Statements of Profit and Loss 62
Consolidated Statements of Comprehensive Income 63
Consolidated Statements of Changes in Shareholders’ Equity 63
Consolidated Statements of Financial Position 64
Consolidated Statements of Cash Flows 65
Notes to the consolidated Financial Statements
Note 1 General Information about the Company
and Basis of Presentation 66
Note 2 Summary of Significant Accounting Policies 66
Note 3 Critical Accounting Judgments, Estimates and Assumptions 71
Note 4 Segment Reporting 74
Note 5 Revenue from Contracts with Customers 75
Note 6 Other Income 77
Note 7 Cost of Sales 77
Note 8 Depreciation, Amortization and Impairments
of Non-current Assets 77
Note 9 Other Charges, Net 78
Note 10 Interest Expense 78
Note 11 Other Financial Expense, Net 78
Note 12 Income Taxes 79
Note 13 Earnings Per Share Information 80
Note 14 Restricted Cash 81
Note 15 Accrued Revenues and Other Receivables 81
Note 16 Other Current Assets 81
Note 17 Property and Equipment 81
Note 18 MultiClient Library 83
Note 19 Other Non-Current Assets 83
Note 20 Other Intangible Assets 85
Note 21 Debt and Guarantees 85
Note 22 Financial Instruments 89
Note 23 Leases, Contingent Liabilities and Provisions 92
Note 24 Accrued Expenses and Other Current Liabilities 94
Note 25 Other Non-Current Liabilities 95
Note 26 Pension Obligations 95
Note 27 Shareholder Information 97
Note 28 Related Party Transactions 98
Note 29 Share Based Payment Programs 99
Note 30 Salaries and Other Personnel Costs, Number of Employees,
and Remuneration to the Board of Directors,
Executive Ocers and Auditors 100
Note 31 Subsidiaries 105
Note 32 Subsequent Events 105
PGS ASA Parent Company
Statements of Profit and Loss 107
Statements of Financial Position 108
Statements of Cash Flows 109
Notes to the Parent Company
Financial Statements
Note 1 Summary of Significant Accounting Policies 110
Note 2 Intercompany Transactions 110
Note 3 Interest Expense, Net 111
Note 4 Other Financial Items, Net 111
Note 5 Income Taxes 111
Note 6 Shares in Subsidiaries 112
Note 7 Restricted Cash 112
Note 8 Shareholders’ Equity 112
Note 9 Debt and Guarantees 113
Note 10 Financial Instruments 113
Note 11 Other Long-term Liabilities 114
Note 12 Pension Obligations 114
Note 13 Accrued Expenses and Other Short-term Liabilities 115
Note 14 Salaries and Other Personnel Costs, Number of Employees,
and Remuneration to the Board of Directors,
Executive Ocers and Auditors 115
Note 15 Subsequent Events 115
Financial Statements
Consolidated
Financial
Statements
| PGS Annual Report 2021
62
PGS ASA
Consolidated Statements of Profit and Loss
Year ended December 31,
(In millions of US dollars) Note 2021 2020
Revenues 5 697.8 473.2
Other income 6 6.0 38.8
Total revenues and other income 703.8 512.0
Cost of sales 7 (227.2) (150.3)
Research and development costs (6.5) (8.7)
Selling, general and administrative costs (36.1) (39.2)
Amortization and impairment of MultiClient library 8 (379.0) (265.5)
Depreciation and amortization of non-current assets (excl. MultiClient Library) 8 (100.6) (89.2)
Impairment and loss on sale of non-current assets (excl. MultiClient library) 17 (15.0) (108.4)
Other charges, net 9 (5.6) (38.7)
Total operating expenses (770.0) (700.0)
Operating profit (loss)/EBIT
(66.2) (188.0)
Share of results from associated companies 19 1.2 (30.0)
Interest expense 10 (99.4) (78.4)
Other financial expense, net 11 0.6 (10.0)
Income (loss) before income tax expense (163.8) (306.4)
Income tax 12 (15.6) (15.1)
Profit (loss) for the year (179.4) (321.5)
Earnings (loss) per share, to ordinary equity holders of PGS ASA: 13
- Basic ($0.45) ($0.85)
- Diluted ($0.45) ($0.85)
| PGS Annual Report 2021
63
PGS ASA
Consolidated Statements of Comprehensive Income
Year ended December 31,
(In millions of US dollars) Note 2021 2020
Profit (loss) for the year (179.4) (321.5)
Other comprehensive income
Actuarial gains (losses) on defined benefit pension plans 26 14.8 (7.6)
Items that will not be reclassified to statements of profit and loss 14.8 (7.6)
Cash flow hedges 4.6 (3.9)
Other comprehensive income (loss) from associated companies - -
Items that may be subsequently reclassified to statements of profit and loss 4.6 (3.9)
Other comprehensive income (loss), net of tax 19.4 (11.5)
Total comprehensive income (loss) to equity holders of PGS ASA (160.0) (333.0)
PGS ASA
Consolidated Statements of Changes in Shareholders’ Equity
Attributable to equity holders of PGS ASA
(In millions of US dollars)
Share capital
par value
Additional
paid-in capital
Accumulated
earnings
Other capital
reserves
Shareholders'
equity
Balance as of January 1, 2020 138.5 852.5 (346.5) (7.4) 637.1
Profit (loss) for the period - - (321.5) - (321.5)
Other comprehensive income (loss) - - (7.6) (3.9) (11.5)
Share issue (a) 15.7 73.7 - - 89.4
Share based payments - 3.1 - - 3.1
Share based payments, cash settled - (0.2) - - (0.2)
Balance as of December 31, 2020 154.2 929.1 (675.6) (11.3) 396.4
Profit (loss) for the period - - (179.4) - (179.4)
Other comprehensive income (loss) - - 14.8 4.6 19.4
Share issue (b) 4.7 1.7 - - 6.4
Share based payments - 2.3 - - 2.3
Balance as of December 31, 2021 158.9 933.1 (840.2) (6.7) 245.1
(a) In Q1 2020, the Company issued 48 627 000 new shares following a private placement raising approximately NOK 850 million as equity. Transaction
costs amounting to $2.4 million are recognized against “Additional paid-in capital”.
(b) The Company received conversion notices from holders of the convertible bond representing NOK 40.4 million of this bond issue, which pursuant to
the bond terms were converted into 13 460 701 shares.
| PGS Annual Report 2021
6
4
PGS ASA
Consolidated Statements of Financial Position
December 31,
(In millions of US dollars) Note 2021 2020
ASSETS
Current assets
Cash and cash equivalents 22 170.0 156.7
Restricted cash 14 16.1 15.8
Accounts receivables 5, 22 134.6 100.6
Accrued revenues and other receivables 5, 15 55.9 57.3
Other current assets 16 56.4 79.2
Total current assets 433.0 409.6
Non-current assets
Property and equipment 17 787.4 898.0
MultiClient library 18 415.6 616.1
Restricted cash 14 57.6 60.8
Other non-current assets 19 14.7 16.2
Other intangible assets 20 84.5 93.1
Total non-current assets 1,359.8 1 684.2
Total assets 1,792.8 2 093.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Interest bearing debt 21, 22 162.6 1 150.4
Lease liabilities 21, 22 35.9 40.1
Accounts payable 22 45.3 31.2
Accrued expenses and other current liabilities 24 80.5 95.5
Deferred revenues 5 123.4 188.6
Income taxes payable 12 16.7 13.7
Total current liabilities 464.4 1 519.5
Non-current liabilities
Interest bearing debt 21, 22 973.5 -
Lease liabilities 21, 22 79.0 118.5
Deferred tax liabilities 12 0.1 0.1
Other non-current liabilities 25 30.7 59.3
Total non-current liabilities 1,083.3 177.9
Shareholders' equity
Share capital; par value NOK 3; issued and outstanding 400,667,697 shares 27 158.9 154.2
Additional paid-in capital 27 933.1 929.1
Total paid-in capital 1,092.0 1 083.3
Accumulated earnings (840.2) (675.6)
Other capital reserves (6.7) (11.3)
Total shareholders' equity 245.1 396.4
Total liabilities and shareholders' equity 1,792.8 2 093.8
Oslo, March 2, 2022
Board of Directors
PGS ASA
Walter Qvam Chairperson | Anne Grethe Dalane Vice Chairperson | Marianne Kah | Richard Herbert | Trond Brandsrud
Anette Valbø | Eivind Vesterås | Gunhild Myhr | Rune Olav Pedersen President & Chief Executive Ocer
| PGS Annual Report 2021
65
PGS ASA
Consolidated Statements of Cash Flows
Year ended December 31,
(In millions of US dollars) Note 2021 2020
Income (loss) before income tax expense (a) (163.8) (306.4)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, impairment 8 494.5 463.1
Share of results in associated companies 19 (1.1) 30.0
Interest expense 10 99.4 78.4
Loss (gain) on sale and retirement of assets (0.3) -
Income taxes paid 12 (11.7) (26.8)
Other items (0.8) 2.3
(Increase) decrease in accounts receivables, accrued revenues & other receivables (32.8) 127.6
Increase (decrease) in deferred revenues 5 (65.2) 64.8
Increase (decrease) in accounts payable 15.2 (23.1)
Change in other current items related to operating activities (5.5) (47.2)
Change in other non-current items related to operating activities (1.3) 3.8
Net cash provided by operating activities 326.6 366.5
Investment in MultiClient library 18 (127.3) (222.1)
Investment in property and equipment 17 (35.4) (32.8)
Investment in other intangible assets 20 (10.2) (8.6)
Investment in other current -and non-current assets assets - -
Proceeds from sale and disposal of assets 17 1.0 26.6
Decrease (increase) in non-current restricted cash - (17.7)
Net cash provided by (used in) investing activities (171.9) (254.6)
Proceeds, net of deferred loan costs, from issuance of non-current debt/net cash payment
for debt amendment a) 21 (19.5) 124.2
Interest paid on interest bearing debt (80.8) (73.7)
Repayment of interest bearing debt 21 - (240.3)
Net change of drawing on the Revolving Credit Facility 21 - 170.0
Proceeds from share issue - 91.9
Payment of lease liabilities (recognized under IFRS 16) 21, 23 (40.3) (43.1)
Payments of leases classified as interest 23 (8.9) (10.7)
Decrease (increase) in restricted cash related to debt service 8.1 (14.1)
Net cash provided by (used in) financing activities (141.4) 4.2
Net increase (decrease) in cash and cash equivalents 13.3 116.1
Cash and cash equivalents as of January 1 156.7 40.6
Cash and cash equivalents as of December 31 170.0 156.7
a) For 2021, the amount represents the fees and expenses relating to the amendment of debt maturities oset by cash proceeds from the convertible
bond issue
| PGS Annual Report 202166
Note 1 – General Information about the
Company and Basis of Presentation
General information
PGS ASA is a public limited liability company established under the laws
of the Kingdom of Norway in 1991. Unless stated otherwise, references
herein to the “Company”, the “Group” and “PGS” refer to PGS ASA and
its subsidiaries.
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. Our services are provided
to the oil and gas industry, as well as to the broader and emerging new
energy industries, including carbon storage and oshore wind. The
Company operates on a worldwide basis with headquarters in Oslo,
Norway. The address is Lilleakerveien 4C, 0283 Oslo.
Basis of presentation
The Company prepares its consolidated financial statements in accordance
with International Financial Reporting Standards (“IFRS”) as adopted by the
European Union (“EU”). IFRS as adopted by the EU diers in certain respects
from IFRS as issued by the International Accounting Standards Board
(“IASB”). References to IFRS hereafter should be construed as references
to IFRS as adopted by the EU. The consolidated financial statements are
prepared using the historical cost basis, except for certain financial assets
and derivative financial instruments that have been measured at fair value.
The consolidated financial statements are presented in millions of US Dollars
(”$” or “dollars”), unless otherwise indicated.
The consolidated financial statements were authorized for issue by the
Board of Directors on March 2, 2022.
Note 2 – Summary of Significant Accounting Policies
Consolidation
Subsidiaries
A subsidiary is an entity (including special purpose entities) that is
controlled by the Company. Control is achieved where the Company is
exposed, or has rights to, variable returns from its involvement with
the entity, and has the ability to aect those returns through its power,
directly or indirectly, over the entity.
The consolidated financial statements include the results of the Company
and all of its subsidiaries from the date that control commences to the
date that control ceases.
Joint arrangements and investments in associated companies
An associated company is an entity over which the Company has
significant influence, being the power to participate in the financial and
operating policy decisions of the entity, but which does not amount to
control or joint control.
A joint arrangement is a contractual arrangement whereby the Company
undertakes an economic activity that is subject to joint control and
requires the parties’ unanimous consent for strategic financial and
operating policy decisions. A joint arrangement is classified as joint
operation if the parties have rights to the assets, and obligations for
the liabilities, relating to the arrangement. If the parties in the joint
arrangement have rights to the net assets of the arrangement, it is
classified as a joint venture.
The consolidated financial statements include the Company’s share of the
post-tax results, other comprehensive income and net assets (less any
impairments), of its joint ventures and associates on an equity-accounted
basis from the point at which joint control or significant influence
respectively commences, to the date that it ceases. Where the Company’s
share of losses exceeds its interest in a joint venture or associate, the
carrying amount is reduced to zero and recognition of further losses is
discontinued, except to the extent that the Company has incurred legal or
constructive obligations or made payments on behalf of the investment.
The Company accounts for its investment in a joint operation by
recognizing its relative share of the investee’s assets, liabilities, revenues
and expenses. The Company periodically reviews its net investments to
determine whether there is an indication of impairment. If such indication
exists, the recoverable amount of the net investment is estimated in
order to determine the extent of the impairment (if any).
The Company has cooperation agreements to invest in certain MultiClient
data projects with other parties, which are classified as joint operations.
The Company recognizes its relative share of the investment in
MultiClient data and its share of revenue, amortization and costs. When
the Company performs services related to acquisition, processing or
marketing to the joint operation the share of expenses attributable to its
partners is recognized as part of MultiClient pre-funding revenue.
Cash and cash equivalents and restricted cash
Cash and cash equivalents include demand deposits and all highly liquid
financial instruments purchased with original maturities of three months
or less. Cash and cash equivalents that are restricted from the Company’s
use are presented separately in the consolidated statements of financial
position and are classified as current or non-current depending on the
nature of the restrictions.
Foreign currency translation and transactions
The financial statements of subsidiaries and associates whose functional
currency is not the US dollar are translated using the current exchange
rate. Assets and liabilities are translated at the foreign exchange rate in
eect at the period end; share par value and paid-in capital are translated
at historical exchange rates; and revenues and expenses are translated
at the average rate of exchange in eect during the period. Translation
adjustments are recorded as a separate component in the consolidated
statements of other comprehensive income.
Foreign exchange gains and losses resulting from the settlement of
foreign currency transactions and from the translation of realized and
unrealized monetary assets and liabilities denominated in foreign
currencies are recognized in the consolidated statements of profit
and loss as other financial expense, except when recognized in the
consolidated statements of other comprehensive income as qualifying
cash flow hedges.
Intangible assets
Intangible assets acquired separately are measured on initial recognition
at cost. Following initial recognition, intangible assets are carried at cost
less accumulated amortization and accumulated impairment. The cost of
internally generated intangible assets, other than those specified below,
is expensed as incurred.
Revenue from contracts with customers
Revenue from contracts with customers arise primarily from (i)
performance of proprietary/exclusive seismic services in accordance with
customer specifications and (ii) granting of licenses to the Company’s
MultiClient data library. Revenue is recognized at the amount that
the Company expects to be entitled to and expects to collect under
the contract. If a contract has multiple performance obligations, the
transaction price is allocated to each performance obligation identified in
the contract on a relative stand-alone selling price basis.
Amounts received from customers in advance of the Company satisfying
its performance obligations are recorded as deferred revenue. In the
event most of the consideration under the contract is received more than
12 months in advance of satisfying the related performance obligation,
a financing factor is accrued and included in the value of the revenue
recognized upon satisfying the performance obligation.
The Company applies the practical expedient for short-term advances
received from customers. That is, the promised amount of consideration
is not adjusted for the eects of a significant financing component if the
period between satisfying the performance obligation and the payment is
one year or less.
| PGS Annual Report 202167
In the rare event the Company has satisfied a performance obligation and
is otherwise entitled to compensation under the contract but there is a
significant uncertainty as to ultimately collecting the compensation, revenue
recognition is delayed until such uncertainty has been suciently reduced.
Where the Company have satisfied its performance obligations and has a
right to consideration, an accrued revenue is recognized.
The principles applied for each of the main types of contracts with
customers are described in more detail below.
MultiClient late sales licenses
The Company grants a license to a customer, which entitles the customer
to a “right to use” a specifically defined portion of the MultiClient data
library as it exists at that point in time. The Company’s performance
obligation is considered to be satisfied at the “point in time” when the
customer has received the underlying data or has granted the access the
licensed portion of the data.
MultiClient Pre-funding licenses
The Company typically obtains funding from a limited number of
customers before a seismic survey project is completed. In return for the
pre-funding, the customer typically gains the ability to direct or influence
the project specifications and to access data as it is being acquired.
The Company recognizes pre-funding revenue as “right to use” licenses
and the revenue is to be recognized at the point in time when the
Company’s performance obligation is considered to be satisfied and
“right to use” license is transferred to the customer. This “point in time”
depends on the specific contract, but is typically upon completion of
processing of the survey and granting of access to the finished data or
delivery of the finished data.
The “point in time” of satisfying the performance obligation is generally the
same for both MultiClient Late Sale licenses and MultiClient Pre-funding
licenses. Accordingly, revenue is generally recognized at this same “point in
time” for each of these two types of licenses in accordance with IFRS 15.
Proprietary sales/Marine contract sales/Imaging revenues
The Company performs seismic services under contract in accordance with
customer specifications. Such service contracts are considered to contain
one performance obligation. This performance obligation is considered to
be satisfied over time because the Company performs the service at the
customer specification, the resultant data is owned by the customer and
the Company has no alternative right to otherwise use or benefit from
the resultant data. The Company recognizes proprietary/contract revenue
over time as the services are performed and the Company is entitled
to the compensation under the contract. Depending on nature of the
contract progress is measured either based on square kilometers or time
progressed. Progress for imaging services is measured based on a model
taking into account both working hours and processing.
Contingent revenue (uplift, transfer fees, etc.)
MultiClient licenses typically contain clauses that require the customer
to pay additional fees upon specific triggering events such as customer
award of acreage (uplift) and change of ownership (transfer fee). Common
to such contingent revenue, is that PGS is typically not required to provide
any further data or service – the data has already been delivered. Hence,
there is no further performance obligation required on the part of PGS.
The contingent consideration is recognized when the triggering event has
taken place.
Other services
Customer contracts for other services are similar in nature and terms
to the proprietary contract sales. Revenue is recognized over time as
the Company satisfies the performance obligation and is entitled to the
compensation under the contract.
MultiClient library
The MultiClient library consists of seismic data surveys which are licensed
to customers on a non-exclusive basis. Costs directly incurred in acquiring,
imaging and otherwise completing seismic surveys are capitalized to the
MultiClient library. Costs incurred while relocating or “steaming” a vessel
or crew from one location to another and borrowing costs incurred during
the acquisition and imaging phases of the survey are also capitalized to
the MultiClient library.
A project remains in surveys-in-progress until imaging is complete which
may be some months or up to more than a year after data acquisition
ends, at which point it is transferred to completed surveys.
The Company records the costs incurred on the MultiClient library in a
manner consistent with its capital investment and operating decision
analysis, which generally results in each survey in the MultiClient library
being recorded and evaluated separately. The cost of projects within the
same political regime, with similar geological traits and that are marketed
collectively are recorded and evaluated as a group by year of completion.
Straight-line amortization - Upon completion of a survey, straight-line
amortization commences over its estimated useful life which is generally
over a period of 4 years from the date it is transferred to completed surveys.
Accelerated amortization - Following the adoption of the straight-line
amortization policy for completed surveys, recognition of impairment of
library may be necessary in the event that sales on a completed survey are
realized disproportionately sooner within that survey’s 4-year useful life.
Further, when a project is completed and after pre-funding revenue is
recognized, recognition of impairment may be necessary in the event the
present value of expected Late Sales is lower than the capitalized cost of
the project.
This accelerated amortization is included in “Amortization and impairment
of MultiClient library” in the consolidated statements of profit and loss
and specified in note 8.
Impairment of MultiClient library - The Company updates its sales forecast
for each survey at each year-end and when an impairment indicator is
deemed to exist. In the event the net book value of survey exceeds its net
present value of estimated future cash flows an impairment is recorded
in the amount of the excess. This impairment is included in “Amortization
and impairment of MultiClient library” in the condensed consolidated
statements of profit and loss and specified in note 8.
Government Grants
Government Grants are recognized where there is reasonable assurance
that the grant will be received and all attached conditions will be complied
with. When the grant relates to an expense item, it is recognized as
income on a systematic basis over the periods that the related costs, for
which it is intended to compensate, are expensed.
Research and development costs
Research costs are expensed as incurred. An internally generated
intangible asset arising from development (or from the development
phase of an internal project) is recognized if all of the following have been
demonstrated: technical and commercial feasibility of completing the
intangible asset so that it will be available for use or sale; the intention
to complete the intangible asset and use or sell it; the ability to use or
sell the intangible asset; how the intangible asset will generate probable
future economic benefits; the availability of adequate technical, financial
and other resources to complete the development to use or sell the
intangible asset; and the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
The amount initially recognized for internally generated intangible
assets is the sum of the expenditure incurred from the date on which the
intangible asset first satisfies the recognition criteria above. All other
development costs are expensed as incurred.
Subsequent to initial recognition, internally generated intangible assets
are reported at cost less accumulated amortization and accumulated
impairment, on the same basis as intangible assets acquired separately.
Capitalized development costs are amortized on a straight-line basis over
the estimated useful life of the asset.
| PGS Annual Report 202168
Patents, licenses and technology
Patents, licenses and technology are stated at cost less accumulated
amortization and accumulated impairment. Amortization is calculated on
a straight-line basis over the estimated period of benefit, ranging from
one to fifteen years.
Property and equipment
Property and equipment are stated at cost, excluding the costs of the
day-to-day servicing, less accumulated depreciation and impairment.
Depreciation is calculated on a straight-line basis over the useful life of
the assets based on cost less estimated residual values. The estimated
useful lives for property and equipment are as follows:
Years
Seismic vessels 25 - 30
Seismic and operations equipment, incl. computers 3 - 15
Buildings and related leasehold improvements 1 - 10
Fixture, furniture, fittings and oce computers 3 - 5
Major overhauls 3 - 7.5
Subsequent expenditures and major inspections/overhauls are included
in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits for the
Company and the cost of the item can be measured reliably. The carrying
amount of replaced asset components are derecognized. All other repairs
and maintenance are charged to the consolidated statements of profit
and loss during the period in which they are incurred.
The assets’ residual values, useful lives and method of depreciation are
reviewed, and adjusted if appropriate, at least at each year-end.
Assets under construction are carried at cost, less accumulated
impairment. Cost includes borrowing costs incurred during construction
in accordance with the Company’s accounting policy as stated below.
Depreciation commences when the asset is ready for its intended use.
A component of property and equipment is derecognized upon disposal
or when no future economic benefit is expected from its use or disposal.
Gains and losses arising on de-recognition of assets (calculated as the
dierence between the net disposal proceeds and the carrying amount of
the asset) is included in the consolidated statements of profit and loss in
the year derecognized.
Significant spare parts are capitalized along with the assets to which they
relate. Other spare parts, consumables and bunker inventory are classified
as other current assets and stated at cost, less any obsolescence.
Steaming costs
Steaming costs relate to relocating or “steaming” a vessel and its crew
from one location to another. Steaming costs are deferred to the extent the
probable future economic benefits from the projects to which the vessel
will steam are sucient to recover the cost of the steam. In the event
the vessel steams at a significantly lower speed than normal, the number
of days allocated to steaming are reduced. The recoverable steaming
cost associated with MultiClient surveys is capitalized as a part of the
MultiClient library (see above). Recoverable steaming cost associated with
exclusive contract surveys is deferred and charged to the consolidated
statements of profit and loss during the periods of data acquisition.
Impairment of property, equipment and intangibles
The carrying amount of intangible assets and property, plant and
equipment are reviewed at each balance sheet date to determine whether
there is any indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated.
Intangible assets not yet available for use are assessed for impairment
annually, or whenever there is an indication that the asset may be
impaired.
The recoverable amount of an asset is the greater of its fair value less
costs to sell and its value in use. In assessing value in use, estimated
future cash flows are discounted to present value using a pre-tax discount
rate that reflects current market assessments of the time value of money
and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, recoverable amount is determined for
the cash-generating unit (“CGU”) to which the asset belongs.
When assessing the recoverable amount or reassessing useful economic
lives, significant future developments are considered including
technological, economic and market changes. The potential impact of
climate change and the energy transition has been incorporated into
future cash-flow projections, including management’s best estimate of
the eects on margins and product mix.
An impairment charge is recognized whenever the carrying amount of
an asset or its CGU exceeds its recoverable amount. Impairment charges
recognized in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to that CGU, and then to reduce the
carrying amount of the other assets in the unit on a pro-rata basis.
An impairment charge in respect of goodwill is not subject to reversal. For
other assets, an impairment charge is reversed if the circumstances that
gave rise to the impairment no longer exist, but only to the extent that
the increased carrying amount does not exceed the carrying amount that
would have existed had no impairment had been recognized.
Leases
The Company assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for
all leases, except for short-term leases and leases of low-value assets.
The Company recognises the liabilities to make lease payments and right-
of-use assets representing the right to use the underlying assets.
Lease term
The lease term is determined on the commencement date of the lease,
and corresponds to the term of the lease contract, unless the Company
is reasonably certain that it will exercise contractual extensions or
termination options.
Measurement of lease liabilities
At the commencement date of the lease, the Company recognises lease
liabilities measured at the present value of lease payments due under the
contract, less any lease incentives receivable, plus the costs of purchase or
termination options if reasonably certain to be exercised. Lease payments
are discounted using the interest rate implicit in the lease. If that rate
cannot be determined, the Company’s incremental borrowing rate is
used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Subsequently, the carrying amount of the lease liability is increased to
reflect the accumulation of interest on the liability balance, and reduced
as the lease payments are charged to the liability. In addition, the
carrying amount of the lease liability is remeasured to reflect contractual
modifications, changes to lease payments or changes in the assessment
of the lease term.
Measurement of right-of-use assets
Right-of-use assets are measured at cost, comprising the initial
measurement of lease liability, lease payments made at the commencement
date, initial direct costs and estimated restoration costs, less any lease
incentives received.
Subsequently, the right-of-use asset is measured at cost, less accumulated
depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities.
Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives of the assets.
| PGS Annual Report 202169
The right-of-use assets are also subject to impairment. Refer to the
accounting policies in section Impairment of property, equipment and
intangibles.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its
short-term leases of machinery and equipment (i.e., those leases that
have a lease term of 12 months or less from the commencement date and
do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption to leases of oce equipment that are
considered to be low value. Lease payments on short-term leases and
leases of low-value assets are recognised as expense on a straight-line
basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the
risks and rewards incidental to ownership of an asset are classified as
operating leases. Rental income arising is accounted for on a straight-line
basis over the lease terms and is included in revenue in the statement of
profit or loss due to its operating nature.
Income taxes
Income tax expense is comprised of current and deferred tax. Income tax
is recognized in the consolidated statement of profit and loss, except to
the extent that it relates to items recorded directly to the consolidated
statements of other comprehensive income.
Current tax is the tax expected to be paid to or recovered from taxation
authorities in respect of taxable income for the year, using tax rates
enacted or substantially enacted during the period.
Deferred tax assets and liabilities are measured using the liability method,
providing for temporary dierences between the carrying amounts of
assets and liabilities for financial reporting purposes, and the amounts
used for taxation purposes. The amount of deferred tax provided is
based on tax rates that are expected to apply in the year of realization
or settlement, using tax rates and laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is not recognized on temporary dierences arising from the
initial recognition of goodwill, or relating to investments in subsidiaries
to the extent that the temporary dierence can be controlled by the
Company and will probably not reverse in the foreseeable future.
Deferred tax assets are recognized only when, on the basis of all available
evidence, it can be regarded as probable that there will be sucient taxable
profits in the foreseeable future against which the asset can be utilized.
Deferred tax assets and deferred tax liabilities are oset when a legally
enforceable right exists to set o current tax assets against current tax
liabilities, and the deferred taxes are related to the same taxable entity and
the same taxation authority. Deferred tax assets and liabilities are classified
as non-current in the consolidated statement of financial position.
Accounting for uncertain tax positions is described in note 3.
Employee benefits
Pension obligations
The Company’s pension arrangements comprise defined benefit plans and
defined contribution plans. The plans are funded through payments to
insurance companies or trustee-administered funds.
A defined benefit plan is a pension plan which defines an amount of
pension benefit that an employee will receive on retirement, dependent
on factors such as age, years of service and compensation. The liability
recognized for defined benefit pension plans is the present value of the
defined benefit obligation at the end of the reporting period, reduced by
the fair value of plan assets. The calculation of the obligation is performed
annually by a qualified actuary, using the projected unit credit method and
key actuarial assumptions at the reporting date.
The amount charged to the consolidated statement of profit and loss
comprises the cost of benefits accruing to employees over the year,
plus net interest expense or income, calculated by applying the liability
discount rate to the net pension liability.
Past service costs are recognized immediately in the consolidated
statement of profit and loss, unless they relate to plan changes which are
conditional on the employees remaining in service for a specified period of
time (the vesting period). In this case, past service costs are recognized on
a straight-line basis over the vesting period.
Actuarial gains and losses due to current period changes in assumptions
applied are recognized immediately in other comprehensive income.
For defined contribution plans, the Company pays contributions to
privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Company has no further payment
obligations once the contributions have been paid. The contributions are
recognized as employee benefit expense when due. Prepaid contributions
are recognized as an asset to the extent that a cash refund or a reduction
in the future payments is available.
Bonus plans
The Company recognizes a provision for bonus where contractually obliged
or where there is a past practice that has created a constructive obligation.
Share-based payments
Restricted Stock Unit Plans are measured at the grant date using the
current market value reduced by expected dividends paid before the
vesting date, which is then further discounted.
Performance Restricted Stock Unit Plans (“PRSUs”) are measured at the
grant date using a Monte Carlo simulation with relative total shareholder
return. The model simulates the future stock prices based on historical
values over the length of the lifetime for the PRSU. The Relative TSR is
calculated against a group of peer companies, where every company is
ranked based on the simulations. An additional measure used is Return
on Capital Employed (“ROCE”).
The awards are adjusted for expected future dividends. Social security tax on
the PRSU is based on the intrinsic value as of the end of the reporting period.
Provision for onerous contracts
A provision is made for legally binding obligations (contracts) whereby the
unavoidable costs of fulfilling the contracts exceed the economic benefits
expected to be received. All costs (including depreciation of assigned assets)
directly related to contract fulfillment are included in the calculation.
Interest-bearing debt and borrowings
Interest-bearing loans are recognized initially at fair value less transaction
costs. Subsequent to initial recognition, interest bearing loans are
measured at amortized cost using the eective interest method. Gains
and losses are recognized in the consolidated statements of profit
and loss when the liabilities are derecognized as well as through the
amortization process.
Financial instruments
Financial assets and financial liabilities are recognized when the Company
becomes party to the contractual obligations of the relevant instrument.
The Company classifies its financial instruments in the following
categories: at fair value through profit and loss, at fair value through other
comprehensive income or at amortized cost. The Company determines the
classification of financial instruments at initial recognition.
Classification and measurement
Financial instruments at fair value through profit and loss
This category comprises financial assets and liabilities held for trading,
including all derivative instruments. Financial instruments in this category
are initially recorded at fair value, and transaction costs are expensed in
the consolidated statement of profit and loss. Realized and unrealized
gains and losses arising from changes in the fair value are included in the
consolidated statements of profit and loss in the period in which they arise.
| PGS Annual Report 202170
Financial instruments at fair value through other comprehensive income
On initial recognition, an election can be made to classify investments in
equity instruments at fair value through other comprehensive income.
Financial instruments in this category are initially recognized at fair value
plus transaction costs. Subsequently, they are measured at fair value,
with gains and losses arising from changes in fair value recognized in
other comprehensive income.
Financial instruments at amortized cost
Financial assets and liabilities in this category are initially recognized at
fair value, and subsequently carried at amortized cost, using the eective
interest method less any allowance for impairment. This category includes
accounts receivable, accounts payable and loans and other borrowings.
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability
is replaced by another from the same lender on substantially dierent
terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The dierence in
the respective carrying amounts is recognized in the statement of profit
and loss as a gain. In subsequent periods the gain is amortized as added
interest expense.
Impairment of financial assets
At each reporting date, the Company measures the loss allowance for
the financial asset at an amount equal to the lifetime expected credit
losses. For accounts receivables and contract assets, the Company uses
a simplified approach in calculating expected credit losses. The Company
recognizes a loss allowance using factors including aging of accounts,
historical experience, customer concentration, customer creditworthiness
and current industry and economic trends. An impairment loss,
amounting to any dierence between the carrying amount of the
loss allowance and the expected credit losses at the reporting date, is
recognized in the consolidated statement of profit and loss.
Derivative financial instruments and hedging
The Company uses derivative financial instruments to reduce its exposure
related to fluctuations in foreign currency rates and interest rates.
Derivative instruments are recognized in the consolidated statements of
financial position at their fair values. Realized and unrealized gains and
losses attributable to derivative instruments that do not qualify for hedge
accounting are recognized as other financial items, net, as they arise.
Fair value hedges
Fair value hedges are used to hedge currency risk on equipment purchases
denominated in currencies other than USD. The change in fair value of the
hedging instrument is recognized in the consolidated statements of profit
and loss, together with any change in fair value of the hedged item that
are attributable to the hedged risk.
When an unrecognized firm commitment is designated as a hedged item,
the subsequent cumulative change in fair value of the firm commitment
attributable to the hedged risk is recognized as an asset or liability with a
corresponding gain or loss recognized in the consolidated statements of
profit and loss.
Cash flow hedges
Cash flow hedging is used to hedge interest rate risk. Gains or losses on
the hedging instrument are recognized in the consolidated statement of
other comprehensive income, to the extent that the hedge is determined
to be eective. All other gains or losses are recognized immediately in the
consolidated statement of profit and loss.
For cash flow hedges of recognized assets or liabilities, accumulated
gains or losses are transferred from other comprehensive income to the
consolidated statement of profit and loss in the same period in which the
hedged transaction aects the consolidated statement of profit and loss.
Hedge accounting is discontinued when a hedging instrument is
derecognized due to expiry, termination or disposal. If the forecasted
transaction continues to be expected to occur, the related gains or
losses are retained in other comprehensive income until the transaction
takes place. Any subsequent change in value is recorded directly to the
consolidated statement of profit and loss.
Convertible bonds
The company have issued a convertible bond in a currency dierent from
its functional currency. The instrument does not meet the “fixed for fixed”
criteria for being accounted for as a convertible bond and is accounted for
as two separate instruments. The right to convert shares are measured
separately as a financial liability at fair value over profit and loss and the
bond is at inception valued as the residual between the nominal value of
the bond and the fair value of the option. The dierence to nominal value
is accounted for as interest costs.
Earnings per share
Basic earnings per share is calculated by dividing the profit attributable
to equity holders of the Company by the weighted average number of
ordinary shares outstanding during the year, excluding ordinary shares
purchased by the Company and held as treasury shares. Diluted earnings
per share is calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares. For diluted earnings per share, dilutive potential ordinary
shares are determined independently for each period presented. When
the number of ordinary shares outstanding changes (e.g., share split)
the weighted average number of ordinary shares outstanding during
all periods presented is adjusted retrospectively. The dilutive eect of
outstanding Restricted Stock Units and Performance Restricted Stock
Units is reflected as additional share dilution in the computation of
earnings per share.
Assets held for sale
Non-current assets are classified as held for sale if it is highly
probable that they will be recovered primarily through sale rather than
through continuing use. The sale is highly likely if, at the reporting date,
management has committed to detailed sales plans, is actively looking for
a buyer and has set a reasonable selling price and the sale is highly likely
to occur within a year.
Such assets are measured at the lower of their carrying amount and fair
value less costs to sell. Once classified as held for sale, the non-current
assets will no longer be depreciated.
New and amended standards and interpretations
adopted by the Company
The Group applied for the first-time certain standards and amendments,
which are eective for annual periods beginning on or after 1 January 2021.
The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet eective.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate
Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition
and Measurement provide a number of reliefs, which apply to all hedging
relationships that are directly aected by interest rate benchmark reform.
A hedging relationship is aected if the reform gives rise to uncertainty
about the timing and/or amount of benchmark-based cash flows of the
hedged item or the hedging instrument.
These amendments have no impact on the consolidated financial
statements.
Amendments to IAS 1 and IAS 8 Definition of Material
The amendments provide a new definition of material that states,
“information is material if omitting, misstating or obscuring it could
reasonably be expected to influence decisions that the primary users
of general- purpose financial statements make on the basis of those
financial statements, which provide financial information about a
specific reporting entity.” The amendments clarify that materiality will
| PGS Annual Report 202171
depend on the nature or magnitude of information, either individually
or in combination with other information, in the context of the financial
statements. A misstatement of information is material if it could
reasonably be expected to influence decisions made by the primary users.
These amendments had no impact on the consolidated financial
statements.
Conceptual Framework for Financial Reporting issued on 29 March 2018
The Conceptual Framework is not a standard, and none of the concepts
contained therein override the concepts or requirements in any standard.
The purpose of the Conceptual Framework is to assist the IASB in
developing standards, to help preparers develop consistent accounting
policies where there is no applicable standard in place and to assist
all parties to understand and interpret the standards. This will aect
those entities which developed their accounting policies based on the
Conceptual Framework. The revised Conceptual Framework includes some
new concepts, updated definitions and recognition criteria for assets and
liabilities and clarifies some important concepts.
These amendments had no impact on the consolidated financial
statements.
Amendments to IFRS 16 Covid-19 Related Rent Concessions
On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions -
amendment to IFRS 16 Leases. The amendments provide relief to lessees
from applying IFRS 16 guidance on lease modification accounting for rent
concessions arising as a direct consequence of the Covid-19 pandemic. As
a practical expedient, a lessee may elect not to assess whether a Covid-19
related rent concession from a lessor is a lease modification. A lessee that
makes this election accounts for any change in lease payments resulting
from the Covid-19 related rent concession the same way it would account
for the change under IFRS 16, if the change were not a lease modification.
This amendment had no impact on the consolidated financial statements.
Standards issued but not yet eective (which the Company has not
early adopted)
Standards and interpretations that are issued up to the date of issuance of
the consolidated financial statements, but not yet eective, are disclosed
below. The Company’s intention is to adopt the relevant new and amended
standards and interpretations when they become eective, subject to EU
approval before the consolidated financial statements are issued.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of
IAS 1 to specify the requirements for classifying liabilities as current or
non-current. The amendments clarify:
What is meant by a right to defer settlement
That a right to defer must exist at the end of the reporting period
That classification is unaected by the likelihood that an entity will
exercise its deferral right
That only if an embedded derivative in a convertible liability is itself
an equity instrument would the terms of a liability not impact its
classification
The amendments are eective for annual reporting periods beginning on
or after 1 January 2023 and must be applied retrospectively.
The Company is still assessing the potential impact.
Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 to specify which
costs an entity needs to include when assessing whether a contract is
onerous or loss-making. The amendments apply a “directly related cost
approach”. The costs that relate directly to a contract to provide goods or
services include both incremental costs and an allocation of costs directly
related to contract activities. General and administrative costs do not
relate directly to a contract and are excluded unless they are explicitly
chargeable to the counterparty under the contract.
The amendments are eective for annual reporting periods beginning on
or after 1 January 2022 but will not impact PGS since this practice already
is applied prior to 2022.
The amendments are not expected to have a material impact on the Company.
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test
for derecognition of financial liabilities
As part of its 2018-2020 annual improvements to IFRS standards process
the IASB issued amendment to IFRS 9. The amendment clarifies the
fees that an entity includes when assessing whether the terms of a
new or modified financial liability are substantially dierent from the
terms of the original financial liability. These fees include only those paid
or received between the borrower and the lender, including fees paid
or received by either the borrower or lender on the other’s behalf. An
entity applies the amendment to financial liabilities that are modified
or exchanged on or after the beginning of the annual reporting period in
which the entity first applies the amendment.
The amendment is eective for annual reporting periods beginning on or
after 1 January 2022 with earlier adoption permitted. The Group will apply
the amendments to financial liabilities that are modified or exchanged on
or after the beginning of the annual reporting period in which the entity
first applies the amendment.
The amendments are not expected to have a material impact on the Group.
Note 3 – Critical Accounting Judgments,
Estimates and Assumptions
The preparation of financial statements in accordance with IFRS requires
management to make estimates, assumptions and judgments that
aect the reported amounts of assets and liabilities and the disclosure of
contingent liabilities. In many circumstances, the ultimate outcome related
to the estimates, assumptions and judgments may not be known for several
years after the preparation of the financial statements. Actual amounts may
dier materially from these estimates due to changes in general economic
conditions, changes in laws and regulations, changes in future operating
plans and the inherent imprecision associated with estimates.
The key assumptions concerning the future and other key sources of
estimation uncertainty at the end of the reporting period that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
Impairment of seismic vessel and equipment, MultiClient library and
other intangible assets
The carrying values of seismic vessels and equipment, MultiClient library
and other intangible assets are assessed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
or CGU may not be recoverable. The calculations of recoverable amounts
are based upon future cash flow estimates which are discounted to
present value and rely upon a number of key estimates and judgements.
Discount rate
The Company applied a pre-tax discount rate of 12% for the year ended
December 31, 2021 and 2020 respectively in determining discounted cash
flows in connection with the impairment evaluations of seismic vessels and
equipment, intangible assets and the MultiClient library. The rates reflect
the estimated weighted average cost of capital for Company activities.
Impairment of seismic vessels and equipment
The recoverable amount of seismic assets has been evaluated using value
in use calculations, which is determined by discounting future cash flows
to their present value. The Company has applied a range of key estimates
in developing cash flow forecasts, including future contract pricing, vessel
maintenance costs and its weighted average cost of capital. Cash flow
forecasts have also included estimates relating to the future impact
of climate change and the speed of the energy transition on Company
operations.
| PGS Annual Report 202172
For the purpose of impairment testing, each vessel is considered as a
separate CGU and seismic equipment is allocated to the vessels.
Future cash flow estimates are based on management assumptions
about demand for our products and services, future market conditions
and technological developments, including the future impact of climate
change. Significant and unanticipated changes in these assumptions
could result in impairments in a future period.
For impairment calculations in 2021, management has assumed that
revenue levels for the fleet in 2022 will be higher than the prior year.
PGS expects the improved oil price, a likely global recovery from the
COVID-19 pandemic, and the eects of deferred projects from 2020
and 2021 to support gradual increasing demand for seismic services in
the subsequent years. From 2030, the impact of the two main energy
transition scenarios has been incorporated into cash flow forecasts, as
described in the section below.
Despite the impacts of the COVID-19 crisis, energy consumption is
expected to continue to increase longer term with oil and gas being an
important part of the energy mix as the global energy transition evolves
towards a higher share of renewable energy sources. Oshore reserves
will be vital for future supply and support demand for marine seismic
services. PGS expects the energy transition to impact future demand for
seismic, developing more towards near-field exploration and surveys over
production fields for reservoir optimization and relatively less interest
in frontier exploration. On that basis, management has forecasted
improved (“EBIT”) margins for 2 years above the historical average, then
to trend towards historic margins above ~15% in the base case scenario
and to trend to approximately half of the historical average in a scenario
assuming a faster energy transition scenario.
Climate change and the energy transition
The Company has considered the impact of climate change and the energy
transition in preparing the financial statements. In particular, the energy
transition is likely to aect future demand and pricing of geophysical
services relating to oil and gas exploration and production, which in turn
may aect the recoverable amount of seismic vessels and equipment.
PGS has incorporated two main scenarios for the energy transition and its
potential impact into its forecasts – the base case scenario and the fast
energy transition scenario.
The base case scenario is developed from the best estimates of current
trends and indications of policy over the next 5 years, and assuming a
steady transition from oil and gas to other sources of energy by 2050. The
reduction in demand for traditional oil and gas E&P services coincides with
an increase in New Energy activity, such as Carbon Capture, Utilization
and Storage (CCUS) projects which are a key technology for reducing and
removing CO2 and achieving net zero goals.
The fast energy transition scenario incorporates the eect of more
dynamic government policy and advances in technology, over an extended
forecasting period to 2042. In this scenario assumptions remain the
same as the base case till 2030, then a significant shift in the market
is assumed to reduce, from pre-covid levels, new frontier exploration
surveys by 80%, stable/slow growth for 4D surveys and a 50% reduction
in demand for all other E&P related seismic surveys. The accelerated
reduction in E&P projects is only partially oset by an increase in New
Energy project activity. The Company assumes fewer active vessels will
be operating in the seismic market based on a review of the expected
economic lifetime of the world fleet.
The above scenarios have been given a 50/50 weighting. Overall, these
assumptions resulted in an impairment of $15 million for seismic vessels
in the current year. As the future eect of climate change and the
energy transition depends upon market, technological and legislative
developments that are currently highly uncertain, subsequent changes in
assumptions may result in further impairment charges or reversals in the
future. The Company will continue to monitor the energy transition and
will update the assumptions in the scenarios and their probabilities as
new information becomes available.
Sensitivity analysis on impairment evaluation of seismic vessels
and equipment
The key assumptions used in evaluating impairment are subject to
substantial uncertainty, due to the volatile nature of macro-economic
factors such as future oil price, discount rate and any changes to rules and
regulations around seismic exploration.
Had assumed long-term EBIT margins been 3 percentage points lower, for
the remaining estimated useful life of the assets when estimating future
cash flows, then impairment of the fleet would approximate $105 million as
of December 31, 2021. If EBIT margins had been 5 percentage points lower
corresponding to an approximately 6 percentage points reduction of pricing,
then impairment of the fleet would be approximate $165 million as of
December 31, 2021.
An increase or decrease of WACC of 2% would have resulted in an impairment
of $ 88 million or reduced impairment to zero respectively. If the fast energy
transition scenario was given 100% weight, impairment would have increased
by approximately $45 million from $15 million to $60 million.
Forecast sales of MultiClient library
Generally, a survey is defined as a separate CGU, but may in some cases be
combined geographically adjacent and marketed combined.
At least annually, management forecasts future sales for each
MultiClient library survey for purposes of determining the amount
of impairment. Sales forecasts are also estimated in calculating the
amount of accelerated amortization for surveys which have licensed
disproportionately sooner than implied by the 4-year amortization life;
and for surveys that are completed at which time prefunding revenue is
recognized. In forecasting sales, management considers past experience,
market developments as described above, general prospects for
hydrocarbons in the area, political risk, likelihood and timing of exploration
licensing rounds, existence of competitor data sets and general economic
conditions. Due to the inherent diculty in forecasting sales and
future developments, it is possible that the amount of impairment
and amortization could vary significantly between periods. In addition,
future revenues from a survey may not be sucient to cover the existing
carrying value. To the extent the future actual revenues achieved prove to
be less than forecasted, future periods will reflect lower profitability and/
or impairment of MultiClient library surveys.
As MultiClient surveys generally have a shorter economic lifetime,
consequently no alternative scenario similar to vessels have been
prepared. Any impact on the marketability of areas is built into the
assessments of the individual surveys, generally PGS have reduced the
expectations for future sales in frontier areas.
Sensitivity of forecasted sales on MultiClient impairment evaluation
Impairment of the MultiClient library for 2021 amounted to $ 13.6 million.
A 10% reduction in the sales forecast for all surveys with a net book value
as of December 31, 2021 would have resulted in an additional impairment
of approximately $6 million. A 20% reduction in the sales forecast for
all surveys with a net book value as of December 31, 2021 would have
resulted in an additional impairment of approximately $16 million.
Depreciation of seismic vessels and equipment
Depreciation is based on management estimates of the future economic
benefits and expected useful lives of seismic vessels and equipment.
These estimates may change due to changes in market conditions
including competition, technological development, use of the assets and
strategic considerations.
There is a risk of seismic vessels getting stranded due to a reduction in
demand for oil & gas related services. Management has in its assessment
among other considered the age of the current world fleet and the
assumed market development as described under the impairment
section. The newest vessel has an assumed economical lifetime till 2042
and management expect the demand for services such as Carbon Capture,
near field exploration and surveys over production areas to support the
economic lifetime of its current fleet. Refer to impairment section for
further information.
| PGS Annual Report 202173
Deferred tax assets
Deferred tax assets are recognized for unused tax losses to the extent it
is probable that future taxable profit will be available against which the
losses can be utilized. Significant management judgment is required to
estimate the amount of deferred tax assets that can be recognized, based
upon the likely timing and level of future taxable profit in the nearer term
(generally 2 to 3 years forward).
As of December 31, 2021, aggregate unrecorded deferred tax assets of the
Company amount to $430 million.
Provision for contingencies, claims and tax litigations
The Company records accruals for contingencies, claims and other
uncertain liabilities, including tax contingencies, when it is more
likely than not that a liability has been incurred and the amount can
be reasonably estimated. These accruals are adjusted periodically as
assessments change or new or additional information becomes available.
In estimating the likelihood of an unfavorable outcome, management
evaluates the specific facts and circumstances in light of the related laws
and regulations; advice from external counsel; and the outcome of similar
cases, if any. Because of the inherent uncertainty in estimating the future
outcome of such matters, it is possible that some of these matters will
ultimately result in the Company incurring a material liability. See note 12
and 23 for further descriptions.
Contingent revenue
In certain circumstances, revenues can be recognized in respect of a
performance obligation that has already been fulfilled in the past. This
happens when a customer is already in possession of the license for
certain data and either (i) the customer is taken-over by or merged with
a competitor who does not yet have the license for such data (and is
thus required to pay a transfer fee), or (ii) the customer involves another
partner, not already having access to the licensed data, for the exploration
of a block, or (iii) customer award of acreage (uplift).
In the event of these specific contractual arrangements’ judgement is
required in determining when the triggering event took place and the
amount to be recognized. Taking into account possible price concessions,
customers re-delivery rights and collectability of the claim.
Going Concern assumption
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 “Financing status” section in the Board of Directors Report,
there is a risk that the Company might not generate sucient 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. Reference is made to note 22 for
further information.
| PGS Annual Report 202174
Note 4 – Segment Reporting
PGS has one operating segment focused on delivery of seismic data and services.
In accordance with the accounting standard for revenues, IFRS 15 MultiClient pre-funding revenues are generally recognized at delivery of the final
processed data, which is typically later than the acquisition of the seismic data.
For the purpose of its internal reporting PGS recognize MultiClient pre-funding revenue on a percentage of completion basis, and the related
amortization of MultiClient library based upon the ratio of aggregate capitalized survey costs to forecasted sales.
PGS will apply IFRS 15 for its internal reporting from January 1st, 2022 and consequently pre-funding revenue on a percentage of completion basis will
not be presented as segment information going forward.
The table below provides a reconciliation of the Company’s segment numbers (“Segment”) against the financial statements prepared in accordance
with IFRS (“As Reported”):
Year ended December 31,
2021 2020 2021 2020 2021 2020
(In millions of US dollars) Segment Reporting Adjustments As Reported
Total revenues and other income* 590.9 595.9 113.8 (83.9) 703.8 512.0
Cost of sales (227.2) (150.3) - - (227.2) (150.3)
Research and development costs (6.5) (8.7) - - (6.5) (8.7)
Selling, general and administrative costs (36.1) (39.2) - - (36.1) (39.2)
Amortization of MultiClient library (274.2) (296.3) (91.2) 65.7 (365.4) (230.6)
Depreciation and amortization (excl. MultiClient library) (100.6) (89.2) - - (100.6) (89.2)
Operating profit/ EBIT ex impairment and other charges,net 54.6 12.2 22.6 (18.2) (32.0) (6.0)
*Includes Other Income of $6.0 million from US government grants and $38.8 in Norwegian government grants in 2021 and 2020, respectively. See note 6.
Year ended December 31,
2021 2020 2021 2020 2021 2020
(In millions of US dollars) Segment Reporting Adjustments As Reported
-Contract seismic 207.8 146.7 - - 207.8 146.7
-MultiClient pre-funding 133.9 218.6 113.8 (83.9) 247.7 134.7
-MultiClient late sales 220.4 1 67. 3 - - 220.4 16 7.3
-Imaging 21.7 23.6 - - 21.7 23.6
-Other Income* 6.2 39.7 - - 6.2 39.7
Total Revenues and Other Income 590.0 595.9 113.8 (83.9) 703.8 512.0
*Includes Other Income of $6.0 million from US government grants and $38.8 in Norwegian government grants in 2021 and 2020, respectively. See note 6.
For the year ended December 31, 2021 MultiClient pre-funding revenues, As Reported, were higher than Segment pre-funding revenues. This dierence
is only related to timing of revenue recognition.
Set out below is the reconciliation of the Company’s segment numbers with the amounts disclosed in revenues from contracts with customers (note 5):
Year ended December 31,
(In millions of US dollars) 2021 2020
Revenues as reported in Segment disclosure* 584.0 55 7.1
Segment MultiClient revenue for projects not yet delivered (82.3) (191.5)
Segment MultiClient revenue from previous years, projects delivered 196.1 107.6
Revenues, As Reported 697.8 473.2
*Excluding government grants presented at Other income in note 6
The dierence is related to timing of recognition of MultiClient pre-funding revenues. Refer to note 2 for further information.
Because the Company provides services worldwide to the oil and gas industry, a substantial portion of the property and equipment is mobile, and their
respective locations at the end of each period are not necessarily indicative of the earnings generated by the related property and equipment during
the period. Property and equipment and other non-current assets are classified based upon location of ownership. The geographic classification of
statements of profit and loss items is based upon location of performance or, in the case of MultiClient seismic data sales, the geographic area covered
by the data being licensed.
| PGS Annual Report 202175
Year ended December 31,
Geographical markets 2021 2020 2021 2020
(In millions of US dollars) Segment Reporting As Reported
Norway** 178.7 145.2 199.0 163.7
Asia/Pacific 70.8 76.2 92.3 91.7
Canada 68.2 22.4 71.7 23.0
Egypt 57. 2 48.0 84.1 3.2
Americas* (excluding Brazil and Canada ) 56.0 36.8 56.7 36.2
Angola 49.6 95.2 70.6 48.3
United Kingdom 43.8 23.3 44.8 15.5
Ukraine 30.0 - 30.0 -
Brazil 24.3 48.7 13.7 29.8
Africa (excluding Angola, South Africa) 8.7 36.9 38.3 37.6
Middle East/Other (excluding Egypt) 1.5 6.1 1.4 6.0
South Africa 1.2 57.1 1.2 57.0
Total Revenues and Other Income 590.0 595.9 512.0 512.0
* Includes Other Income of $6.0 million in government grants in 2021. See note 6.
** Includes Other Income of $38.8 million in government grants in 2020. See note 6.
Total non-current assets (a) December 31,
(In millions of US dollars) 2021 2020
Norway 974.6 1 038.1
Americas (excluding Brazil) 98.1 147.3
Brazil 92.5 73.4
Africa 60.8 166.0
Asia/Pacific 46.8 102.3
Middle East/Other 13.6 55.4
Europe (excluding Norway) 13.4 34.3
Total 1 299.8 1 616.8
(a) Consists of Property and equipment, MultiClient library, Investments in associated companies (note 19) and Other intangible assets.
Note 5 — Revenue from Contracts with Customers
The company earns revenue from the following categories of customer contracts:
Type of goods or service Year ended December 31,
(In millions of US dollars) 2021 2020
Contract seismic 207.8 146.7
MultiClient pre-funding 247.7 134.7
MultiClient late sales 220.4 1 67. 3
Imaging 21.7 23.6
Other 0.2 0.9
Total revenues from contracts with customers 697.8 473.2
Depending on the type of contract with the customers, the Company’s performance obligation is considered to be satisfied over time or at a point in time.
Performance obligations satisfied over time generally include Contract seismic, Imaging services and Multiclient revenue from Joint Operation partner.
Set out below is the reconciliation of the timing of revenue from contract with customers.
Timing of revenue recognition* Year ended December 31,
(In millions of US dollars) 2021 2020
Licenses transferred at a point in time 433.1 302.9
Services transferred over time 264.7 170.3
Total revenues from contracts with customers 697.8 473.2
*Refer to section on performance obligations below
In 2021, aggregate revenues from the two largest customers accounted for 10% and 7% of the Company’s consolidated revenues compared to 13% and
10% in 2020, respectively.
| PGS Annual Report 202176
Revenue from Joint Operations
The Company has cooperation agreements to invest in certain MultiClient data projects with other parties. These agreements are classified as joint
operations where the parties have rights to the assets and liability of the investment. The Company generally holds an interest between 30-50%.
PGS recognizes its share of the revenue. For the year ended December 31, 2021 and 2020, $59.0 million and $32.1 of the revenue recognized relates to
projects with Joint Operations, respectively.
Accounts receivable
December 31,
(In millions of US dollars) 2021 2020
Accounts receivables from contracts with customers 134.6 100.6
Accounts receivables 134.6 100.6
Contract balances
Balances related to customer contracts consists of the following;
December 31, January 1,
(In millions of US dollars) 2021 2020 2020
Accounts receivables 134.6 100.6 167.4
Accrued revenues (note 15) 52.8 55.7 116.4
Total assets from contracts with customers 187.4 156.3 283.8
Deferred revenues 123.4 188.6 123.9
Total liabilities from contracts with customers 123.4 188.6 123.9
Trade receivables are non-interest bearing and are generally on terms of 30 to 45 days.
Accrued revenues are initially recognized for revenue earned, but not yet invoiced. This is generally related to Contract and Imaging projects where the
conditions to invoice are not yet satisfied, as well as Late Sales generally to be invoiced the following month.
The increase in assets from contracts customers is mainly due to increased sales in the fourth quarter. Deferred revenues consist of revenue billed, not
yet recognized. A substantial share of the balance is related to MultiClient pre-funding licenses where revenue is generally recognized at completion of
the survey. The Company currently expects the majority of all deferred revenues to be recognized the following year.
The decrease in deferred revenues is due to several larger MultiClient projects delivered in 2021.
Set out below is the amount of revenue recognized from amounts included in contract liabilities at the beginning of the year:
Year ended December 31,
(In millions of US dollars) 2021 2020
Amounts included in contract liabilities at the beginning of the year 142.3 95.4
Performance obligations
Contract seismic and imaging
The performance obligation is satisfied over-time and payment is generally due monthly or upon defined project milestones.
MultiClient Pre-funding
The performance obligation is satisfied at a point-in-time, usually by delivery of final data, and payment is generally due upon defined project
milestones. The customer is usually entitled to other deliverables such as preliminary data, but these are deemed not to be distinct within the context
of the contract.
Revenue the company receives from Joint Operation partners for acquisition or processing preformed is classified as MultiClient pre-funding. The
ownership of data is, in most cases, joint and the partner assumes ownership, rights and obligations as the data is produced, the revenue is therefore
considered as transferred over time. This amounts to $ 35.2 million and nil for the years ended December 31, 2021 and 2020, respectively.
MultiClient Late Sales
The performance obligation is satisfied at a point-in-time upon signing of contract and delivery of data. Payment is generally due 30-45 days after
the performance obligation is satisfied. Certain contracts may contain uplift payments dependent on a condition such as the customer subsequently
being awarded acreage that is covered by the MultiClient data license granted to the customer. These are considered contingent consideration and
consideration is recognized when the triggering event has taken place.
| PGS Annual Report 202177
The transaction price, for contracts entered into as of December 31, allocated to the remaining performance obligations
(unsatisfied or partly unsatisfied) as follows:
Year ended December 31,
(In millions of US dollars) 2021 2020
Licenses transferred at a point in time 125.0 226.9
Services transferred over time 202.4 106.8
Within one year 3 27.4 333.6
Licenses transferred at a point in time - 14.6
Services transferred over time - -
More than one year - 14.6
Total 32 7.4 348.2
All ongoing MultiClient projects as of December 31, 2021 with pre-funders are expected to be completed during 2022. The timing of performance
obligations is uncertain as MultiClient projects are subject to allocation of internal imaging capacity and progress.
Note 6 – Other Income
Year ended December 31,
(In millions of US dollars) 2021 2020
Government grants 6.0 38.8
Total Other income 6.0 38.8
PGS recorded Other Income of $6.0 million in 2021 from government grants relating to the Covid-19 pandemic. The amount is related to the US Payroll
Protection program given as a loan in 2020 and forgiven in 2021.
For the year ended 31 December, 2020 the Company recorded Covid-19 related cash support from the Norwegian Government amounting to $38.8
million The compensation scheme oers financial compensation to Norwegian companies which have experienced a substantial decrease in turnover
as a result of the coronavirus pandemic. The Government has set up a broad, temporary compensation scheme for businesses which are experiencing a
substantial decrease in turnover due to the crisis.
Note 7 – Cost of Sales
Year ended December 31,
(In millions of US dollars) 2021 2020
Vessel costs & direct project cost (275.5) (287.5)
New Ventures, project porfolio & Imaging (62.3) (80.9)
Technology/ digitalization & other (13.5) (1.4)
Total cost of sales, gross (351.3) (369.8)
Steaming deferral, net (3.2) (2.8)
Less amount capitalized to MultiClient library 127.2 222.3
Total cost of sales, net (227.2) (150.3)
Note 8 – Depreciation, Amortization and Impairments of Non-current Assets
Amortization and impairment of the MultiClient library consist of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Amortization of MultiClient library (note 18) (151.2) (125.4)
Accelerated amortization of MultiClient library (note 18) (214.2) (105.2)
Impairment of MultiClient library (note 18) (13.6) (34.9)
Amortization and impairment of MultiClient library (379.0) (265.5)
Impairment relates mainly to surveys where the level of previously expected sales has not materialized or are no longer probable. In 2021 approximately
30% relates to projects in North and South America and the remainder mainly Europe and Asia Pacific, compared to approximately 40% related to
Africa and the remainder mainly Europe and Asia Pacific in 2020.
| PGS Annual Report 202178
Amortization and depreciation of non-current assets (excluding MultiClient library) consist of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Gross depreciation and amortization * (142.4) (176.2)
Deferred Steaming depreciation, net (2.1) (0.8)
Depreciation capitalized to the MultiClient library 43.9 87.8
Depreciation and amortization of non-current assets (excl. MultiClient Library) (100.6) (89.2)
* Includes depreciation of right-of-use assets amounting to $ 22.7 million and $ 31.8 million for the years ended December 31, 2021 and 2020,
respectively.
Impairments of non-current assets (excluding MultiClient library) consist of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Impairment of property and equipment (note 17) (15.0) ( 107.4 )
Impairment other intangible assets (note 20) - (1.0)
Impairment non-current assets (excl. MultiClient Library) (15.0) (108.4)
In 2021, PGS recorded an impairment charge of $15.0 million on two Ramform Titan-class vessels. Reference is made to note 3 for further information.
The recoverable values of seismic vessels are sensitive to the assumed margins and duration of the current downturn as well as changes to the
operation plan for vessels. Reference is made to note 3 for information on sensitivities.
Note 9 – Other Charges, Net
Other charges, net consist of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Severance cost 0.2 (22.2)
Onerous contracts with customers (1.8) (4.5)
Other restructuring costs and stacking - (12.0)
Other* (4.0) -
Total (5.6) (38.7)
* In 2021 the company recognized a loss on the estimated value of an earn-out related to a 2018 sale of its fiber optic reservoir monitoring solution, OptoSeis.
Note 10 – Interest Expense
Interest expense consists of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Interest on debt, gross (98.0) (80.5)
Imputed interest cost on lease agreements (note 23) (8.7) (10.7)
Interest capitalized to the MultiClient library (note 18) 7.3 12.8
Total (99.4) (78.4)
The average interest rate used to determine the amount of interest cost eligible for capitalization was 6.8% and 6.3% for the years ended December 31,
2021 and 2020, respectively.
Note 11 – Other Financial Expense, Net
Other financial expense, net, consists of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Interest income 0.3 0.8
Currency exchange gain/loss (1.0) 4.9
Loss related to modification of debt (7. 7 ) -
Net gain related to extinguishment of debt 9.4 -
Net gain/(loss) on separate derivative financial instrument 0.9 -
Other (1.3) (15.7)
Total 0.6 (10.0)
| PGS Annual Report 202179
The line “Net gain related to extinguishment of debt” includes a gain related to extinguishment of debt of $13.5 million and $4.1 million of deferred debt
issuance cost charged to expense.
In 2021, PGS recorded a $0.9 million gain on separate derivative financial instrument at fair value relates to the convertible bond. The derivative
instrument will, until conversion, be reported as a liability (in “other current liabilities”) at fair value with changes in fair value reported as gain or loss.
Upon conversion, the fair value will be reported as a contribution to equity. As of December 31, 2021, the derivative financial instrument is valued at $4.1
million.
For the year ended December 31, 2020 the line “Other” primarily relates to expensed cost for amending and extending debt.
Note 12 – Income Taxes
Income tax consists of the following:
Year ended December 31,
(In millions of US dollars) 2021 2020
Current taxes (15.6) (15.1)
Deferred taxes - -
Total income tax expense (15.6) (15.1)
For the year 2021 current tax expense relates to foreign withholding tax and corporate tax on activities primarily in Africa.
Year ended December 31,
(In millions of US dollars) 2021 2020
Income (loss) before income tax (163.8) (306.4)
Norwegian statutory rate 22% 22%
Provision for income taxes at statutory rate 36.0 67.4
Increase (reduction) in income taxes from:
Eect of tax rates other than statutory tax rate in Norway 1.8 (0.1)
IFRS 15 Revenue and amortization recognized in previous years (a) - (0.6)
Tax exempt income within tonnage tax regimes 0.2 (0.8)
Gain/losses equity investments 0.3 (6.6)
Foreign taxes not creditable in home country (5.2) ( 7. 0)
Currency eects (b) (11.7) 11.0
Changes in unrecognized deferred tax assets (15.3) (85.8)
Prior period adjustments (21.2) 6.2
Other permanent items (0.5) 1.2
Income tax (15.6) (15.1)
(a) Following the implementation of IFRS 15, the Company reversed revenue and amortization towards the opening balance as of January 1, 2018.
Revenue and amortization previously recognized have been taken out as a permanent dierence. This did not have any impact on the Balance
Sheet or tax expense, as all deferred tax is currently unrecognized.
(b) Currency eects primarily relate to translating tax positions in local currency to US dollar functional currency.
The tax eects of the Company’s temporary dierences are as follows:
December 31,
(In millions of US dollars) 2021 2020
Deferred tax assets
Employee benefits (8.1) (8.7)
Tax loss carry-forwards (336.0) (313.1)
Property and equipment (56.3) (49.3)
Other (36.0) (55.3)
Deferred tax assets, gross (436.4) (426.4)
Deferred tax liabilities
Property and equipment 0.3 4.0
Intangible assets 5.6 6.9
Other 0.8 1.0
Deferred tax liabilities, gross 6.6 11.9
(Table continued on next page)
| PGS Annual Report 202180
Deferred tax assets, net (429.8) (414.5)
Deferred tax assets not recognized in the consolidated statements of financial position 429.9 414.6
Net recognized deferred tax assets and liabilities 0.1 0.1
December 31,
(In millions of US dollars) 2021 2020
Deferred tax assets - -
Deferred tax liabilities 0.1 0.1
Income tax liabilities, gross 0.1 0.1
Any temporary dierences related to IFRS 16 is considered on a net basis. Deferred tax is recognized on temporary dierences that arise when the
net asset or liability changes. The amount is not material and is included in other deferred tax assets.
The Company has incurred several years of consecutive tax losses in the Norwegian tax jurisdiction, including for 2021 and the outlook for 2022
remains uncertain. Although the Company believes it will attain a satisfactory level of profitability, sucient convincing evidence of such as required
by International Accounting Standard 12 is not present.
Deferred tax assets specified by jurisdiction, both recognized and unrecognized, and tax losses including expiration periods as of December 31, 2021
are as follows:
(In millions of US dollars) Tax losses Expiry dates
Recognized deferred
tax assets
Unrecognized deferred
tax assets
Norway 1 250.7 None - 275.1
UK 81.3 None - 15.5
Other 178.1 Various - 45.4
1 510.1 - 336.0
It is the Company’s current view that unremitted earnings from international operations in subsidiaries are expected to be reinvested indefinitely, and
as a result, no withholding taxes have been provided for unremitted earnings.
With its multinational operations, the Company is subject to taxation in many jurisdictions around the world with increasingly complex tax laws. The
Company has matters in several jurisdictions that could eventually make it liable for material amounts of taxes relating to prior years.
Total provision for uncertain tax positions are recognized as follows:
December 31,
(In millions of US dollars) 2021 2020
Other non-current liabilities 0.1 0.1
Total provision for uncertain tax positions 0.1 0.1
Tax Contingencies
The Company estimates the likelihood of unfavorable outcomes for tax contingencies amounting to approximately $23 million as reasonably possible
(20-50%) and approximately $78 million as remote (less than 20%); these contingencies are not provided for.
This includes ongoing tax disputes related to charter of vessels into Brazil. The assessments, which seek to levy 15% withholding tax and 10% CIDE
(service) tax, amount to $35.6 million in total. See note 23 for more information.
Note 13 – Earnings Per Share Information
Specification of average number of shares:
Year ended December 31,
2021 2020
Weighted average basic shares outstanding (a) 380 510 818 380 510 818
Dilutive potential shares 1 714 603 1 714 603
Weighted average diluted shares outstanding 382 225 421 382 225 421
(a) Weighted average basic shares outstanding for each year is reduced by the average number of treasury shares owned by the Company during the
year (see Note 27)
| PGS Annual Report 202181
Note 14 – Restricted Cash
Restricted cash consists of the following:
December 31,
(In millions of US dollars) 2021 2020
Current:
Restricted payroll withholding taxes 3.7 4.3
Restricted cash debt service - 6.4
Other 12.4 5.1
Total restricted cash, current 16.1 15.8
Non-current:
Deposits disputes (note 23) 17.9 17.7
Restricted cash debt service 39.4 43.1
Other 0.3 -
Total restricted cash, non-current 57.6 60.8
Non-current restricted cash of $39.4 million is 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. Current other restricted cash mainly relates to deposits on various
guarantees.
Note 15 – Accrued Revenues and Other Receivables
Accrued revenues and other receivables consist of the following:
December 31,
(In millions of US dollars) 2021 2020
Accrued revenues 52.8 55.7
Other receivables 3.1 1.6
Total 55.9 57.3
Note 16 – Other Current Assets
Other current assets consist of the following:
December 31,
(In millions of US dollars) 2021 2020
Prepaid operating expenses 10.8 22.6
Consumables, supplies and fuel inventory 26.8 21.8
Deferred steaming and project costs 5.0 10.2
Prepaid reinsurance 4.0 3.7
Withholding taxes and taxes receivable 8.0 2.6
Other 1.8 18.3
Total 56.4 79.2
Note 17 – Property and Equipment
The changes in property and equipment are as follows:
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures
and furniture Total
Cost as of January 1, 2020 2,679.4 138.1 2,817.5
Additions 25.2 10.9 36.1
Asset retirements (153.0) - (153.0)
Reclassification/Other (1.0) - (1.0)
Cost as of December 31, 2020 2 550.6 149.0 2 699.6
Additions 34.0 1.8 35.8
Asset retirements (0.4) - (0.4)
IFRS 16 adjustments - (3.2) (3.2)
Reclassification/Other (0.4) - (0.4)
Cost as of December 31, 2021 2 583.8 147.4 2 731.2
Accumulated depreciation as of January 1, 2020 1 507.5 65.0 1 572.5
Impairments as of January 1, 2020 112.6 - 112.6
(Table continued on next page)
| PGS Annual Report 202182
Depreciation 142.2 18.4 160.6
Impairments 10 7.4 - 10 7.4
Asset retirements- accumulated depreciation (150.9) - (150.9
Asset retirements- accumulated impairment (0.6) - (0.6)
Depreciation as of December 31, 2020 1 498.8 83.4 1 582.2
Impairments as of December 31, 2020 219.4 - 219.4
Depreciation 109.4 18.0 127.3
Impairments 15.0 - 15.0
Asset retirements- accumulated depreciation - (0.2) (0.2)
Asset retirements- accumulated impairment - - -
Depreciation as of December 31, 2021 1 608.2 101.2 1 709.3
Impairments as of December 31, 2021 234.4 - 234.4
Balance as of December 31, 2020 832.4 65.6 898.0
Balance as of December 31, 2021 741.2 46.3 787.4
Right of Use assets included within property and equipment
For the year ended December 31, 2021 and 2020, Seismic vessels and equipment and Buildings, fixtures and furniture included the following right of use assets:
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures
and furniture Total
Cost as of January 1, 2020 151.5 61.4 212.9
Additions - 0.8 0.8
Remeasurement/Other (0.8) 4.9 4.1
Asset retirements ( 7.3 ) (0.8) (8.1)
Cost as of December 31, 2020 143.4 66.3 209.7
Additions - 0.2 0.2
Remeasurement/Other - 0.2 0.2
Asset retirements - (3.9) (3.9)
Cost as of December 31, 2021 143.4 62.9 206.3
Accumulated depreciation as of January 1, 2020 30.2 13.7 43.9
Impairments as of January 1, 2020 - - -
Depreciation 18.6 13.2 31.8
Impairments 61.3 - -
Asset retirements ( 7.3) (0.4) -
Depreciation as of December 31, 2020 41.5 26.5 68.0
Impairments as of December 31, 2020 61.3 - 61.3
Depreciation 9.2 13.5 22.7
Impairments - - -
Asset retirements - - -
Depreciation as of December 31, 2021 50.7 40.0 90.7
Impairments as of December 31, 2021 61.3 - 61.3
Balance as of December 31, 2020 40.6 39.8 80.4
Balance as of December 31, 2021 31.4 22.9 54.3
For more information on leases refer to note 23.
Impairments
Management regularly evaluates its fleet plan and capital expenditure levels in light of market conditions. In 2021 and 2020 management performed
such evaluations and made decisions which resulted in impairments of certain vessels in the fleet described below. Refer to note 3 for information.
2021 Impairments
PGS recorded aggregate impairment charges of $15.0 million in 2021. The impairment primarily reflects a change in assumptions related to the impact
of energy transition to PGS business, refer to note 3 for further information. The recoverable values of seismic vessels and other Company asset are
sensitive to the assumed margins and cycles of the seismic industry as well as changes to operational plans. As a result, further impairments may arise
in future periods.
| PGS Annual Report 202183
December 31,
(In millions of US dollars) 2021 2020
Titan vessels 15.0 30.0
PGS Apollo (right-of-use asset) - 44.0
Sanco Swift (right-of-use asset) - 25.5
Ramform Viking - 3.7
Impairment of seismic equipment - 4.2
Total impairment 15.0 107.4
Note 18 – MultiClient Library
The changes in the MultiClient library are as follows:
(In millions of US dollars) 2021 2020
Balance as of January 1, 616.1 558.6
Capitalized cash costs 127.2 222.3
Capitalized interest 7.3 12.8
Capitalized depreciation 43.9 8 7.8
Amortization expense (151.2) (125.4)
Accelerated amortization (214.2) (105.2)
Impairments (see note 7) (13.6) (34.9)
Other 0.1 0.1
Balance as of December 31, 415.6 616.1
The net carrying value of the MultiClient library, by the year of survey completion is as follows:
December 31,
(In millions of US dollars) 2021 2020
Completed surveys:
Completed during 2017 - 14.1
Completed during 2018 13.9 43.8
Completed during 2019 53.6 92.1
Completed during 2020 49.3 76.3
Completed during 2021 117.7 -
Completed surveys 234.6 226.3
Surveys in progress 181.0 389.8
MultiClient library 415.6 616.1
Note 19 – Other Non-Current Assets
Other non-current assets consist of the following:
December 31,
(In millions of US dollars) 2021 2020
Investments in associated companies (a) 12.3 9.6
Other 2.4 6.6
Total 14.7 16.2
(a) Specification of investments in and loans to equity accounted investments as follows:
December 31, 2021 December 31, 2020
(In millions of US dollars) Jurisdiction Net book value Ownership Net book value Ownership
Azimuth II Ltd. Bermuda 6.2 35% 5.6 35%
Ocean Floor Geophysics Inc.. Canada 3.3 46% 2.0 20%
Ocean Geo-Frontier Co. Ltd Japan 2.3 34% 1.3 34%
Other* 0.4 - 0.7 -
Total 12.3 9.6
* Includes investment in Azimuth Ltd and Azimuth III Ltd.
| PGS Annual Report 202184
PGS share of income (loss) from associated companies is as follows:
Year ended December 31, 2021 Year ended December 31, 2020
(In millions of US dollars)
Profit (loss) for
the year
Adjustments
(a)
Share of
income (loss)
Profit (loss) for
the year
Adjustments
(a)
Share of
income (loss)
Azimuth II Ltd. 0.7 - 0.7 (23.0) (1.2) (24.2)
Ocean Floor Geophysics Inc.. (0.5) - (0.5) - - -
Ocean Geo-Frontier Co. Ltd 1.3 - 1.3 0.5 - 0.5
Other (0.2) - (0.2) ( 7.5 ) 1.2 (6.3)
Total 1.2 (30.0)
(a) Adjustments relate to accounting for exploration costs in the Azimuth companies; losses on dilution of ownership and recoverable investment
value; and loss limitation entries to reflect investment balance at no less than nil.
The Company owns 35% of Azimuth Limited, 35% of Azimuth II Limited and 44% of Azimuth III Limited, which together are the holding companies
of the Azimuth Group. The remaining shares are held by a majority shareholder and minority shareholder comprised of employees of Azimuth. The
investments are therefore accounted for as associated companies. The Azimuth Group consists of several operating entities, which invest in Exploration
and Production (“E&P”) companies and exploration assets.
In 2020 the Company recognized a loss in its investment in Azimuth III of $28.2 million based upon an assessment of recoverable value.
The Company did not make any contributions to the Azimuth Group in 2021 or 2020. During 2020 the Azimuth Group purchased data and other services
from the Company for $0.4 million.
The Company has entered into a cooperation agreement whereby the Company provides certain services to the Azimuth Group. The Azimuth Group
has the right to buy, for cash and at fair value, up to 50% of any future equity settlement that the Company may receive as payment for its library or
services. The Company has a right, but no obligation to provide further funding of Azimuth Group and has no guarantees outstanding.
Ocean Geo-Frontier Co. Ltd is a joint venture established in 2019 to administer services provided by the Company, and its partners, to Japan Oil, Gas and
Metals National Corporation (“JOGMEC”). The Company holds a 34% share.
Ocean Floor Geophysics Inc. is a company incorporated in Canada that provides geophysics data acquisition, analysis and exploration services. It also
designs, develops and sells marine geophysical sensors. The Company holds a 46% share pre-dilution and 43% share on a fully diluted basis.
The following table illustrates the summarized financial information (100% basis) as of December 31:
Azimuth Limited Ocean Floor Geophysics Inc. Ocean Geo-Frontier Co. Ltd.
(In millions of US dollars) 2021* 2020(a) 2021* 2020(a) 2021* 2020(a)
Current assets 16.2 15.9 3.9 7.1 12.0 10.5
Non-current assets 54.2 62.0 6.5 3.4 1.4 0.8
Current liabilities 16.8 16.5 3.6 3.5 7.0 5.2
Non-current liabilities 0.3 0.2 3.1 4.1 - -
Equity 53.3 61.2 3.7 2.9 6.4 6.1
Revenue - - 6.0 6.1 74.9 64.5
Operating expenses - - 6.8 6.3 71.7 61.2
Financial (income) expenses 7.9 44.2 0.6 0.8 - -
Income (loss) before tax (7. 9) (44.2) (1.4) (1.0) 3.1 3.2
Income tax - - - - (1.1) (1.1)
Profit (loss) for the year ( 7.9 ) (44.2) (1.4) (1.0) 2.0 2.1
Other comprehensive income - - - - - -
Total comprehensive income ( 7.9 ) (44.2) (1.4) (1.0) 2.0 2.1
(a) The preliminary 2020 financial statements numbers for the Azimuth II Ltd included in the 2020 Annual report have been updated to reflect final
numbers.
* reflects preliminary numbers
The changes for the year in Investments in Associated Companies are as follows:
December 31,
(In millions of US dollars) 2021 2020
Balance at January 1 9.6 38.1
Investments 1.8 2.0
Impairment and share of results from associated companies 1.2 (30.0)
Dividend received (0.4) (0.5)
Other comprehensive income (loss) from associated companies - -
Other changes - -
Balance at December 31 12.3 9.6
| PGS Annual Report 202185
Note 20 – Other Intangible Assets
The changes in other intangible assets are summarized as follows:
(In millions of US dollars)
Patents, licenses,
technology and other
Intangible assets in
development Total
Cost as of January 1, 2020 332.5 37.4 370.0
Additions to costs - 8.5 8.5
Asset retirements (1.0) - (1.0)
Asset transfers 1.0 (1.0) -
Cost as of December 31, 2020 332.5 44.9 377.5
Additions to costs - 10.2 10.2
Asset retirements - (3.8) (3.8)
Asset transfers - - -
Reclassification - 2.1. 2.1
Cost as of December 31, 2021 332.5 53.4 386.0
Amortization as of January 1, 2020 (a) 268.8 - 268.8
Amortization expense 15.6 - 15.6
Asset retirements (1.0) - (1.0)
Impairments 1.0 - 1.0
Amortization as of December 31, 2020 (a) 284.4 - 284.4
Amortization expense 15.1 - 15.1
Asset retirements - - -
Impairments - - -
Reclassification 2.0 - 2.0
Amortization as of December 31, 2021 (a) 301.5 - 301.5
Balance as of December 31, 2020 48.1 44.9 93.1
Balance as of December 31, 2021 31.0 53.4 84.5
Estimated useful life 1 to 15 years
(a) The accumulated impairment charge on intangibles other than goodwill was $165.8 millions as of December 31, 2021.
Impairments
PGS recorded aggregate impairment charges of $0.2 million and $1 million in 2021 and 2020, respectively. Impairment charges is related to technology no longer
expected to be utilized.
Note 21 – Debt and Guarantees
Interest bearing debt consists of the following:
December 31,
(In millions of US dollars) 2021 2020
Secured:
Term loan B, Libor + 250 Basis points, due 2021 - 2.0
Term loan B, Libor + 6-700 basis points (linked to total gross leverage ratio), due 2024 873.0 520.4
Export credit financing, due 2025 109.4 109.4
Export credit financing, due 2027 189.1 189.1
Revolving credit facility, due Sep 2020 - 135.2
Unsecured
Convertible bond 5%, due 2024 8.6 -
Total loans and bonds, gross 1 180.1 1 170.9
Less current portion (162.6) (1 150.4)
Less deferred loan costs, net of debt premiums (29.6) (20.5)
Less modification of debt treated as extinguishment (9.3) -
Less eect from separate derivative financial instrument convertible bond (5.1) -
Non-current interest bearing debt 973.5 -
(Table continued on next page)
| PGS Annual Report 202186
Undrawn facilities consists of:
December 31,
(In millions of US dollars) 2021 2020
Unsecured
Performance bond 1 7. 3 22.8
Total 17.3 22.8
Summary of net interest-bearing debt:
December 31,
(In millions of US dollars) 2021 2020
Loans and bonds gross (1 180.1) (1 170.9)
Cash and cash equivalents 170.0 156.7
Restricted cash (current and non-current) 73.7 76.6
Net interest bearing debt, excluding lease liabilities (936.4) (937.6)
Lease liabilities current (35.9) (40.1)
Lease liabilities non-current (79.0) (118.5)
Net interest bearing debt, including lease liabilities (1 051.3) (1 096.2)
Reconciliation of debt arising from financing activities:
Cash flows Non-cash changes
(In millions of US dollars)
January 1,
2021
Repayment
of interest
bearing
debt
Payment
of lease
liabilities
Net change
of drawing
on the
Revolving
Credit
Facility
Proceeds,
net of
deferred
loan costs,
from
issuance
of non-
current
debt
Foreign
exchange
movement
New leases
Other
December
31, 2021
Secured debt 1 150.4 - - - (25.1) - - 7.4 1 132.7
Bond debt - - - - 5.7 (0.4) - (1.8) 3.5
Lease liabilities 158.6 - (40.3) - - (1.3) - (2.2) 114.8
Total liabilities from financing activities 1 309.0 - (40.3) - (19.4) (1.7) - 3.4 1 251.0
Cash flows Non-cash changes
(In millions of US dollars)
January 1,
2020
Repayment
of interest
bearing
debt
Payment
of lease
liabilities
Net change
of drawing
on the
Revolving
Credit
Facility
Proceeds,
net of
deferred
loan costs,
from
issuance
of non-
current
debt
Foreign
exchange
movement
New leases
Other
December
31, 2020
Secured debt 873.7 (28.3) - 170.0 124.2 - - 10.8 1 150.4
Bond debt 210.7 (212.0) - - - - - 1.3 -
Lease liabilities 197.1 - (43.1) - - 0.4 0.8 3.4 158.6
Total liabilities from financing activities 1 281.5 (240.3) (43.1) 170.0 124.2 0.4 0.8 15.5 1 309.0
Credit Facility
At December 31, 2021, the Senior Secured Credit Facility (the “Credit Facility”) as amended and originated in 2007 comprises of a $873.0 million Term Loan
B (the “Term Loan” or “TLB”). On February 9, 2021, Petroleum Geo-Services AS replaced PGS ASA as the Norwegian borrower, PGS Finance Inc. continues
as US Borrower and PGS Holding II Ltd enters as UK Co-Borrower. Borrowings under the Credit Facility are secured by pledges of substantially all assets
of the Company except assets pledged to the Export Credit Loans (see below) for which it has an indirect 2nd lien pledge capturing values exceeding the
export credit loans. The TLB facility is guaranteed by all material subsidiaries except PGS Titans AS, holding the four titan-class vessels financed by four
export credit loans (see below). For comparison, at December 31, 2020, the Credit Facility comprised of a $522.4 million TLB and a fully drawn $350.0 million
Revolving Credit Facility (“RCF”).
| PGS Annual Report 202187
Due to the dramatic negative market change caused by the COVID-19 pandemic, PGS initiated in 2020 a process to renegotiate its main credit agreements
extending its near-term debt maturities and amortization profiles to support its liquidity position (the “Transaction”). The Company was not able to agree
the revised terms with all lenders ahead of when the $135 million RCF tranche was due in September 2020. The non-payment of principal of such facility
was an event of default under the RCF and TLB, with a cross default under the ECF. A required majority of lenders did enter into forbearance agreements
undertaking not to take any enforcement action in connection with the ongoing default. Consequently, the Company was in default under the RCF, TLB and
ECF as of December 31, 2020 and the Facilities were classified as current in the Statement of Financial Position.
As less than 100% of the RCF and TLB lenders consented to the amendments, the Company initiated a process to implement the transaction pursuant to
an UK Scheme of Arrangement (the “Scheme”) under English law upon approval of the English Court, after obtaining the required majority creditor consent
(being minimum 75% by value and a majority in number of the total RCF and TLB voting in the Scheme). The Scheme enabled the Transaction in respect of
the RCF and TLB to be implemented and bind all RCF and TLB lenders (including those who voted against or did not vote).
On February 2, 2021 the Scheme was sanctioned by an English court allowing the implementation of the financing Transaction announced on October
21, 2020 with main terms as listed below. The Scheme had support of lenders to the RCF/TLB facilities representing 95.3% by value of debt and 99.5%
by number of creditors voting. The Transaction closed and took eect February 9, 2021. With the Transaction, PGS extended its near-term maturity and
amortization profile under its RCF/TLB and ECF facilities by approximately two years.
The $135 million RCF due 2020 and $215 million RCF due 2023, and the remaining $2 million of the TLB not extended in February 2020, due 2021 were
converted into a new TLB on the same terms and conditions as the existing TLB. Petroleum Geo-Services AS replaced PGS ASA as the Norwegian borrower,
PGS Finance Inc. continued as US Borrower and PGS Holding II Ltd entered as UK Co-Borrower.
The total debt under the new TLB facilities (including PIK fees and osetting exchange of loans into the CB as described below) of $ 873.0 million maturing
in March 2024 has the following amortization profile payable pro-rata to all TLB lenders:
• $135 million amortization payment due in September 2022
• $200 million amortization payment due in September 2023
• $9.2 million quarterly amortization starting March 2023.
In addition, the excess cash flow sweep for the RCF/TLB facilities was replaced by an excess liquidity sweep for any liquidity reserve in excess of $200
million at each quarter end, with such amounts to be applied against (i) the deferred amounts under the ECF (ref below) and (ii) the $ 135 million TLB
amortization due in September 2020, until they have both been paid in full. Thereafter, any liquidity reserve in excess of $175 million at each quarter end
will be applied against the remaining TLB amortizations.
The financial maintenance covenants were amended, with the maximum Total Net Leverage Ratio to be 4.5x through June 30, 2021, 4.25x through December
31, 2021, 3.25x through December 31, 2022 and 2.75x thereafter. The minimum liquidity covenant continues to be $ 75 million in unrestricted cash and cash
equivalents with an extra reporting obligation if cash and cash equivalents falls below $ 115 million. There are customary cure periods and provisions. For
information on risk of not complying with covenants, please refer to note 22.
The margin on the TLB is based on a pricing grid as follows: if Total Gross Leverage Ratio is above 1.75:1.0 the margin is 7.0%; above 1.25:1.0 and less
than or equal to 1.75:1.0, the margin is 6.50%; and less than or equal to 1.25:1.0, the margin is 6.00%. The Total Gross Leverage Ratio (“TGLR”) is defined
as the consolidated indebtedness, net of restricted cash held for debt service in respect of the Export Credit financing, to consolidated adjusted EBITDA
less non -pre-funded MultiClient library investments. Total Net Leverage Ratio (“TNLR”) as referenced above and below allows in addition for the
deduction of unrestricted cash and cash equivalents from consolidated indebtedness.
If the corporate family rating from Moody’s or Standard & Poor’s is below B3/B- stable outlook, the credit margin on the TLB will be 7.5%. The Company
may only access the minimum margin of 6% if the ratings from Moody’s and Standard & Poor’s are at least B2 stable and B stable, respectively.
Moody’s and Standard & Poor’s rating as of March 8, 2022 are Caa1 and CCC+ (both with negative outlook), respectively. The Credit Facility contains
financial covenants and negative covenants that restrict the Company in various ways. The facility provides that:
i) The Company may not incur senior secured debt other than as replacement of existing secured debt, with certain baskets and exceptions among
such being assumed debt acquired through entities merged or acquired as long as the Total Net Leverage Ratio on a proforma basis does not
exceed 2.0:1.0 and such transaction is accretive (i.e., does not increase the leverage ratio proforma); and leases defined as operational leases under
the definition existing prior to IFRS 16. Subject to certain baskets and exceptions, the Company may not incur further junior secured or senior
unsecured debt if the total net leverage ratio exceeds 2.00:1.
ii) The Company may not pay dividends or similar (with certain exceptions) until February 9, 2023. Thereafter, dividend payments or similar are
permitted out of cumulative distributable earnings (as defined by the agreement) as long as total net leverage ratio is not greater than 2.0:1.0.
On or after March 31, 2023 if net leverage ratio is below 1.0:1.0 there is no restriction on dividend payments or similar. Cumulative distributable
earnings, as defined, primarily comprises 50% of Net Income and accumulates over time starting October 1, 2019.
In addition, the Credit Facility restricts or could restrict our ability, among other things, to sell assets without the sales proceeds being reinvested
in the business or used to repay debt; issue preferred shares; prepay interest and principal on other indebtedness; create liens on assets; make
investments, loans, guarantees or advances; make acquisitions; engage in mergers or consolidations; enter into sale and leaseback transactions; engage
in transactions with aliates; amend material agreements governing our indebtedness; change our business; enter into agreements that restrict
dividends from subsidiaries; and enter into speculative financial derivative agreements.
During 2020, and until it was converted into a TLB on February 9, 2021, the $215 million RCF had an interest rate on drawn (borrowed) amounts based
on LIBOR plus a margin and a utilization fee. The undrawn amount was subject to a commitment fee. The margin on the drawn amount was based on a
leverage grid. During the first quarter of 2020 a margin of 6% was applied, whilst the margin was 6,5% for the remainder of 2020. The RCF was subject
to a utilization fee based upon the total amount drawn as follows. For the two first months of 2020 a utilization fee of 0.5% was paid and from March
2020 the RCF was fully drawn and a utilization fee of 0.75% was paid. The RCF facility did in addition have a commitment fee on undrawn amounts of
40% of the applicable margin. The $135 million non-extended RCF was subject to a margin of 3.75%, the same utilization fee as the extended RCF; and
a commitment fee on the undrawn amount of 50% of the applicable margin. The extended and non-extended RCF were drawn pro rata during 2020.
| PGS Annual Report 202188
The $523 million extended and increased TLB carried a floating interest rate of LIBOR plus a margin based on the same leverage grid as the extended
RCF. During the first quarter of 2021 a margin of 7.0% applied whilst for the rest of 2021 a margin of 7.5% applied to the extended TLB.
The Term Loan principal amortizing profile was 1% per annum paid quarterly during 2020, but no amortization was paid for the 3rd or 4th quarters (see
above with reference to the forbearance agreement).
The rescheduling of the $135 million RCF originally due in September 2020 has been accounted for as an extinguishment due to substantially dierent
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.
Senior Notes
On December 23, 2016, the Company issued $212.0 million in aggregate principal amount of 7.375% Senior Notes due 2020 (the “New Notes”) as part
of the Exchange Oer in an oering that was not subject to the registration requirements of the U.S. Securities Act. The New Notes were admitted to
listing on the Ocial List of the Luxembourg Stock Exchange and to trading on the Euro MTF market of the Luxembourg Stock Exchange.
On February 7, 2020 the Senior Notes were called for redemption and were repaid in full at par value plus accrued interest on February 18, 2020.
Export credit financing
The Export credit financing arrangement comprises four loans each with Japan Bank for International Cooperation (“JBIC”) and Sumitomo Mitsui
Banking Corporation (“SMBC”), with an aggregate value at inception of $544.2 million. The loans were incurred by the subsidiary, PGS Titans AS, for
the financing of the four Ramform Titan class vessels. PGS ASA guarantees the obligations under two internal 12-year bareboat charter agreements
between PGS Falcon AS and PGS Titans AS for the two vessels, the Ramform Titan and the Ramform Atlas, and guarantees the loans financing for the
Ramform Tethys and the Ramform Hyperion. The loans are senior facilities secured by first priority mortgages over the vessels and fittings on board
(but excluding “in sea” equipment such as streamers), pledge of the borrower’s right under a debt service reserve account and assignment of insurance
rights in the vessels. The loans are repaid over 12 years from inception in equal semiannual installments and each loan comprise two tranches held by
JBIC and SMBC, respectively. The JBIC tranche bears a fixed interest and is repaid from the 7th to 12th year after draw down, while the SMBC tranche
bears a floating interest based on 6 months Libor plus a margin and is repaid from 1st to 6th year after draw down. SMBC has received credit insurance
from Nippon Export and Investment Insurance (“NEXI”) and the insurance premium is paid by PGS Titans AS.
With the completion of the Transaction eective February 9, 2021, described above, the repayment profile of the loans was altered. All scheduled
installments for the period September 2020 to September 2022 amounting to ~$ 106 million were deferred. The original semiannual repayment profile
will resume from December 2022. The deferred instalments will be repaid over four quarters starting December 2022 through September 2023. The
export credit loans will share an excess liquidity sweep for any liquidity reserve in excess of $200 million at each quarter end, with such amounts to be
applied against (i) the deferred amounts under the ECF and (ii) the $ 135 million TLB amortization due in September 2020, until these amounts have
both been paid in full. With the transaction, PGS ASA will also guarantee the loans financing for the Ramform Titan and the Ramform Atlas, and each
of PGS Holding I Ltd, PGS Holding II Ltd and Petroleum Geo-Services AS will guarantee for the loans financing for the Ramform Titan, Ramform Atlas,
Ramform Tethys and Ramform Hyperion.
With the transaction, the export credit lenders have also received enhanced security by certain shared security with the TLB.
Under the deferral period the export credit financing loans will have the same financial maintenance and reporting covenants as the Credit Facility.
Convertible Bond
As part of the Transaction closed February 9, 2021, PGS issued convertible bond of NOK 116.2 million with 3 years tenor and 5% coupon paid semi-annually.
The unsecured convertible bond (“CB”) has PGS ASA as borrower and can from issuance and during the life of the bond be converted into new PGS shares
at NOK 3 per share (corresponding to 38,720,699 shares, equaling 10% of the then currently outstanding PGS shares). As part of the Transaction certain
lenders to the RCF and TLB facilities subscribed for the CB against conversion of a corresponding amount of their existing secured loans (~NOK 67.1
million/~$7.8 million) and for cash (~NOK 49.1 million/~$5.7 million). 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.
During 2021 bondholders representing NOK 40.4 million of the bond have converted into 13.5 million shares. As of December 31, 2021, NOK 75.8 million of
the convertible bond is outstanding, which can be converted into 25.3 million shares.
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 dierence
between the initial value of the debt component and the nominal value of the CB will be 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 $8.6 million. As of December 31, 2021, the
derivative financial instrument (relating to the conversion option) is valued to $5.1 million. For further information on accounting for a conversion right in a
dierent currency (NOK), see Note 2.
Letters of credit and guarantees
The Company has $30.0 million uncommitted bid and performance bond facilities ($30 million in 2020) intended for operational use. Drawings under
these facilities totaled $12.7 million and $7.2 million as of December 31, 2021 and 2020, respectively. During 2020 and 2021, the Company was required to
deposit cash collateral to cover new or amended bonds drawn under this facility. As of December 31, 2021 the Company had deposited $12.4 million ($5.1
million in 2020) which is included in Restricted Cash (see note 14). Drawings under this facility represent the outstanding letters of credit and similar
guarantees not reflected in the accompanying consolidated statements of financial position.
PGS ASA has guaranteed the payment obligation under the lease of PGS Apollo (see note 23).
| PGS Annual Report 202189
Note 22 — Financial Instruments
Valuation of financial instruments carried at fair value
The Company classifies financial instruments carried at fair value in the consolidated statement of financial position using the Fair Value Hierarchy.
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable
either directly or indirectly.
Level 3: techniques for which all inputs which have a significant eect on the recorded fair value that is not based on observable market data.
Nominal value and fair values of financial assets and liabilities
December 31, 2021 December 31, 2020
(In millions of US dollars)
Hierarchy
Level
Nominal
value
Fair
values
Nominal
value
Fair
values
FINANCIAL ASSETS
At fair value through profit and loss
Foreign exchange contracts 2 - - - -
Derivatives designated as hedging instruments
Foreign exchange contracts 2 - - - -
Interest rate swaps 2 - - - -
Total - - - -
FINANCIAL LIABILITIES
Financial liabilities at amortized cost
Debt with fixed interest rate 2 (256.5) ( 2 57.4 ) (256.5) (256.5)
Debt with variable interest rate 2 (914.4) (82 7.0) (914.4) (825.1)
Convertible Bond* 2 (8.6) ( 7.7 ) - -
Lease liabilities 2 (114.9) (114.9) (158.6) (158.6)
At fair value through profit and loss
Foreign exchange contracts 2 - - - -
Interest rate swaps 2 (0.5) (0.5) - -
Option conversion 2 (4.1) (4.1) - -
Derivatives designated as hedging instruments
Foreign exchange contracts 2 - - - -
Interest rate swaps 2 (2.2) (2.2) (6.7) (6.7)
Total (1 301.7) (1 213.8) (1 336.2) (1 246.9)
* Book value $3.5 MUSD.
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accrued revenues and other receivables, other current assets, accounts
payable and accrued expenses classified at amortized cost approximate their respective fair values because of the short maturities of those instruments.
The fair values of the non-current debt instruments, forward exchange contracts and interest rate swaps are estimated using quotes obtained from dealers
in such financial instruments or latest quoted prices or indexes at Reuters or Bloomberg. Where market prices are not observed or quotes from dealers are
not obtained, an indirect method is used by use of implied credit spread from debt instrument with similar risk characteristics.
Financial risk management policies
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to repay or be able
to refinance debt when it falls due and provide returns for shareholders such as dividends, after reaching a target net debt level (excluding lease
obligations) of $500–600 million, and work towards an optimal capital structure to reduce the cost of capital.
The management of the capital structure involves active monitoring and adjustments in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure the Company may refinance its debt, buy or issue new shares
or debt instruments, sell assets or return capital to shareholders.
The Company monitors debt on the basis of the leverage ratio and other covenants in credit agreements. The Total Net Leverage Ratio (“TNLR”) is
calculated as the consolidated indebtedness, net of restricted cash held for debt service in respect of the Export Credit financing and unrestricted cash
and cash equivalents, divided by adjusted EBITDA less non-pre-funded MultiClient library investments. The TNLR as of December 31, 2021 was 3.27x
compared to the maximum covenant level of 4.25x. The covenant was suspended for December 31, 2020. The Company has earlier announced that there
is 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.
In addition, the Company monitors leverage based on net debt. Net debt is calculated as total debt (including short-term and non-current debt as
reported in the consolidated statement of financial position) less cash and cash equivalents, including restricted cash. During 2018, taking into account
| PGS Annual Report 202190
experience from the down cycle and with a view that the Company’s markets will continue to be cyclical in the future, the Company has adopted a
strategic target to over time reduce Net Interest-Bearing Debt to a level, excluding lease obligations, not exceeding $500-600 million, assuming the
current size and composition of business activities. As a result, the Company will give higher priority to profitability, cash flow generation and debt
reduction than business growth until it reaches a lower debt level. While PGS has adjusted expenditures to mitigate the impact of lower revenues, it will
need a market recovery to continue significant debt repayments.
The Company is exposed to market risks such as interest rate risk, foreign exchange rate risk, credit risk and liquidity risk. The Company’s risk
management policies are approved by the Board of Directors. The treasury function reports regularly to the Company management and any breach of
limits set in the policy are required to be reported to the Board of Directors.
Interest rate risk management
The Company is subject to interest rate risk on debt, including lease liabilities. The risk is managed by using a combination of fixed -and variable rate
debt, together with interest rate swaps, where appropriate, to fix or lower the borrowing costs.
December 31, 2021 December 31, 2020
Notional
amounts
Weighted average
interest rate
Notional
amounts
Weighted average
interest rate
Debt at fixed interest rate 265.1 3.09% 256.5 3.03%
Debt at variable interest rate based on US dollar plus a margin 689.9 7.43% 689.4 6.64%
Variable interest rate debt with interest fixed 225.0 1.93% 225.0 1.93%
After giving eect to the Company’s interest rate swaps, for every one-percentage point hypothetical increase in LIBOR, the annual net interest
expense on variable rate debt, inclusive non-restricted cash holdings, would have increased by $4.8 million and $4.9 million approximately measured
from December 31, 2021 and 2020, respectively.
Foreign currency risk management
The Company is exposed to currency fluctuation due to the eects of a predominantly USD based revenue stream, while the Company’s operating
expenses and capital expenditures are mainly denominated in USD, GBP, NOK and EUR. The Company maintains a foreign currency risk management
strategy that normally uses foreign currency exchange contracts to reduce volatility in the income statement and protect against fluctuations in cash
flow caused by volatility in currency exchange rates. The Company does not currently have any bank lines available to hedge currency exposures, but has
used cash where possible to oset material exposures. The Company did not have any open forward contracts as of December 31, 2021 or December
31,2020. The table shows exposures and foreign exchange contracts in currencies that the Company hedges on a regular basis.
December 31, 2021 December 31, 2020
(in millions, local currency) NOK GBP BRL NOK GBP BRL
Restricted cash 32.6 - 99.7 36.7 - 99.7
Cash held as hedges 104.3 21.9 - 89.4 29.4 -
Current assets 19.6 0.8 23.0 11.8 2.0 131.6
Current liabilities (139.0) (0.4) (0.8) (133.4) (0.7) (2.2)
Pension liabilities (26.6) (18.7) - (28.9) (31.4) -
Finance leases (260.4) (0.4) (1.9) (380.9) (4.3) (3.0)
Other non-current liabilities (67. 6 ) (1.0) - - (2.6) -
Net statements of financial position exposure (337.1) (2.2) 120.0 (405.3) (7.6) 226.1
Hedged committed operational cash flow and capital expenditure:
Next year - - - - - -
1-2 years - - - - - -
2-3 years - - - - - -
Net forward commitments - - - - - -
Forward exchange contracts - - - - - -
Net exposure (337.1) (2.2) 120.0 (405.3) (7.6) 226.1
The following analysis illustrates the sensitivity of changes in relevant foreign exchange rates, after the impact of hedging. All other variables remain
constant. The sensitivity analysis is based on the Company’s financial assets and liabilities held as of the year ended December 31, 2021 and 2020. The
foreign exchange rate analysis assumes a 10% depreciation in USD.
December 31, 2021 December 31, 2020
(in millions, local currency) NOK GBP BRL NOK GBP BRL
Impact on profit before tax: Gain / (loss) (4.2) (0.3) 2.4 (5.3) (1.0) 4.8
Average rate Year end spot rate
| PGS Annual Report 202191
2020 2020 2020 2020
USD / NOK 8.587 9.445 8.832 8.548
GBP / USD 1.377 1.284 1.350 1.365
USD / BRL 5.353 5.053 5.569 5.191
Credit risk management
Credit risk is the risk that counterparties to financial instruments do not perform according to the terms of the contract. The approximate maximum
credit exposure related to financial assets is as follows:
December 31,
(In millions of US dollars) 2021 2020
Cash and cash equivalents 170.0 156.7
Restricted cash (note 13) 73.7 76.6
Accounts receivable 134.6 100.6
Accrued revenues and other receivables (note 15) 55.9 5 7. 3
Total 434.2 391.2
Cash and cash equivalents
The Company continually monitors the counterparty credit risk of banking partners, including derivatives counterparties and the institutions in which
cash is held on deposit.
Accounts receivables
Trade receivables are primarily with multinational integrated oil companies and independent oil and natural gas companies, including companies
owned in whole or in part by governments. As of December 31, 2021, approximately 46% of the balance relates to 5 customers, compared to 58% as of
December 31,2020.
The aging of trade receivables is as follows:
December 31,
(In millions of US dollars) 2021 2020
Current 89.9 88.6
Up to one month past due 21.9 2.1
Between one and two months past due 19.8 2.1
More than three months past due 8.2 12.5
Allowance for doubtful accounts (5.2) (4.7)
Total 134.6 100.6
The Company provides for expected credit losses through a loss allowance, which is based on the lifetime expected credit losses at the reporting date. The
Company assesses expected credit losses using factors including aging of accounts, historical experience, customer concentration, customer creditworthiness
and current industry and economic trends. The provision for expected credit losses is related to receivables more than three months past due.
For accrued revenues, the Company has assessed the collectability prior to recognizing the revenue and assessed credit risk on the same basis as trade
receivables. There is no allowance related to accrued revenues as of December 31, 2021 and 2020.
The Company is also exposed to credit risk from o-balance sheet items such as agreements to provide future services to customers and counterparties on
derivatives and where cash is held on deposit. The Company manages its exposure to such risks through continuous monitoring of counterparties.
Exposure to liquidity risk
The Company tries to minimize liquidity risk through ensuring access to a diversified set of funding sources, and management of maturity profile on
debt and derivatives. The Company is exposed to liquidity risk related to the following:
December 31, 2021 Contractual cash flows*
(In millions of US dollars)
Nominal
value
Notional
value Total 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years Thereafter
Non-derivative financial liabilities
Trade payables (45.3) - (45.3) (45.3) - - - - -
Debt with fixed interest rates (265.1) - (288.9) (20.0) (118.6) (60.0) (44.6) ( 27. 7 ) (18.1)
Debt with variable interest rates (914.9) - (1,053.8) (218.8) (322.5) (512.4) - - -
Total (1,225.3) - (1,388.0) (284.1) (441.2) (572.4) (44.6) ( 27.7) (18.1)
Derivative financial assets/liabilities
Interest rate swaps hedge accounted (2.2) 225.0 (2.2) (2.1) (0.1) - - - -
Forward exchange contracts used for hedging - - - - - - - - -
Other foreign exchange contracts - - - - - - - - -
Total (2.2) 225.0 (2.2) (2.1) (0.1) - - - -
*Refer to note 20 for further information on debt classification.
| PGS Annual Report 202192
December 31, 2020 Contractual cash flows
(In millions of US dollars)
Nominal
value
Notional
value Total 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years Thereafter
Non-derivative financial liabilities
Trade payables (31.2) - (31.2) (31.2) - - - - -
Debt with fixed interest rates (256.5) - (258.8) (258.8) - - - - -
Debt with variable interest rates (914.4) - (924.3) (924.3) - - - - -
Total (1 202.1) - (1 214.2) (1 214.2) - - - - -
Derivative financial assets/liabilities
Interest rate swaps hedge accounted (6.7) 225.0 (6.7) (3.9) (2.5) (0.3) - - -
Forward exchange contracts used for hedging - - - - - - - - -
Other foreign exchange contracts - - - - - - - - -
Total (6.7) 225.0 (6.7) (3.9) (2.5) (0.3) - - -
As of December 31, 2021, the Company had cash and cash equivalents of $170.0 million, being the total liquidity reserve, compared to cash and cash
equivalents of $156.7 million and unutilized drawings of the RCF of nil at year-end 2020. The Company does not currently have an RCF, subsequent to
completion of the amendments described in note 21, the previous fully drawn RCF was converted to a Term Loan February 9, 2021.
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 sucient 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 sucient 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. Reference also to the Board of Directors Report, in section on Financing
status, for a description of related risks.
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 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. Refer to note 3 for implications as to going concern assessment.
Interest rate hedge accounting
The Company has not excluded any components of the derivative instruments’ gain or loss from the assessment of hedge eectiveness with respect to
the qualifying interest rate swaps. In April 2019 the Company entered into interest rate swaps with a notional amount of $125 million, to fix the interest
rate on part of its floating rate debt. The hedges were not designated as hedging instruments and the change in fair value of these swaps was taken
directly through the Income Statement. In February 2020 the Company entered into additional interest rate swaps, with a total notional amount of
$100 million, to fix the interest rate on part of its floating rate debt. All of the interest rate swaps were then designated as hedging instruments after
the refinancing of the TLB in February 2020. The negative market value of the existing swaps at the time of designation was
$2.8 million, which was taken through the Income Statement, all subsequent change in fair value of these swaps were recorded in other comprehensive
income as the eective portion of the designated and qualifying hedging instrument.
The interest rate swaps from 2020 and 2021 had a negative fair value of $2.2 and $6.8 million recorded in the Income Statement at December 31, 2021
and 2020, respectively.
Foreign exchange rate hedge accounting
The majority of revenues are in USD. The company previously entered into derivatives accounted for under fair value hedge relationships to hedge the
currency risk. The Company has no foreign exchange rate hedging as of December 31, 2020.
Sensitivity analysis derivatives
The Company has no foreign exchange rate hedging using currency derivatives as of December 31, 2021 and 2020.
Note 23 – Leases, Contingent Liabilities and Provisions
Company as lessee
The Company has lease contracts for various items of seismic vessels, equipment and buildings used in its operations. Leases of seismic vessels have
lease terms between 2 and 10 years, while buildings and equipment generally have lease terms between 1-15 years and 1-6 years. There are several lease
contracts that include extension and termination options which are further described below.
The Company also has certain leases with lease terms of 12 months or less and leases of equipment with low value. The Company applies the ‘short-
term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
| PGS Annual Report 202193
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures
and furniture Total
Balance as of January 1, 2020 121.3 4 7.7 169.0
Additions (note 17) - 0.8 0.8
Remeasurement/Other (note 17) (0.8) 4.5 3.7
Impairment expense (note 17) (61.3) - (61.3)
Depreciation expense (note 17) (18.6) (13.2) (31.8)
Balance as of December 31, 2020 40.6 39.8 80.4
Additions (note 17) - 0.2 0.2
Remeasurement/Other (note 17) - (3.2) (3.2)
Impairment expense (note 17) - - -
Depreciation expense (note 17) (9.2) (13.5) (22.7)
Balance as of December 31, 2021 31.4 23.3 54.7
Set out below are the carrying amounts of lease liabilities and the movements during the period:
2021 2020
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures and
furniture Total
Seismic vessels
and equipment
Buildings, fixtures and
furniture Total
Balance as of January 1 106.6 52.0 158.6 137.4 59.7 197.1
Additions - 0.2 0.2 - 0.8 0.8
Interest 6.1 2.7 8.8 7.6 3.1 10.7
Lease payments (32.5) (16.7) (49.2) (37. 3) (16.5) (53.8)
Remeasurements 0.2 (3.8) (3.6) (1.1) 4.9 3.8
Balance as of December 31 80.4 34.4 114.8 106.6 52.0 158.6
The maturity of lease liabilities can be analysed as follows:
December 31, 2021
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures
and furniture Total
Less than one year 31.4 10.9 42.3
One to five years 58.1 23.1 81.2
More than five years - 5.3 5.3
Total 89.4 59.8 128.7
December 31, 2020
(In millions of US dollars)
Seismic vessels
and equipment
Buildings, fixtures
and furniture Total
Less than one year 31.4 16.9 48.3
One to five years 89.5 32.9 122.4
More than five years - 10.0 10.0
Total 120.9 59.8 180.7
The following are the amounts recognised in profit and loss:
(In millions of US dollars) 2021 2020
Interest on lease liabilities adopted under IFRS 16 8.8 10.7
Expenses relating to short term and low value leases 11.7 17.8
Depreciation expense of right-of-use assets 22.7 31.8
Impairment expense of right-of-use assets - 61.3
Total 43.2 121.6
The Company had total cash outflows for leases of $60.9 million in 2021, and $71.6 million in 2020. The Company also had non-cash additions to right-
of-use assets and lease liabilities of $0.2 million in 2021 and $0.8 million in 2020.
| PGS Annual Report 202194
Seismic support vessels
The Company leases four seismic support vessels under time-charter agreements which expire in 2024-2025. The lessor holds options to purchase each
vessel from the 3rd party owner at certain times during each lease and at the end of the lease term. At the end of each lease, the 3rd party owner may
also require the lessor to purchase the vessel for a pre-determined amount. Should the lessor not purchase the vessel, the 3rd party owner may require
PGS to purchase the vessel for a price of $5.5 million which is estimated to be less than fair value.
Seismic vessels
The Company leases one 3D vessel, Sanco Swift, under a time charter agreement which expires in 2023. The Sanco Swift agreement has two 2-year
renewal options.
Sale and leaseback
In 2015, the Company entered into a sale and operating bareboat leaseback for the 3D vessel PGS Apollo. The remaining leaseback period is 4.5 years,
expiring in 2025, with an option to extend for a 5-year period. PGS has the option but no obligation, to acquire the vessel after the end of year 8 (in 2023).
Extension and termination options
Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of extension and termination
options, irrespective of likelihood they will be exercised, that are not included in the lease term:
December 31, 2021
(In millions of US dollars) Within five years More than five years Total
Extension options expected not to be exercised 196.6 84.5 281.1
Termination options expected to be exercised - - -
Total 196.6 84.5 281.1
December 31, 2020
(In millions of US dollars) Within five years More than five years Total
Extension options expected not to be exercised 197.7 84.5 282.2
Termination options expected to be exercised - - -
Total 197.7 84.5 282.2
Contingent liabilities
Brazil service tax claim on charter
The Company has ongoing tax disputes related to charter of vessels into Brazil. The assessments, which inter alia seek to levy 15% withholding tax and
10% CIDE (service) tax, amount to $33.9 million in total. The Company holds a legal deposit amounting to $17.9 million in 2021 to challenge one of the
disputes in court. The deposit is held in an interest-bearing bank account with a commercial bank. Since the Company considers it more likely than not
that these contingencies will be resolved in its favor, no provision has been made for any portion of the exposure.
Petrojarl
Following the demerger of Petrojarl (today part of Teekay) in 2006, the Company retained a joint secondary liability for certain obligations of Petrojarl.
Petrojarl agreed to indemnify the Company from liabilities related to its operations. The Company remains with a joint secondary liability with Petrojarl
under their FPSO service agreement with the customer for the Petrojarl Ban FPSO. The guarantee is not capped. If the claim is made and Petrojarl
does not honor its obligation to indemnify PGS, it could adversely aect the Company’s business, results of operation or financial condition.
Note 24 – Accrued Expenses and Other Current Liabilities
Accrued expenses consist of the following:
December 31,
(In millions of US dollars) 2021 2020
Accrued employee benefits 25.5 19.3
Accrued vessel operating expenses 13.2 17. 8
Provision for onerous customer contracts 11.0 9.2
Accrued Legal Expenses 10.6 12.7
Accrued Severance pay 2.2 6.1
Accrued revenue share 2.0 13.8
Accrued interest expenses 1.3 1.8
Accrued sales tax and VAT 1.0 0.6
Accrued commissions 0.6 1.1
Other 13.1 13.1
Total 80.5 95.5
| PGS Annual Report 202195
Note 25 – Other Non-Current Liabilities
Other non-current liabilities consist of the following:
December 31,
(In millions of US dollars) 2021 2020
Pension liability (note 26) 28.3 46.3
Other 2.4 13.0
Total 30.7 59.3
Note 26 – Pension Obligations
Defined benefits plans
Plan characteristics
The Company operates a defined benefit pension plan in the UK. The defined benefit plan was closed to new entrants in 2006 and to further vesting in
2015. The plan is administered through a pension trust which is legally separate from the Company. It is the Company’s general practice to fund defined
benefit plans in accordance with applicable statutory requirements.
In addition, as described in note 30, the CEO and one executive ocer have an early retirement plan allowing for termination of employment without
cause when the CEO or the executive ocer reaches the age of 62. Full early retirement benefits are defined as 60% of the last base salary beginning
in the year of retirement. The CEO is eligible for 85% of full benefits if he retires at the age of 62 and full benefits if he retires at the age of 65. The
executive ocer is eligible for full benefits if he retires at the age of 62. The early retirement benefits cease when the CEO and executive ocer reach
the age of 67.
Actuarial valuations and assumptions
The actuarial valuations are performed by independent actuaries in Norway and UK.
Risks
Actuarial valuations as applied in the consolidated financial statements are based upon financial and demographic assumptions which may be impacted
by future events. Such future events include, but are not limited to, longer than expected longevity of participants, lower than expected return on
investments and higher than expected inflation. Changes to assumptions may increase the liabilities or reduce the value of assets of the plan.
Financial impact
A summary of changes in the plans’ aggregate projected benefit obligations and fair values of assets are summarized as follows:
(In millions of US dollars) 2021 2020
Projected benefit obligations (PBO) as of January 1, (a) 232.9 202.3
Service cost 0.2 0.1
Interest cost 3.2 4.2
Social security tax - -
Actuarial loss (gain), arising from changes in financial assumptions (9.0) 37.7
Actuarial loss (gain), arising from changes in demographic assumptions (0.5) (16.5)
Actuarial loss (gain) due to scheme experience 2.2 (2.6)
Benefits paid (4.0) (3.6)
Exchange rate eects (2.4) 11.3
Projected benefit obligations (PBO) as of December 31, (a) 222.6 232.9
(a) $3.0 million and $3.4 million arise from unfunded plans as of December 31, 2021 and 2020, respectively.
Change in fair value of pension plan assets:
(In millions of US dollars) 2021 2020
Fair value of plan assets as of January 1, 186.6 163.7
Expected return on plan assets 2.6 3.4
Employer contributions 3.7 3.0
Actuarial gain (loss) arising from return on plan assets 7.0 11.0
Benefits paid (3.4) (3.1)
Exchange rate eects (2.2) 8.6
Fair value of plan assets as of December 31, 194.2 186.6
The aggregate funded status of the plans and amounts recognized in the Company’s consolidated statements of financial position are summarized as follows:
December 31,
(In millions of US dollars) 2021 2020
Projected benefit obligation (PBO) 222.6 232.9
Fair value of plan assets 194.2 186.6
Net pension liability 28.3 46.3
| PGS Annual Report 202196
The net amount recognized as accrued pension liability is presented as other non-current liabilities (see note 25).
The net periodic pension cost for the Company’s defined benefit pension plans are summarized as follows:
Year ended December 31,
(In millions of US dollars) 2021 2020
Service cost 0.2 0.1
Interest cost 3.2 4.2
Expected return on plan assets/net interest cost (2.6) (3.4)
Social security tax - -
Net periodic pension cost 0.8 0.9
The net periodic actuarial gains and losses arising from the Company’s defined benefit plans and recorded in other comprehensive income is as follows:
Year ended December 31,
(In millions of US dollars) 2021 2020
Actuarial gain (loss), arising from changes in financial assumptions 9.0 ( 37. 7 )
Actuarial gain (loss), arising from changes in demographic assumptions 0.5 16.5
Actuarial gain (loss) due to scheme experience (2.2) 2.6
Actuarial gain (loss) arising from return on plan assets 7.0 11.0
Net actuarial gain (loss) recognized in other comprehensive income 14.3 (7.6)
Significant acturial assumptions:
2021 2020
Norway UK Norway UK
Discount rate 1.90% 1.89% 1.70% 1.36%
Return on plan assets - 1.89% - 1.36%
Compensation increase 2.75% - 2.25% -
The discount rate assumptions used for calculating pensions reflect the rates at which the obligations could be eectively settled. Observable long-
term rates on corporate bonds are used for the Norwegian and UK plans.
Plan asset allocation
The Company’s pension plan asset allocations, by asset category, are presented by major plan group as follows:
December 31,
(In millions of US dollars) 2021 2020
Fair value plan assets 194.2 186.6
Plan assets at fair value with quoted prices in active markets for identical assets
Equity/diversified growth funds 30% 38%
Bonds 57% 51%
Real estate 11% 9%
Other 2% 2%
Total 100% 100%
Management of plan assets must comply with applicable laws and regulations in Norway and the UK where the Company provides defined benefits
plans. Within constraints imposed by laws and regulations, and given the assumed pension obligations and future contribution rates, assets are
managed to obtain a long-term rate of return that at least reflects the chosen investment risk.
Sensitivity
The following table show the sensitivity to the principal assumptions of the present value of the defined benefit obligation. The sensitivities shown
below are approximate and each sensitivity considers one change in isolation.
(In millions of US dollars) Change in assumptions Change in liabilities
Discount rate Decrease of 1.0% p.a. 26.0%
Inflation rate Increase of 1.0% p.a. 15.8%
The Company expects to contribute approximately $4.6 million to its defined benefit pension plans in 2022.
Defined contribution plans
Substantially all employees not eligible for coverage under the defined benefit plans in Norway and the UK are eligible to participate in pension plans in
accordance with local industrial, tax and social regulations. All of these plans are considered defined contribution plans. For some of the plans, subject
| PGS Annual Report 202197
to statutory limitations, employees may make voluntary contributions in addition to the Company’s contributions. Plan contributions made by the
Company aggregated $6.2 million and $8.1 million for 2021 and 2020, respectively. Plan contributions made by employees aggregated $4.1 million and
$5.1 million for 2021 and 2020, respectively.
Note 27 — Shareholder Information
At the Annual General Meeting (“AGM”) held on April 21, 2021, authority was given for the Board of Directors to acquire treasury shares at a maximum
face value of in total NOK 116,162,098. Under no circumstances can the Company acquire shares leading to an aggregate number of treasury shares
exceeding 10 percent of the total number of shares.
The shares may be used to meet obligations arising from employee incentive schemes; as part of consideration payable for acquisitions made by the
Company; as part of consideration for any mergers, demergers or acquisitions; by way of cancellation of the shares in part or full; to raise funds for
specific investments; for the purpose of repaying loans (including convertible loans); or to strengthen the Company’s capital base. The Board is free to
choose the method of disposal considered expedient for such purposes. The Company’s loan agreements restrict buying own shares until February 9,
2023/March 31, 2023 for other purposes than employee equity compensation plan. This exception is limited to $10 million, plus $10 million multiplied by
number of calendar years that have commenced since February 9, 2021.
Further, the 2021 AGM authorized the Board of Directors to increase the Company’s share capital by a total amount of NOK 116,162,098 through one or
more subscriptions. The authorization shall be utilized in connection with potential acquisitions of companies or businesses within the oil and energy
sector, including the oil service sector, settlement of obligations (including convertible loans), funding of material investments, debt repurchases or
to raise funds to strengthen the Company’s capital base. The authorization includes the right to increase the Company’s share capital in return for
non-cash contributions and the right to assume special obligations on behalf of the Company. The Board was also on the 2021 AGM authorized to issue
convertible bonds at a total amount of NOK 3,500,000,000. The share capital of the Company may be increased by a total amount of NOK 116,162,098
as a result of the convertible loans being converted into equity. The right to issue convertible bonds and the right to increase the share capital is jointly
capped at 10% of the share capital of the Company.
The above is authorizations are all valid until June 30, 2022 (unless earlier revoked by the 2022 AGM).
As of December 31, 2019, PGS ASA had a share capital of NOK 1,015,739,988 on 338 579 996 shares of par value NOK 3 each, all fully paid.
On February 13, 2020, the extraordinary general meeting in PGS ASA approved to issue 48,627,000 new shares following a private placement raising
approximately NOK 850 million as equity (approximately $95 million). On February 14, 2020, the registered share capital in the Company was increased
to NOK 1,161,620,988 comprising of 387,206,996 shares, each with a nominal value of NOK 3 all fully paid.
As of December 31, 2020, PGS ASA had a share capital of NOK 1,161,620,988 comprising of 387,206,996 shares of par value NOK 3 each, all fully paid.
Early 2021, the Company successfully completed a re-negotiation of amortization and maturity profiles for its main credit facilities. The negotiated
result was completed by a UK Scheme of Arrangement (the “Scheme”) sanctioned by an English court and having support of almost all the Company’s
lenders. The agreements included the issuance of a convertible loan of total NOK 116,162,097. Per December 31, 2021, NOK 75.8 million of this loan
remain outstanding. During 2021 PGS ASA received conversion notices from holders of the convertible bond representing NOK 40.4 million that have
been converted into 13 460 701 shares. As of December 31, 2021, PGS ASA had a share capital of NOK 1,202,003,091 comprising of 400,667,697 shares of
par value NOK 3 each, all fully paid.
All shares have equal voting rights and equal rights to dividends. Any distribution of the Company’s equity is dependent on the approval of the
shareholders, and the ability to make distributions is limited by certain debt covenants and Norwegian Corporate Law. The ordinary shares are listed on
the Oslo Stock Exchange.
The Board of Directors will not propose any dividend to the AGM in 2022 for the year ended December 31, 2021.
The Company’s holding of treasury shares reconciles as follows:
Treasury shares
% of total shares
outstanding
Balance as of January 1, 2020 1 739 0.00%
Used to fulfill employee benefit programs in 2020 (note 29) -
Balance as of December 31, 2020 1 739 0.00%
Used to fulfill employee benefit programs in 2021 (note 29) (1 149) 0.00%
Balance as of December 31, 2021 590 0.00%
The 20 largest shareholders (a) in PGS ASA were as follows:
December 31, 2021
Total shares Ownership percent
Coltrane Asset Management LP 63 914 900 16.0
DNB Asset Management AS 29 024 749 7.2
M&G Investment Management Limited 26 931 374 6.7
Dimensional Fund Advisors LP 12 977 624 3.2
The Boeing Company Employee Retirement Plans Master Trust 12 885 165 3.2
Barclays Capital Inc. 7 951 764 2.0
Susquehanna International Group Ltd. 5 528 848 1.4
Monaco Asset Management SAM 5 187 082 13
Mats Geo AB 4 900 000 1.2
(Table continued on next page)
| PGS Annual Report 202198
Credit Andorra 4 616 595 1.2
Andbank Wealth Management SGIIC SAU 4 311 590 1.1
Legal & General Investment Management Limited 4 213 000 1.1
Charles Schwab Investment Management, Inc. 4 171 008 1.0
Trefoil Capital Advisers 4 012 445 1.0
MH Capital A/S 3 983 490 1.0
Saxo Capital Markets UK Ltd 3 546 948 0.9
City of New York Group Trust 2 931 262 0.7
SPB A/S 2 811 435 0.7
UBS Switzerland AG (Investment Management) 2 622 999 0.7
American Century Investment Management Inc. 2 438 622 0.6
Other 191 706 797 47.8
Total 400 667 697 100.00
(a) The data in this table is provided by Q4 Inc. and is obtained through an analysis of beneficial ownership and fund manager information provided
in replies to disclosure of ownership notices issued to all custodians in relation to the PGS share register provided by the Norwegian Central
Securities Depository (VPS). Every reasonable eort has been made to verify the data, however neither PGS nor Q4 Inc. can guarantee the
accuracy of the analysis.
Shares owned or controlled by members of the Board of Directors, Chief Executive Ocer and Other Executive Ocers were as follows:
December 31, 2021
Total shares
Ownership
percent
Board of Directors
Walter Qvam, Chairperson 35 000 (a)
Anne Grethe Dalane 48 000 (a)
Marianne Kah 28 589 (a)
Richard Herbert 9 500 (a)
Trond Brandsrud 60 000 (a)
Eivind Vesterås 103 500 (a)
Anette Valbø 7 142 (a)
Gunhild Myhr - -
Chief Executive Ocer and Other Executive Ocers
Rune Olav Pedersen, President and Chief Executive Ocer 228 617 (a)
Gottfred Langseth, Executive Vice President and Chief Financial Ocer 450 106 (a)
Rob Adams, Executive Vice President of Operations 176 703 (a)
Berit Osnes, Executive Vice President New Energy 36 186 (a)
Nathan Oliver, Executive Vice President of Sales & Services - -
(a) Less than 1% of the Company’s shares as of December 31, 2021
Note 28 – Related Party Transactions
The following transactions were carried out with related parties:
Year ended December 31,
(In millions of US dollars) 2021 2020
Sale of goods and services
Associates – MultiClient data - -
Associates – Other services 36.4 31.7
Transactions with related parties are mainly proceeds from sale of goods and services to Ocean Geo-Frontier Co. Ltd.
The Company has $1.6 million and $2.0 million in outstanding balances with related parties as of December 31, 2021 and 2020, respectively.
All transactions with related parties are priced on an arm’s length basis.
Chief Executive Ocer (“CEO”), other Executive Ocers and Directors of the Company are also on the Board of certain customers and suppliers. As of
December 31, 2021 and 2020, the Company did not have any significant outstanding balances with any of these companies.
| PGS Annual Report 202199
Note 29 – Share Based Payment Programs
RSU’s and PRSU’s granted under the Company’s employee share- based programs are as follows:
Grant Year
Options, RSU's and
PRSU's granted
Additional options
granted year
Additional options
granted Description
2013 771 425 2014/2016 7 500/2 000 Restricted Stock Plan (RSU)
2014 739 500 2015/2017 2 000/17 500 Restricted Stock Plan (RSU)
2015 657 100 - - Restricted Stock Plan (RSU)
2015 776 100 - - Performance Based Restricted Stock Plan (PRSU)
2016 647 150 2018 26 200 Restricted Stock Plan (RSU)
2016 762 150 - - Performance Based Restricted Stock Plan (PRSU)
2017 456 320 - - Restricted Stock Plan (RSU)
2017 839 480 - - Performance Based Restricted Stock Plan (PRSU)
2018 1 746 450 - - Performance Based Restricted Stock Plan (PRSU)
2019 2 249 300 2020/2021 30 000/50 000 Performance Based Restricted Stock Plan (PRSU)
2020 2 399 050 - - Performance Based Restricted Stock Plan (PRSU)
2021 5 993 000 - - Performance Based Restricted Stock Plan (PRSU)
The programs
In the period 2019-2021, the company only awarded PRSUs. Settlement of the PRSUs granted and subsequent transfer of shares to the eligible
employee will take place three years after the grant subject to the Company achieving a satisfactory Total Shareholder Return (“TSR”) compared to the
companies in LTI Comparator Group” adjusted for dividends.
For PRSUs granted under the 2019-2021 LTI Plan, 75% of the PRSUs will settle subject to the TSR goal as outlined above and 25% subject to a goal on
Return on Capital Employed (“ROCE”).
Eect on financial statements
For the years ended December 31, 2021 and 2020, the Company recognized compensation cost with a corresponding increase in shareholders’ equity
of $2.5 million and $3.1 million, respectively. Total net unrecognized compensation cost as of December 31, 2021 was $3.1 million (PRSU’s), which is
expected to be recognized over a period of 3 years.
In 2021 the PRSU’s did not result in any payout. For 2020, the company settled PRSU and RSU’s by cash consideration. Equity was correspondingly
decreased with $0.2 million. The PRSU’s did not result in any payout, the amounts relate to the RSU programs only.
The tables below detail the Company’s outstanding share awards (RSU and PRSU) for the years presented.
Year ended December 31, 2021
Grant date
RSUs as of
December 31,
2020
RSUs
granted
2021
RSUs
forfeited
2021
RSUs
released
2021
RSUs as of
December 31, 2021
Weighted-
average remaining
contractual term
2016 13 800 - - (13,800) - -
2017 - - - - - -
Total 13 800 - - (13,800) - -
Grant date
PRSUs as of
December 31,
2020
PRSUs
granted
2021
PRSUs
forfeited
2021
PRSUs
exercised
2021
PRSUs
adjusted
(due to
performance)
2021
PRSUs as of
December 31, 2021
Weighted-
average remaining
contractual term
2018 1 577 350 - - - (1 577 350) - -
2019 2 158 900 50 000 (103 000) - - 2 105 900 0.47 years
2020 2 384 550 - (161 000) - - 2 223 550 1.65 years
2021 - 5 993 000 (275 000) - - 5 718 000 2.37 years
Total 6 120 800 6 043 000 (539 000) - (1 577 350) 10 047 450 1.82 years
| PGS Annual Report 2021100
Year ended December 31, 2020
Grant date
RSUs as of
December 31,
2019
RSUs
granted
2020
RSUs
forfeited
2020
RSUs
released
2020
RSUs as of
December 31, 2020
Weighted-
average remaining
contractual term
2014 7 500 - - (7 500) - -
2015 - - - - - -
2016 23 400 - (9 600) - 13 800 0.64 years
2017 368 060 - (10 100) (357 960) - -
Total 398 960 - (19 700) (365 460) 13 800 0.64 years
Grant date
PRSUs as of
December 31, 2019
PRSUs granted
2020
PRSUs
forfeited 2020
PRSUs
exercised
2020
PRSUs
adjusted
(due to
performance)
2020
PRSUs as of
December 31, 2020
Weighted-
average remaining
contractual term
2015 - - - - - -
2016 - - - - - - -
2017 697 090 - (15 150) - (681 940) - -
2018 1 650 850 - (73 500) - - 1 577 350 0.44 years
2019 2 240 300 30 000 (111 400) - - 2 158 900 1.48 years
2020 - 2 399 050 (14 500) - - 2 384 550 2.64 years
Total 4 588 240 2 429 050 (214 550) - (681 940) 6 120 800 1.67 years
The table below details the Company’s assumptions used to calculate estimated fair value at grant date:
Grant date
Options, RSU and
PRSU outstanding
December 31,2021
Average
exercise price
Weighted
average share
price at grant
date Risk free rate Dividend yield
Volatility
factor
Weighted
average life
Estimated fair
value at grant date
(average NOK/USD
per share option/
RSU/PRSU)
2016 (a) - NOK 0 NOK 24.55 N/A - N/A N/A NOK 24.54/$2.99
2016 (b) - NOK 0 NOK 24.56 N/A - N/A N/A NOK 18.99/$2.32
2017 (a) - NOK 0 NOK 14.59 N/A - N/A N/A NOK 14.59/$1.71
2017 (b) - NOK 0 NOK 14.59 N/A - N/A N/A NOK 10.17/$1.19
2018 (b) - NOK 0 NOK 40.70 N/A - N/A N/A NOK 31.29/$3.88
2019 (b) 2 105 900 NOK 0 NOK 13.39 N/A - N/A N/A NOK 10.50 / $ 1.23
2020 (b) 2 223 550 NOK 0 NOK 3.40 N/A - N/A N/A NOK 2.15 / $ 0.24
2021 (b) 5 718 000 NOK 0 NOK 5.36 N/A - N/A N/A NOK 4.03 / $ 0.49
Total 10 047 450
(a) Restricted Stock Units (“RSU”)
(b) Performance based Restricted Stock Units (“PRSU”)
The estimated fair value of the RSU and PRSU’s granted are lower than the weighted average share price at the same date as the fair value calculations include
adjustment for expected dividends up to vesting. In addition, the fair value of the PRSU’s is reduced due to the performance conditions in the program.
Note 30 – Salaries and Other Personnel Costs, Number of Employees,
and Remuneration to the Board of Directors, Executive Officers and Auditors
Salary and social expenses that are included in cost of sales, research and development costs and selling, general and administrative costs consist of:
Year ended December 31,
(In millions of US dollars) 2021 2020
Salaries and bonuses 118.5 141.9
Social security 10.5 11.0
Pension 6.1 8.1
Other benefits 13.0 14.9
Total 148.1 175.9
The Company had an average of 915 and 1,056 employees during the years ended December 31, 2021 and 2020, respectively.
| PGS Annual Report 2021101
Chief Executive Ocer (“CEO”) and Senior Executives
In 2021, the Company paid compensation to its President and CEO and other executive ocers as follows:
Total compensation paid in 2021 (a)
Name Fixed salary Bonus (b)
Other
benefits (c)
Total paid
salary and
compensation
(in dollars)
Pension
benefits (d)
Rune Olav Pedersen
President and Chief Executive Ocer 612 364 - 18 800 631 164 174 332
Gottfred Langseth
Executive Vice President and Chief Financial Ocer 458 588 - 24 847 483 435 99 050
Nathan Oliver
Executive Vice President of Sales & Services 397 978 - 45 989 443 967 38 281
Berit Osnes
Executive Vice President of New Energy (e) 307 467 - 9 751 317 218 35 594
Rob Adams
Executive Vice President of Operations 396 931 - 32 749 429 680 36 670
(a) Amounts in NOK have been translated to US Dollars using average exchange rate for 2021 of NOK/USD 8.5991.
(b) There was no performance related bonus for 2020 and management did not receive any bonus payments in 2021
(c) Includes items such as PRSU’s/RSU’s, car allowance, house allowance, telephone, internet and other minor benefits.
(d) Contribution to defined contribution plans (Norway) and earned benefits for members of the defined benefit plan.
(e) Berit Osnes as Executive Vice President of New Energy from 1 April 2021.
RSUs and PRSU’s held by the CEO and executive ocers as of December 31, 2021 were as follows:
Name
PRSUs as of
December 31,
2020
PRSUs
granted
2021
PRSUs
forfeited
2021
PRSUs
exercised
2021
PRSUs
adjusted
(due to
performance)
2021
PRSUs as of
December 31,
2021
Weighted average
remaining
contractual term
Rune Olav Pedersen 462 000 420 000 - - (126 000) 756 000 1.79
Gottfred Langseth 210 000 175 000 - - (60 000) 325 000 1.76
Nathan Oliver 180 000 175 000 - - (30 000) 325 000 1.76
Berit Osnes 149 000 125 000 - - (24 000) 250 000 1.97
Rob Adams 135 000 175 000 - - (30 000) 280 000 1.66
In 2020, the Company paid compensation to its President and CEO and other executive ocers as follows:
Total compensation paid in 2020 (a) (b)
Name Fixed salary Bonus (c)
Other
benefits (d)
Total paid salary and
compensation (in
dollars)
Pension
benefits (e)
Rune Olav Pedersen
President and Chief Executive Ocer 464 343 116 908 21 721 602 972 138 843
Gottfred Langseth
Executive Vice President and Chief Financial Ocer 413 085 66 105 27 253 506 443 83 605
Nathan Oliver
Executive Vice President of Sales & Services 355 091 60 095 40 726 455 912 32 578
Berit Osnes
Executive Vice President of New Ventures (f) 209 672 60 095 8 935 278 703 24 341
Rob Adams
Executive Vice President of Operations 372 813 40 320 73 426 486 559 36 076
(a) Amounts in NOK have been translated to US Dollars using average exchange rate for 2020 of NOK/USD 9.400.
(b) Amounts in GBP have been translated to US Dollars using average exchange rate for 2020 of GBP/USD 1.2820.
(c) Received bonus is related to performance in 2019
(d) Includes items such as PRSU’s/RSU’s, car allowance, house allowance, telephone, internet and other minor benefits.
(e) Contribution to defined contribution plans (Norway) and earned benefits for members of the defined benefit plan.
(f) Berit Osnes was Executive Vice President of New Ventures until the reorganization 1 August 2020.
| PGS Annual Report 2021102
RSUs and PRSU’s held by the CEO and executive ocers as of December 31, 2020 were as follows:
Name
RSUs as of
December 31,
2019
RSUs
granted
2020
RSUs
forfeited
2020
RSUs
released
2020
RSUs
expired
2020
RSUs as of
December 31,
2020
Weighted average
remaining
contractual term
Rune Olav Pedersen 9 000 - - (9 000) - - -
Gottfred Langseth 9 000 - - (9 000) - - -
Nathan Oliver 4 000 - - (4 000) - - -
Berit Osnes 4 000 - - (4 000) - - -
Rob Adams 3 200 - - (3 200) - - -
Name
PRSUs as of
December 31,
2019
PRSUs
granted
2020
PRSUs
forfeited
2020
PRSUs
exercised
2020
PRSUs
adjusted
(due to
performance)
2020
PRSUs as of
December 31,
2020
Weighted
average
remaining
contractual term
Rune Olav Pedersen 330 000 168 000 - - (36 000) 462 000 1.62
Gottfred Langseth 171 000 75 000 - - (36 000) 210 000 1.60
Nathan Oliver 111 000 75 000 - - (6 000) 180 000 1.79
Berit Osnes 105 000 50 000 (6 000) 149 000 1.90
Rob Adams 64 800 75 000 - - (4 800) 135 000 1.70
See note 27 for shares held by the Company’s CEO and other executive ocers and note 29 for further information on the share- based payments programs.
Rune Olav Pedersen, President and CEO of the Company, had an annual fixed salary of NOK 5,265,000 in 2021. The CEO has a mutual 6-months period
of notice. The CEO is, both during and after the employment, obliged to refrain from taking employment with companies that are in direct or indirect
competition with PGS. This prohibition applies for a period of two years from the termination date unless the Company sets a shorter period of time.
Other executive ocers have similar provisions in their employment terms, with periods of notice of twelve months or less.
Further information on compensation of the CEO and other executive ocers are provided in the Board of Directors’ Policy on Remuneration to the
Company’s CEO and Senior Executives below.
Board of Directors
None of our Directors has any contract with the Company providing benefits upon termination of service.
The table below provides information about our Directors and compensation for 2021:
Name Position Director since Term expire Compensation (In dollars) (a)
Walter Qvam Chairperson 2013 2022 110 070
Anne Grethe Dalane Vice Chairperson 2013 2022 73 380
Marianne Kah Director 2018 2022 68 422
Richard Herbert Director 2017 2022 67 847
Trond Brandsrud Director 2019 2022 67 510
Eivind Vesterås Director (Empl.rep) 2021 2023 7 752
Anette Valbø Director (Empl.rep) 2015 2023 11 629
Gunhild Myhr Director (Empl.rep) 2021 2023 7 752
Total 414 362
(a) Amounts in NOK have been translated to US Dollars using average exchange rate for 2021 of NOK/USD 8.5991. None of the members or deputy
members of the board received compensation from any other Group companies, except for the employee representatives. Their remuneration as
employees is not included above.
The table below provides information about our Directors and compensation for 2020:
Name Position Director since Term expire Compensation (In dollars) (a)
Walter Qvam Chairperson 2013 2021 114 000
Anne Grethe Dalane Vice Chairperson 2013 2021 77 000
Marianne Kah Director 2018 2021 73 500
Richard Herbert Director 2017 2021 73 500
Trond Brandsrud Director 2019 2021 70 500
Hege Renshus Director (Empl.rep) 2017 2021 10 638
Anette Valbø Director (Empl.rep) 2015 2021 10 638
Grunde Rønholt Director (Empl.rep) 2019 2021 10 638
Total 440 415
| PGS Annual Report 2021103
(a) Amounts in NOK have been translated to US Dollars using average exchange rate for 2020 of NOK/USD 9.400. None of the members or deputy
members of the board received compensation from any other Group companies, except for the employees.
See note 27 for shares held by the Company’s Board of Directors.
Board of Directors’ Policy on Remuneration to the CEO and Senior Executives
Introduction
In accordance with §6-16a of the Norwegian Public Limited Liability Companies Act, PGS ASA (“PGS” or “the Company”) and its Board of Directors (the
“Board”) has for our President & CEO (the “CEO”) and the executive ocers (the “Senior Executives”) established a Policy related to determination of
salary and other benefits (the “Policy”). The Policy is outlined below, and was approved by the shareholders at the Annual General Meeting (“AGM”) on
21 April, 2021. The Policy will apply for a four year policy period from the 2021 AGM, or until the general meeting resolving changes to the Policy if earlier.
PGS is an international company operating in the global geophysical industry. Our operations are conducted worldwide. This means that our talent
pool is and needs to be diverse and international. The total compensation package for our CEO and Senior Executives will therefore need to be based
on the norms in both the Norwegian labor market and the global talent market that we compete within. Whilst responding to the Company’s financial
ability, both the level of total compensation and the structure of the compensation package for our CEO and Senior Executives is designed to incentivize
enhanced performance, achieve PGS’ strategy and long-term interests, and ensure common goals and interest between the shareholders and the CEO/
Senior Executives. The Policy is also designed to attract and retain highly qualified leaders with diverse backgrounds and experience. All of the above will
require the use of several dierent instruments and components, as explained below.
Overview of Total Compensation for the CEO and Senior Executives
The current remuneration package for our CEO and Senior Executives includes fixed elements and variable elements. The fixed elements consist of
a base salary and other benefits such as car allowance, phone, internet and similar. The fixed elements also include a defined contribution pension
scheme and an individual pension scheme. The variable elements consist of Short-Term Incentive Plans (“STI Plans”) which is our annual bonus scheme,
and Long-Term Incentive Plans (“LTI Plans”) which are composed of Performance Restricted Stock Units (“PRSUs”).
PGS has with the help of an external advisor identified a specific peer group of comparable companies across relevant markets. The advisor has
collected, and combined information related to total compensation level and structure amongst these companies. As of December 31, 2020, the peer
group consisted of 15 companies from Norway and Europe. These companies are of comparable size and have international operations in the oil & gas
and oil services sectors. The peer group is subject to regular review. The Board and its Remuneration and Corporate Governance Committee (“Remco”)
uses this information, among other tools, to benchmark and decide on an appropriate total compensation structure for the CEO and Senior Executives.
Remco and the Board evaluate the remuneration of the CEO and Senior Executives regularly. As part of its meeting schedule, Remco annually reviews
the total compensation level and the mix between fixed and variable compensation. As part of this review, the mix between long-and short-term
incentives, and the mix between corporate financial goals and personal performance goals are evaluated. At the beginning of each calendar year the
corporate financial goals and its targets and ranges are reviewed and approved by Remco and the Board. PGS has routines for detecting and preventing
conflicts of interests, and thereby ensuring a balanced determination of compensation of the CEO and Senior Executives.
Taking into account the global industry PGS is operating in and the peer group information, the total compensation of the CEO is designed to target a
relative share for each component approximately as follows: 40-50% as base salary, 30-40% as target bonus payment from the STI Plan, and 20-30%
as target settlement from the LTI Plan. For the Senior Executives, the target is approximately 50-60% as base salary, 25-35% as bonus payment from
the STI Plan, and 10-20% as settlement from the LTI Plan. These are long-term targets, and the actual compensation and the split will depend on the
Company’s financial performance and other elements.
Fixed elements
Base salary for the CEO and Senior Executives is reviewed by Remco. Base salary is approved by the Board with regards to that of the CEO, and by the
CEO with regards to that of any Senior Executive.
In addition to base salary and other fixed benefits mentioned in Section 2 above, the CEO and - as of 31 December 2020 - one Senior Executive have an
early retirement plan allowing for termination of employment without cause when reaching the age of 62. Full early retirement benefits are defined as
60% of the last base salary in the year of retirement. The CEO is eligible for 85% of full benefits upon retiring at the age of 62 and full benefits upon
retiring at the age of 65. The other Senior Executive is eligible for full benefits upon retiring at the age of 62. The early retirement benefits cease when
the CEO and the other Senior Executive reach the age of 67.
Short Term Incentive Plans
Participation in the STI Plans and the minimum-, target- and maximum pay-out levels under such plans are determined by the Company on an annual
basis. Minimum-, target- and maximum pay-out levels are annually reviewed and approved by Remco and the Board. Bonus payments under the STI
Plans to the CEO and Senior Executives will be based partly on the Company and its subsidiaries achievement of one or more key performance indicators
(“KPIs”), and partly on achievement of agreed goals in the individual’s personal performance contract. The personal performance KPIs are related to
areas such as financial, strategic, operational-, organizational, people, and ESG (environmental, social and governance). Bonus payments under the STI
Plan, is for the CEO and Senior Executives over time targeted to be 85% and 57% of base salary respectively, whereas payments are capped to 150% and
100% respectively.
Separately, for incentivization purposes, the Board may award a discretionary bonus to CEO and/or Senior Executives in the event the Company
is involved in major transactions that is deemed to protect or generate shareholder value and be in the Company’s best long-term interests. Such
discretionary bonus will be capped to 150% and 100% of base salary for the CEO and Senior Executives respectively.
Long Term Incentive Plans
The Company’s AGMs have for several years annually authorized LTI Plans in order to ensure continued long-term incentives linked to the Company’s
financial performance and relative share price development. The Board will annually throughout the Policy period continue to propose an LTI Plan for
approval at the AGM, and will each year present the full details of the LTI Plan document.
| PGS Annual Report 2021104
Each LTI Plan will for all eligible employees consist solely of a pool of PRSUs that will be awarded to eligible employees following the AGM approving
such plan and a given deadline in the LTI Plan. Settlement of the PRSUs will be conditioned upon the Company over a defined period from award
meeting certain goals and share price related targets under one or more Key Performance Indicators (“KPIs”) set out in each LTI Plan. The KPIs, their
relative weighting, and the associated pay out levels from each KPI will be designed to protect the Company’s long term-interests and create value
over time. During the recent years, the KPIs in LTI Plans have been Total Shareholder Return (“TSR”) and Return On Capital Employed (“ROCE”). TSR
achievement have been measured against a comparator group of companies while the ROCE has been an absolute financial target. These KPIs have
been seen by the Board to be adequate metrics to gauge the protection of long-term interests for the Company and creation of shareholder value over
time. The KPIs may however for each LTI Plan change depending on the Company’s financial situation and its current key strategic priorities.
The total PRSU awards under all outstanding LTI Plans and the equivalent maximum potential share settlement thereunder will not at any time exceed
5% of the Company’s share capital. The Board will for the period between an upcoming AGM and the subsequent AGM not distribute to the CEO or any
Senior Executives any other share based incentives than PRSUs under the approved LTI Plans.
The full LTI Plan including the KPIs, goals, the size of the pool of PRSUs subject for award, and the LTI Plan terms
and conditions will be presented in the Calling Notice for each AGM for shareholder approval.
The LTI Plan and its KPIs and goals are designed to contribute to PGS meetings its businesses strategy and to promote the Company’s long-term
interests whilst taking PGS’ financial ability into account.
Upon proposing material changes during the Policy period applying from the 2021 AGM, the Company will either seek approval in an AGM or call for an
Extraordinary General Meeting to solicit approval. The Company will in the calling notice describe the proposed changes and take note of shareholders’
voting over the Company’s remuneration policy and remuneration report for the previous fiscal year. Otherwise, the Board will ensure that the Policy is
reviewed and presented for approval by the AGM at least every fourth year.
Remuneration of auditor
Fees for audit and other services provided by the Company’s auditor EY, are as follows (exclusive VAT and including out of pocket expenses):
Year ended December 31,
(In millions of US dollars) 2021 2020
Audit fees 1.3 1.4
Tax services 0.2 0.4
All other fees 0.1 0.1
Total 1.6 1.9
| PGS Annual Report 2021105
Note 31 – Subsidiaries
The ownership percentage in subsidiaries as of December 31, 2021, was as follows:
Company Jurisdiction Shareholding and voting rights
PGS Australia Pty. Ltd. Australia 100%
Seahouse Insurance Ltd. Bermuda 100%
PGS Suporte Logistico e Servicos Ltda. Brazil 100%
PGS Overseas Operation (Cyprus) Limited -under liquidation Cyprus 90%
PGS Data Processing Middle East SAE Egypt 100%
PGS Egypt for Petroleum Services Egypt 100%
PGS Ghana Limited Ghana 90%
PT Petroprima Geo-Servis Nusantara Indonesia 94%
PGS Marine Services (Isle of Man) Ltd. -under liquidation Isle of Man 100%
PGS Japan K.K. Japan 100%
Petroleum Geo-Services Asia Pacific Labuan Ltd -under liquidation Malaysia 100%
Petroleum Geo-Services Exploration (M) Sdn. Bhd. Malaysia 100%
PGS Data Processing & Technology Sdn. Bhd. Malaysia 100%
PGS Geophysical Nigeria Ltd. Nigeria 100%
Petroleum Geo-Services AS Norway 100%
PGS Shipowner AS Norway 100%
Multiklient Invest AS Norway 100%
PGS Falcon AS Norway 100%
PGS Geophysical AS Norway 100%
PGS Titans AS Norway 100%
Natuna Ventures Pte. Ltd. Singapore 100%
Petroleum Geo-Services Asia Pacific Pte. Ltd. Singapore 100%
PGS Geophysical (UK) Ltd. United Kingdom 100%
Panoceanic Energy Limited United Kingdom 100%
Petroleum Geo-Services (UK) Ltd. United Kingdom 100%
PGS EM Ltd. United Kingdom 100%
PGS Exploration (UK) Ltd. United Kingdom 100%
PGS Geophysical (Angola) Ltd. United Kingdom 100%
PGS Pension Trustee Ltd. United Kingdom 100%
Petroleum Geo-Services, Inc. United States 100%
PGS Imaging, Inc. United States 100%
PGS Finance, Inc. United States 100%
PGS Holding I Ltd United Kingdom 100%
PGS Holding II Ltd United Kingdom 100%
PGS Imaging, S.A. de C.V. - under liquidation Mexico 100%
Subsidiaries with minority interests are not considered significant and as such, are not disclosed in the consolidated statements of financial position
and the consolidated statement of changes in shareholders’ equity.
Note 32 – Subsequent Events
The Company’s operation is not directly impacted by the recent invasion of Ukraine. But for the PGS group there are approximately $5 million outstanding
from Ukraine and Russian customers where recoverability may be at risk. Find further information in the consolidated financial statements.
Parent
Company
Financial
Statements
| PGS Annual Report 2021107
PGS ASA (Parent Company)
Statements of Profit and Loss
Year ended December 31,
(In millions of NOK) Note 2021 2020
Revenue 2 3.1 9.3
Selling, general, administrative and other costs 2, 14 (49.1) (45.2)
Total operating expenses (49.1) (45.2)
Operating loss (46.0) (35.9)
Interest expense, net 2, 3 (9.2) (561.8)
Impairment, net of reversal of impairment on shares in subsidiaries/ intercompany receivables 1, 6 - (2 974.8)
Dividends/group contributions received from subsidiaries 2 145.6 406.5
Other financial items, net 2, 4 (9.0) 111.1
Income (loss) before income taxes 81.3 (3 054.9)
Income tax 5 - -
Net income (loss) 81.3 (3 054.9)
| PGS Annual Report 2021108
PGS ASA (Parent Company)
Statements of Financial Position
December 31,
(In millions of NOK) Note 2021 2020
ASSETS
Non-current assets:
Shares in subsidiaries 1, 6 2 262.8 6 486.0
Intercompany receivables 1, 2, 6 - 3 529.9
Total non-current assets 2 262.8 10 015.9
Current assets:
Intercompany receivables 2 260.3 83.8
Other current assets 7.2 101.3
Restricted cash 7 0.5 1.2
Cash and cash equivalents 7 35.8 936.1
Total current assets 303.9 1 122.5
Total assets 2 566.6 11 138.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity:
Common stock; par value NOK 3; issued and outstanding 387,206,996 shares 8 1 202.0 1 161.6
Additional paid-in capital 8 5 994.4 5 958.3
Total paid in capital 7 196.4 7 119.9
Other equity 8 (4 764.9) (4 846.1)
Total shareholders' equity 2 431.5 2 273.8
Non-current liabilities:
Interest bearing debt 9, 10 30.5 -
Intercompany debt 1, 2 - 1 416.1
Other non-current liabilities 11 40.4 80.3
Total non-current liabilities 70.9 1 496.4
Current liabilities:
Interest bearing debt 9, 10 - 7 295.7
Accrued expenses and other short-term liabilities 13 64.2 72.5
Total current liabilities 64.2 7 368.2
Total liabilities and shareholders' equity 2 566.6 11 138.4
Oslo, March 2, 2022
Board of Directors
PGS ASA
Walter Qvam
Chairperson
Anne Grethe Dalane
Vice Chairperson Board Member
Marianne Kah Richard Herbert
Board Member
Trond Brandsrud
Board Member
Rune Olav Pedersen
President & Chief Executive Ocer
Board Member
Anette Valbø
Board Member
Eivind Vesterås
Board Member
Gunhild Myhr
| PGS Annual Report 2021109
PGS ASA (Parent Company)
Statements of Cash Flows
Year ended December 31,
(In millions of NOK) Note 2021 2020
Cash flows provided by (used in) operating activities:
Net income (loss) 81.3 (3 054.9)
Adjustments to reconcile net income to net cash used in operating activities:
Impairment, net of reversal of impairment of shares/intercompany receivables 6 - 2 974.8
Interest expense - 645.2
Loss (gain) sale of subsidaries - -
Dividends/group contributions 2 (145.6) (406.5)
Foreign exchange (gain) loss, unrealized 4 (17.2) (173.9)
Changes in current assets and current liabilities (26.4) (115.5)
Other items 36.1 137.1
Net cash provided by (used in) operating activities (71.8) 6.3
Cash flows provided by (used in) investing activities:
Investment in subsidiaries, net 2, 6 (1,038.6) -
Received dividends from subsidaries 145.6 406.5
Reduced (increased) intercompany receivables 1 7.6 (563.4)
Increased (reduced) intercompany debt 15.7 169.8
Change in restricted cash 0.7 (0.1)
Net cash provided by (used in) investing activities (859.0) 12.7
Cash flows provided by (used in) financing activities:
Proceeds, net of deferred loan costs, from issuance of non-current debt/net cash payment
for debt amendment 9 30.5 1 140.0
Net change of drawing on the Revolving Credit Facility 9 - 1 615.9
Proceeds from share issue 8 - 828.0
Repayment of interest bearing debt 9 - (1 995.3)
Interest paid - (590.9)
Net cash provided by (used in) financing activities 30.5 997.7
Net increase (decrease) in cash and cash equivalents (900.3) 1 016.7
Eect of exchange rate changes on cash and cash equivalents - (98.1)
Cash and cash equivalents at beginning of year 936.1 17.5
Cash and cash equivalents at end of year 35.8 936.1
| PGS Annual Report 2021110
Note 1 — Summary of Significant Accounting Policies
PGS ASA (or “the Company”) and its subsidiaries prepares its consolidated financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union, while the Company prepares its financial statements in accordance with the Norwegian
Accounting Act and accounting principles generally accepted in Norway (“N GAAP”). The Company’s headquarters is at Oslo, Norway. The address is
Lilleakerveien 4C, 0283 Oslo.
The Company applies the same accounting policies as described in note 2 in the notes to the consolidated financial statements where relevant, except
that unrealized foreign exchange gain (loss) on non-current intercompany loans is recognized in the statements of profit and loss. The functional
currency is Norwegian kroner (“NOK”) for the financial statements prepared in accordance with the Norwegian Accounting Act and accounting principles
generally accepted in Norway (“N GAAP”).
Shares in subsidiaries (see note 6) are presented at cost less impairment. Impairment is recognized based upon the carrying value of the individual
shares and net intercompany receivables in the subsidiaries less the estimated recoverable amount (based on discounted estimated future cash
flows). If estimated recoverable amounts increase, impairment charges are reversed accordingly. There is no fixed plan for repayment of long-term
intercompany receivables and payables.
The statement of cash flows is set up using the indirect method.
Note 2 — Intercompany Transactions
PGS ASA has intercompany transactions with its subsidiaries. PGS ASA charged out management fee to PGS Geophysical AS, NOK 3.1 and NOK 9.3 million
in 2021 and 2020, respectively. Guarantee fee income is NOK 3.4 million in 2021. Dividends/group contributions from subsidiaries were NOK 145.6 and NOK
406.5 million in 2021 and 2020, respectively.
In February 2021, as part of a restructure of the PGS Group, the Company contributed most of its assets and liabilities to its subsidiary Petroleum Geo-
Services AS. The shares in Petroleum Geo-Services as was subsequently contributed as a capital increase in kind to PGS Holding I Ltd, a UK entity 100%
owned by PGS ASA.
The contribution in kind amounted to NOK 976 429 378,- and consisted of;
• all cash and cash equivalents, except restricted cash related to employees,
• all subsidiaries except for PT Petroprima Geo-Service Nusantra,
• TLB and RCF, being all external interest-bearing debt,
• all receivables and debt to group companies as of 31.12.2020.
Following the transaction, the Company have significantly reduced its activity related to financing of subsidiaries.
Intercompany transactions in the statements of profit and loss consist of:
Subsidiaries Year ended December 31, 2021
(In millions of NOK) Net interest
Net Receivables/
(Liabilities)
Petroleum Geo-Services AS 16.9 259.1
Petroleum Geo-Services, Inc. - 0.2
PGS Exploration (UK) Ltd. - 0.6
PGS Suporte Logistico e Servicos Ltda. - 0.3
PGS Imaging, Inc. - 0.1
Sum transactions intercompany 16.9 260.3
Accumulated impairment -
Net transactions intercompany 260.3
Subsidiaries Year ended December 31, 2020
(In millions of NOK) Net interest
Net Receivables/
(Liabilities)
Multiklient Invest AS 10.9 448.3
Natuna Ventures Pte. Ltd. - 100.2
Petroleum Geo-Services AS - 103.7
Petroleum Geo-Services, Inc. - 515.7
Petroleum Geo-Services (UK) Ltd. (22.1) (251.2)
PGS Americas, Inc - 230.8
Petroleum Geo-Services Asia Pacific Pte. Ltd. (1 7.7 ) (119.1)
PGS Australia PTY Ltd - 657.7
PGS Imaging S.A. de C.V. - 33.7
PGS Data Processing Middle East SAE (Egypt) (6.1) 9.3
PGS Egypt for Petroleum Services (31.8) (565.6)
PGS EM Ltd. 73.0 947.1
PGS Exploration (M) SDN BHD - 181.1
PGS Geophysical Nigeria Limited - 40.8
(Table continued on next page)
| PGS Annual Report 2021111
PGS Exploration (UK) Ltd (20.4) (297.0)
PGS Falcon AS 34.3 796.2
PGS Geophysical AS 59.0 968.1
PGS Geophysical Angola 1.4 20.0
PGS Ghana Limited - 52.8
PGS Imaging, Inc - 185.7
PGS Japan K.K. (3.3) (43.4)
PGS Marine Services (Isle of Man) Ltd. - 28.2
PGS Seismic Sevices Ltd. 1.4 17.6
PGS Shipowner AS (1.2) ( 67. 6)
PGS Suporte Logistico e Servicos Ltda. - 106.2
PGS Titans AS 8.7 159.6
PT Petroprima Geo-Servis Nusantara - 520.2
Seahouse Insurance Ltd. (5.4) (44.5)
Other (0.2) (18.0)
Sum transactions intercompany 80.4 4 716.5
Accumulated impairment (2 518.9)
Net transactions intercompany 2 197.6
Note 3 – Interest Expense, Net
Interest expense, net, consists of:
Year ended December 31,
(In millions of NOK) 2021 2020
Interest income, external 0.1 2.9
Interest income, intercompany 24.3 188.9
Interest expense, external (26.2) (645.2)
Interest expense, intercompany ( 7.4) (108.4)
Total (9.2) (561.8)
Note 4 – Other Financial Items, Net
Other financial items, net, consist of:
Year ended December 31,
(In millions of NOK) 2021 2020
Foreign currency (loss) gain, realized and unrealized ( 7.4) 194.6
Guarantee fee 3.4 39.9
Other (5.1) (123.4)
Total (9.0) 111.1
Note 5 – Income Taxes
The income tax expense diers from the amounts computed when applying the Norwegian statutory tax rate to income before income taxes as a result
of the following:
Year ended December 31,
(In millions of NOK) 2021 2020
Income before income taxes 81.3 (3 054.9)
Norwegian statutory tax rate 22% 22%
Provision for income taxes at the statutory rate (17.9) 672.1
(Increase) reduction in income taxes from:
Impairment (reversal) of shares in subsidiaries - (533.0)
Impairment of intercompany receivables - (123.1)
Other permanent items 31.6 78.2
Correction previous year (12.8) (6.1)
Changes in unrecognized deferred tax assets (0.9) (88.1)
Income tax (expense) benefit - -
| PGS Annual Report 2021112
Year ended December 31,
(In millions of NOK) 2021 2020
Temporary dierences relate to:
Pension liabilities (a) - 4.9
Intercompany receivables - 57.4
Other 0.0 0.2
Tax losses carried forward 1 162.1 1 100.5
Deferred tax assets, net 1 162.1 1 163.0
Deferred tax assets not recognized in the statement of financial position (1 162.1) (1 163.0)
Net recognized Deferred tax assets - -
(a) Change in deferred tax for actuarial gains/losses on pensions are recognized directly to shareholder’s equity (see note 8 and 12).
Note 6 – Shares in Subsidiaries
Shares in subsidiaries are recognized in PGS ASA balance sheet at cost less any impairment.
As of December 31, 2021
(In millions of NOK)
Registered
oce
Shareholding
(a) Book value (b) Equity (b)
Impairments
2021
Net income
2021
PGS Holding I Ltd (UK) Oslo 100% 2 263 2 252 - -
PT Petroprima Geo-Servis Nusantara Indonesia 93% - -3.1 - -1.5
Total 2 262.8 -
(a) Voting rights are equivalent to shareholding for all companies.
(b) The numbers are preliminary and statutory audit has not been completed.
As of 31 December 2021, PGS ASA has accumulated impairments related to shares in subsidiaries totaling NOK 2.7 million. This is entirely related to the
company PT Petroprima Geo-Servis Nusantara.
For additional information on impairment of shares in subsidiaries and intercompany receivables, see note 1.
Note 7 – Restricted Cash
The Group has a cash pool agreement where PGS ASA is Group Account holder and specific Norwegian and UK companies are participants with notional
bank accounts. PGS ASA as the owner of the cash pool is the owner to the cash in the cash pool, whilst cash on participants notional accounts are a
receivable on PGS ASA or an overdraft on the nominal account is a payable to PGS ASA.
Restricted cash consists of:
December 31,
(In millions of NOK) 2021 2020
Payroll withholding taxes 0.5 1.2
Total 0.5 1.2
Note 8 – Shareholders’ Equity
Changes in shareholders’ equity for the years ended December 31, 2021 and 2020 are as follows:
Paid-in capital
(In millions of NOK) Common stock
Own shares,
par value
Additional
paid-in capital Other equity
Shareholders’
equity
Balance as of December 31, 2019 1 015.7 (0.0) 5 250.1 (1 758.8) 4 507.0
Share issue 145.9 - 682.1 - 828.0
Employee benefit plans - - 1.9 - 1.9
Employee share options recharged to subsidiaries - - 24.2 - 24.2
Interest rate swaps (net of tax) - - - (31.6) (31.6)
Actuarial gains and losses charged to equity (net of tax) - - - (0.8) (0.8)
Net income (loss) - - - (3 054.9) (3 054.9)
Balance as of December 31, 2020 1 161.6 (0.0) 5 958.3 (4 846.1) 2 273.8
Share based payments - - 21.7 - 21.7
Share issue* 40.4 - 14.4 - 54.8
Net income (loss) - - - 81.3 81.3
Balance as of December 31, 2021 1 202.0 (0.0) 5 994.4 4 764.9 2 431.6
| PGS Annual Report 2021113
* During 2021 PGS ASA received conversion notices from holders of the convertible bond representing NOK 40.4 million that have been converted into 13
460 701 shares. As of December 31, 2021, PGS ASA had a share capital of NOK 1,202,003,091 comprising of 400,667,697 shares of par value NOK 3 each,
all fully paid.
Note 9 – Debt and Guarantees
Long term debt consists of the following:
December 31,
(In millions of NOK) 2021 2020
Secured:
Term loan B, Libor + 250 Basis points, due 2021 - 1 7.1
Term loan B, Libor + 6-700 basis points (linked to total leverage ratio (“TLR”), due 2024 - 4 448.6
Revolving credit facility, due Sep 2020 - 1 155.7
Revolving credit facility, due Sep 2023 - 1 836.2
Unsecured:
Convertible bond 5%, due 2024 75.8 -
Total 75.8 7 457.6
Less current portion - (7 295.7)
Less deferred loan costs, net of debt premiums - (7 295.7)
Less eect from separate derivative financial instrument convertible bond 45.3 (161.9)
Total non-current interest bearing debt 30.5 -
Undrawn facilities consist of the following:
December 31,
(In millions of NOK) 2021 2020
Secured:
Revolving credit facility, due 2020 - 1 493.7
Unsecured:
Bank facility (NOK 50 mill) - 50.0
Performance bond - 84.4
Total - 1 628.0
Early 2021, the Company successfully completed a re-negotiation of amortization and maturity profiles for its main credit facilities. The negotiated result
was completed by a UK Scheme of Arrangement (the “Scheme”) sanctioned by an English court and having support of almost all the Company’s lenders. The
agreements included the issuance of a convertible loan of total NOK 116,162,097. Per December 31, 2021, NOK 75.8 million of this loan remain outstanding.
The remaining interest-bearing debt have been transferred to a subsidiary as part of a restructure, refer to note 3 for further information.
For additional information see Note 21 and 22 in the consolidated financial statements.
Note 10 – Financial Instruments
Fair values of financial instruments
The Company classifies financial instruments carried at fair value in the consolidated statement of financial position using the Fair Value Hierarchy.
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either
directly or indirectly.
Level 3: techniques for which all inputs which have a significant eect on the recorded fair value that is not based on observable market data.
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accrued revenues and other receivables, other current assets,
accounts payable and accrued expenses classified at amortized cost approximate their respective fair values because of the short maturities of those
instruments.
The fair values of the non-current debt instruments, forward exchange contracts and interest rate swaps are estimated using quotes obtained from
dealers in such financial instruments or latest quoted prices or indexes at Reuters or Bloomberg. Where market prices are not observed or quotes from
dealers are not obtained, an indirect method is used by use of implied credit spread from debt instrument with similar risk characteristics.
| PGS Annual Report 2021114
The carrying amounts, estimated fair values of debt and derivatives instruments including how fair value is determined are summarized as follows:
December 31, 2021 December 31, 2020
(In millions of NOK)
Nominal
value
Fair
value
Nominal
value
Fair
value
Financial liabilities
Financial liabilities at amortised cost
Debt with fixed interest rate 2 - - - -
Debt with variable interest rate 2 - - (7 457.6) (6 694.0)
Convertible bond * 2 (75.8) (6 7.6 ) - -
At fair value through profit and loss
Foreign exchange contracts 2 - - - -
Interest rate swaps 2 (4.5) (4.5) - -
Convertible bond option conversion 2 (35.9) (35.9) - -
Derivatives designated as hedging instruments
Interest rate swaps 2 - - (57.3) (57.3)
Foreign exchange contracts 2 - - - -
Total (116.1) (107.9) (7 514.9) (6 751.3)
Interest rate risk management
The Company is subject to interest rate risk on debt. The risk is managed by using a combination of fixed- and variable rate debt, together with interest
rate swaps, where appropriate, to fix or lower the borrowing costs. The Company retains an interest rate swap with a notional amount of NOK 440.5
million which is matures in June 2022, paying a fixed rate of 2.36% and receiving 3-month USD LIBOR. This instrument represents an economical hedge
for the variable rate loan held in Petroleum Geo-Services AS, for PGS ASA this is accounted for at fair value over profit and loss.
December 31, 2021 December 31, 2020
(In millions of NOK)
Notional
amounts
Weighted
average
interest rate
Notional
amounts
Weighted
average
interest rate
Debt at fixed interest rate 75.8 5.00% - -
Debt at variable interest rate based on US dollar plus a margin - 0.00% (5 534.2) 6.89%
Variable interest rate debt with interest fixed 440.5 2.36% (1 923.4) 1.93%
Exposure to liquidity risk
The Company tries to minimize liquidity risk through ensuring access to a diversified set of funding sources, and management of maturity profile on
debt and derivatives.
Note 11 – Other Long-term Liabilities
Other long-term liabilities consist of:
December 31,
(In millions of NOK) 2021 2020
Unrealized loss hedge contracts (note 10) 40.4 57.7
Pension liability (note 12) - 21.7
Other non-current liabilities - 0.9
Total 40.4 80.3
Note 12 – Pension Obligations
Pension obligations are transferred to Petroleum Geoservices AS as part of a restructuring of the group. Find further information about pension
obligations in the consolidated financial statements.
| PGS Annual Report 2021115
Note 13 – Accrued Expenses and Other Short-term Liabilities
Accrued expenses and other short-term liabilities consist of the following:
December 31,
(In millions of NOK) 2021 2020
Accrued unrealized loss on hedging (note 10) - -
Foreign taxes 0.2 0.9
Account payables 61.1 61.7
Accrued employee benefits 0.5 2.4
Accrued interest expense 1.5 6.0
Other 0.9 1.5
Total 64.2 72.5
Note 14 – Salaries and Other Personnel Costs, Number of Employees,
and Remuneration to the Board of Directors, Executive Officers and Auditors
Salary and social expenses that are included in cost of sales and selling and general and administrative costs consist of:
Year ended December 31,
(In millions of NOK) 2021 2020
Salaries and bonus 8.9 1 7.8
Social security 1.3 2.3
Pension 0.2 3.0
Other benefits 0.1 0.5
Total 10.6 23.6
As of December 31, 2021, PGS ASA had 0 employees. Man-years were 1 and 2 for the years 2021 and 2020, respectively.
In 2021 the members of the board were compensated with NOK 3.9 million. For a full listing of Board of Directors, CEO and Other Executive Ocers and
their compensation, see note 28 in the consolidated financial statements.
PGS ASA has not provided loans or guarantees to the Board of Directors as of December 31, 2021.
Remuneration of auditor
Fees for audit and other services provided by PGS ASA’s auditor EY who was elected in May 2014, are as follows (exclusive VAT and inclusive out of
pocket expenses):
Year ended December 31,
(In millions of NOK) 2021 2020
Audit fees 3.2 4.8
Fees for tax services (a) 0.3 0.2
All other fees - -
Total 3.6 5.0
(a) Include fees for tax filing services and other tax assistance.
Note 15 – Subsequent Events
The Company’s operation is not directly impacted by the recent invasion of Ukraine. But for the PGS group there are approximately $5 million
outstanding from Ukraine and Russian customers where recoverability may be at risk. Find further information in the consolidated financial statements.
Statsautoriserte revisorer
Ernst & Young AS
Dronning Eufemias gate 6a, 0191 Oslo
Postboks 1156 Sentrum, 0107 Oslo
Foretaksregisteret: NO 976 389 387 MVA
Tlf: +47 24 00 24 00
www.ey.no
Medlemmer av Den norske Revisorforening
A member firm of Ernst & Young Global Limited
INDEPENDENT AUDITOR'S REPORT
To the Annual Shareholders' Meeting of PGS ASA
Report on the audit of the financial statements
Opinion
We have audited the financial statements of PGS ASA (the Company) which comprise the financial
statements of the Company and the consolidated financial statements of the Company and its
subsidiaries (the Group). The financial statements of the Company comprise of the statements of financial
position as at 31 December 2021 and statement of profit and loss and statement of cash flow for the year
then ended and notes to the financial statements, including a summary of significant accounting policies.
The consolidated financial statements of the Group comprise of the statements of financial position as at
31 December 2021, statement of profit and loss, statement of comprehensive income, statement of cash
flow and statement of changes in shareholder's equity for the year then ended and notes to the financial
statements, including a summary of significant accounting policies.
In our opinion
the financial statements comply with applicable legal requirements,
the financial statements give a true and fair view of the financial position of the Company as at 31
December 2021 and its financial performance and cash flows for the year then ended in
accordance with the Norwegian Accounting Act and accounting standards and practices
generally accepted in Norway,
the consolidated financial statements give a true and fair view of the financial position of the
Group as at 31 December 2021 and its financial performance and cash flows for the year then
ended in accordance with International Financial Reporting Standards as adopted by the EU.
Our opinion is consistent with our additional report to the audit committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We are independent of the Company and the Group in
accordance with the requirements of the relevant laws and regulations in Norway and the International
Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Company for 8 years from the election by the general meeting of the
shareholders on 8 May 2014 for the accounting year 2014.
2
Independent auditor's report - PGS ASA 2021
A member firm of Ernst & Young Global Limited
Material uncertainty related to going concern
We draw attention to note 3 of the financial statements, which describes the risk that the Company might
not generate sufficient liquidity to repay the 2022 loan maturities whilst also meeting the other
requirements of the main credit agreement. These events or conditions, along with other matters as set
forth in note 22, indicate that a material uncertainty exists that may cast significant doubt on the Group’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements for 2021. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement
of the financial statements. The results of our audit procedures, including the procedures performed to
address the matters below, provide the basis for our audit opinion on the financial statements.
Impairment evaluation of MultiClient library
Basis for the key audit matter
MultiClient library accounts for $415.6 million or
approximately 23 % of total assets of the Group
as at 31 December 2021. The Group performed
impairment testing to determine value in use and
recorded an impairment loss of $13.6 million in
2021. Management has identified impairment
indicators, including low spending on seismic
activities by customers and reduction in share
price. The Group uses forecasts of future sales
when determining value in use. These forecasts
are based on budgets and assumptions, thus
requiring considerable insight and judgment by
management about future market conditions and
spending on exploration and production by oil and
gas companies, including licensing activities and
farm-ins. Impairment evaluation of MultiClient
library is a key audit matter due to the significant
management judgment involved and the
continued uncertain market conditions.
Our audit response
We evaluated management’s assessment of
impairment indicators for the MultiClient library.
Our audit procedures included inquiries of
management, including senior sales personnel
and test of controls. Our audit procedures also
included analyses and evaluation of historical
accuracy of prior year’s forecast. We further
evaluated the assumptions used in the sales
forecasting process based on the current market
situation, expectations about oil prices, licensing
rounds and exploration activities. Furthermore, we
considered the valuation methodology and the
discount rate applied in the value in use model.
We also tested the mathematical accuracy of the
value in use calculations and performed sensitivity
analysis of key assumptions. We used a valuation
specialist to assist us in evaluating the calculation
and components of the applied discount rate. We
also assessed the Group's disclosures regarding
those assumptions and the recorded impairment
losses of MultiClient library. We refer to notes 3
and 8 of the consolidated financial statements.
3
Independent auditor's report - PGS ASA 2021
A member firm of Ernst & Young Global Limited
Impairment evaluation of vessels and seismic equipment
Basis for the key audit matter
Vessels and related seismic equipment accounts
for $741.2 million or approximately 41 % of total
assets of the Group as at 31 December 2021. The
Group performed impairment tests to determine
the recoverable amounts and recorded an
impairment loss of $15.0 million during the year.
The evaluation is sensitive to forward looking
assumptions. As there are limited remaining
headroom, any negative changes to these
assumptions would increase the impairment
further. Management has identified impairment
indicators, including continued operating losses,
low spending on seismic activities by customers,
vessels taken out of operations and reduction in
share price. The Group assessed the recoverable
amount by determining value in use for each
vessel. Estimating the value in use requires
management judgment when estimating future
revenues, operating expenses, growth rates,
useful lives and capital expenditures and
determining the discount rate. Management's
impairment evaluation is a key audit matter due to
the multiple variables and the significant
management judgement involved in estimating
future cash flows under the continued uncertain
market conditions.
Our audit response
Our procedures included assessing the
assumptions and methods used by management
in the impairment evaluation. We tested the key
assumptions and underlying data by comparing
them to external market information and historical
data, and by analyzing sensitivities. We also
assessed the historical accuracy of
management's estimates and tested the
mathematical accuracy of the impairment model.
We involved a valuation specialist to assist us in
evaluating the calculation and the applied
discount rate. We also assessed the disclosures
regarding the assumptions applied by
management and verified the arithmetical
accuracy of the sensitivity analysis disclosed in
Note 3. We refer to notes 3 and 17 of the
consolidated financial statements.
Other information
Other information consists of the information included in the annual report other than the financial
statements and our auditor’s report thereon. Management (the board of directors and Chief Executive
Officer) is responsible for the other information. Our opinion on the financial statements does not cover
the other information, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information,
and, in doing so, consider whether the board of directors’ report, the statement on corporate governance
and the statement on corporate social responsibility contain the information required by applicable legal
requirements and whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information or
that the information required by applicable legal requirements is not included, we are required to report
that fact.
We have nothing to report in this regard, and in our opinion, the board of directors’ report, the statement
on corporate governance and the statement on corporate social responsibility are consistent with the
financial statements and contain the information required by applicable legal requirements.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements of the
Company in accordance with the Norwegian Accounting Act and accounting standards and practices
generally accepted in Norway and of the consolidated financial statements of the Group in accordance
4
Independent auditor's report - PGS ASA 2021
A member firm of Ernst & Young Global Limited
with International Financial Reporting Standards as adopted by the EU, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s and the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the
Company or the Group, or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s and the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company’s and the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company and the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
5
Independent auditor's report - PGS ASA 2021
A member firm of Ernst & Young Global Limited
From the matters communicated with the board of directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
Report on compliance with regulation on European Single Electronic Format (ESEF)
Opinion
As part of our audit of the financial statements of PGS ASA we have performed an assurance
engagement to obtain reasonable assurance whether the financial statements included in the annual
report, with the file name 213800T66DRTE6O6BV87-2021-12-31-en, has been prepared, in all material
respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815
on the European Single Electronic Format (ESEF Regulation) and regulation given with legal basis in
Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the
preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial
statements.
In our opinion, the financial statements included in the annual report have been prepared, in all material
respects, in compliance with the ESEF Regulation.
Management is responsible for the preparation of an annual report and iXBRL tagging of the consolidated
financial statements that complies with the ESEF Regulation. This responsibility comprises an adequate
process and such internal control as management determines is necessary to enable the preparation of
an annual report and iXBRL tagging of the consolidated financial statements that is compliant with the
ESEF Regulation.
Auditor’s responsibilities
Our responsibility is to express an opinion on whether, in all material respects, the financial statements
included in the annual report have been prepared in accordance with the ESEF Regulation based on the
evidence we have obtained. We conducted our engagement in accordance with the International
Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or
reviews of historical financial information”. The standard requires us to plan and perform procedures to
obtain reasonable assurance that the financial statements included in the annual report have been
prepared in accordance with the ESEF Regulation.
As part of our work, we performed procedures to obtain an understanding of the company’s processes for
preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL
tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL
tagged data with the audited financial statements in human-readable format. We believe that the
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Oslo, 7 March 2022
ERNST & YOUNG AS
Finn Ole Edstrøm
State Authorised Public Accountant (Norway)
A Clearer Image | www.pgs.com
PGS Annual Report 2021
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