ANNUAL REPORT / 2021
Our Vision
To shape the future of energy through innovative data
solutions and intelligence.
3
Financial Highlights ..................................................4
Letter to Shareholders ..............................................7
2021 Operational Highlights .....................................9
This is TGS ...............................................................14
2021 Board of Directors Report ..............................22
2021 TGS Financials ................................................30
Alternative Performance Measures ........................72
Parent Company Financials ....................................75
Auditor’s Report ....................................................... 91
Corporate Governance ............................................94
Investor Relations ..................................................101
Sustainability Report .............................................106
TGS Main Office Locations ....................................126
Table of Contents
Financial
Highlights
Combining core skillsets with our large and
diversified portfolio of energy data, TGS is well set to
continue supporting our customers in an increasingly
complex energy landscape.
5
2021
2020
Restated
2
2019
Restated
2
2018 2017
Revenue
518,689 360,001 585,610 614,239 492,181
EBIT
(72,331) (228,919) 128,998 230,025 97,429
Pre-tax profit
(85,087) (223,389) 131,211 236,771 99,636
Net income
(75,985) (167,498) 113,111 178,800 75,594
EBIT margin
-14% -64% 22% 37% 20%
Net income margin
-15% -47% 19% 29% 15%
Return on average capital employed
1
-7% -20% 12% 24% 10%
Earnings per share
(0.65) (1.43) 1.05 1.75 0.74
Earnings per share fully diluted
(0.65) (1.43) 1.03 1.73 0.73
Total assets
1,629,827 2,008,818 2,211,080 1,582,044 1,424,100
Shareholders’ equity
1,115,328 1,268,657 1,527,521 1,232,606 1,200,102
Equity ratio
68% 63% 69% 78% 84%
Share buy-back
15,689 6,601 43,413 – –
Dividend per share (paid in year)
USD 0.56 USD 0.75 USD 1.08 USD 0.8 USD 0.6
2021 Financial Highlights
(All amounts in USD 1,000s apart from EPS, ratios and dividend per share)
1)
Return on average capital employed = EBIT/Average capital employed. Capital employed = Equity + Net interest-bearing debt.
2)
2020 and 2019 figures have been restated. Refer to note 28 of the Annual Report for more details.
6
Multi-client Library
Investments in new projects Pre-funding revenues
1
20212017 2018 2019 2020
350,000
400,000
–
50,000
10 0,000
150,000
200,000
250,000
300,000
Cash Distribution to Shareholders
– 5 25 45 65 85 105 145 165125
2020
2019
2021
2017
2018
Dividend in USD million* Share Buy-back
* Dividend payments in the year
2021
2020
Restated
2
2019
Restated
2
2018 2017
Opening net book value 965,551 1,102,630 870,495 799,015 812,399
Multi-client data purchased from third parties 16,000 15,000 183,505 6,507 9,522
Investments in new projects 182,178 316,129 339,527 256,922 279,440
Amortization and impairment (458,861) (468,209) (290,897) (270,781) (302,346)
Adjustments related to implementation of IFRS 15 – – – 78,832 –
Ending net book value 704,868 965,551 1,102,630 870,495 799,015
Prefunding % on operational investments
1
48% 48% 38% 41% 41%
1)
Pre-funding revenues is based on segment reporting, see note 4 of the Annual Report for comparison to IFRS.
2)
2020 and 2019 figures have been restated. Refer to note 28 of the Annual Report for more details.
Revenues Operating profit
20212017 2018 2019 2020
(300,000)
(200,000)
(100,000)
–
200,000
400,000
300,000
10 0,000
600,000
500,000
700,000
Earnings per share Earnings per share fully diluted
20212017 2018 2019 2020
2.00
1.50
1.00
0.50
(0.50)
(1.50)
–
(1.00)
(2.00)
1)
Pre-funding revenues are based on segment reporting, see note 4 of the Annual Report for comparison to IFRS.
2)
2020 and 2019 figures have been restated. Refer to note 28 of the Annual Report for more details.
Total assets Total equity
20212017 2018 2019 2020
2,500,000
2,000,000
1,500,000
1,000,000
500,000
–
7
Letter to Shareholders,
2021 turned out to be another eventful year for the world, the energy industry and
TGS. Successful rollouts of COVID vaccinations helped reduce the impact of the
pandemic, and the world gradually began to get back to normal. As a result, the
demand for energy grew, which, together with supply chain constraints, caused
higher oil prices and record-high gas prices towards the end of the year. We expect
this positive momentum to continue in 2022, and TGS is well placed to benefit from
growing demand across our global energy data business, including both oil and gas
subsurface data and new energy data and solutions.
Our flexible business model remains
superior in volatile markets, and while
segment revenues were down 31%
in 2021, free cash flow* was as much
as 12 times higher than in 2020 due
to significant cost reductions, lower
CAPEX and strong cash collections.
As a result, TGS paid dividends in
2021, totaling USD 66 million (equal
to USD 0.56 per share). In addition, we
spent USD 16 million repurchasing
1.3 million own shares, which are
subject to cancellation at the Annual
General Meeting (AGM). In May 2022,
the Board will propose to the AGM authorization to pay further quarterly dividends
for the following 12 months and renewal of authorization to repurchase shares.
TGS’ ambition of returning the Company’s value creation to shareholders through a
combination of quarterly cash dividends and share buybacks remains firm.
The focus on climate change and the energy transition continued in 2021, and an
increasing number of governments and corporations worldwide have committed to
gradually lower emissions and set ambitious net-zero targets. At the same time, we
have also experienced that the energy transition must be carefully managed to avoid
temporary shortages of supply and unsustainable prices. The EU’s acceptance of the
critical role of natural gas in the energy transition, serving as an energy source for
all sectors, including heating, cooking and industrial applications, is a great example
of how to stabilize the path to green energy while reducing carbon emissions in the
short term.
TGS is well placed to
benefit from growing
demand across our
global energy data
business, including both
oil and gas subsurface
data and new energy
data and solutions."
8
the future of energy through innovative data
solutions and intelligence.
The unprecedented challenges the world
has endured clearly demonstrate why
sustainability is so important. In 2021, we
made significant strides to further ensure
our commitment to sustainability. We are
particularly proud to be one of the top four
energy equipment and service companies in
S&P Global’s 2021 Corporate Sustainability
Assessment with an improved rating from
2020. After formally adopting the United
Nations’ Women’s Empowerment Principles in January 2021, TGS is also honored to
be part of the 2021 and 2022 Bloomberg Gender Equality Index. We are encouraged
by the increase in female hires in 2021 and aim to continue this trend in 2022. TGS
remains fully committed to safeguarding and maintaining the environment in which
we operate and live, while also providing a safe and healthy workplace for our
employees and contractors. I encourage you to read our 2021 Sustainability Report
for more details on our efforts.
2021 was a challenging year for many companies across the globe, but I am proud
of the ongoing dedication of our employees to advance the Company’s goals and
shape the future of energy through innovative data solutions and intelligence. Our
employees’ dedication, passion and
teamwork are what make TGS such a
great company. Further, I would like
to sincerely thank our clients for their
ongoing trust in TGS. The continuous
feedback on quality and service and
repeat business are the ultimate proof
of our success!
Finally, I would like to thank our
shareholders for your confidence and investment in TGS. We remain assured of our
ability to deliver lasting value to our owners, and I’m looking forward to seeing you in
person in 2022.
Kristian Johansen
Chief Executive Officer / TGS
A more sustainable world fueled by cleaner energy sources will not come overnight,
meaning oil and gas will remain crucial for providing the energy society needs for
the coming decades. Global oil and gas discoveries in 2021 hit their lowest level in
75 years, according to Rystad Energy, but continued growth in global demand for
energy, increased focus on energy security and falling reserves of both oil and gas put
pressure on governments and E&P companies to revise their strategies. Eventually,
this will lead to increased exploration activity for oil and gas and significant growth in
investments related to renewable energy. TGS will capitalize on these opportunities
from our vast data library, core competencies and strong balance sheet. We are
excited about an improving market in 2022 and additional growth opportunities
thereafter across the energy spectrum.
While our subsurface data business
for oil and gas contributed to most
of our cash generation in 2021, the
energy transition has highlighted
new opportunities for TGS to grow
and diversify our business further.
Combining our industry-leading
subsurface data library with the
Company’s unique expertise in big
data and analytics, data management,
international business development
and client relationships, we are uniquely
positioned to enter new business areas
where data is key to making business-
critical decisions. The acquisition of
the UK-based company 4C Offshore in
May 2021 marked TGS’ entry into the rapidly growing market for data and insight for
offshore wind. Following this acquisition, TGS organically developed and launched a
wind data analytics platform, Wind AXIOM. The platform, consisting of various types
of proprietary and public data combined with data analytics and AI/ML algorithms,
allows developers, investors, analysts, banks and suppliers to assess and identify
suitable areas for offshore wind development. Looking ahead, our strategy is to
build a complete ecosystem on a digital platform consisting of high-quality data
and applications supporting decision-making for companies invested in the energy
transition. We remain committed to bringing innovative ideas and opportunities
through our unique data and intelligence to help solve the world’s evolving energy
needs.
The employees of TGS are strong ambassadors of our core values of quality, service,
integrity and growth. Thanks to our people, TGS has become one of the world’s largest
and most successful multi-client geoscience data providers. Going forward, we will
continue to leverage our core strengths to broaden our product offerings to the wider
energy industry, and we are excited to present and action our new vision to shape
A more sustainable
world fueled by
cleaner energy
sources will not come
overnight, meaning oil
and gas will remain
crucial for providing
the energy society
needs for the coming
decades."
We remain committed
to bringing innovative
ideas and opportunities
through our unique
data and intelligence to
help solve the world’s
evolving energy needs."
Our employees’
dedication, passion and
teamwork are what
make TGS such a great
company."
9
2021 Highlights
OFFSHORE DATA LIBRARY
Latin America
• In 2021, TGS continued its investment in Brazil through the following projects:
» Completed acquisition for the Santos 3D Phase 4 survey, an approximate
3,400 km² extension to the Santos Phases 1-3 3D program, totaling 20,550
km² over key blocks in the southern Santos basin and the Ametista block
within the pre-salt area.
» Completed processing of the Santos Phase 1-3 3D in Q3 2022 - providing
comprehensive coverage over the southern Santos basin in preparation for
future bid rounds.
» Completed acquisition for the Espirito Santo 3D, TGS’ first dual-azimuth
3D survey in Brazil, which was designed to better illuminate the underlying
structures.
» Completed Campos 3D processing and delivered 14,112 km² of high-quality
PSDM data to clients in Q3 2021.
» Acquired and processed 9,518 km of 2D data in the Pelotas basin, providing
modern data where existing coverage was sparse as more companies are
investigating this basin.
» Completed Pelotas basin 2D reprocessing, adding 19,500 km of upgraded
broadband data to the existing Pelotas 2D grid.
» Commenced 3D seismic data reprocessing projects in the Campos and
Potiguar basins. Both of these reprocessing projects will provide additional
volumes that can be utilized for specific interpretative purposes.
• In Argentina, TGS completed acquisition of 17,800 km² for the Malvinas 3D
program. Fast Track data was delivered to clients in Q1 and Q3 of 2021, with final
products expected in Q2 2022. This data enabled block holders to comply with
work commitments while offering TGS additional opportunities for future sales
to future partners or for regional viewing.
• In Suriname, TGS (in consortium with BGP and CGG) commenced the offshore
Suriname Phase 1 3D survey, consisting of 11,100 km² new acquisition and 3,000
km² of reprocessing. Data deliveries will start throughout 2022 and Q1 2023 in
preparation for the upcoming Suriname bid rounds.
US Gulf of Mexico
• Continued progress on the ultra-long offset Ocean Bottom Node (OBN) strategy
and delivered final results from the Amendment Ph1 survey. Combining long
offset data with new Dynamic Matching Full Waveform Inversion (DM-FWI)
processing techniques, TGS delivered a step-change in subsalt imaging needed
for our clients to push exploration and development in complex geologic
environments.
• Commenced acquisition of Engagement Phase 2 in Q3, further extending the
footprint of OBN data into Green Canyon, in partnership with Schlumberger.
• Reprocessing of Declaration Refocus (multi-azimuth WAZ data in Mississippi
Canyon) continues. The updates provide an improved frequency image at Miocean
and Norphlet levels, along with a new DM-FWI derived velocity model. In addition,
the Eastern Delta Refocus project wrapped up in Q4 2021 and Sophies Refocus
project began, both extending the coverage of modern processing with FWI.
Santos 3D, Offshore Brazil
10
East Coast Canada
• Commenced new 3D surveys as well as infill/expansion of existing surveys.
The Cape Anguille 3D survey in northern Orphan Basin Newfoundland covers
approx. 10,000 km² and is acquired in partnership with PGS. These data provide
state-of-the-art 3D coverage over the 2022 November license round. We were
also able to fill in and complete the Lewis Hills 3D and Jeanne d’Arc 3Ds.
• Commenced a full reprocessing of the Lewis Hills 3D, including a new PSDM
product, and the 2019 South East Grand Banks 2D data, including a new depth
product. These 2D data cover the other area in Newfoundland that will be
available for lease in November 2022.
• Led a crustal scale study of the gravity and magnetic data along the full
Newfoundland and Labrador coast, which was completed in conjunction
with BainGeo. This study supports our seismic library in exploration efforts
throughout this highly prospective margin.
Africa Middle East
• Commenced a new 6,800 km² 3D seismic survey in the Red Sea, Egypt, in
partnership with Schlumberger as part of a long-term commitment with the
Egypt Ministry of Petroleum and South Valley Egyptian Petroleum Holding
Company (GANOPE) to promote the prospectivity of the Egyptian Red Sea.
• Completed the NWAAM 2021 survey, the latest addition to the flagship North-
West Africa Atlantic Margin (NWAAM) 2D campaign. This 7,500 km seismic survey
was designed to illuminate the regional plays in the ultra-deep and deepwater
areas with a new azimuth and provide prospectivity insights of an oil-prone area
in relation to recent key wells.
Europe
• Completed the first season of NOAKA, a 437 km² Ocean Bottom Node (OBN)
seismic survey on the Norwegian Continental Shelf (NCS) to emulate the previous
success of the TGS-AGS Utsira OBN project in the North Sea, the first large-
scale densely sampled OBN survey for exploration.
• Announced a suite of unique derivative datasets for the TGS Utsira OBN survey,
created through Artificial Intelligence (AI) analysis. This groundbreaking project
is the first example of AI geological interpretation on a large-scale, densely
sampled OBN exploration dataset covering over 1,500 square kilometers. The
objective was to deliver an entirely new suite of derivative seismic products
to provide enhanced exploration insights through AI, especially in areas with
significant Infrastructure lead exploration (ILX) activity.
• Significantly expanded and enhanced the TGS Facies Map Browser covering
northwest Europe and Barents Sea. Version 4.6.0 was delivered in April 2020 to
existing clients and made available to new customers, enabling them to instantly
expand their subsurface knowledge of these key regions of exploration.
Amendment DM FWI, Offshore US Gulf of Mexico
Utsira OBN, North Sea
Asia Pacific
• Commenced a 6,400 km² 3D survey in the Sarawak Basin, offshore Malaysia,
together with PGS and Schlumberger. The survey is the first phase of a multi-
year contract awarded by Petronas in 2020 through competitive bidding to
acquire and process up to 105,000 square kilometers of multi-client 3D data over
5 years in the Basin.
11
• Purchased three 3D multi-client seismic surveys from Polarcus covering a total
of 12,200 square kilometers offshore Australia to further enhance TGS’ position in
certain prospective basins where many of our customers are actively exploring.
• Undertook a comprehensive reprocessing of Kyranis 3D, an extensive cross-
border multi-client seismic survey offshore both Timor-Leste and Australia.
This 9,024 square kilometer survey will provide 3D broadband PSDM imaging for
the first time in an area that has recently been re-opened for exploration.
overall footprint and dramatically increasing efficiency via the rapid deployment
and retrieval of recording equipment. Additional ESG attributes on the project
include stakeless surveying, which nearly eliminates any marking along the
survey’s heavily tree-covered receiver lines.
• Completed assessment of an embedded test conducted in 2020 (Ravenclaw 3D)
comprised of recording data collected using varying, low-impact directional
charges. Data quality evaluations were conducted to determine the viability
of low-impact charge sizes used as an alternative source to reduce a seismic
project’s environmental impact and further drive efficiency. Encouraging results
from the first test have set the stage for Phase II of an imbedded test which will
be carried out within the Hipp Creek 3D using varying design and charge size
options under low-impact source constraints.
IMAGING TECHNOLOGIES
• Commercialized offering for DAS processing services, including 3D and 4D DAS.
• Depth Imaging:
» Advanced toolkit and capabilities with the addition of FWI Imaging. The
technology creates a high-fidelity image, building on the success of DM-FWI.
» Added capabilities to produce higher-fidelity images in sparse acquisitions,
including OBN and DAS, using the full acoustic wavefield in our imaging
algorithms.
• Time Imaging:
» Broadened and deepened TGS’ time processing toolkit with the addition
of enhanced deblending and deghosting technologies along with denoise
algorithms, including machine learning deswell, 3D curvelet technologies
and complex wavelet technologies.
» Continued focused efforts to improve quality and deepen engagement with
energy companies leading to a proprietary backlog.
• Advanced abilities to deliver cloud-based solutions by developing the Jefe batch
system, which includes enhanced scalability and job error correction.
• Improved node processing technology and tools, including wavefield separation
and node demultiple.
Kyranis 3D, Offshore Australia
ONSHORE DATA LIBRARY
United States
• Continued to invest in the Powder River Basin in 2021. After successfully
completing the Railgun 3D in 2020, we acquired the Voyager 3D in Johnson
County, Wyoming. Field operations were completed in Q4 2021. Final data
delivery is expected in Q2 2022. With the addition of the 477 km² Voyager Survey,
TGS now holds 1,440 km² of high-quality 3D data in this basin.
• Delivered final data products to our customers for the 247 km² Plains 3D in
Yoakam County, Texas. The Plains 3D was acquired in late 2020 and utilized high-
resolution, blended source acquisition techniques. The resulting subsurface
image attests to the step-change improvement that can be achieved when these
techniques are deployed.
• Secured and commenced a large, multi-client 3D acquisition project in a core
area of the Montney Basin in Northeast British Columbia. The Hipp Creek 3D
utilizes cableless, single-sensor recording technology, reducing the project’s
12
WELL DATA PRODUCTS
• Expanded well data offering by providing ESG data nationwide including Vent and
Flare for 300,000+ wells and injection data for 122,000+ new wells and 31,000+
disposal wells.
• Expanded the world’s largest digital well log data collection by adding 180,000
domestic digital Log ASCII Standard (LAS) wells, enhanced digital LAS+ well
logs, raster logs, Validated Well Headers and ARLAS well as directional surveys
and production data.
• Enhanced the user experience of the well data online portal R360 through
improved search and download functionality, online account management
features and customer onboarding features.
• Continued investment and expansion of TGS’ leading interpretive product, the
Facies Map Browser (FMB), in Northwest Europe and Barents Sea (FMB 4.6),
Mexico FMB, and launched FMBConnect API Webservices.
• Completed the Haynesville Basin Temperature Model (BTM), which supports
unconventional hydrocarbon exploitation, geothermal and CCUS domains.
• Added 150,000 international wells to the TGS well data collection.
DATA & ANALYTICS
• Developed and released OSDU 3.0 compliant API supporting Well, Wellbores,
Log Data and Wellbore Trajectories.
• Developed and released FMB In Cloud. Clients can now subscribe to our FMB
data and access it via APIs.
• Developed and released a new Entitlement Engine for Well Data products to
improve performance and user experience.
• Developed and released Industry Insights subscription email service.
• Launched a global Deep Learning model for swell noise removal in data
processing. The machine learning model benefited from a novel workflow
to generate training data from TGS’ extensive worldwide library - creating a
global model disrupts the traditional processing sequence and reduces project
turnaround time.
• Expanded TGS’ New Energy portfolio using the innovative TGS.ai platform by
adding free apps for Carbon Storage, Deep Sea Minerals, Geothermal and Wind.
• Released commercial Carbon AXIOM, enabling analysis screening of over 10,000
potential carbon storage sites in the US Gulf Coast area, including feasibility for
emitters.
• Collaborated with CGG and PGS to announce Versal, the world’s first unified data
ecosystem where clients can access and evaluate all their multi-client seismic
data and entitlements in one place.
Mud Log and LAS, Belize
Versal
13
NEW ENERGY SOLUTIONS
• Launched the New Energy Solutions (NES) business unit to leverage TGS’ unique
energy data expertise and advance the company’s goal of becoming the leading
provider of energy data and insights. Focus will be directed toward industries
actively contributing to reducing GHG emissions, such as Carbon Capture and
Storage (CCS), Deep Sea Mining (DSM), geothermal energy, wind energy and
solar energy.
• Developed and launched Carbon AXIOM, a subsurface classification dataset
designed as a prospecting and technical assessment tool for potential carbon
dioxide (CO
2
) storage and enhanced oil recovery potential in depleted reservoirs.
The Atlas is delivered in a convenient web interface with interactive browse and
query capability, bringing together critical analytics about new storage volumes
and CO
2
emitters.
• Released a comprehensive numerical weather prediction (NWP) model dataset,
in collaboration with Vaisala, to create a higher resolution dataset than publicly
available with coverage over the entirety of offshore Scotland. The dataset will
assist in enhancing wind energy knowledge and operations offshore Scotland,
including the ScotWind lease round areas.
• Expanded numerical weather prediction (NWP) model data coverage into the
East Coast U.S. to inform and enhance wind resource assessment ahead of
the New York Bight lease sale. This additional dataset covers a 400,000 square
kilometers area extending from Massachusetts to North Carolina.
• Announced two new technology pilot projects for Carbon Capture and Storage
(CCS) and offshore wind in collaboration with Magseis Renewables AS. Both
projects intend to utilize high-resolution 3D seismic acquisition to demonstrate
the technology for use in carbon storage and wind farm development.
• Acquired the company 4C Offshore, a leading market intelligence and consultancy
firm, providing research and insights to the offshore wind industry. The strengths
of 4C Offshore fit perfectly with TGS’ ambition to become the leading global
provider of energy data and insights to support decision-making processes
across the energy value chain.
• Signed a Memorandum of Understanding (MOU) with carbon storage experts
Horisont Energi to jointly develop new Carbon Capture and Storage (CCS)
technologies. This represents a unique collaborative effort to identify and develop
efficient methods for both the identification and classification of CO
2
storage
reservoirs and 4D monitoring technology for the surveillance of CO
2
injection.
Wind AXIOM
Carbon AXIOM
This is TGS
Leading energy data and intelligence
15
This is TGS
Leading Energy Data and Intelligence
TGS is a leading energy data and intelligence company, recognized for its asset-light,
multi-client business model and vast data collection.
TGS employs approximately 470 employees, with its corporate headquarters in Oslo,
Norway, and its operational headquarters in Houston, Texas, U.S.A. The Company’s
other main offices are in the UK, Brazil and Perth, with additional employees located
in other cities around the globe. The Company’s stock is traded on the Oslo Stock
Exchange. TGS’ primary business is to provide data and intelligence to companies and
investors across the energy spectrum. TGS offers extensive global data libraries that
include seismic data, magnetic and gravity data, multi-beam and coring, digital well
log and production data, wind energy data, and other data related to the renewables
sector. TGS also offers specialized services such as advanced processing and
analytics, and cloud-based data applications and solutions.
A Brief History
TGS was founded in Houston in 1981 and over time built the dominant 2D multi-client
data library in the Gulf of Mexico. The company expanded further into North America
and West Africa and upgraded to a substantial 3D portfolio in the Gulf of Mexico.
Also, in 1981, NOPEC was founded in Oslo and began building an industry-leading
multi-client 2D database in the North Sea, with additional operations in Australia
and the Far East. In 1997, NOPEC went public on the Oslo Stock Exchange. In 1998,
the companies merged to form TGS-NOPEC Geophysical Company (TGS), creating a
winning combination for investors, customers and employees. Since then, we have
set the standard for geoscience and subsurface data around the world.
We Are Energy Data
For over 40 years, TGS has built a strong foundation as a global leader in providing
a diverse range of energy data and insights to meet the industry - where it’s at and
where it’s headed. Our proven technology and innovation, robust business model,
and obsession with customer service position us to continue to lead the way in oil
and gas opportunities and undertake long-term investments in industries that look
to reduce carbon emissions.
Our competitive advantages and core strengths of innovation, people, expertise,
quality data and superior service allow us to provide the right energy data at the right
time. We provide our customers with the actionable insights they need to make the
best business decisions.
Before taking on energy investment risks, companies look for clarity and confidence
through subsurface data. TGS geological, geophysical and engineering data coupled
with analytical competencies provide valuable exploration insights, superior imaging
of the subsurface and potential operational challenges ahead of drilling programs or
infrastructure development. Our multi-client approach offers ease and flexibility for
operators at a substantially lower cost than proprietary models.
Forward-looking, our data supports the development of renewable energy.
Leveraging our historical data expertise and coupling this with machine learning,
compute power, cloud-based applications and strategic partnerships, we offer the
same superior data solutions and insights for new energy investments as we do for
oil and gas.
Our Competitive Advantages
Focus
Last year, over 95% of our revenues came from multi-client data sales. This is our
core business, and our entire company is intensely focused on developing the best
multi-client projects to maximize returns and achieve long-term profitable growth.
Our culture drives achievement where all employees have common goals and share
in our success through profit-related bonuses.
Asset-Light
TGS does not own acquisition vessels and equipment. Nor do we have seismic crews
on the payroll. All data acquisition activity is outsourced, which gives us the flexibility
to execute only those projects that meet our investment criteria and align with client
goals. We are not influenced by vessel or crew utilization targets. Instead, we only
access these resources when needed, and we are free to use the most appropriate
vendors and technologies to tackle specific imaging and intelligence challenges. TGS
is asset-light, which means low overheads and high stability, regardless of industry
cycles.
Quality Processing
While acquisition is outsourced, we process the data in-house. This is how we
ensure our customers get the highest quality seismic data. To learn more about our
processing services, visit: www.tgs.com/products-services/processing
16
Sustainability
TGS is committed to a sustainable future. To review our position on transparency,
people and operations, and review our most recent ESG report card, visit: https://
www.tgs.com/sustainability
ROI Discipline
TGS typically targets projects that will earn sales returns between 2 and 2.5 times the
investment. On projects with lower targeted returns, we require high levels of pre-
funding to ensure the investment remains attractive.
Renowned Data Collection
TGS has one of the largest and best performing multi-client data libraries in the world.
We utilize this data resource both as an ongoing revenue stream and to leverage
unique insight using data analytics techniques. In addition, we are committed to
developing platforms to enhance data accessibility and empower business decisions.
Active Portfolio Management
The multi-client business is a portfolio business. Some projects may underperform,
and others exceed expectations. A 3D project is a significant financial undertaking,
and TGS has the means to invest in a broad portfolio of projects to balance risks and
rewards.
Geographic Diversity
TGS has a truly global data collection with a diverse range of data types to serve
the energy industry’s expanding needs. We strive to build and maintain leadership
positions around the world. Our oil and gas data covers a wide variety of exploration
plays, including deepwater, pre-salt geologies, the Arctic and North America onshore.
Our New Energy data and solutions support the evolving energy transition efforts
across the globe. This diversity gives us significant stability and business continuity
in the face of shifting markets, regional economic strain and geopolitical challenges.
Superior Team
Our most important competitive advantage comes from our people. Our global team’s
outstanding work, from data scientists to geoscientists, has made TGS the world’s
leading energy data provider. Our people are the reason TGS continues to deliver
superior project quality and financial performance, year after year.
Strategic Acquisitions
While most of our growth has been organic, we have also expanded our business
through acquisitions. These opportunities have allowed us to expand our energy data
library - adding new processing capabilities and data types to our library. TGS will
also purchase other multi-client libraries when the price is attractive and where we
see strong potential returns.
Declaration Refocus M-WAZ, Offshore US Gulf of Mexico
17
Core Product Lines
Geophysical Multi-client Data
For nearly 40 years, TGS has provided multi-client seismic data to energy companies
globally. Over that time, we have built experience in exploration areas worldwide,
established a vast global database and become the leading multi-client data provider.
We offer the most current data, acquired and imaged with the latest technologies. In
addition to seismic data, our geophysical library includes gravity, magnetics, seep,
geothermal, controlled-source electromagnetic and multibeam data. This library
generates over 89% of our segment revenues and is organized by region: North and
South America, Europe and Russia, Africa-Middle East and Asia Pacific. Our multi-
client success begins with a professional, geoscience and commercial approach
to project development. When planning new seismic surveys, our priority is to
gain thorough geological and geophysical understanding. Our experienced project
developers evaluate all available seismic, gravity, magnetic and geological data to
set the project objectives and optimize the survey design. We also work closely with
energy companies, local governments and geoscience specialists to address each
survey’s specific challenges. Our process ensures we acquire the right data to meet
our clients’ needs.
Geological Multi-client Data
TGS’ Well Data Products vision is to provide a single platform to access the largest
volume of high-quality digital subsurface and well performance data along with
easy-to-use geoscience interpretation products. We have the industry’s largest
global collection of digital well logs available through our online well data portal,
R360™. Additionally, our Well Performance Data now includes data in Canada and
has expanded to provide previously unavailable historical production data in the U.S.
prior to 1970. In 2021, we expanded the world’s largest digital well log data collection
by adding 180,000 domestic digital Log ASCII Standard (LAS) wells, enhanced digital
LAS+ well logs, raster logs, Validated Well Headers and ARLAS well as directional
surveys and production data. We also added 150,000 international wells to the TGS
well data collection.
Imaging Services
TGS employs the latest processing technologies to deliver the imaging products
demanded by energy companies through TGS’ extensive multi-client data library and
proprietary processing. TGS’ imaging capabilities span a broad range of data types
including 2D and 3D land and marine as well as 3D DAS and VSP processing services.
Products are delivered in both the depth and time domains. Depth processing
includes a broad range of technologies including Dynamic Matching FWI, anisotropic
parameter estimation, Kirchhoff, RTM and Least Squares Imaging. Access to our
well log database enables calibration of our seismic data to well data. In addition to
continuing to advance our depth processing capabilities, we continue to expand our
time processing toolkit including the addition of 3D de-ghosting and a wide range of
de-blending and de-noise techniques, including some algorithms that leverage the
power of machine learning, which enables delivery of broad band data. The imaging
technologies in combination with access to TGS’ HPC and Cloud computing capacity
allows TGS Imaging to deliver large volume and specialized processing services for
vintage as well as high spec modern acquisition data types including high-density
narrow azimuth towed streamer, OBN, OBC, wide azimuth towed streamer and other
innovative acquisition geometries.
New Energy Solutions
TGS New Energy Solutions provides valuable insights for the energy transition
toward more sustainable energy systems. Our data-driven solutions and accessible
data platforms help reduce costs, risks, and cycle times, helping our customers and
partners meet their carbon reduction goals.
For example, TGS provides subsurface insight and monitoring solutions to inform
and support Carbon Storage initiatives across the globe. Carbon AXIOM, a platform
designed as a screening tool for new CCS projects, was launched in 2021 to standardize
attributes that provide a basis for comparing carbon storage opportunities and their
proximity to emitters over a large area. The data is visualized via a user-friendly app
for instant, interactive analysis of potentially suitable areas for carbon storage.
In addition, TGS provides various solutions for the offshore wind industry, whether it is
actionable insights stemming from its market intelligence subsidiary 4C Offshore or
through its Wind AXIOM solution for screening and evaluating new Wind development
projects, including resource assessment, remote sensing and unique wind project
information. Similar applications are being developed for geothermal and deep-sea
minerals solutions to assist our clients in achieving their energy transition ambitions.
18
Executive Management
Sven served as CFO of TGS from 2015
until 2019, when he assumed the
position of Head of Strategy and M&A.
He took on the role of Interim CFO in
August 2021. Before joining TGS in
2015, Sven was CFO of Prosafe, the
world’s leading owner and operator
of semisubmersible accommodation
vessels for the offshore oil and gas
industry. He was also CFO of Prosafe
Production, one of the world’s leading
FPSO contractors. Sven holds an
M.S. degree in business specializing
in finance from Bodo Graduate
School of Business in Norway.
Sven Børre Larsen
CFO
Kristian joined TGS in 2010 as Chief
Financial Officer and became Chief
Operating Officer in early 2015 before
being appointed Chief Executive
Officer in March 2016. Prior to joining
TGS, Kristian was the Executive Vice
President and CFO of EDB Business
Partner in Oslo (now Tietoevry). Mr.
Johansen also has experience from
executive and board positions in the
construction, banking and oil industries.
Mr. Johansen currently serves on the
board of directors for the National
Ocean Industries Association (NOIA)
and is the Chairman of the International
Association of Geophysical Contractors
(IAGC). A native of Norway, Kristian
earned his undergraduate and
master’s degrees in business
administration from the University
of New Mexico in 1998 and 1999.
Kristian Johansen
CEO
Whitney joined TGS in 2014 as
Corporate Compliance Director and
was appointed to Vice President,
Compliance, in August 2019. She
gained additional responsibility for
TGS’ ESG program before becoming
Executive Vice President, Compliance
and ESG, in February 2021. Her
background includes almost 15 years
of legal experience, with significant
knowledge on implementing
and managing holistic corporate
compliance programs. She received
her JD degree from the University of
Richmond School of Law and her BA in
Public Communication with University
Honors from American University.
Whitney Eaton
EVP Compliance & ESG
19
Executive Management
Will joined TGS in 2011 with the
acquisition of Stingray Geophysical. He
has ser ved TG S in a number of leader ship
roles including M&A, Finance, Investor
Relations, HR and Marketing. Will
had executive responsibility for
the North America business from
January 2019 until moving to the role
of Executive Vice President, Eastern
Hemisphere in March 2021. Will has
over 23 years of experience in the oil
& gas industry, having worked with
BP, QinetiQ and a number of start-
up E&P services companies. Will
received M.A. (with honors) and B.A.
(with honors) degrees in geography
from the University of Oxford in 1997.
Will Ashby
EVP East Hemisphere
David joined TGS in 2017 as Director
of Business Development in Western
Hemisphere. In 2018 he took on the
role of VP Latin America and oversaw
the unit during the integration of
Spectrum post-merger. David’s
latest assignment was VP of Africa,
Mediterranean, Middle East and Asia
Pacific before assuming the role of EVP
Western Hemisphere in 2021. Prior to
joining TGS, he spent nearly 9 years with
PGS based in Houston, working in both
the Onshore and Marine groups. David
received his MBA (with distinction)
from Robert Gordon University in 2011
and his B.S. degree in microbiology
from the University of Texas in 2005.
David Hajovsky
EVP West Hemisphere
Tana serves as an Executive Vice
President - Legal and General Counsel,
joining TGS in 2013. Her background
includes a combination of legal and
accounting experience, with significant
knowledge of the energy sector. Prior
to TGS, Tana worked with several global
law firms, specializing in corporate and
transactional law, and served as the
general counsel of a publicly traded
construction contractor focused on
energy infrastructure. She received
her BBA degree in accounting in 1982
from Texas Tech University and her JD
degree from the University of Houston
Law Center in 1992. She is also licensed
as a Certified Public Accountant.
Tana Pool
EVP Legal
Jan joined TGS with the acquisition
of Spectrum where he had been
the COO since 2011, responsible for
global operations and executing the
company’s strategic growth plan. Prior
to Spectrum, he served 16 years at
PGS in various technical, operational
and commercial leadership roles,
including regional responsibility
for the Asia Pacific business. Jan
holds a master’s degree in earth
sciences and a Ph.D. in geophysics
from Delft University of Technology.
Jan Schoolmeesters
EVP NES & Operations
20
Board of Directors
Ms. Agerup is currently head of Board
Governance and Support in Telenor
Asia in Singapore. She also chairs the
board in Telenor Pakistan and serves
on the board of Digi.com Berhad,
an entity partially owned by Telenor,
which is listed on the Malaysian
stock exchange. She previously held
positions in Telenor as EVP Corporate
Affairs and General Counsel and Head
of Group Holdings. From 1997 to 2015,
she held various positions in Norsk
Hydro, including head of Corporate
M&A, Plant Manager in Årdal and
Project Director in Hydro UMC in
Australia. She served as Executive
Vice President Corporate Staffs and
General Counsel in Norsk Hydro
from 2010 to 2015. Ms. Agerup also
served as a board member of Equinor
ASA from 2015 to 2020. She was first
elected as a Director of TGS in 2015.
Wench Agerup
Director
Mr. Hamilton has served as Chairman
of the Board of TGS since June 2009,
and previously served as CEO of TGS
from 1995 through June 2009. He
started his career as a geophysicist
with Shell Offshore (1981-1987) before
joining Schlumberger (1987-1995),
where he ultimately held the position of
VP and General Manager for all seismic
product lines in North and South
America. Mr. Hamilton currently serves
on the board of a privately held company.
He was first elected as a Director of
TGS in 1998 and as Chairman in 2009.
Henry H. Hamilton
Chairman
Mr. Leonard is currently the President
of Leonard Exploration, Inc. He retired
in 2007 from Shell Oil Company
after 28 years of service. During his
tenure at Shell, Mr. Leonard held
a number of executive positions
including Director of New Business
Development in Russia/CIS, Director
of Shell Deepwater Services, Director
of Shell E&P International Ventures
and Chief Geophysicist for Gulf of
Mexico. Mr. Leonard serves on the
board of a privately held company and
various nonprofit boards. He was first
elected as a Director of TGS in 2009.
Mark Leonard
Director
21
Board of Directors
Ms. Moen has 40 years of experience
in leadership positions within the oil,
gas and energy industry, 25 years of
which (1982-2007) were within Equinor
(Statoil) and four years (2007-2011)
within Shell Europe. From 2011 to 2013,
Ms. Moen served as Vice President of
Petoro AS, a fully Norwegian State-
owned oil company managing the
State Direct Financial Interest in Joint
Ventures (SDFI/SDØE); and from 2013
to January 2021, she served as CEO of
Petoro. Ms. Moen serves on the board
of directors of OKEA ASA, which is
listed on the Oslo Stock Exchange. She
currently serves as a board member of
two privately held companies. She was
first elected as a Director of TGS in 2021.
Grethe Kristin Moen
Director
Mr. Øygard is a business owner,
investor and independent advisor, with
substantial expertise in the finance
and energy industries. From 1983 to
the mid-1990s, Mr. Øygard worked
within the Norwegian Ministry of
Finance, including as Deputy Minister,
and held various other roles within
the Norwegian Parliament. From the
mid-1990s, Mr. Øygard held various
prominent positions within McKinsey
Company, with a focus on the global oil
and gas industry. In 2009, Mr. Øygard
served as the Interim Central Bank
Governor of the Icelandic Central
Bank. From mid-2016, he has been co-
owner and Chairman of DBO Energy,
a Brazilian oil and gas company. He
is also the co-founder of two private
companies in Brazil, focused on
energy transition, and serves on the
Board of several other privately held
companies. Mr. Øygard serves as
Chairman of the Board of Norwegian
Air Shuttle ASA, which is listed on the
Oslo Stock Exchange. He was first
elected as a Director of TGS in 2021.
Svein Harald Øygar
Director
Mr. Finlayson, a geologist and
petroleum engineer by training, has
nearly 40 years of technical and
commercial experience in the oil and
gas industry. He joined Shell in 1977
and, during his career, held various
leadership roles in exploration and
production and liquefied natural gas
around the world. Mr. Finlayson joined
BG Group plc in 2010 as Executive
President and Managing Director,
Europe and Central Asia. From 2013 to
2014, he served as the Chief Executive
Officer and Executive Director of the
BG Group. Mr. Finlayson serves as
a non-executive Chairman of Siccar
Point Energy Ltd., which is listed on
the Oslo Stock Exchange, and a board
member of one other privately held
company. Mr. Finlayson is a Fellow
of the Energy Institute. He was first
elected as a Director of TGS in 2019.
Christoper Finlayson
Director
Ms. Egset currently serves as the Chief
Financial Officer of Posten Norge,
joining in 2019. From 2008 to 2018, she
served in various financial leadership
roles with Statkraft, joining as CFO
of the Solar Power Unit from 2008,
transferring to Statkraft Wind Power
and Technologies (WPT) in 2010, and
most recently serving as Executive
Vice President and CFO of Statkraft
from 2016 to 2018. From 2005 to 2008,
she was a financial manager for J.F.
Knudtzen, and from 2000 to 2005, she
served as Controller for Nera SatCom,
Ms. Egset held a variety of financial
roles at Statoil (now Equinor) from 1992
to 2000. She began her career in 1988 as
a financial manager for Ulstein Elektro
(part of the Ulstein Group). Ms. Egset
serves as a board member for three
privately held companies. She was first
elected as a Director of TGS in 2019.
Irene Egset
Director
Board of
Director’s
Report
A strong balance sheet combined with robust cash
generation capacity provides us with flexibility to
continue to pay dividends to shareholders at the
same time as we pursue selected strategic inorganic
investment opportunities.
23
2021 Board of Director’s Report
TGS ASA and its subsidiaries (TGS or the Group) provide scientific data and intelligence
to companies active in the energy sector. In addition to a global, extensive and diverse
energy data library, TGS offers specialized services such as advanced processing
and analytics alongside cloud-based data applications and solutions. TGS operates
globally and is presently active in North and South America, Europe, Africa, Middle
East, Asia and Australia. The corporate headquarters of TGS are in Oslo, Norway. Its
primary subsidiary, TGS-NOPEC Geophysical Company, is based in Houston, Texas,
U.S.A. TGS also has regional offices in London, Rio, Perth, Calgary, Lowestoft and
country-specific offices elsewhere, depending on project and sales activity.
All financial statements in this report are presented on a going concern basis in
accordance with the Norwegian Accounting Act, section 3-3a, and the Board of
Directors confirms that the prerequisites for a going concern assumption are indeed
present.
Mergers and Acquisitions
In May 2021, the Group announced it had acquired 4C Offshore Ltd. (4C Offshore), a
leading market intelligence provider for the offshore wind energy industry based in
the UK. The acquisition of 4C Offshore was an important step in realizing the strategy
of broadening the data offering towards energy transition-related industries.
In June 2021, TGS completed the acquisition of a portfolio of 3D seismic surveys,
mostly in Australia, from Polarcus.
In November 2021, TGS completed the purchase of an interest in a portfolio of 3D
seismic surveys in the Green Canyon area of the U.S. Gulf of Mexico.
Changes to Accounting Principles
No new IFRS standards or amendments, or IFRIC interpretations that are effective
from 1 January 2021, had impact on the consolidated financial statements of TGS. The
Group has not early adopted any standards, interpretations or amendments that have
been issued but are not yet effective. There are no IFRS standards or amendments or
IFRIC interpretations that are not yet effective that the Group currently expects will
have a material impact on TGS’ financial statements going forward.
Financial Results, Financial Position and Capitalization - IFRS
Note that the Financial Statements for 2020 have been restated. Please refer to note
28 for more details.
Revenues in 2021 amounted to USD 518.7 million, up 44% compared to the USD 360.0
million recognized in 2020. The increase is driven by completion of several significant
projects during the year. Under IFRS, revenues are recognized at the point of delivery
of completed data to the customer, leading to relatively high volatility in results
quarterly and annually.
Operating loss for 2021 was USD 72.3 million, corresponding to a margin of -14%,
compared to an operating loss of USD 228.9 million (-64% margin) in 2020. The
negative result is driven by large impairments of the multi-client library recognized
as a result of the continued challenging market conditions. In 2021, amortization and
impairments of the multi-client library were USD 458.9 million versus USD 468.2
million in 2020. Of this amount, impairments (excluding accelerated amortization)
accounted for USD 71.6 million, compared to USD 92.6 million in 2020. Accelerated
amortization, which represents impairments recognized in connection with the
recognition of revenues when projects are completed and performance obligations
met, amounted to USD 213.0 million in 2021 versus USD 119.9 million in 2020. Straight-
line amortization for 2021 totaled USD 174.3 million, down from USD 255.7 million
in 2020. The reduction is partly caused by the impairments recognized in 2020 and
partly by a lower level of investments in new projects during the past two years.
Net financial items amounted to USD -12.8 million in 2021 compared to USD 5.5
million in 2020. The reduction was primarily caused by net exchange losses of USD 8.9
million versus a gain of USD 7.8 million in 2020, but also increased financial expenses
(USD 6.4 million in 2021 versus USD 3.1 million in 2020) had an impact.
Net loss before taxes was USD 85.1 million (USD 223.4 million in 2020).
In 2021 a tax gain of USD 9.1 million was recognized (gain of USD 55.9 million in
2020). The effective tax rate in 2021 was 11%, compared to 25% in 2020. Profits were
generated in certain high-tax jurisdictions, and losses in other jurisdictions with an
average tax rate of 20-22%, causing the reduction in effective tax rate. In 2020 there
were losses in all tax jurisdictions.
Net loss after taxes was USD 76.0 million in 2021, compared to a net loss of USD 167.5
million in 2020.
At year-end 2021, cash and cash equivalents amounted to USD 215.3 million, an
increase from USD 195.7 million at the end of 2020.
TGS held current assets of USD 435.3 million and current liabilities of USD 446.7
million on 31 December 2021. Goodwill increased to USD 304.0 million at the end of
24
2021 from USD 288.4 million at the end of the prior year. The increase is attributable
to the acquisition of 4C Offshore Ltd., which was concluded in May 2021.
As of 31 December 2021, total equity amounted to USD 1,115.3 million (USD 1,268.7
million in 2020), corresponding to an equity ratio of 68% (63% in 2020). The reduction
in equity was mainly caused by the impairments recognized on the multi-client library
and subsequent negative results for 2021, as well as dividends and share repurchases.
TGS is listed on the Oslo Stock Exchange. It had a market capitalization of USD 1.1
billion as of 31 December 2021.
TGS issued 0.2 million new shares in 2021 as part of long-term incentive programs.
The Board does not anticipate issuing any new shares in 2022 other than shares
issued as part of employee long-term incentive programs or unless necessary to
finance the acquisition of a target business or a major business opportunity.
Cash Flow from Operations, Investments, Financing and Dividends
TGS had cash flow from operating activities of USD 317.6 million in 2021, compared
to USD 354.7 million in 2020. Operating cash flow is significantly higher than the
operating result as non-cash expenses in the form of amortization and impairments
of the multi-client library are the Group’s largest expense item.
Net negative cash flow from investing activities amounted to USD 200.8 million in
2021, versus USD 390.5 million in 2020. Cash flow from investing activities included
organic cash investments in the multi-client library of USD 155.5 million (USD 171.5
million including inorganic investments), compared to USD 341.1 million in 2020 (USD
356.1 million including inorganic investments).
TGS has paid quarterly dividends since 2016. The Annual General Meeting held on
11 May 2021 resolved to renew the Board of Directors’ authorization to distribute
quarterly dividends.
In 2021, TGS paid dividends totaling USD 65.5 million (USD 0.56 per share) down from
USD 87.8 million (USD 0.75 per share) paid in 2020. In addition, in 2021 the Group
repurchased 1.3 million own shares for a total of USD 15.7 million. In 2020, the Group
repurchased 0.3 million own shares for a total of USD 6.6 million.
A total number of 50,100 treasury shares held by the Group were canceled following
the decision of the Annual General Meeting on 11 May 2021.
On 10 February 2022, TGS announced that the Board of Directors resolved to pay a
quarterly dividend of USD 0.14 in Q1 2022, maintaining the same quarterly run-rate
for dividends as in 2021. The quarterly dividend was paid on 3 March 2022. On 11
February 2021, TGS announced that the Board had authorized a share repurchase
program of up to USD 20 million to be executed before the Annual General Meeting in
May 2022. As of 31 December 2021, USD 4.7 million of repurchases remained under
this program.
Including dividends and other cash flows from financing activities, TGS’ cash balance
increased by USD 19.6 million in 2021 (USD 127.7 million reduction in 2020) to USD
215.3 million at year-end (USD 195.7 million at year-end 2020).
Shareholders Value Metrics 2021
2020
Restated
1
Revenues (MUSD) 518.7 360.0
Operating Profit (MUSD) (72.3) (228.9)
Operating Margin -14% -64%
Earnings Per Share Fully Diluted (EPS) (USD) (0.65) (1.43)
Net Multi-client Revenues / Average Net Book Value Ratio
of Multi-client Library
59% 33%
Return on Average Capital Employed (ROACE) -7% -20%
Free Cash Flow from Operations after Organic Multi-client
Investments (MUSD)
162.2 13.6
Shareholders Equity / Total Assets 68% 63%
Operations - Segment Reporting
The annual report is prepared in accordance with IFRS, but for internal reporting
purposes TGS uses segment reporting, where net revenues from projects-in-
progress are recognized based on Percentage of Completion (POC), as opposed
to the IFRS accounts where revenue recognition generally is deferred until project
completion and delivery to the customer. For more details about segment reporting
principles, see Note 5 of the Consolidated Financial Statements. The following review
of the operations and multi-client library is based on segment reporting.
TGS reported pre-funding revenues of USD 86.8 million in 2021, down from USD
151.9 million in 2020. Organic multi-client investments in new projects amounted
to USD 182.2 million in 2021, compared to USD 316.1 million in 2020, as the Group
quickly scaled back investments in response to the negative market situation. The
investments carried a pre-funding rate of 48% for 2021, the same pre-funding rate
as in 2020.
Late sales of vintage data and data in progress amounted to USD 196.8 million in
2021, down from USD 218.6 million in 2020. The decrease reflected clients’ reduction
in investments in exploration for oil and gas following volatility in commodity prices.
Proprietary revenues in 2021 amounted to USD 25.3 million, up from USD 15.2
million in 2020. The increase is attributable to a seismic project in Norway that TGS
conducted on the exclusive basis for a client, in addition to the normal proprietary
data processing activities.
Total revenues amounted to USD 308.9 million, down 31% compared to the USD 448.8
million recognized in 2020.
25
Multi-client Data Library - Segment Reporting
TGS’ geoscientific data library is one of the industry’s most comprehensive multi-
client resources, encompassing a wide range of geophysical, geological, gravity,
magnetic and bathymetry data. The following chart summarizes TGS’ data inventory
at year-end.
In 2021, TGS recorded total investments in the multi-client library of USD 198.2 million
(USD 331.1 million in 2020). Of this, USD 16.0 million (USD 15.0 million in 2020) was
related to non-organic investments.
The well data library is amortized on a straight-line basis over seven years, while
data purchased from third parties follows a straight-line amortization profile over the
remaining useful life of the assets. Amortization and impairments of the multi-client
library amounted to USD 343.4 million in 2021 versus USD 527.4 million in 2020.
Despite signs of improving market conditions towards the end of 2021, the Group
recognized USD 96.7 million of impairments of the multi-client library in 2021 (USD
132.0 million in 2020). The impairments were mostly related to certain regions where
demand is expected to continue to be weak. Examples of such markets are Argentina,
where regulatory risk is high, and frontier parts of Norway, which is out of favor, with
focus mostly on infrastructure-led exploration. Moreover, in certain cases, expected
revenues are pushed out in time so that they fall outside of the forecasting window,
thus affecting net present value calculations negatively.
Commitments to Seismic Acquisition Capacity
TGS procures all seismic acquisition capacity from external suppliers for both offshore
and onshore projects. As of the end of 2021, TGS had entered into commitments for
three 3D vessels, one source vessel and two OBN crews. All of these commitments will
expire in 2022, and the amount committed, including contractual lease agreements,
totaled USD 43 million for marine capacity (2020 total marine and land capacity: USD
22 million). Office leases and data center leases are recognized in the balance sheet.
See Note 7 of the Consolidated Financial Statements for more information on lease
liabilities.
New Energy Solutions
A successful transition toward a global energy system with less emissions of
greenhouse gasses (GHG) requires significant changes in the energy mix in the longer
term. Although oil and gas inevitably will remain important sources of energy also in
the future, renewable energy sources are expected to gain significant market share
over the coming decades. This implies that a much larger share of energy production
will be intermittent by nature, causing more volatile prices and a larger need for back-
up resources. Moreover, the energy supply is likely to be increasingly fragmented,
with more energy sources holding significant shares of the market.
These developments are likely to lead to more complexity and volatility in the energy
markets going forward. To help customers navigate the energy markets of the future,
TGS launched its New Energy Solutions (NES) business unit in February 2021.
By leveraging its core strengths, TGS’ goal is to be the leading provider of data
and insights directed towards industries actively contributing to reduction of GHG
emissions, such as Carbon Capture and Storage (CCS), geothermal energy, wind
3,000,000 5,000,0004,000,000 6,000,000
2021 2020
2D Seismic -
5,512,611
km
2D Seismic -
5,549,286
km
300,000 900,000600,000 1,200,000
2021 2020
2,000,000 6,000,000 10,000,0004,000,000 8,000,000
2021 2020
Well Logs -
9,473,902 logs
Well Logs -
9,395,803 logs
*Data inventory may from time to time be reduced based on marketing rights expiring. This explains the reduction
in 2D library when comparing 2021 to 2020.
With a net book value of USD 501.4 million (USD 646.7 million in 2020), TGS’ library of
multi-client seismic data, geological data and integrated products represented 35%
(36% in 2020) of total assets as of 31 December 2021. Seismic data, representing 90%
of the library’s net book value at year-end, is amortized on a project-by-project basis
as follows:
• During the work in progress (WIP) phase, amortization is based on total cost
versus forecasted total revenues of the project.
• After a project is completed, it is amortized on a straight-line basis. The straight-
line amortization is assigned over the remaining useful life, which for most
offshore projects is four years. For most onshore projects, the useful life after
completion is seven years.
3D Seismic -
1,104,138 km
3D Seismic -
1,039,735 km
26
energy and solar energy. The starting point is the Company’s vast subsurface data
library, combined with core skills in geoscience, data processing, data management,
data analytics and artificial intelligence (AI). This will be complemented by relevant
additional data types and subject matter expertise.
The execution of the NES strategy accelerated during 2021. In May 2021, the Group
acquired 4C Offshore Ltd., a leading provider of market intelligence for the offshore
wind industry based in Lowestoft, UK. In addition, a number of organic growth
projects have been initiated, with several products being launched.
Risk Management and Internal Control
TGS’ activities are heavily dependent on the capital spending budgets of E&P
companies in the oil and gas industry. These budgets are, in turn, largely a function
of actual and/or expected shifts in oil and gas prices. Consequently, TGS’ activities,
opportunities and profitability are linked to the fluctuations in these prices. Under
TGS’ business model, discretionary investments in new multi-client projects are by
far the largest use of the Group’s cash. As TGS does not itself own seismic vessels or
onshore seismic crews, but rather outsources these acquisition services on short-
term contracts to vendors, the Group can quickly adjust cash outflow in accordance
with market changes, thereby mitigating part of the risk represented by movements
in oil and gas prices.
TGS is exposed to financial risks such as currency, liquidity and credit risk. Our
operational exposure to currency risk is low as significant portions of revenues
earned and costs incurred are in USD. However, as significant parts of the Group’s
taxes are calculated and paid in NOK and BRL, fluctuations between the NOK/BRL
and the USD result in currency exchange gains or losses. From 2016, the quarterly
dividend payments have been linked to USD, which has reduced the NOK exposure
significantly.
TGS operates in a range of tax jurisdictions with complex considerations and legislation
concerning both indirect and direct taxation, including Brazil and Argentina. Thus,
uncertainties exist related to reported tax liabilities and exposures. Recognized
taxes (both direct and indirect) are based on all known and available information and
represents our best estimate as of the date of reporting.
The jurisdictions in which TGS operates are also subject to changing tax regulations,
which may impact assessments, for instance concerning the recoverability of credits.
Furthermore, tax authorities may challenge the calculation of both taxes and credits
from prior periods. Such processes and proceedings may result in changes to
previously reported and calculated tax positions, which in turn may lead to TGS having
to recognize operating or financial expenses in the period of change.
Liquidity risk arises from a lack of correlation between free cash flow and financial
commitments. As of 31 December 2021, TGS held current assets of USD 435.3
million, of which cash and cash equivalents represented USD 215.3 million, and
current liabilities were USD 446.7 million. In addition, the Group established a USD
100 million revolving credit facility in October 2018 and renewed it in February 2021; it
remains undrawn at the date of this report.
The Group holds no material interest-bearing debt apart from capitalized lease
obligations (USD 43.8 million versus USD 57.9 million 2020). The multi-client library
(USD 704.9 million in 2021 versus USD 965.6 million in 2020) is treated as a non-
current asset in the financial statements. The Board considers the liquidity risk of
the Group to be low. TGS is exposed to credit risk through sales and receivables and
uses its best efforts to manage this risk by monitoring receivables and implementing
credit checks and other actions as deemed appropriate. In addition, excess cash is
placed in either bank deposits or financial instruments that have a minimum rating
of “investment grade.”
The Group’s maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial assets, such as accounts receivables, other short-term
receivables and other non-current assets. TGS evaluates the concentration of risk
with respect to trade receivables as low due to the Group’s credit rating policies and
because our clients are mainly large energy companies, considered to be financially
sound. TGS is highly focused on maintaining adequate internal controls.
The Group’s primary business activity is building its multi-client geoscientific data
library, which represents its largest financial asset, through multiple investments in
new data for licensing to clients. TGS uses customized investment proposal models
and reporting tools to assess and monitor the status and performance of the multi-
client projects.
TGS is exposed to different types of climate-related risks, which are addressed by
the Board’s sustainability strategy. Please refer to the Sustainability report for more
details.
Reference is made to Note 16 of the Consolidated Financial Statements and to the
more detailed information on risk management and internal control in the Corporate
Governance section of the Annual Report.
Organization, Working Environment and Equal Opportunity
TGS’ global workforce grew 2% from year-end 2020 to year-end 2021 (decrease of 4%
when excluding 4C Offshore).
As various office locations returned to in-person or hybrid working conditions, the
focus was on renewing engagement activities and improving communication with
the aim of reconnecting employees across departments and locations. The Board
emphasizes the importance of employee engagement and has set relevant measures
for management, e.g., as part of the 2022 Employee Bonus Plan. TGS continued
to maintain voluntary staff turnover at an acceptable 10% (11% in 2020) and was
successful in attracting new talent.
27
The Parent Company had 35 employees as of 31 December 2021. At year-end, TGS
had a total of 471 employees in the following locations: 293 employees in the United
States, 114 employees in the United Kingdom, 35 employees in Norway, 15 employees
in Brazil, 7 employees in Australia, 4 employees in Canada and 3 employees in other
countries. TGS also had 28 4C Offshore employees in the United Kingdom. The
number of employees in the Group at the end of 2020 was 462.
The Board considers the working environment in the Group to be good, as confirmed
by the annual employee engagement survey. The Board and Management believe that
the diversity of our employees is a core strength of TGS; and employees of diverse
gender, ethnicity and nationality are provided with equal opportunity and treated fairly
within the Group.
At the end of 2021, women comprised 27% of the total workforce in the Group (29% in
2020). The corresponding figure for managers is 29% at the end of 2021 (29% in 2020).
In 2021, 31% of promotions and 32% of new hires were female.
In 2021 a total of 862 (752 in 2020) working days were lost due to sickness,
corresponding to 0.85% (0.62%) of total days worked.
Health, Safety and Environmental
As a strong supporter of environmental sustainability, TGS is fully committed to
safeguarding and maintaining the environment in which we operate and live, while
also providing a safe and healthy workplace for its employees and contractors.
TGS manages and monitors these activities and operations through the active
implementation of a comprehensive HSE Management System. Built around
corporate policies and procedures and in alignment with industry standards. TGS’ HSE
Management System is designed to ensure that all Group operations are conducted
in the absence of significant risk, which is achieved by continuously identifying and
controlling hazards which may arise through any aspect of the Group’s operations.
TGS understands the importance and value of working with local governments,
regulatory authorities and non-government organizations and strives to establish
effective communication with all relevant stakeholders to help identify, understand
and mitigate environmental risks associated with geophysical research activities.
TGS complies with relevant laws and local regulations, while also working closely
with several industry associations to investigate and implement ways to mitigate
the potential impact from seismic operations on the environment. Additionally, TGS
works with vessel owners and seismic contractors to ensure compliance with TGS’
Sustainability Program, which includes tracking and reporting of carbon emissions,
zero reportable spills to the environment and reporting 3.4 metrics tons of marine
debris removal efforts to EnerGeo’s Ghost Net Initiative.
Each year, TGS promotes a top-down message of health and safety by requiring
that each member of TGS’ executive management conduct at least one HSE facility
inspection and one field visit. In light of ongoing COVID-19 travel restrictions in 2021,
members of TGS’ Executive Management team participated in eight startup/closeout
meetings with field crews and completed all executive HSE facility inspections.
Additionally, TGS’ Project and HSE Managers participated in all project planning
activities. Finally, TGS achieved full compliance with vessel and land crew HSE audit
requirements, and TGS Project and HSE Managers ensured that all outstanding
action items were properly rectified before the start of acquisition. All employees
completed one HSE training course in 2021 (100% training compliance) that included
modules on mitigating COVID-19 in the office and office emergency preparedness/
response.
In 2021, TGS continued to enact its business continuity plan and the local COVID-19
Response Teams continued to monitor the pandemic, ensuring that mitigation
measures were aligned with national guidance from health authorities and that
employees were given adequate support, information and resources for managing
COVID-19. For TGS’ field operations, all contractor and operational COVID-19 plans
were reviewed by TGS and were updated accordingly throughout the lifecycle of
each project, ensuring that adequate mitigation measures were implemented while
also focusing on managing the wellbeing of field contractors. In 2021, there was
one confirmed COVID-19 work-related case in a TGS office and no other community
spread event occurred. Regarding field operations, there was one shoreside work-
related COVID-19 case and there was no community spread onboard any of the
vessels operating for TGS. Within our land operations, there were two work-related
COVID-19 cases and the affected individuals received necessary treatment, were
properly quarantined and fully recovered.
More detailed information on TGS’ HSE initiatives may be found in the Sustainability
Report, included as a separate section of the Annual Report and on TGS’ website
through our dedicated sustainability webpage.
Sustainability and Corporate Social Responsibility
Ensuring that TGS’ business operates sustainably and provides sustainable solutions
for our customers continues to be high on the Board of Directors’ agenda. In 2021, the
Group continued to address the implications of the COVID-19 pandemic, both in its
workforce and its operations, through global and local strategies aimed at ensuring
our employees’ and contractors’ health, safety, engagement and wellness.
TGS continued implementing the Board’s sustainability strategy by addressing
Scope 1 and 2 emissions and setting net zero targets, releasing a Human Rights
policy coupled with enhanced review and monitoring our supply chain’s human
rights practices, and integrating a Supplier Code of Conduct and related contractual
provisions into our supplier agreements to ensure our supply chain operates in
a sustainable manner. In addition, TGS focused on ways to provide products and
services to help our customers address their sustainability initiatives and diversified
into providing commercial solutions for renewables industry.
28
TGS is committed to minimizing and mitigating the potential disruption to the marine
and onshore environment and climate that may be caused by its operations. Proper
project planning and management, as well as coordination with our vendors, partners
and local communities, play a significant role in ensuring that our operations and
activities do not have a detrimental impact to the environment.
Please refer to the Sustainability Report, included as a separate section of this Annual
Report and on TGS’ website at www.tgs.com, for more information. The report has
been prepared in accordance with the Norwegian Accounting Act, section 3-3c,
and the Board of Directors believes that the Group complies with the reporting
requirements.
Board Structure and Corporate Governance
The Board of Directors consists of seven directors, each serving a one-year term.
The Board’s Audit and Compensation Committees are composed exclusively of
independent directors. No material transactions other than the remuneration
disclosed in Note 10 of the Consolidated Financial Statements have occurred in 2021
between TGS and its management, directors or shareholders.
The independent Nomination Committee, elected by the shareholders, consists of the
following members: Glen Ole Rødland (Chair), Christina Stray and Herman Kleeven.
Rødland and Stray were elected for two-year terms at the Annual General Meeting on
11 May 2021, while Kleeven was elected for a two-year term on 12 May 2020.
TGS emphasizes independence and integrity in all matters relating to the Board,
management and its shareholders.
The Group conducts an active compliance program designed to continually inform
and educate employees on ethical and legal issues. TGS employs a Board-appointed
compliance officer who reports quarterly on the Group’s compliance activities and
objectives.
TGS bases its corporate governance policies and practices on the Norwegian Code of
Practice for Corporate Governance issued on 14 October 2021. The Board of Directors
believes that TGS complies in all areas relating to the Code of Practice and will
address compliance with any subsequent amendments. A more detailed description
of how TGS complies with the Code of Practice and the Norwegian Accounting Act’s
requirements for reporting on corporate governance is included in the Report on
Corporate Governance included in this Annual Report and on TGS’ website at www.
tgs.com.
Salary and Other Compensation
TGS compensates its employees according to market conditions that are reviewed
on an annual basis by the Compensation Committee. Compensation includes base
salary, insurance and retirement benefits programs, a profit-sharing bonus plan
based on the Group’s performance and, in certain cases, equity-based, long-term
incentive awards. For further details, please refer to section 12 of the Report on
Corporate Governance and the Declaration on Executive Remuneration 2021.
The members of the Board of Directors do not participate in any bonus plan, profit-
sharing plan or stock incentive plan. In recent years, the directors’ compensation
has been composed of both a fixed fee and a number of restricted TGS shares. The
remuneration is not related to the Group’s financial result.
Reference is made to Note 10 of the Consolidated Financial Statements for details on
the remuneration for 2021.
Significant Litigation
The Board is regularly updated on significant litigation matters. As a result, at
each Board meeting, the Board receives an update on any material developments
in the matters described in Note 24 to the Consolidated Financial Statements. The
Audit Committee also receives an update on a quarterly basis regarding other less
significant potential and pending litigation matters.
Outlook
Although demand for multi-client seismic data remains at a low level in a historical
perspective, some positive signs of improvement have been observed lately, and the
sales momentum towards the end of 2021 was better than earlier in the year, even
when adjusting for the normal seasonality. This is further underscored by a strong
order inflow for new projects experienced during the last three months of the year.
Strengthening oil prices have driven reported cash flows of the E&P companies to
record high levels, with returns on investments continuing to improve. As a result,
spending for exploration and production activities is expected to grow substantially in
2022. Contrary to previous cycles, seismic spending has so far lagged the increase in
energy prices, as clients to a larger extent are prioritizing investments in other energy
sources with lower GHG emissions, combined with the strong focus on reducing debt
and providing direct returns to shareholders.
While the strong recent cash flow has accelerated the deleveraging of balance sheets,
some clients have indicated concerns about the falling reserves that will naturally
result from reduced investments in exploration. The Board believes that the need to
increase reserves, together with stronger balance sheets and solid oil and gas prices,
will result in more exploration activity. As a result, the Board is confident about a
gradually improving market in 2022.
Over the past weeks leading up to the date of this report, Russia’s invasion of Ukraine
has affected the global energy markets. Prices for oil and gas have increased
substantially and the topic of energy security has been returning on the agenda, which
could increase spending for the exploration for oil and gas.
29
These forward-looking statements reflect current views about future events and are,
by their nature, subject to significant risks, uncertainties and assumptions that are
difficult to predict because they relate to events and depend on circumstances that
will occur in the future.
Events after the Balance Sheet Date
After 31 December 2021 Russia invaded Ukraine. TGS has low direct exposure to the
situation, with only approximately 0.3% of revenues in 2021 coming from the sale of
data in Russia and no revenues from Ukraine. The Board of Directors continues to
monitor the situation and assess potential direct and indirect consequences for TGS,
and how it may affect financial performance going forward.
On 27 January 2022, a federal court in the U.S. decided to vacate the U.S. Gulf of
Mexico (GOM) sale that took place in November 2021, ruling that the environmental
impact study conducted in support of the lease sale was insufficient. Although the
decision may be appealed, the practical effect is likely that no further lease sales in
the GOM will occur until a new five-year lease schedule plan is in place. Over the past
two to three years, there has been a gradual shift from frontier to infrastructure-led
exploration in the GOM, and TGS’ recent OBN-projects have been primarily targeted
at held acreage rather than future licensing rounds. As such, the Board believes that
most of its expected revenues in the U.S. would not be significantly impacted by a
temporary halt in GOM acreage awards.
On 9 February 2022, the Board of Directors resolved to pay a quarterly dividend of
the NOK equivalent of USD 0.14 per share (NOK 1.24) to shareholders. The dividend
payment was made on 3 March 2022.
Annual Result of the Parent Company and Allocation of Loss
In 2021, revenues of the Parent Company decreased by 16% to USD 142.8 million from
USD 170.5 million in 2020, as the challenging conditions in the global multi-client
seismic market continued through the year. 2021 operating loss amounted to USD
53.9 million compared to an operating loss of USD 98.2 million in 2020. The decrease
in loss was mainly due to lower amortization and impairment charges related to the
multi-client library in 2021. Net loss for 2021 was USD 55.5 million, a reduction of 17%
compared to net loss of USD 66.7 million in 2020. The Board proposes that the Parent
Company’s net loss of USD 55.5 million shall be allocated as follows:
Provision for dividend USD 16.3 million
Allocated to Other Equity USD -71.7 million
Total allocated USD -55.5 million
2021 was another demanding year for our industry, with continued low spending by
clients, combined with longer periods of COVID-related office closures and travel
restrictions. The Board of Directors would like to thank all employees for the flexibility
and dedicated focus shown to maintain activity levels through this period.
Oslo, 30 March 2022
Confirmation from the Board of Directors and CEO
We confirm, to the best of our knowledge, that the financial statements for the period
1 January to 31 December 2021 have been prepared in accordance with current
applicable accounting standards and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the entity and the Group taken as a whole. We
also confirm that this report of the Board of Directors with references to the notes to
the accounts and the Corporate Governance section of the Annual Report includes
a true and fair review of the development and performance of the business and the
position of TGS, together with a description of the principal risks and uncertainties
facing the Group.
Henry H. Hamilton III
Chairman
Irene Egset
Director
Mark S. Leonard
Director
Kristian Johansen
Chief Executive Officer
Vicki Messer
Director
Wenche Agerup
Director
Grethe Kristin Moen
Director
Christopher Finlayson
Director
Svein Harald Øygard
Director
Henry H. Hamilton III
Chairman
Irene Egset
Director
Mark S. Leonard
Director
Kristian Johansen
Chief Executive Officer
Vicki Messer
Director
Wenche Agerup
Director
Grethe Kristin Moen
Director
Christopher Finlayson
Director
Svein Harald Øygard
Director
TGS Financials
TGS’ asset-light and flexible business model ensures
that we are continuing to generate healthy cash flow
during periods of challenging market conditions.
31
Consolidated Statement of Comprehensive Income
(All amounts in USD 1,000s unless noted otherwise)
Note 2021 2020
Restated
1
Revenue 4,5,18,25,28 518,689 360,001
Cost of goods sold - proprietary and other 28 11,625 7,050
Amortization of the multi-client library 8,18,28 174,276 255,738
Impairment of the multi-client library 8,9,18,28 284,584 212,471
Personnel costs 10 54,870 53,864
Other operating expenses 46,410 39,866
Depreciation, amortization and impairment 6,7,8 19,255 19,932
Total operating expenses 591,021 588,920
Operating profit/(loss) (72,331 ) (228,919 )
Financial income 26 2,525 853
Financial expenses 26,28 (6,362 ) (3,130 )
Net exchange gains/(losses) 26,28 (8,918 ) 7,807
Net financial items (12,756 ) 5,530
Profit/(loss) before taxes (85,087 ) (223,389 )
Taxes 27,28 (9,103 ) (55,892 )
Net Income (75,985 ) (167,498 )
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Other comprehensive income, net of tax 27 – –
Total comprehensive income/(loss) for the period (75,985 ) (167,498 )
Net income attributable to the owners of the Parent (75,985 ) (167,498 )
Net income attributable to non-controlling interests – –
(75,985 ) (167,498 )
Total comprehensive income attributable to the owners of the Parent (75,985 ) (167,498 )
Total comprehensive income attributable to non-controlling interests – –
(75,985 ) (167,498 )
Earnings per share (USD) 12 (0.65 ) (1.43 )
Earnings per share, diluted (USD) 12 (0.65 ) (1.43 )
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
32
Consolidated Balance Sheet – Assets
As of 31 December (All amounts in USD 1,000s unless noted otherwise)
Note 2021 2020
Restated
1
Assets
Non-current assets
Goodwill 3,8,9 303,964 288,377
Intangible assets: Multi-client library 3,8,9,28 704,868 965,551
Other intangible assets 8,9 25,477 17,396
Deferred tax assets 27,28 95,888 76,048
Buildings 6 3,057 2,257
Machinery and equipment 6 16,462 25,349
Right-of-use-asset 7 35,770 48,690
Sub-lease asset 7 1,258 965
Other non-current assets 17,24 7,791 19,471
Total non-current assets 1,194,533 1,444,104
Current assets
Accounts receivable 16,19 113,513 168,746
Accrued revenues 16,19 32,551 108,737
Other receivables 19,28 73,901 91,516
Cash and cash equivalents 14 215,329 195,716
Total current assets 435,294 564,715
Total assets 1,629,827 2,008,818
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
33
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Consolidated Balance Sheet - Equity & Liabilities
As of 31 December (All amounts in USD 1,000s unless noted otherwise)
Note 2021 2020
Restated
1
Equity and liabilities
Equity
Paid-in capital
Share capital 13 4,086 4,082
Treasury shares 13 (38 ) (1 )
Share premium 416,878 416,878
Other paid-in equity 45,248 45,248
Total paid-in capital 466,174 466,206
Other equity 28 649,161 802,457
Equity attributable to owners of the Parent 1,115,335 1,268,664
Non-controlling interests (7 ) (7 )
Total equity 28 1,115,328 1,268,657
Liabilities
Non-current liabilities
Other non-current liabilities 16 2,706 757
Lease liability 7 33,022 44,551
Deferred tax liability 27 32,059 29,100
Total non-current liabilities 67,787 74,408
Current liabilities
Short-term debt 16,20 – 2,500
Accounts payable and debt to partners 16,20,28 71,669 77,683
Taxes payable, withheld payroll tax, Social
Security and VAT
20,27,28 77,941 37,582
Lease liability 7,20 10,782 13,333
Deferred revenue 4,20,28 238,169 441,341
Other current liabilities 20,28 48,151 93,314
Total current liabilities 446,712 665,754
Total liabilities 514,499 740,162
Total equity and liabilities 1,629,827 2,008,818
Henry H. Hamilton III
Chairman
Irene Egset
Director
Mark S. Leonard
Director
Kristian Johansen
Chief Executive Officer
Vicki Messer
Director
Wenche Agerup
Director
Grethe Kristin Moen
Director
Christopher Finlayson
Director
Svein Harald Øygard
Director
Oslo, 30 March 2022
34
Consolidated Statement of Changes in Equity
As of 31 December (All amounts in USD 1,000s unless noted otherwise)
Share Capital
(par value at
NOK 0.25)
Treasury
Shares
Share Premium
Other Paid-in
Capital
Foreign Currency
Translation Reserve
Retained Earnings Total Non-controlling Interest Total Equity
Opening balance 1 January 2021 4,082 (1 ) 416,878 45,248 (22,233 ) 824,689 1,268,664 (7 ) 1,268,657
Net income – – – – – (75,985 ) (75,985 ) – (75,985 )
Total comprehensive income – – – – – (75,985 ) (75,985 ) – (75,985 )
Distribution of treasury shares – 0 – – – 238 238 – 238
Purchase of own shares – (38 ) – – – (15,651 ) (15,689 ) – (15,689 )
Cancellation of treasury shares held (1 ) 1 – – – – – – –
Cost of equity-settled long-term incentive plans 5 – – – – 3,627 3,632 – 3,632
Dividends – – – – – (65,524 ) (65,524 ) – (65,524 )
Balance 31 December 2021 4,086 (38 ) 416,878 45,248 (22,233 ) 671,394 1,115,335 (7 ) 1,115,328
Share Capital
(par value at
NOK 0.25)
Treasury
Shares
Share Premium
Other Paid-in
Capital
Foreign Currency
Translation Reserve
Retained Earnings
1
Total Non-controlling Interest Total Equity
Closing balance 31 December 2019 4,127 (49 ) 416,878 45,248 (22,233 ) 1,101,841 1,545,819 (7 ) 1,545,812
Adjustments – – – – – (18,285 ) (18,285 ) – (18,285 )
Opening balance 1 January 2020 4,127 (49 ) 416,878 45,248 (22,233 ) 1,083,556 1,527,527 (7 ) 1,527,520
Net income – – – – – (167,498 ) (167,498 ) – (167,498 )
Total comprehensive income – – – – – (167,498 ) (167,498 ) – (167,498 )
Distribution of treasury shares – 0 – – – 165 165 – 165
Purchase of own shares – (7 ) – – – (6,594 ) (6,601 ) – (6,601 )
Cancellation of treasury shares held (54 ) 54 – – – – – – –
Cost of equity-settled long-term incentive plans 9 – – – – 2,843 2,852 – 2,852
Dividends – – – – – (87,783 ) (87,783 ) – (87,783 )
Balance 31 December 2020 4,082 (1 ) 416,878 45,248 (22,233 ) 824,689 1,268,664 (7 ) 1,268,657
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
35
Consolidated Statement of Cash Flow
As of 31 December (All amounts in USD 1,000s unless noted otherwise)
Note 2021 2020
Cash flow from operating activities
Received payments from customers 438,869 572,021
Payments for salaries, pensions, social security tax (43,841 ) (69,340 )
Payments of other operational costs (63,201 ) (84,260 )
Paid income taxes 27 (14,178 ) (63,694 )
Net cash flow from operating activities
1
Cash flow from investing activities
Investments in tangible and intangible assets (13,579 ) (35,200 )
Investments in multi-client library (171,490 ) (356,146 )
Investments through mergers and acquisitions (18,304 ) –
Interest received 2,525 853
Net cash flow from investing activities (200,848 ) (390,493 )
Cash flow from financing activities
Interest paid (6,362 ) (2,896 )
Dividend payments 13 (65,524 ) (87,783 )
Repayment of interest bearing debt (2,500 ) –
Purchase of own shares (15,689 ) (6,601 )
Net Cash flow from financing activities (90,075 ) (97,280 )
Net change in cash and cash equivalents 26,726 (133,045 )
Cash and cash equivalents at the beginning of the period 14 195,716 323,408
Net unrealized currency gains/(losses) (7,113 ) 5,354
Cash and cash equivalents at the end of the period 14 215,329 195,716
1) Reconciliation
Profit before taxes 2021 2020²
Depreciation/amortization/impairment 6,8,9 (85,087 ) (223,389 )
Disposals at cost price 478,115 488,141
Changes in accounts receivables and accrued revenues 131,418 101,688
Unrealized currency gains/(losses) – (5,354 )
Changes in other receivables 17,616 (39,316 )
Changes in other balance sheet items (210,235 ) 96,652
Paid taxes 27 (14,178 ) (63,694 )
Net cash flow from operating activities 317,649 354,728
2)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
36
1. GENERAL ACCOUNTING POLICIES
General Information
TGS ASA (the Parent Company) is a public limited liability company incorporated in
Norway on 21 August 1996. The address of its registered office is Askekroken 11,
0277 Oslo, Norway. TGS ASA is listed on the Oslo Stock Exchange under the trading
symbol “TGS.”
TGS ASA and its subsidiaries (TGS or the Group) provide multi-client geoscience data
to oil and gas exploration and production companies worldwide. In addition to extensive
global geophysical and geological data libraries that include multi-client seismic data,
magnetic and gravity data, digital well logs, production data and directional surveys,
TGS also offers advanced processing and imaging services, interpretation products
and data integration solutions. During 2021 TGS also established an offering of data,
insights and software directed towards energy transition-related industries, such as
wind, solar and geothermal energy, as well as Carbon Capture and Storage (CCS) and
deep-sea mineral exploration. The consolidated financial statements of TGS were
authorized by the Board of Directors on 30 March 2022.
Basis of Preparation
The consolidated financial statements of TGS have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union
(EU) in effect as of 31 December 2021 and consist of the consolidated statement of
comprehensive income, the consolidated balance sheet, the consolidated cash
flow statement, the consolidated statement of changes in equity and notes to the
consolidated financial statements. The consolidated financial statements have been
prepared on a historical cost basis. The financial statements of the subsidiaries have
been prepared for the same reporting year as the Parent Company, using consistent
accounting policies.
Summary of Significant Accounting Policies
Principles of Consolidation
Companies Consolidated
The consolidated financial statements comprise the financial statements of the Parent
Company and its subsidiaries as of 31 December 2021. Control is achieved when TGS
is exposed, or has rights, to variable returns from its involvement with the investee
and can affect those returns through its power over the investee. Specifically, TGS
controls an investee if and only if TGS has:
Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee),
• Exposure, or rights, to variable returns from its involvement with the investee,
and
• The ability to use its power over the investee to affect its returns.
Consolidation of a subsidiary begins when TGS obtains control over the subsidiary
and ceases when TGS loses control of the subsidiary. Assets, liabilities, income and
expenses of a subsidiary acquired or disposed of during the year are included in the
statement of comprehensive income from the date TGS gains control until the date
TGS ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed
to the equity holders of the Parent Company and to the non-controlling interests,
even if this results in the non-controlling interests having a deficit balance. All intra-
group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of TGS are eliminated in full through consolidation.
If TGS loses control over a subsidiary, the Group derecognizes the related assets
(including goodwill), liabilities, non-controlling interest and other components of
equity while any resulting gain or loss is recognized in profit or loss. Any retained
investment is accounted for in accordance with the applicable IFRS.
Presentation Currency
TGS presents its consolidated financial statements in USD. The majority of TGS’
revenues and expenses are denominated in USD, and USD is the functional currency
for all material entities in TGS, including the Parent Company. The financial statements
of the Parent Company are presented separately in this Annual Report.
Foreign Currency
Transactions in foreign currency are translated to the functional currency using
the exchange rates prevailing at the dates of the transactions. Monetary assets and
liabilities in non-functional currencies are translated into functional currency spot
rate of exchange ruling at the date of the balance sheet. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in non-functional currencies are
recognized within profit and loss.
Notes to Consolidated Financial Statements
(All amounts in USD 1,000s unless noted otherwise)
37
Revenue from Contracts with Customers
Revenue from contracts with customers is recognized when control of the goods
or services are transferred to the customers at an amount which reflects the
consideration to which the Group expects to be entitled in exchange for those goods
or services.
Unfinished data
Multi-client pre-funding contracts and contracts for late sales of unfinished data (i.e.,
contracts entered into after commencement of a survey, but prior to data being ready
for delivery) are considered to be “right to use licenses” under IFRS 15, meaning that
all revenues related to these contracts are recognized at the point in time when the
licenses are transferred to the customers, which would typically be upon completion
of processing of the surveys and granting of access to the finished surveys or delivery
of the finished data, independent of services delivered to clients during the project
phase. The Group has generally concluded that it is the principal in its revenue
arrangements, because it typically controls the goods or services before transferring
them to the customer.
Finished Data
Revenue for sale of finished data is recognized at a point in time, generally upon
delivery of the final processed data (i.e., when the client has gained access to the data
under a binding agreement). Through the binding agreement the customer is granted
a non-exclusive license to use the finished data. Sales of finished data are presented
as part of late sales revenue together with sales of unfinished data in cases where the
relevant survey had already commenced when the contract was entered into.
Revenue Sharing Arrangements
From time to time, TGS enters into contracts where revenue is shared with
governments or other parties (see Joint Arrangements below). Such revenue is
recognized on a net basis in accordance with applicable recognition principles.
Proprietary Contracts
Revenue from proprietary contracts, where TGS delivers services for the exclusive
benefit of the customer, is recognized over time, normally on a percentage of
completion basis, measured according to the acquired and processed volume of data
in relation to the total size of the project.
Royalty Income
Royalty income is recognized when the subsequent sale related to the royalty occurs.
Cost of Goods Sold (COGS) - Proprietary Contracts and Other
Cost of goods sold consists of direct costs related to proprietary contract work and
costs related to delivery of geoscientific data.
Multi-client Library
The multi-client library includes completed and in-progress geophysical and
geological data to be licensed on a non-exclusive basis to energy companies. The
costs directly attributable to data acquisition and processing are capitalized and
included in the library value. Costs directly attributable to data acquisition and
processing includes mainly vessel costs, payroll and hardware/software costs. Data
acquisition costs include mobilization costs incurred when relocating vessels to the
survey areas. The library also includes the cost of data purchased from third parties.
The library of finished multi-client seismic data and interpretations is presented at
cost reduced by accumulated amortization and impairment.
Straight-line amortization
After a project is completed, a straight-line amortization is applied. The straight-
line amortization is assigned over the remaining useful life, which for most marine
projects is four years. For most onshore projects, the remaining useful life after
completion of a project is seven years.
Accelerated Amortization of Seismic Data
No amortization is recognized until the point in time when the license is transferred
to the customer, which would typically be upon completion of processing of the survey
and granting of access to the finished survey or delivery of the finished data. When a
project is completed and after pre-funding is recognized, recognition of accelerated
amortization may be necessary in the event the recoverable value (present value of
expected Late Sales) is lower than the net book value of the survey (capitalized cost
of the survey).
Following the adoption of the straight-line amortization policy for completed surveys,
recognition of accelerated amortization of a library may be necessary in the event
that sales on a survey are realized disproportionately sooner within that survey’s
useful life.
Amortization Policy on Seismic Data Purchased from Third Parties
When purchasing seismic data from third parties, a straight-line amortization over
the remaining useful life of the data is recognized. The straight-line amortization is
based on the cost of the seismic data recognized on the date of the purchase.
38
Amortization Policy on Well Data Products
The library of multi-client well logs is presented at cost, reduced by accumulated
amortization. Amortization is recorded as a straight-line amortization over seven
years.
Impairment Evaluation Multi-Client Library
When there are indicators that the net book value may not be recoverable, the library
is tested for impairment on the individual cash generating unit (CGU). Any impairment
of the multi-client library is recognized immediately and presented as “Impairment
of the multi-client library” together with accelerated amortization in the statement of
profit or loss.
For further information about impairment, see “Impairment of Non-Financial Assets”
below.
Joint Arrangements
A joint arrangement is a contractual arrangement providing that TGS and other
parties undertake an economic activity that is subject to joint control (i.e., when the
strategic, financial and operating policy decisions relating to the activities of the
joint arrangement require the unanimous consent of the parties sharing control).
Joint arrangements are classified as joint operations or joint ventures, depending
on the rights to the assets and obligations for the liabilities of the parties to the
arrangements. If the parties to the joint arrangement have rights to the net assets
of the arrangement, the arrangement is a joint venture. However, if the parties have
rights to the assets and obligations related to the liabilities of the arrangement, the
arrangement is a joint operation. Interests in joint ventures are accounted for using
the equity method.
For certain multi-client library projects, TGS invests in the project with other parties
and has cooperation agreements whereby revenues and costs will be shared with
other companies. These agreements are initiated and agreed to as joint operations
where both parties have rights to the assets and share in the liabilities. TGS recognizes
its share of the investment in the multi-client library, its share of revenues from the
sale of the multi-client survey, related amortization and expenses. When TGS has a
right to market and sell the seismic project, TGS enters into the license contracts
with customers and invoices and collects payments from the customers. Accounts
receivables under these arrangements are presented on a gross basis, with the
portion due to the partner being presented as debt to partners. Similarly, when a
partner holds the right to market and sell the project and is the party responsible
for invoicing and collection from the customers, TGS only recognizes its share of the
related accounts receivables.
Other Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
The cost of intangible assets in a business combination is its fair value at the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortization and accumulated impairment losses, if any.
Internally generated intangibles, excluding capitalized development costs, are
not capitalized and the related expenditure is expensed in the period in which the
expenditure is incurred.
Intangible assets with finite life are amortized over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may
be impaired. The amortization period and the amortization method for an intangible
asset with a finite useful life are reviewed at least at the end of each reporting period.
The straight-line amortization method is used for most intangible assets as this best
reflects the consumption of the assets.
Research and Development Costs
Research costs are expensed as incurred. Development expenditures on an individual
project are recognized as an intangible asset when TGS can demonstrate:
• It is technically feasible to complete the product so that it will be available for use;
• Management intends to complete the product and use it;
• There is an ability to use the software product;
• It can be demonstrated how the product will generate future economic benefits;
• Adequate technical, financial or other resources to complete the development
and to use the product are available; and
• The expenditure attributable to the product during its development can be
reliably measured.
Following initial recognition of the development expenditure as an asset, the asset
is carried at cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete, and the
asset is available for use. It is amortized over the period of expected future benefit.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred, measured
at fair value at the acquisition date, and the amount of any non-controlling interest
in the acquiree. For each business combination, the acquirer measures the non-
controlling interest in the acquiree either at fair value or at the proportionate share
39
of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and
included in administrative expenses.
When TGS acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual
terms, economic circumstances and pertinent conditions at the acquisition date.
This involves recognizing identifiable assets (including previously unrecognized
intangible assets) and liabilities (including contingent liabilities but excluding future
restructuring) of the purchased business at fair value. This includes the separation of
embedded derivatives in host contracts by acquiree.
Any contingent consideration to be transferred by the acquirer will be recognized at
fair value at the acquisition date. Subsequent changes to fair value of the contingent
consideration, which is deemed to be an asset or liability, will be recognized in profit or
loss. If the contingent consideration is classified as equity, it will not be remeasured.
Subsequent settlement is accounted for within equity. In instances where the
contingent consideration does not fall within the scope of IFRS 9, it is measured at
fair value at each reporting date and changes in fair value will be recognized in profit
or loss.
Goodwill is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the amount recognized for non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration
is lower than the fair value of the net assets of the subsidiary acquired, the difference
is recognized as a bargain purchase gain in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill from a business
combination is, from the acquisition date, allocated to each of TGS’ CGUs that are
expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities of TGS are assigned to those units. Each unit, or group of
units to which the goodwill is allocated, represents the lowest level within TGS at
which the goodwill is monitored for internal management purposes.
Should part of an operation carrying goodwill be disposed of, the goodwill which is
associated with the disposed operation is then included in book value of the operation
when determining the gain or loss on the disposal. The goodwill disposed of in this
circumstance is determined measured based on the relative values of the operation
disposed of and the portion of the CGU retained.
Goodwill is reviewed for impairment annually or more frequently if events or changes
in circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of the
CGU, or group of CGUs, to which the goodwill relates. Where the recoverable amount
of the CGU (or group of CGUs) is less than the book value of the CGU (or group of CGUs)
to which goodwill has been allocated, an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed in future periods.
Tangible Non-Current Assets
Tangible non-current assets are presented at historical cost less accumulated
depreciation and accumulated impairment losses. Purchases which are expected to
have a technical and economic life of more than one year are capitalized as tangible
non-current assets. Depreciation begins when the assets are available for use.
Tangible non-current assets held for sale are stated at the lower of book value and
presumed market value and are not subject to depreciation.
Impairment of Non-Financial Assets
TGS assesses, at each reporting date, whether there is an indication that an asset
may need to be impaired. If any indication exists, or when annual impairment testing
for an asset is required, TGS estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or CGUs fair value less costs of
disposal and its value in use. The recoverable amount is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets. When the carrying amount of an asset or
CGU exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount.
In assessing value in use, the estimated future cash flows calculated in USD are
discounted to their present value using a post-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
TGS bases its impairment calculation on detailed budgets and forecast calculations,
which are prepared separately for each of TGS’ CGUs to which the individual assets
are allocated. These budgets and forecast calculations generally cover a period of
five years. For longer periods, a long-term growth rate is calculated and applied to
project future cash flows after the fifth year.
Impairment losses are recognized in the statement of profit or loss in expense
categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to
determine whether there is an indication that previously recognized impairment
losses no longer exist or have decreased. If such indication exists, TGS estimates the
asset’s or the CGU’s recoverable amount. A previously recognized impairment loss
is reversed only if there has been a change in the assumptions used to determine
the asset’s recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not exceed its
recoverable amount, or the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in the statement of profit or loss.
40
Provisions and Contingencies
Provisions are made when TGS has a current obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made
of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects, where appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is
recognized as a finance cost.
Contingent liabilities are possible obligations as a result of a past event where the
existence of the liability depends on the occurrence, or not, of a future event. An
existing obligation, in which it is not likely that the entity will have to dispose economic
benefits, or where the obligation cannot be measured with sufficient reliability, is
also considered a contingent liability. Contingent liabilities are not recognized in
the financial statements, but if material, disclosed in the accompanying notes. A
contingent asset is not recognized in the financial statement but disclosed if there is
a certain degree of probability that it will be an advantage of TGS.
Income Taxes
Current Income Tax
Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted at the reporting date in the countries where TGS
operates and generates taxable income.
Deferred Tax
Deferred tax is provided using the liability method on temporary differences at the
balance sheet date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities have been recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the
carryforward of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible temporary
differences and the carryforward of unused tax credits and unused tax losses can be
utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred
tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable
right exists to set off current income tax assets against current income tax liabilities
and the deferred taxes relate to the same taxable company and the same taxation
authority. Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realized, or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted at
the balance sheet date.
Deferred tax relating to items recognized outside profit or loss is recognized outside
profit or loss. Deferred tax items are recognized in correlation to the underlying
transaction either in OCI or directly in equity.
The Parent Company pays its tax obligation in NOK and the fluctuations between the
NOK and the USD impact the financial items. TGS’ legal entities that do not have their
tax base in USD are exposed to changes in the USD/tax base-currency rates. Effects
within the current year are classified as tax expense.
Tax positions subject to uncertainty are identified and assessed either individually or
in groups based on an estimate of the probability that the tax authorities will accept or
reject a certain treatment. Where it is assessed that it is not probable the tax authorities
will accept an uncertain tax treatment, the effect of the uncertainty is reflected in the
calculation of the taxable profit, tax bases, unused tax losses or credits, or tax rates.
The effect of the uncertainty is calculated by applying the most appropriate method
(most likely amount or expected value). Changes in circumstances are assessed and
reflected at each reporting date.
Share-based Payments
Key employees of TGS receive remuneration in the form of share-based payments
pursuant to which employees render services as consideration for Performance
Share Units (PSUs) and Restricted Share Units (RSUs).
The cost of the equity-settled transactions (PSUs and RSUs) is measured by reference
to the fair value at the date on which they are granted. The fair value is determined by
an external valuator using an appropriate pricing model.
The expense of the equity-settled transactions is recognized, together with a
corresponding increase in equity, over the period in which the performance and/or
service conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (the vesting date). The cumulative expense
recognized for equity-settled transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has expired and TGS’ best estimate
of the number of the equity instruments that will ultimately vest. The Consolidated
Statement of Comprehensive Income for a period represents the movement in
41
cumulative expense recognized at the beginning and end of that period. No expense
is recognized for awards that do not ultimately vest. The dilutive effect of outstanding
unvested PSUs and RSUs is reflected as additional share dilution in the computation
of diluted earnings per share.
Financial Assets
A financial asset is any contract which gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity.
IFRS 9 contains three principal classification categories for financial assets:
measured at amortized cost, fair value through other comprehensive income (FVOCI)
and fair value through profit or loss (FVTPL).
The classification of financial assets at initial recognition depends on the financial
asset’s contractual cash flow characteristics and the Group’s business model
for managing them. With the exception of trade receivables that do not contain a
significant financing component, the Group initially measures a financial asset at its
fair value plus, in the case of a financial asset not at FVTPL, transaction costs.
The Group’s financial assets are trade and other receivables, and cash and cash
equivalents. Based on the nature of these assets and how they are managed, the
Group has evaluated that these qualify for classification as measured at amortized
cost.
Financial Liabilities
The Group has financial liabilities measured at amortized cost. Financial liabilities at
amortized cost comprise largely of accounts payable and debt to partners, taxes and
some minor amounts of non-current liabilities and long-term debt. These obligations
are initially recognized at fair value less transaction costs, and subsequently
measured at amortized cost through using the effective interest method. The Group
has no financial liabilities at FVTPL.
Impairment of Financial Assets
The Group recognizes an allowance for expected credit losses (ECLs) for all debt
instruments not held at FVTPL as well as for contract assets. ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted at an approximation
of the original effective interest rate. The expected cash flows will include cash flows
from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.
Loss allowances are deducted from the gross carrying amount of the financial asset.
The gross carrying amount of a financial asset is written off when the Group has no
reasonable expectations of recovering a financial asset in its entirety or a portion
thereof. Receivables are written off if the customer goes bankrupt, collection by a debt
collector has been unsuccessful for a period and in other concrete cases. However,
financial assets that are written off could still be subject to enforcement activities.
Pensions
TGS operates defined-contribution plans in Norway, UK, USA (401k) and Australia
where the Group covers the superannuation. Contributions are expensed to the
income statement as they become payable.
Leases
As a lessee:
The Group mainly leases offices and data centers. At the lease commencement date,
the Group recognizes a lease liability and corresponding right-of-use asset for all
lease agreements in which it is the lessee, except for short-term leases (defined as
twelve months or less) and low value assets, for which the Group recognizes the lease
payments as other operating expenses in the statement of profit or loss when they
incur.
The Group measures the lease liability at the present value of the lease payments
for the right to use the underlying asset during the lease term that are not paid at
the commencement date, by using the Group’s incremental borrowing rate. The
lease term represents the non-cancellable period of the lease, together with periods
covered by an option either to extend or to terminate the lease when the Group is
reasonably certain to exercise this option.
The lease payments included in the measurement comprise of:
• Fixed lease payments (including in-substance fixed payments), less any lease
incentives receivable;
• Variable lease payments that depend on an index or a rate, initially measured
using the index or rate as at the commencement date;
• Amount expected to be payable by TGS under residual value guarantees;
• The exercise price of a purchase option, if TGS is reasonably certain to exercise
that option;
• Payments of penalties for terminating the lease, if the lease term reflects TGS
exercising an option to terminate the lease.
The Group does not include variable lease payments in the lease liability. Instead, the
Group recognizes these variable lease expenses in profit or loss.
The lease liability is subsequently measured by increasing the carrying amount to
reflect interest on the lease liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to reflect any reassessment or
42
lease modifications, or to reflect adjustments in lease payments due to an adjustment
in an index or rate.
The Group measures the right-of-use asset at cost, less any accumulated depreciation
and impairment losses, adjusted for any remeasurement of lease liabilities. The cost
of the right-of-use asset comprises the amount of the initial measurement of the
lease liability recognised, any lease payments made at or before the commencement
date, less any incentives received, and any initial direct costs incurred by the Group. In
addition, the right-of-use asset is affected by an estimate of the costs to be incurred
by the Group in dismantling and removing the underlying asset, restoring the site
on which it is located or restoring the underlying asset to the condition required by
the terms and conditions of the lease, unless those costs are incurred to produce
inventories.
The Group applies the depreciation requirements in IAS 16 Property, Plant and
Equipment in depreciating the right-of-use asset, except that the right-of-use asset
is depreciated from the commencement date to the earlier of the lease term and the
remaining useful life of the right-of-use asset. The Group applies IAS 36 Impairment
of Assets to determine whether the right-of-use asset is impaired and to account for
any impairment loss identified.
Some property leases contain extension options exercisable by the Group. The Group
seeks to include extension options in new leases to provide operational flexibility. The
extension options held are exercisable only be the Group and not by the lessors. The
Group assesses at the lease commencement date whether it is reasonably certain
to exercise the extension options. The Group reassesses whether it is reasonably
certain to exercise the options if there is a significant event or significant change in
circumstances within its control.
As a lessor:
For contracts where the Group acts as a lessor, it classifies each of its leases as
either an operating lease or a finance lease. A lease is classified as a finance lease
if it transfers substantially all the risks and rewards incidental to ownership of an
underlying asset. A lease is classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to ownership of an underlying asset.
The Group sub-leases some of its right-of-use assets. On transition to IFRS 16, the
right-of-use assets related to a financial sub-lease are de-recognized from the right-
of-use asset and presented as a sub-lease asset and measured at fair value at that
date. The Group assessed the classification of the sub-lease contracts with reference
to the right-of-use asset rather than the underlying asset and concluded that they are
finance leases under IFRS 16.
Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash in bank accounts and
on hand and short-term deposits with an original maturity of three months or less.
Treasury Shares
TGS’ equity instruments that are reacquired (treasury shares) are recognized at
cost and deducted from equity. No gain or loss is recognized in profit or loss on the
purchase, sale, issue or cancellation of TGS’ own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognized in the
retained earnings.
Dividends
A dividend approved by TGS’ shareholders is recognized as a liability in TGS’ financial
statements. A corresponding amount is recognized directly in equity.
Cash Flow Statement
The cash flow statement is compiled using the direct method.
Changes in Accounting Policy and Disclosures
No standards, amendments, IFRSs or IFRIC interpretations that are effective from 1
January 2021 had impact on the consolidated financial statements of TGS. The Group
has not early adopted any standards, interpretations or amendments that have been
issued but are not yet effective. There are no IFRSs or IFRIC interpretations that are
not yet effective that the Group currently expects will have a material impact on TGS’
financial statements going forward.
2. SIGNIFICANT ACCOUNTING JUDGMENTS,
ESTIMATES AND ASSUMPTIONS
In the process of applying TGS’ accounting principles, management is required to
make estimates, judgments and assumptions that affect the amount reported in the
consolidated financial statements and accompanying notes. Management bases its
estimates and judgments on historical experience and on various other factors that
are believed to be reasonable under the circumstances, the results of which will form
the basis for making judgments on carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
The key sources of judgment and estimation of uncertainties at the balance sheet date
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 Evaluation of Multi-client Data Library
TGS performed impairment reviews and determined the value in use of the multi-
client library during 2021. The Group estimated value in use based on discounted
estimated future sales forecasts. The underlying estimates that form the basis for
the sales forecast depend on variables such as the number of oil and gas exploration
43
and production (E&P) companies operating in the area that would be interested in
the data, overall E&P spending, expectations regarding hydrocarbons in the area,
whether licenses will be awarded in the future, expected farm-ins to licenses,
relinquishments, etc. Local corporate tax rates and sales costs are applied. Changes
in these estimates may potentially affect the estimated amount of future sales
forecasts materially. The future sales forecasts are evaluated on a regular basis and
impairments are recognized in the period they occur.
For details about the book value, amortization and impairment of the multi-client
library, see Notes 8 and 9.
Impairment Evaluation of Goodwill
TGS tests the value of its goodwill on an annual basis or when there are indicators
that the carrying amount may not be recoverable. This requires an estimation of
the value in use or fair value less cost of disposal, whichever that is highest of the
CGUs or groups of CGUs to which the goodwill is allocated. Estimating the value in
use amount requires management to make an estimate of the expected future cash
flows from the CGU and to choose a suitable discount rate in order to calculate the
present value of those cash flows. Variables such as estimated future revenues,
margins and estimated long-term growth are the key drivers for the basis of the value
in use calculations. Future cash flows also depend on general development in E&P
spending, the number of market participants and technological developments.
For details about goodwill and impairment, see Note 9.
Deferred Tax Assets, liabilities and uncertain tax positions
TGS operates in a range of tax jurisdictions with complex considerations and legislation
concerning both indirect and direct taxation, which includes Brazil and Argentina.
Thus, there is always an uncertainty related to reported tax liabilities and exposures.
Tax assets and liabilities (both direct and indirect) are reported and assessed based
on all known and available information and represent TGS’ best estimate.
The jurisdictions in which TGS operates are also subject to changing tax regulations
which may impact assessments, for instance concerning the recoverability of
credits. Furthermore, tax authorities may challenge the calculation of both taxes and
credits from prior periods. Such processes and proceedings may result in changes
to previously reported and calculated tax positions, which in turn may impact TGS
results in each period.
For details about uncertain tax positions and tax contingencies, see Note 24.
Deferred tax assets are recognized for temporary deductible differences and
carryforward tax losses to the extent that it is probable that taxable profit will be
available against which the losses can be utilized. Management judgment is required
to determine the amount of deferred tax assets that can be recognized, based upon
the likely timing, any expiration of tax losses to be carried forwards, and level of future
taxable profits together with future tax planning strategies.
For details about deferred tax assets, see Note 27.
Contingent Liabilities
The preparation of the financial statements has required TGS to make judgment,
estimates and assumptions that affect the reported amounts of liabilities and the
disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying
amount in future periods.
For a description of contingent liabilities, see Note 24.
3. BUSINESS COMBINATIONS
On 12 May 2021, TGS announced its acquisition of all of the equity in 4C Offshore
Limited (4C Offshore). 4C Offshore is a leading consultancy and market research
company targeting the offshore wind energy market, providing risk analysis to the
marine, energy and subsea sectors. The current service offerings include data
subscriptions, consultancy and bespoke reports.
As the transaction was effective from 12 May 2021, the sales and costs from the
acquired company for the period 12 May to 31 December 2021 is reflected in the
consolidated financial statements of TGS.
The total goodwill, USD 15.6 million, represents the excess purchase price after
all the identifiable assets, liabilities and obligations are recognized. Goodwill can
be explained by the value associated with the skills and know-how of 4C Offshore’s
employees, new customers and potential extensions of existing relationships. The
other major fair value adjustments relate to the value of the technology, customer
relationships, trademark and deferred revenue.
The accounting for the acquisition will be revised to the extent new information is
obtained within one year of the date of acquisition relating to facts or circumstances
that existed at the date of acquisition and that require adjustments to the above
amounts, or relating to additional provisions that existed at the date of acquisition.
In June 2021, TGS completed the acquisition of a portfolio of 3D seismic surveys,
mostly in Australia, from Polarcus.
In November 2021, TGS completed the purchase of an interest in a portfolio of 3D
seismic surveys in the Green Canyon area of the U.S. Gulf of Mexico.
44
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group’s revenue from contracts with customers has been disaggregated and
presented in the table below.
Revenue type - 2021
IFRS (As
reported)
Adjustment Segment
Pre-funding
156,796 – 70,037 86,760
Late sales - unfinished data
218,292 – 142,700 75,592
Late sales - finished data
119,073 2,168 121,241
Proprietary
24,528 757 25,285
Total
518,689 – 209,812 308,877
Revenue type - 2020 Restated
1
IFRS (As reported) Adjustment Segment
Pre-funding 85,715 66,209 151,924
Late sales - unfinished data 98,640 24,312 122,951
Late sales - finished data 159,680 -985 158,695
Proprietary 15,967 -757 15,210
Total 360,001 88,779 448,780
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Payment terms
Payment terms for sale of unfinished data vary for each contract and are generally
paid in portions over a longer period with 30-days payment terms. Payment terms for
finished data and proprietary sales are mainly 30 days.
Other terms
The Group’s refund liability, return liability and warranties are considered limited, and
the Group has not recognized any such liabilities in the consolidated balance sheet.
Remaining performance obligations unsatisfied or partly unsatisfied are as of year-
end.
Performance obligations unsatisfied at year-end 2021 2020 Restated
1
Within one year 268,301 490,135
More than one year 55,962 22,107
Total 324,262 512,242
The following table provides information about receivables, contract assets and
contract liabilities from contracts with customers.
Receivables, contract assets and contract liabilities 31.12.2021 31.12.2020 Restated
1
Accounts receivables 113,513 168,746
Accrued unbilled revenue (Contract asset) 32,551 108,737
Accounts payable and debt to partners (71,669) (77,683)
Deferred revenue (Contract liabilities)
2
(238,169) (441,341)
Contract liabilities
2
2021 2020 Restated
1
At 1 January (441,341) (314,897)
Deferred during the year (93,510) (308,049)
Recognized as revenue during the year 296,682 181,605
At 31 December (238,169) (441,341)
Current (238,169) (441,341)
Non-Current – –
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
2)
Contract liabilities are presented gross.
The Group applies the practical expedient for short-term advances received from
customers. That is, the promised amount of consideration is not adjusted for the
effects of a significant financing component if the period between the transfer of the
promised goods or service and the payment is one year or less. Further, the Group
applies the practical expedient to immediately expense costs to obtain a contract if
the amortization period of the asset that would have been recognized is one year or
less. Costs to obtain and costs to fulfill contracts are not considered significant by
the Group, and these are therefore not capitalized.
5. SEGMENT INFORMATION
TGS reports monthly management information to executive management based on
the defined operating segments. Where appropriate, these operating segments are
aggregated into reportable segments that form the basis of the segment reporting. In
2019, following the acquisition of Spectrum, management reassessed its reportable
segments and reports North America, Latin America and Land separately due to the
increase in the size of these segments in respect of the group. Previously these three
operating segments were aggregated into one reportable segment, North and South
America. Land represents onshore activities in North America.
TGS has operating segments that do not individually meet the quantitative thresholds
to qualify as reportable segments. The segments which are aggregated and form
“Other segments/Corporate costs” include GPS Well Logs, GPS Interpretations,
Global Services, Imaging, Data & Analytics, New Energy Solutions and G&A. GPS
45
Wells Logs and GPS Interpretations provide well data products, interpretive studies and services to clients; Imaging processes data for multi-client and proprietary projects and
continually develops new technology and workflows for seismic imaging as well as enhancing existing ones; Data & Analytics provides Geoscience AI, Data Management, Cloud
Computing and Data Library products and services; Global Services provides project management, GIS and HSE functions. New Energy Solutions is providing data driven insights
and solutions that support the energy transition, with particular focus on renewable energy sources and Carbon Capture and Storage.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.
Segment performance is evaluated using different principles for recognition of multi-client revenues and amortization of the multi-client library than the principles applied in the
consolidated accounts.
In the segment information, revenues related to unfinished projects are recognized in accordance with percentage of completion of the relevant projects, while amortization in
the work-in-progress (WIP) phase is based on the ratio of forecasted total revenues to total forecasted cost.
During the WIP phase, amortization is based on total expected cost versus total expected revenue of the project, i.e., amortization is recorded in line with how segment revenue
is recognized for each project during this phase.
In the period after completion of the data, revenue recognition and amortization principles are consistent with those used for the consolidated accounts, meaning that a straight-
line amortization is applied. The straight-line amortization is assigned over the remaining useful life, which for most marine projects is considered to be four years. For most
onshore projects, the remaining useful life after completion of a project is considered to be seven years.
Group financing (including finance costs and finance income) and income taxes are managed on a group basis and are not allocated to the operating segments. Transactions
between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties. No inter-segment sales between the reportable segments have
taken place during 2021 or 2020. Employee bonuses and cost related to share-based payments are recognized within “Corporate costs.”
2021 North America Latin America Land Europe
Africa, Middle East &
Asia/Pacific
Other segments/
Corporate costs
Total
Pre-funding 13,777 15,970 82,278 35,957 5,694 3,120 156,796
Late sales - unfinished data 9,531 167,708 5,508 9,377 4,094 22,073 218,292
Late sales - finished data 51,387 11,068 23,247 16,775 12,808 3,787 119,073
Proprietary 0 0 0 8,788 11,016 4,724 24,528
Net external revenues 74,696 194,746 111,034 70,897 33,613 33,704 518,689
APM adjustments (segment pre-funding)
1
11,956 19,150 -69,349 -33,445 2,946 -1,294 -70,037
APM adjustments (segment late sales - unfinished data)
1
19,678 -149,775 -5,461 -7,657 2,844 595 -139,775
Net segment revenue 106,330 64,121 36,223 29,795 39,404 33,005 308,877
Costs of goods sold - proprietary & other 12 257 21 7,788 3,144 403 11,625
APM adjustments (Amortization and impairment of multi-client library)
2
74,341 122,031 40,249 47,704 38,757 20,301 343,384
Operational costs 1,502 6,392 1,843 1,953 5,938 83,652 101,280
Depreciation, amortization and impairment of other tangible and intangible assets 28 145 246 19 70 18,747 19,255
Segment Operating profit/(loss) 30,446 -64,705 -6,137 -27,669 -8,504 -90,097 -166,666
1)
Relates to revenues from unfinished data that has been recognized over time in segment reporting.
2)
Relates to sales amortization under the WIP phase, linear amortization for finished projects and impairments under segment reporting. See above for more information on differences in accounting principles between segment
reporting and IFRS.
46
2020 North America Latin America Land Europe
Africa, Middle East &
Asia/Pacific
Other segments/
Corporate costs
Total
Pre-funding 14,101 28,807 16,001 8,529 14,131 4,146 85,715
Late sales - unfinished data 6,752 49,147 9,930 89 9,539 23,183 98,640
Late sales - finished data 66,364 16,975 8,519 21,685 39,578 6,560 159,680
Proprietary – – 2,114 – 5,663 8,190 15,967
Net external revenues 87,217 94,929 36,564 30,302 68,911 42,078 360,001
APM adjustments (segment pre-funding)
1
6,306 39,972 27,753 765 -7,998 -588 66,209
APM adjustments (segment late sales - unfinished data)
1
2,779 25,357 -4,102 4,197 -5,236 -425 22,570
Net segment revenue 96,302 160,257 60,215 35,264 55,678 41,065 448,780
Costs of goods sold - proprietary & other 7 2,093 1,680 – 2,436 833 7,050
APM adjustments (Amortization and impairment of multi-client library)
2
118,569 197,660 73,403 81,310 35,057 21,366 527,365
Operational costs 2,733 5,767 3,250 2,383 5,418 74,179 93,730
Depreciation, amortization and impairment of other tangible and intangible assets 59 152 247 22 78 19,374 19,932
Segment Operating profit/(loss) -25,067 -45,415 -18,365 -48,451 12,688 -74,686 -199,296
1)
Relates to revenues from unfinished data that has been recognized over time in segment reporting.
2)
Relates to sales amortization under the WIP phase, linear amortization for finished projects and impairments under segment reporting. See above for more information on differences in accounting principles between segment
reporting and IFRS.
Impairments of the multi-client library totaled USD 96.7 million for 2021 under the
segment reporting.
Impairments of the multi-client library totaled USD 132.0 million for 2020 under the
segment reporting.
A reconciliation of Operating profit/(loss) to Profit/(loss) before taxes is provided as
follows:
2021 2020
Operating profit for reportable segments (166,666) (199,296)
APM adjustment (amortization, impairment and revenue) 94,335 (29,623)
Operating profit according to IFRS (72,331) (228,919)
Financial income 2,525 853
Financial expenses (6,362) (3,130)
Exchange gains/losses (8,918) 7,807
Profit/(loss) before taxes (85,087) (223,389)
Total assets are not a part of the information regularly provided to executive
management. TGS does not report a measure of liabilities for the reportable
segments. As the operating segments reported are broken down to geographic
areas, there is no further breakdown of revenues to the customer’s country of
domicile.
In 2021, no customers represented more than 10% of total revenues individually.
Similarly in 2020, no customers represented more than 10% of total revenues
individually.
Analysis of external revenues:
2021 2020
Pre-funding 86,760 151,924
Late sales 196,833 281,647
Proprietary 25,285 15,210
Total net revenues 308,877 448,780
47
6. TANGIBLE NON-CURRENT ASSETS
2021
Machinery and
Equipment
Buildings
5
2020
Cost as of 1 January 2021
144,388
7,931 152,319
Acquisition of a subsidiary
1
288
– 288
Additions
3,394
1,387 4,781
Disposals
3
(3,189)
– (3,189)
Cost as of 31 December 2021
144,880
9,318 154,199
Accumulated depreciation as of 1 January 2021
119,039
5,674 124,713
Reclassification
2
45
(45) –
Depreciation for the year
7,989
491 8,480
Acquisition of a subsidiary
1
126
– 126
Accumulated depreciation on disposals
(2,336)
14 (2,323)
Capitalized to the multi-client library
4
3,555
127 3,682
Accumulated depreciation as of 31 December 2021
128,418
6,261 134,679
Net book value as of 31 December 2021
16,463
3,057 19,520
Useful life 2 to 7 years 3 to 12 years
1)
Acquisition of 4C Offshore.
2)
Reclassification from Buildings to Machinery and Equipment.
3)
Gains on disposals during the year were recognized by 0.2 million.
4)
Capitalized directly as multi-client library and is not part of the depreciation charges recognized in the
Statement of Comprehensive Income.
5)
Mainly leasehold improvements.
2020
Machinery and
Equipment
Buildings
3
2020
Cost as of 1 January 2020
122,526
13,916 136,442
Reclassification
1
6,484
(5,017) 1,466
Additions
16,244
2,366 18,610
Disposals
2
(866)
(3,333) (4,199)
Cost as of 31 December 2020
144,388
7,931 152,319
Accumulated depreciation as of 1 January 2020
100,212
11,519 111,731
Reclassification
1
5,127
(4,806) 321
Depreciation for the year
8,582
432 9,015
Accumulated depreciation on disposals
4
(804)
(1,683) (2,488)
Capitalized to the multi-client library
5,923
212 6,134
Accumulated depreciation as of 31 December 2020
119,039
5,674 124,713
Net book value as of 31 December 2020
25,349
2,257 27,606
Useful life 2 to 7 years 3 to 12 years
1)
Reclassification from Buildings and Other Intangible Assets to Machinery and Equipment.
2)
Gains on disposals during the year were recognized by USD 0.9 million.
3)
Mainly leasehold improvements.
4)
Capitalized directly as multi-client library, and is not part of the depreciation charges recognized in the
Statement of Comprehensive Income.
7. LEASES
Leases as a lessee
The Group mainly holds office and data center leases. These leases run for a period
between three to eleven years. The Group has applied the exemption in IFRS 16 and
not capitalized leases of low-value assets or short-term leases.
Right-of-use asset Office leases Data centers Total
Balance at 1 January 2021 26,974 21,715 48,690
Additions 516 – 516
Impairments -1,162 – -1,162
Adjustments -708 – -708
Depreciation -4,002 -7,564 -11,566
Balance at 31 December 2021 21,619 14,151 35,770
48
Sub-lease asset Office leases Data centers Total
Balance 1 January 2021 965 – 965
Balance 31 December 2021 1,258 – 1,258
Right-of-use asset Office leases Data centers Total
Balance at 1 January 2020 17,026 6,419 23,445
Additions 11,377 24,186 35,563
Impairments -4,101 -370 -4,470
Adjustments 6,922 465 7,387
Depreciation -4,251 -8,985 -13,235
Balance at 31 December 2020 26,974 21,715 48,690
Sub-lease asset Office leases Data centers Total
Balance 1 January 2020 2,366 – 2,366
Balance 31 December 2020 965 – 965
The Group has recognized an impairment of right-of-use assets of USD 1.2 million in
2021 (USD 4.1 million in 2020). In both years, the impairments are mainly related to
office premises that will no longer be in use. The impairment charge recognized is
net of expected sub-lease income.
Amounts recognized in profit or loss 2021 2020
Interest on lease liability -1,595 -1,920
Expense related to short-term leases 11,632 13,020
Expense related to leases of low-value asset, excluding short-term leases of
low-value assets
2,628 3,143
Variable lease payments 1,512 1,966
Depreciation charge for the year
1
-5,845 -4,648
1)
Depreciation charge for the year in the above table has been reduced with depreciations capitalized, and hence
not directly expensed as depreciations in the Statement of Comprehensive Income.
Amounts recognized in the statement of cash flow 2021 2020
Total cash outflow for leases (16,794) (16,580)
Some leases include extension options exercisable near the end of the lease term.
The Group assesses at lease commencement date whether it is reasonably certain
to exercise the extension options. The Group reassesses whether it is reasonably
certain to exercise the options if there is a significant event or significant changes in
circumstances within its control. The following table sets out a maturity analysis of
lease payables, showing the undiscounted lease payments to be paid after reporting
date.
Maturity analysis - lease payables 2021 2020
Less than one year 12,819 16,713
One to five years 23,003 32,176
More than five years 10,911 15,006
Total undiscounted lease payments 46,734 63,896
Discount effect (2,929) (6,011)
Lease liability as of 31 December 43,804 57,885
Lease liability 2021 2020
Current 10,782 13,333
Non-current 33,022 44,552
Lease liability as of 31 December 43,804 57,885
Leases as a lessor
The Group sub-leases office spaces that are not in use by the Group. The following
table sets out a maturity analysis of lease receivables, showing the undiscounted
lease payments to be received after reporting date.
Maturity analysis - lease receivables 2021 2020
Less than one year 612 608
One to two years 436 537
Two to three years 260 –
Three to four years 22 –
Total undiscounted lease receivables 1,329 1,145
Unearned finance income -72 -180
Net investment in the lease as of 31 December 1,257 965
49
8. INTANGIBLE ASSETS
2021 Acquisition Cost and Depreciation Goodwill Multi-client Library Multi-client Library in Progress Other Intangible Assets Total
Cost as of 1 January 2021 338,991 5,015,337 561,919 105,451 6,021,697
Additions through business combinations 15,587 – – 7,181 22,768
Addition
1
– 17,193 180,984 9,905 208,083
Transfers – 388,936 (388,936) – –
Cost as of 31 December 2021 354,578 5,421,467 353,967 122,537 6,252,548
Accumulated amortization and impairment as of 1 January 2021 50,615 4,590,875 20,829 88,055 4,750,375
Amortization for the year – 176,362 – 5,713 182,076
Impairment for the year – 277,149 5,349 – 282,498
Capitalized to the multi-client library
2
– – – 3,292 3,292
Accumulated amortization and impairment as of 31 December 2021 50,615 5,044,387 26,179 97,060 5,218,241
Net book value as of 31 December 2021 303,964 377,080 327,788 25,477 1,034,307
Useful life
4 to 7 years 3 to 7 years
1)
Additions to Other Intangible Assets are internally developed software.
2)
Capitalized directly as multi-client library, and is not part of the depreciation charges recognized in the Statement of Comprehensive Income.
50
2020 Acquisition Cost and Depreciation Goodwill Multi-client Library Restated
5
Multi-client Library in Progress Restated
5
Other Intangible Assets Total
Cost as of 1 January 2020 338,991 4,728,448 517,679 96,402 5,681,520
Reclassification
1
– – – (1,466) (1,466)
Additions
2
– 30,894 300,235 10,779 341,908
Transfers – 255,995 (255,995) – –
Disposals
3
– – – (264) (264)
Cost as of 31 December 2020 338,991 5,015,337 561,919 105,450 6,021,698
Accumulated amortization and impairment as of 1 January 2020 50,615 4,143,496 – 82,700 4,276,811
Reclassification1 – – – (321) (321)
Amortization for the year – 255,738 – 2,069 257,807
Impairment for the year – 191,642 20,829 – 212,471
Accumulated amortization on disposals – – – (153) (153)
Capitalized to the multi-client library
4
– – – 3,760 3,760
Accumulated amortization and impairment as of 31 December 2020 50,615 4,590,875 20,829 88,055 4,750,375
Net book value as of 31 December 2020 288,377 424,462 541,089 17,395 1,271,323
Useful life
4 to 7 years 3 to 7 years
1)
Reclassification of Other Intangible Assets to Machinery and Equipment.
2)
Additions to Other Intangible Assets are internally developed software.
3)
Losses on disposals during the year were to USD 111 thousand.
4)
Capitalized directly as multi-client library, and is not part of the depreciation charges recognized in the Statement of Comprehensive Income.
5)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
51
9. IMPAIRMENT EVALUATION OF MULTI-CLIENT
LIBRARY, GOODWILL AND OTHER INTANGIBLE
ASSETS
TGS reviews the carrying value of its multi-client libraries and goodwill when there
are events and changes in circumstances that indicate that the carrying value of
these assets may not be recoverable. Impairment indicators have been assessed
as a result of the significant volatility in the market during 2021 and include factors
such as revised sales estimates on existing surveys, COVID-19 market effects and
oil price fluctuation. Key inputs and assumptions in the impairment model have been
revisited. The challenging market presents uncertainties and risk related to these
estimates.
Multi-client library
The Group estimates value in use based on discounted estimated future sales
forecasts. For the multi-client library, the value in use has been determined
based on revenue and cash flow projections from financial estimates prepared by
management. Due to the prevailing markets, future expected cash flows are reduced
and consequently the value in use of the multi-client library is reduced. The changes
in the market are a consequence of factors such as revised sales estimates on
existing surveys, COVID-19 effects and oil price fluctuations. TGS has implemented
a detailed process each quarter to assess projects at risk and impairment of the
library amid the current volatility and uncertainty in the market.
TGS is operating in a global industry. TGS’ customers are operating on a global
scale, and the market for TGS’ products is global. However, many local aspects
affect the risk of the various cash generating units (CGUs) across the world, as each
survey is considered a CGU. Based on this, TGS applies a country risk premium to
determine the post-tax weighted average cost of capital (WACC) of all CGUs. The
WACC varies between 8.2% to 15.2% for all the CGUs throughout the Group. The
significant difference is due to the country risk added for specific surveys in the
multi-client library. The WACC unadjusted country-specific risk is 8.2%. The average
WACC weighted according to CGU net book value is 10.0% post-tax and 13.9% pre-
tax. At year-end 2020, TGS used a WACC between 8.0% to 19.2% for all the CGUs
throughout the Group, with a WACC unadjusted country-specific risk of 8.0%. The
change of WACC from 2020 to 2021 is mainly due to decreased country-specific risk
and increased risk-free rate.
The table below shows the impairment charges recognized for the multi-client
library in the year, including accelerated amortization as IFRS requires pre-
funding revenues to be recognized upon delivery while no amortization charges are
recognized at this point:
Impairment of multi-client library 2021 2020 2021 Value in Use WACC
North America 14,049 40,413 314,556 8.2%
Latin America 139,408 88,972 270,494 12.9%
Land 73,699 33,681 133,482 8.2%
Europe 52,794 39,610 93,023 8.2%
Africa, Middle East and Asia Pacific 4,180 9,194 156,778 9.7%
Other 453 602 – 10.0%
Total 284,584 212,471 968,333 9.5%
Out of the amounts above, USD 213.0 million is accelerated amortization (USD 119.9
million in 2020).
The impairment review is sensitive to multiple inputs, such as expected sales
forecasts and WACC. A change in expected sales forecast can significantly impact
the impairment review for a CGU. The impact will depend on the current value in
use and carrying value of the relevant CGU. A change in WACC will also impact
the impairment review, while other inputs are considered not to have a significant
impact. The following provides a sensitivity analysis as to these inputs:
• 10% reduction of sales forecast would lead to increased impairment of USD 15.0
million.
• 20% reduction of sales forecast would lead to increased impairment of USD 37.4
million.
• 2.5% increase in WACC would lead to increased impairment of USD 8.1 million.
• 5% increase in WACC would lead to increased impairment of USD 17.3 million.
Management does not see any other reasonable changes in the key assumptions
that could cause additional impairments as of 31 December 2021.
Goodwill
In accordance with IFRS, TGS tests goodwill for impairment annually at year-end,
or more frequently if there are indications that goodwill might be impaired. A group
of CGUs should be impaired if the carrying amount is higher than the recoverable
amount. The recoverable amount is the higher amount of the fair value and the value
in use of a CGU. The carrying amount is the carrying amount of all PPE, intangibles,
multi-client library, net working capital and goodwill allocated to the CGUs.
52
Specification of goodwill North America Latin America Land Europe Africa Middle East & Asia/Pacific, Other segments/Corporate costs Total
Net book value as of 1 January 2021 24,899 100,856 26,894 37,201 48,820 49,706 288,377
PPA adjustment 4C acquisition – – – – – 15,587 15,587
Impairment – – – – – – –
Net book value as of 31 December 2021 24,899 100,856 26,894 37,201 48,820 65,293 303,964
WACC post-tax 8.2 % 10.8 % 8.2 % 8.2 % 9.8 % 8.2 % 9.5%
Goodwill acquired through business combinations has been allocated to individual
cash generating units (CGUs) as referred to in the table above.
Based on the impairment testing performed, no impairments have been recognized
during 2021 (2020: USD 0 million).
In assessing value in use, the estimated future cash flows both from the current
multi-client library and expected future investments are discounted to their present
value using a post-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. The post-tax rate is calculated
based on the local tax rates in the relevant tax jurisdictions and applying an average
of the relevant country risks for the groups of CGUs as specified in the table above.
TGS bases its impairment calculation on detailed budgets and forecast calculations,
which are prepared separately for each of TGS’ CGUs to which the individual assets
are allocated. These budgets and forecast calculations generally cover a period of
five years. For longer periods, a long-term growth rate is calculated and applied to
project future cash flows after the fifth year. Currently a long-term growth rate of
0% is applied.
The impairment calculations are most sensitive to the changes in the forecasted
sales, which depend on both the expected investments and expected returns of
investments. These factors are mainly influenced by future E&P spending and
demand for TGS’ products. A change in expected sales forecast can significantly
impact the impairment review for a CGU. The impact will depend on the current
value in use and carrying value of the relevant CGU. In addition, the impairment
calculations are sensitive to changes in WACC, as well as expected cost levels
and expected development of working capital. The following provides a sensitivity
analysis as to these inputs:
• 10% reduction of expected return of investments would lead to an impairment of
USD 24.2 million.
• 20% reduction of expected return of investments would lead to an impairment of
USD 113.1 million.
• 2.5% increase in WACC would lead to an impairment of USD 95.3 million.
• 5% increase in WACC would lead to an impairment of USD 144.0 million.
Management does not see any other reasonable changes in the key assumptions
that would cause the value in use to be lower than its carrying value.
10. PERSONNEL COSTS / NUMBER OF EMPLOYEES /
REMUNERATION TO EXECUTIVE MANAGEMENT,
BOARD OF DIRECTORS AND AUDITORS
Personnel costs 2021 2020
Payroll 62,479 71,044
Social Security costs 5,180 6,118
Pension costs 3,990 3,695
Other employee-related costs 5,633 3,664
Salaries capitalized to developed software (10,767) (12,451)
Cost of RSU/PSU 6,119 2,852
Salaries capitalized to multi-client library (17,763) (21,058)
Personnel costs 54,870 53,864
The number of employees as of 31 December 2021 was 471 (including 28 employees
in 4C Offshore) versus 462 as of 31 December 2020.
53
Cash bonus plans
In 2021, TGS had in place a Short-Term Incentive Bonus Plan that was funded by allocating 3.82% of budgeted EBITDA. Employees are generally eligible to participate in the bonus
plan after being employed for six months. The bonus is payable quarterly, and the amount paid is based on actual EBITDA for the quarter. An individual employee’s relative share of
the bonus pool is based on level of responsibility, individual contribution, performance versus previous year goals, and benchmark data. All bonuses earned in respect of the 2021
bonus plan have been paid or accrued as of 31 December 2021. More information on the Short-Term Incentive is provided in the Group’s Declaration on Executive Remuneration,
published contemporaneously with the Annual Report.
Executive Management Stock Incentives
The following table provides the stock, incentive stock units [in the form of Performance Share Units (PSUs) and/or Restricted Share Units (RSUs)] and related warrants held by
executive management.
Executive Management 2021
No. of Shares Held 31/12/2021 Incentive stocks awarded in 2021
Total balance of freestanding warrants related to
unvested incentive stock units
Kristian Johansen (CEO) 143,752 60,500 178,120
Fredrik Amundsen (CFO to August 2021) 36,320 – –
Jan Schoolmeesters (EVP Digital Energy Solutions) 50,868 24,300 69,600
Will Ashby (EVP East Hemisphere) 49,829 24,300 69,600
Rune Eng (EVP International) 133,663 – –
Tanya Herwanger (EVP Staff & Support) 26,358 – –
Tana Pool (EVP Legal) 41,657 24,300 69,600
Sven Børre Larsen (CFO from August 2021) 48,680 24,300 55,300
Whitney Eaton (EVP ESG Compliance from March 2021) 2,158 24,300 35,980
David Hajovsky (EVP West Hemisphere from March 2021) 4,557 24,300 50,980
The table below shows total expensed compensation to executive management in 2021.
Salary Bonuses Other Benefits
4
Payments from long-term
incentive plans
5
Pension Total Remunerations
Kristian Johansen (CEO) 609 73 97 586 17 1,382
Fredrik Amundsen (CFO to August 2021)
1,7
259 15 97 156 16 543
Jan Schoolmeesters (EVP Digital Energy Solutions)
1
458 19 3 – 14 494
Will Ashby (EVP East Hemisphere)
2
321 22 136 233 22 734
Rune Eng (EVP International to February 2021)
1,6
49 – 1,170 – 9 1,228
Tanya Herwanger (EVP Staff & Support to December 2021) 299 31 2 168 21 521
Tana Pool (EVP Legal) 336 20 14 216 17 603
Sven Børre Larsen (CFO from August 2021)
1,3
160 – 8 282 6 457
Whitney Eaton (EVP People & Sustainability from March 2021) 187 9 11 14 9 231
David Hajovsky (EVP West Hemisphere from March 2021) 245 22 16 60 9 352
54
The amounts set forth in the table above reflect amounts paid to the executives during the year. Compensation is only reflected for the period of time that the executive served as an executive of the Group. With respect to bonus amounts,
the Short-Term Incentive Bonus Plan is paid on a quarterly basis following reporting of the quarterly results. Therefore, bonuses paid in 2021 reflect bonus amounts for the fourth quarter of 2020 and the first three quarters of 2021.
1)
Compensation is paid in NOK, with the USD equivalent determined based on the average exchange rate during the year.
2)
Compensation is paid in EUR and GBP, with the USD equivalent determined based on the average exchange rate during the year.
3)
Mr. Larsen became CFO of the Group in August 2021.
4)
Other benefits include certain benefits provided to all employees (Company-paid life insurance and welfare insurance). Other benefits also include certain expatriate benefits for applicable executives.
5)
Represents the value of shares issued during 2021 with respect to the 2018 Long-Term Incentive Plan, which vested in 2021.
6)
Mr. Eng served as part of the Executive Team through February 2021. He received total termination benefits of USD 1,168 million as set forth in the table above as “Other Benefits.”
7)
Mr. Amundsen resigned his position as CFO in August 2021, but continued as an employee through the balance of 2021. He received termination benefits of USD 86,000 as set forth in table above under “Other Benefits.”
The table below shows total compensation to executive management in 2020.
Salary Bonuses Other Benefits
4
Payments from long-term
incentive plans
5
Pension Total Remunerations
Kristian Johansen (CEO) 532 314 116 1,202 17 2,181
Fredrik Amundsen (CFO)
1
310 61 5 443 13 832
Jan Schoolmeesters (EVP Operations)
1
355 296 3 – 11 665
Will Ashby (EVP North America) 267 61 103 407 17 854
Rune Eng (EVP International)
1
424 479 (0) – 11 913
Tanya Herwanger (EVP Staff & Support) 259 33 44 395 8 739
Tana Pool (EVP Legal) 324 67 14 407 17 829
Sven Børre Larsen (was part of the Executive Team from February to
May 2020)
1,3
112 75 1 – 4 192
Dean Zuzic (CFO to February 2020)
1
40 301 – – 2 343
The amounts set forth in the table above reflect amounts paid to the executive during the year. With respect to bonus amounts, the Short-Term Incentive Bonus Plan is paid on a quarterly basis following reporting of the quarterly results.
Therefore, bonuses paid in 2020 reflect bonus amounts for the fourth quarter of 2019 and the first three quarters of 2020.
1)
Compensation is paid in NOK, with the USD equivalent determined based on the average exchange rate during the year.
2)
Compensation is paid in EUR and GBP, with the USD equivalent determined based on the average exchange rate during the year.
3)
Compensation is only reflected for the period of time that the executive served as an executive of the Group. Sven Børre Larsen was an employee of the Group during the entire 2020, and part of the Executive Team from February 2020
until May 2020.
4)
Other benefits include certain benefits provided to all employees (Company-paid life insurance and welfare insurance). Other benefits also include certain expatriate benefits for applicable executives.
5)
Represents the value of shares issued during 2020 with respect to the 2017 Long-Term Incentive Plan, which vested in 2020.
55
TGS awards its executive and senior leadership teams Long-Term Incentives with
performance metrics measured over a three-year period. In 2021, performance
share units (PSUs) were issued to the executive and senior leadership teams under
the 2021 Long-Term Incentive Plan. The plan and status versus performance metrics
is further described in the Declaration on Executive Remuneration. The 2021 plan is
settled in TGS common shares, and each PSU represents the right to receive one
common share. The total number of shares issuable is determined based upon the
Group’s achievement against the performance metrics, with the payout ranging from
0% to 100% of the PSUs awarded. The 2021 plan also provides for the issuance of
RSUs to non-executive key employees, as further described in the 2021 Declaration
on Executive Remuneration.
Termination benefits
The CEO and certain other executives have employment agreements that provide
for certain benefits upon termination of employment. Pursuant to Mr. Johansen’s
employment agreement, the maximum amount payable to the CEO in case of
termination of employment without cause or for good reason is one times the amount
of his highest annual base salary in effect during the three years that immediately
precede the date of termination, payable over an ensuing one-year period and
conditional upon his continued compliance with restrictive covenants. Additionally,
the maximum amount payable to the TGS CFO, Mr. Larsen, in case of termination for
any reason other than redundancy, gross misconduct or statutory retirement, is the
lower of (i) one times the amount of his highest annual base salary in effect during
the three years that immediately precede the date of termination, spread over an
ensuing one-year period conditional upon his continued compliance with restrictive
covenants or (ii) an agreed cap.
In the case of termination for Mr. Johansen and Mr. Larsen associated with a
“change of control” event, the amount payable is one times the highest gross annual
compensation received during the three years immediately preceding the “change of
control” event, paid as a lump sum.
No other members of the executive management team have employment agreements
providing termination benefits.
Board of Directors Fees and Other Fees
The following sets forth the compensation paid to the Board of Directors.
Board of Directors Fees 2021
Director’s fee
1
Value of Shares
Received
Total Remunerations
Hank Hamilton (Chair of the Board) 175 – 175
Mark Leonard (Director)
3
44 24 63
Irene Egset (Director) 44 24 63
Wenche Agerup (Director) 39 24 63
Christopher Geoffrey Finlayson (Director) 39 24 63
Svein Harald Øygard (Director) 19 24 43
Grethe Kristin Moen (Director) 19 24 43
Vicki Messer (Director until May 2021) 20 – 20
Torstein Sanness (Director until May 2021) 20 – 20
1)
The table includes Directors’ fees paid during the year. Directors receive fees on a biannual basis as decided
by the AGM, payable in NOK. Deviations in individual fees are related to the timing of the biannual payments.
2)
In May 2021, each of the Directors, other than the Chair, received 1,650 restricted shares in TGS.
3)
Includes fee from being Chair of the Compensation Committee (Mr. Leonard) and the Audit Committee (Mrs.
Egset).
Board of Directors Fees 2020
Director’s fee
1
Value of Shares
Received
Total Remunerations
Hank Hamilton (Chair of the Board) 200 – 200
Mark Leonard 39 18 57
Vicki Messer 35 18 53
Tor Magne Lønnum (Director until May 2020) 39 – 39
Wenche Agerup 35 18 53
Torstein Sanness 35 18 53
Irene Egset 35 18 53
Christopher Geoffrey Finlayson 54 50 103
1)
The table includes Directors’ fees paid during the year. Directors receive fees on a biannual basis as decided
by the AGM, payable in NOK. Deviations in individual fees are related to the timing of the biannual payments.
2)
In May 2020, each of the Directors, other than the Chair, received 1,650 restricted shares in TGS. Mr. Finlayson
received additional 1,650 restricted shares in TGS for 2019.
56
Board of Directors’ Stock Ownership
No. of Restricted Shares
Received during 2021
No. of Shares Held
31/12/2021
Hank Hamilton (Chair of the Board) – 1,352,400
Mark Leonard (Director) 1,650 29,100
Irene Egset (Director) 1,650 4,950
Wenche Agerup (Director) 1,650 11,550
Christopher Geoffrey Finlayson (Director) 1,650 4,950
Svein Harald Øygard (Director) 1,650 1,650
Grethe Kristin Moen (Director) 1,650 1,650
Compensation to the members of the Nomination Committee
1
2021 2020
Tor Himberg-Larsen (Chair until May 2021) 21 13
Christina Stray 12 5
Herman Kleeven 11 4
Glen Ole Rødland (Chair from May 2021) 11 –
1)
The table shows compensation paid during the year. The members of the committee receive compensation per
meeting held, and the amounts are paid in NOK.
Auditor’s Fee
Audit and other services 2021 2020
KPMG
Statutory audit 1,448 1,120
Other attestation services 6 6
Other services 56 3
Total fees 1,510 1,129
All amounts are exclusive of VAT.
11. SHARE-BASED PAYMENTS
Since 2015, TGS has issued awards of incentive stock units to its executive
management, senior leadership team and other non-executive key employees. From
2015 to 2021, TGS awarded a limited number of performance share units (PSUs) to
executive management, while a limited amount of restricted share units (RSUs) were
awarded to non-executive key employees other than the executive management. In
2019, 2020 and 2021, TGS awarded PSUs to members of the senior leadership team.
The awards are settled in common shares of TGS, and each of the PSUs and RSUs
represent the right to receive the maximum of one common share. The PSUs and the
RSUs vest three years after the date of grant. During 2021, the 2018 PSU and RSU
awards vested, and in 2020, the 2017 PSU and RSU awards vested.
In 2021, TGS issued a total of 338,600 PSUs to members of the executive and senior
leadership teams. The actual number of shares to be received by holders of the
2021 PSUs are dependent on three performance metrics which are measured for
the period 1 January 2021 through 31 December 2023 (2020 plan: 1 January 2020
through 31 December 2022):
• Relative return on average capital employed
• Absolute return on average capital employed
• Health, social and environmental (HSE) metrics and sustainability metric (2021
and 2020 only)
The performance metrics are described in more detail in the Declaration on
Executive Remuneration. The payout percentage for the PSUs will depend on the
Group’s achievement when all the performance metrics are fully earned, with payout
ranging from 0% to 100%. If fully earned at 100% payout, a total of 314,300 PSUs
would vest (2020 plan: 204,000 PSUs remaining at 31 December 2021). The fair value
of the PSUs granted in 2021 is measured based on the market value at the grant date
and expensed over the vesting period.
The holders of the RSUs are eligible to receive one share per RSU on the vesting
date, and the fair value of the RSUs granted in 2021 is measured based on the market
value of the shares on the grant day. A total of 137,500 RSUs were granted in 2021
(2020 plan: 114,000 RSUs).
The expense recognized for incentive stock units awarded, which is considered
expense for employee services during the year, is shown in the following table.
57
2021 2020
Expense arising from equity-settled, share-based payment plans 5,820 2,843
TGS’ shares are traded in NOK at the Oslo Stock Exchange. TGS’ functional currency
is USD and the share-based payment plans will expose TGS to currency risk in
relation to the amount of costs booked with fluctuations between NOK and USD.
The fair value of share-based payments granted is estimated at the date of the grant
using the Black-Scholes model, taking into account the vesting pattern of each
share-based award. Fair value of the share-based award has been determined by a
level 3-technique from the fair value hierarchy (see also Note 16).
The following table illustrates the number of outstanding share-based awards
expected to be vested (No.) and weighted average exercise prices (WAEP) of, and
movements in, RSUs and PSUs.
2021 No. WAEP (NOK)
1
2020 No WAEP (NOK)
1
Outstanding at 1 January 1,145,070 0.25 1,177,710 0.25
Granted during the year 480,100 0.25 456,300 0.25
Adjusted quantity due to
performance criteria
(127,200) 74,000
Forfeited during the year (189,660) (163,440)
Exercised during the year (247,000) 0.25 (399,500) 0.25
Expired during the year – –
Outstanding at 31 December 1,061,310 0.25 1,145,070 0.25
1)
The WAEP for the incentive stock units is the par value of each share of stock, which must be paid by the holder
of the units.
The weighted average remaining contractual life for the long-term incentive plans
outstanding on 31 December 2021 is 1.63 years (2020: 1.73 years).
The weighted average fair value of the PSUs and RSUs granted during 2021 was NOK
99.76. The weighted average fair value of the PSUs and RSUs granted during 2020
was NOK 138.92.
The RSU and PSU plan is equity-settled and the fair values are measured at grant
date.
The liabilities, Social Security taxes, arising from the plans amounted to USD 0.14
million as of 31 December 2021 (2020: USD 0.8 million).
Outstanding PSUs and RSUs as of 31 December 2021.
No. of
PSUs/RSUs
Exercise dates Holders Price/ conditions Granted
86,250 See below
1
Key employees
Fair market value (FMV) of a share
including expected dividends
30 August 2019
219,160 See below
Executive
management
Fair market value (FMV) of a share
including expected dividends,
adjusted for performance criteria
30 August 2019
103,500 See below Key employees
Fair market value (FMV) of a share
including expected dividends
10 August 2020
204,000 See below
Executive
management
Fair market value (FMV) of a share
including expected dividends,
adjusted for performance criteria
10 August 2020
134,100 See below Key employees
Fair market value (FMV) of a share
including expected dividends
10 August 2021
314,300 See below
Executive
management
Fair market value (FMV) of a share
including expected dividends,
adjusted for performance criteria
10 August 2021
1,061,310
1)
The holders will receive maximum one share per unit on 30 August 2022.
2)
The holders will receive maximum one share per unit on 30 August 2022, subject to determination of payout
percentage ranging from 0% to 100%.
3)
The holders will receive maximum one share per unit on 10 August 2023.
4)
The holders will receive maximum one share per unit on 10 August 2023, subject to determination of payout
percentage ranging from 0% to 100%.
5)
The holders will receive maximum one share per unit on 10 August 2024.
6)
The holders will receive maximum one share per unit on 10 August 2024, subject to determination of payout
percentage ranging from 0% to 100%.
12. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net profit for the year attributable
to ordinary equity holders of TGS by the weighted average number of ordinary shares
outstanding (net of treasury shares) during the year. Diluted earnings per share is
calculated by dividing the net profit attributable to ordinary equity holders of TGS
by the weighted average number of ordinary shares outstanding during the year
plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares (RSUs and PSUs) into ordinary
shares. The following reflects the income and share data used in the basic and
diluted earnings per share computations.
58
2021 2020 Restated
1
Net profit attributable to ordinary equity holders of the Parent (75,985) (167,498)
Weighted average number of ordinary shares (excluding treasury
shares) for basic earnings per share
116,740 117,054
Effect of dilution 1,101 1,183
Weighted average number of ordinary shares (excluding treasury
shares) adjusted for effect of dilution
117,841 118,237
Basic earnings per share (0.65) (1.43)
Diluted earnings per share (0.65) (1.43)
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
13. EQUITY AND SHAREHOLDERS’
AUTHORIZATIONS
Ordinary shares issued and fully paid
Number of shares USD
31 December 2018 102,647,790 3,672
Issued 14 August 2019 for Spectrum ASA
acquisition, see note 3
16,076,047 449
Issued 27 August 2019 for cash on vesting of
PSU and RSU
182,941 5
31 December 2019 118,906,778 4,127
Cancelled treasury shares 25 August 2020 (1,924,450) (54)
Issued 25 August 2020 for cash on vesting of
PSU and RSU
321,070 9
31 December 2020 117,303,399 4,082
Cancelled treasury shares 30 September
2021
(50,100) (1)
Issued 06 October 2021 for cash on vesting of
PSU and RSU
187,819 5
31 December 2021 117,441,118 4,086
Treasury shares
TGS, from time to time, buys back shares under authorizations given by the
shareholders. The shares may be held in treasury, used as payment in M&A
transactions, used in relation to exercise of employees’ stock options or eventually
cancelled. As of 31 December 2021, TGS held 1,334,261 treasury shares, 1.14% of
the total shares issued (2020: 75,000 shares, 0.06%). The following table shows the
movement of treasury shareholdings.
Number of shares USD
31 December 2018 104,630 3
9 May 2019, treasury shares distributed to Board
members
(9,900) (0)
15 May 2019 - 20 December 2019, treasury
shares bought back
1,647,370 46
31 December 2019 1,742,100 49
14 May 2020, treasury shares distributed to
Board members
(11,550) (0)
18 February - 26 February 2020, treasury shares
bought back
268,900 7
25 August 2020, treasury shares cancelled (1,924,450) (54)
31 December 2020 75,000 2
11 February - 13 December 2021, treasury
shares bought back
1,319,261 38
11 May 2021, treasury shares distributed to
Board members
(9,900) (0)
30 September 2021, treasury shares
cancelled
(50,100) (1)
31 December 2021 1,334,261 38
Shareholders’ Authorization to the Board to Increase Share Capital in the Group
and to Issue Convertible Loans
By resolution of the Annual General Meeting (AGM) held 11 May 2021, the Board is
authorized to, on behalf of the Group, increase share capital of the Group by up to
NOK 2,932,584 through one or more issuances of new shares or bonus issues. The
subscription price and other subscription terms will be determined by the Board.
The capital increase may be paid in cash, by set-off or by other contributions in kind.
The authorization includes the right to incur special obligations on behalf of the
Group, cf. Section 10-2 of the Norwegian Public Limited Liability Companies Act. The
shareholders’ preemptive rights pursuant to Sections 10-4, cf. Section 10-5 of the
Norwegian Public Limited Liability Companies Act, to subscribe for any new shares
may be deviated from by the Board. The authorization encompasses share capital
increases in connection with mergers, cf. section 13-5 of the Norwegian Public
Limited Liability Companies Act. The authorization is valid until the Annual General
59
Meeting in 2022, but no later than 30 June 2022. The authorization replaces previously
granted authorizations to issue new shares. By resolution of the AGM held 11 May
2021, the Board is also granted the authorization to issue loans for a total amount
of up to NOK 2,250,000,000 with the right to require shares to be issued (convertible
loans). The share capital may be increased by up to NOK 2,932,584 provided that
the combined number of shares that are issued pursuant to this authorization and
the authorization to increase the share capital will not exceed 10% of the Group’s
current share capital. The subscription price and other subscription terms will be
determined by the Board. The shareholders’ preemptive rights pursuant to section
11-4 of the Norwegian Public Limited Companies Act, cf. sections 10-4 and 10-
5, may be deviated from by the Board. The authorization is valid until the Annual
General Meeting in 2022, but no later than 30 June 2022. The authorization replaces
previously granted authorizations to issue convertible loans. In addition, by resolution
of the AGM held 11 May 2021, the issuance of maximum 550,000 shares, supported
by freestanding warrants, to executives and key employees pursuant to the TGS 2021
Long-Term Incentive Plan (2021 LTIP), was approved. By the resolution of the AMG
held 11 May 2021, the Group’s share capital was reduced by NOK 12,525 through
cancellation of 50,100 treasury shares held by the Group, each with par value of NOK
0.25.
Shareholders’ Authorization to the Board to Buy Back Shares in the Group
By resolution of the AGM held 11 May 2021, the Board is authorized to acquire, on
behalf of the Group, the Group’s own shares up to 10% of the nominal value of Group’s
share capital, which pursuant to the current nominal value is up to NOK 2,932,584.
The limitations are adjusted in the event of share consolidation, share splits and
similar transactions. The lowest price to be paid per share is the par value and the
highest price to be paid per share is the volume weighted average price as quoted on
the stock exchange for the five business days prior to the time of the acquisition plus
5%. The lowest price is equal to the current nominal value and shall be adjusted in
the event of share consolidation, share splits and similar transactions. Acquisition
and sale of the Group’s own shares can take place in the manner which the Board
of Directors considers to be in the Group’s best interest. The authorization can be
used one or several times. This authorization is valid until the AGM in 2022, however
no longer than until 30 June 2022. The authorization replaces previously granted
authorizations to acquire own shares.
Shareholders’ Authorization to the Board to Distribute Dividends
The AGM held 11 May 2021 renewed the Board of Directors’ authorization to distribute
quarterly dividends on the basis of the 2020 financial statements. The authorization
shall be valid until the Group’s AGM in 2022, but no later than 30 June 2022.
• On 12 May 2021, the Board of Directors resolved to pay a quarterly dividend of the
NOK equivalent of USD 0.14 per share (NOK 1.16) to the shareholders.
• On 22 July 2021, the Board of Directors resolved to pay a quarterly dividend of the
NOK equivalent of USD 0.14 per share (NOK 1.23) to the shareholders.
• On 28 October 2021, the Board of Directors resolved to pay a quarterly dividend of
the NOK equivalent of USD 0.14 per share (NOK 1.18) to the shareholders.
• On 10 February 2022, the Board of Directors resolved to pay a quarterly dividend
of the NOK equivalent of USD 0.14 per share (NOK 1.24) to the shareholders.
60
The 20 Largest Shareholders as of 31 December 2021 as Registered with VPS
Name Country Shares %
1 The Northern Trust Comp United States 14,080,698 12.0%
2 FOLKETRYGDFONDET Norway Ordinary 9,059,634 7.7%
3 The Bank of New York Mellon SA/NV The Netherlands Nominee 8,507,076 7.3%
4 State Street Bank and Trust Comp United States 8,497,479 7.2%
5 RBC INVESTOR SERVICES TRUST Canada Nominee 4,350,627 3.7%
6 JPMorgan Chase Bank United States 4,196,702 3.6%
7 PARETO AKSJE NORGE VERDIPAPIRFOND Norway Ordinary 2,419,645 2.1%
8 BNP Paribas Securities Services Luxembourg Nominee 2,235,673 1.9%
9 Brown Brothers Harriman (Lux.) SCA Luxembourg Nominee 2,005,497 1.7%
10 State Street Bank and Trust Comp United States 1,689,902 1.4%
11 BNP Paribas Securities Services Luxembourg 1,629,992 1.4%
12 The Northern Trust Comp United States 1,560,283 1.3%
13 HAMILTON United States 1,352,400 1.2%
14 TGS ASA Norway Ordinary 1,334,261 1.1%
15 State Street Bank and Trust Comp United States 1,246,066 1.1%
16 CLEARSTREAM BANKING S.A. Luxembourg Nominee 1,191,355 1.0%
17 The Northern Trust Comp United States 1,177,264 1.0%
18 The Northern Trust Comp United States 1,151,514 1.0%
19 JPMorgan Chase Bank United States 1,092,311 0.9%
20 The Bank of New York Mellon United States Nominee 1,091,960 0.9%
20 LARGEST 69,870,339 59.6%
Total number of shares, par value of NOK 0.25 117,303,399 100.0%
61
14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand deposits and high liquid instruments
purchased with maturities of three months or less.
Cash and cash equivalents 2021 2020
Bank deposits 213,834 194,180
Restricted cash deposits 1,495 1,537
Total cash bank deposits 215,329 195,716
The bank deposits are mainly denominated in USD.
Restricted cash deposits relate to employee tax withholdings in Norway.
15. RELATED PARTIES
No material transactions took place during 2021 or 2020 with related parties. See
Note 10 for further information of the remuneration to the Board of Directors and to
the executive management. See Note 3 for Business Combinations.
See Note 23 for further information about the Parent Company’s subsidiaries.
Internal transactions are eliminated in the consolidated financial statements and do
not represent transactions with related parties.
16. FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
TGS has various financial assets. These are primarily held in USD, which is the
functional currency for most of TGS’ entities. TGS’ principal financial liabilities
comprise trade payables and other current liabilities. TGS does not hold any currency
or interest rate swaps.
It is, and has been, TGS’ policy that no trading in derivatives is undertaken. The
primary risks arising from the financial risk management are currency risk, liquidity
risk and credit risk.
The Board of Directors reviews and approves policies for managing each of the risks,
which are summarized below.
Currency Risk
Substantial portions of TGS’ revenues and costs are in US dollars. Due to this, TGS’
operational exposure to exchange rate fluctuation is low. However, as the Parent
Company pays taxes in Norwegian kroner to Norwegian Tax Authorities and dividends
to shareholders in Norwegian kroner, fluctuations between the NOK and the USD
impact currency exchange gains or losses on the tax expense and financial items
of the consolidated accounts. A reasonably possible strengthening (weakening) of
the USD against NOK at 31 December would have affected the measurement of
financial instruments denominated in a foreign currency and affected profit or loss
by the following amounts: For deferred tax balances calculated in NOK, a change
of +10% on the NOK/USD currency exchange rate would have an impact on profit
after tax of approximately USD 4.9 million (2020: USD 3.1 million). Further, the
Group also holds financial instruments denominated in BRL, which is cash and cash
equivalents, accounts receivable and accounts payable. A change of +10% on the
BRL/USD currency exchange rate would have a negative impact on profit before tax
of approximately USD 0.8 million (2020: USD 3.3 million). This analysis assumes that
all other variables remain constant.
Liquidity Risk
Liquidity risk arises from a lack of correlation between cash flow from operations
and financial commitments. Per the balance sheet date, TGS held current assets
of USD 435.3 million, of which cash and cash equivalents represented USD 215.3
million and other current assets represent USD 220.0 million. In comparison current
liabilities amounted to USD 446.7 million. As of 31 December 2021, TGS considers
the liquidity risk to be low.
The table shows a maturity analysis for the different financial liabilities.
2021 0-6 months 6-12 months > 1 year Total
Accounts payable and debt to partners 71 669 – – 71 669
Taxes – 77 941 – 77 941
Other non-current liabilities – – 2 706 2 706
Total 71 669 77 941 2 706 152 316
2020 Restated
1
0-6 months 6-12 months > 1 year Total
Accounts payable and debt to partners 77 683 – – 77 683
Taxes – 37 582 – 37 582
Other non-current liabilities – – 757 757
Total 77 669 37 582 757 116 023
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
62
Credit Risk
All placements of excess cash are bank deposits. TGS is exposed to credit risk
through sales and uses best efforts to manage this risk. The maximum exposure to
credit risk at the reporting date is the carrying value of each class of financial assets
disclosed in the table below and the carrying value of the accounts receivables and
other short-term receivables disclosed in Note 19. TGS considers the concentration
of risk with respect to trade receivables as low due to the Group’s credit rating
policies and as its clients are primarily large oil and gas companies considered to be
financially sound.
TGS from time to time accepts extended payment terms on parts of firm commitments
from clients. To the extent these terms do not carry an interest component to be paid
by clients, the revenues recognized by TGS are discounted to reflect this element.
TGS may also seek extra security from the clients in certain cases, such as pledges,
overriding royalty interest agreements (ORRIs) or carried interests in an exploration
license held by the client.
As of 31 December 2021, none of the outstanding accounts receivables were secured
by ORRIs (2020: USD 0 million).
For details of the accounts receivable including aging, refer to Note 19.
For details on other financial assets, refer to Note 19.
Capital Management
The goals for TGS’ capital management of funds held are to:
• Protect and preserve investment principal,
• Provide liquidity and
• Return a market rate of return or better.
As of 31 December 2021, total equity represented 68% of total assets (2020: 63%).
It is the ambition of TGS to pay a cash dividend that is in line with its long-term
underlying cash flow. When deciding the dividend amount, the TGS Board of Directors
will consider expected cash flow, investment plans, financing requirements and a
level of financial flexibility that is appropriate for the TGS business model.
The aim will be to keep a stable quarterly dividend in US dollars through the year,
but the actual level paid will be subject to continuous evaluation of the underlying
development of the Group, its financial position and the market.
Fair Value of Financial Instruments
Set out below is a comparison by class of the book value and fair value of the financial
instruments that are carried in the financial statements.
The fair value of the financial assets and liabilities are included at the amount at which
the instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. The following methods and assumptions
were used to estimate the fair values:
• Cash and cash equivalents, accounts receivables and other short-term
receivables approximate their carrying amounts largely due to the short-term
maturities of these instruments.
• Fair value of other financial non-current assets is evaluated by TGS based on
parameters such as interest rates and the individual creditworthiness of the
counterparty.
• Fair value of other financial liabilities is estimated by discounting future cash
flows using rates currently available for debt on similar terms, credit risk and
remaining maturities.
• Fair value of the long-term debt is determined by using the discounted cash flow
method that reflects the issuer’s borrowing rate as at the end of the reporting
period.
31 December 2021
Financial instruments at
amortized cost
Assets
Accounts receivable 113 513
Accrued revenues 32 551
Cash and cash equivalents 215 329
Total financial assets 361 393
Liabilities
Interest-bearing loans and borrowings
Short-term debt –
Other financial liabilities
Trade and other payables 149 611
Total financial liabilities 149 611
63
31 December 2020
Restated
1
Financial instruments at
amortized cost
Assets
Accounts receivable 168 746
Accrued revenues 108 737
Cash and cash equivalents 195 716
Total financial assets 473 199
Liabilities
Interest-bearing loans and borrowings
Short-term debt 2 500
Other financial liabilities
Trade and other payables 115 266
Total financial liabilities 117 766
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Fair Value Hierarchy
TGS uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
• Level 1: Quoted (unadjusted) prices in active markets for identical assets or
liabilities.
• Level 2: Other techniques for which all inputs which have a significant effect on
the recorded fair value are observable, either directly or indirectly.
• Level 3: Techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
17. OTHER NON-CURRENT ASSETS AND
LIABILITIES
Other Non-current Assets
Other non-current assets comprise accounts receivables with extended payment
terms and loans. None of the non-current receivables are due as per 31 December
2021.
Interest-bearing loans
TGS has interest-bearing loans to Production Energy Company AS. The loan has a
total gross value of USD 21.1 million. The loan has a carrying value of USD 0 million
as of 31 December 2021 and 31 December 2020. Impairment provisions have been
made for the loan (USD 21.1 million).
Other non-current assets 2021 2020
Restricted cash 4,391 3,128
Investments in associated companies 2,906 2,906
Interest-bearing loans 21,100 21,100
Loss allowance interest-bearing loans (21,100) (21,100)
Other non-current assets 494 13,437
Total other non-current assets 7,791 19,471
PIS/COFINS tax credit filing in Brazil
In 2016, Spectrum (now part of TGS) filed credits for certain transaction taxes in
Brazil (PIS/COFINS). The tax credit is recognized as other receivables and classified
as current and non-current, based on expected utilization. The credits recognized
as other current receivables or other current liabilities are expected to be utilized
within the next 12 months.
18. JOINT OPERATIONS
As part of its multi-client business, TGS invests in some of the multi-client projects
as joint operations. Projects considered as joint operations are typically seismic
projects organized between two parties where a vessel owning company provides
the vessel used to acquire the data, while TGS provides the data processing services.
Both parties have rights to the assets and liabilities relating to these arrangements
and share the costs of the project.
TGS has not established any material legal entities together with other companies
with the purpose of acquiring a seismic project. The table below provides TGS’ share
of revenues, amortization, impairment and net book value of the multi-client library
at year-end for projects considered as joint operations.
Other non-current assets 2021 2020 Restated
1
Revenue joint operations (projects invoiced by TGS) 251,466 208,303
Revenue allocated to partners (projects invoiced by TGS) (87,171) (61,308)
Net revenue (projects invoiced by TGS) 164,295 146,995
Revenue allocated to TGS from partners (projects invoiced by
partner)
32,649 17,316
Net revenue joint operations 196,944 164,311
Amortization 99,123 115,880
Impairment 121,971 88,932
Net book value of multi-client library (joint operations) at
31 December (recognized by TGS)
341,750 633,919
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
64
19. ACCOUNTS RECEIVABLES AND OTHER
CURRENT RECEIVABLES
Accounts receivables are measured at cost less any amounts of expected credit
losses.
The amount of revenues for in-progress projects not yet invoiced is presented as
accrued revenues in the balance sheet.
Other short-term receivables consist primarily of prepayments made for multi-
client projects during the seismic data acquisition phase.
For certain multi-client library projects, TGS has cooperation agreements pursuant
to which revenues are shared with other companies and/or governments. In such
situations, accounts receivables are presented gross for projects where TGS issues
the license agreement and is responsible for invoicing, while the related partner
share is presented within “Accounts payable and debt to partners.” See Note 25 for
a breakdown of gross revenues and revenues allocated to other parties and Note 18
for gross revenues and revenues allocated to other parties from projects considered
as joint operations.
In cases where extended payment terms have been agreed, the implied interest is
reflected in the stated amount.
2021 2020 Restated
1
Accounts receivables 115,987 171,644
- Provision for impairment of accounts receivables (2,474) (2,899)
Accounts receivables - net 113,513 168,746
Accrued revenues 32,551 108,737
Other current receivables 73,901 91,516
Total 219,965 368,999
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
The aging of the accounts receivables and accrued revenue (nominal amounts) are
as follows:
Total Not due < 30 days 30 - 60 days 60 - 90 days Over 90 days
2021 148,538 101,192 17,628 2,913 7,594 19,213
2020 280,381 225,733 1,311 6,736 1,353 45,247
TGS applies the simplified approach when calculating expected credit losses. When
calculating expected credit loss, TGS takes into account the aging of the outstanding
amounts and other relevant information.
TGS has a credit assessment and payment terms policy. Credit assessments
are required when signing or renegotiating a new master license agreement or
supplemental license, changes occur in credit rating, payment terms on prior sales
are not met due to potential financial difficulties, or insight or information indicates
that an existing client is in a difficult financial situation. TGS uses D&B as credit
rating provider. When the credit rating is at a low level, an approval from the area
Executive Vice President or the CFO will be required.
TGS also risk rates all clients. The credit risk rating is assessed in 4 levels, where
risk category 1 is low risk (national oil companies, majors or supermajors, clients
with superior reputation, clients with high credit rating); category 2 is medium risk
(clients that do not fall into category 1 or 3); category 3 is high risk (companies with
poor payment history and/or low credit rating or low transparency - regarding
shareholder structure and financial information); and category 4 is receivables
collected by Joint Venture partners. As of 31 December 2021, 84% of TGS’ customers
are in category 1, 7% in category 2, 2% in category 3 and 7% in category 4. For amounts
above 90 days, 50% are within category 1, 5% in category 2, 5% in category 3 and
40% in category 4. Provisions for accounts receivables are based on an individual
assessment and calculated expected credit losses.
Movements on TGS’ provision for impairment of accounts receivables are as follows:
2021 2020
At 1 January 2,899 422
Provision for receivables impairment (424) 2,567
Receivables written off during the year as uncollectible – (64)
Amount collected – (26)
At 31 December 2,474 2,899
The provision for impaired receivables has been included in “Other operating
expense” in the statement of comprehensive income. Amounts charged to the
allowance account are generally written off when there is no expectation of
recovering additional cash.
For a description of credit risk, see Note 16.
65
20. CURRENT LIABILITIES
2021
2020
Restated
1
Accounts payables 31,477 34,034
Debt to partners 40,192 43,648
Short-term debt – 2,500
Lease liabilities 10,782 13,333
Deferred revenue (contract liabilities) 238,169 441,341
Accrued expenses and other current liabilities 48,151 93,315
Taxes payable, withheld payroll tax, Social Security and VAT 77,941 37,582
Total current liabilities 446,712 665,754
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Accounts payables are non-interest-bearing and are normally settled on 30-days
terms.
Contract liabilities relate to deferred revenue. See Note 4 for further details.
21. BANK OVERDRAFT FACILITY AND
GUARANTEES
3-Year Term Secured Revolving Credit Facility
In October 2018, TGS entered into a secured revolving credit facility of USD 100
million with an interest rate of LIBOR + 2% per interest period as determined by
TGS and as per the defined terms of the revolving credit facility. The closing of the
security granted under the credit facility occurred in January 2019. TGS paid an
upfront fee of 0.60% of the facility amount and pays a commitment fee of 0.40 % per
annum for the unused and uncancelled part of the facility. With respect to financial
conditions, TGS must maintain (i) an equity ratio of 50% or more, (ii) a leverage ratio
of no more than 1.00:1.00, (iii) EBITDA minus operational capex at zero or above,
and (iv) must maintain a liquidity of USD 75 million on a consolidated basis. As of 31
December 2021, TGS had not drawn any amounts under the facility and was in full
compliance with all of the financial covenants. The facility is secured by a lien on the
assets of the Parent company and subsidiaries having net revenues representing 5%
or more of the Group’s net revenues as defined in the facility (as of year-end 2021,
TGS AP Investment AS, TGS-NOPEC Geophysical Company, A2D Technologies Inc.,
TGS Geophysical Company (UK) Limited, TGS Canada Corp. and TGS AS). The same
subsidiaries have also provided guarantees.
The revolving credit facility was renewed with three years in February 2021 with
same terms except from:
• Margin increase due to increased market risk post-COVID (+ 50 bps)
• Letter of Credit option removed as agreed
• Updates on sanctions language
• Reference rate transition language update
• Any other LMA-based updates
Guarantees
As of 31 December 2021, one new guarantee has been issued on behalf of the Group.
(2020: 0 USD million.)
TGS provides, from time-to-time, Parent company guarantees for its subsidiaries’
performance linked to certain projects. In addition, under section 479A of the UK
Companies Act 2006, a number of TGS’ UK-based subsidiaries have claimed an
exemption from audit of their statutory financial statements for the year ended 31
December 2020. This is pursuant to guarantees issued by TGS whereby the Parent
undertakes to guarantee all outstanding liabilities to which the subsidiary company
is subject at the end of the financial year to which the guarantee relates, until they
are satisfied in full. TGS may make an annual election to support such guarantees
for each financial year. Management is in the process of drafting annual financial
statements for all UK-based subsidiaries for the years ended 31 December 2021.
It is unlikely that the exemptions under section 479A of the UK Companies Act 2006
will be practically exercised for these. Dormant subsidiaries will apply the exemption
under section 480 of the Act, and other operating entities will be audited for that year.
In this case, no guarantees will be required.
22. COMMITMENTS
Operating Leases
As of the end of 2021, TGS had entered into commitments for three 3D vessels, one
source vessel and two OBN crews. All these commitments will expire in 2022, and the
amount committed, including contractual lease agreements, totaled USD 43 million
(2020 total: USD 22 million). Office leases and data center leases are recognized in
the balance sheet. See Note 7 for more information on such lease liabilities.
66
23. SUBSIDIARIES AND JOINT VENTURES
The table below shows the Group’s subsidiaries and joint ventures as of 31 December
2021.
Company Name
Country of
Incorporation
Shareholding and
Voting Power
TGS ASA Norway Parent Company
TGS AP Investments AS Norway 100%
TGS AS Norway 100%
TGS NES AS Norway 100%
TGS Contracting AS Norway 100%
Aceca Norge AS Norway 100%
OBS MC Investments I AS Norway 100%
Spectrum Geo AS Norway 100%
Spectrum Geo CH AS Norway 100%
Carmot Seismic AS Norway 100%
Carmot Processing AS Norway 100%
TGS-NOPEC Geophysical Company (UK), Ltd. UK 100%
TGS Geophysical Investments, Ltd. UK 100%
Spectrum Geo Ltd. UK 100%
Spectrum Energy and Information Technology Ltd. UK 100%
Aceca Ltd. UK 100%
TGS Geophysical Company (UK) Ltd. UK 100%
Magsurvey, Ltd. UK 100%
4C Offshore Ltd. UK 100%
Spectrum Information Technology Ltd. UK 100%
Spectrum Resources Ltd. UK 100%
Spectrum Geophysical Services Ltd. UK 100%
Spectrum Datagraphic Systems Int’l Ltd. UK 100%
Geoscan Ltd. UK 100%
TGS-NOPEC Geophysical Company USA 100%
A2D Technologies, Inc. USA 100%
Parallel Data Systems, Inc. USA 100%
Volant Solutions Inc. USA 100%
Digital Petrodata LLC USA 100%
TGS Alaska Company USA 100%
TGS Mexico Contracting LLC USA 100%
Lasser, Inc. USA 100%
Calibre Seismic Company USA 50%
Spectrum Geo, Inc. USA 100%
TGS do Brasil Ltda Brazil 100%
Spectrum Geo do Brasil Servicos Geofisicos Ltda Brazil 100%
TGS-NOPEC Geophysical Company PTY, Ltd. Australia 100%
Spectrum Geo PTY Ltd. Australia 100%
Spectrum Geo Australia PTY Ltd. Australia 100%
TGS-NOPEC Geophysical Company PTE, Ltd. Singapore 100%
Spectrum Geo PTE Ltd. Singapore 100%
Geo Bridge Pte Ltd. Singapore 50%
TGS Canada Ltd. Canada 100%
TGS Canada Corp. Canada 100%
TGS-NOPEC Geophysical Company Moscow, Ltd. Russia 100%
NOPEC Geophysical Company S. de R.L. de C.V. Mexico 100%
Spectrum Geo S.A. de C.V. Mexico 100%
Spectrum Geo Panama LLC Panama 100%
TGS FJ Geophysical (Ghana) Ltd. Ghana 90%
TGS-Petrodata Offshore Services Ltd. Nigeria 49% /51%
TGS Geopex Ltd. Egypt 50%
24. CONTINGENT LIABILITIES
Conclusion of Økokrim Charges and Related Civil Matters
In May 2014, Økokrim, the Norwegian National Authority for Investigation and
Prosecution of Economic and Environmental Crime, charged TGS for violations of
the Norwegian Tax Assessment Act related to transactions entered into in 2009 to
2010 with Skeie Energy AS, later known as E&P Holding AS and Production Energy
Company AS (referred to as Skeie). The charges claimed that TGS contributed to
unwarranted tax refunds received by Skeie under the Norwegian Petroleum Tax Act
through licenses of seismic data to Skeie. In 2020, the matter was fully resolved
in favor of TGS. TGS was also awarded MNOK 16.5 (USD 1.8 million) for costs and
expenses incurred from 2014 through 2020.
In relation to the transactions with Skeie, civil claims were made for monetary
compensation among various parties involved, including claims against TGS for
its part in the transactions. The primary claimant was DNB, who repaid the tax
refunds received by Skeie under a provision in the Tax Payment Act that statutorily
assessed liability to DNB due to its status as pledgee of the tax refunds and thus
sought reimbursement for such amounts it paid to the Norwegian Government.
Prior to commencement of the trial in October 2021, the parties settled all claims.
TGS recognized the settlement amount as Other Operating Expenses in the third
quarter of 2021.
67
Brazil services tax dispute
In February 2017, Spectrum Geo do Brasil Servicos Geofisicos Ltda (Spectrum Brazil),
a wholly owned subsidiary of TGS, received a tax assessment which currently stands
at BRL 36.4 million (USD 6.5 million) for a municipal services tax (ISS) in Brazil on
the basis that licenses of multi-client data is classified as a service. This specific
classification is a debated topic in Brazil with several independent parties currently
challenging it through the Brazilian administration and court system.
Spectrum Brazil has disputed this classification and asserted that no ISS is owed in
this regard. However, the entity has adopted a conservative position and paid ISS on
licensing revenues with certain exemptions, including the assessed amount. They
have filed a legal action to recover the BRL 45.1 million (USD 8.1 million) ISS paid.
Since 2017, and until resolution of this dispute, all further ISS relating to the above is
being deposited into an interest-bearing bank account in Brazil. The total accumulated
amount deposited as of 31 December 2021 is the local currency equivalent of USD
4.4 million. The balance accumulated in this fund will be used to settle any amounts
owing upon resolution of this case. Any remaining balance will then be released
back into the entity. The ultimate ruling of this case is not expected for a number of
years. The deposit is presented as long-term restricted cash in the statements of
financial position.
The outcome of preliminary rulings made on the matter in Brazil seem to support
Spectrum Brazil’s view on the classification. In February 2021, the Company
received a partially favourable first level administrative decision following appeal in
March 2017, which held that the company had not underpaid ISS. The Company has
lodged a voluntary appeal against other aspects of the ruling in relation to ancillary
obligations and is currently awaiting a second level administrative decision. TGS
considers it likely that this will be resolved in favour of Spectrum Brazil, and thus
no provision is recognized for any portion of the exposure. Final rulings, both of the
assessment and of the counterclaim, may take a number of years.
Tax contingencies
Following a U.S. Tax Court decision in September 2021, the Court held that the
Company’s revenues from marine seismic data qualified as Domestic Production
Gross Receipts (DPGR) under section 199(c)(4) rather than, as has been previously
claimed in the Company’s tax returns, section 199(c)(5). This had the impact of
increasing the deductions available to the Company in respect of the 2008 tax year.
The Company is challenging determinations by the United States Internal Revenue
Service (IRS) regarding certain research and development (R&D) tax credits taken
by the Company in its U.S. tax returns filed for 2009 through 2015 and is currently
evaluating the impact of the change in approach following the Tax Court ruling. Until
these are properly evaluated, it is uncertain what the benefit or liability arising will
be. Due to the uncertainty over the value and timing of any liabilities, no provisions
have been made or are deemed necessary.
Other tax exposures
TGS operates in a range of tax jurisdictions with complex considerations and
legislation concerning both indirect and direct taxation, including Brazil and
Argentina. Thus, uncertainties exist related to reported tax liabilities and exposures.
Recognized taxes (both direct and indirect) are based on all known and available
information and represent our best estimate as of the date of reporting.
The jurisdictions in which TGS operates are also subject to changing tax regulations
which may impact assessments, for instance concerning the recoverability of
credits. Furthermore, tax authorities may challenge the calculation of both taxes
and credits from prior periods. Such processes and proceedings may result in
changes to previously reported and calculated tax positions, which in turn may lead
to TGS having to recognize operating or financial expenses in the period of change.
Other contingent liabilities
As of 31 December 2021, TGS has entered certain agreements with suppliers
whereby a liability will arise contingent on future sales. No obligation will arise until
these future sales occur. Contingent liabilities related to these agreements totaled
USD 46.8 million in 2021 (2020: USD 49.6 million). These contingent liabilities are not
recognized in the balance sheet.
25. GROSS AND NET REVENUES
TGS enters into multi-client contracts with other companies whereby revenue is
shared proportionally and presented net. (See Note 18.) In some cases, TGS enters
into multi-client contracts where a portion of revenue is shared with governments in
certain countries. The table below provides the breakdown for 2021 and 2020.
2021
2020
Restated
1
Gross revenues from sales 609,425 436,801
Revenue sharing (90,736) (76,800)
Revenues 518,689 360,001
Revenues allocated to joint operation partners (87,171) (61,308)
Revenue allocated to other partners (3,565) (15,492)
Total (90,736) (76,800)
1) 2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
68
26. FINANCIAL ITEMS
2021
2020
Restated
1
Interest income 1,599 853
Exchange gains 40,083 28,969
Other financial income 926 1,744
Total financial income 42,608 31,566
Interest expense (2,471) (2,618)
Exchange loss (49,001) (21,162)
Other financial expenses (3,891) (2,256)
Total financial expenses (55,363) (26,035)
Net financial items (12,756) 5,530
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
27. TAX EXPENSE AND DEFERRED TAX
2021
2020
Restated
1
Profit before taxes
Norway (34 073) (251 650)
Outside Norway (51 014) 28 261
Total profit before taxes (85 087) (223 390)
Current taxes
Norway 4 090 529
Outside Norway 6 202 (1586)
Total current taxes 10 292 (1058)
Changes in deferred taxes
Norway (13 033) (61 846)
Outside Norway (3 848) 2 009
Changes in deferred taxes (16 882) (59 837)
Adjustments in respect of current income tax of previous
years and estimates
Norway – –
Outside Norway (2 514) 5 003
Total adjustments in respect of current income tax of
previous years and estimates
(2 514) 5 003
Income tax expense reported in the income statement (9 103) (55 892)
2021 2020
Profit before taxes (85 087) (223 390)
Expected income taxes according to corporate income
Tax rate in Norway (18 719) (49 146)
Tax rates outside Norway different from 22% 6 185 (6)
Adjustment in respect of current income tax of previous
year
(2 514) 5 003
Change in deferred tax asset not recognized – 3 292
Non-taxable income – (952)
Change in deferred tax branches – (6 210)
Non-deductible expenses 6 723 (758)
Currency effects (777 (7 114)
Income tax expense (9 103) (55 892)
Effective tax rate in % 11 % 25%
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Comments on Selected Line Items in the Preceding Table
Tax rates different from the Norwegian tax rate
The tax rates for subsidiaries outside Norway are different than the Norwegian
tax rate of 22% (2020: 22% tax rate). The tax rates in the jurisdictions where TGS
operates are between 17% and 34%.
Deferred Tax Asset Not Recognized
Deferred tax assets based on unused tax losses carried forward are not recognized
when TGS cannot demonstrate that it is probable that taxable profit will be available
against which the losses carried forward can be utilized. TGS has unused tax losses
and deductible temporary differences of zero USD (2020: 26.2 million) where no
deferred tax assets were recognized in the balance sheet; all of these unused tax
losses sit in entities outside Norway.
69
Non-deductible expenses
Non-deductible expenses consist of various types of expenses and payments of
various local taxes, which are not deductible for tax purposes in the tax jurisdictions
where TGS operates.
Currency Effects
TGS entities that do not have their tax base in USD are exposed to changes in the
USD/tax base-currency rates. Effects within the current year are classified as tax
expense.
Tax Effects of Temporary Differences and Tax Loss Carry-forwards as of 31
December
2021 2020
Differences that give rise to a deferred asset or a deferred tax
liability:
Multi-client library/well logs (26 833) (75 213)
Fixed assets (1 042) (2 106)
Goodwill and intangibles (11 111) (11 481)
Accruals 8 535 3 304
Accounts receivables 196 255
Other long-term items (6 240) 7 138
Lease asset vs. liability 661 1 371
Tax losses carried forward 65 127 40 389
Deferred revenue 33 944 87 276
Withholding taxes carried forward – –
Other 592 (3 985)
Basis deferred tax asset (liability) 63 830 46 948
Of which:
Deferred tax asset 95 888 76 048
Deferred tax liability 32 059 29 100
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Change in net deferred tax asset/(liability) 2021 2020
As of 1 January 46 948 (12 889)
Recognized in profit or loss (16 882) (59 837)
As of 31 December 63 830 46 948
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Comments on Selected Line Items in the Preceding Table
Recognition of Deferred Tax Assets on Tax Losses Carried Forward
Deferred tax assets are capitalized to the extent it is probable that TGS will have
taxable profits and the carryforward tax losses can be utilized. Deferred tax asset
on carryforward tax losses which are recognized are mainly related to Brazil, United
Kingdom and Norway.
With reference to Note 24 and “other tax exposure,” the Group notes uncertainties
concerning the tax balances in particular in Latin America. The information reported
is based on the information available to the Group as at the date of these financial
statements.
Temporary Differences of Group’s subsidiaries
No deferred tax has been recognized in respect of temporary differences related
to unremitted earnings of the Group’s subsidiaries where remittance is not
contemplated and where the timing of distribution is within the control of the Group.
Draft Taxation Ruling in Australia
On 20 December 2017, the Australian Tax Office (ATO) released for public comment a
draft taxation ruling (2017/D11 Income tax: capital allowances: expenditure incurred
by a service provider in collecting and processing multi-client seismic data). The
final ruling was issued 18 September 2019 (TR 2019/4). The comments made by the
seismic industry to the draft tax ruling have to a significant degree been considered,
and the conclusions of the final tax ruling have been adjusted compared to the draft
version. TGS considers that the conclusions in the final tax ruling will not lead to a
different tax position compared to the current practice. Therefore, it is not probable
that there will be an outflow of resources embodying economic benefits necessary to
settle an obligation, and no provisions have been made. Multi-client data will now be
considered capital in nature and as such is not a deductible cost. However, seismic
companies are also considered to be first users of the data, and can therefore deduct
the cost of acquiring the multi-client data in the income year the expenditure was
incurred.
28. CORRECTIONS FROM PRIOR YEARS
Tax Latin America
TGS has substantial operations in Latin America, a significant portion of which
resulted from the acquisition of Spectrum ASA in August 2019. Activities in Latin
America are subject to several different taxes depending on the jurisdiction, such
as corporate income tax, value-added taxes, import taxes and withholding taxes.
TGS has conducted a review of the accounting treatment of the different taxes
and has concluded that certain changes to the historical practices are advisable.
Consequently, to reflect these changes, the Group has restated certain account
balances for quarters Q1 to Q3 in 2021 and the full year 2020.
70
The restatement reflects an increase in multi-client investments due to an
adjustment for capitalized indirect taxes and prepaid cost balances not previously
included. The restatement also results in an increase in accrued expenses related to
indirect taxes. Foreign currency gains and losses have been recognized on monetary
amounts denominated in foreign currencies. Adjustments pertaining to periods prior
to 2020 have been reflected through an adjustment to retained earnings in opening
equity.
Timing of revenue
In accordance with IFRS 15, revenues from contracts entered into prior to
completion of the projects shall be recognized when the project is completed and
the performance obligation towards the customer is met. A seismic project typically
consists of several deliveries, and deliveries to different customers can happen at
different points in time. After reassessing the timing of meeting the performance
obligations on certain projects, it has been concluded that revenues recognized in
connection with the completion of the projects should be moved to 2020 from 2021.
This change has also led to associated changes in taxes as described in the table
below.
Multi-client investments
The timing of investments in two projects in Latin America have been restated
following a review of multi-clients in 2019 and 2020. Both projects had prepayments
of cost after the projects was completed. As a consequence, the opening balance of
2020 and the investment in 2020 have been restated.
Certain parts of investments in two projects, Colorado Basin in Argentina and
Santos 3D in Brazil, have not been recorded at the correct periods. Both projects
had prepayments of cost after the projects were completed. As the investments are
related to 2020 and 2019, they have been restated back to opening balance of 2020
and as investments in 2020.
01 Jan 2020 Before
Restatements
Restatements
01 Jan 2020 After
Restatements
Multi-client library 1,091,294 11,336 1,102,630
Total non-current assets 1,482,442 11,336 1,493,778
Other equity 1,079,608 -18,285 1,061,323
Equity 1,545,806 -18,285 1,527,521
Taxes payable, withheld payroll tax,
Social Security and VAT
37,639 24,370 62,009
Other current liabilities 117,981 5,250 123,231
Total current liabilities 589,661 29,621 619,282
2020 Before
Restatements
Restatements
2020 After
Restatements
Revenue 319,453 40,548 360,001
Cost of goods sold - proprietary
and other
5,409 1,641 7,050
Amortization of the multi-client
library
259,178 -3,440 255,738
Impairment of the multi-client
library
205,437 7,034 212,471
Financial expenses -2,896 -234 -3,130
Net exchange gains/(losses) 5,354 2,452 7,807
Taxes -72,324 16,432 -55,892
Net income -188,598 21,100 -167,498
EPS USD -1.61 -1.43
EPS USD, fully diluted -1.61 -1.43
31 Dec 2020
Before restatements
Restatements
31 Dec 2020
After Restatements
Multi-client library 946,263 19,288 965,551
Deferred tax asset 88,624 -12,576 76,048
Total non-current assets 1,437,392 6,712 1,444,104
Other receivables 104,819 -13,302 91,516
Total current assets 578,017 -13,302 564,715
Other equity 799,642 2,815 802,457
Equity 1,265,841 2,815 1,268,657
Accounts payable and debt to
partners
116,028 -38,344 77,683
Taxes payable, withheld payroll
tax, social security and VAT
11,691 25,892 37,582
Deferred revenue 484,693 -43,352 441,341
Other current liabilities 46,915 46,399 93,314
Total current liabilities 675,160 -9,406 665,754
71
Effects on segment figures
The restatements related to Tax in Latin America are the same for segment reporting
as the IFRS figures in the tables above, except for changes to the multi-client library.
Segment amortization and impairment of multi-client library has been restated with
USD 0.8 million 2020. Segment multi-client library 31.12.2020 has been restated
from USD 623.9 million to USD 646.7 million. The remaining restatements had no
impact on Segment accounts.
29. EVENTS AFTER THE BALANCE SHEET DATE
On 27 January 2022, a federal court in the U.S. decided to vacate the U.S. Gulf of
Mexico (GOM) sale that took place in November 2021, ruling that the environmental
impact study conducted in support of the lease sale was insufficient. Although the
decision may be appealed, the practical effect is likely that no further lease sales
in the GOM will take place until a new five-year Lease Schedule Plan is in place.
Over the past two to three years, there has been a gradual shift from frontier to
infrastructure-led exploration in the GOM, and TGS’ recent OBN-projects have
been primarily targeted at held acreage rather than future licensing rounds. As
such, the Board believes that most of its expected revenues in the U.S. would not be
significantly impacted by a temporary halt in GOM acreage awards.
After 31 December 2021 Russia invaded Ukraine, and as a result the U.S., UK, EU and
other countries implemented several economic sanctions against Russia, Russian
companies and individuals. TGS has low direct exposure to the situation, with only
approximately 0.3% of revenues in 2021 coming from the sale of data in Russia and
no revenues from Ukraine. The Board of Directors continues to monitor the situation
and assess potential direct and indirect consequences for TGS, and how it may affect
financial performance going forward.
Alternative
Performance
Measures
High operational leverage combined with a lean cost
structure and flexible business model positions TGS
well to show improved financial performance in a
better market.
73
High operational leverage combined with a lean cost structure and flexible
business model positions TGS well to show improved financial performance in a
better market.
Alternative Performance Measures
TGS’ financial information is prepared in accordance with IFRS. In addition, TGS
provides alternative performance measures to enhance the understanding of TGS’
performance. The alternative performance measures presented by TGS may be
determined or calculated differently by other companies.
EBIT (Operating Profit)
Earnings before interest and tax is an important measure for TGS as it provides an
indication of the profitability of the operating activities.
The EBIT margin presented is defined as EBIT (Operating Profit) divided by net
revenues.
Pre-funding percentage
The pre-funding percentage is calculated by dividing the multi-client pre-funding
revenues by the operational investments in the multi-client library, excluding
investments related to projects where payments to the vendors are contingent
on future sales. The pre-funding percentage is considered as an important
measure as it indicates how the Group’s financial risk is reduced on multi-client
investments.
EBITDA
EBITDA means earnings before interest, taxes, amortization, depreciation and
impairments. TGS uses EBITDA because it is useful when evaluating operating
profitability as it excludes amortization, depreciation and impairments related
to investments that occurred in the past. Also, the measure is useful when
comparing the Group’s performance to other companies.
All amounts in USD 1,000s 2021 2020 Restated
1
Net income (75,985) (167,498)
Taxes (9,103) (55,892)
Net financial items (12,756) 5,530
Depreciation, amortization and impairment 19,255 19,932
Amortization and impairment of multi-client library 458,861 468,209
EBITDA 380,272 270,282
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Return on average capital employed
Return on average capital employed (ROACE) shows the profitability compared to
the capital that is employed by TGS, and it is calculated as operating profit divided
by the average of the opening and closing capital employed for a period of time.
Capital employed is calculated as equity plus net interest-bearing debt. Net
interest-bearing debt is defined as interest-bearing debt minus cash and cash
equivalents. TGS uses the ROACE measure as it provides useful information about
the performance under evaluation.
All amounts in USD 1,000s 31 December 2021
31 December 2020
Restated
1
Equity 1,115,328 1,268,657
Interest bearing debt – 2,500
Cash 215,329 195,716
Net interest bearing debt (215,329) (193,216)
Capital employed 899,999 1,075,440
Average capital employed 987,720 1,141,181
Operating profit (72,331) (228,919)
ROACE -7% -20%
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Free cash flow (after organic MC investments)
Free cash flow (after organic MC investments) when used by TGS means cash flow
from operational activities minus cash investments in multi-client projects. TGS
uses this measure as it represents the cash that the Group is able to generate
after investing the cash required to maintain or expand the multi-client library.
All amounts in USD 1,000s 31 December 2021 31 December 2020
Cash flow from operational activities 317,649 354,728
Organic investments in multi-client library (155,490) (341,146)
Free cash flow (after organic MC investments) 162,159 13,582
Alternative Performance Measures
74
Multi-client net revenues/average net book value ratio
The ratio is defined as the net revenues from multi-client revenues divided by the
average of the opening and closing balance of the multi-client library.
All amounts in USD 1,000s 2021 2020 Restated
1
Prefunding 156,796 85,715
Late sales - unfinished data 218,292 98,640
Late sales - finished data 119,073 159,680
Multi-client net revenues 494,161 344,034
Opening balance multi-client library 965,551 1,102,630
Closing balance multi-client library 704,868 965,551
Average net book value 835,210 1,034,091
Multi-client net revenues/average net book value ratio 0.59 0.33
1)
2020 figures have been restated. Refer to note 28 of the Annual Report for more details.
Backlog
Backlog is defined as the total value of future net revenues from signed customer
contracts.
Yield
Yield is defined as the dividend per share divided by the share price at the time of
the dividend announcement. The 2021 dividend yield is annualized based on the
weighted yield at the time of announcement of quarterly dividends.
Parent
Company
Financials
TGS has a large and diversified portfolio of energy
data covering a range of dierent data types in most
of the important geographical areas.
76
Note 2021 2020 Restated
1
Revenue 17 142,762 170,540
Revenue 142,762 170,540
Cost of goods sold - proprietary and other 7,800 134
Amortization of the multi-client library 3 102,517 168,165
Impairment of the multi-client library 3,21 42,384 69,396
Personnel costs 4 9,860 8,751
Other operating expenses 13,18 33,039 21,338
Depreciation, amortization and impairment 2 1,108 994
Total operating expenses 196,707 268,778
Operating profit/(loss) (53,945) (98,238)
Interest income 15 1,862 3,804
Financial income 15,21 1 634
Exchange gains/(losses) 15 (13,074) 12,527
Interest expenses 15 (2,222) (4,900)
Financial expenses 15 (1,458) (939)
Net financial items (14,891) 11,127
Profit before taxes (68,836) (87,111)
Tax expense 16,21 (13,357) (20,393)
Net income (55,479) (66,718)
Profit/(loss) for the year is proposed allocated as follows:
Provision for dividend 16,255 16,412
To/(from) other equity 6 (71,734) (83,130)
Total allocated (55,479) (66,718)
Note 2021 2020 Restated
1
Assets
Non-current assets
Intangible non-current assets
Multi-client library 3,21 236,820 306,883
Deferred tax asset 16 173 167
Total intangible non-current assets 236,993 307,050
Tangible non-current assets
Machinery and equipment 2 4,144 5,100
Total tangible non-current assets 4,144 5,100
Financial non-current assets
Investments in subsidiaries 7 113,912 153,912
Total financial non-current assets 113,912 153,912
Total non-current assets 355,049 466,062
Current assets
Receivables
Accounts receivable 9 22,250 27,705
Accrued revenues 9 52,509 60,673
Current receivables group companies 10,21 536,514 616,545
Other receivables 9 4,317 5,021
Total receivables 615,590 709,944
Cash and cash equivalents 8 32,982 13,748
Total current assets 648,572 723,691
Total assets 1,003,621 1,189,754
Income Statement Balance Sheet
(All amounts in USD 1,000s unless noted otherwise) (All amounts in USD 1,000s unless noted otherwise)
PARENT COMPANY PARENT COMPANY
1)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more
details.
1)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more
details.
77
Note 2021 2020 Restated
1
Equity and Liabilities
Equity
Paid-in capital
Share capital 5, 6 4,085 4,082
Treasury shares held 5, 6 (38) (2)
Share premium 6 110,130 230,976
Other Reserves 6 2,667 12,517
Total paid-in capital 116,843 247,572
Retained earnings – –
Total equity 21 116,843 247,572
Liabilities
Non-current liabilities
Deferred tax 16,21 56,578 69,936
Total non-current liabilities 56,578 69,936
Current liabilities
Accounts payable and debt to partners 16,485 31,916
Current liabilities group companies 10 772,302 809,302
Taxes payable 16 22 22
Social security, VAT and other duties 7,067 45
Provisions for dividends 6 16,255 16,412
Other current liabilities 11 18,068 14,550
Total current liabilities 830,199 872,247
Total liabilities 886,777 942,182
Total equity and liabilities 1,003,620 1,189,754
Balance Sheet
(All amounts in USD 1,000s unless noted otherwise)
1)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more
details.
Henry H. Hamilton III
Chairman
Irene Egset
Director
Mark S. Leonard
Director
Kristian Johansen
Chief Executive Officer
Vicki Messer
Director
Wenche Agerup
Director
Grethe Kristin Moen
Director
Christopher Finlayson
Director
Svein Harald Øygard
Director
Oslo, 30 March 2022
PARENT COMPANY
78
Note 2021 2020
Cash flow from operating activities
Profit/(loss) before taxes 16 (68,836) (87,111)
Depreciation/amortization/impairment 2, 3 146,009 238,555
Changes in accounts receivables and accrued revenue 13,619 44,393
Changes in other receivables 704 38,980
Changes in other balance sheet items 118,781 (45,239)
Paid taxes 729 (17,052)
Net cash flow from operating activities 211,005 172,526
Cash flow from investing activities
Investment in tangible assets 2 (154) (1,759)
Investments in multi-client library 3 (88,151) (107,183)
Investments in subsidiaries 7 (21,897) –
Interest received 15 1,862 3,804
Net cash flow from investing activities (108,340) (105,137)
Cash flow from financing activities
Interest paid 15 (2,222) (4,900)
Dividend payments 6 (65,524) (87,783)
Purchase of treasury shares 6 (15,689) (6,601)
Proceeds from share offerings 6 5 9
Net cash flow from financing activities (83,429) (99,275)
Net change in cash and cash equivalents 19,236 (31,886)
Cash and cash equivalents at the beginning of the period 8 13,748 45,633
Cash and cash equivalents at the end of the period 32,982 13,748
Statement of Cash Flow
(All amounts in USD 1,000s unless noted otherwise)
PARENT COMPANY
79
1. GENERAL ACCOUNTING POLICIES
General Information
TGS ASA (TGS or the Company) is a public limited company incorporated in Norway
on 21 August 1996. The address of its registered office is Askekroken 11, 0217 Oslo,
Norway. The Company is listed on the Oslo Stock Exchange under the trading symbol
“TGS.”
The Company’s financial statements were authorized by the Board of Directors on 23
March 2022.
TGS has been granted exemption from the Norwegian Tax Authority to publish its
Annual Report in English only.
The Company, as used in these financial statements, is the Parent Company under
the Consolidated Financial Statements also included in this Annual Report.
Reporting Currency
The Parent Company, TGS ASA, reports its financial results in USD, which is the
Company’s functional currency.
General Accounting Policies
The financial statements are prepared in accordance with the Norwegian Accounting
Act and generally accepted accounting principles in Norway. The notes are an integral
part of the financial statements.
Significant Accounting Judgments, Estimates and Assumptions
In the process of applying the Company’s accounting principles, management is
required to make estimates, judgments and assumptions that affect the amount
reported in the financial statements and accompanying notes. Management bases
its estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which will
form the basis for making judgments on carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these
estimates. The key sources of judgment and estimation of uncertainty at the balance
sheet date 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 Evaluation of Multi-client Data Libraries
TGS performed impairment reviews and determined the value in use of the multi-
client library during 2021. The Company estimated value in use based on discounted
estimated future sales forecasts. The underlying estimates that form the basis for
the sales forecast depend on variables such as the number of oil and gas exploration
and production (E&P) companies operating in the area that would be interested in
the data, the overall E&P spending, expectations regarding hydrocarbons in the
sector, whether licenses to perform exploration in the sectors exist or will be given
in the future, expected farm-ins to licenses, relinquishments, etc. Changes in these
estimates may potentially affect the estimated amount of future materially. The
revenue estimates are evaluated on a regular basis and impairments are recognized
in the period they occur.
Provision for Impairment Losses of Accounts Receivables
The Company has made provisions for impairment losses of specific accounts
receivables deemed uncollectible. When assessing the need for provisions, the
Company uses all available information about the various outstanding receivables,
including the payment history and the credit quality of the actual companies.
Share-based Payments
The Company measures the share-based payment plans granted to employees by
reference to the fair value of the equity instruments at the date at which they are
granted (equity-settled transactions) or at the end of each reporting period (cash-
settled transactions) in accordance with NRS 15A (IFRS 2). Estimating fair value
requires appropriate valuation model to value the share-based instruments. The
values are dependent on the terms and conditions of the granted share-based
instruments. This also requires determining the appropriate assumptions in the
valuation models including the expected life of the instruments, volatility and dividend
yield.
Contingent Liabilities
The preparation of the financial statements has required TGS to make judgment,
estimates and assumptions that affect the reported amounts of liabilities and the
disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying
amount in future periods.
Notes to Parent Company Financials
(All amounts in USD 1,000s unless noted otherwise)
80
Summary of Significant Accounting Policies
Revenue Recognition
Revenue is recognized when it is probable that the economic benefits from a
transaction will flow to the Company and the revenue can be reliably measured.
Revenue is measured at fair value of the consideration received, net of discounts and
sales taxes or duty. The following describes the specific principles:
Work in Progress (WIP)
Sales in the form of pre-funding commitments from customers under binding
contracts are recognized as revenue on a percentage of completion (POC) basis
normally measured according to the acquired and processed volume of data in
relation to the estimated total size of the project. Sales made prior to commencement
of acquisition for each project are recognized on a POC basis and presented as
pre-funding revenues. Sales after the commencement, but while projects are in
progress are also recognized on a POC basis progress and presented as POC late
sales revenues. The amount of revenues for in- progress projects not yet invoiced, is
presented as accrued revenues in the balance sheet.
Finished Data
Revenue is recognized for sales of finished data at the time of the transaction; i.e.,
when the client has gained access to the data under a binding agreement.
Volume Sales Agreements
In certain situations, TGS grants licenses to the customer for access to a specified
number of blocks of multi-client library within an area. These licenses typically enable
the customer to select and access the specific blocks over a period of time. Revenue
recognition for volume sales agreements is based on a proportion of the total volume
sales agreement revenue, measured as the customer gains access to the data.
Revenue Sharing Arrangements
TGS shares certain multi-client revenues with other companies and governments.
Revenues are recognized on a net basis in accordance with applicable recognition
principles, representing TGS’ share of the revenue for the project.
Proprietary Contracts
Revenue from proprietary contracts for clients is recognized in the same way as work
in progress (POC) in accordance with the specific agreement.
Interest Income
Interest income is recognized as interest accrues. Interest income is included in the
financial items in the income statement.
Royalty Income
Royalty income is recognized on an accrual basis in accordance with the substance of
the relevant agreements.
Cost of Goods Sold (COGS) - Proprietary Contracts and Other
Cost of goods sold includes only direct cost related to proprietary contract work, and
costs related to delivery of geoscientific data.
Multi-client Library
The multi-client library includes completed and in-progress geophysical data to
be licensed on a non-exclusive basis to oil and gas exploration and production
companies. The costs directly attributable to data acquisition and processing
are capitalized and included in the asset value. Costs directly attributable to data
acquisition and processing includes mainly vessel costs, payroll and hardware/
software costs. Directly attributable costs do also include mobilization costs
when relocating a vessel to the survey area. The library also includes the cost of
data purchased from third parties. The library of finished multi-client seismic data
and interpretations is presented at cost reduced by accumulated amortization and
accumulated impairment.
Amortization of Seismic Data
TGS is amortizing the cost of its seismic data library as follows:
Amortization of Seismic Data
TGS is amortizing the cost of its seismic data library as follows:
• During the work in progress phase, amortization is based on total cost versus
forecasted total revenues of the project. Amortization is recorded in line with
how revenues are recognized for each project during this phase.
• After a project is completed, a straight-line amortization is applied. The straight-
line amortization is assigned over a remaining useful life, which for most marine
projects is 4 years. For most onshore projects, the remaining useful life after
completion of a project is 7 years.
Impairment Test Multi-client Library
When there are indicators that the net book value may not be recoverable, the library
is tested for impairment individually per project. Any impairment of the multi-client
library is recognized immediately and presented as “Impairment of the multi-client
library” in the statement of profit or loss.
TGS assesses, at each reporting date, whether there is an indication that a project
may be impaired. If any indication exists, TGS estimates the project’s recoverable
amount. A project’s recoverable amount is the higher of a project’s fair value less
81
costs of disposal and its value in use. When the carrying amount of a project exceeds
its recoverable amount, the project is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows are
discounted to their 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 project.
Contingent Rent Agreements
The Company has entered into agreements on rental of seismic vessels where a
part of the rental payment is paid during the rental period, while the other part of
the rent is deferred and contingent on a future sale. The balance of the other part
of the rent will be paid as/if sales occur. The deferred payment is not considered
to be a current liability, and no provision has been recognized as future payment is
based on a future sales event. When sales occur, TGS will recognize revenues with
a corresponding investment recognition. The obligation to pay the remaining vessel
rent will be recognized as a liability when the sales transaction occurs.
Goodwill
Goodwill is depreciated over ten years. In addition, goodwill is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
Tangible Non-current Assets and Principles of Depreciation
Tangible non-current assets are presented at historical cost less accumulated
depreciation and impairment charges. If an indication of impairment exists, an
impairment test is performed. If the fair value of a tangible non-current asset is lower
than book value, the asset will be written down to the higher of fair value less cost to
sell and value in use. Depreciation is determined in light of the asset’s economic life.
Purchases which are expected to have a technical and economic life of more than one
year are capitalized as tangible non-current assets. Depreciation begins when the
assets are available for use.
Exchange Rate Adjustments
Transactions in foreign currency are translated at the rate applicable on the
transaction date. Monetary assets, receivables and liabilities are translated at the
exchange rate on the balance sheet date. Changes to exchange rates are recognized
in the income statement as they occur during the accounting period.
Research and Development Costs
Research costs are expensed as incurred. Development expenditures on an individual
project are recognized as an intangible asset when the Company can demonstrate:
• It is technically feasible to complete the product so that it will be available for use;
• Management intends to complete the product and use it;
• There is an ability to use the software product;
• It can be demonstrated how the product will generate future economic benefits;
• Adequate technical, financial or other resources to complete the development
and to use the product are available; and
• The expenditure attributable to the product during its development can be
reliably measured.
Following initial recognition of the development expenditure as an asset, the asset
is carried at cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete, and the
asset is available for use. It is amortized over the period of expected future benefit.
Provisions
Provisions are made when the Company has a current obligation (legal or constructive)
as result of a past event, it is probable that the Company will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using
a pre-tax rate that reflects, where appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is
recognized as a finance cost.
Contingent liabilities are possible obligations as a result of a past event where the
existence of the liability depends on the occurrence, or not, of a future event. An
existing obligation, in which it is not likely that the entity will have to dispose economic
benefits, or where the obligation cannot be measured with sufficient reliability, is
also considered a contingent liability. Contingent liabilities are not recognized in
the financial statements, but if material, disclosed in the accompanying notes. A
contingent asset is not recognized in the financial statement but disclosed if there is a
certain degree of probability that it will be an advantage of the Company.
Income Taxes
Current Income Tax
Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted at the reporting date.
82
Deferred Tax
Deferred tax is provided using the liability method on temporary differences at the
balance sheet date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities have been recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the
carryforward of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible temporary
differences, and the carryforward of unused tax credits and unused tax losses, can
be utilized.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current income tax liabilities and the
deferred taxes relate to the same taxable company and the same taxation authority.
Deferred tax assets and liabilities are measured at the tax rates that are expected
to apply to the year when the asset is realized, or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
The Company pays its tax obligation in Norwegian Kroner (NOK), and the fluctuations
between the NOK and the USD impact the financial items. Exchange rate fluctuations
related to the basis for current year income tax expense are classified as tax expense.
Share-based Payments
Key employees of the Company receive remuneration in the form of share-based
payment, whereby employees render services as consideration for Performance
Share Units (PSUs) and Restricted Share Units (RSUs).
The cost of equity-settled transactions is measured by reference to the fair value at
the date on which they are granted. The fair value is determined by an external value
using an appropriate pricing model.
The cost of equity-settled transactions is recognized, together with a corresponding
increase in equity, over the period in which the performance and/or service conditions
are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (the vesting date). The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Company’s best estimate of the number of
equity instruments that will ultimately vest. The income statement expense or credit
for a period represents the movement in cumulative expense recognized at the
beginning and end of that period.
No expense is recognized for awards that do not ultimately vest.
Pensions
The Company operates defined-contribution plans in Norway. Contributions are
expensed to the income statement as they become payable.
Leases - TGS as lessee
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases
are classified as operating leases. The evaluation is based on the substance of the
transaction at the inception date of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets or the arrangement conveys a right
to use the asset.
Finance leases are recorded as assets and liabilities, and lease payments are
apportioned between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are recognized in the income statement.
Operating lease payments are recognized as an expense in the income statement on
a straight-line basis over the lease term.
Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash in bank accounts and
on hand and short-term deposits with an original maturity of three months or less.
Accounts Receivables and Other Receivables
Receivables are measured at cost less any amounts expected to be uncollectible.
Sales with deferred payments due to be settled more than twelve months or later are
presented as non-current receivables.
Investments in Subsidiaries and Associated Companies
Investments in subsidiaries and investments in associates are valued at cost in the
Company’s financial statements. The investment is valued as cost of the shares
in the subsidiary, less any impairment losses. An impairment loss is recognized
if the impairment is not considered temporary, in accordance with the generally
accepted accounting principles. Impairment losses are reversed if the reason for the
impairment loss disappears in a later period.
Dividends, group contributions and other distributions from subsidiaries are
recognized in the same year as they are recognized in the financial statement of the
provider. If dividends/group contribution exceed withheld profits after the acquisition
date, the excess amount represents repayment of invested capital, and the distribution
will be deducted from the recorded value of the acquisition in the balance sheet for
the Parent Company.
83
Dividends
The dividends are recognized as a liability in the financial statements when proposed
by the Board of Directors.
Financial Instruments
Financial instruments are valued at the lower of historical cost and market value.
Loans are recognized at the amount received, net of transactions costs. The loans
are thereafter recognized at amortized costs using the effective interest rate method.
Treasury Shares
TGS’ equity instruments that are reacquired (treasury shares) are recognized at
cost and deducted from equity. No gain or loss is recognized in profit or loss on the
purchase, sale, issue or cancellation of TGS’ own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognized in the
share premium.
Cash Flow Statement
The cash flow statement is compiled using the indirect method.
2. TANGIBLE NON-CURRENT ASSETS
2021
Acquisition cost and depreciation: Machinery and Equipment
Cost as of 1 January 2021 10,801
Additions 154
Disposals 417
Cost as of 31 December 2021 10,538
Accumulated depreciation as of 1 January 2021 5,701
Depreciation for the year 1,108
Accumulated depreciation on disposals
1
415
Accumulated depreciation as of 31 December 2021 6,394
Net book value as of 31 December 2021 4,144
Straight-line depreciation percentage 14% - 33.3%
Useful life 3 - 7 years
1)
Profit on disposals during the year was USD 0.
2020
Acquisition cost and depreciation: Machinery and Equipment
Cost as of 1 January 2020 9,042
Additions 1,759
Disposals1 –
Cost as of 31 December 2020 10,801
Accumulated depreciation as of 1 January 2020 4,708
Depreciation for the year 994
Accumulated depreciation on disposals
1
–
Accumulated depreciation as of 31 December 2020 5,701
Net book value as of 31 December 2020 5,100
Straight-line depreciation percentage 14% - 33.3%
Useful life 3 - 7 years
1)
Multi-client Library: See the “General Accounting Policies”, for the policies on amortization of this asset.
3. INTANGIBLE NON-CURRENT ASSETS
2021
Acquisition cost and depreciation: Goodwill Multi-client Library Total
Cost as of 1 January 2021 3,073 3,706,799 3,709,873
Additions – 74,838 74,838
Cost as of 31 December 2021 3,073 3,781,637 3,784,711
Accumulated amortization as of 1 January 2021 3,073 3,399,916 3,402,990
Amortization for the year 102,517 102,517
Impairment for the year – 42,384 42,384
Accumulated amortization and impairment as of
31 December 2021
3,073 3,544,817 3,547,890
Net book value as of 31 December 2021 – 236,820 236,820
Straight-line amortization percentage 10%
Useful life 10 years
2
4 to 7 years
1
1)
Multi-client Library: See the “General Accounting Policies”, for the policies on amortization of this asset.
2)
Goodwill paid for in acquisitions of companies is amortized over the first ten years after the date of the acquisition.
84
2020
Acquisition cost and depreciation: Goodwill Multi-client Library
3
Total
Cost as of 1 January 2019 3,073 3,555,584 3,558,658
Additions – 151,215 151,215
Cost as of 31 December 2019 3,073 3,706,799 3,709,873
Accumulated amortization as of 1 January
2019
3,073 3,162,355 3,165,428
Amortization for the year 168,165 168,165
Impairment for the year – 69,396 69,396
Accumulated amortization and impairment
as of 31 December 2019
3,073 3,399,916 3,402,990
Net book value as of 31 December 2019 – 306,883 306,883
Straight-line amortization percentage 10%
Useful life 10 years
2
4 to 7 years
1
1)
Multi-client Library: See the “General Accounting Policies”, for the policies on amortization of this asset.
2)
Goodwill paid for in acquisitions of companies is amortized over the first ten years after the date of the acquisition.
3)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
4. SALARIES/NUMBER OF EMPLOYEES/BENEFITS/
EMPLOYEE LOANS/PENSIONS
2021 2020
Payroll 7,556 6,046
Social security costs 1,165 1,274
Pension costs 352 407
Other employee related costs 844 1,091
Salaries capitalized (57) (67)
Personnel costs 9,860 8,751
Number of employees at 31 December 35 43
Average number of employees 38 45
As of 31 December 2021, the Company had 35 employees: 25 male employees and 10
female employees.
The Company operates defined contribution plans in Norway.
The plans fulfill the requirements of the Norwegian law.
Auditor Fees 2021 2020
KPMG
Statutory audit 466 244
Other attestation services 6 6
Other services outside the audit scope 51 3
Total fees 523 253
All amounts are exclusive VAT.
Information about remuneration of the Board of Directors and the executive
management is included in Note 10 to the consolidated financial statements.
For information about share-based payment plans, see Note 11 to the consolidated
financial statements.
5. SHARE CAPITAL AND SHAREHOLDER
INFORMATION
The share capital of TGS ASA as of 31 December 2021 was USD 4,085,151.85, NOK
29,360,279.50 consisting of 117,441,118 ordinary shares at NOK 0.25 per share. The
Company’s shares have equal voting rights.
For information of treasury shares, shareholders’ authorization and the 20 largest
shareholders, see Note 12 to the consolidated financial statements.
6. EQUITY RECONCILIATION
Equity
Reconciliation
Share
Capital
Treasury
shares
Share
premium
Other
Reserves
Retained
Earnings
Total
Equity
Balance 1 January 2021 4,082 (2) 230,975 12,517 0 247,572
Purchase of own shares – (38) – (15,413) (238) (15,689)
Treasury shares distributed – 0 – – 238 238
Cancellation of treasury
shares held
(1) 1 – – – –
Cost of equity-settled long-
term incentive plans
5 – – 5,563 – 5,569
Quarterly dividends resolved
and paid
– – (49,112) – – (49,112)
Provisions for quarterly
dividends (USD 0.14 per
share)¹
– – (16,255) – – (16,255)
Profit/(loss) for the year – – (55,479) – – (55,479)
Balance 31 December 2021 4,085 (38) 110,129 2,667 0 116,844
85
1)
The Annual General Meeting held 23 March 2021 authorized the Board of Directors to distribute quarterly
dividends based on the 2020 statements. The authorization shall be valid until the Company’s next Annual
General Meeting.
On 9 February 2022, the Board of Directors resolved to pay quarterly dividend of the NOK equivalent of USD 0.14
per shares (NOK 1.24) to the shareholders.
Equity
Reconciliation
Share
Capital
Treasury
shares
Share
premium
Other
Reserves
Retained
Earnings
Total
Equity
Balance 1 January 2020 4,127 (50) 359,032 11,929 5,349 380,387
Purchase of treasury shares – (7) (1,080) – (5,514) (6,600)
Treasury shares distributed – 0 – – 165 165
Cancellation of treasury
shares held
(54) 54 – – – –
Purchase of own shares 9 – – 588 – 597
Quarterly dividends resolved
and paid
– – (43,846) – – (43,846)
Provisions for quarterly
dividends (USD 0.14 per share)
– – (16,412) – – (16,412)
Profit/(loss) for the year – – (66,718) – – (66,718)
Balance 31 December 2020 4,082 (2) 230,975 12,517 0 247,572
1)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
7. INVESTMENTS IN SUBSIDIARIES
As of 31 December 2021, the Parent Company had the following investments in subsidiaries:
Included in the Balance Sheet as: Registered Office
Share Capital of
Company
No. of Shares Book Value Net Income Total Equity
Shareholding and
Voting Power
TGS NES AS Oslo, Norway NOK 100,000 100,000 184 (2,082) (2,244) 100%
TGS AP Investments AS Oslo, Norway NOK 200,000 1,000 51,752 (7,001) (45,404) 100%
TGS Contracting AS Oslo, Norway NOK 100,000 1,000 4,219 7 (4,104) 100%
TGS AS Oslo, Norway NOK 30,000 30,000 15,224 (58,303) (245,471) 100%
TGS-NOPEC Geophysical Company (UK) Ltd. Bedford, UK GBP 1 1 – – 0 100%
Aceca Ltd. Surbiton, UK GBP 1 10 162 – (162) 100%
TGS Geophysical Investments Ltd. Surbiton, UK USD 100,000 100,000 – – 0 100%
TGS Geophysical Company (UK) Ltd. Surbiton, UK GBP 166,035.34 16,603,534 – (5,264) 1,481 100%
TGS-NOPEC Geophysical Company PTY Ltd Perth, Australia AUD 1 1 0 2,706 21,167 100%
TGS-NOPEC Geophysical Company PTE Ltd Singapore SGD 1 1 – (21) 352 100%
TGS do Brasil Ltda. Rio de Janeiro, Brazil BRL 43,400,200 39,060,180 9,900 (35,127) (13,606) 90%
TGS Canada Corp. Calgary, Canada CAD 73,945 100,000 32,471 3,416 36,519 100%
TGS-NOPEC Geophysical Company Moscow Ltd Moscow, Russia RUB 300,000 1 – (76) (3,583) 100%
Nopec Geophysical Company, S. de R.L. de C.V. Mexico City, Mexico MXN 1,000 1 – 21 (259) 90%
Balance sheet value 113,912
86
The Parent company has direct or indirect 100% voting rights in all subsidiaries.
The negative equity in TGS AS arises as a result of the accounting of the Spectrum
merger, and the difference between measurement of the merger liability and the fair
value of the net assets acquired under NGAAP. The negative equity effect is eliminated
on group level.
8. RESTRICTIONS ON BANK ACCOUNTS
As of 31 December 2021, USD 1.5 million of cash and cash equivalents are restricted
to meet the liability arising from payroll taxes withheld. (2020: USD 1.5 million).
9. ACCOUNTS RECEIVABLES AND OTHER
RECEIVABLES
Accounts receivables, including accrued revenues, is stated in the balance sheet
at net realizable value and totaled USD 74.8 million as of 31 December 2021 (2020:
USD 88.4 million). The Company has made a bad debt provision of USD 0 million in
2021 (2020: USD 0 million). The Company expects to collect the stated balance of
receivables as of 31 December 2021. Realized losses on trade receivables in 2021
amounted to USD 0 million (2020: USD 0.2 million). Prepayments to suppliers and
other short-term receivables totaled USD 4.3 million as of 31 December 2021 (2020:
USD 5.0 million).
10. CURRENT RECEIVABLES AND LIABILITIES
GROUP COMPANIES
2021 2020
Company Receivables Liabilities Receivables Liabilities
TGS AP Investments AS 40,742 – 43,811 –
Aceca Norge AS – 5,343 – 5,294
TGS NES AS1 22,069 – – 21
TGS AS 468,624 – 504,105 –
TGS-NOPEC Geophysical Company – 607,375 – 632,386
A2D Technologies Inc. – 67,131 – 53,097
TGS Geophysical Company (UK) Ltd. – 48,554 – 52,732
TGS-NOPEC Geophysical Company
PTY Ltd
– 16,371 – 18,495
TGS-NOPEC Geophysical Company
Pte
– – – –
2021 2020
Company Receivables Liabilities Receivables Liabilities
OBS MC Investments I AS – 6,840 5,090 –
TGS Moscow 356 – 284 –
TGS Canada Corp. 29 – – 35,237
Nopec Geophysical Company, S. de
R.L. de C.V.
360 – 360 –
Carmot Seismic AS 834 – 786 –
Spectrum Geo Inc 45 – – 10
Spectrum Geo Ltd – 11,046 – 4,547
Spectrum Geo Australia Pty Ltd – 6,113 – 4,000
Spectrum Geo Pty Ltd – 189 – –
Spectrum Geo AS – 1,861 – 1,988
Spectrum Geo S.A.de C.V. (Mexico) 22 – 7 –
Spectrum Pte Ltd (Singapore) – 1,480 – 1,495
Spectrum Geo CH AS 2,399 – – –
TGS do Brasil Ltda. 1,036 – 62,101 –
Total 536,515 772,302 616,545 809,302
1)
With effect from 23 June 2021, the name of the Company was changed from Maglight AS to TGS NES AS.
2)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
Realized losses on intercompany receivables in 2021 amounted to USD 0 million
(2020: USD 0 million).
3-Year Term Secured Revolving Credit Facility
In October 2018, TGS entered into a secured revolving credit facility of USD 100
million with an interest rate of LIBOR + 2% per interest period as determined by TGS
and as per the defined terms of the revolving credit facility. The closing of the security
granted under the credit facility occurred in January 2019. TGS paid an upfront fee of
0.60% of the facility amount and pays a commitment fee of 0.40% per annum for the
unused and uncancelled part of the facility. With respect to financial conditions, TGS
must maintain (i) an equity ratio of 50% or more, (ii) a leverage ratio of no more than
1.00:1.00, (iii) EBITDA minus operational capex at zero or above and (iv) a liquidity of
USD 75 million on a consolidated basis. As of 31 December 2021, TGS had not drawn
any amounts under the facility and was in full compliance with all of the financial
covenants. The facility is secured by a lien on the assets of the Parent company
and subsidiaries having net revenues representing 5% or more of the group’s net
revenues as defined in the facility [as of year-end 2021, TGS AP Investment AS, TGS-
NOPEC Geophysical Company, A2D Technologies Inc., TGS Geophysical Company
(UK) Limited, TGS Canada Corp. and TGS AS]. The same subsidiaries have also
provided guarantees.
87
The revolving credit facility was renewed with three years in February 2021 with same
terms except from:
Margin increase due to increased market risk post-COVID (+ 50 bps)
Letter of Credit option removed as agreed
Updates on sanctions language
Reference rate transition language update
Any other LMA based updates
11. OTHER CURRENT LIABILITIES
2021 2020 Restated
1
Deferred revenues 7,023 5,425
Accrued project costs 4,737 5,262
Other accrued expenses 6,308 3,864
Total other current liabilities 18,068 14,550
1)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
12. GUARANTEES
Parent Company Guarantee
Under section 479A of the UK Companies Act 2006, a number of TGS’ UK-based
subsidiaries have claimed an exemption from audit of their statutory financial
statements for the year ended 31 December 2020. This required the Parent undertake
to guarantee all outstanding liabilities to which the subsidiary company is subject at
the end of that financial year to which the guarantee relates, until they are satisfied
in full.
For the year ended 31 December 2021, management is in the process of finalizing all
UK-based financial statements. Under the audit exemption per section 480 of the UK
Companies Act 2006, no such guarantee will be provided for dormant companies.
Bank Guarantees
As of 31 December 2021, one guarantee has been renewed on behalf of the Company.
- Lease guarantee - Albury Land (Surbiton) UK office - GBP 292,562
13. COMMITMENTS AND CONTINGENCIES
Operating leases - Company as lessee
At the end of 2021, TGS has entered into commitment for one 3D vessel and two OBN
crews. The commitments will expire in 2022, and the amount committed, including
contractual lease agreements, totaled USD 27 million (2020: USD 2 million).
The Company has one operating lease commitment relating to premises. The
commitment expires 30 June 2030.
The commitment have no termination before expiry date.
Rental expense for operating leases was USD 1.3 million for the year ended 31
December 2021 (2020: USD 0.6 million). Future minimum payments for operating
leases as of 31 December are as follows:
2021 2020
Within one year 644 1,209
After one year but not more than five years 2,573 2,737
More than five years 2,251 3,028
5,468 6,974
The Company does not have any financial leases.
Contingent rent agreements
As of 31 December 2021, there were no deferred parts of contingent rent agreements,
which is contingent on future sales (2020: USD 0 million).
14. RELATED PARTIES
No material transactions took place during 2021 with related parties, other than
operating business transactions between the companies in the TGS Group. All
companies within TGS are 100% owned, directly or indirectly, by the Company,
except for Calibre Seismic Company (50%), Spectrum Geopex Egypt Ltd. (50%), TGS-
Petrodata Offshore Services Ltd. (49%) and TGS FJ Geophysical (Ghana) Ltd. (90%),
which is owned by one of the subsidiaries. Business transactions between the entities
of TGS were performed according to arm’s length principles. The main business
transactions can be aggregated as follows:
2021 2020
Data processing costs 15,150 32,462
Brokerage fees 5,095 13,341
Management fees 13,630 11,473
88
For information about intercompany interest income and expense, see Note 15.
The Company has no liabilities in form of mortgages of entities within the TGS Group.
For information about guarantees, see Note 12.
For a specification of intercompany receivables and liabilities, see Note 10.
15. FINANCIAL ITEMS
Financial income/expense: 2021 2020
Interest income 396 134
Interest income subsidiaries 1,466 3,670
Exhange gain 2,976 19,372
Other financial income 1 634
Total financial income 4,839 23,810
Interest expense (6) (116)
Interest expense subsidiaries (2,216) (4,783)
Exchange loss (16,050) (6,845)
Other financial expenses (1,458) (939)
Total financial expense (19,730) (12,683)
Net financial items (14,891) 11,127
16. TAX EXPENSE
Explanation of total tax expense versus nominal tax rate on pre-tax profit:
Financial income/expense: 2021 2020 Restated
3
Profit/(loss) before taxes (68,836) (87,111)
Permanent differences¹ 7,658 (10,356)
Changes in temporary differences (16,620) 30,799
Currency exchange effects on base for current tax 462 4,823
Basis for current tax (77,336) (61,845)
Total tax expense for the year:
Deferred tax - changes (13,357) (20,522)
Adjustment in respect of current income tax of previous year – (11)
Tax effect of group relief – 140
Total tax expense for the year (13,357) (20,393)
Effective average tax rate 19% 23%
Specification of basis for deferred taxes:
Temporary differences:
Multi-client library (55,067) (119,410)
Revenues on seismic projects in the work in progress phase 99,156 134,203
Accounts receivable – (270)
Accruals (11,025) (9,895)
Other 1,133 894
Merger receivable² 358,643 370,698
Tax loss carried forward (135,666) (58,330)
Total 257,174 317,890
Deferred tax liability/(asset) based on temporary differences 56,578 69,936
Withholding taxes carried forward (173) (167)
Deferred tax liability/(asset) recognized 56,405 69,769
Explanation of total tax expense versus nominal tax rate
on pre-tax profit:
Tax calculated using nominal tax rate on pre-tax profit (15,144) (19,164)
Effect of permanent differences 1,685 (2,278)
Effect of Group Contribution – 140
Exchange gain/loss reported as tax expense 102 910
Total tax expense recorded in income statement (13,357) (20,393)
1)
Permanent differences related to non-tax deductible items. Permanent differences related to non-tax deductible
items, in 2020 to a large part related to reversal of the Skeie accrual.
2)
Receivable from merger with TGS AS. See Note 3 in Group Financials.
3)
2020 figures have been restated. Refer to note 21 of the Financial Statements for more details.
17. GROSS AND NET REVENUES
TGS enters into multi-client contracts with other companies whereby revenue is
shared proportionally and presented net. In some cases, TGS enters into multi-client
contracts where a portion of revenue is shared with governments in certain countries.
The table below provides the breakdown for 2021 and 2020.
2021 2020
Gross revenues from sales 158,120 192,799
Revenues allocated to other parties (15,358) (22,259)
Revenues 142,762 170,540
89
18. FINANCIAL RISK MANAGEMENT
Currency Risk
Functional currency for the Company is USD. Substantial portions of TGS’ revenues
and costs are in US dollars, except for personnel and administrative costs. Due to this,
the Company’s operational exposure to exchange fluctuations is low. However, as the
Company pays taxes in Norwegian kroner to Norwegian Tax Authorities and dividends
to shareholders in Norwegian kroner, fluctuations between the NOK and the USD
impact currency exchange gains or losses on tax expense and financial items.
Liquidity Risk
Liquidity risk arises from lack of correlation between cash flow from operations and
financial commitments. As of balance sheet date, the Company held current assets of
USD 648,6 million, of which cash and cash equivalents represents USD 33,0 million,
and current liabilities of USD 830,2 million, of which debt to subsidiaries represents
USD 772,3 million. As of 31 December 2021, TGS considers the liquidity risk to be low.
Credit Risk
All placements of excess cash are either bank deposits or in financial instruments
that at minimum carry an “investment grade” rating. The Company’s clients are oil
and gas companies. The Company is exposed to credit risk through sales and uses
best efforts to manage this risk. The maximum exposure to credit risk at the reporting
date is the carrying value of the financial assets, the carrying value of the accounts
receivables and other short-term receivables. TGS considers the concentration of
risk with respect to trade receivables as low due to the Company’s credit rating
policies and because the clients are mainly large oil and gas companies, considered
to be financially sound.
From time to time, the Company accepts extended payment terms on parts of
firm commitments from clients. To the extent these terms do not carry an interest
compensation to be paid by clients, the revenues recognized by the Company are
discounted to reflect this element.
19. OTHER NON-CURRENT ASSETS AND
LIABILITIES
Other non-current assets comprise accounts receivables with extended payment
terms and loans. Any revenue share associated with these receivables is presented
as other non-current liabilities.
TGS has an interest-bearing loan to Production Energy Company AS. The loan has
a total value of gross USD 21.1 million (net to TGS of USD 8.7 million). The loan has
been fully provided for and is recognized at USD 0 million as of 31 December 2021 (31
December 2020: USD 0 million).
20. CONTINGENT LIABILITIES
Conclusion of Økokrim Charges and Related Civil Matters
In May 2014, Økokrim, the Norwegian National Authority for Investigation and
Prosecution of Economic and Environmental Crime, charged TGS for violations of
the Norwegian Tax Assessment Act related to transactions entered into in 2009 to
2010 with Skeie Energy AS, later known as E&P Holding AS and Production Energy
Company AS (referred to as Skeie). The charges claimed that TGS contributed to
unwarranted tax refunds received by Skeie under the Norwegian Petroleum Tax Act
through licenses of seismic data to Skeie. In 2020, the matter was fully resolved
in favor of TGS. TGS was also awarded MNOK 16.5 (USD 1.8 million) for costs and
expenses incurred from 2014 through 2020.
In relation to the transactions with Skeie, civil claims were made for monetary
compensation among various parties involved, including claims against TGS for
its part in the transactions. The primary claimant was DNB, who repaid the tax
refunds received by Skeie under a provision in the Tax Payment Act that statutorily
assessed liability to DNB due to its status as pledgee of the tax refunds and thus
sought reimbursement for such amounts it paid to the Norwegian Government. Prior
to commencement of the trial in October 2021, the parties settled all claims. TGS
recognized the settlement amount as Other Operating Expenses in the third quarter
of 2021.
21. CORRECTIONS FROM PRIOR YEARS
Following a thorough review process, impairment of the multi-client library for 2020
has been reassessed between different projects. This has resulted in a change in
impairment of the multi-client library for TGS ASA of USD 6.1 million.
When the 2020 Tax Return was filed, the tax calculation was updated, resulting in
lower loss carried forward and less group contribution received for TGS ASA.
USD 13.2 million have been reclassified from other current liabilities to current
liabilities group companies.
90
Company
2020 Before
restatements
Restatements
2020 After
restatements
Impairment of the multi-client library 75,485 (6,089) 69,396
Financial income 7,224 (6,589) 634
Tax expense (25,148) 4,755 (20,393)
Net income (61,463) (5,255) (66,718)
Company
2020 Before
restatements
Restatements
2020 After
restatements
Multi-client library 300,794 6,089 306,883
Current receivables group companies 623,134 (6,589) 616,545
Total Equity 252,827 (5,255) 247,572
Deferred tax 65,181 4,755 69,936
Current liabilities group companies 796,093 13,209 809,302
Other current liabilities 27,759 (13,209) 14,550
22. EVENTS AFTER THE BALANCE SHEET DATE
On 27 January 2022, a federal court in the U.S. decided to vacate the U.S. Gulf of Mexico
(GOM) sale that took place in November 2021, ruling that the environmental impact
study conducted in support of the lease sale was insufficient. Although the decision
may be appealed, the practical effect is likely that no further lease sales in the GOM
will take place until a new five-year Lease Schedule Plan is in place. Over the past
two to three years, there has been a gradual shift from frontier to infrastructure-led
exploration in the GOM, and TGS’ recent OBN-projects have been primarily targeted
at held acreage rather than future licensing rounds. As such, the Board believes that
most of its expected revenues in the U.S. would not be significantly impacted by a
temporary halt in GOM acreage awards.
After 31 December 2021 Russia invaded Ukraine, and as a result the U.S., UK, EU and
other countries implemented several economic sanctions against Russia, Russian
companies and individuals. TGS has low direct exposure to the situation, with only
approximately 0.3% of revenues in 2021 coming from the sale of data in Russia and
no revenues from Ukraine. The Board of Directors continues to monitor the situation
and assess potential direct and indirect consequences for TGS, and how it may affect
financial performance going forward.
91
KPMG AS
Sørkedalsveien 6
Postboks 7000 Majorstuen
0306 Oslo
Telephone
+47 45 40 40 63
Fax
Internet
www.kpmg.no
Enterprise
935 174 627 MVA
To the General Meeting of TGS ASA
Independent Auditor’s Report
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of TGS ASA, which comprise:
• The financial statements of the parent company TGS ASA (the Company), which comprise the
balance sheet as at 31 December 2021, the income statement and cash flow statement for the
year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and
• The consolidated financial statements of TGS ASA and its subsidiaries (the Group), which
comprise the consolidated balance sheet as at 31 December 2021, the consolidated
statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows 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 statutory 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 its cash flows for the year then ended in
accordance with the Norwegian Accounting Act and accounting standards and practices
generally accepted in Norway, and
• the 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 its 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 as required by laws and regulations 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 4 years from the election by the general meeting of the
shareholders on 8 May 2018 for the accounting year 2018.
Independent Auditor's Report - TGS ASA
2
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 of the current period. 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.
Revenue recognition
Refer to the consolidated financial statements Note 1 General Accounting Policies, Note 4 Revenue from
Contracts with Customers, Note 5 Segment Information and Note 28 Corrections from prior years.
The key audit matter
How the matter was addressed in our audit
For the year ended 31 December 2021, the Group
reported revenues of USD 524 million, of which USD
158 million pertained to pre-funding contracts, USD
220 million to late sales of unfinished data and USD
147 million to late sales of finished data and sales of
proprietary data.
For prefunding contracts and contracts for late sales
of unfinished data, customers commit to purchasing
licenses from TGS prior to the acquisition and
processing of data or after commencement of a
survey but prior to data being ready for delivery.
Under IFRS 15, revenue from these contracts is
recognized at a point in time upon delivery of the
finished multi-client data license to the customer.
Revenue recognition in accordance with IFRS 15
can be complex and there is a risk revenue may be
recognized in the incorrect period due to several
factors including but not limited to:
• The magnitude of individual contracts,
contracts with multiple deliveries and
performance obligations;
• The assessment as to the timing of the
fulfilment of performance obligations;
• The fulfilment of significant performance
obligations in the period close to year-end.
The Group applies different revenue recognition
principles in the Consolidated Statement of
Comprehensive Income and the disclosed segment
information for pre-funding contracts. In the
disclosed segment information, revenue from these
contracts is presented based on a percentage of
completion model according to the progress of the
multi-client survey. Revenue recognition for these
contracts under IFRS 15 was considered to be a key
audit matter due to the complexity and significance
of individual contracts. In addition, the application of
different revenue recognition principles in the income
statement and in the disclosed segment information
adds complexity to the financial reporting process.
Late sales of finished data and proprietary data are
treated consistently under IFRS 15 and the segment
information. In 2021, corrections were made to prior
periods in respect of certain projects where revenue
had not been recognized in the correct period.
Our audit procedures in this area included:
• Evaluating management’s processes and
controls over revenue recognition;
• Assessing the consistency in application of the
Group’s revenue recognition principles across
the Group under IFRS 15 and under the
segment reporting principles for purposes of
the note disclosures;
• Assessing the appropriateness of the timing of
revenue recognition in accordance with IFRS
15 based on the deliveries of multi-client data
from a sample of contracts pertaining to pre-
funding and late sales of unfinished and
finished data;
• Testing of a sample of accrued and deferred
revenue balances to confirm existence and
accuracy of the balances;
• Testing of multi-client revenue recognized
subsequent to period end to assess the
completeness of the revenue recognized in the
period;
• Review of significant contracts entered into
during the period to assess accuracy of
accounting treatment;
• Assessing and reconciling differences in
revenue recognition in the Consolidated
Statement of Comprehensive Income and in
Note 5 Segment Information;
• Assessing the adequacy and appropriateness
of the disclosures in the financial statements
related to revenues from contracts with
customers;
• Assessing the appropriateness of the
accounting for corrections related to the
recognition of revenue in prior periods and the
related disclosures.
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Independent Auditor's Report - TGS ASA
4
Other Information
The Board of Directors and the Managing Director (management) are responsible for the information
in the Board of Directors’ report and the other information accompanying the financial statements. The
other information comprises information in the annual report, but does not include the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not cover
the information in the Board of Directors’ report nor the other information accompanying the financial
statements.
In connection with our audit of the financial statements, our responsibility is to read the Board of
Directors’ report and the other information accompanying the financial statements. The purpose is to
consider if there is material inconsistency between the Board of Directors’ report and the other
information accompanying the financial statements and the financial statements or our knowledge
obtained in the audit, or whether the Board of Directors’ report and the other accompanying
information otherwise appears to be materially misstated. We are required to report if there is a
material misstatement in the Board of Directors’ report or the other information accompanying the
financial statements. We have nothing to report in this regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report
• is consistent with the financial statements and
• contains the information required by applicable legal requirements.
Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate
Governance and Sustainability Report.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with the Norwegian Accounting Act and accounting standards and practices generally
accepted in Norway, and for the preparation and true and fair view of the consolidated financial
statements of the Group in accordance 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. The financial statements of the Company use the going concern basis of accounting insofar
as it is not likely that the enterprise will cease operations. The consolidated financial statements of the
Group use the going concern basis of accounting unless management either intends to liquidate 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 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. We 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
Independent Auditor's Report - TGS ASA
3
Impairment assessment of the multi-client library and goodwill
Refer to the consolidated financial statements Note 1 General Accounting Policies, Note 2 Significant
Accounting Judgements, Estimates and Assumptions, Note 8 Intangible Assets and Note 9 Impairment
Evaluation of Multi-client Library, Goodwill and Other Intangible Assets.
The key audit matter
How the matter was addressed in our audit
As at 31 December 2021 the Group has reported a
multi-client library balance of USD 705 million, and a
goodwill balance of USD 304 million.
Management uses judgment in determining whether
the carrying amount of the multi-client library and
goodwill exceeds the recoverable amount by making
assumptions related to expected discounted future
cash flows.
There is significant inherent uncertainty in
forecasting future sales of the multi-client library
which is impacted by the overall exploration and
production spending within the oil and gas industry,
interest in specific regions, whether licenses to
perform exploration in the various regions exist or
will be awarded in the future, changes in the geo-
political environment and other factors. For goodwill
there are additional uncertainties related to future
investments, cashflows expected to be generated
from those investments, and the long-term growth
rate. Changes in key assumptions impacting future
cashflows, together with the discount rate can
significantly impact impairment assessments and
conclusions.
Due to the potential impact on the financial
statements given the significance of the multi-client
library and goodwill balances and the judgment
required when assessing future market conditions
and the other key factors included in the forecasting
of future sales, the assessment of the carrying
amount of the multi-client library and goodwill is
considered to be a key audit matter.
An impairment of USD 285 million was recorded in
2021 related to the multi-client library. No impairment
was recorded against goodwill.
Our audit procedures in this area included:
• Inspecting management’s impairment indicator
assessment and considering whether further
indicators should have been assessed based
on our knowledge of the business, its
operating environment, industry knowledge,
current market conditions and other
information obtained during the audit;
• For those multi-client libraries where
impairment triggers are identified, and for the
goodwill balances, assess the key
assumptions of the cash flow forecasts,
including;
• Performing retrospective reviews to assess
accuracy of management’s estimates;
• Testing sensitivity of movement in key
assumptions;
• Inspecting supporting documents and
assessing the basis for key assumptions;
• Challenging management on the forecasted
cash flows, underlying market assumptions,
approved budgets, and other factors which
could affect forecasts;
• Assessing the accuracy of management’s
calculations for those libraries subject to
impairment testing;
• Evaluating, with assistance from our valuation
specialists, the discount rates applied and the
mathematical accuracy of the models used to
calculate the recoverable amounts;
• Assessing the disclosure of impairment risks
and sensitivities in the financial statements.
• Evaluating the adequacy and appropriateness
of the disclosures in the financial statements
with particular reference to the disclosures
describing the inherent uncertainty in the
estimates and the related sensitivities.
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Independent Auditor's Report - TGS ASA
6
the internal control procedures which management determines is necessary for the preparation,
tagging and publication of the financial statements.
Auditor’s Responsibilities
Our responsibility is to express an opinion on whether the financial statements have been prepared in
accordance with ESEF. We conducted our work 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 have been prepared in accordance with the
European Single Electronic Format.
As part of our work, we performed procedures to obtain an understanding of the company’s processes
for preparing its financial statements in the European Single Electronic Format. We evaluated the
completeness and accuracy of the iXBRL tagging and assessed management’s use of judgement. Our
work comprised reconciliation of the financial statements tagged under the European Single Electronic
Format 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, 31 March 2022
KPMG AS
Julie Berg
State Authorised Public Accountant
Independent Auditor's Report - TGS ASA
5
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 or 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 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 a true and fair view.
• 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.
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
We have performed an assurance engagement to obtain reasonable assurance that the financial
statements with file name “549300NUPLAXPB0WYH90-2021-12-31-en” have been prepared in
accordance with Section 5-5 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and the
accompanying Regulation on European Single Electronic Format (ESEF).
In our opinion, the financial statements have been prepared, in all material respects, in accordance
with the requirements of ESEF.
Management’s Responsibilities
Management is responsible for preparing, tagging and publishing the financial statements in the single
electronic reporting format required in ESEF. This responsibility comprises an adequate process and
Corporate
Governance
TGS actively promotes a culture designed to build
confidence and trust among its stakeholders. Key
elements of this culture include open and honest
communication, a well-developed system of controls
and policies and a compliance program.
95
1. IMPLEMENTATION AND REPORTING ON
CORPORATE GOVERNANCE
TGS ASA (TGS or the Company) actively promotes a culture designed to build
confidence and trust among its stakeholders. Key elements of this culture include
open and honest communication, a well-developed system of controls and policies,
and a compliance program.
It is the opinion of the Board of Directors (Board) that TGS complies with the
Norwegian Code of Practice of Corporate Governance (Code of Practice), dated 14
October 2021, found at www.nues.no. This Report on Corporate Governance details
how TGS operates in accordance with each of the topics covered by the Code of
Practice, including any deviations. Furthermore, in accordance with the Norwegian
Accounting Act, section 3-3b, an account of the principles and practices related to
corporate governance is included in the Board of Directors’ Report in this Annual
Report.
The Company emphasizes independence and integrity in all matters between its
Board, management and shareholders. These same principles of independence
and integrity also apply in business relations with all interest groups, including
customers, suppliers and other business partners.
Code of Conduct
The TGS Statement of Values and its Code of Conduct, available on the TGS website
at www.tgs.com, define the ethical behavior and fair business conduct that is
expected of members of our Board and all employees. These documents form
the foundation of TGS’ compliance program, which is managed by a compliance
officer appointed by the Board. TGS’ compliance program continually informs and
educates employees on ethical issues. Each employee of the Company must read
and acknowledge our Code of Conduct, Statement of Values, and Policy on Insider
Trading on an annual basis and complete a related training course that includes
components on anticorruption and antibribery, trade controls and sanctions,
human rights and modern slavery, as well as discrimination and harassment. In
addition, all high-risk third parties working for the Company must complete an
annual anticorruption compliance training and certification program.
It is important for the Company to be aware of potential problems as early as possible,
and the Code of Conduct requires employees to report any known or suspected
ethical irregularities. TGS has in place appropriate whistleblower procedures for
individuals to report concerns of non-compliance, including a hotline that allows
for anonymous reporting and assurances that no retaliation will be levied against
employees who file reports or cooperate in investigations of misconduct. A more
detailed description of our compliance program is also included in our Sustainability
Report, which is included in the Annual Report and can also be found on the TGS
website.
Corporate Social Responsibility
TGS believes that sustainable business practices are fully compatible with
successful business conduct. TGS’ long-standing Statement of Values recognizes
that the Company is responsible to a number of stakeholder groups and describes
the principles to which the Company adheres. A more detailed description of TGS’
sustainability practices is included in the Sustainability Report, which is included in
the Annual Report and can also be found on the TGS website.
2. BUSINESS
TGS provides scientific data and intelligence to companies active in the energy
sector. In addition to a global, extensive and diverse energy data library, TGS offers
special services such as advanced processing and analysis alongside cloud-based
data applications and solutions.
The business objective of TGS defined in the Company’s Articles of Association states
that the principal business of the Company is in the provision of data, information
and intelligence, including associated products and services, to the energy industry.
The Company’s Articles of Association are published in the Corporate Governance
section of the Investor Center on the TGS website, and further information about
TGS’ operations may be found in the Board of Directors’ Report and the Annual
Report for 2021, as well as the TGS website.
3. EQUITY AND DIVIDENDS
As of 31 December 2021, total equity amounted to USD 1,115.3 million (including a
share capital of USD 4.1 million). This corresponds to an equity ratio of 68%, which
the Board considers to be satisfactory. The adequacy of the Company’s capital
is monitored closely with respect to the Company’s objectives, strategy and risk
profile.
Because of the highly cyclical nature of the energy services industry, the Board
remains convinced that the Company’s unique business model, strong balance
sheet and cash position are essential to its financial health, risk management
and future growth. It is the ambition of TGS to pay a quarterly cash dividend in
Corporate Governance
96
line with its long-term underlying cash flow. When deciding the quarterly dividend
amount, the Board will consider factors such as expected cash flow, investment
plans, financing requirements and a level of financial flexibility that is appropriate
for the TGS business model. The aim is to keep a stable quarterly dividend in U.S.
dollars throughout the year, but the actual level paid will be subject to continuous
evaluation of the underlying development of the Company and the market.
The ex-dividend date will normally be seven days after the announcement of the
dividend in connection with the release of quarterly financial statements, with
the payment date 14 days after the ex-dividend date. In addition to paying a cash
dividend, TGS may also buy back its own shares as part of its plan to distribute
capital to shareholders, subject to authorization from the Annual General Meeting
(AGM).
TGS has paid quarterly dividends since 2016 based on authorization from the AGM.
The Board is currently authorized to buy back up to 10% of the nominal value of the
Company’s share capital. In addition, the Board has authorization to increase the
Company’s share capital or issue convertible bonds for up to 10% of the Company’s
share capital, which authorization is currently NOK 2,936,028, for the purposes of
potential acquisitions, organic growth and to strengthen the Company’s balance
sheet. The authorizations are valid until the 2022 AGM, but no later than 30 June
2022. In accordance with past practice, new authorizations to increase the share
capital for certain business purposes, issue convertible bonds and acquire own
shares will be proposed for separate votes at the next AGM. When a proposed
resolution encompasses share capital increases and/or the issuance of convertible
bonds or the acquisition of the Company’s own shares for various purposes, the
Company does not find it practical to hold separate votes on each element of
the proposals. This deviates from the Recommendation No. 3 under the Code of
Practice where it is recommended that when the AGM considers mandates to the
Board for the issuance of shares for different purposes, each mandate should be
considered separately by the meeting.
For further information on these shareholder authorizations, please refer to Note
13 of the Consolidated Financial Statements, which are included in the Company’s
Annual Report for 2021 available on the TGS website.
4. EQUAL TREATMENT OF SHAREHOLDERS AND
TRANSACTIONS WITH RELATED PARTIES
The Company has only one class of shares. All shares have one vote each and
otherwise equal rights in all respects.
TGS may, from time to time, buy back shares under authorizations given by the AGM.
Such shares may, inter alia, be held in treasury or canceled, used as transaction
consideration or to settle employees’ long-term incentive programs. The Company
held 1,334,261 treasury shares on 31 December 2021. When applicable, transactions
involving the Company’s own shares are carried out through the Oslo Stock
Exchange or at prevailing stock exchange prices if carried out in any other way.
During 2021, the Company increased its share capital by NOK 46,954.75 in connection
with the Company’s long-term incentive programs. For further information, refer to
Note 13 of the Company’s Consolidated Financial Statements. In addition to shares
issued in connection with the Company’s long-term incentive programs, the Board
may, from time to time, issue new shares under authorizations given by the AGM.
For such issuances, the Board may depart from the preemptive right of existing
shareholders if justified by the interest of the Company and the shareholders.
A justification will be publicly disclosed should the Board choose to authorize a
waiver of its preemptive rights in connection with a share issue.
Any transaction with close associates is required to be conducted on market terms.
Information about transactions with related parties is also disclosed in Note 15
of the Consolidated Financial Statements. The Board has implemented guidelines
to ensure that employees inform their manager and/or the Board if they have a
material interest, directly or indirectly, in any agreement entered into by the
Company.
5. FREELY NEGOTIABLE SHARES
All TGS shares carry equal rights and are freely transferable. The Company has not
imposed any restrictions on ownership or voting of shares.
6. GENERAL MEETINGS
The AGM is the Company’s ultimate corporate body. The Board of Directors, the
Nomination Committee and the Chief Executive Officer are typically present at
the AGM, as well as the Company’s auditor. The minutes from the AGM and any
Extraordinary General Meeting (EGM) are made available on the Company’s website
shortly after the date of the AGM or EGM, as applicable, and are also available for
inspection at the Company’s corporate offices in Norway.
The 2022 AGM will be held on 11 May 2022. The notices for the AGM and any EGM
and all supporting documentation are made available on the Company’s website no
later than three weeks in advance of the meeting. The notice is also mailed (post or
email) to registered shareholders.
In accordance with the Company’s Articles of Association, the deadline for
shareholders to notify the Company of their intention to attend a General Meeting
is no later than three days before the day of the meeting.
Each General Meeting appoints a chairperson for the meeting. The Board seeks to
facilitate the appointment of an independent chairperson.
97
General Meetings are open to all shareholders, and any shareholder not in attendance
may appoint a proxy to vote on their behalf. Proxy forms are made available together
with the notice of the meeting and allow for separate voting instructions to be given
for each matter to be considered. The Company also facilitates for advance voting.
The notice to the General Meeting will provide information about whether the
shareholders may vote in advance in writing and about the guidelines that apply to
such voting.
In accordance with the Norwegian Public Limited Liability Companies Act, the AGM
is required to approve the annual financial statements, the Board of Directors’
report and the distribution of dividends. The AGM must also address the Board of
Directors’ statement and report on remuneration for senior executive personnel,
as well as the Corporate Governance Report. Shareholders are also given the
opportunity to vote separately for each candidate nominated for election to the
Board. Any other matters to be covered at the AGM will follow from the notice.
The last AGM was on 11 May 2021, the minutes from which are available on the
Company’s website.
7. NOMINATION COMMITTEE
According to the Company’s Articles of Association, the Company has a Nomination
Committee that is responsible for the nomination of directors to the Board of
Directors and the recommended remuneration payable to the directors. The AGM
stipulates guidelines for the duties of the Nomination Committee and determines
the Nomination Committee’s own remuneration.
The Nomination Committee consists of a Chairperson and up to three members
elected by and among the shareholders. The members serve for a period of two
years. None of the members serve on the Board of Directors or as an employee of
the Company.
As of 31 December 2021, the Nomination Committee consisted of the following
members: Glen Ole Rødland (Chairman), Christina Stray and Herman Kleeven. Ms.
Stray and Mr. Rødland were elected for a two-year term at the 2021 AGM, while Mr.
Kleeven was elected for a two-year term at the 2020 AGM.
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 any member
of the Nomination Committee or to the Chairman of the Board.
As part of its work, the Nomination Committee meets at least annually with the
Board and members of the executive management. The Committee also consults
selected shareholders to ensure that its recommendations have their support. In
accordance with Section 6 above, the Nomination Committee’s recommendations
and report of its work are made available in accordance with the 21-day deadline
for the notice calling the AGM.
8. BOARD OF DIRECTORS: COMPOSITION AND
INDEPENDENCE
The Board of Directors currently consists of seven members, all of whom are
deemed independent of TGS’ management, major shareholders and material
business contacts.
The members of the Board are proposed by the Nomination Committee and elected
by the AGM for a term of one year. The Chairman of the Board is also elected by
the AGM.
The members of the Board balance experience from the geoscience industry and
the general energy industry with broader industrial, financial and management
experience. A biography of each Board member can be found in the Annual Report
and on the TGS website.
Information on shares in TGS held by members of the Board can be found in Note
10 of the Consolidated Financial Statements.
9. THE WORK OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the overall management and supervision
of the Company. The Board is responsible for establishing control systems and
ensuring that TGS operates in compliance with laws and regulations and TGS’
Statement of Values and Code of Conduct. The Board emphasizes the safeguarding
of the interests of all shareholders, as well as the interests of TGS’ other
stakeholders.
The Board prepares an annual plan for its work, emphasizing goals, strategies,
company performance and execution.
The Board operates under specific rules of procedure, which define the duties, tasks
and responsibilities of the Board and individual members of the Board. The Board
also states guidelines for the CEO’s work and duties of oversight by the Board.
The Board carries out an annual evaluation of its own performance, working
arrangements and competence. The assessment is made available to the
Nomination Committee. The Board also carries out an annual evaluation of the
CEO’s performance.
The Board conducted a total of eight meetings in 2021. Each of Wenche Agerup,
Christopher Finlayson and Torstein Sanness was unable to attend one of the
meetings. All other directors (including former directors) attended all meetings. In
addition, certain matters are, when deemed appropriate, considered by the Board
in writing.
98
Board Committees
The following committees have been established by the Board to monitor and guide
certain activities. Each committee operates under a defined charter that may be
viewed at: https://www.tgs.com/investor-center/corporate-governance/rights-
responsibilities-tgs-governing-bodies.
Audit Committee
The Audit Committee is appointed by the Board, and its primary responsibility is to
supervise the Company’s internal controls over financial reporting and to ensure
the independence and quality of performance of the Company’s external auditor.
Further, the responsibility of the committee is to ensure that the annual accounts
provide a fair and accurate picture of the financial results and financial condition
of the Company in accordance with generally accepted accounting practices. The
Audit Committee receives reports on the work of the external auditor and the
results of the audit, including the significant risks in the financial statements and
the treatment thereof in the audit report, as well as auditor’s assessment of internal
control weaknesses. The Audit Committee charter, updated in February 2021,
incorporates the requirements of the new Auditors Act and reflects the enhanced
role of the Audit Committee in respect of financial reporting, internal control and
risk management and auditor interaction, consistent with the general description
set forth in this paragraph. With effect from the 2021 AGM, the members of the
Audit Committee are:
• Irene Egset, Chairman
• Christopher G. Finlayson
• Svein Harald Øygard
The Audit Committee conducted a total of seven meetings in 2021, and all members
(including former members) attended all meetings during the period of time they
served on the Board.
Compensation Committee
The Compensation Committee reviews the compensation practices of TGS and
its peer group and makes proposals to the Board on the employment terms and
conditions and total remuneration of the CEO and other executive personnel. These
proposals are also relevant for other employees.
The members of the Compensation Committee with effect from the 2021 AGM are:
• Mark Leonard, Chairman
• Wenche Agerup
• Grethe Moen
The Compensation Committee conducted a total of seven meetings in 2021. All
members (including former members) attended all meetings, except Wenche
Agerup who was unable to attend one meeting.
Risk Management and Internal Control
The Board monitors TGS’ risk exposure and oversees the Company’s internal
controls and systems for risk management to ensure they are appropriate for the
Company’s activities. The Company continually strives to maintain and improve its
internal control processes and systems for risk management and regularly reports
on these matters to the Board.
The Company’s executive management carries out an annual risk evaluation process
to assess total enterprise risk in the Company. Through risk workshops involving
key TGS employees, executive management identifies strategic and operational
risk factors and prioritizes these risks based upon their likelihood of occurrence,
significance of impact, year-over-year trends and current mitigation factors. Action
plans are developed to manage those significant risk factors where further action
may be needed, and quarterly and annual updates are provided to the Board. The
key risk factors and related action plans are part of the Board’s annual presentation
on risk management and internal controls by the CEO and CFO. The Board provides
input as to the key risk factors and considers the need for any further measures in
relation to the risk factors identified.
The Company’s Audit Committee oversees the routines related to financial
risk management, financial reporting and related internal controls. The Audit
Committee receives regular reports from management regarding the assessment
of the internal control environment pertaining to financial reporting and proposed
changes and improvements. The Company continually assesses the adequacy of
the internal control systems in place, with specific focus throughout 2020 and 2021
on changes in the internal control systems resulting from the increase in size and
complexity of the Company following the merger with Spectrum ASA concluded
in August 2019. Particular focus in 2021 also included further formalization of the
internal control framework over financial reporting and structured monitoring
activities over the effectiveness of key controls.
TGS has a separate legal department, managed by the corporate General Counsel
who reports to the CEO. Procedures and guidelines are in place to ensure that
the legal department is involved in matters that could represent a material legal
risk for the Company, including entering into material agreements and managing
claims, disputes and litigation. The Company has standard policies for contract
terms and conditions.
TGS is committed to fair business conduct and compliance with all legal and
ethical requirements and standards of the industries in which TGS operates and
the communities in which TGS employees live and work. TGS considers its values,
culture and environment key elements in its continued success as a company.
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11. REMUNERATION OF THE BOARD OF
DIRECTORS
The remuneration of the Board of Directors is designed to attract and retain an
optimal Board structure in a competitive environment. The directors’ compensation
is recommended by the Nomination Committee and determined by the shareholders
at the AGM each year.
In recent years, the directors’ compensation has comprised both a fixed fee and
an amount of restricted TGS common shares. The remuneration is not related to
the Company’s financial results. Note 10 of the Consolidated Financial Statements
details the directors’ remuneration for 2021. TGS believes the remuneration reflects
the Board’s responsibility, expertise, time commitment and the complexity of the
Company’s activities.
No member of the Board has taken on specific assignments for the Company in
addition to his/her appointment as a member of the Board or committees of the
Board.
12. REMUNERATION OF EXECUTIVE PERSONNEL
Pursuant to the Norwegian Public Limited Liability Companies Act, section 6-16
a(2), the Board prepares guidelines for executive remuneration. In accordance with
this, TGS has prepared a Declaration on Executive Remuneration that is released
alongside the Annual Report and is available for download at the TGS website.
The Declaration describes:
• TGS’ Compensation Policy Statement regarding executive remuneration,
including the connection of performance-related remuneration to shareholder
value creation and the Company’s financial performance over time;
• 2022 executive remuneration, including proposals and implementation; and
• 2021 executive remuneration results and assessment.
Reference is made to the Declaration and Note 10 of the Company’s Consolidated
Financial Statements for details regarding remuneration of the CEO and other
executive personnel.
The Compensation Committee of the Board is responsible for reviewing executive
remuneration and making recommendations to the Board. The Board ensures
that remuneration objectives reflect the convergence of the financial interests of
executive personnel and shareholders.
The CEO proposes the compensation packages (excluding his own) for all executives
for Compensation Committee review and Board approval. The CEO’s proposal will
be based on performance assessed against pre-defined goals.
The Compensation Committee proposes the CEO’s compensation package to the
Board for final review and approval. This includes the CEO’s target bonus, which is
specifically set by the Board.
In addition, pursuant to the Norwegian Public Limited Liability Companies Act,
section 6-16 b(2), the Board prepares a report on senior executive remuneration
during 2021. The report is included in the Declaration on Executive Remuneration
that is released alongside the Annual Report and is available for download at the
TGS website.
13. INFORMATION AND COMMUNICATIONS
TGS’ investor relations (IR) policy is designed to inform the stock market and
stakeholders of the Company’s activities and status in a timely and accurate
manner in compliance with applicable listing rules. The Company submits quarterly
and annual financial reports to the Oslo Stock Exchange. In addition, any interim
information of significance for assessing the Company’s value is distributed as stock
exchange announcements through Newsweb. This information is also available on
the Company’s website.
The Company uses the Code of Practice for reporting of IR information issued by
Oslo Stock Exchange and the Norwegian Investor Relations Association (NIRA) as
a guideline for IR reporting. Announcements are published in English only, and the
Company has been granted exemption from the Norwegian Tax Authority to publish
its Annual Report in English only.
The Company’s quarterly earnings presentations are recorded and made available
as webcasts or slide presentations in real time. The Company also makes
presentations and conducts roadshows throughout the year to inform existing and
potential investors about TGS.
The financial calendar setting out the dates for the coming year’s interim reports
and General Meetings for shareholders is posted on the TGS website.
14. TAKEOVERS
The Board of Directors has established guiding principles for how it will act in the
event that a takeover bid is received.
During the course of a takeover process, the Board and management of both
the party making the offer and the target company are responsible for ensuring
that shareholders in the target company are treated equally and that the target
company’s business activities are not disrupted unnecessarily. The Board is
particularly responsible for ensuring that shareholders are given both sufficient
information and time to assess the offer.
The Board will not hinder or obstruct takeover bids for the Company’s activities or
shares.
100
In the event of a takeover bid for the Company’s shares, the Board will not exercise
mandates or pass any resolutions with the intention of obstructing the takeover bid
unless this is approved by the General Meeting following announcement of the bid.
Any agreement with the bidder that limits the Company’s ability to arrange other
bids for TGS shares will only be entered into where such agreement is considered
to be in the common interest of TGS and its shareholders. This also applies to any
agreement for the payment of financial compensation to the bidder if the bid does
not proceed. The terms of any agreements entered into between the Company and
the bidder that are material to the market’s evaluation of the bid will be publicly
disclosed no later than the time of the announcement of the bid.
If an offer is made for TGS’ shares, the Board will issue a statement evaluating the
offer and, where appropriate, make a recommendation as to whether shareholders
should accept the offer. The Board’s statement will set out whether the views
expressed are unanimous. The Board may arrange for a valuation of TGS from an
independent expert, the conclusion of which will be made public no later than at
the time of the public disclosure of the Board’s statement. This will also apply if the
bidder is a major shareholder, a member of the Board or executive management,
close associates of such individuals or anyone who has recently held such a position.
Any such valuation will be either appended to the Board’s statement, be reproduced
in the statement or be referred to in the statement.
Any transaction that is, in effect, a disposal of the Company’s total activities will be
decided by a General Meeting.
15. AUDITOR
The Board of Directors has determined the procedure for the external auditor’s
regular reporting to the Board. The auditor attends at least one meeting each year
with the Audit Committee of the Board and the Board of Directors in executive
session where the Company’s management is not represented. In addition, the
auditor participates at meetings of the Board relating to the preliminary annual
financial statements. If there are any significant changes from the preliminary
accounts, the auditor will also participate in the meeting that approves the annual
financial statements. The audit engagement partner is also present in all Audit
Committee meetings and, in 2021, the auditor participated in all Audit Committee
meetings.
The Company’s external auditor presents to the Audit Committee the primary
features of the plan for the execution of the audit, and reports on the key accounting
principles and estimates and the results of the audit to the Audit Committee and
the Board of Directors. The auditor also presents any internal control weaknesses
and improvement opportunities to the Audit Committee and the Board.
TGS has established guidelines for use of the external auditor for services other
than auditing. The Audit Committee receives an annual summary from the external
auditor of services other than auditing that have been provided to TGS. The auditor
also presents any threats to his/her independence and documents measures
implemented to reduce these as required by the Audit and Auditors Act, Section
5a-3 3. The external auditor provides the Audit Committee with an annual written
confirmation of independence. The Board reports the remuneration paid to the
auditor at the AGM, including details of the fee paid for audit work and any fees paid
for other assignments.
The auditor’s fee is determined at the AGM. Refer to Note 10 of the Consolidated
Financial Statements for auditor’s compensation for 2021.
The auditor is required to attend a General Meeting if the business to be transacted
is of such a nature that his or her attendance must be considered necessary. In
addition, the auditor is, in any case, entitled to participate in the General Meeting.
Investor
Relations
TGS has a proven track record of generating healthy
free cash flow through both upcycles and downcycles
in our industry. As a result, TGS has been one of a few
oil services companies worldwide that has kept up
dividends through upcycles and downcycles.
102
Shareholder Facts 2021 2020 2019 2018 2017
Market Value at 31 December (USD 1000s) 1,113,490 1,821,570 3,617,189 2,466,807 2,421,840
Shareholder Equity at 31 December (USD 1000s)* 1,141,837 1,374,270 1,611,574 1,265,465 1,200,102
Shares Outstanding 31 December 117,441,118 117,303,399 118,906,778 102,647,790 102,345,890
of which Treasury Shares 31 December 1,334,261 75,000 1,742,100 104,630 116,180
Volume Traded on the OSE 79,876,573 117,026,183 103,220,804 112,023,226 95,527,192
Average Daily Trading volume 316,971 466,240 414,541 449,892 380,586
Share Price at 31 December (NOK) 84.6 132.7 267.1 208.8 194.2
Share Price High (NOK at close) 162.0 237.6 281.6 350.1 208.5
Share Price Low (NOK at close) 77.7 85.0 194.6 185.0 157.7
Earnings per Share (Fully Diluted)* -1.33 -1.23 1.61 1.33 0.73
Dividend per Share (paid in year) (USD) 0.56 0.75 1.08 0.80 0.60
Yield (% closing price at day of announcement)** 4.58% 4.51% 4.02% 2.63% 2.77%
Market Price/Earnings per Share (P/E)* Neg. Neg. 18.53 17.93 32.04
Market Price/Equity per Share (P/B) 0.98 1.33 2.31 1.95 2.02
Enterprise Value/Operating profit (EV/EBIT)* Neg. Neg. 16.76 12.77 22.29
TGS Shareholder Facts
Symbol: TGS
Listing: Oslo Stock Exchange
ADR: TGSGY (traded on the U.S. over-the-counter-market)
Analyst coverage: 11 firms; for list, see: www.tgs.com/investor-center/investor-relations/shareholder-information/analyst-coverage-tgs
Average daily trading volume in 2021: 316,971 shares
Investor Relations
* Segment reporting
** Average annualized yield at the day of announcement of quarterly dividends
103
Distribution of Share Holdings*
TGS Shareholder Composition
0 20 40 60 80 100
Company Related Institutional
Non-institutional
Miscellaneous
88%3%6%3%
TGS Institutional Shareholder Composition
0 20 40 60 80 100
Norway / 21%
United States / 16%
United Kingdom / 29%
Netherlands / 11%
Canada / 14% Rest of Europe / 7%
Rest of World / 2%
21% 16% 29% 14% 11% 7% 2%
Volume Stock Price
Dec-30-20 Feb-28-22
Share Price (NOK)
180
160
140
120
100
80
60
40
20
0
3,500,00
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Daily Volume (Share)
TGS Share Price and Volume
Stock Performance
TGS is listed on the Oslo Stock Exchange and also has an American Depository
Receipt (ADR) facility managed by The Bank of New York Mellon.
During 2021, the TGS share price declined 36% (33% adjusted for dividends), clos-
ing at NOK 84.58 (30 December 2021).
The TGS share had a volatile development during 2021. It peaked in early March
driven by strong oil price development. It then slid gradually until mid-Septem-
ber as it became apparent that the higher oil price did not immediately translate
into higher exploration spending by oil and gas companies. It remained relatively
stable, trading mostly in the range of NOK 80 to 100, for the remainder of the year.
So far in 2022 the share has traded significantly up, as the outlook for the industry
has improved.
*Based on location of beneficial owners at 31/12/2021
Source: Nasdaq Advisory Services
Capital Distribution to Shareholders
TGS is constantly evaluating the best use of its cash flow from operations for
continued shareholder growth. The company uses cash for organic investments
in its multi-client library, historically providing healthy returns. In addition, the
company from time to time uses cash for inorganic investment opportunities. This
can include the acquisition of third-party libraries or complementary businesses
that add value to the TGS offering.
104
From 2016, TGS started paying quarterly dividends in accordance with the
resolution made by the Annual General Meeting on 6 May 2015 and renewed on
11 May 2021. The aim is to keep a stable quarterly dividend through the year, but
the actual level paid will be subject to continuous evaluation of the underlying
development of the Company and the market.
The ex-dividend date will normally be seven days after the announcement of the
dividend in connection with the release of the quarterly financial statements, with
the payment date 14 days after the ex-dividend date.
In 2021, TGS paid quarterly dividends of USD 0.14 in each of the quarters,
amounting to USD 0.56 per share (NOK 4.75 per share) for the year, and
repurchased 1,319,261 shares at an average price of NOK 102.9 per share.
On 10 February 2022 TGS announced that the Board of Directors had resolved to
pay a quarterly dividend of USD 0.14 in Q1 2022, the same as the quarterly run-
rate during 2021. The quarterly dividend was paid on 3 March 2022.
Also, on 11 February 2021, it was announced that the Board had authorized a
share repurchase program of up to USD 20 million to be executed before the
Annual General Meeting in May 2022. As of 31 December 2021, USD 4.7 million of
repurchases remained under this program.
Investor Relations at TGS
TGS places great emphasis on providing accurate and timely information to
the market and shareholders. The earnings reports and press releases are
issued only in English to ensure simultaneous and consistent information to all
shareholders.
The full-year financial reporting calendar is published and posted on the TGS
website. This calendar is updated annually following the second quarter earnings
release. Each quarter TGS pre-announces the quarterly revenues no later than
the sixth trading day after quarter close, at the Oslo Stock Exchange.
The full quarterly financial statements are typically released 3-6 weeks after
quarter close and at the same day the results are presented by the CEO and CFO
through a webcast. All presentation material is published on the TGS website in
near real-time.
In addition to the quarterly and annual financial reports, TGS also provides interim
information of significance through press releases to aid in the assessment of
the Company’s value. TGS management maintains a quiet period on discussing
significant business during intervals spanning the last weeks of a financial
quarter and up to the pre-announcement of revenues for that financial period.
The general shareholder meetings for TGS are held in Oslo, Norway. All
shareholders are invited to attend. Shareholders who wish to attend shareholder
meetings must notify the Company of their attendance, at the latest, three
business days before the day of the meeting. Shareholders who have not given
notice of attendance can be denied the right to meet and vote at shareholder
0.0
0.2
0.4
0.6
0.8
1.2
1.4
1.0
1.6
2010 2011 2012 2013 2014 2015 2016
6 NOK
2017 2018 2019
2021 2022
5 NOK
4 NOK
8 NOK
8.5 NOK
8.5 NOK
USD .60 USD .60
USD .56
USD 1.08
USD .80
0.14
2020
USD .75
Dividend Paid* (2010 - 2022)
Dividend Yield (2010 - 2021)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2012 2013 2014 2015 2016 2017 2019 2020 202120182010 2011
4.0%
3.6%
3.5%
3.9%
4.9%
5.2%
3.7%
2.8%
2.6%
4.0%
4.5%
4.6%
2022
3.7%
* Quarterly dividends defined in USD from 2016. Historical NOK dividends converted to USD using FX rate on
ex-dividend date.
* 2016 - 2021 Dividend Yield annualized based on the weighted yield at the time of announcement of quarterly
dividends
It is the ambition of TGS to pay a cash dividend that is in line with its long-term
underlying cash flow. When deciding the dividend amount, the TGS Board
of Directors will consider expected cash flow, investment plans, financing
requirements and a level of financial flexibility that is appropriate for the TGS
business model.
In addition to paying a cash dividend, TGS may also buy back its own shares as
part of its plan to distribute capital to shareholders. In 2021 the Company spent
USD 15.7 million repurchasing shares.
105
meetings. Documents concerning matters to be considered at the general
shareholder meetings are made available on the Company’s website prior to the
event. To vote at an annual or extraordinary general meeting, a shareholder must
be registered as a holder of title to the shares to be voted in the share register
maintained at the Norwegian Central Securities Depository (VPS), in due time
before the shareholder meeting.
TGS Executive Management is available for direct contact with investors, potential
investors and analysts on an ongoing basis and regularly participates in road
shows and investor conferences in both Europe and North America. Historical
financial reports can be found on the TGS website at www.tgs.com/presentations/
tag/earning-releases.
Sustainability
Report
“TGS is responsible to our customers, our employees,
the communities in which we live and work, to the
world community and to our shareholders. Living
the TGS Values every day, in everything that we do,
helps us to meet or exceed the expectations of our
stakeholders both today and in the future, and is
critical to delivering sustainable growth over the long
te r m .”
Hank Hamilton
Chairman of the Board
107
Corporate Sustainability Report
1. OUR COMMITMENT TO SUSTAINABILITY
1.1 What TGS Believes
TGS provides data, intelligence, advanced processing, analytics, cloud-based data applications, and other specialized services and solutions to energy companies across the energy
spectrum, whether it is oil and gas, carbon capture and storage, or wind development. By investing in multi-client projects worldwide, TGS has the world’s largest integrated
subsurface data library that includes seismic data, magnetic and gravity data, multibeam and coring data, digital well logs, and production data from deepwater offshore to
conventional and unconventional plays worldwide. We have a global presence to support our customers in any market with our corporate headquarters in Oslo, Norway; our
operational headquarters in Houston, Texas, USA; and with additional offices located in Brazil, Australia, United Kingdom and Canada. Because of TGS’ global presence and
business model, sustainability is an integral part of how we operate and essential to our prosperity, and the prosperity of our stakeholders.
CO
2
Leveraging its data library that includes over 5.5 million km of 2D onshore and offshore seismic data, over 1 million km
2
of 3D onshore
and offshore seismic data and approximately 10 million well logs, TGS utilizes diverse sources of data to provide innovative, data-driven
solutions and insights across the energy spectrum.
Wide Azimuth (WAZ) Seismic
M-WAZ Seismic
OBN and Long Offset
Electromagnetics (CSEM)
Aeromagnetics
Geological Products and Services
Seabed / Seaseep Studies
LONGBOW Well Performance
Facies Map Browser
SUBSURFACE
SOLUTIONS
Carbon AXIOM
Carbon Storage Pathfinder
Long-Term Monitoring Solutions (4D Monitoring)
Full Suite Geophysical Services
Basin Temperature Models
CARBON STORAGE
EVALUATION SOLUTIONS
Versal
SaltNet
ARLAS
Land and Marine Seismic Imaging
DAS and VSP Imaging
4D Seismic Monitoring and Processing
DM-FWI for Depth Imaging
Cloud and High-Performance Computing
Data Management
IMAGING, DATA &
ANALYTICS SOLUTIONS
Wind AXIOM
Wind Pathfinder
4C Offshore ForeSEE
Wind Resource Assessment (Floating LiDAR)
Geophysical and Geotechnical Data and Interpretation
Ground Model Development
WIND FARM
SOLUTIONS
108
The past year brought new challenges and opportunities with implementing our
sustainability strategy. One of TGS’ primary focuses was addressing the continued
impact of the COVID-19 pandemic to both the workforce and field operations
by developing global and local strategies aimed at ensuring the health, safety,
engagement and wellness of our employees and contractors. TGS set Net Zero
targets for its Scope 1 and 2 emissions and worked with our industry to develop
a consistent framework to address Scope 3 emissions resulting from seismic
operations. TGS also launched the New Energy Solutions business unit and the
Versal digital platform aimed at providing customers technological solutions to
address their varying energy challenges.
1.2 Governance and Risk Management
TGS’ sustainability strategy is embedded in the overall corporate strategy and is
overseen by the Board of Directors. TGS’ Leadership Team, which includes the
Executive Vice President of People and Sustainability, is responsible for implementing
TGS’ sustainability strategy and incorporating this strategy into company and
department goals. TGS’ Leadership Team and the Board of Directors hold sessions
throughout the year to discuss the various risks that impact our business and to
evaluate sustainability risks and opportunities.
TGS evaluates sustainability risks as part of the annual enterprise risk management
process, which is a multi-tiered process that seeks input from key employees across
the organization, the Leadership Team and the Board of Directors. Through this
process, we understand (i) where further action may be needed if a risk’s materiality,
impact or probability of occurring increases (i.e., cybersecurity, macroeconomic
event), and (ii) where our risk management efforts are effective because of
decreasing materiality, impact or probability scores. TGS relies upon policies,
procedures and guidelines, as well as targeted action plans with key performance
indicators, to measure progress in mitigating risks. Additionally, each investment
decision or significant commercial project undertaken by TGS incorporates
risk analyses that evaluate key operational, health and safety, environmental,
compliance and other risks prior to review and approval by TGS’ Leadership. Each
of these processes, along with our corporate governance principles, provides the
necessary underpinnings for monitoring risk and incorporating sustainability within
our organization and operations.
In 2021, the Board also included dedicated sustainability strategy sessions as part
of its annual strategy meeting to focus on TGS’ efforts to diversify its data and
service offerings to serve other industries such as wind, solar, carbon capture and
storage. These sessions considered carbon accounting of TGS’ operations and
improving gender diversity in the workforce. The Board receives regular reports
on TGS’ sustainability efforts as well as updates on the Company’s data security
program, the compliance program which includes anticorruption and human rights,
the operational and workforce health and safety program, employee engagement
and HR efforts. As the COVID-19 pandemic continued to be a prevalent concern
through 2021, the Board received updates throughout the year on TGS’ management
and mitigation efforts that targeted (i) the health and safety of our workforce and our
project operations, (ii) employee engagement as our workforce transitioned back
to an in-office or hybrid work model and (iii) data security in light of the increase in
global cybersecurity threats. Finally, TGS includes sustainability targets relating to
health and safety and emissions reduction into its long-term incentive plan, as well
as in the 2022 employee profit-sharing plan (see TGS’ 2022 Executive Remuneration
Report).
1.3 Materiality and Stakeholder Engagement
TGS’ sustainability strategy is driven by priorities and issues identified as being
material to TGS and our various stakeholders. We recognize our value chain is
expanding beyond oil and gas to incorporate new energy sources, and as a result,
the composition of our key stakeholders is evolving. In addition to the governments,
customers and suppliers noted above, other key stakeholder groups include our
employees, shareholders and the communities in which we operate, including non-
governmental organizations and academia. TGS engages with various stakeholders
throughout the year to ensure we clearly understand their priorities and how our
business activities impact them.
TGS is a strong proponent of working with local governments, regulatory authorities
and non-government organizations to help identify, understand and mitigate
potential risks associated with its geophysical activities. TGS supports EnerGeo
(formerly the International Association of Geophysical Contractors) financially and
by actively engaging in committees, workgroups and projects throughout the year.
TGS also participates in the National Ocean Industries Association (NOIA) and its
Environmental, Social and Governance (ESG) Program. TGS will continue these
efforts as well as look to collaborate with other organizations and stakeholders to
promote sustainable practices.
In 2021, TGS continued a customer feedback process to capture feedback from
internal and external customers on its imaging performance, which is critical
to monitoring and assessing customer satisfaction on the products and services
provided by TGS. Performance is rated based upon five key performance indicators:
People, Turnaround Time, Technology, Quality Control and Operational Innovation.
The customer sets the weight of each indicator. TGS initiated this process in 2020
with proprietary projects and expanded the process in 2021 to include both multi-
client and proprietary projects.
TGS engages with its employees through global quarterly meetings, an annual risk
assessment and strategy sessions to assist in our materiality determination. In
2021, TGS increased communications and activities with employees to reengage the
workforce as we transitioned back to an in-office and hybrid work model. Further,
TGS conducted global and local polls of our workforce on workforce-related issues,
the employee engagement survey and the employee compliance assessment
discussed in this report.
109
Finally, as part of our annual enterprise risk program, TGS assesses which
sustainability issues are considered significantly material to business and commercial
success, taking into account how important our stakeholders consider the issue to
be in determining whether to do business with or invest in TGS. The results of this
survey help define our sustainability strategy by assessing the materiality of each
of these issues to TGS’ business and commercial success. The chart ranks each
sustainability topic based upon the percentage of respondents who selected the
issue as “significantly material” to TGS’ business and commercial success.
1.6 Business Ethics
TGS is committed to complying with all applicable laws, including fair competition
and antitrust, export controls and trade sanctions, anticorruption and anti-bribery,
and insider trading. We engage in ethical and fair business practices with our clients,
partners, suppliers and other third parties. In return, TGS expects the highest levels
of personal conduct and fair dealing from all its employees, the Board of Directors,
partners and any third parties retained on behalf of the Company. TGS believes in
competition and endeavors to not take an unfair advantage in a business situation by
acting illegally, unethically or by abusing or misusing confidential information.
Governance. TGS’ Compliance Officer reports to the Board of Directors, provides
updates on at least a quarterly basis and participates in the Audit Committee meetings.
The Compliance Officer sits on the Executive Leadership Team and participates in
regular leadership meetings, annual planning sessions and departmental business
reviews. The TGS Code of Conduct sets the standard of responsible conduct and
Development of Renewable Energies
Business Ethics & Anticorruption
Impact to Marine & Land Environments
Innovation & Knowledge Sharing
Inclusion & Diversity
Health & Safety in Operations
Human Rights in the Workforce
Employment & Skills Development
Human Rights in the Supply Chain
Scope 3 Emissions
Corporate Governance
Health & Safety in Office
Economic Impact & Wealth Creation
Scope 1 & 2 Emissions
Waste Generation
Local Community Impact
52%
52%
48%
42%
39%
37%
32%
31%
29%
22%
18%
14%
12%
12%
7%
6%
1.4 Supply Chain
Supply chain management is critical to TGS’ success as TGS does not own or
operate vessels or seismic equipment, nor does it employ the crews utilized in our
operations. To ensure our supply chain understands TGS’ priorities and incorporates
similar priorities into its business, TGS maintains a Supplier Code of Conduct that
addresses (i) business and ethics integrity, (ii) health, safety and the environment
and (iii) labor and human rights. TGS works with partners and third parties to stress
the importance of operating sustainably, ethically and in compliance with the law
and TGS policies. How we manage our suppliers with respect to each of these issues
is discussed in more detail throughout this report.
1.5 UN Sustainable Development Goals
TGS remains committed to the UN Global Compact, its universal sustainability
principles and the Sustainable Development Goals (SDGs). TGS remains dedicated to
incorporating the Global Compact’s principles on human rights, labor, environment
and anticorruption into our strategy, culture and operations. In addition, TGS has
identified the following SDGs as being aligned with our business practices and the
following chart highlights some of the actions taken in 2021 to support these SDGs.
Key 2021 Actions
• Signatory to the UN’s Women’s Empowerment Principles and included on the Bloomberg
Gender Equality Index in both 2021 and 2022
• Over 30% increase in female new hires in 2021 compared to 2020
• Added 12 weeks at full pay for new parents in the United States
• TGS met its total recordable incident rate targets for both land seismic operations (TRIR
<2.0 per 200,000 man hours) and marine operations (TRIR .27 per 200,000 man hours)
• TGS achieved full compliance with vessel and land crew HSE audit requirements
• The increased focus on training and development in 2021 resulted in the number of hours
of training per employee increasing 3-fold from 5.8 in 2020 to 18.6 in 2021
• Capitalized research & development spending corresponded to approximately 2.2% of net
revenues
• TGS presented 56 technical papers (compared to 32 papers in 2020) in more than 8
conferences and 3 industry journals and publications in 2021
• 10% decrease in Scope 1 and 2 emissions between 2020 and 2021
• 15% decrease in kwh usage in our data centers despite increased compute power in 2021
due to adoption of more energy-efficient equipment
• On track to be Net Zero in Scope 1 and 2 emissions by 2030
• Zero reportable spills or unplanned releases to the marine environment, and zero
reportable spills to the land environments during seismic operations
• Removed 3.4 metric tons of debris as part of EnerGeo’s Ghost Net Initiative and require all
vessel contractors to track and report as part of this initiative
• Active participant in EnerGeo and working to establish industry standards on carbon
accounting in seismic operations as well as other safe, environmentally sound and
sustainable practices
• Partnered with the National Oil Company of Liberia to renovate the intensive care and
trauma units at the John F. Kennedy Memorial Center
• Partnered with CGG and PGS to launch a unified ecosystem, Versal, an independent,
secure, cloud-based ecosystem that allows clients easy access to all their data and
entitlements
110
2021 Compliance Assessment in which 78% of respondents indicated that they were
comfortable raising compliance matters directly to the Compliance department and
over 90% feel comfortable raising concerns regarding non-compliance without fear
of retaliation.
1.7 Anticorruption Efforts
TGS recognizes that preventing bribery and corruption in its operations is essential
in today’s business environment. TGS works to ensure that its employees, as well as
partners and third parties, understand and are sensitive to the legal requirements
that apply to the Company’s operations. These include the U.S. Foreign Corrupt
Practices Act, the U.K. Bribery Act, the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business, and the anti-bribery and
anticorruption laws of the various countries in which TGS operates or conducts
projects.
Employee Awareness. TGS has a variety of policies and procedures to ensure
compliance with anticorruption laws, including TGS’ Anticorruption Policy and
Supplier Code of Conduct, as well as procedures that address training and social
welfare provided as part of government obligations, engagement of high-risk third
parties, giving or receiving gifts or entertainment. TGS’ Anticorruption policy
expressly prohibits bribery, kickbacks and other illegal payments, as well as
facilitation payments and political contributions on behalf of the Company. In 2021,
all TGS employees received anticorruption training through their annual Code of
Conduct training and TGS had no confirmed instances of corruption in 2021 (same
as 2020).
Project Management. TGS conducts a risk-based analysis that assesses the
potential anticorruption risks of projects. This analysis includes a review of the
scope of the project; the countries in which it will take place; the use of any partners,
consultants, suppliers or vendors; and the necessary mitigation measures to
combat the corruption risk. Only a small portion of TGS’ revenues (<1%) derive from
projects located in the 20 countries ranked lowest by Transparency International in
its Corruption Percentage Index.
Third-Party Management. In 2021, TGS conducted due diligence on partner and
third-party relationships (based upon various risk factors including geographic
location and nature of services) at the outset of the relationship and updated the
information on a regular basis throughout the relationship and incorporated
compliance provisions in the agreements that prohibit bribery and corruption. The
Company continued to require these third parties to certify their compliance with
TGS’ Anticorruption policy and complete online anticorruption training. TGS also
reviewed payments made by these third parties. All of TGS’ international agents
were assigned anticorruption training and a compliance certification; TGS had no
reported anticorruption violations by its international agents in 2021.
fair business practices for every TGS employee and serves as the Company’s ethical
roadmap to ensure all employees perform their duties with honesty, with integrity
and in accordance with the law.
Employee Awareness. Employees are educated on compliance risks as well as TGS
policies and procedures, on key topics within our Code of Conduct, through in-person
workshops and mandatory e-learning sessions that employees must complete each
year. In 2021, 100% of TGS employees completed the Code of Conduct training
and certified their compliance to TGS’ Code of Conduct. This training includes
components on anticorruption and antibribery, trade controls and sanctions, human
rights and modern slavery, as well as discrimination and harassment. In 2021, TGS
assessed employee understanding of their obligations by conducting an employee-
wide compliance assessment that focused on TGS employees’ (i) perception of
TGS’ compliance program and the ethical leadership of TGS; (ii) understanding and
daily enactment of TGS’ Code of Conduct and compliance program; (iii) perception
of TGS’ compliance challenges; and (iv) willingness and comfort with reporting
concerns. Seventy-one percent (71%) of employees participated in the assessment,
and the results were predominately favorable with over ninety-five percent (95%) of
participants agreeing that:
• TGS values compliance and conducting business in an ethical manner.
• Their manager provides a good example of ethical business behavior.
• TGS’ compliance program is effective in ensuring TGS is compliant with the law
and ethics.
• Employees receive appropriate training and guidance on the compliance risks
relevant to TGS and their jobs.
• TGS provides sufficient reporting channels to raise concerns regarding non-
compliance.
• Employees know where to go if they have questions about the Code of Conduct
or TGS’ compliance program.
TGS will continue this exercise on at least a biannual basis going forward to measure
and track the understanding and effectiveness of its compliance program.
Reporting. TGS provides multiple avenues for TGS’ internal and external stakeholders
to report potential non-compliance, including TGS’ publicly available compliance
hotline that allows anonymous reporting. TGS’ Code of Conduct expressly prohibits
retaliation against those who report or cooperate in an investigation. All reported
potential violations of the law and Code of Conduct are investigated, including
discrimination and harassment, insider trading, conflicts of interest, financial fraud
and corruption issues. All reports are addressed based upon the findings of the
subsequent investigation, and the findings are reported internally. In 2021, five (5)
matters were reported directly or indirectly to the Compliance Officer, compared
to 19 in 2020 and 11 in 2019. The predominant reporting method continues to be
directly to the Compliance department, which is supported by the responses to the
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1.8 Cybersecurity
TGS’ Board of Directors and Leadership Team oversee TGS’ cybersecurity strategy
and receive periodic reports on TGS’ data security efforts and any notable information
security incidents from TGS’ Cybersecurity department. TGS’ cybersecurity risks
and strategy are evaluated on an annual basis as part of TGS’ annual risk enterprise
program.
TGS aligns its cybersecurity practices with the NIST Cybersecurity Framework.
Annual assessments are conducted to evaluate the current maturity state and
aid in the development of the cybersecurity program. The company promotes
cybersecurity awareness and education throughout the organization through training
and special sessions to “high-risk” employees (i.e., Finance and HR departments) on
the topics of data sensitivity, spear phishing and fraud. In 2021, TGS established a
formal Cybersecurity Incident Response Plan and implemented Incident Detection
& Response and Vulnerability Management platforms. Particular focus was paid to
the remediation of severe vulnerabilities found in the environment and maintenance
of a monthly patch schedule to protect the company from the most recent exploits.
The company also continues to maintain cyber insurance coverage. As a result of
TGS’ cybersecurity efforts, the company was not impacted by many high-profile
cybersecurity events of 2021 (Exchange Hafnium, Solarwinds, Kaseya, log4j, etc.).
1.9 Tax
As part of its global operations TGS is exposed to different kinds of taxes, including
income taxes, withholding taxes, sales taxes, customs and social security taxes, and
is committed to complying with the letter and spirit of tax laws and regulations in
the countries in which it operates. TGS’ Tax policy is set by the Board and managed
by the Finance department’s tax manager who reports to the CFO, participates in
Audit Committee meetings and engages with external and local tax consultants
who are independent from our auditors, when necessary. Given that TGS operates
globally and conducts projects in different jurisdictions, TGS assesses the different
tax risks as part of the project approval process so that the company understands
its exposure to these risks, including double taxation, and structures the project to
optimize tax consequences. TGS does not use tax havens or offshore tax centers,
nor do we transfer value created to lower tax jurisdictions solely for a more favorable
tax regime. TGS paid USD 14.5 million in taxes in 2021, and below is a summary of
the taxes paid in 2021 in TGS’ key jurisdictions.
Country
Taxes Paid in 2021*
(all amounts are in USD 1,000s unless noted otherwise)
Norway 52
United States (18)
United Kingdom 400
Brazil (16,313)
Argentina (226)
Canada 3,889
Singapore (294)
Australia (2,000)
Mexico (5)
*Included in these amounts are (i) payment of income tax following the 2020 income tax filing; (ii) prepayments
of 2021 taxes; and (iii) indirect taxes. The amounts in parenthesis represent taxes paid and the positive amounts
are tax credits received.
1.10 Looking Forward
TGS will continue to ensure business ethics and cybersecurity remain a priority
for the company in 2022 through the frameworks established above. This includes
identifying and managing these risks through risk assessments, training and
awareness campaigns, monitoring of information systems, oversight of projects and
operations in regions that present a higher risk of corruption, while ensuring that
employees and other stakeholders are empowered to raise concerns through the
various channels provided by the organization.
2. ENVIRONMENT
2.1 New Energy Solutions
In 2021, TGS launched the New Energy Solutions business unit which supports
our clients’ digital transformation and energy transition goals, specifically carbon
capture and storage, wind energy development, geothermal and deep-sea minerals,
through data and insights via online platforms like Wind Axiom, Carbon Storage
Pathfinder and Geothermal Pathfinder. This group is working closely with TGS’ Data
& Analytics and Well Data Products business units as part of our Digital Energy
Solutions group to create an ecosystem that supports the full project life across the
energy value chain with data, insights and software solutions.
TGS intends to grow and develop this business through both organic growth and
expansion via partnerships and inorganic growth. As part of the growth strategy,
TGS acquired 4C Offshore Ltd. in May 2021, which offers a broad suite of data,
analytics and services for the offshore wind industry. This acquisition brought TGS
the capability to provide key data and insights for the development and operations of
offshore wind farms.
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2.2 Climate Impact
2.2.1 TGS’ Climate-related Strategy
TGS has been a supporter of the “Task Force on Climate-related Financial
Disclosures” (TCFD, set up by the Financial Stability Board) since 2020. The following
chart addresses the financial impacts of climate risks and opportunities. Below are
TGS’ status and goals with respect to climate risk outlined in accordance with the
TCFD framework:
Governance TGS Board Oversight
TGS’ Board of Directors oversees TGS’ strategy and efforts in assessing the financial,
business and operational risks, and opportunities associated with climate change on TGS.
The risks and opportunities related to climate change and its impact on TGS, either directly or
indirectly, and the energy industry, oil price, customer behavior and technology advancement
are all considered by the Board as part of the annual risk enterprise assessment. The Board
also holds annual strategy sessions in which it evaluates TGS’ business strategy considering
changes to the industry, market conditions, customer behavior and technology brought on
by the impact of climate change. The Board also receives regular operational updates that
highlight the impact climate risk has on operations, as there are changes in environmental
legislation, increased reporting requirements and greater need for stakeholder engagement.
Finally, the Compensation Committee reviews and approves climate goals and objectives
related to executive compensation and TGS’ employee bonus plan.
TGS Leadership’s Role
TGS’ EVP, People and Sustainability, is responsible for overseeing TGS’ sustainability strategy
which includes assessment of the climate-related risks and opportunities and putting in
place a strategy to reduce Scope 1 and 2 emissions. TGS’ VP Projects and HSE Director
are responsible for measuring emissions in operations and working with business units to
develop and design surveys with minimal environmental impact. TGS’ EVP Digital Energy
Solutions is responsible for providing products and services that assist our customers in
addressing their climate impact through carbon capture and storage and transitioning
to other energy sources like wind or geothermal. Finally, TGS’ entire Leadership Team
participates in the annual risk assessment and strategy sessions, implements the action
plans related to these exercises, and assesses and evaluates all relevant risks, including the
impact of climate change, on projects and corporate strategy.
Strategy TGS’ strategy to address climate impact is influenced by the following key factors: impact of
market conditions and the oil price, shifts in customer behavior, advancements in technology
and changes in legislation and policy. TGS regularly reviews and adjusts its strategy to
mitigate and account for the impact of these key factors. In 2021, TGS modified its strategy
to diversify its business and revenue stream to serve carbon capture and storage, deep sea
mining, geothermal energy, wind energy and solar energy. This adjusted strategy addresses
the potential financial impact to the changes in oil and gas exploration and provides business
opportunities for new revenue streams, products and services. TGS aims to achieve this
strategy through both organic and inorganic growth.
Risks
Short-term (3-5 years) risks include increased environmental legislation and permitting
requirements, changing customer behavior, uncertainty in the market. Medium-term (510
years) risks include carbon pricing mechanisms, mandates and regulations on existing
products and services, transition to lower-emissions operations, technology advancements.
Opportunities
Short- and medium-term (5-10 years) opportunities include access to new markets and
expansion of data and service offerings.
Risk
Mangement
Risks and opportunities are identified, assessed and managed at the overall corporate level,
department level and project level. These risk assessments analyze changes in our industry
and market, customer behavior, environmental legislation and industry practices, and
developments in technology.
Identifying Risks
Climate-related risks are identified at a corporate level through the annual risk assessment
process which includes consideration of the energy industry, energy mix, oil price, customer
behavior, technology advancement, and legal and regulatory changes. The impacts of
climate-related risks are assessed as part of the project development and management
process to understand the impact local rules or regulations may have on permitting, address
concerns to local communities and environments with respect to project impact, assessing
technology solutions. These are identified through environmental impact assessments
(EIAs), site surveys, public or social consultations, engaging with environmental consultants,
participation and membership in industry trade organizations (e.g., EnerGeo, IOGP), project-
specific hazard assessments and consultation with regulators and permitting agencies.
Managing Risks
TGS commissions EIAs to understand potential impacts on the environment it may operate
in. TGS also employs protected species observers (PSOs) and utilizes passive acoustic
monitoring (PAM) on its operations to ensure our operations do not have a detrimental
effect on the environment in which we operate. TGS employs various other environmental
mitigation measures including conducting soft starts or ramp-ups and placing buffer zones
around environmentally sensitive areas. TGS also coordinates with relevant stakeholders (i.e.,
customers, local communities, government agencies, industry trade organizations, partners,
suppliers, etc.) to ensure we are addressing concerns and mitigating risks as appropriate.
Integrated Risk Management
Risk management is integrated throughout the organization at the corporate level,
department level and project level. TGS’ annual risk enterprise program incorporates
environmental and climate-related risks, as well as TGS’ mitigation measures. TGS’ Board
and Leadership Team also look at the climate-related risks and opportunities as part of
its regular strategy sessions to ensure that TGS’ short-term and long-term strategies
account for all relevant risks and opportunities. TGS also receives regular feedback from its
stakeholders, including investors and clients, and incorporates such feedback into how TGS
manages its climate-related risk.
Metrics &
Targets
2021
- Scope 1 emissions: < 1 mt CO
2
e
• The above accounts for total Scope 1 emissions over which TGS has financial control
- Scope 2 emissions: 11,208.25 mt CO
2
e
• The above accounts for total Scope 2 emissions over which TGS has financial control
Scope 3 emissions (operations): 133,488.86 mt CO
2
e
• The above accounts for emissions derived from fuel consumption by our vendors for our
marine, onshore and air seismic operations in 2021.
TGS follows the Greenhouse Gas Protocol in classifying, deriving and calculating its
emissions. The Scope 1 and 2 emissions calculations are based upon the IEA International
Electricity Factors (2020), UK DEFRA - Conversion Factors (2020), US EPA - eGRID 2019 Sub
Region and US EPA - Emissions Factor Hub 2020. Scope 3 marine operations emissions
calculations are based on the European Commission’s “Quantification of Emissions from
Ships Associated with Ship Movements between Ports in the European Community,” July
2002; Econometrica “Greenhouse Gases, CO, COe, and Carbon: What do all these Terms
Mean?,” August 2012; “Excise Duty on Emissions of NOx,” 2015 no. 14/2015S; The Greenhouse
Gas Protocol; and the EPA’s “Greenhouse Gas Inventory Guidance: Direct Emissions from
Stationary Combustion Sources,” December 2020. Scope 3 land and airborne seismic
operations emissions calculations are based upon the EPA Simplified GHG Emissions
Calculator (SGEC) version 3.2 June 2014.
Targets
Scope 1 and 2 short-term CO
2
e target: remain below the baseline levels established in 2020
(12,355 mt COe)
Combined Scope 1 and 2 emissions for 2021 is 11,208.91 mt COe, which is a 10% decrease
from 2021.
Scope 1 and 2 long-term target: Net Zero COe emissions by 2030
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2.2.2 Scope 1 and 2 Emissions
TGS leases office space for our 443 employees in the United States, United Kingdom,
Norway, Brazil, Australia and Canada, and does not operate or own vessels,
manufacturing plants or factories. TGS’ Scope 1 emissions are not material to our
overall emissions and are solely related to two vehicles maintained by the company
for local deliveries in Houston and Oslo. TGS does not consider the impact of either
our water usage or waste from our office operations to be material; however, recycling
bins for paper and cardboard, glass, plastic, batteries and print toner cartridges are
available in TGS offices, and employees are encouraged to follow proper recycling
procedures. In 2021, TGS’ Houston Operational Headquarters (which is the
Company’s largest office with approximately two-thirds of the workforce) composted
3.4 tons of waste and recycled 4 tons of trash, diverting a total of 7.4 tons of waste
(29% of total waste) from being deposited in a landfill.
Scope 1 Emissions
CO
2
e (mt) CO (mt) CH (kg) NO (kg)
2020 (Baseline) 337.75 337.12 .45 .18
2021 .67 .66 0 0
Energy usage in our offices and data centers make up TGS’ Scope 2 emissions. Energy
consumption for data processing and high-performance computing are responsible
for the bulk of the emissions related to the generation of purchased energy (Scope 2),
with our Houston data centers comprising 93% of Scope 2 emissions and 92% of kwh
usage. As a result of this, over 99% of TGS emissions and 98% of kwh usage occurs
in TGS’ US offices and data centers.
Scope 2 Emissions
kwh COe (mt) CO (mt) CH (kg) NO (kg)
2020 Total (Baseline) 33,634,278 12,558.61 12,501.23 845.98 121.58
- Offices 3,645,301 1,378.58 1,373.02 89.77 12.04
- Data Centers 29,988,977 11,517.51 11,465.33 774.28 110.16
2021 Total 28,564,309 11,215.16 11,166.7 614.43 111.08
- Offices 2,420,961 769.67 766.21 43.38 7.97
- Data Centers 26,143,348 10,466.16 10,401.16 571.05 103.12
As the above chart shows, there was a 15% decrease in kwh usage between 2020
and 2021 and an 11% decrease in COe emissions. Office emissions dropped by 44%
while data center emissions dropped by 9%. The data center emissions decrease
is notable because our on-premise compute actually increased in 2021. The chart
below illustrates the growth in on-premise compute capability measured in teraflops
(TFLOPS) from 2018-2021 (left axis). The right axis shows a decrease in the amount
of kWh required to run 1 teraflop for a year. As the graph portrays, TGS is becoming
more energy efficient in our compute capabilities at our on-premise data centers.
2.2.3 Scope 3 Emissions - Operations
TGS tracks emissions generated through our seismic operations, which are classified
as Scope 3 emissions (purchased goods and services) since TGS’ field operations
are acquired by geophysical contractors that specialize in land, marine and airborne
geophysical operations. Tracking, reporting and developing a strategy to reduce
and/or offset these emissions is a critical part of both TGS’ and the industry’s
sustainability strategy. As one of the largest buyers of seismic acquisition capacity,
TGS has a unique opportunity to influence and contribute to ongoing industry efforts
to standardize GHG emission tracking and reporting, but our strategy requires
coordination with our contractors who own or operate the equipment and field crews.
Industry Collaboration. TGS participates in and contributes to EnerGeo’s marine
emissions working group, which is a collective effort supported by several marine
seismic contractors and E&P companies to define industry standards and guidance
for the seismic industry on carbon emissions recording and reporting. This working
group published an EnerGeo factsheet in September 2021 that outlines the industry’s
strategy towards understanding and defining emissions in marine geophysical
operations, including our ambitions towards successfully managing, tracking and
reporting on GHG emissions. In 2022, EnerGeo’s working group will provide a
comprehensive guidance document that sets the standards for collecting, tracking
and calculating emissions in marine geophysical industry, and in future years
TGS will look to adopt these standards in our emissions reporting for geophysical
operations.
Marine Operations. TGS contractually requires all marine seismic contractors to
report their carbon emissions and the factors used to derive emissions from fuel
consumption. As illustrated in the following charts, the type of survey and field
operations directly impact the carbon emissions of a project. The majority of TGS’
2021 Scope 3 emissions are from marine seismic projects, which are categorized
as either 2D, 3D or nodal (OBC/OBN). 2D surveys use smaller vessels that tow less
in-sea equipment, resulting in a lower carbon footprint (.63 mt COe/km). 3D or
Total on premise compute TFLOPSkWh per TFLOP required
2018 20212019 2020
70,000 800.00
– –
10,000
200.00
10 0.00
20,000
300.00
30,000
400.00
40,000
500.00
50,000
600.00
60,000
700.00
Efficiency in compute over time
115
nodal seismic surveys require a combination of larger vessels and additional in-sea
equipment, which accounts for a higher emissions output per square kilometer (2.82
mt CO2e/km
2
for 3D and 6.34 mt CO
2
e/km
2
for nodal surveys). The other factors
that impact the fuel consumption of a marine survey include weather and sea state,
ocean currents, fuel type, survey design, transit time during mobilization periods,
and the type and amount of in-sea seismic equipment being towed.
Onshore and Airborne Operations. For onshore and airborne seismic programs,
TGS’ field contractors track their fuel consumption data based upon the fuel
types and field equipment, which may include helicopters, seismic vibrators, ATV/
UTVs, passenger vehicles, etc. A 3D land survey involves laying out a patch of data
recording nodes in the ground and using seismic vibrators or other conventional
seismic sources to generate a 3D cube of subsurface data. For airborne acquisition,
gravity imaging equipment installed aboard the aircraft records enhanced gravity,
magnetics and LiDAR data acquired over a predefined grid of flight lines by using a
dual propeller aircraft. In these types of surveys, fuel consumption and emissions
are impacted by the size of the survey, the equipment and vehicles used, the local
environment and geography, and use of helicopters for equipment transport,
scouting or portable heli-drilling. In 2021, TGS’ plans to continue the 2020 Horus
I eFTG program did not materialize; however, emissions were generated while the
crew was on standby and those are reported in the following chart.
2021 Scope 3 Emissions - Summary by Project Type
CO
2
e (mt) CO
2
(mt) CH
4
(mt) N0 (mt) SOx (mt) NOx (mt)
2D Marine Seismic 10,367.92 10,242.87 0.48 0.37 15.20 161.27
3D Marine Seismic 95,568.07 94,492.38 5.12 3.13 79.95 1,516.77
OBN/OBC Marine Seismic 27,145.28 26,791.01 0.65 1.13 66.22 393.55
Subtotal Marine Seismic 133,081.26 131,526.26 6.26 4.63 161.37 2,071.59
Subtotal 3D Land Seismic 406.20 399.77 0.02 0.02
Subtotal Airborne Surveys 1.40 1.34 0.00 0.00 – –
TOTAL SCOPE 3 EMISSIONS 133,488.86 131,927.37 6.27 4.65 161.37 2,071.59
• Included in the emissions reported for marine survey above are those emissions related to mobilization as
well as the support vessels used in the survey. Emission calculations were done in MultiSeis by deriving daily
fuel consumption figures into emissions. Calculations and factors are based on the European Commission’s
“Quantification of Emissions from Ships Associated with Ship Movements between Ports in the European
Community,” July 2002; Econometrica “Greenhouse Gases, CO, COe, and Carbon: What do all these Terms
Mean?,” August 2012; “Excise Duty on Emissions of NOx,” 2015 no. 14/2015S; The Greenhouse Gas Protocol;
and the EPA’s “Greenhouse Gas Inventory Guidance: Direct Emissions from Stationary Combustion Sources,”
December 2020.
• Land and airborne seismic emissions were calculated by converting fuel consumption figures to emissions
using the EPA Simplified GHG Emissions Calculator (SGEC) version 3.2 June 2014. Fuel and vehicle type, as
well as mileage and fuel usage, were calculated within the “Mobile Sources” tab.
2021 Scope 3 Survey Emissions - Intensity Figures
Distance
Area
Acquiredt
Unit
CO
2
e
(mt/unit)
CO
2
(mt/unit)
CH
4
(kg/unit)
N0
(mt)
SOx
(mt)
NOx
(mt)
2D Marine Seismic 16,557.51 km 0.63 0.62 0.03 0.02 0.92 9.74
3D Marine Seismic 33,856.03 sq km 2.82 2.79 0.15 0.09 2.36 44.80
OBN/OBC Marine
Seismic
4,280.28 sq km 6.34 6.26 0.15 0.26 15.47 91.94
3D Land Seismic 184.72 sq km 2.20 2.16 0.08 0.11 NA NA
2.3 Marine Operations
TGS is committed to protecting marine and coastal ecosystems and ensuring that
our marine seismic contractors share this commitment. As noted above in our
materiality chart, this issue is material to both TGS and to our stakeholders. TGS
recognizes that if proper mitigation measures are not imposed or enforced, seismic
operations and the towing of acoustic arrays through the marine environment has the
potential to disrupt or impact the marine environment through possible unplanned
spills, pollution or disruption of marine mammal migration paths, spawning groups
or other ecologically sensitive locations. Both the geophysical industry and TGS
impose stringent measures to lessen or negate these potential impacts to the
environment.
Project Management. When planning and designing surveys, TGS commissions
environmental impact assessments (EIAs) to identify marine mammal migration
paths, spawning grounds, sanctuary areas or other ecologically sensitive locations
that may be present in and around the survey area. TGS engages with stakeholders,
such as fisheries and local communities, to understand their concerns and ensure
ongoing communication throughout the duration of the seismic surveys. During the
acquisition phase of a survey, TGS employs protected species observers (PSOs) and
utilizes passive acoustic monitoring (PAM) to ensure that our field operations do not
have a negative effect on cetaceans, turtles, marine mammals, etc. When operating
in environmentally sensitive areas, such as Brazil and Argentina, TGS employs third-
party HSE advisors who are tasked with managing all aspects of health, safety and
the environment onboard their respective vessels, ensuring that full compliance
with all environmental regulations and permit stipulations is achieved.
Audits and Reporting. To ensure compliance with the International Convention for
the Prevention of Pollution from Ships (MARPOL), the Company requires all vessel
contractors to report all spills, regardless of quantity and substance, and whether
the spill entered the marine environment or was contained onboard a vessel. TGS
has consistently met its goal of zero recordable spills and unplanned releases to
the marine environment in our offshore operations since 2014, with 2021 being
no exception. TGS requires all vessel contractors to comply with all applicable
environmental laws and regulations and undergo audits from the International
Marine Contractors Association or Offshore Vessel Inspection Database (IMCA or
116
OVID). These audits are conducted by trained and accredited third-party auditors and
inspectors; evaluate compliance with all applicable health, safety and environmental
regulations and industry requirements; and ensure that all required health, safety
and environmental permits and certificates are valid. TGS also conducts additional
HSE inspections and audits throughout the acquisition phase of a seismic survey.
In 2021, TGS chartered 37 vessels, including seismic, support, node layout and
source vessels, and each of these vessels underwent the required audits and/or
HSE inspections.
Ghost Net & Marine Debris Removal Initiative. TGS supports EnerGeo’s Ghost
Net & Marine Debris Removal Initiative (GNI) and removed a total of 3.4 metric tons
(7,496 lbs.) of debris from the marine environment through its 2021 operations.
This initiative is an industry-wide effort to remove and collect ocean debris and
fishing gear while conducting marine seismic surveys with the goal of creating and
promoting a healthier marine environment and ecosystem. This debris is removed
from the marine environment to reduce the harm it presents to ocean life such
as turtles, birds, mammals or fish. Since 2020, TGS requires all vessels on TGS
projects to report their marine debris removal efforts to EnerGeo and TGS on a
project-by-project basis.
2.4 Land Operations
As with our marine operations, addressing and mitigating the potential disruption
that onshore seismic surveys may cause to the onshore environment is a material
issue to both TGS and to our stakeholders. Onshore seismic surveys have the
potential to cause pollution, physical damage or disturb vegetation or wildlife if these
matters are not properly addressed when planning and executing the survey.
Project Management. TGS engages with local communities to discuss potential
environmental impacts as TGS recognizes the importance of working with local
communities and landowners to understand their concerns and ensure minimal
disturbance to their land. In planning its onshore seismic operations in Canada
and the United States, TGS continues to take additional measures and precautions
beyond those set by law or regulation, including:
• Utilizing high-resolution imagery and LiDAR data during survey planning stages
to help identify environmentally sensitive areas, chart routes of least or minimal
impact and avoid tree cutting and vegetation disturbance.
• Washing equipment to mitigate the potential spread of noxious plants or invasive
species.
• Planning operations away from riparian areas to minimize potential impacts on
aquatic areas.
• Working with biologists around designated wildlife-sensitive areas and abiding
by any potential timing restriction related to wildlife migration periods.
• Completing archeological reviews of proposed survey areas prior to starting
operations and ensuring that archaeologists clear off-road access to protect
cultural resources.
• Minimize fuel consumption and emissions by utilizing accommodations near the
project area and reducing crew exposure hours.
• Blocking certain access points to recreational traffic within the survey area
to allow vegetation to regenerate naturally and working exclusively on foot in
designated areas to maintain a zero-impact footprint on the environment.
• Utilizing existing train access and roads to minimize surface disruption and
compaction and suspending vehicle operations during wet ground conditions to
prevent surface deformation.
• Maintaining regulatory compliance throughout continuous State and Federal
Inspections.
• Reducing waste, promoting recycling practices, burning or burying all
biodegradable solid domestic waste without contaminating water bodies during
operations.
• Carrying out reclamation programs to rehabilitate areas disturbed by vehicles
operations.
Audits and Reporting. TGS requires documented audits of field equipment and HSE
procedures for all new surveys to ensure that all equipment is in proper working
order and that HSE procedures adequately mitigate potential impacts. Every spill,
regardless of the amount or substance, must be reported, cleaned up and properly
disposed of; and TGS tracks all spills through its HSE management software system.
There were no reportable spills or releases in 2021 during TGS’ onshore operations.
2.5 Looking Forward
In 2022, TGS will continue its efforts to minimize its climate and environmental
impact. TGS has set the target of ensuring its Scope 1 and Scope 2 emissions remain
below the 2020 baseline levels and to achieve its overall goal of Net Zero in Scope 1
and 2 emissions by 2030. TGS will aim to complete its climate scenario analysis and
publish a summary of its findings and continue its collaboration with the industry to
develop unified carbon accounting standards for seismic operations.
The Company will continue with several key initiatives in its marine operations and
ensure that its marine contractors abide by TGS’ environmental standards, including
requiring participation in EnerGeo’s Ghost Net Initiative (GNI) for marine acquisition
projects, aiming for zero reportable spills and unplanned releases to the marine
environment during seismic vessel operations, and require each chartered vessel
undergo an IMCA/OVID audit within six months of hire, and every twelve months
thereafter.
117
With respect to its land operations, all land contractors will continue to be required
to report all spills to TGS, regardless of quantity spilled, with the aim of no reportable
spills to the environment and to contain and properly clean up all spills, regardless
of how much was spilled. TGS will require documented audits of field equipment
and HSE procedures for all new surveys to ensure that all equipment is in proper
working order and that HSE procedures adequately mitigate potential environmental
impacts.
3. PEOPLE
3.1 Investing in Human Capital
In 2021, the Company focused on keeping our employees safe, healthy and engaged
through a lasting pandemic that continued to result in unique working conditions.
As various office locations returned to in-person or hybrid working conditions,
TGS focused on renewing engagement activities and improved communication
with the aim of reconnecting employees across departments and locations. The
efforts included regular updates regarding COVID-19 mitigation measures and
office requirements, townhalls with leadership and the CEO, and a redesigned and
relaunched intranet that more closely resembles a social media platform where
content can be shared, liked and commented on. Engagement events ranged from
simple games during lunch hours to globally coordinated Earth Day activities and
year-end holiday parties. TGS believes these are essential to maintaining and
rebuilding culture in a post-pandemic environment. Finally, TGS ensured employees
had the necessary resources and support by providing technology upgrades to
guarantee teams could collaborate effectively in hybrid home and in-office working
conditions and by providing additional mental and emotional support to employees at
each location through its external Employee Assistance Programs (EAP).
TGS’ 2021 Engagement Survey showed improved employee engagement with a
94% global participation rate; 86% of employees responded favorably across all five
survey categories: leadership, trust, communication, identity and wellbeing, and
culture and values. This was an increase from the 2020 baseline results of 78% and
was significantly higher than the Mercer 2021 Employee Engagement Benchmarking
Report results of 74%.
3.1.1 Diversity and Equality
TGS has 443 employees across offices in the United States, Norway, United
Kingdom, Brazil, Australia, Canada, Mexico and Singapore, plus 28 employees at
4C Offshore, which TGS acquired in 2021 and is working to integrate into the TGS
organization in 2022. TGS strives to promote and maintain a work environment in
which our people are treated with dignity, decency and respect, and published its
Commitment to Diversity and Inclusion in 2021 in which TGS outlines its expectation
that the workplace be business-like and free of unlawful bias, prejudice and
harassment, and that employment decisions should be made on merit and not on
the basis of race, color, national origin, religion, sex, disability or any other status
protected by law. TGS also commits to being transparent in its progress and
ensuring Board and Leadership oversight of its diversity and inclusion efforts. TGS’
policies against discrimination and harassment in the workplace are also reiterated
in TGS’ Code of Conduct and local employee handbooks. Employees may report
violations in accordance with the reporting procedures outlined above. Finally, all
TGS employees receive annual training on TGS’ policies prohibiting discrimination,
harassment, bullying and retaliation in the workplace and how to promote a diverse
and more inclusive working environment.
TGS respects national and local laws on freedom of association in the communities
in which we do business, and the right of all people to join or not join a trade union to
bargain collectively. 3.4% of our workforce was covered by a collective bargaining
agreement in 2021, flat from 2020.
*Note: The following breakdowns show TGS employees across its offices exclusive of 4C Offshore employees
as they will be integrated into TGS’ systems in 2022.
Employee Statistics 2021 2020 2019
Total # of Employees at Year-End 443 462 666
New Hires 47 49 64
Employee Turnover 10% 11% 8%
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The company is committed to improving diversity, and in particular gender diversity,
within the organization as well as working with other organizations to ensure women
are given equal opportunity for development and advancement. Some key steps
the Company took in 2021 include implementing a new Parental Leave policy in
the US to provide increased time off to new parents. This new policy provides 16
weeks of paid time off for birth mothers and 12 weeks of paid time off for non-birth
parents, all at 100% of salary. TGS initiated a gender compensation analysis through
an independent provider at the start of 2021, utilizing the metrics set by the World
Economic Forum and the UK Gender Pay Gap. The results of this analysis show
that TGS had an overall gender compensation gap of 22%, but equal representation
of women across all four pay quartiles. Finally, TGS is part of the 2021 and 2022
Bloomberg Gender Equality Index and formally adopted the United Nation’s Women’s
Empowerment Principles in January 2021. TGS is encouraged by the increase in
female hires in 2020 and 2021 as compared to 2019 and looks to continue this trend
in 2022.
Tenure 2021
0 - 5 37%
5 - 10 years 23%
10 - 20 years 29%
+20 years 11%
37%
23%
29%
11%
New Hires 11%
Management 0%
2%
>30 y/o
New Hires 57%
Management 57%
57%
30 50 y/o
New Hires 32%
Management 43%
40%
50+ y/o
Age: Total Workforce
Management Levels
Board of Directors 57% 43%
Executives 63% 38%
Senior Leaders 64% 36%
Middle Managers 72% 28%
Individual Contributors 74% 26%
Gender 2021
New Hires 68%
Promotions 69%
Voluntary Turnover 60%
73%
2020 / Male 71% New Hires 65%
2019 / Male 65 % New Hires 79%
New Hires 32%
Promotions 31%
Voluntary Turnover 40%
27%
2020 / Female 29% New Hires 35%
2019 / Female 35% New Hires 21%
Understanding the average age and tenure of our workforce helps ensure we are
continuing to be an attractive company for those just starting out in the job market.
The average age of a TGS employee is 48.47 and the average age of TGS Management
is 48.84.
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3.1.2 Training and Development
In 2021, TGS increased the focus on improving employee engagement through
training and development. The Company provides departmental cross-training
opportunities to employees and continues to ensure its employees receive technical
training and have opportunities to improve their imaging and geoscience skills. This
year, employees across all divisions participated in over 4,555 hours of in-house
geological and imaging courses and lunch-and-learn sessions and 521 hours of
software training. TGS also provided additional professional development training
opportunities for all employees through an external training partner, offering a
diverse range of training and development programs developed by top universities
and companies. Our employees were encouraged to use this platform through the
inclusion of a training and development goal in their 2021 performance development
plan. A total of 195 unique courses were taken, accruing over 2,720 hours of training.
By increasing the focus on training and development, the number of hours of training
per employee increased 3-fold from 5.8 in 2020 to 18.6 in 2021.
TGS redesigned the Performance Development Plan (PDP) process for the 2021-
2022 cycle with the intent to empower employees and managers to focus on
meaningful performance and development conversations, ensure employees
continue to develop the necessary skills to grow, and set goals around personal
growth and alignment with corporate strategy. Six core competencies have been
identified as essential development areas and have been incorporated into the PDP
process: communication, technical and job-specific knowledge, project and task
management, teamwork and leadership, business acumen and understanding, and
passion and motivation. These competencies provide a framework for managers
and employees to evaluate performance and development needs in a more focused
manner, leading to more targeted development goals and training.
3.1.3 Compensation
TGS is committed to compensating its employees fairly and in accordance with
all applicable labor laws. TGS’ compensation philosophy is based upon market
conditions that are reviewed on an annual basis by the Compensation Committee
of the Board of Directors. Employee compensation includes base salary, insurance
and retirement benefits programs, and a profit-sharing bonus plan based on the
Company’s performance and, in certain cases, stock-based, long-term incentive
awards.
As TGS’ profit-sharing bonus plan is a key component of employee compensation,
TGS revised the calculations for the 2021 plan to reflect current market conditions
and expectations and ensure greater predictability for employees’ bonus
expectations. Going forward, TGS incorporated a strategic component in addition to
profitability component in the 2022 profit-sharing bonus. The strategic component
is based upon key performance indicators linked to emissions reduction, health and
safety, and advancements in our Imaging performance and Digital and New Energy
Solutions. TGS’ long-term incentive program continues to incorporate sustainability
metrics, such as health and safety and emissions targets (see TGS’ 2021 Executive
Remuneration Report).
TGS’ lowest salary is significantly above the national minimum wages. The table
below shows TGS’ CEO is paid between 8.36 to 11.62 times the median target
compensation in each of TGS’ main offices.
Norway US UK
Median TGS Target Compensation $125,741 $147,800 $106,348
TGS CEO Pay Multiple 9.83x 8.36x 11.62x
3.2 Health and Safety
3.2.1 Integrating Health and Safety into TGS
TGS is committed to providing a safe, healthy and sustainable workplace for our
employees, contractors, vendors and clients; and as noted at the outset of this
report, safe and healthy operations are considered a significant material issue to
TGS and its stakeholders. TGS management continually strives to eliminate risk and
reduce hazards, but successful operations can only be achieved through the full
cooperation and commitment of all TGS employees and contractors.
US Workforce By Race
Two or More Races
American Indian or
Alaska Native
Not Disclosed
Asian
Black or African American
Hispanic or Latino
White
<1%
<1%
10%
31%
3%
9%
46%
31%
46%
9%
3%
10%
66% of TGS’ workforce is located in the US, and we are working to understand and
improve the racial diversity of our US workforce.
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Governance. TGS promotes a top-down message of health and safety and each
member of TGS’ Executive Management conducts at least one HSE facility inspection
and one field visit per year. In light of COVID-19 travel restrictions and quarantine
measures, these were conducted remotely in 2021, with 100% participation and
completion. TGS also actively engages with relevant trade associations and
authorities to develop, implement and update our HSE standards. TGS’ HSE Director
is responsible for managing and implementing TGS’ HSE-MS and reports directly to
senior management as well as providing quarterly updates to both TGS Leadership
and the Board of Directors.
Employee and Contractor Awareness. The HSE Director provides HSE information,
training and resources to employees through regularly scheduled safety meetings,
internal auditing, HSE review meetings and general company-wide communications.
TGS requires all employees and contractors to be accountable for, and committed to,
their own health and safety, as well as for those they work with. Each is empowered
to intervene and STOP any operation or activity that they feel is unsafe or hazardous,
with the knowledge that such action will be supported by management. All employees
completed one HSE training course during 2021 (100% training compliance) that
included modules on mitigating COVID-19 in the office and outlined COVID-19
reporting procedures and expectations, as well as other workplace safety issues
such as evacuations and fire emergencies. Finally, during the summer of 2021, TGS’
HR and HSE departments coordinated the “TGS Around the World Challenge” to
create a fun and engaging event for its employees, while focusing on health benefits
and safe practices. The challenge involved employees tracking individual distances
achieved through various exercise types (hiking, running, cycling, kayaking, etc.),
with the goal of traveling a total of 33,015 km from Perth, Australia to Rio de Janeiro,
Brazil, making stops at each TGS office location around the world.
HSE-Management System. TGS defines safe operating procedures and guidelines
in its HSE Management System (HSE-MS) designed to meet or exceed all appropriate
legal requirements and, in the absence of any defined standards, to meet or exceed
industry-wide best operating practices. In 2021, TGS began a review and update of
its HSE-Management System policies, standard operating procedures and manual
to ensured alignment with industry standards. TGS is working with an independent
advisor to review and update the Company’s Emergency Response and Crisis
Management plans. The global plan was finalized in 2021 and local plans for each
office will be finalized in 2022. Following this process, tabletop exercises will be
conducted to ensure understanding of roles and responsibilities and to identify
any potential gaps in our response strategy. Finally, TGS migrated to a new HSE
Management Software System (Cority) in 2021 to enhance incident management and
tracking of key performance indicators.
Contractor Management. TGS engages with its subcontractors in reviewing a range
of HSE-related documents, including HSE project plans, hazard assessments, crew
HSE plans and emergency preparedness documents. TGS monitors and assesses
contractor performance by tracking and reviewing a range of leading and lagging
HSE indicators to ensure adequate and correct incident information was collected
and the situation remedied. TGS encourages contractors to report all near-miss
and high-potential events to identify and share lessons learned, ensure adequate
mitigation measures were implemented, and to safeguard personnel and equipment.
Where necessary, TGS assists and participates in incident investigations. HSE
performance is tracked and catalogued through TGS’ HSE-MS software application,
allowing TGS to continuously monitor its contractors’ performance over time. Upon
completion of a survey, TGS reviews all aspects of HSE performance to identify and
discuss areas for improvement, lessons learned and additional hazards identified
during the acquisition phase. HSE statistics and performance are reviewed with the
senior management team on a quarterly basis. TGS achieved full compliance with
vessel and land crew HSE audit requirements, and TGS Project and HSE Managers
ensured that all outstanding action items were properly rectified before the start of
acquisition.
3.2.2 COVID-19 Related Efforts
Office Operations. At the onset of the COVID-19 pandemic in 2020, TGS enacted its
business continuity plan and established global and local response teams, overseen
by members of the Executive team, to monitor the pandemic and ensure that our
response strategy remained effective throughout 2021. The local response teams
communicated updates and relevant COVID information to employees, ensured
each TGS office had adequate supplies, discussed lessons learned and monitored
updates from health and government authorities to ensure that every TGS office
stayed compliant with applicable rules and regulations. TGS restricted business
travel to essential or business-critical travel only and ensured compliance with all
COVID-19 travel restrictions and guidelines. The Company established a dedicated
COVID-19 reporting process to notify select members of the COVID-19 response
team of possible or confirmed exposure to the virus, as well as a dedicated internal
COVID-19 webpage that included information on TGS policies, mitigation measures
and hyperlinks to key websites such as the World Health Organization and the Center
for Disease Control. All employees also completed a COVID-19 training module that
covered proper hygiene and sanitation practices and TGS’ COVID-19 policies and
procedures. In 2021, there was 1 confirmed COVID-19 work-related case in a TGS
office (compared to 0 in 2020). No other community spread occurred in any TGS
office location.
Field Operations. Prior to commencing operations, TGS liaised closely with marine
and onshore contractors regarding their COVID-19 travel and mitigation plans and
ensured clients and other relevant stakeholders were kept abreast of TGS’ actions
regarding COVID-19 mitigation measures. TGS saw that its contractors’ COVID-19
plans followed industry standards as well as regulations from governments and
health authorities, and TGS worked with its contractors to implement additional
measures if any gaps were identified. All contractor and operational COVID-19 plans
were reviewed by TGS and were adapted and updated throughout the lifecycle of
a project to effectively safeguard the health and safety of all crew members. The
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pandemic particularly impacted crew changes and, in response, TGS imposed
additional planning and coordination to address local testing, screening and
quarantining requirements, crew fatigue and monitoring of mental health and stress
levels of all crew members. TGS participated in COVID-19 meetings and events
coordinated through EnerGeo to share lessons learned, ensure that proper industry
standards were being followed and to stay informed on COVID-19 trends and news.
TGS fully investigated all suspected or confirmed COVID-19 cases, ensured that
contact tracing was properly conducted, that suspected cases received necessary
testing and that proper quarantine measures were followed. Through 2021, within
our marine operations there was 1 shoreside work-related COVID case and there
was no community spread onboard any of the vessels operating for TGS in 2021.
Within our land operations, there were 2 work-related COVID cases. All affected
individuals received necessary treatment, were properly quarantined and fully
recovered.
3.2.3 2020 Health and Safety Key Performance Indicators
Employees. In 2021, there were no recordable injuries reported in any TGS office.
The number of Working Days Lost Due to Sickness and the Sickness Absence
Frequency values showed a slight increase from 2020 to 2021, which is likely
attributable to employees returning to the office and properly reporting sick days to
TGS, as opposed to a drop in reporting in 2020 due to the majority of our workforce
working remotely and not reporting sick days. Lastly, TGS’ Canada Land Operations
division received 98% on the Government of Alberta’s Certificate of Recognition,
marking the 5th consecutive year in a row that TGS has scored 90% or higher on an
external audit of its health and safety program.
Employee Health and Safety
Statistics
2021 2020 2019
Man-hours 812,142 966,411 954,685
Fatalities 0 0 0
Lost-time Injuries (LTI) 0 0 0
Medical Treatment Cases 0 1 0
Restricted Work Cases 0 0 0
Recordable Case Frequency* 0 1.03 0
LTI Frequency* 0 0 0
Working Days Lost Due to Sickness 862 752 1311
Sickness Absence Frequency 0.85% 0.62% 1.10%
*Per million man-hours
Contractor Health and Safety
Statistics
2021 2020 2019
Man-hours 2,258,284 3,232,981 4,590,692
Fatalities 0 0 1
Lost Time Injuries (LTI) 1 1 3
Medical Treatment Cases 2 3 5
Restricted Work Cases 0 1 1
Recordable Case Frequency* 1.33 1.55 2.18
LTI Frequency* 0.44 0.31 0.65
*Per million man-hours
Contractors. In 2021, TGS operated with several established land, marine and
airborne seismic contractors, all of which were selected based on their experience,
technology, sustainability, commitment to the environment, HSE performance and
track record.
Despite the complex challenges associated with managing global operations during a
pandemic, except for a slight increase in LTI Frequency attributable to a drop in man-
hours as compared to 2020, TGS’ contractor health and safety metrics improved
from 2019 and 2020. TGS’ motor vehicle accident rate (MVAR, per 1,000,000 miles
driven) was under the 2021 target of <2.0 for land seismic operations as there were
no motor vehicle accidents recorded (MVAR = 0.0 for 2021, total of 574,480 miles
driven). TGS’ 2021 total recordable incident rate for land seismic operations (TRIR,
per 200,000 man-hours) was less than the 2021 target of <2.0 as no recordable
incidents occurred on land operations, and the TRIR (per 200,000 man-hours) for
marine operations was less than the 2021 goal of <2.0 at 0.27. One Lost Time Incident
was recorded on a marine project, resulting in a Lost Time Incident rate (LTIR, per
200,000 man-hours) of 0.09. There were no recordable or Lost Time Incidents
recorded on TGS airborne surveys.
3.3 Human Rights
TGS remains committed to the UN Universal Declaration of Human Rights and
undertakes to operate in recognition of the freedom, the rights, the dignity and the
worth of the human person and promotion of equality irrespective of gender, race or
religion. TGS’ Statement of Values and Code of Conduct define the expectations of
ethical behavior of TGS’ Board of Directors, employees, vendors and suppliers. TGS
embraces diversity and equality in its workforce and suppliers and will not use or
tolerate child labor or slavery in any of its offices or operations. As set forth in TGS’
Modern Slavery Act Transparency Statement, Supplier Code of Conduct and Human
Rights policy, each available on www.tgs.com, TGS sets policies at the group level
and is committed to ensuring that there is no modern slavery or child labor used in
its operations or by its supply chain.
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Materiality and Risk Management. TGS analyzes human rights and modern slavery
risks within the organization and our supply chain as part of our annual corporate
risk enterprise program. TGS 2021 Compliance Assessment also evaluates our
employees’ perception of human rights and modern slavery risks at TGS, both in
the office and in the supply chain, and experience with incidents of modern slavery
or violations of human rights laws in the past year. As previously noted, TGS’
employees are highly skilled and educated and predominantly based in offices and
as such, TGS considers the risk of child labor or modern slavery in its workforce
to be low. As with any company that predominantly relies upon contractors for
its operations, the potential risk for human rights violations is greater within TGS’
supply chain. However, given that TGS conducts its operations through a limited
pool of suppliers, many of which have operated with TGS for many years, and that
geophysical operations require a skilled and certified workforce, TGS feels the
measures outlined below properly mitigate this risk.
Supply Chain. TGS expects its supply chain to share its commitment to human
rights and modern slavery laws. As part of its due diligence process, TGS requires
suppliers to disclose their policies with respect to human rights and modern slavery
and management of human rights issues in its supply chain and any human rights
or modern slavery investigations, lawsuits or violations involving the supplier. TGS
contractually requires suppliers and vendors to comply with human rights, modern
slavery and labor laws, as well as TGS’ Supplier Code of Conduct and Human Rights
policy, to ensure their supply chains do the same, in their work for TGS, and to notify
TGS of any potential or actual violation of these laws. TGS has the contractual right
to audit a supplier or vendor to ensure compliance with human rights laws as well
as the right to terminate for violation of these laws or TGS’ policy. Finally, high-
risk third parties, suppliers and vendors also complete a certification of compliance
on an annual basis that addresses their compliance with human rights, labor and
modern slavery laws, TGS’ Human Rights policy and Supplier Code of Conduct. TGS
had no cause to audit or terminate a supplier for failure to comply with the law or
TGS’ human rights policies in 2021.
Reporting. TGS provides multiple avenues for TGS’ internal and external stakeholders
to report potential non-compliance with the law or TGS’ Code of Conduct, including
modern slavery or human rights abuses. These mechanisms include the TGS hotline,
which allows for anonymous reporting, and TGS prohibits retaliation. No incidents
of child labor or forced labor were reported in 2021.
3.4 Looking Forward
Diversity and inclusion, along with training and development, are key areas of focus
for TGS in 2022. The Company will continue to monitor its workforce to understand
trends, look to improving retention among underrepresented groups and creating a
work environment focused on inclusion. TGS has created a standalone department in
2022 that will help employees across departments and offices receive development
and training programs tied to the new performance development competencies and
their roles within the organization.
TGS’ Health and Safety goals for 2022 include aiming for (i) zero Lost Time Incidents
(LTI) for both our field and office operations; (ii) a Total Recordable Injury Rate (TRIR,
per 1,000,000 man-hours) below 9.0, taking into account TGS offices and all field
operations, and (iii) a Motor Vehicle Accident Rate (MVAR, per 1 million miles) below
2.0 for land seismic operations. The Company will also continue with its update
of local emergency response plans and crisis management plans. Contractor
management on operations remains a key material issue and focus for TGS in 2022,
and the Company has incorporated key performance indicators related to this in its
2022 employee bonus program.
4 Communities
4.1 Community Engagement
TGS actively supports reputable charitable programs and organizations that
serve people in need in countries where TGS has offices or projects by providing
ongoing financial donations, as well as encouraging employees to donate their time
and energy to help those in society who are less fortunate. TGS is committed to
supporting local, nonprofit community organizations and charities that focus their
services on people and are dedicated to (i) providing access to healthcare, medical
services and helping to fight disease; (ii) assisting underprivileged, underrepresented
or at-risk communities or groups; (iii) providing humanitarian aid or disaster relief;
(iv) addressing environmental issues; or (v) promoting geophysics and geoscience
educational experiences to children.
In 2021, TGS focused its efforts on supporting the community in Houston and Texas
after a winter storm battered the state, overwhelming the power grid and forcing
millions to struggle through lack of electricity, water and adequate heat. TGS
organized a food drive and made a monetary donation to the Houston Food Bank, which
is America’s largest food bank in distribution, leading hunger relief in 18 southeast
Texas counties. Finally, as part of its commitment to support the communities
where it operates, TGS also worked closely with the National Oil Company of Liberia
(NOCAL) to renovate and rehabilitate the intensive care and trauma units of the John
F. Kennedy Memorial Centre in Liberia. The project was completed in May 2021 with
a dedication ceremony attended by the President of Liberia.
4.2 Innovation
TGS believes in collaboration with other geologists, geoscientists, data scientists and
engineers to encourage innovation within our industry and within the Company. In
2021, TGS’ capitalized research and development spending across the organization
corresponded to approximately 2.2% of net revenues (compared to 4.2% in 2020).
The decrease is due in part to higher IFRS revenues in 2021 and slightly lower spend.
TGS hosted, sponsored and/or presented virtually or in-person at over 34 geoscience
and engineer industry events designed to share advancements in imaging, data
analytics, geoscience, well data technologies and solutions for the energy transition
- notably carbon capture, geothermal and wind energy. Significant events included
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the National Association of Petroleum Engineers (NAPE) Summit, the combined
annual meeting and conference for the Society of Exploration Geophysicists (SEG)
and American Association of Petroleum Geologist (AAPG), and the European
Association of Geoscientists and Engineers (EAGE) Annual Meeting. TGS presented
56 technical papers (compared to 32 papers in 2020) at conferences and published
in other industry publications during 2021, covering topics relevant to the industry,
including key developments in acquisition and imaging technologies and the use of
these technologies in different basins or regions and for the energy transition. TGS
works with academia and universities around the world to provide data to further
their research; and in 2021, TGS supported research projects and consortia at the
Imperial College London, Memorial University of Newfoundland, Colorado School of
Mines, Oklahoma State University, University of Louisiana at Lafayette, Heriot-Watt,
University of Houston, Royal Holloway and Bedford New College, Oxford University,
the University of Oslo and the University of Bergen.
Additionally, in conjunction with our partners CGG and PGS, TGS launched a unified
ecosystem for accessing multi-client seismic data across multiple vendors called
Versal. Versal is an independent, secure, cloud-based ecosystem that allows clients
easy access to all their data and entitlements in one place. It will improve decision-
making by reducing uncertainty and provide access to over 70% of the seismic multi-
client market through a single vendor-neutral system.
5 About the Report, Data Summary and Index
This Sustainability Report communicates to our investors, customers, suppliers and
other stakeholders how TGS incorporates sustainable practices into our operations
and strategy. It is the opinion of the Board of Directors that this report complies
with Norwegian statutory requirements for annual reporting. The remainder of
the annual report includes additional information on TGS’ business, financial and
operation performance, shareholder information and corporate governance.
EU Taxonomy. In 2021, TGS conducted an analysis of its operations and revenues
to assess whether any of its activities are considered eligible activities under the EU
Taxonomy Climate Delegated Act (EU) 2021/2139 (EU Taxonomy). TGS specifically
focused on whether any of its operations or revenue aligned with the screening
criteria for climate change mitigation and climate change adaptation as defined by the
EU Taxonomy. At this time, TGS does not have any activities that meet the screening
criteria, and thus has no revenue, operational expenditures or capital expenditures
to report under the Taxonomy. However, TGS will update its analysis in 2022 as
the Company continues to expand and diversify its offerings into renewable energy
sources and to find ways its products and services can support our customers’
energy transition efforts.
Sustainability Standards. TGS uses key sustainability frameworks to guide our non-
financial disclosures, including the Global Reporting Initiative (GRI), Sustainability
Accounting Standards Board Standards (SASB), Task Force on Climate-Related
Financial Disclosures (TCFD) Recommendations, UN Sustainable Development
Goals, UN Guiding Principles on Business and Human Rights Reporting Framework,
IPIECA and the World Economic Forum core set of ESG metrics. We view this
report to be our Communication on Progress to the United Nations (UN) and this
report identifies actions taken by TGS to specifically address the UN Sustainable
Development Goals material to our operations. We also engage with several third-
party firms that collect and report on ESG performance including Bloomberg, CDP,
S&P Global’s CSA, Sustainalytics, ISS ESG and MSCI ESG.
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Category Topic Metric Reporting Standard (SASB, GRI, UN SDG) Section Number
Governance Materiality List material topics and process followed to determine material topics GRI 3-1, GRI 3-2(a) Section 1.3
Governance Risk Management
Description of management systems used to identify and mitigate
catastrophic and tail-end risks
EM-SV-540a.1 Section 1.2
Governance Stakeholder Engagement Describe approach to engaging with stakeholders GRI 2-29 Section 1.3
Governance Business Ethics Reporting mechanism and number of matters reported in 2021 GRI 2-26, GRI 2-27 Section 1.6
Governance Business Ethics
Amount of net revenue in countries that have the 20 lowest rankings in
Tranparency International's Corruption Perception Index
EM-SV-510a.1 Section 1.7
Governance Business Ethics
Description of the management system for prevention of corruption and
bribery throughout the value chain
EM-SV-510a.2, GRI 205-1(b) Section 1.7
Governance Business Ethics
Number of employees and third parties who have received training on TGS'
Code of Conduct and anticorruption policies and procedures
GRI 205-2 Sections 1.6 and 1.7
Governance Business Ethics Confirmed incidents of corruption GRI 205-3 Section 1.7
Governance Membership Organizations
Report industry and membership organizations in which the company
participates in a significant role
GRI 2-28 Section 1.3
Governance Tax
Approach to tax, governance, control and risk management, and country-by-
country report of tax
GRI 207-1, GRI 207-2, GRI 207-4 Section 1.9
Environmental Affordable & Clean Energy Efforts related to advancements in renewable energy SDG 7 Section 2.1
Environmental Ecological Impact
Discussion of strategy or plan to address risks and oportunities related to
ecological impacts from core activities
EM-SV-160a.2, GRI 304-2, SDG 14, SDG 15 Sections 2.3 and 2.4
Environmental Climate Impact
Discussion of strategy or plans to address air emissions-related risks,
opportunities and impacts
EM-SV-110a.2, SDG 13 Section 2.2
Environmental Climate Impact Scope 1, Scope 2 and Scope 3 emissions and targets
GRI 305-1, GRI 305-2, GRI 305-3, GRI 305-4, GRI 305-5, GRI
305-7, SDG 13
Section 2.2
Social New Employee Hire and Turnover Report of new hires and employee turnover GRI 401-1 Section 3.1.1
Social Collective Bargaining Agreements Percentage of total employees covered by collective bargaining agreements GRI 2-30(a) Section 3.1.1
Social Workforce Diversity Percentage of workforce by age, gender, tenure, and race (for US employees) GRI 405-1 Section 3.1.1
Social Gender Diversity Proportion of women in managerial positions SDG 5 Section 3.1.1
Social Compensation
Ratio of total annual compensation of CEO to median annual total
compensation and wage levels
GRI 2-21(a) Section 3.1.3
Social Health & Safety Description of health and safety management systems GRI 403-1, EM-SV-320a.2 Section 3.2
Social Health & Safety Hazard identification, risk assessment and incident investigation GRI 403-2 Section 3.2
Social Health & Safety
Worker participation, training and promotion of health and safety within the
workforce
GRI 403-5, GRI 403-6 Section 3.2
Social Health & Safety Work-related injury and illness statistics GRI 403-9, EM-SV-320a.1 Section 3.2.3
Social Training & Development
Average hours of training per year per employee and programs for upgrading
employees skills and development
GRI 404-1, GRI 404-2 Section 3.1.2
Social Human Rights
Description of human rights and prevention of modern slavery including
number of incidents of forced or child labor
GRI 409-1, SDG 8 Section 3.3
Social Innovation
Percentage of research and development expenditure as a proportion of
revenue
SDG 9 Section 4.2
* TGS does not operate wells or drills, nor do we engage in operations related to hydraulic fracturing or drilling. Therefore, the following SASB metrics within Oil & Gas - Services are not material or relevant to our operations or the
services we provide: EM-SV-110a.3 (percentage of engines that meet Tier 4 compliance for non-road diesel engine emissions); EMV-SV-140a.1 and a.2 (water consumption in operations providing hydraulic fracturing, completion, drilling
and/or water management services); EM-SV-150a.1 and a.2 (volume of hydraulic fracturing fluid used, percentage hazardous; strategy or plans to address chemical-related risks, opportunities and impacts); EM-SV-160a.1 (average
disturbed acre per (i) oil and (ii) gas well site); EM-SV-000A (number of active rig sites); EM-SV-000.B (number of active well sites); EM-SV-000.C (total amount of drilling performed)
125
KPMG AS
Sørkedalsveien 6
Postboks 7000 Majorstuen
0306 Oslo
Telephone
+47 45 40 40 63
Fax
Internet
www.kpmg.no
Enterprise
935 174 627 MVA
To the readers of TGS ASA’s Sustainability Reporting 2021
Independent auditor’s assurance report
We have been engaged by the management of TGS ASA ('TGS') to provide limited assurance in
respect of the sustainability reporting in the Annual Report of TGS. Included in the scope are the
following sections: Commitment to Sustainability, Environment, People, Communities and Data
Summary & Index (hereafter sustainability reporting 2021). The scope excludes future events or the
achievability of the objectives, targets and expectations of TGS and information contained in
webpages referred to in the sustainability reporting 2021 unless specified in this report.
Our conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusions.
Based on the limited assurance procedures performed and the evidence obtained, as described
below, nothing has come to our attention, to indicate that the sustainability reporting 2021 is not
presented, in all material respects, in accordance with the reporting criteria as defined by TGS in
section 5 of the sustainability report.
Management of TGS’ responsibility
The management of TGS is responsible for the preparation and presentation of the sustainability
reporting 2021 in accordance with the reporting criteria as defined by TGS in section 5 of the
sustainability report. It is important to view the information in the sustainability reporting 2021 in the
context of these criteria.
These responsibilities include establishing such internal controls as management determines are
necessary to enable the preparation of the information in the sustainability reporting 2021 that are free
from material misstatement, whether due to fraud or error.
Our responsibility
Our responsibility is to provide a limited assurance conclusion on TGS’ preparation and presentation
of the sustainability reporting 2021.
We conducted our engagement in accordance with the International Standard for Assurance
Engagements (ISAE 3000 revised): "Assurance Engagements other than Audits or Reviews of
Historical Financial Information", issued by the International Auditing and Assurance Standards Board.
ISAE 3000 requires that we plan and perform the engagement to obtain limited assurance about
whether the information in the sustainability reporting 2021 is free from material misstatement.
The firm applies International Standard on Quality Control 1 and accordingly maintains a
comprehensive system of quality control including documented policies and procedures regarding
TGS ASA
2
compliance with ethical requirements, professional standards and applicable legal and regulatory
requirements.
We have complied with the independence and other ethical requirements of the Code of Ethics for
Professional Accountants issued by the International Ethics Standards Board for Accountants, which
is founded on fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behavior.
Limited assurance of the sustainability reporting 2021
The procedures selected depend on our understanding of the sustainability reporting and other
engagement circumstances, and our consideration of areas where material misstatements are likely to
arise. Our procedures for limited assurance on the sustainability reporting 2021 included, amongst
others:
• A risk analysis, including media search, to identify relevant sustainability issues for TGS in the
reporting period;
• Interviews with senior management and relevant staff at corporate level concerning
sustainability strategy and policies for material issues, and the implementation of these across
the business;
• Inquiries to management to gain an understanding of TGS’ processes for determining material
issues for key stakeholder groups;
• Reviewing relevant internal and external documentation, on a limited test basis, in order to
determine the reliability of the sustainability reporting 2021;
• Reviewing the sustainability reporting 2021 to determine whether there are any material
misstatements of fact or material inconsistencies based on our understanding obtained
through our assurance engagement.
• Involvement together with the financial audit team to ensure a coherent approach.
The procedures performed in a limited assurance engagement vary in nature and timing from, and are
less in extent than for, a reasonable assurance engagement, and consequently the level of assurance
obtained in a limited assurance engagement is substantially lower than the assurance that would have
been obtained had a reasonable assurance engagement been performed.
Purpose of our report
In accordance with the terms of our engagement, this assurance report has been prepared for TGS for
the purpose of assisting the management in determining whether TGS’ limited assurance
sustainability information is prepared and presented in accordance with the reporting criteria as
defined by TGS in section 5 of the sustainability report and for no other purpose or in any other
context.
Oslo, 31 March 2022
KPMG AS
Julie Berg
State Authorized Public Accountant
TGS Offices
Norway
Corporate Headquarters
Askekroken 11,
Oslo, 0277, Norway
Tel: +47 22 55 04 00
Fax: +1 713 334 3308
Australia
Ground Floor, 1110 Hay Street
West Perth, WA, 6005, Australia
Tel: +61 8 9480 0000
Fax: +61 8 9321 5312
UK
Dukes Court, Duke Street
Woking, GU21 5BH, UK
Tel: +44 (0) 1483 730201
Fax: +44 (0) 1483 762620
Canada
2100, 250 5
th
Street SW
Calgary, Alberta, T2P OR4
Canada
Tel: +1 403 781 1700
Fax: +1 403 781 1710
Brazil
Av. Presidente Wilson No. 231
14o.Andar, Sala 1404
Centro, Rio de Janeiro,
CEP 20030-021, Brazil
Tel: +55 21 3995 3328
USA
Operational Headquarters
10451 Clay Road
Houston, Texas 77041, USA
Tel: +1 713 860 2100
Fax: +1 713 334 3308