Tgs Nopec Geophysical Company ASA Preliminary Q4 2015 Operating Revenues and Financial Guidance for 2016 Call
Jan 07, 2016 AM EST
TGS.OL - TGS NOPEC Geophysical Company ASA
Tgs Nopec Geophysical Company ASA Preliminary Q4 2015 Operating Revenues and Financial Guidance for 2016 Call
Jan 07, 2016 / 02:00PM GMT
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Corporate Participants
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* Robert Hobbs
TGS-NOPEC Geophysical Company ASA - CEO
* Sven Borre Larsen
TGS-NOPEC Geophysical Company ASA - CFO
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Conference Call Participants
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* Rahul Bhat
J.P. Morgan - Analyst
* Hayley Meyer (ph)
Barclays Capital - Analyst
* John Olaisen
ABG - Analyst
* Rob Pulleyn
Morgan Stanley - Analyst
* Christopher Mollerlokken
SpareBank 1 Markets - Analyst
* Amy Wong
UBS - Analyst
* Jon Masdal
DnBNor Markets - Analyst
* Charles Stone
Alfreton Capital Management - Analyst
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Presentation
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Operator [1]
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Good day and welcome to the TGS 2016 Guidance Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Robert Hobbs. Please go ahead.
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [2]
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Thanks, Roland. Hello and welcome to TGS' 2016 guidance conference call. My name is Robert Hobbs, I'm CEO of TGS and joining me today on the call is Sven Borre Larsen, our Chief Financial Officer.
This morning, we posted a press release, providing both an update on Q4 2015 and our 2016 guidance. We've also posted a new investor presentation on our website, which provides a useful summary, as well as our 2016 scheduled announced projects. I hope you've had an opportunity to review the press release. And I'll now just give a brief summary of the main points before opening the call to your questions.
Based on our preliminary review of sales, we estimate our Q4 2015 net operating revenues to be approximately $131 million, down 56% from Q4 of 2014. Our expected 2015 full year revenues will be. therefore. approximately $612 million, down 33% from 2014. Based on a preliminary view of investments, we estimate Q4 2015 operational multi-client investments of approximately $84 million, to reach full year investments of $497 million versus $602 million in 2014.
Our higher investment in 2015 is indicative of the attractive opportunities that we saw for countercyclical investment. Despite this increase in investment, we closed the year with a very healthy balance sheet that includes a cash balance of $162 million and no interest-bearing debt. A complete release of TGS' Q4 2015 earnings and full year 2015 will be published on February 2.
Looking ahead to 2016, analysts are estimating a reduction in E&P spending of approximately 15% to 20% and that's on top of an approximate 25% reduction in 2015. There is therefore a higher uncertainty than usual with respect to late sales, which are normally heavily dependent on oil companies E&P spending.
TGS expects 2016 late sales to move in line with or slightly better than general E&P spending trends. During such challenging periods, it's critical to TGS stays true to its strategic objectives and maintains its focus and business model. While we like to invest counter cyclically, our overriding priority is project quality. TGS will only invest in projects that meet our economic hurdles, which include a necessary level of pre-funding, which will vary, depending on the level of risk we see in a particular project.
TGS' 2016 operational multi-client investments will be reduced by more than 50% compared to 2015. This is partly a result of lower cost of acquiring seismic data, as average vessel day rates will be substantially lower than in 2015. However, we'll also be reducing the overall activity level, as oil companies have become less willing to pre-fund new surveys. This lower investment, combined with the significant reduction in operating expenses should positively impact free cash flow in 2016, helping to drive value for our shareholders, despite the challenging market.
Our pipeline of announced projects is dominated by our activity in Mexico, which represents a very exciting opportunity for TGS. We've already acquired almost 50% of Gigante, our 186,000 kilometer regional 2D seismic multi-client survey. We expect to have four 2D seismic vessels active on this project until late summer of 2016. In addition, TGS will continue acquisition of the multibeam and coring project in Mexico with the associated geochemical analysis. This is a very complementary product of the Gigante regional seismic survey, providing E&P companies with a critical tool for early stage exploration.
Outside of Mexico, we plan to return to the Northeast Greenland to complete our multi-year, multi-client 2D seismic program there. 1,800 km out of 14,500 km is remaining to be acquired in 2016. This activity will take place in arctic conditions requiring the use of an icebreaker vessel and drawing upon TGS' considerable expertise at planning surveys in extreme environments. In addition to the seismic business, TGS plans to continue growing its well data library and expects to benefit from its complementary products, such as Digital Petrodata GIS information, interpretation reports and basin models.
I also want to highlight that as we announced on December 4, 2015, the accounting practice with respect to amortization of the multi-client library will change with effect from January 1, 2016. In accordance with the new policy, TGS estimates multi-client amortization of close to $290 million in 2016. An expected impact of the new accounting practice will be more predictable and less volatile quarterly normal amortization of the data library.
I'll finish the call, or I'll finish this comment with our 2016 guidance, which is as follows: TGS expects multi-client investments of approximately $220 million and the multi-client investments are expected to be pre-funded between 45% and 50%.
At this time, we'll open the call to your questions. I'll now turn it over to Roland to queue the questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Rahul Bhat, J.P. Morgan.
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Rahul Bhat, J.P. Morgan - Analyst [2]
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Not a great start to the new year, I guess. I just had a few quick questions for you. First is on the CapEx number, it's a significant decline and it's larger than what most were expecting. I just wanted to know, is it because you went around talking to clients during Q4, and that was a lot -- their tone was lot weaker than you expected, or is it that you've changed your expectation of the duration of the down cycle in the oil price?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [3]
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No, I mean, this wasn't -- the reduction in investments is a function of, sort of, our bottom up approach to building a budget and something we've been working on since September of last year. So it's not -- this hasn't been a -- the recognition that we need to pull back our investments in 2016, our activity level in 2016 is not something that's transpired over the past several weeks, that's something we recognized over several months that we were going to have to pull back our activity, in addition to the lower cost of acquisition, mind you. Part of the reason why we're reducing our investment level in 2016 is it costs us less to acquire the same amount of data. So there is that aspect, but then also we recognized, in our discussion with our customers, that they are not looking to pre-fund as much seismic going forward into 2016, similar to the impact that we've seen in the latter part of 2015 too. It's been very difficult to attract pre-funding commitments from energy companies.
And so I think our budgets for investments in 2016 sort of realistically reflect the demand for new seismic projects in the market today and we have -- we've also adjusted for that by taking a number of cost-cutting moves. We've resized our organization to fit this lowered investment level and we took that measure as early as -- you'll recall Rahul, in second week of November I think -- third week of November, November 16. And so it's been something that we've recognized that our activity level is going to be lower for a couple of months now.
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Rahul Bhat, J.P. Morgan - Analyst [4]
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And then you touched on this briefly on Q4. So this is the first time I've seen, I think, sequential decline in Q4 in a very long time, Q4 over Q3. And could you just touch briefly on what transpired over there? Was it that discussions, because I think when we last spoke during Q3 call you said discussions are still ongoing with customers and they are still -- that discussions have not reduced, but the number -- the revenue number has been quite low. So what -- where did things go wrong?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [5]
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Well, I think we're not -- we're actually not too far off of our annual guidance, we're at [$612 million]. We guided [$630 million]. So I think even -- I'm trying to think off my head here. But even if we had hit our guidance number smack on, it would not be a normal -- it would not be a normal Q4 for TGS. I think it just reflects the market that we're in right now. We don't see -- we normally see some seasonality in our revenues, were Q4 tends to be the highest revenue quarter for the Company and that's largely due to unspent budget money in energy companies and sort of a budget flush effect and we are certainly at that. We saw a couple of companies during the quarter have some year-end money, but the degree that we've seen in the past of sort of budget flush was just not there in 2015. And again, I think that was reflected even in our guidance to the market, so we've sort of expected this.
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Sven Borre Larsen, TGS-NOPEC Geophysical Company ASA - CFO [6]
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And also the sequential decline that you see is largely down to pre-funding revenue, which you can see from our vessel schedule that the activity level in Q4 is significantly lower than in Q3.
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Rahul Bhat, J.P. Morgan - Analyst [7]
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And just one last question if I may. On the amortization rate, and it was I think confusing enough as it is and with it being changed again, I think if I do the implied amortization rate of your amortization number, which as you know, the rough kind of revenue guidance that comes up to quite a high number, [60%, 65%] to 70%, in that range. So is that -- as in A, is that number going to be the new normal? And B, if not then what would -- is that the right way to look at it or is this not the right way to look at it now?
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Sven Borre Larsen, TGS-NOPEC Geophysical Company ASA - CFO [8]
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Now, with new amortization scheme, where we will do amortization as before, sales-based amortization in the work and in progress phase, but a straight-line amortization schedule in the late sales phase, after completion of the project. This means that amortization will be less dependent on sales, not completely independent, but much less dependent of sales. So the amortization rate will not be as relevant as a measure going forward as it has been in the past. But at the end of the day, we think the new amortization scheme will, over time, yield more or less the same results as the old one, but particularly in years with weak sales, you will see a little bit higher amortization than we would have had in the previous scheme. But in years with normal sales or high sales, the amortization will be more or less the same as before. But also bear in mind that the amortization will be more [linked] with the revenues. It will be more stable from quarter-to-quarter, which means that the operating results and the net results will be more volatile on a quarterly basis, but probably not so much on an annual basis.
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Operator [9]
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[Hayley Meyer], Barclays.
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Hayley Meyer, Barclays Capital - Analyst [10]
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Very quickly from me, can you comment on your dividend plans going forward? Obviously, your 2016 guidance implies a very high payout ratio. If you could maybe just give us some kind of sense on your commitment there. And then also if you could help us understand how your change in investment plans impacts your existing cost savings plan on the operating cost side, how should we be thinking about that? Thank you.
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [11]
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Yes, Hayley, our Board will obviously review our dividend plans for 2016 here in the next several weeks. We're going to come out with our Q4 earnings on February 2 and that will be the first quarterly payout of dividend for -- that will be announced for 2016. And you'll recall that that's a change from what we've done in the past. In the past, we've paid out an annual dividend in Q2. So we're going to be going to quarterly in 2016.
So the Board is obviously going to monitor the market and look at cash flow going forward in terms of setting that dividend. I think our Board certainly has the aspiration to maintain a healthy dividend and will be setting that amount in the next several weeks. And so, kind of stay tuned to that on February 2, and we'll be able to announce, at least the first quarter dividend. It is the ambition during the year to maintain that sort of payout level quarter by quarter through the year. So I think certainly on February 2 you'll get a flavor for what -- on an annualized basis what we believe the dividend payout will be in 2016.
In terms of the second question, when we went through our latest reorganization in mid-November, we were pretty far into our process of building a budget for 2016. We recognize that we would be less -- overall less active in terms of investment in 2016. So we have taking taken a pretty drastic or pretty complete reorganization of our business. In total, in 2015, we reduced our headcount by about 28%. And the last part of that or most of that was done in November. And it was certainly in concert with our view for what we would need in terms of manpower going into 2016 to fulfill the investment plans that we had. So we've gone from an headcount of 955 people in January to about 670 currently through the two reorganizations we did in 2015.
We're obviously very focused right now on costs, making sure that we have appropriate cost structure to fit the market challenges that we see right now. So, we're going to continue to monitor it very closely and take further actions if need be, but we're pretty happy right now with where we see our activity in 2016, we're pretty happy with what the organization looks like at this point.
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Operator [12]
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John Olaisen, ABG.
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John Olaisen, ABG - Analyst [13]
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A couple of questions really. First is on Q4, is it possible to give some indication of the split between late sales and pre-funding revenues in Q4?
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Sven Borre Larsen, TGS-NOPEC Geophysical Company ASA - CFO [14]
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We don't want to provide that split as of now. But as I said earlier, much of the decline compared to Q3 is down to pre-funding.
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John Olaisen, ABG - Analyst [15]
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Okay, rather than late sales, okay. And then for 2016, when I put all the numbers together and all the indications you've given, it seems to imply a fairly good free cash flow. Is that something -- is that correctly interpreted?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [16]
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I think certainly the lower investment obviously is going to support cash flow in 2016. And obviously, we don't guide on that specifically, but it should result in positive free cash flow development in 2016, I think is correct.
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John Olaisen, ABG - Analyst [17]
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And then I wonder, given that day rates are as low as they are and you repeated in the [call] that you wanted invest counter cyclical, and day rates now seem to be close to cash breakeven, why don't you take on more risk and increase investments early, you kept the investment less than you do, so invest more when it's possible?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [18]
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Well, I don't see us changing from that philosophy now. I think certainly in 2015 we invested counter cyclically by increasing our investments through the year. 2016, our philosophy hasn't appreciably changed, even with the 55% reduction in investment, but we also have to be realistic and we have to be a bit cautious John, because there's such lack of visibility of when the next side of the cycle is going to be. Obviously, if we knew what the other side of this down cycle, if we knew the timing of the other side of the down cycle, we might take a different approach to our investment plans right now, but we have to be a bit cautious. We have to focus on quality projects, which in most cases translates into adequate prefunding and it's just tough to get pre-funding right now.
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John Olaisen, ABG - Analyst [19]
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With your current cash position and the current CapEx level and all the guidance number, is that leaving you have some room for flexibility to increase multi-client investments or to acquire multi-client library as some of this transpires?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [20]
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I think certainly this part of the cycle is probably a time where there might be assets available at decent prices and I think you could probably assume that TGS would be a logical buyer if those assets were available. You'll recall, we do have a credit line that we've not drawn from, of $75 million, that we could draw from for M&A, for transactions like that and that would probably be a logical use of that credit line, in addition to cash flow. And, I think, given that we have such a large percentage of the $220 million that we're guiding for investments, is we have such a large percentage of that already committed with Mexico and Greenland, I think there is probably more upside to that investment figure in 2016 than probably downside. So we've not told our organization to stop trying to identify investment opportunities out of the guided investment level, we're encouraging them to work the market as much as they always have, for opportunities for us to invest more. And like we did in 2015, we will always -- if we can identify those opportunities we'll take into our Board and try to get those sanctioned from our Board. And so we'll treat it that way.
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John Olaisen, ABG - Analyst [21]
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And how much of the $220 million multi-client investments for 2016 has already been booked, and what's pre-funding level?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [22]
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Yes, somewhere around $160 million probably has already been committed to.
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John Olaisen, ABG - Analyst [23]
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And the pre-funding level for that?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [24]
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We're not communicating that.
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Operator [25]
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Christopher Mollerlokken, SB1.
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Christopher Mollerlokken, SpareBank 1 Markets - Analyst [26]
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Yes, good afternoon gentlemen. Thank you for taking my questions. Most of them have been answered already, but I have one remaining. Would you agree that you are reducing the investment level now also to preserve cash for the inorganic opportunities that might arise, given the weak market?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [27]
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No, I mean we -- in terms of inorganic investments, we sort of evaluate those in line with our organic investments. It's not -- we're not consciously sort of reducing organic investment to keep a war chest to the side to pick up assets. I would say, though, that we did enter into this credit facility that we entered into last year with the recognition that there could be some attractive assets available. So that's one sort of strategic move that we made to prepare for assets being available in this market, but I wouldn't say we have necessarily consciously prioritize M&A transactions over organic investments.
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Christopher Mollerlokken, SpareBank 1 Markets - Analyst [28]
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Looking on the vessel schedule you provide in the presentation published today, (inaudible) 2D multi-client investments, in addition to the Mexican coring program. Would you say it's fair to assume that the 2D activity as a percentage will be higher than what we've seen in the last couple of years from TGS this year?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [29]
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Yes, I mean the given the fact that we have so much committed of the $220 million, and as you've seen on the chart that it's pretty much all 2D that would probably be a fair statement.
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Operator [30]
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Rob Pulleyn, Morgan Stanley.
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Rob Pulleyn, Morgan Stanley - Analyst [31]
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So a few questions if I may. The first one regards your comments on vessel pricing. Just to clarify. So vessel pricing seems to have been falling for about two years. You guys kept your CapEx high to invest counter cyclically, which I think we all understand and now you cut the CapEx. But talking about vessel pricing falling again this year, what sort of quantum of further vessel pricing collapse do you expect in 2016 or is this reduction in your investment spend sort of somewhat catching up with the leading-edge events we've seen over the last couple of years? I've got a couple of other questions. But maybe if you take that one first, so I don't carry on too long.
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [32]
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So on our comments on vessel pricing today are more related to average vessel costs that were -- average dayrates we would be paying in 2016 versus 2015. Remember, in 2015, out of the $497 million of investments, we entered the year with about $300 million already locked in, it was pretty high percentage locked in. And that $300 million of investment was done off of vessel dayrates that we had negotiated in 2014, and in one case even 2013. So I think as was commented by another questioner in this Q&A today, we've probably been -- we've seen low dayrates for many months now and it's hard to see them going much lower in 2016 from where they've been the past few months. And so I think that our comments are based more on average dayrate that we pay in 2015 versus 2016, versus sort of an immediate dayrate.
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Rob Pulleyn, Morgan Stanley - Analyst [33]
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And just on your dividend, that's a follow-up from another question from earlier. In terms of -- when you look at the dividend, the cash flow and the balance sheet, from your perspective, does the dividend have to be entirely covered by free cash flow or are you prepared to burn some of the cash on the balance sheet in order to fulfill your dividend commitments? And also in terms of cash flow, could you maybe give us a bit of a steer as to how we should think about working cap at this point in the cycle, are receivables going to take longer to transfer into cash? Presumably the same will be the same for your payables to your own suppliers.
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Sven Borre Larsen, TGS-NOPEC Geophysical Company ASA - CFO [34]
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To take the last one first, we do not see any significant changes in days sales outstanding or anything like that. We don't see any trend shift there. With regards to dividend and how we think in terms of the balance sheet, I mean, we'd always like to keep a reasonable cash level on our balance sheet and what that cash level is will vary a little bit from situation to situation in a market with high activity level and high investments, we would require to, or we would keep a higher cash buffer. And in a market with lower investments, we could lower our cash buffer. And in our markets were we are lowering the cash buffer, we could of course allow dividend payments to be a bit higher than free cash flow. But, of course, over time we need to see free cash flow being higher than the dividend, of course.
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Rob Pulleyn, Morgan Stanley - Analyst [35]
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Okay I think that's clear. And we'll look forward to full year results as to what you are going to say about the dividend. And maybe just one very quick question. Could you give us a steer on the tax rate for next year? Obviously, given the reduction in activity, is it going to be vastly different to what we saw this year, this year being 2015, or something similar?
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Sven Borre Larsen, TGS-NOPEC Geophysical Company ASA - CFO [36]
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Now, I don't think the tax rate, sort of in terms of percentage in the P&L won't be too different. But in terms of cash tax payments that will obviously be lower than we have seen previously for different reasons. One of the reasons is the impairments that we have warned about in -- that would be charged to the Q4 accounts.
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Operator [37]
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Amy Wong, UBS.
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Amy Wong, UBS - Analyst [38]
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I just had one question, just to get a bit more color on your comment about oil companies unwilling or less willing to put up pre-funding. Is that more in terms of certain geographies or do you find kind of overall, across all types of pre-funding -- all types of projects out there, the overall level of pre-funding just happens to be a bit lower?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [39]
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Well, I think there is less interest. I mean oil companies, they've reduced their exploration activity significantly globally around the world. So, in general, there's -- in general, less demand for seismic data, and that translates in higher difficulty to get pre-funding commitments. There are certain projects in certain regions that are more attractive to oil companies. And so, for example, our Mexico project, we've been very pleased with oil company interest in our Mexico data and so we were happy to reach our pre-funding targets there. Northwest Greenland -- or Northeast Greenland, to cite the fact that it's a region, is very frontier and covered by ice most of the year. We've had good interest in that data set. So, I think you can find certain projects in certain regions where oil companies feel like they have to maintain a certain level of exploration activity. But overall, globally, oil companies have just dramatically pulled back from exploration and that translates into lower seismic demand.
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Amy Wong, UBS - Analyst [40]
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And perhaps just let me follow up, like if we were to go like certain new provinces, like you kind of mentioned Greenland was still quite frontier, but are there certain areas, such as maybe Africa, which maybe previously you thought oil companies would have been quite lukewarm about, but because of the low oil prices, they're just not willing to commit to any kind of exploration in newer provinces?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [41]
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I think it depends upon -- a lot of it depends upon contractual terms. I think they're probably basins in regions around the world where the governments, the host governments have not really kept up with the oil price, and those would certainly be areas or regions in which oil companies would -- in this market would probably shy away from those areas and not be particularly interested in acquiring new projects and buying from data libraries in those regions. I think in -- I think statements we've made about our 2016 plan, sticking to more proven areas is sort of a reflection of where oil company interest is right now. In general, there's probably less interest in investing in regions that have high geologic risk, in combination with high political risk and poor contractual terms. So I think there are regions in the world and host governments and hydrocarbon basins that really -- they're probably areas that really need to pick up and really need to catch up with where the market is and where the oil price is right now. And one would hope that that would occur in the next 12 months or so.
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Operator [42]
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(Operator Instruction) [Heida], Private Investor.
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Unidentified Participant [43]
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I only have one question for you. Are you looking to call the US side option in the Gulf of Mexico as things stand now, and if so when do you expect that to begin with the SeaBird Exploration of the counter party?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [44]
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Not quite sure about the question. On the Mexican side of the Gulf of Mexico, we are chartering SeaBird vessels to acquire data for us there. We have acquired, I guess, late in 2014, we started acquisition of data on the US side of the Gulf of Mexico to tie into that Mexico program. And we have in the past been heavy investors of data on the US side of the Gulf of Mexico. And if opportunities present itself, we'll go back to investing more in the US side, but right now we haven't announced any new projects on the US side for 2016.
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Operator [45]
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(Operator Instructions) Jon Masdal, DnB.
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Jon Masdal, DnBNor Markets - Analyst [46]
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Just a quick question, just in light of the guidance that you came out with now. How do you think your market share will develop, both in terms of investments and revenues going forward?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [47]
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Certainly, we've seen an increase in our market share over the past two years now. And I think in terms of traditional multi-client projects, it's our ambition to continue to increase that market share from a revenue perspective. I can't address from an investment perspective, because I don't know what our competitors are going to be announcing for their 2016 multi-client investment plans for the most part. And that really doesn't concern us all that much, to be honest with you. We are going to be focused on project quality, rather than just trying to invest a specific amount of money. But certainly it's our ambition to continue to increase our revenue market share in the multi-client space and I think we continue to have opportunities to do that, even in this market.
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Operator [48]
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(Operator Instructions) Charles Stone, Alfreton Capital.
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Charles Stone, Alfreton Capital Management - Analyst [49]
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I was hoping you could elaborate a little bit more on why you don't expect current vessel rates to fall any further?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [50]
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I think it's our sense Charles that right now a lot of these vessel operators are operating at or even below cash breakeven. And we've seen one of our suppliers go bankrupt in the past couple of weeks. And one of our suppliers announced a pretty significant reorganization this morning. It's hard to imagine that dayrates are going to go much lower. Also, what you're seeing is there's a pretty disciplined reaction, I think, to the market, in that there is a lot of vessel supply going out of the market being stacked right now and I think that's a healthy response to a very challenging market. So it just seems difficult to imagine any significant decreases going forward.
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Charles Stone, Alfreton Capital Management - Analyst [51]
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Do you have any other levers you can pull to lock in these low prices for a longer period of time or take advantage of this weak situation that your suppliers find something?
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [52]
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Well, always helps to -- longer-term commitments from TGS always is a benefit to TGS. I mean we always get -- whether it's dayrates or whether it's contractual terms, and I will point out Charles in this discussion, you know, it's not only -- we haven't only seen a substantial decrease in dayrates over the past couple of years, but we've also seen a substantial improvement of contractual terms from the standpoint of, now most contracts, most charters that we're entering into are turnkey contracts versus dayrate contracts. And that allows us to push a lot more of our risk off to the vessel supplier and translates into lower dayrates for us. But -- yes, so I think, we are -- any kind of longer-term commitment that we can give one -- our vessels suppliers that typically is a benefit to us and a benefit to them too. However, in this market that we're in right now -- well, I would say that in the past if we've taken a longer-term commitment on a vessel, it's usually been because you're in a tighter vessel market where you are more concerned about getting vessel capacity going forward. And right now that's not a concern obviously. So there's not a lot of need for us to take on a longer-term contract.
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Operator [53]
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(Operator Instructions) We have no further questions over the telephone at this time.
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Robert Hobbs, TGS-NOPEC Geophysical Company ASA - CEO [54]
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Great. Thanks, Roland. Thanks everybody for joining us on the call. We look forward to coming back to you on February 2 with our Q4 earnings release and look forward to continuing to navigate the challenging market we're in right now and continuing to perform for our shareholders. I think there are some -- despite the challenging market, I think we see a lot of opportunities going forward that are available to us, given our balance sheet strength. And I think we're excited to see -- to try to lock in those opportunities going forward. So thank you very much.
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Operator [55]
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Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.
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contemplated in the forward-looking statements will be realized.
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