barclays’ ceo energy conference 2020 reports/company presentations/t… · bbl/d in 2040. m...

Kristian JohansenCEOSeptember 2020

Barclays’ CEO Energy Conference 2020

Forward-looking statements

2

All statements in this presentation other than statements of historical fact, are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. These factors include TGS’ reliance on a cyclical industry and principal customers, TGS’ ability to continue to expand markets for licensing of data, and TGS’ ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected in the forward-looking statements. TGS undertakes no responsibility or obligation to update or alter forward-looking statements for any reason.

©2018 TGS-NOPEC Geophysical Company ASA. All rights reserved

Highlights

©TGS-NOPEC Geophysical Company ASA. All rights reserved 3

Challenging market conditions near-term

Long-term drivers intact – increased exploration efforts needed to meet future oil and gas demand

Structural changes to the industry needed

TGS continuing to invest counter-cyclically in key areas

Energy transition creates opportunities for TGS

Challenging market in the near-term

• COVID-19 and sharp oil price drop have led to deep cuts in 2020 E&P spending budgets

• On average E&P companies has revised their 2020 budgets down by 25%* leading to a 26%* reduction relative to 2019

• Discretionary (uncommitted) spending down significantly more than overall spending

• Most planned near-term seismic purchases put on hold


-49%

-37%

-34%

-33%

-30%

-29%

-27%

-26%

-26%

-25%

-23%

-20%

-20%

-20%

-20%

-19%

-11%

-60%-50%-40%-30%-20%-10%0%

Occidental

Apache

Murphy Oil

Exxon

Kosmos Energy

Noble Energy

Hess Corp.

Suncor

Eni

BP

Talos

Total

Shell

Chevron

Aker BP

Equinor

ConocoPhillips

Change from original 2020 budget

2020 capex revisions selected E&P companies

Average 25%*

* Based on public announcements from 60 E&P companies since 10 March 2020

Source: ABG

A more balanced oil market going forward

• A growing number of countries are slowly getting back to normal following the lock-downs in the initial phase of the COVID-19 crisis

• Global oil demand has started to recover following the sharp drop seen in Q1 and Q2• Global oil supply has been scaled down significantly and is expected to recover at a slower pace than demand

resulting in a more balanced market going forward


80

85

90

95

100

105

110

Mbb

l/day

World liquid fuels production and consumption

Production Consumption

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Cha

nge

mbb

l/day

World liquid fules implied stock build/(draw)

Source: EIA Short-Term Energy Outlook July 2020

More oil and gas resources needed to meet future demand

• Average decline rates developed supply at 8% p.a. for oil and 6% p.a. for gas

• Even when taking the most optimistic energy transition scenarios into account substantial amounts of new oil and gas production are required for meeting demand and compensating for decline


Global supply and demand scenarios to 2040

0

20

40

60

80

100

120

M b

bl/d

Oil

Minimum supply from onstream fields

Minimum supply gap to meet 2°C scenario2

Additional supply gap to base case scenario1

50-95mbbl/d in 2040

0

20

40

60

80

100

120

M b

oe/d

Gas

Minimum supply from onstream fields

Minimum supply gap to meet 2°C scenario2

Additional supply gap to base case scenario1 35-65m

boe/d in 2040

1. The energy transition outlook (ETO) represents WoodMac’s base case view of the energy world, broadly consistent with a 3°C global warming view2. The accelerated energy transition 2-degree scenario (AET-2) represents how the world can augment efforts towards deep decarbonization with a credible pathway to reach a 2°C global warming trajectory by 2050.

Source: Wood Macenzie

Exploration to play an important role in closing the supply gap

• Explorers, on average, tend to find better resources through exploration than the legacy assets that still await development

• I.e. exploration for new resources is a competitive alternative to developing already discovered resources


0 5 10 15 20

Proven developed oil

Onstream oil incremental

Oil under development

Pre-FID oil

Oil exploration

Proven developed gas

Onstream gas incremental

Gas under development

Pre-FID gas

Gas exploration

Average point-forward cost USD/boe

Point-forward costs of oil and gas supply by development status

Source: Wood Macenzie

Industry not creating long-term value – structural changes neededTGS a notable exception


0

500

1,000

1,500

2,000

2,500

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Jun-

10

Jun-

11

Jun-

12

Jun-

13

Jun-

14

Jun-

15

Jun-

16

Jun-

17

Jun-

18

Jun-

19

Jun-

20

Total Shareholder ReturnPhiladelphia Oil Service Index (OSX) / TGS

OSX TGS USD - rebased

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Return on Capital Employed1

Oil Service2 / Seismic3 / TGS

Oil service Seismic TGS

Avr. 10% p.a

Avr. -5% p.a

Avr. 31%Avr. 7%Avr. 9%

1. EBIT ex. impairments / (Net Debt + Equity)2. 37 international oil service companies across a variety of different sub-segments3. PGS, CGG, Polarcus, Dolphin, Spectrum, Seabird Source: Bloomberg, Factset, ABG

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Declining Industry Concentration Chasing Returns

Return on Capital Concentration*

Structural changes needed


• This last decade the number of OFS companies has grown by 14%

• There are only 2.5% fewer companies today than there were at the 2015 peak

• Too many companies chasing market share to compensate for stagnating organic growth – industry returns suffering

Source: Evercore ISI Source: Evercore ISI

280283

294

303

311

326 328 326323 321 320

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

No. of firms operating with Oilfield Services

* Herfindahl-Hirschman Index (HHI) indexed to 2008

Counter-cyclical investments key to long-term value creationContinuing to invest in selected areas despite difficult market conditions


Continuing to invest in the South Atlantic basin

Continuing to invest in next generation data (OBN) in US GoM

Extending Atlantic margin portfolio

Curbing onshore investments due to market conditions

2020 multi-client investments expected to be approximately USD 325 million

Key R&D Achievements


Dynamic Matching Fullwave Inversion

• Dynamic Matching Fullwave Inversion uses seismic reflection and refraction information to automatically update the velocity model

• Enabling high-quality images in geologically complicated areas

• Reduce imaging cycle time and interpretation ambiguity – leading to less risk

SaltNet

• SaltNet is a software tool which allows interpreters to integrate machine learning to generate quality interpretations in a forward-thinking manner

• Cutting-edge tool and a step towards drastically reducing cycle time in seismic processing.

Well Performance

• Well Intel is a unique collection of insights, forecasts and analysis derived from the industry’s most extensive subsurface data library

• Find Well Intel series at https://info.tgs.com/well-intel

https://info.tgs.com/well-intel

Moving towards a fully integrated data companyEnergy transition offers opportunities for expansion into new areas

• Technology offers opportunities for expanding through the value chain from “data” towards “decision”

• Potential for duplicating business model into other industries with extensive data needs

• Renewables• Carbon capture and storage• Offshore mineral exploration

• Applying core competencies for a wider purpose

• G&G• Data processing• Data collection and management• Data analytics• HPC


Summary


Challenging market conditions near-term

Long-term drivers intact – increased exploration efforts needed to meet future oil and gas demand

Structural changes to the industry needed

TGS continuing to invest counter-cyclically in key areas

Energy transition creates opportunities for TGS

Thank you

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