TGS, PGS combine to form full-service energy data company
(WO) – TGS ASA and PGS ASA announced that they have agreed on the principal terms of a combination of TGS and PGS to create a strong, full-service energy data company.
The transaction establishes the combined company as a full-service geophysical data company with a strong offering in all segments, including multi-client data, streamer data acquisition, ocean bottom node (‘OBN') data acquisition, imaging and new energy data. The transaction helps mitigate supply chain risks and will add further to economies of scale and efficiency, enhancing the value offered to clients.
Following the completion of the transaction, TGS and PGS shareholders will own approximately 2/3 and 1/3 of the combined company, respectively, based on the share capital of each of the companies as of Sep. 15, 2023.
The transaction is supported by the Board of Directors of both companies. Kristian Johansen and Sven Børre Larsen will continue as CEO and CFO post transaction.
In multi-client, the combined company will offer customers a global seismic library with data from all active basins in both the western and eastern hemispheres.
In data acquisition, the combined company will be a substantial player globally with a strong operational track record.
For streamer acquisition, it will hold an operational fleet of seven 3D data acquisition vessels, and for Ocean Bottom Node (OBN) acquisition, the combined company will benefit from around 30,000 mid and deepwater nodes.
Within imaging, the combined company will offer a strong service to in-house and external customers integrating on-premises and cloud based high-performing computing services.
In addition, the combined company sees significant growth opportunities in new energy with complementary technology offerings for Carbon Capture and Storage (CCS) and offshore wind.
The combination will benefit from cost synergies with a preliminary estimate to be above $50 million annually.
“Our clients will benefit from scale, a unique technology portfolio and premier service quality. Bringing together two distinct, yet complementary, companies position us even better for a continued upcycle in the energy sector", stated Kristian Johansen, Chief Executive Officer of TGS.
"The seismic industry is changing, whereby production seismic is becoming increasingly important, alongside the traditional exploration seismic. By combining TGS and PGS’ complementary resources, we create a fully integrated geophysical service provider well positioned to generate significant value for all stakeholders" stated Rune Olav Pedersen, President & Chief Executive Officer of PGS.
Financing. The combined company will have a combined fully diluted market cap of approx. $2,616 million and a net interest-bearing debt (NIBD) of $649 million (2Q 2023), corresponding to a market cap:NIBD ratio of 80:20.
The combined company will seek to optimize its capital structure, efficiency and cost based on the strength of the combined balance sheets and cash flows. As such, the combined company plans to refinance PGS’ $450 million senior notes and the term loans on first call opportunity. As an overriding principle, TGS will continue to maintain a conservative balance sheet profile.
Key terms of the merger. Based on a TGS share price as of close Sep. 15, 2023, of NOK 147.50, the exchange ratio of 0.06829 and 925,321,732 fully diluted PGS shares, the equity value of PGS is NOK 9,321 million, corresponding to a price per share of NOK 10.073. This represents a premium of 20.7% to PGS closing price on Sep. 15, 2023, and an exchange ratio premium of 22.4%, 40.8% and 41.6% based on 30 days, 3 month and 6 months VWAP.
