TGS ASA

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00:02 Welcome to the presentation of TGS Q3 Financial Results for twenty twenty one. My name is Kristian Johansen, and with me today we have Sven Borre Larsen, our CFO, who is going to cover the financial section of the presentation.

And just a reminder for those of you who are following this session on webcast, you can post your questions during the presentation, and we will respond to that when we're finished with the presentation today. 00:32 This is a very special day for us at TGS, and it is a special day because it's the first physical presentation we have in Oslo since the Q4 presentation of twenty nineteen, which we held in February twenty twenty.

Since then, a lot of has changed. But at the time, we presented the best result in the history of TGS and obviously, we're not pleased with the results of Q3 of twenty twenty one, but the fact that we are here physically means that the world is moving on.

We've passed definitely the worst part of COVID or the pandemic and we are hopefully entering into a better market also for exploration spending. 01:13 We've already seen some early signs of what happened when you accelerate the energy transition too quickly.

The world's spare oil capacity is falling and as a result, we see early signs of energy shortage, which means that prices go up and consumers get unhappy. So the only solution to that is to invest more in production and eventually also invest more in exploration resources.

So the energy transition is on us, and we're in the middle of it, but it's going to take long time, it's going to take decades, and perhaps even generations. And in the meantime, oil and gas will play a very important role, and that's why we're still quite optimistic on the future of TGS.

01:57 If we move to the forward-looking statements and the presentation or the highlights of the quarter. We had net revenues of sixty one million dollars in Q3.

Late sales of thirty three million dollars, and pre-funding of twenty two million dollars. In addition to that, we had six million dollars of proprietary revenues.

We still have a very strong financial position. We have net cash of one hundred and ninety eight million dollars, and that puts us in a great position to continue to pay quarterly dividend of zero point fourteen dollars per share which accounts about sixteen million dollars for the quarter.

In addition to that, we've been carrying out our buyback program with seven million dollars. 02:41 As I said in my introduction, we still see a continuing challenging market conditions, but we also see some early signs of improvement.

So since the quarter closed, we've had several new contracts signed in terms of getting pre-funding for new projects, and we still have a list of projects that we are pursuing now and trying to get pre-funding for to get started for the twenty twenty two season. 03:05 And it definitely looks better and we definitely have more traction with clients now than we had three or six months ago, which is a clear sign that things are getting back to normal.

And again, the fact that we have a physical presentation now, the fact that last week we had EAG in Amsterdam. We had IAGC Annual Conference in Houston.

We had the Annual NOA Meeting in Alabama and they were all really well attended. Really means that we are going back to a more normal market and that again is going to have an impact on exploration spending and eventually seismic spending.

03:41 We're also progressing well on the New Energy Solutions strategy. As you all remember, we made an acquisition of a company called 4C this year.

4C is developing according to plan and a lot of the organic initiatives we have in place are also moving forward according to plan or sometimes even faster or better than we planned for. So we're very excited about the development in that business unit as well.

04:04 And we even said in the report today that we expect that business you need to account for about five percent to ten percent of the total revenues of TGS for next year, and that obviously means that we still need to look at M&A, and M&A will be a very important part of the strategy for that business unit. But we are looking at several targets and we think that we will be in a position to generate quite significant revenues from that business unit already in twenty twenty two.

04:30 And then, we're pleased to launch a platform called Versal, this morning. This is a unified seismic data ecosystem.

It is a digital platform, where we basically include all the geophysical data from both CGG, PGS and TGS in one unified platform, meaning that we create a seamless experience for the clients who can go out and look at seismic data from these three companies accounting for more than seventy percent of all the seismic data in the world at the same time. 05:00 So you can seamlessly go in and look at different databases and look at different data, and then make a put -- which makes your purchasing decision much easier.

So that again, it's just a great example of how we work together and collaborate through difficult times in the seismic industry, and you will probably see much more of that in the future. 05:17 We also see that in terms of the new projects that we are pursuing.

A lot of those projects are in partnership with some of our peers. So we've been talking a lot about consolidation at TGS, and you've already seen some attempts on trying to consolidate industry.

Obviously, last time with Spectrum, the acquisition of Spectrum, it's been difficult to do more consolidation because that capital structures are very different between the different companies and also the business models are quite different. But what we really believe in is, as an alternative to consolidation, you will see more partnerships and collaboration among the different players and we will show you some great examples of that today as well.

06:00 I just want to remind you of how we see the TGS investment case. For those of you who are not familiar to the company, let me just repeat how we look at that.

So if you start on the left hand side, the dividend story is quite unique for any oil service company or compared to any other oil service company. We have a dividend yield today of about five point seven percent, but it's actually close to seven percent if you include the buybacks as well, which is a quite unique story for all services.

06:29 We also have a ten years track record of paying a dividend, and in fact we paid more than one point one billion dollars in dividend over the past ten years. That's more than the current market capital TGS paid out to shareholders as a dividend.

And the strong balance sheet that we have allows consistency in the dividend. 06:48 As you see on the second bullet point on the business model, we have a cash outflow that's easily adjusted to the market.

So when we enter into situations we've been through in twenty twenty and twenty twenty one, we can very quickly adjust our cost base such that our cash flow remains solid. And I'm proud to say that the free cash flow TGS over the past four quarters has been one hundred and thirty five million dollars.

07:11 Obviously, a significant part of that has been spent on dividends, some part of it has been spent on share buybacks, and we've also done M&A as part of that strong inflow. So we clearly have counter-cyclical qualities in our business model, and this is something we have -- that has held TGS through both good and bad times in the past and we will continue to do so in the future.

07:35 Energy data, as I said in my introduction, we're getting more and more excited about the new initiatives that we have. We are transitioning from being a leading data company within oil and gas to being a leading data company also for other energy data types.

And as I said, the progress in that regard has been better than we expected. We are still looking at some interesting acquisition candidates, but in the meantime, we are also developing organic products that are very excited and we get good feedback from our clients.

08:07 So we're capitalizing on existing data, software, and platform, and then building a very similar system in new energy transition related industries as we've been doing for seismic and well logs and other types of data for many years. 08:22 ESG is getting more and more important and I'm very pleased to see that TGS ranks number one in the world among one hundred and ten oil service companies in terms -- in the latest survey from Sustainalytics.

And this was announced yesterday, and it's a great achievement by TGS, and really proves that what we've done in terms of ESG efforts internally has paid off really well. 08:48 In fact, we have the lowest scope one and two emissions in the peer group and we have a goal of becoming carbon neutral within twenty thirty.

But back to Sustainalytics, there were one hundred and ten energy service companies as part of that survey and TGS scored the lowest and lowest is good in this regard, meaning that we are considered to have the lowest ESG risk among all the sites or all the oil service or energy service companies in the world that took part of that survey, so very, very pleased about that as well. 09:19 And then, TGS is a recovery story.

We know exploration is at record low levels at current. That is not sustainable.

We've already seen signs of that unsustainability in terms of gas prices reaching record levels. We see oil prices reaching top five or the highest levels they have seen in the last five years.

And as a result, the consumer has to pay for this. So the consumer will feel the burden of that with higher energy prices and higher electricity prices, and you name it.

09:51 So we still believe that there is a great future for exploration. We still think it's going to take a little bit of time, but we have definitely passed or turned the corner, and we're moving into a better market.

The multi-client model continues to provide the best value proposition. And last but not least, we are well positioned when the market turns to take advantage of that.

10:11 So I want to move on and talk a little bit about the operational highlights and what we have going on right now and talk a little bit about some of the future projects you will see entering into twenty twenty two. So we start with Latin America, which has been a growth area for TGS for the past couple of years.

Obviously, significantly impacted by COVID there as well, but it's been a good and profitable area with TGS and many of these countries have a leading market share. 10:37 We have signed an agreement with Staatsolie, which is the state-owned oil company in Suriname.

And as you know, Suriname is adjacent to Guyana. It's a very hot exploration area at current.

And that agreement is signed in a consortium with CGG and BPG, so another example of the collaboration initiatives within our industry. 10:57 The consortium has exclusivity to acquire, promote and license new multi-client 3D programs, and also legacy data reprocessing offshore Suriname.

So this is a big program that we are starting up in Q4 of twenty twenty one. The acreage includes three blocks recently awarded and then current open acreage that will be offered in a twenty twenty three bid round.

So we're doing a combination of shooting over held acreage, and also new acreage or open acreage that will be bid quite shortly. So data will be available for our clients in H2 of twenty twenty two.

11:37 Moving to Europe. We just finished the first part of the NOAKA OBN survey.

This is part of our strategy that we have talked about many times to you before, to provide the next generation seismic data and what we call the ILX area. So infrastructure led exploration area of the Norwegian Continental Shelf.

11:56 It's the first season that we completed in October twenty twenty one. So we had done about three hundred square kilo meters, that's about two-thirds of the total program, and we are committed to complete the acquisition of the remaining area in next summer in twenty twenty two, and this is a pretty much a fully funded service.

It's a survey that we will continue and then finish up in twenty twenty two. 12:20 If we move over to Asia-Pacific, we've announced the Sarawak, so that's the Phase 1 of another collaboration initiative that we're doing together with partners.

So this is a consortium of TGS, Schlumberger and PGS. This is a survey that covers an area of up to eight thousand six hundred square kilo meters.

It's the first phase of a multi-year contract and the survey includes acreage in the Malaysia twenty twenty one Bid Round. So again another example of partners working together and really taking advantage of each other's strength.

And I think that's again something you will see more of in the future in our industry for sure. 13:04 And then touching on the US Gulf of Mexico.

We called the headline, improving outlook in the Gulf of Mexico, and the reason for that is that we see a combination of low breakeven cost and low GHG emissions from the current production in the GoM that puts GoM in a very favorable spot compared to other basins in the world. 13:23 So most IOCs have GoM on the strategic priority list.

So you see all the big players playing in the GoM, but you also see NOCs entering the basins. There are several NOCs entering the U.S.

Gulf of Mexico over the past couple of years. And in addition to that, we see small independents who are preparing to enter the basin again.

So this is kind of going to continue to be a very important area for TGS going forward. 13:44 License rounds out to be restarted.

So we will have a license round in Q4 of twenty twenty one. It is coming up in late November, and then another one in the first half of twenty twenty two.

And we have new OBN projects in advanced planning phase. We're not ready to announce anything today, but it's something you should definitely look out for because there is no secret that we have permits.

And having permits in the Gulf of Mexico add great value today, because they don't award a lot of new permit. So we're working hard now with clients to try to get the necessary pre-funding to get started on new OBN projects in the U.S.

Gulf of Mexico. 14:23 As I said, we are progressing well on the New Energy Solutions strategy.

Most of you have probably seen that we announced the survey that we're doing together with MagSeis, kind of, a traditional seismic test where we pilot an area, where it can – where we can use subsurface data and imaging for wind and carbon capture and storage. 14:44 So this is just another initiative that we're doing together with partners in terms of proving the value of the subsurface data and applying subsurface data outside the traditional oil and gas industry into the growing areas of wind and CCS, a very exciting projects that we're carrying out together with MagSeis.

15:02 We're also doing wind modeling data. So this is going to be part of our platform going forward where our ambition is to be a data provider in all types of energy transition-related industries, and one of them is obviously wind.

We're also launching what we call a CCS Atlas. So CCS Atlas is a digital platform with carbon capture and storage or carbon storage data, where you can -- as a client, you can subscribe to the platform, you can go in and review different basins and different reservoirs and get some kind of a risk matrix based on that and a ranking model based on several characteristics that is in our database.

15:45 So this is another example of digitalization of our industry moving gradually into subscription based services and providing data, providing very much of the same data as we've licensed to oil and gas for many, many years for different purpose. And for CCS, we've already seen data sales that are being used not to find new oil but to find reservoirs so that we can store carbon, so very exciting development there as well.

16:12 4C Offshore is developing well. We have a forty four percent growth in order inflow year-to-date and we are evaluating further M&A opportunities for the new energy solutions as well.

We expect pro forma revenues from this business. You need to be approximately ten million dollars for twenty twenty one.

And as I said, we have ambitions to reach somewhere between five percent and ten percent of total revenues already in twenty twenty two, it should come from new energy solutions. 16:45 Then we introduced Versal this morning.

This is a unified seismic data ecosystem. And you see an example on the right hand side.

And basically, what you can see here is data from all three vendors. So you can -- from the same platform, you can go in and review and evaluate and even do some kind of interpretation of data from both PGS, CGG and TGS in the same unified ecosystem.

And this is a great development. And as I said, this covers more than seventy percent of the total seismic data in the world.

17:18 Versal connects multiple multi-client libraries for a unified data experience and it allows customers to access their data, entitlements, and also identify new opportunities in a cloud based ecosystem, as I said. So you see the address there that you can go in and have a look and play with the data and see how it looks real time.

17:38 And then, last but not least, I touched on the ESG performance. I think this slide does a great job in terms of telling what we have done just within the course of two years.

So if you start in the upper left hand corner, it is the Sustainalytics ESG Risk Rating where we ranked number one in our industry among one hundred and ten companies. 17:59 Moving to the right, State Street Global Advisors, who have rated as a leader and which means that we are in the top ten percent of our industry.

The Governance Group in the lower left hand corner, we're ranked among the top fifteen companies on the Oslo Stock Exchange regardless of industry. And last but not least, MSCI ESG rating where we also above industry average in each one of ESG categories.

18:22 So this is important to us. This is important for investors as well, and I think when you look at different papers that you can invest in, our goal is that there shouldn't be any reason why you shouldn't be investing in TGS from an ESG standpoint, and I think this clearly tells you that TGS is a stock that you can invest without having any great ESG concerns, because we rank definitely among the lowest in the industry in terms of risk.

18:47 So with that, I want to hand it over to Sven Borre Larsen, who is going to go through our financials, and then we'll come back and talk a little bit about the market, the outlook and how we see the world? Thank you very much.

19:03 Thank you for that, Kristian and good morning, everyone. I have to agree with Kristian, it's really good to be back and present in person.

So I will run through the financials for Q3 today. And I will start by going through the composition of the net revenues starting on that chart on the top left hand side with pre-funding revenues.

19:30 Pre-funding in the quarter was twenty two million dollars. So although this is higher than we had in Q3 of last year, it's quite low in a historical perspective.

Bear in mind that Q3 is normally high season in the Northern Hemispheres in terms of acquiring new data. So although, we see an increase relative to last year, it's still at a very low level.

19:58 Then moving to late sales on the top right hand side, we had thirty three million dollars of late sales in the quarter, which is more or less the same level as we saw in Q2. And it's also in a historical context, very low, and a reflection of the very weak markets we are in.

20:16 Then moving to the proprietary revenues on the bottom left hand side, five point two million dollars in the quarter. You can see we have had quite decent activity on the proprietary area in the quarter.

This is related to imaging projects we do on behalf of customers and you should expect their run rate to be somewhat lower going forward than you have seen in the past few quarters. Then -- in summary, it means that we have sixty one million dollars of revenues in the quarter.

20:56 Then talking about operating expenses adjusting for some non-recurring items that I will come back to later. We had operating expenses more or less in line with what we have seen in the past few quarters.

It would have been slightly lower if under normal circumstances, but as we discussed, we had higher activity with respect to proprietary revenues and imaging projects on behalf of customers, which means that a smaller portion of our imaging costs are being capitalized on multi-client projects and are instead being expensed in association with the recognition of proprietary revenues. 21:39 Then moving to amortization and impairments.

We have fifty one million dollars of amortization in the quarter, which is quite low compared to what we have seen in previous quarters. Thirty six million dollars of this was straight-line, amortization of the vintage library and fifteen million dollars was amortization of progress -- or projects that are in progress.

22:09 Going forward, we expect the straight line part of it to go slightly up, since we have now completed the large projects in Brazil, Campos and Santos. So they now go into vintage and will add to the straight line amortization.

22:26 Moving to the bottom left hand chart shows the operating profit. Still in negative territory by eighteen million dollars, when adjusting for these non-recurring items that I briefly mentioned.

When looking at investments, we invested fifty six million dollars in the quarter. Again, as I said, low in an historical context for Q3, but slightly higher than what we saw in Q3 of last year.

We had pre-funding rate that was relatively low at forty percent in the quarter. We expect this to be somewhat higher in Q4.

23:10 Then moving to the income statement. As I already said, we had sixty one million dollars of revenues in the quarter.

And due to this non-recurring costs, the cost level was high in the quarter. The largest portion of the non-recurring costs relates to settlement of the [indiscernible] case that was reached -- the civil matters of the Skeie (ph) case that would reach now in October.

So I'm glad to say that this is the last time you will hear about that or hear about this case that happened twelve years ago. We have also had some severance cost related to cost efficiency programs being executed.

23:58 You should also note that other operational costs in Q3 of last year were artificially low as we had some cost reversals booked in that quarter. So it's not really comparable for the underlying cost level.

When subtracting these costs, we ended up with an operating result of twenty eight million dollars, and result before taxes of minus twenty nine million dollars. 24:25 The tax rate was rather low in the quarter at ten percent and this has to do with the mix of between low and high tax jurisdictions with respect to profits and losses.

But all-in-all, this gave us a net result of minus twenty six million dollars or corresponding to an EPS of minus zero point nineteen dollars in the quarter, which is the same as we had in Q3 of last year. 24:56 Then, moving to the balance sheet.

You see here that goodwill is higher than last year, three hundred and four million dollars that has to do with the 4C acquisition that was executed in Q2. You also see the multi-client library being significantly lower than last year.

It's slightly up actually compared to Q2. But apart from Q2, this is the lowest level we have seen since early twenty twelve actually.

25:27 And this is obviously the low library value. It's obviously a reflection of high amortization and impairments that we have booked over the past few years, but it's also a reflection of the quite low unit cost in our investments over the past few years compared to what it used to be if you go seven, eight, nine years back in time.

25:50 The balance sheet remains strong with almost two hundred million dollars of cash -- one hundred ninety eight million dollars of cash, and the solidity is strong with an equity ratio of eighty percent at the end of the quarter. 26:08 Then moving to the cash flow statement.

Q3 is normally -- not a strong cash flow quarter normally. So this quarter, we -- after paying dividends of sixteen million dollars and buying back shares of almost seven million dollars, we had a negative net cash flow of twenty two point seven million dollars or, sorry, twenty four million dollars which reduced the cash balance down to this one hundred and ninety eight million dollars.

26:39 If you look at year-to-date numbers, we've had strong cash flow with free cash flow of one hundred and eight million dollars in the first-nine months of the year compared to minus four million dollars actually in the first-nine months of last year. 26:56 Then moving to dividends.

The Board has resolved to maintain the dividend at zero point fourteen dollars per share for -- it says Q3 on the slide there. It's obviously for Q4 twenty twenty one.

The share will trade ex this dividend on fourth of November, and it will be paid out to the shareholders on eighteenth of November. 27:20 In addition, during the quarter, we bought back six -- little bit more than six hundred thousand shares worth six point six million dollars.

So it means that we have approximately seven point five million dollars left of the twenty million dollar share buyback program that was announced earlier this year. 27:42 And by that, I hand the word back to you, Kristian.

27:58 Thank you, Sven. We've talked a lot about the current exploration activity level not being sustainable, and I'll talk a little bit about that on this slide.

I think first of all, you'll see on the left hand side there, you see a bar chart and the bar chart shows the total discoveries, the volume of the discoveries since twenty eleven, so over the past ten years. 28:18 What you see then is that, you know in terms of oil, which is a blue bar, it's about half of what it used to be.

So the levels being found or discovered right now is about half of what it used to be -- early in this time cycle. And the same goes with gas, which is actually much less than that, so we're talking about a quarter of the volumes that have been found in twenty twenty compared to, for example, twenty eleven and twenty twelve.

So this is obviously not a great development and it means that there is a lot of pressure on our clients now to find more oil. 28:49 At the same time, you see they invest less and that's in multi-client, and you cannot really draw the conclusion that spending less on multi-client means that you're going to find less but I think there is clearly a correlation between the two, because multi-client is typically a good measure of your total exploration spending.

And the fact is that companies are spending less in exploration now, but they need to find more and that's obviously not a great combination. 29:12 In fact, one of our clients told us quite recently that they need, over the next five years, they need to find four times, as much oil as they found over the past five years.

I mean, it clearly highlights the need to spend more money on exploration and there is a great push to do that, but obviously, a lot of these clients also face a dilemma of how much do you spend on the energy transition versus spending on exploration. 29:36 But I think this slide does a good job in terms of highlighting a big issue now for the energy companies and for the world as a whole that we simply don't have enough oil.

And then there are people saying while we had all the oil that we need for the next decades have already been found. 29:53 I think the last bullet point is important in that regardless, a substantial amount.

So these proven resources will never be developed and there is a reason why they never have been developed because they are either too high costs, it may be too high risk or it may be -- an even more important right now, too high GHG emissions in production, which means that these discoveries will never be put into production. 30:19 If you look at the value proposition of exploration, it is probably at an all-time high level.

You can see that from the left side, you look at the exploration cost index. This is basically what is the cost of drilling and seismic and your total exploration cost which typically accounts for somewhere between ten percent and twenty percent of the overall E&P cost.

30:41 But you look at that and it's pretty much at an all-time low levels. I mean, rig rates are really low, seismic rates are low, prices of multi-client data are really low, and at the same time, the oil price is reaching not all-time high levels, but if you look at the gap between the two, it is definitely close to all-time high.

So very good value proposition for exploration. 31:02 We see continued challenging market conditions in the near term, but signs of the trough being reached.

I talked about that at the Q2 presentation that we have passed the trough, despite the fact that Q3 wasn't the great quarter and we didn't expect it to be a great quarter. But we still repeat the message that we feel the trough was passed in Q2 and we think that we are slowly moving into better market.

We've already seen that -- the signs of that in terms of signing new commitments for pre-funding and some of their contracts and new projects that I talked about today. 31:36 We also see that through improving license round activity, I think, over the course of twenty twenty and twenty twenty one, you've seen a lot of license rounds being delayed or postponed for good reasons, of course.

You don't want to do a license round even if the oil price is high. You don't want to hold the license round, if you know that there is not going to be any demand, because all companies are busy with restructurings or reorganizations and probably a combination of the two.

32:05 But the fact now is that, what we see now for twenty twenty two in terms of licensing round is pretty much back at the levels we used to see back in twenty eighteen and twenty nineteen. We see a lot of African countries finally getting out and awarding acreage again, and we see Latin America acreage being awarded, you see Brazil, Suriname, Argentina and Trinidad on the list.

32:26 And you also see Asia-Pacific with countries such as India, Indonesia and Malaysia, where you haven't seen much activity over the past two or three years, but they are finally coming back now of holding licensing rounds which is a key to drive our late sales for the future, of course. We're hopeful when we look at this and we're hopeful that we will see increased demand from our existing data library, but also new commitments in terms of pre-funding for new projects.

32:54 So with that, I just want to summarize the presentation today. So Q3 of twenty twenty one, net revenues of sixty one million dollars segment.

Obviously, a result that we're not very proud of, but again, as I said, we see lights of -- at the end of the tunnel, and we see a slowly improvement in the market which is obviously good. 33:13 And we're extremely fortunate to have a very strong financial position.

We've kept that strong financial position throughout the pandemic. And having net cash of one hundred and ninety eight million dollars after free cash flow of one hundred thirty five million dollars over the past four quarters is truly unique in our industry.

33:32 That means that we can continue to pay a dividend and a dividend yield of close to seven percent if you include the quarterly dividend with the buybacks of seven million dollars. Yes, we see a continued challenging market conditions, but we see improvements and that is good.

And we're also progressing well on the New Energy Solutions strategy, which I've talked about today. 33:52 And last but not least, we launched Versal, which I talked about already, and this is again something we do together with partners.

Great example of collaboration between the different companies in the seismic industry. 34:06 So with that, I want to thank you very much for your attention today.

We have Q&A. And I want to ask Sven Borre to come up and assist me in the Q&A, where we're going to have, I guess, questions from the web.

34:18 I have one question that I just received on my phone while I was sitting here from one of the analysts who said, you've been going through a couple of the regions where you have activity for Q4 and into twenty twenty two. Can you also talk a little bit about the outlook for the onshore market, and in particular, in the U.S.

and lower 48 (ph)? 34:49 So I'll do that.

I think what makes onshore quite unique is that it's definitely less impacted by the ESG pressure and less impacted by Biden's politics in terms of pausing the new leases and that's kind of stuff. So I think, what you will see is a pickup -- a gradual pickup in activity.

35:10 I think the reason why it's taking so long because the oil price is at the great level compared to the breakeven cost for most of these companies, but the reason why it's taking a while is that better -- they're being really disciplined, they've learned from the past where they've pumped up the production too fast and then losing money. And there has been a lot of money burnt over the years in U.S.

onshore. 35:31 But I think some of these players have learned.

I recently visited some of these guys just a couple of weeks ago, and we definitely see more optimism and we definitely see that. Although they're still disciplined, we think there will be gradual increase in terms of spending in U.S.

onshore as well.

35:51 Okay. We have some questions on the web.

So first one from Morten Nystrom of Strawberry Capital. You didn't mention U.S.

onshore when you went through the different regions. What do you see with respect to activity and do you expect your investments in U.S.

sale to be up in twenty twenty two versus twenty twenty one?

36:13 Yeah, very similar question to what I just answered. But yeah, I think in terms of investments, yeah, I think we will invest more in U.S.

onshore in light with the recent optimism that we hear in the industry. So I think there will be higher investments for twenty twenty two.

They are not going to be significant. We're not going to double our investments.

But I'm pretty confident that we will invest more in onshore. And as you know, these projects are typically highly prefunded.

They had a slightly different characteristics to some of the frontier offshore projects, so quite optimistic that you will see growth area.

36:46 And then we have some questions from John Olaisen in ABG. Are you likely to see significant late sales ahead of seventeenth of November lease round in the Gulf of Mexico or was the notice too short?

And on that same note, are we sure that there will be Gulf of Mexico lease round in March twenty twenty two?

37:11 Yeah, I think, the first question is hard to answer, whether it is going to be significant late sales. Yes, there will be late sales related to that round.

We think that round is going to be -- there is going to be reasonable interest for the rounds. Yes, the time limit is quite short.

So that may probably put a little bit of a limit to how much impact you can see. I think there will be sales related to that and we're quite optimistic that we're going to have a few of the smaller players.

We will definitely bid there. That's the indications we're getting.

And as I said, this is really a place where you see a lot of the big companies will definitely take part of that round. 37:48 In terms of the round scheduled for next year, yes, we think that's going to happen.

In fact, I think they are required by law to have that round in twenty twenty two, because it's part of a five-year plan. So I think it will have serious consequences if they don't do it.

Then I think the big question is not whether there's going to be a round in twenty two. The question is going to be what is the new five-year plan going to look like, because the new five-year plan for the U.S.

government and other areas is due sometime later this summer of twenty twenty two. So we don't have much clarity on that, but I just read a recent report from McKinsey on the U.S.

Gulf of Mexico, which is quite optimistic in terms of, as I said, the combination of very low emissions and a low breakeven price puts a lot of pressure on Biden to open up or at least have some activity going forward. 38:37 I also heard some indications that one solution would be to go back again to only one round per year so that at least the government shows that they're taking some cautionary actions in terms of the activity level there, but that's just an indication or rumor that we've heard so far.

So we were not sure what's going to happen. We think there will be continued licensing in the U.S.

Gulf of Mexico. That's our best guess.

38:59 And then John has another question on -- related to M&A and New Energy Solutions. Could you shed some more light on this?

What kind of companies are you looking at? Which segments of the renewable industry size and not the least how big acquisitions in dollar value should we expect and also timing of potential acquisition?

39:25 Yeah, it's a lot of questions. I think when we look at the New Energy Solution related industries.

So when we look at energy transition related industries, it starts with CCS, then you have Geothermal, you have Offshore Minerals, you have Wind, and you have Solar. And our ambition is to build up a database or a digital platform that contains data within all this energy related or energy transition related industries.

39:53 And I think there is -- we already have the largest subsurface database in the world. So we can fill or use our existing data for geothermal and offshore wind, sorry, Offshore Minerals.

We can also use our existing data for CCS, the carbon capture and storage, but where we don't really have a lot of data to support industries would be in wind and solar. 40:15 So I think without saying too much, the M&A candidates would definitely be within wind, solar or a combination of the two.

When is that going to happen? Well, I think we will definitely see acquisitions.

Well, if we follow our plan, that will be in the first half of twenty twenty two. Feel pretty good about that.

40:33 You're in charge of M&A, so I see you nodding as I get your approval to say that. But yeah we are continuing to pursue M&A opportunities within the wind and solar, first and foremost.

40:46 And then he wants us to elaborate a little bit on the write-down risk, the impairment risk of the multi-client library for the fourth quarter? 40:59 I can cover that.

Of course when the market is as weak as it is now, of course, we have to take a forward look at it. However, we are in the budget process now.

So it's too early to conclude firmly on what we need to do there, but it's certainly a risk that we will have to take some impairments given the market conditions that we're facing currently. 41:23 And then we have questions from the Jorgen Lande at Danske with respect to Versal.

He wants us to elaborate a little bit on the commercial model, whether it's a subscription based or whether it's an open model, and yeah, basically explain the commercial model behind that?

41:50 So I mean, this is a multi-phase project. And I think the Phase 1 is what we've done right now.

It is to get all the data in one platform, making sure that every company behind their CGG, PGS and TGS has the data in the cloud and easily accessible and in the same platform. And then Phase 2 will be, okay, so when we have all the data together, what can we do with that data.

42:14 Could we start playing with interpretation tools, could we do artificial intelligence tools and add to that platform, stuff like that. That's still under development and still being discussed, but I think you can -- you can easily see that in a few years from now, this could develop into a commercial model that is very different to what we do today.

42:33 In terms of subscriptions and how it works, while the plan is that you will have -- you will pay a subscription fee to access that platform that is not going to be a big fee as long as the platform only contains existing data, but this is what I said. The next phases of this would typically be that you add other things to the platform and then, obviously as a result, you will add more value to it and price it differently of course.

43:00 So it's a really exciting project. But it's still at a very early stage and we are dependent on obviously buying from all partners in terms of making the next steps here.

But so far it's been a very smooth and good projects with -- and I think I speak on behalf of all three components when I say that, so far, there has been a great success for all of us.

43:19 Then we have a question from [indiscernible] which simply says our TGS looking to buy PGS.

43:29 That was a very direct question. I was really prepared for that.

I guess the answer is that if we were to do that, we will probably send out a stock exchange release on it. So now we don't have any immediate plans to do that.

43:42 And then we have a question from Mick Pickup at Barclays. You talked of more cooperation going forward.

How do your clients see this in a pretty consolidated industry? What do your partners bring in that you don't have versus the traditional market?

Is this a capital availability?

44:01 No, I think it's a great way to benefit from different strengths. So one great example is, we've seen a shift in our client base, and we see a gradual shift in our client base where IOCs probably become less important if you look at the next five, ten, fifteen years.

NOCs may become more important, and you also need to stay very close to small independents. We're all different.

So we can have some strengths. I mean, one of TGS strengths is that we're really close to small independents in the U.S.

Gulf of Mexico, for example. 44:31 One of the weaknesses will be that we don't have an office in China or in Malaysia, right.

It may be that one of our partners have that or they already have a subsidiary in that country. So really making sure that you play and benefit from each other's strengths is really what I see as a key benefit from a -- some of these partnerships that we've been talking about today.

And I think clients also benefit from that, because you have a much more complete product to offer. So I think so far, there's been no complaints from clients.

I think, in general, I think they appreciate the fact that we work together in a collaborative way.

45:10 And then we have a couple of fairly similar questions from Morten Nystrom again and also Andreas Buxton. They want to know how Q4 has started in terms of late sales, both compared to how the previous quarters this year started and also compared to previous fourth quarters.

45:29 Yeah. I can't really comment on what we've had have done so far.

I don't think that's fair. But what I can say is that we have no reason to believe that Q4 is going to be different to previous Q4s in terms of being the kind of end of year quarter in terms of accessing end of year budgets, et cetera, et cetera, which means that late sales in any given Q4 is typically higher than for the previous three quarters.

We think that's going to be the case this time around as well. Will it be like twenty nineteen?

No. But in terms of -- or compared to the other quarters of twenty twenty one, we think it's going to be a -- the best quarter in terms of late sales.

46:09 In terms of new investments and pre-funding, I think you can see that from the activity report that we share in terms of vessel schedules, et cetera. As I said, there is a great hope that we will announce a few projects over the next few weeks.

And when and if we announce these projects, we will probably include the vessel schedule, so that you can see how Q4 will play out in terms of activity level, but also give you an indication of how pre-funding is. 46:33 So I think you will have a pretty good understanding of what the pre-funding level is going to be.

And in terms of the late sales, as I said, I mean, play with the numbers and see how Q4 has played out relative to the previous three quarters in any given years. And I think that this year is going to be no different to that.

46:52 Okay. That's it.

Q -

46:54 All right. That's the last question.

I want to thank you very much for your attention, both for people in the room here, but also the people who are following the presentation on the web. Looking forward to hopefully present a better result after Q4.

So hopefully be back again physically also to present that and see more of you then. So in the meantime, stay safe, and have a great day, and have a great, great weekend when that comes up.

Thank you very much.