PGS and TGS combine to establish the premier energy data company

• Creating a stronger and more diversified geophysical company and data provider to the energy value chain, driven by technology and innovation
• The combined entity will offer a robust position in all verticals: Multi-Client, acquisition, imaging and new energy
• Significant economies of scale, preliminary estimate of more than USD 50 million annually in cost synergies
• Enhancing the value and technology offering to clients
• Bringing together two complementary players, creating the most attractive workplace in the industry
• The transaction is supported by the Board of Directors of both companies

Oslo, 18 September 2023

TGS ASA ("TGS" or the "Company", OSE: TGS) and PGS ASA ("PGS”, OSE: PGS) announced today that they have agreed the principal terms of a combination of TGS and PGS to create a strong full-service energy data company.

The transaction is expected to be completed as a statutory merger pursuant to Norwegian corporate law, with merger consideration to PGS shareholders in the form of 0.06829 ordinary shares of TGS for each PGS share.

Following the completion of the transaction, TGS and PGS shareholders will own approximately 2/3 and 1/3 of the combined company, respectively, on the basis of the share capital of each of the companies as of 15 September 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.

Definitive merger agreements are expected to be entered into in October 2023, with closing of the transaction expected during the first half of 2024, subject to satisfaction of conditions for completion.

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. Moreover, the transaction helps mitigate supply chain risks and will add further to economies of scale and efficiency, enhancing the value offered to clients.

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.

In addition to providing an improved client offering and a platform for further profitable growth, the combination will benefit from cost synergies with a preliminary estimate to be above USD 50 million annually.

"We are excited to announce a merger with PGS, completing a major milestone of building a fully integrated and robust global energy data provider. Our clients will benefit from scale, a unique technology portfolio and premier service quality. Bringing together two distinct, yet complementary, companies positions 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.

"This is a strategic transaction for TGS and a major step on the journey we started in 2019. It will combine the capabilities of both companies to create a geophysical powerhouse. The transaction continues TGS’ strategic development from a pure Multi-Client seismic company to the leading acquirer and provider of geophysical data to both the oil and gas and new energy industries” stated Chris Finlayson, Chair of the Board of TGS.

"The merger creates a full-service geophysical company with a strong balance sheet. Financial flexibility enables investments in attractive core activities as well as in the rapidly growing new energy business. The pioneering innovation cultures in both companies will contribute to a strong foundation for new product offerings and profitable growth” stated Walther Qvam, Chair of the Board of PGS.

Financing:
The combined company will have a combined fully diluted market cap of approx. USD 2,616 million and a net interest-bearing debt (NIBD) of USD 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’ USD 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 15 September 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 15 September 2023 and an exchange ratio premium of 22.4%, 40.8% and 41.6% based on 30 days, 3 month and 6 months VWAP as of 15 September 2023, respectively.

Future TGS dividend payments up to closing will be compensated to PGS shareholders. The full merger plan is expected to be published during October 2023.

The transaction remains subject to certain conditions, including a confirmatory due diligence by both parties, finalizing and executing a definitive merger plan, as well as customary closing conditions such as relevant regulatory approvals and consents and expiry of statutory waiting periods and no material adverse change occurring. The transaction is also subject to approval by extraordinary general meetings in both TGS and PGS with at least two-thirds majority. Closing of the transaction would occur as soon as possible thereafter.

Conference call:
Further information regarding the transaction will be provided in a joint TGS and PGS conference call at 10:00 (CEST) on 18 September 2023. A replay of the conference call will be provided at tgs.com and pgs.com.

Link to webcast: https://channel.royalcast.com/landingpage/hegnarmedia/20230918_1/

Advisors:
SpareBank 1 Markets is acting as financial advisor and Schjødt is acting as legal advisor to TGS. Pareto Securities is acting as financial advisor and Advokatfirmaet BAHR is acting as legal advisor to PGS.

Contact information:

TGS:
Sven Børre Larsen
CFO
Tel: +47 909 43 673
Email: investor@tgs.com

PGS:
Gottfred Langseth
CFO
Tel: +47 930 55 580
Email: ir@pgs.com

Attachment

• Investor presentation