<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of October 1999
--------------------------------------
PETROLEUM GEO-SERVICES ASA
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(Translation of registrant's name into English)
Strandveien 50E
P.O. Box 89
N-1325 Lysaker
Norway
----------------------------------------
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
--- ---
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
--- ---
THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE IN THE
REGISTRATION STATEMENT OF PETROLEUM GEO-SERVICES ASA ON FORM S-8 (SEC
REGISTRATION NO. 333-6420) AND IN THE PROSPECTUSES CONSTITUTING PART OF THE
REGISTRATION STATEMENTS OF PETROLEUM GEO-SERVICES ASA ON FORM F-3 (SEC
REGISTRATION NOS. 333-10348, 333-9518 AND 333-9520) AND PART OF THE REGISTRATION
STATEMENT OF PETROLEUM GEO-SERVICES ASA ON FORM F-4 (REGISTRATION NO. 333-9702).
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The discussion set forth below should be read in conjunction with the
Company's audited Consolidated Financial Statements and notes thereto and the
unaudited financial statements and notes included herein. The discussion is
based upon, and such financial statements have been prepared in accordance with,
US generally accepted accounting principles.
GENERAL
The anticipated recovery in exploration and production spending,
expected to occur with the recent improvement in oil and gas prices, has been
negatively impacted by continued caution regarding the long-term hydrocarbon
price environment, ongoing cost-cutting efforts by oil and gas companies and
consolidation within the oil and gas industry. However, increasing worldwide
demand for oil and gas coupled with declining production in many areas should
support a stable, relatively favorable level of oil and gas prices in the
future, resulting in increased exploration and production spending in 2000 and
improved demand for geophysical and other oilfield services.
The Company's geophysical services -- from its high-technology,
low-cost seismic acquisition services to its consulting and data management
services -- are increasingly valuable to an oil and gas company in the current
market environment. PGS' geophysical services group offers services that can be
used to reduce exploration and development risk, to better evaluate exploration
and development opportunities, and to develop new exploration opportunities in
unexplored basins. Recent developments in the oil and gas industry have resulted
in a shift in the use of 3D seismic data from field evaluation and development
to deepwater exploration. In deepwater areas, opportunities exist for larger
discoveries that allow finding and development costs to be spread over a greater
reserve base, which in turn allows for profitable field development at lower
hydrocarbon price levels. The Company's six Ramform-design seismic vessels --
cornerstones of the geophysical services group -- continue to acquire 3D seismic
data more efficiently than any conventional hull 3D seismic vessel and to
consistently generate high-quality data with a rapid turnaround. These
high-capacity vessels have a distinct competitive advantage in efficiently
acquiring the large 3D seismic surveys that are currently being tendered in the
highly prospective deepwater areas of the world, such as West Africa and Brazil,
where larger industry players have recently refocused much of their exploration
spending.
With respect to the 3D seismic exploration market, PGS has now
allocated an increasing percentage of working marine capacity to the
multi-client market, rather than contracting to shoot proprietary data at the
current marginal or loss pricing. We do not believe that the current contract
prices in certain markets cover the operating expenses of a typical
four-streamer vessel due to the large size of the surveys and the length of time
it normally takes to acquire these surveys with a low-capacity vessel. This
situation, combined with the Company's desire to reduce its multi-client library
investment in 2000, has led to the recent decision to further reduce existing
capacity. However, as a result of the continued shift in demand towards the
multi-client business model, the Company has increased its 1999 budget for
multi-client investments by approximately 20%. Overall, PGS expects that
multi-client activity will improve from increased North American spending over
the coming months, while the contract market will likely remain depressed into
2000. The expected increase in long-term oil prices should translate into higher
oil company spending for 2000. Meanwhile, lower technology seismic capacity
should be removed from the market as the liquidity necessary to run some of
these vessels becomes more scarce.
PGS' geophysical services can also be used to obtain a better
understanding of existing reservoirs and to target the placement of gas and
water injection wells in order to improve the
<PAGE> 3
overall hydrocarbon recovery rate. As oil and gas companies refocus existing
spending, there is increasing demand for more sophisticated seismic data around
existing reservoirs. Multi-component, high-density, single-source streamer,
vertical cable and deepwater dragged array data allow oil and gas companies to
more effectively image, drill and produce existing reservoirs. In response to
rising demand for these types of reservoir characterization data, PGS is
evaluating the need to reconfigure one or more of its existing six-streamer
vessels into multi-component/vertical cable crews. This reconfiguration will be
in addition to the two reservoir crews currently in operation. The existing
reservoir crews have a solid backlog that is expected to grow in the coming
quarters as this technology gains momentum and oil and gas companies focus on
maximizing production from existing reservoirs.
This reservoir characterization market is generally expected to be a
proprietary market as most of the data will be acquired over existing fields or
held acreage; therefore, future sales potential under the typical multi-client
model is expected to be minimal. While the technology is now proving to be an
excellent tool to image through gas chimneys and other gas-saturated areas,
these areas tend to develop around existing reservoirs. Therefore, it is not
feasible to acquire this specialized, high-cost data over vast exploration
areas. Additionally, there are no meaningful economies of scale to be gained by
shooting a large contiguous area.
Within the data processing business, PGS has now set aside a dedicated
group that will focus upon reservoir processing in order to enhance our leading
position with respect to advanced multi-component, vertical cable, 4D, AVO and
pre-stack time and depth migration data. In addition, a dedicated group has been
assigned the task of processing 3D seismic data behind the PGS Ramform seismic
fleet. We believe that this segregation of expertise will result in a more
efficient and lower cost 3D seismic product, particularly in the multi-client
market.
Another important part of PGS' long-term strategy has been to diversify
its exploration-driven revenue stream to include production-oriented oil company
projects. These projects typically have long-term contracts and steady,
predictable cash flow streams. With the Company's expansion into production
services (through the Awilco and Atlantic Power acquisitions, the newbuild
Ramform Banff FPSO and the recently acquired Petrojarl Varg FPSO), PGS can offer
the industry cost-effective offshore production services that allow both major
and independent oil companies to outsource many aspects of the production cycle,
from the wellhead to the refinery. With PGS' production services, oil companies
can focus their resources on adding new, low-cost reserves to their portfolios
and leave the monetization of those reserves to PGS, which, in some cases, is
willing to assume a limited amount of reservoir risk through a tariff-based rate
structure. While the North Sea has been at the forefront of utilizing FPSO
technology, many major and independent companies are now evaluating FPSO
solutions in West Africa, Brazil, the Asia Pacific region, Canada and the
deepwater Gulf of Mexico. Under the current oil and gas market conditions, PGS'
long-term FPSO strategy has proven to be a solid move and should continue to
provide stable contributions to revenue, cash flow and profits. Consistent with
the success of this strategy, PGS continues to evaluate additional acquisitions
of floating production assets in order to increase its market share and
establish a leading fleet in the industry.
RECENT EVENTS
Although market conditions during the 1999 third quarter continued to
be generally depressed, the Company had ongoing success in securing commitments
for its high-technology seismic acquisition services. In the Asia Pacific
region, the Company began acquiring 3D data in China for a state-owned oil
company. In that same region, the Company was awarded several
<PAGE> 4
multi-component/4C acquisition contracts, with work expected to commence during
the fourth quarter. These awards further demonstrate the increased market
interest in this high-quality, specialized seismic data type. In the
multi-client arena, the Company continued to secure high levels of prefunding
for its intended projects, particularly in Australia and in Brazil's Campos and
Santos Basins. In West Africa, the Company continued to acquire deepwater 3D
multi-client data under an exclusive arrangement with the Nigerian government in
anticipation of next year's licensing round.
On July 22, 1999, PGS completed the acquisition of the Varg FPSO from
Saga Petroleum ASA, acting on behalf of the Varg field license holders (Saga-35%
and Statoil-65%), for $350 million. The acquisition was initially financed with
a fully underwritten $350 million unsecured bank facility, which was
subsequently refinanced with proceeds from the Company's offering of $200
million of senior unsecured notes and 11,159,500 ADS and shares (net proceeds of
$195 million and $214 million, respectively). PGS executed charter and operating
agreements for a term covering the full productive life of the Varg field, with
a minimum term of three years. The charter agreement provides an option during
the first year for Saga to extend the minimum term of the lease to ten years. In
addition to a day rate designed to cover operating expenses (reimbursement of
actual expenses during a transition period of approximately six months and
approximately $58,000 per day thereafter), PGS receives a charter hire day rate
of $177,000 for the first three-year period and $162,000 thereafter or, if the
minimum lease term is extended to ten years, $157,500 per day thereafter. The
Petrojarl Varg (as renamed) currently operates on the Varg field, where
production began in 1998, and is the only contractor-owned and operated FPSO
working in Norway.
In September 1999, the Ramform Banff FPSO achieved a significant
milestone, producing more than 5 million barrels of oil from the Banff field
since February 1999. Since the achievement of gas export in June 1999 and the
planned shutdown in early July, the Ramform Banff has significantly increased
its average daily production levels during August and September. The Company
expects average daily production levels of the Banff field to ultimately reach
60,000 barrels per day.
The Company's third quarter results included approximately $4.5 million
in loss related to its 46% ownership in Spinnaker Exploration Company; much of
this loss was non-recurring. While future results cannot be predicted, based
upon current market conditions, the Company's share of Spinnaker's near-term
earnings is not anticipated to be significant. On September 28, 1999, Spinnaker
Exploration Company completed an initial public offering and the Company's
ownership level was reduced to approximately 26%.
During the first quarter of 1999, the Company began certain
restructuring efforts that resulted in restructuring charges for employee
termination costs, vessel derigging costs, lease termination/revision costs and
related equipment impairments in order to reduce capacity across its lines of
business in response to depressed activity in the oil field services sector. The
Company continues to evaluate the current and projected market conditions and
intends to continue reorganizing its operations to remove older, less productive
seismic equipment from the market. As a result, a charge of $21.9 million ($17.0
million, net of tax) was incurred during the third quarter for additional
restructuring costs. This charge was partially offset by one-time gains totaling
$15.3 million related to certain tax issues that were resolved during the
current quarter.
Effective January 1, 1999, the Company adopted Statement of Position
98-5, "Reporting on the Costs of Start-up Activities." Accordingly, the Company
expensed all start-up costs, which before had been capitalized, in connection
with the initiation of new business lines and
<PAGE> 5
areas of business. Previously, the Company capitalized start-up costs and
expensed them over either a one-year or a three-year period, depending upon the
nature of the cost. The $20.0 million in expensed costs, net of tax, included
expenditures related to the start-up of the PGS floating production business,
the reservoir monitoring business, and the multi-component, vertical cable and
land seismic businesses, as well as costs related to opening various worldwide
offices as the Company expanded its geographic operations. Any future start-up
costs will be expensed as incurred.
RESULTS OF OPERATIONS
Third quarter revenue increased by approximately 3% to $219.5 million,
as compared to the same period of 1998. The production services group
contributed $108.1 million of total quarterly revenue, compared to $48.8 million
for the third quarter of 1998. Increased 1999 production services revenue can be
primarily attributed to revenue from the operations of Atlantic Power (which was
acquired in August 1998) and the Ramform Banff and Petrojarl Varg (which were
not a part of 1998 results). Geophysical services revenue for the third quarter
of 1999 was $111.4 million, as compared to $164.6 million for the same period of
the previous year. The 32% decline in geophysical services revenue resulted from
continued reduced demand for oil field services due to delays and reductions in
exploration and production spending. Multi-client seismic revenue for the third
quarter and the nine months ended September 30, 1999, was $65.4 million and
$170.2 million, respectively, down 26% and 33%, respectively, from the same
periods of 1998.
Revenue for the nine-month period ended September 30, 1999, increased
by approximately 3% to $567.5 million, as compared to $550.5 million for the
same period of 1998. Production services revenue was $265.6 million, or 47% of
year-to-date 1999 revenue, versus 12% of 1998 revenue. Year-to-date geophysical
services revenue declined 38% to $301.8 million as compared to the same period
of 1998, primarily for the reasons noted above.
Cost of sales for the third quarter and the nine months ended September
30, 1999, increased by $34.3 million (62%) and $78.0 million (51%),
respectively, as compared to the same periods of 1998. The increases primarily
reflect the Company's production services activities, including operations of
the Ramform Banff and the newly acquired Petrojarl Varg. During the same periods
of 1998, production services activities included only the FPSO operations
acquired from Awilco ASA (effective May 19, 1998) and the activity of the
Atlantic Power Group (acquired effective August 31, 1998). While the Company
operated two additional Ramform seismic vessels during 1999 versus 1998, the
associated cost increase was more than offset by significant capacity reductions
in other parts of the geophysical services business.
Depreciation and amortization for the 1999 third quarter declined by
$12.8 million, or 17%, compared to the 1998 third quarter. This decrease
reflects the lower level of multi-client seismic revenue in 1999 (although the
overall amortization rate remained consistent with the rate achieved in 1998)
and the retirement of certain assets as part of the Company's restructuring
efforts, partially offset by higher depreciation related to Ramforms Victory and
Vanguard and the Ramform Banff and Petrojarl Varg, which were not a part of
results for 1998. Depreciation and amortization for the nine-month period ended
September 30, 1999, declined by $34.7 million, or 17%, compared to the same
period in 1998, primarily due to reduced multi-client seismic sales during 1999,
partially offset by the aforementioned seismic and production services fixed
asset additions.
<PAGE> 6
Selling, general and administrative costs for the 1999 third quarter
and nine-month period ended September 30, 1999, increased 5% and 15%,
respectively, over the same 1998 periods. These increases were generally due to
acquisitions and operations in the Company's production services group, which
was a part of the Company's operations for only a portion of 1998.
Net unusual items for the 1999 third quarter included $21.9 million
($17.0 million net of tax) in restructuring charges related to employee and
lease termination costs, vessel derigging costs and equipment impairments
directly related to restructured operations. These charges were partially offset
by $15.3 million in gains related to the resolution of certain tax issues during
the quarter. Net unusual items for the nine-month period ended September 30,
1999, included $74.0 million ($53.9 million net of tax) in employee and lease
termination costs, vessel derigging costs and equipment impairments directly
related to restructured operations, as well as $15.9 million in asset
impairments necessitated by market conditions. These charges were partially
offset by $19.1 million in UK lease gains associated with the Ramforms Victory
and Vanguard and the $15.3 million in tax gains noted above.
Net financial expense for the 1999 third quarter was $26.2 million, 88%
greater than expense for the comparable period of 1998. The increase in the
interest expense component was primarily due to higher levels of indebtedness
under the Company's revolving credit facility and the issuance during the 1999
third quarter of $200 million of senior unsecured notes. For the nine months
ended September 30, 1999, net financial expense was $35.7 million greater than
expense for the same period of 1998. The issuance of $1.1 billion in new notes
subsequent to the first quarter of 1998 increased the Company's 1999 interest
costs over 1998 levels, as did higher levels of indebtedness under the Company's
revolving credit facilities in 1999. The increased debt service was incurred
largely to fund the Awilco FPSO acquisition, the Ramform Banff, the Ramforms
Viking, Valiant, Victory and Vanguard and the acquisition of the Petrojarl Varg.
A benefit for income taxes was provided on current income (loss) from
operations. The benefit was generated from losses on operations in high-tax
jurisdictions, a result of the current depressed conditions in the oilfield
services market, combined with significant net income earned in low or no-tax
jurisdictions. As PGS' tax structure generates tax benefits when market
conditions are less than favorable, this situation is expected to continue as
long as the current market conditions remain depressed. For the third quarter
and nine months ended September 30, 1999, the tax benefit associated with
current operations was $4.9 million and $2.6 million, respectively. The
remaining benefit recorded for these periods relates to the unusual items
recorded by the Company during the year.
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
The Company's future capital requirements consist primarily of capital
expenditures for the Company's 3D multi-client library and working capital for
the seasonal nature of the Company's business. The Company's future capital
requirements also include normal, ongoing equipment replacement and
refurbishment needs, although it is expected that these needs will be reduced as
a result of the Company's restructuring efforts.
Capital expenditures of $386.4 million in the third quarter of 1999 and
$630.1 million for the first nine months of 1999 related primarily to the
acquisition of the Petrojarl Varg, final payments on the Ramform Victory
(delivered in January 1999) and the Ramform Vanguard (delivered in April 1999),
the Ramform Banff and ongoing maintenance capital expenditures.
<PAGE> 7
During the third quarter and the first nine months of 1999, the Company
invested $84.4 million and $268.4 million, respectively, in its multi-client
library, primarily in strategic, deepwater seismic surveys in the North Sea, in
the Gulf of Mexico and in the West African and Asia Pacific regions. These
investments reflect the Company's evaluation of the future market demand for
non-exclusive surveys in conjunction with the best use for its high-technology,
cost-effective seismic crews in the current environment.
Despite the current oil and gas environment, the Company believes that
its multi-client investment will provide a valuable revenue base. Slightly over
90% of the multi-client library as of September 30, 1999, was acquired during
the preceding 30 months, while the remainder is less than five years old. The
Company's multi-client library provides oil and gas companies with one of the
most cost-effective exploration and development products possible -- and one
that is available immediately. In difficult market conditions, the multi-client
data allows oil and gas companies to focus their investments and efforts on
readily identifiable exploration and development opportunities.
A substantial amount of the Company's capital expenditures and
investment in its multi-client library is discretionary. Capital expenditures
and investment in the Company's multi-client library during 1999 are expected to
range between $600 million and $640 million. The April 1999 delivery of the
Ramform Vanguard marked the end of our construction program for streamer seismic
vessels. In addition, the Company completed its acquisition of the Petrojarl
Varg for approximately $350 million in July 1999. The Company does not have any
major commitments for future capital expenditures. However, we intend to pursue
additional opportunities to provide floating production, storage and offloading
systems and advanced geophysical services to our customers. Any investment in
floating production assets will be subject to obtaining long-term contracts for
those assets.
CAPITAL RESOURCES AND LIQUIDITY
The Company has historically financed its activities through cash flows
from operations, bank credit facilities, equity financing and the issuance of
debt.
At September 30, 1999, the Company had $140.0 million in available
revolving credit facilities.
In connection with the acquisition of the Petrojarl Varg, the Company
obtained a fully underwritten unsecured bank facility in the amount of $350.0
million. On July 21, 1999, the full amount of this bridge facility was drawn to
pay for the acquisition of the Petrojarl Varg, which closed on July 22, 1999.
On July 22, 1999, the Company sold $200 million of 8.15% senior
unsecured notes, resulting in net proceeds to the Company of $195.4 million. The
notes have an effective yield of 8.24% and mature on July 15, 2029. Interest
payments are made semiannually. Net proceeds from this offering were used to
repay a portion of the aforementioned bridge facility.
In August 1999, the Company completed an offering of 11,159,500 ADS and
shares, resulting in net proceeds to the Company of $214.0 million. The net
proceeds from this offering were used to repay the remaining amount drawn under
the aforementioned bridge facility, as well as certain bank debt.
The Company expects to finance its future capital expenditures,
multi-client investments
<PAGE> 8
and working capital needs through a combination of operating cash flows, bank
credit facilities, equity offerings and debt financing. There can be no
assurance that such sources of funds will be available in the future or be
available at costs acceptable to the Company. As a result, in addition to
analyzing operating market conditions and/or the award of long-term contracts,
the Company routinely analyzes available sources of financing before committing
to significant capital expenditures.
The Company believes that cash on hand, operating cash flows and
available bank credit facilities will be adequate to meet the Company's current
commitments for capital expenditures, anticipated multi-client investments and
working capital requirements.
Petroleum Geo-Services is a technologically focused oilfield service
company principally involved in two businesses -- geophysical services and
production services. PGS acquires, processes, manages and markets 3D, 4D and 4C
marine seismic data. Such data is used by oil and gas companies in the
exploration for new reserves, the development of existing reservoirs and the
management of producing oil and gas fields. In its production services business,
PGS owns four floating production, storage and offloading systems (FPSOs) and
operates numerous offshore production facilities for oil and gas companies.
FPSOs permit oil and gas companies to produce oil and gas from offshore oil and
gas fields more cost-effectively. PGS also provides data management solutions,
4D reservoir monitoring and characterization studies, and other specialized
geophysical services. PGS operates on a worldwide basis with headquarters in
Houston, Texas, and Oslo, Norway.
* * * * * * * * * * * * * * * * * * * *
The information included herein contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and its
perception of historical and future trends, on general economic and business
conditions and on numerous other factors, including expected future
developments, many of which are beyond the control of the Company. Such
forward-looking statements are also subject to certain risks and uncertainties
as disclosed by the Company in its filings with the Securities and Exchange
Commission. As a result of these factors, the Company's actual results may
differ materially from those indicated in, or implied by, such forward-looking
statements.
- FINANCIAL TABLES TO FOLLOW -
<PAGE> 9
Petroleum Geo-Services ASA
Consolidated Income Statements
<TABLE>
<CAPTION>
Quarter ended Nine months ended Year ended
September 30, September 30, December 31,
----------------------- ------------------------ ------------
(In thousands of dollars, except for share data) 1999 1998 1999 1998 1998
----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $ 219,470 $ 213,392 $ 567,470 $ 550,464 $ 761,762
----------- ---------- ----------- ---------- ----------
Cost of sales 89,387 55,078 230,815 152,828 236,647
Depreciation and amortization 62,951 75,763 170,293 205,000 273,799
Research and technology costs 2,543 3,661 13,612 11,477 14,508
Selling, general and administrative costs 17,820 17,003 52,817 46,067 67,103
Unusual items, net (1) 6,537 2,950 55,465 2,950 25,737
----------- ---------- ----------- ---------- ----------
Total operating expenses 179,238 154,455 523,002 418,322 617,794
----------- ---------- ----------- ---------- ----------
Operating profit 40,232 58,937 44,468 132,142 143,968
Financial expense, net (3) (26,179) (13,953) (67,063) (31,376) (40,241)
Other income, net (3,732) 7,040 (2,308) 5,925 39,820
----------- ---------- ----------- ---------- ----------
Income (loss) before income taxes and cumulative
effect of accounting change 10,321 52,024 (24,903) 106,691 143,547
Provision (benefit) for income taxes (9,781) 11,404 (22,409) 25,139 31,950
----------- ---------- ----------- ---------- ----------
Income (loss) before cumulative effect
of accounting change 20,102 40,620 (2,494) 81,552 111,597
Cumulative effect of accounting change, net (2) -- -- (19,977) -- --
----------- ---------- ----------- ---------- ----------
NET INCOME (LOSS) $ 20,102 $ 40,620 $ (22,471) $ 81,552 $ 111,597
=========== ========== =========== ========== ==========
Basic earnings (loss) per share before cumulative effect
of accounting change $ 0.21 $ 0.47 $ (0.03) $ 1.02 $ 1.36
Cumulative effect of accounting change, net (2) -- -- $ (0.21) -- --
----------- ---------- ----------- ---------- ----------
Basic earnings (loss) per share $ 0.21 $ 0.47 $ (0.24) $ 1.02 $ 1.36
=========== ========== =========== ========== ==========
Diluted earnings (loss) per share before cumulative effect
of accounting change $ 0.20 $ 0.46 $ (0.03) $ 0.99 $ 1.32
Cumulative effect of accounting change, net (2) -- -- $ (0.21) -- --
----------- ---------- ----------- ---------- ----------
DILUTED EARNINGS (LOSS) PER SHARE $ 0.20 $ 0.46 $ (0.24) $ 0.99 $ 1.32
=========== ========== =========== ========== ==========
Basic shares outstanding 97,948,880 87,127,202 92,499,346 79,823,189 82,260,652
----------- ---------- ----------- ---------- ----------
Diluted shares outstanding 99,678,053 88,903,218 92,499,346 82,784,214 84,794,836
=========== ========== =========== ========== ==========
</TABLE>
NOTES:
(1) Unusual items, net in 1999 includes $74.0 million (of which $21.9 million
($17.0 million net of tax) was incurred during the third quarter of 1999)
in employee termination costs, lease termination/revision costs, vessel
derigging costs and equipment impairments directly related to restructured
operations, as well as $15.9 million in asset impairments necessitated by
market conditions. Additionally, unusual items, net for 1999 includes $19.1
million in UK lease gains related to the Ramform Victory and the Ramform
Vanguard (which were delivered in January and April of 1999, respectively)
as well as $15.3 million in gains related to the resolution of certain tax
issues during the third quarter of 1999.
(2) Effective January 1, 1999, the Company adopted Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-up Activities." This SOP requires
that the initial, one-time costs related to introducing new products and
services, conducting business in new territories or commencing new
operations be expensed as incurred. Accordingly, the Company has recognized
a charge to income of $28.0 million ($20 million net of tax) as the
cumulative effect of the change in accounting principle.
(3) In the second quarter of 1999, PGS Trust I, a Delaware statutory business
trust and a wholly owned finance subsidiary of the Company, issued $144
million liquidation amount of 9.625% trust preferred securities to the
public. Financial expense, net includes $4.0 million in minority interest
expense related to the trust's securities. The sole assets of the trust are
junior subordinated debentures of the Company with an aggregate principal
amount equal to the aggregate liquidation amount of the trust preferred
securities and the common securities of the trust issued to a subsidiary of
the Company, which bear interest at the rate of 9.625% per year and mature
on June 30, 2039. The trust has no independent assets or operations. The
declaration of trust of the trust, the junior subordinated debentures, the
indenture and the Company's undertakings pursuant to its guarantee related
to the trust preferred securities, when considered together, constitute a
full and unconditional guarantee by the Company of the obligations of the
trust under the trust preferred securities.
(4) Certain reclassifications have been made to conform prior year amounts with
the current year presentation.
<PAGE> 10
Petroleum Geo-Services ASA
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands of dollars, except for share data) 1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 50,732 $ 53,273
Accounts receivable, net 230,446 247,694
Other current assets 98,245 130,881
----------- -----------
Total current assets 379,423 431,848
Multi-client library, net 769,345 553,415
Property and equipment, net 2,462,376 1,948,635
Goodwill and other long-term assets, net 452,607 475,365
----------- -----------
TOTAL ASSETS $ 4,063,751 $ 3,409,263
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt and
capital lease obligations $ 28,809 $ 157,413
Accounts payable and accrued expenses 273,972 233,821
Income taxes payable 8,771 23,724
----------- -----------
Total current liabilities 311,552 414,958
Long-term debt 1,880,454 1,402,695
Long-term capital lease obligations 15,586 18,975
Other long-term liabilities 106,184 109,794
Deferred income taxes 23,257 65,690
----------- -----------
Total liabilities 2,337,033 2,012,112
----------- -----------
Commitments and contingencies
Guaranteed preferred beneficial interest in PGS junior
subordinated debt securities (3) 139,049 --
Shareholders' equity:
Common stock, par value NOK 5; issued & outstanding 101,583,087 shares at
September 30, 1999 and 89,540,537 shares at December 31, 1998 70,109 62,312
Additional paid-in capital 1,209,237 996,499
Retained earnings 321,184 343,654
Accumulated other comprehensive loss (12,861) (5,314)
----------- -----------
Total shareholders' equity 1,587,669 1,397,151
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,063,751 $ 3,409,263
=========== ===========
</TABLE>
<PAGE> 11
Petroleum Geo-Services ASA
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Quarter ended Nine months ended Year ended
September 30, September 30, December 31,
---------------------- ---------------------- ------------
(In thousands of dollars) 1999 1998 1999 1998 1998
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 20,102 $ 40,620 $ (22,471) $ 81,552 $ 111,597
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization charged to expense 62,951 75,763 170,293 205,000 273,799
Unusual items and accounting change, net of tax 1,649 -- 47,434 -- 17,774
Provision for deferred income taxes (4,893) 3,813 (2,462) 9,507 9,930
Working capital changes and other items 8,549 (10,961) (12,868) (74,692) (138,444)
--------- --------- --------- --------- ---------
Net cash provided by operating activities 88,358 109,235 179,926 221,367 274,656
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in multi-client library (84,351) (99,606) (268,379) (273,248) (388,228)
Capital expenditures (386,352) (124,454) (630,068) (402,369) (521,630)
Cash acquired in purchase acquisition -- 601 -- 55,398 55,398
Other items, including net proceeds from UK leases (4,265) 58,130 7,445 41,268 37,652
--------- --------- --------- --------- ---------
Net cash used in investing activities (474,968) (165,329) (891,002) (578,951) (816,808)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt 195,412 -- 195,412 644,213 891,506
Net proceeds from issuance of guaranteed preferred beneficial
interest in PGS junior subordinated debt securities -- -- 138,914 -- --
Net proceeds from issuance of common stock 216,795 2,333 220,531 7,885 7,940
Repayment of long-term debt (4,076) (24,431) (17,202) (477,066) (486,797)
Net increase (decrease) in revolving and short-term debt (14,759) 121,899 173,428 166,404 79,385
Principal payments under capital lease obligations (1,427) (5,427) (11,298) (19,105) (24,380)
Lease financing of owned equipment -- -- 8,812 -- --
--------- --------- --------- --------- ---------
Net cash provided by financing activities 391,945 94,374 708,597 322,331 467,654
--------- --------- --------- --------- ---------
Effect of exchange rate changes in cash and cash equivalents (96) (162) (62) 203 280
Net increase (decrease) in cash and cash equivalents 5,239 38,118 (2,541) (35,050) (74,218)
Cash and cash equivalents at beginning of period 45,493 54,323 53,273 127,491 127,491
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,732 $ 92,441 $ 50,732 $ 92,441 $ 53,273
========= ========= ========= ========= =========
</TABLE>
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PETROLEUM GEO-SERVICES ASA
(Registrant)
By: /s/ William E. Harlan
------------------------------------------
William E. Harlan
Vice President, Chief Accounting Officer
and Controller
Date: October 22, 1999
