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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 March 2000
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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
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(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
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[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]
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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. 333-90379, 333-9518 AND 333-9520) AND PART OF THE REGISTRATION
STATEMENT OF PETROLEUM GEO-SERVICES ASA ON FORM F-4 (REGISTRATION NO. 333-9702).
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RECENT EVENTS
During the fourth quarter of 1999, our Ramform Banff floating
production, storage and offloading ("FPSO") facility achieved lower than
expected production due to operational difficulties associated with the
facility's power generation system. We have identified the cause of the
operational difficulties and have taken temporary measures to mitigate them. We
expect that a permanent solution will be implemented during a planned shutdown
in the first half of 2000.
Also contributing to reduced production were difficulties associated
with the operation of the oil offloading system during severe North Sea weather
conditions. We believe that we have developed a solution to the offloading
problems that should allow for more consistent production during difficult
weather periods. The solution involves a new offloading system, and we do not
believe that the additional daily operating costs associated with the new system
will be material. We expect this new system to be implemented during the summer
of 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the discussion under this caption in conjunction with
our consolidated financial statements and the related notes we have previously
filed with the Securities and Exchange Commission and those included elsewhere
in this report. This discussion is based upon, and such financial statements
have been prepared in accordance with, US GAAP. The following information
contains forward-looking statements. You should refer to the section captioned
"Forward-Looking Information" in our annual report on Form 20-F for the year
ended December 31, 1998 for cautionary statements related to forward-looking
statements.
1999 Compared with 1998
Revenue for the year ended December 31, 1999 totaled $788.2 million, an
increase of approximately 3% over revenue for the year ended December 31, 1998.
The production services group contributed $368.3 million of 1999 revenue, versus
$139.5 million for 1998. The increase in production services revenue in 1999
resulted from the FPSO operations acquired from Awilco ASA in May 1998 and from
the operations of Atlantic Power Group Limited acquired in August 1998, the
Ramform Banff, which began production in January 1999, and the Petrojarl Varg,
acquired in July 1999. Geophysical services revenue for 1999 totaled $419.9
million, a decline of 33%, or $202.4 million, from 1998. The depressed market
for oil field services during 1999 resulted in lower multi-client and contract
sales revenue compared to 1998 levels.
Cost of sales for the year ended December 31, 1999 increased by $97.8
million, or 39%, as compared to the prior year. Cost of sales as a percentage of
revenue was 44% in 1999 as compared to 33% in 1998. The increase in cost of
sales primarily reflects the expansion of our production
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services operations as noted above, partially offset by lower overall costs in
the geophysical services operations resulting from our capacity reductions and
restructuring efforts implemented during 1999.
Depreciation and amortization for the year ended December 31, 1999
declined by $35.2 million, or 13%, as compared to the prior year. Depreciation
and amortization represented 30% and 36% of 1999 and 1998 revenue, respectively.
The decrease in 1999 resulted primarily from reduced multi-client seismic
revenue in that year (although the overall amortization rate remained consistent
with that of 1998) and the retirement of certain assets as part of our
restructuring efforts. This decrease was partially offset by (1) higher
depreciation related to the Ramforms Victory and Vanguard, which were delivered
in 1999 and therefore not a part of 1998 operations, and (2) the expansion of
the production services operations as noted above.
Selling, general and administrative costs for 1999 increased $4.6
million, or 7%, as compared to 1998. This increase was primarily due to
acquisitions and expanded operations in our production services group, which was
a part of our operations for only a portion of 1998.
Unusual items for the year ended December 31, 1999 totaled $89.9
million, which included $74.0 million 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 caused by market conditions.
Net financial expense for the year ended December 31, 1999 increased by
$55.7 million as compared to the prior year. The increase was primarily due to
an increase in outstanding debt during 1999 incurred primarily to finance the
delivery of the Ramforms Victory and Vanguard and the acquisition of the
Petrojarl Varg.
Other income, net for the year ended December 31, 1999 totaled $23.7
million, a decrease of 39% as compared to the prior year. For 1999, other
income, net included $19.1 million in gains associated with UK leases that we
implemented on some of our vessels. For 1998, other income, net included $32.5
million of such gains.
An income tax benefit was provided on current income (loss) from
operations as a result of (1) losses relating to operations in high-tax rate
jurisdictions due to depressed conditions in the oil field services market
during 1999; (2) significant income earned in low or no-tax rate jurisdictions;
and (3) the recognition of $15.3 million in tax gains related to the successful
resolution of certain tax issues.
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Capital Requirements
Our capital requirements consist primarily of capital expenditures
related to:
o seismic vessels and equipment
o FPSO systems
o investments in our 3D multi-client library
o computer processing, data management and reservoir monitoring
equipment
o working capital related to growth and the seasonal nature of our
business
In prior years, our capital requirements have related not only to normal ongoing
equipment replacement and refurbishment needs, but also to increases in
capacity. The most significant additions to capacity occurred in our seismic
data acquisition operations and our FPSO operations. In 2000, we expect to
reduce significantly capital expenditures related to capacity additions.
Capital expenditures of $668 million for 1999 related primarily to the
acquisition of the Petrojarl Varg in July 1999, final payments on the Ramform
Victory (delivered in January 1999), the Ramform Vanguard (delivered in April
1999) and the Ramform Banff (which commenced production in the first quarter of
1999) and ongoing maintenance capital expenditures.
During 1999, we invested $339 million in our multi-client library,
primarily in strategic, deepwater seismic surveys in the North Sea, the Gulf of
Mexico, Brazil and the West African and Asia Pacific regions. These investments
reflect our evaluation of the future market demand for non-exclusive surveys.
Despite the current oil and gas environment, we believe that our
multi-client investment provides a valuable revenue base. Approximately 90% of
the investment in our multi-client library as of December 31, 1999 was acquired
during the preceding 24 months, while the remainder is less than five years old.
We believe that our multi-client library provides oil and gas companies with a
cost-effective exploration and development product, and one that is available
immediately. In difficult market conditions, the multi-client data allow oil and
gas companies to focus their investments and efforts on readily identifiable
exploration and development opportunities.
A substantial amount of our capital expenditures and investments in our
multi-client library is discretionary, and we expect to reduce substantially
such expenditures and investments in 2000. In addition, we currently do not have
any major commitments for future capital expenditures. We intend, however, to
pursue additional opportunities to provide FPSO systems and advanced geophysical
services to our customers. We expect that any substantial investment in FPSO
assets will be subject to obtaining long-term contracts for those assets.
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Capital Resources and Liquidity
We have historically financed our activities through cash flows from
operations, bank credit facilities, equity financing and the issuance of debt.
At December 31, 1999, we had $30 million in available revolving credit
facilities. Our unsecured five-year $430 million revolving credit facility bears
interest at a LIBOR-based rate plus a margin of either 0.35% per annum or 0.40%
per annum, depending upon the level of our indebtedness.
In June 1999, one of our special purpose subsidiaries sold $144 million
liquidation amount of 9.625% Trust Preferred Securities, resulting in net
proceeds to us of $139 million. These securities have an annual distribution
rate of 9.625% payable quarterly in arrears. We may, however, defer
distributions for up to five years without penalty. We can redeem these
securities at their liquidation amount ($25 per security) on or after June 30,
2004, and we must redeem them no later than June 30, 2039. The net proceeds from
this trust preferred offering were used to repay amounts outstanding under our
revolving credit and short-term credit facilities.
In connection with the acquisition of the Petrojarl Varg, we obtained a
$350 million bank facility. We borrowed the full amount of this facility in July
1999 to pay for the acquisition of the Petrojarl Varg.
In July 1999, we issued $200 million of 8.15% senior notes due 2029.
The net proceeds from the offering, totaling $195.4 million, were used to repay
indebtedness outstanding under the facility used to fund the Petrojarl Varg
acquisition.
In August 1999, we completed an offering of 11,159,000 American
Depositary Shares and shares, resulting in net proceeds of $214.0 million. The
net proceeds were used to repay the remaining indebtedness outstanding under the
Petrojarl Varg bank credit facility and other indebtedness outstanding under our
bank credit facilities.
We expect to finance our future capital expenditures, multi-client
investments and working capital needs through a combination of operating cash
flows, sales of non-core assets, bank credit facilities, equity offerings and
other debt financing. We cannot assure you that such sources of funds will be
available in the future or be available at costs acceptable to us. As a result,
in addition to analyzing operating market conditions and/or the award of
long-term contracts, we routinely analyze our available sources of financing
before committing to significant capital expenditures.
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Petroleum Geo-Services ASA
Consolidated Income Statements
<TABLE>
<CAPTION>
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Year ended
December 31,
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(In thousands of dollars, except for share data) 1999 1998
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<S> <C> <C>
Revenue $ 788,160 $ 761,762
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Cost of sales 348,919 251,155
Depreciation and amortization 238,576 273,799
Selling, general and administrative costs 71,738 67,103
Unusual items, net 89,855 25,737
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Total operating expenses 749,088 617,794
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Operating profit 39,072 143,968
Income from equity investments (4,935) 854
Financial expense, net (2) (95,969) (40,241)
Other income, net 23,650 38,966
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Income (loss) before income taxes and cumulative
effect of accounting change (38,182) 143,547
Provision (benefit) for income taxes (41,890) 31,950
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Income (loss) before cumulative effect
of accounting change 3,708 111,597
Cumulative effect of accounting change, net (1) (19,977) --
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NET INCOME (LOSS) $ (16,269) $ 111,597
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Basic earnings (loss) per share before cumulative effect
of accounting change $ 0.04 $ 1.36
Cumulative effect of accounting change, net (1) $ (0.21) --
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Basic earnings (loss) per share $ (0.17) $ 1.36
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Diluted earnings (loss) per share before cumulative effect
of accounting change $ 0.04 $ 1.32
Cumulative effect of accounting change, net (1) $ (0.21) --
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DILUTED EARNINGS (LOSS) PER SHARE $ (0.17) $ 1.32
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Basic shares outstanding 94,767,967 82,260,652
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Diluted shares outstanding 94,767,967 84,794,836
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</TABLE>
NOTES:
(1) 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.
(2) For information regarding $143.8 million liquidation amount of 9.625% trust
preferred securities issued by PGS Trust I, a statutory business trust
formed by the Company, see footnote (3) to the Consolidated Income
Statement contained in the Company's Report on Form 6-K dated October 22,
1999. Financial expense, net for the year ended December 31, 1999, includes
$7.7 million in minority interest expense related to the trust's
securities. The sole assets of the trust are junior subordinated debentures
of the Company that bear interest at the rate of 9.625% per year and mature
on June 30, 2039. As of December 31, 1999, the trust held $148.2 million
principal amount of such debentures.
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Petroleum Geo-Services ASA
Consolidated Balance Sheets
<TABLE>
<CAPTION>
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December 31, December 31,
(In thousands of dollars, except for share data) 1999 1998
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 63,044 $ 53,273
Accounts receivable, net 240,634 247,694
Other current assets 93,256 130,881
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Total current assets 396,934 431,848
Multi-client library, net 816,423 553,415
Property and equipment, net 2,427,898 1,948,635
Goodwill and other long-term assets, net 467,537 475,365
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TOTAL ASSETS $ 4,108,792 $ 3,409,263
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt and
capital lease obligations $ 22,409 $ 157,413
Accounts payable and accrued expenses 228,657 233,821
Income taxes payable 9,805 23,724
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Total current liabilities 260,871 414,958
Long-term debt 1,986,143 1,402,695
Long-term capital lease obligations 12,387 18,975
Other long-term liabilities 104,736 109,794
Deferred income taxes 15,613 65,690
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Total liabilities 2,379,750 2,012,112
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Commitments and contingencies
Guaranteed preferred beneficial interest in PGS junior
subordinated debt securities (2) 139,164 --
Shareholders' equity:
Common stock, par value NOK 5; issued & outstanding
101,609,587 and 89,540,537 shares at December 31, 1999
and 1998, respectively 70,126 62,312
Additional paid-in capital 1,208,873 996,499
Retained earnings 327,386 343,654
Accumulated other comprehensive loss (16,507) (5,314)
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Total shareholders' equity 1,589,878 1,397,151
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,108,792 $ 3,409,263
=================================================================================================
</TABLE>
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Petroleum Geo-Services ASA
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
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Year ended
December 31,
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(In thousands of dollars) 1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (16,269) $ 111,597
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization charged to expense 238,576 273,799
Unusual items and accounting change, net of tax 47,434 17,774
Provision for deferred income taxes (10,106) 9,930
Working capital changes and other items (58,957) (138,444)
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Net cash provided by operating activities 200,678 274,656
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in multi-client library (338,718) (388,228)
Capital expenditures (667,869) (521,630)
Cash acquired in purchase acquisition -- 55,398
Other items, including net proceeds from UK leases 5,496 37,652
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Net cash used in investing activities (1,001,091) (816,808)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt 195,712 891,506
Net proceeds from issuance of guaranteed preferred beneficial
interest in PGS junior subordinated debt securities 138,914 --
Net proceeds from issuance of common stock 220,024 7,940
Repayment of long-term debt (29,924) (486,797)
Net increase (decrease) in revolving and short-term debt 283,334 79,385
Principal payments under capital lease obligations (13,437) (24,380)
Lease financing of owned equipment 15,512 --
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Net cash provided by financing activities 810,135 467,654
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Effect of exchange rate changes in cash and cash equivalents 49 280
Net increase (decrease) in cash and cash equivalents 9,771 (74,218)
Cash and cash equivalents at beginning of period 53,273 127,491
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,044 $ 53,273
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</TABLE>
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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
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(Registrant)
By: /s/ WILLIAM E. HARLAN
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William E. Harlan
Vice President, Chief Accounting Officer
and Controller
Date: March 13, 2000
