ASKER, Norway – TGS says it is implementing a global cost reduction and efficiency plan.
In view of the weak market conditions, TGS has continued to review its cost base in order to identify organizational efficiencies, improvement potential, and cost saving opportunities across all business units and levels. The company says it will implement a number of measures and changes that will further improve its competitiveness and support operational cash flow.
As a result, TGS’ global workforce will be reduced by about 130 people, corresponding to around 16% of the total workforce. This will reduce operating expenses by about $13 million per annum from the beginning of 2016. A restructuring cost of $8 million will be charged to the accounts for 4Q 2015.
Furthermore, the company has also chosen to adopt more prudent assumptions with regards to the length of the downturn in the evaluation of the multi-client library. The revised assumptions will lead to total impairments for selected surveys of approximately $150 million to be recognized in the 4Q 2015 accounts. These assumptions are influenced by recent statements made by large oil companies regarding reductions in E&P budgets not only for 2016 but also for 2017 and beyond.
The impaired surveys account for approximately 10% of the total number of surveys in the balance sheet. The impaired surveys, which were all acquired during the peak of the market with substantially higher cost levels than seen currently, fall into two categories:
• Projects in frontier areas where demand deterioration has been greater than the general market demand trends
• Projects in areas with greater political and regulatory risk, which typically have attracted lower customer interest in the current challenging market.
Robert Hobbs, CEO of TGS, said: “Although the TGS library continues to perform well compared to the industry, we have chosen to take a cautious view when evaluating the net book values. The cost of shooting the same seismic today is dramatically lower than two to three years ago and this has of course played a role in our assessment.”
As announced in October, the company has received commitments of a revolving credit facility of minimum $75 million (up from $50 million under the existing facility). Closing of this facility is expected within the next two to three weeks.
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