Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Thank you. Good afternoon to our international callers, and good morning to our US participants. Again, my name is Suzanne McLeod. I'm with Petroleum Geo-Services Investor Relations, and we would like to welcome you today to PGS's conference call, following the release of the Company's earnings report for third quarter ended September 30, 2004. We trust that all of you have received a copy of our press release, and wish to thank you for your interest in Petroleum Geo-Services.
With us today from management are Svein Rennemo, Chief Executive Officer, Gottfred Langseth, Chief Financial Officer, Diz MacKewn, Group Senior Vice President, Geophysical, Sverre Skogen, President, PGS Production, and Sam Morrow, Senior Vice President, Finance and Treasurer. Management will make some opening remarks, and then we will open the line for questions. Please be sure to limit your questions to one per caller, as we would like to give everyone the opportunity to address management.
Before I turn the call over to Svein Rennemo, I want to comment on any forward looking statements that might be made during the course of this conference call. Certain statements made during this conference call are based on management's expectations or predictions of the future, and are therefore forward looking statements. The Company's actual results could differ materially from those projected in such forward looking statements.
Factors and risks that could cause actual results to differ materially from those expectations are detailed in today's earnings release and in the Company's filings with the SEC. Now, I'd like to turn the call over to Svein Rennemo.
SVEIN RENNEMO, CEO, PETROLEUM GEO-SERVICES: Good morning to you, all of you in America, and good afternoon to all participants here in Europe. The third quarter clearly brought significant improvement in revenues and financial performance for PGS. Revenues are up 19%, year-on-year, and adjusted EBITDA is up 21% from the third quarter 2003, and operating profit, at $74.6m is up 92% compared with the third quarter last year.
If we take the sequential development, all business units showed improvements, both in revenues and EBITDA compared to the second quarter. And obviously, we welcome the progress. We welcome the progress and still we are not yet where we would like to be, and in particular, we continue to strive for improved returns and notably improved returns within our Marine Geophysical business.
Cash-flow development in the quarter was favorable, particularly from operations at $135.3m and we also saw a notable increase in our cash balances. For the first time also the net debt was below $1b after our exit from Chapter 11.
As you all know, the November 16 represented a major milestone for PGS as we filed the 20-F for 2003, and thereby put the pieces in place for a re-listing in the US. Operationally, the HSE performance of PGS remains strong, and it is a very much focused area for this management to sustain that performance.
If we move to the Q3 financial summary, for the first 3 quarters of 2004, you see that we had a slight decline in total revenues, 2% down to $838.2m. We had a 10% decline in adjusted EBITDA, and remember, the first 3 quarters of 2003 were quarters of extremely strong financial performance for PGS. Cash-flow positive investments were at $198.2m for the first 3 quarters of this year, down 24% compared to last year.
Moving on then to Quarter 3 cash-flow post investments, as you see, cash-flow post investments for the quarter were roughly unchanged from the previous year at $87.8m, and you will see that this has been driven by improvements in Pertra and Production and declines in Marine and the Onshore Seismic businesses.
Moving on to Quarter 3 cash-flow positive investments, Quarter 3 versus the preceding quarter, and here you see the sustained improvements for all business units, in particular Pertra which had a good quarter with respect to production, and also with most of the investments being in the preceding quarter, in the second quarter of this year.
From them to the market share in 2004/2005, I guess the brief version of this is that we see better market conditions for Geophysical in 2005 than we are experiencing in total for 2004. And we see that partly in terms of the expected contract amount. We see it in terms of the employment of our fleet and the total industry fleet.
We see it in terms of increased use of High Density 3D Seismic, which to us in particular a favorable development, and we see it in a more active, onshore seismic market, both in the US and in some new onshore markets opening up. And obviously the continued favorable oil price environment, that serves Pertra specifically, but it also underpins in general the demand for our services medium to the longer-term.
I then turn the word onto Gottfred Langseth who will review in more detail the business unit performance and the Group's financials for the quarter.
GOTTFRED LANGSETH, CFO, PETROLEUM GEO-SERVICES: Thank you, Svein. Starting with Marine Geophysical, in Quarter 3, we saw improved contract revenues and margins compared to the first half of 2004. Our backlog into the winter season is good, in total $95m, compared to $150m end Q2.
Multi-client late sales in Quarter 3 were in line with Quarter 3 03. We had sales of $9.4m in the …