Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company is exposed to certain credit risk related to off-balance items such as long-term agreements entered into with
customers and suppliers. The Company manages its exposure to such risks through continuously monitoring of counterparties.
The Company also monitors the counter party risk of its banking partners, including counterparties on derivatives and where
cash is held on deposits.
The carrying amount of financial assets represents the maximum credit exposure. The Company is exposed to credit risk on
certain off-balance sheet items. In addition the Company has outstanding guarantees (see Note 25).
As described above, the Company’s treasury function continuously monitors counterparties to mitigate credit risk. As of
December 31, 2011, the Company is not aware of any specific credit risk related to counterparties other than those described.
Exposure to liquidity risk
The Company is exposed to liquidity risk related to the payment of debt and derivatives with negative value. The Company tries
to minimise liquidity risk through ensuring access to a diversified set of funding sources, and management of maturity profile on
debt and derivatives (see Note 25 and tables above for maturity profile on debt and above for derivatives with negative value).
Note 27 - Leases, Commitments and Provisions
Leases
The Company has operating lease commitments expiring at various dates through 2023. Future minimum payments related to
non-cancellable operating and finance leases were as follows:
December 31, 2011 December 31, 2010
(In thousands of dollars)
Operating
leases
Finance
leases
Operating
leases
Finance
leases
2011 --- --- 63,816 ---
2012 69,790 107 37,332 ---
2013 45,453 62 28,428 ---
2014 29,740 --- 21,678 ---
2015 18,025 --- 17,076 ---
2016 6,523 --- --- ---
Thereafter 5,256 --- 10,986 ---
Total 174,787 169 179,316 ---
Imputed interest (13) ---
Net present value of finance lease obligations 156 ---
Current portion of finance lease obligations 96 ---
Long-term portion of finance lease obligations 60 ---
The Company had no finance lease arrangements for the year ended December 31, 2010.
The future minimum payments under the Company's operating leases relate to the Company's operations as follows:
December 31,
(In thousands of dollars) 2011 2010
Marine seismic and support vessels 88,040 82,826
Buildings 70,992 77,285
Data processing operations equipment 2,915 5,493
Other 12,840 13,712
Total 174,787 179,316
Rental expense for operating leases, including leases with terms of less than one year, was $103.3 million, $73.5 million and
$89.5 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Claim towards a Polish yard
In 2008, PGS subsidiary Arrow Seismic Invest IV LTD (“Arrow IV”) terminated a contract with Polish yard Stocznia Marynarki
Wojennej S.A. (the “yard”) for conversion works on the vessel Southern Explorer. The yard has subsequently detained the
vessel as security for alleged claims against Arrow IV, whereas Arrow IV has in December 2009 initiated a law suit against the
yard in which Arrow IV claims damages and repossession of the vessel. The yard is now in bankruptcy proceedings and the
estate is party to the dispute which is pending before Danish courts. PGS does not consider it probable that the outcome will
have any adverse effect on the Company’s business, results of operation or financial condition.
Spanish leases
In connection with the purchase of Arrow (see Note 18) the Company became party to Spanish lease structures for the
construction of four high capacity seismic vessels (NB’s 532, 533, 534 and 535). The contracts for NB’s 532 and 533 were
cancelled in 2009 due to delays and the NB 535 was cancelled in 2010. The NB 534 (named PGS Apollo) was delivered in
2010. See Note 18.
35 PGS ANNUAL REPORT 2011
106 PGS Annual Report 2011