Annual Report 2011 - PGS

Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General Information about the Company and Basis of Presentation
General information
Petroleum Geo-Services ASA (“PGS ASA”) is a public limited liability company established under the laws of the Kingdom of
Norway in 1991. Unless stated otherwise, references herein to the “Company” and “PGS” refer to Petroleum Geo-Services ASA
and its majority owned subsidiaries and affiliates, companies in which it has and controls a majority voting interest.
PGS is a technologically focused oilfield service company principally involved in providing geophysical services worldwide. PGS
provides a broad range of geophysical and reservoir services, including seismic data acquisition, processing, interpretation and
field evaluation. The Company’s headquarters are at Lysaker, Norway. See further discussion of the Company's services in
Note 6.
The Company has prepared its consolidated financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”). IFRS as adopted by the EU differ in certain respects from IFRS
as issued by the International Accounting Standards Board (“IASB”). References to IFRS hereafter should be construed as
references to IFRS as adopted by the EU. The consolidated financial statements have been prepared under the historical cost
basis, except for available-for-sale financial assets and derivative financial instruments that have been measured at fair value
and assets impaired that are measured at value-in-use. The consolidated financial statements are presented in US Dollars (”$”
or “dollars”), which is defined as the presentation currency.
The consolidated financial statements were authorised for issue by the Board of Directors on March 22, 2012.
Significant transactions and events, including subsequent events
In February 2011 SeaBird Exploration PLC issued a convertible loan of $42.9 million directed towards the Company. In
December 2011 the instrument was partially repaid and partially restructured as a Senior Secured Bond (Coupon rate 6%) with
a nominal value of $31.7 million. A loss of $7.5 million was recognized in the consolidated statement of operations in 2011 as
the fair value of the new bond was lower than the nominal value.
In April 2011, the Company ordered two Ramform Titan-class vessels, with an option for another two vessels, from Mitsubishi
Heavy Industries Ltd. The vessels are the first in a new generation of Ramform vessels. Agreed deliveries of the two first
vessels are in 2013, and progress is according to plan. The options for delivery of the two additional vessels in 2015 are valid to
mid April 2012. The estimated total cost for each of the Ramform Titan-class is approximately $250 million, including
commissioning and a comprehensive seismic package, but excluding capitalized interest.
In third quarter 2011, the Company participated in the establishment of the Exploration & Production (E&P) focused investment
company Azimuth primarily by contributing existing equity holdings in smaller E&P companies. The Company owns 45.1% of
Azimuth and has entered into a cooperation agreement whereby the Company provides certain services to Azimuth and
whereby Azimuth has the right to buy, for cash and at fair value, up to 50% of any future equity settlement that PGS may
receive as payment for its library or services. The Company has no obligation to provide further funding of Azimuth and has no
guarantees outstanding.
In November 2011, the company issued $300 million Senior notes which are due in December 2018. The Senior notes were
issued at 98.638% of the principal amount with a coupon of 7.375%. The Senior notes are ranked as senior obligations of the
company and rank equally in right of payment with all other existing and future senior debt.
In fourth quarter 2011, the Company recognized an impairment of long-lived assets with a net effect of $2.6 million which
consists of adjusted estimates of impairment on the cancelled Arrow new builds in Spain of $4.6 million and reversal of
impairment on previously impaired equipment to be used on the vessels in construction of $2 million.
In fourth quarter 2011, the Company recognized an impairment of shares available for sale of $9.6 million due to a significant
decline in the share price of San Leon and Providence.
During 2011 the company made optional repurchases of the Convertible notes for a nominal amount of $153.9 million at an
average price of 98.83%. Per December 31, 2011 the Company owns $209.4 million of the Convertible notes representing
52.4% of the total outstanding issue.
Subsequent events
During 2012 the Company made optional repurchases of the Convertible notes for a nominal amount of $144.0 million at an
average price of 100.67%. Following the transactions the Company owns $353.4 million of the Convertible notes representing
88.4% of the total outstanding issue. According to the loan agreement the Company can redeem all of the Notes outstanding at
their principal amount if it has repurchased and cancelled more than 85% of the principal amount issued. On February 20, 2012
the Company announced its intention to exercise the option to redeem the remaining outstanding Notes, including accrued but
unpaid interest up until the redemption date set to March 16, 2012. On March 16, 2012 note holders for a nominal amount of
$1.1 million requested that their notes were converted to shares. This was effectuated on March 20, 2012 when the Company
transferred 28,079 of its treasury shares as settlement. The remaining outstanding amount was redeemed and cancelled on
March 22, 2012.
PGS ANNUAL REPORT 2011 2
PGS Annual Report 2011 73