TGS

Overall Company Performance

• Total Q2 2026 revenues hit $400 million, up 30% year-over-year, driven by strong multi-client segment performance. EBITDA was $244 million (61% margin) and EBIT was $120 million (30% margin), in line with TGS historical averages.
• Streamer vessel utilization reached 94%, the highest level since Q3 2013, demonstrating the effectiveness of TGS's integrated model that shifts capacity between multi-client and contract work.
• Total new order inflow was $377 million in the quarter, bringing total end-of-Q2 order backlog to $756 million, flat relative to end-Q1 2026 and substantially higher than year-ago levels.
• The quarterly dividend of $0.155 per share was maintained, matching prior quarters.
• After quarter-end, TGS completed the sale of its North American Wellbeta (Well Data) business for $100 million upfront plus $15 million in conditional earnouts, strengthening the balance sheet and accelerating progress toward the net debt target range.

Operational Updates

• Active Q2 multi-client projects included two pre-funded projects in Brazil's Pelotas Basin, a multi-client 3D survey offshore Nigeria and 2D survey offshore Angola, completion of the APEX-1 OBN project in the US Gulf of Mexico, and commencement of the Osta Graben multi-client 3D project in the North Sea. TGS secured exclusive rights for multi-client acquisition offshore Brunei and announced a mega offshore survey project in Equatorial Guinea.
• Key contract awards included an 8-month 4D streamer contract offshore Angola and an extension to an existing multi-year OBN contract with a supermajor in the US Gulf of Mexico, maintaining TGS's leading position in that basin. One vessel is fully deployed on a long-term contract with a supermajor in Indonesia.
• TGS completed two technology-focused M&A transactions: a strategic collaboration with Alton to simplify OBN deployment and recovery, and the acquisition of Apparation Geoservices to gain proprietary simultaneous source acquisition technology that boosts operational productivity by up to 30%, filling the last gap in TGS's end-to-end seismic technology suite.

Strategic Context

• Management's long-term outlook is supported by a push-out of peak oil estimates to after 2050 (from 2030-2032 just two years ago), persistent declining reserve lives for supermajors, renewed focus on energy security and geopolitical portfolio diversification, improving investor sentiment toward E&P exploration spending, and strong recent exploration success that drives future activity.
• Offshore acreage awards have risen sharply in recent years, with most of this activity yet to translate into seismic and drilling spending, creating a strong leading indicator for a 2027 exploration upcycle.
• The WellData divestiture is aligned with TGS's strategy of sharpening focus on its integrated offshore technology offering, prioritizing higher-growth offshore opportunities relative to slower-growth onshore assets, and improving capital discipline to enable future increased shareholder returns.

• Full-year 2026 multi-client investment guidance is narrowed to $550 million from the prior range of $525-$575 million. Multi-client investment will be lower in H2 2026 than in H1 2026, as TGS shifts capacity back to contract work in line with previously announced plans. Total annual CapEx is expected to remain at similar levels to 2025, with current activity tracking in line with this projection.
• Full-year 2026 gross operating expenses are now expected to be slightly higher than the original guidance of $950 million, due to higher-than-anticipated H1 activity, a higher mix of work in high-cost regions, and elevated fuel prices. H2 costs are expected to trend back toward the original $950 million annualized run rate, with slightly higher costs in Q3 offset by lower costs in Q4.
• Streamer vessel utilization is expected to remain very strong at 85% in Q3 2026. TGS maintains its target long-term net debt range of $250-$350 million, and expects to reach this range by the end of 2026 following the WellData divestiture and projected strong H2 cash flow. Once the target range is hit, management will discuss increased shareholder distribution (dividends or share buybacks) with the board, with an update expected at the Q3 2026 earnings presentation.
• For the full marine market: 2026 global streamer capacity utilization is expected to be slightly up from 2025, with growth projected for 2027. 2026 OBN activity is expected to be slightly down from 2025, but tender activity for 2027 OBN projects has picked up, leading management to expect 2027 OBN growth.

1. Multi-client: Total revenue of $284 million (71% of total company revenue), consisting of $247 million in multi-client licensing revenue and $37 million in joint venture contract revenue. EBITDA was $253 million, up from $126 million in Q2 2025. Multi-client investments totaled $168 million in the quarter, up from $114 million in Q2 2025. 2. Marine Data Acquisition (MDA): Total revenue of $240 million, consisting of $98 million in external contract revenue and $142 million in internal production for multi-client projects. EBITDA was $50 million, down slightly from $53 million in Q2 2025. The 21% EBITDA margin is calculated only against external revenue, as internal production carries zero margin, resulting in healthy underlying profitability. 3. Imaging & Technology: Total revenue of $32 million, flat year-over-year, consisting of $14 million in external contract revenue and $18 million in internal production for multi-client projects. EBITDA was $8 million. More than 50% of revenue came from zero-margin internal production this quarter, pulling down the reported EBITDA margin to 24% from 40% a year prior, with full capacity utilization across all imaging centers.

• Contract pricing on streamer projects remains below desired levels, with competitors underpricing bids by 15-20% to win work, which continues to pressure industry margins. While TGS maintains pricing discipline and still earns positive returns on won contracts, the competitive pricing environment is not ideal, and improvement is not expected until a broader market upcycle in 2027.
• The OBN market is fragmented with more than five suppliers, and past poor market discipline has pressured pricing, though management notes recent signs of modest pricing improvement as smaller players have exited unprofitable work.
• Seasonal working capital headwinds are expected to continue into Q3 2026, with revenue collection delayed until Q4 for many ongoing projects, though full H2 cash flow is still projected to be strong overall.
• Exploration spending recovery is not expected to materialize until 2027, and growth will be gradual as E&P companies adjust their long-term budget plans to the new market environment.

Q: How is vessel utilization expected to hold up through the typically softer winter season, and what are your expectations for H2 2026 multi-client late sales? / A: Management notes a strong positive trend in utilization compared to a year ago, and is actively securing backlog for winter months. Sales cycles for streamer work range from 3-6 months (longer for OBN), so more updates will be provided at the next quarter's earnings call. Management reported that H2 late sales have come in slightly ahead of internal and analyst expectations, with only minor non-substantial M&A-related revenue this quarter.\n\nQ: Has the delayed pre-funding commitment for the Brazil multi-client survey been finalized, and what was Q2's pre-funding rate with full-year expectations? / A: The pre-funding commitment for the Brazil survey was closed in Q2 2026, as anticipated; cash payment will be received in early Q3. TGS does not disclose pre-funding rates publicly, but management notes overall pre-funding levels are healthy, with most multi-client activity focused on proven basins (less frontier exposure) and TGS not taking on excessive risk.\n\nQ: How is TGS seeing seismic data purchases correlate to the recent high level of offshore acreage awards, and how have contract pricing and pre-funding levels changed recently? / A: Unlike past cycles where seismic acquisition preceded acreage awards, the current market has shifted to more direct, exclusive acreage negotiations with governments that do not require upfront seismic purchases. Higher seismic sales are expected after acreage is secured, when customers move toward drilling. Streamer pricing has been flat; TGS maintains pricing discipline but has lost recent bids to competitors underpricing by 15-20%, so current pricing is satisfactory but not exceptional, with improvement expected in 2027.\n\nQ: Why is cash flow generation expected to be much stronger in H2 versus H1 2026? / A: The primary driver is that $78 million in Q2 working capital (revenue from sales completed in Q2) has not yet been collected, and will be received in H2. Second, H2 multi-client investment will be substantially lower than H1 investment under the $550 million full-year guidance, leading to lower cash outflow for capital projects.