TGS cuts 10% of workforce in cost reduction program

ASKER, Norway -- TGS has announced a cost reduction program, which will include cutting more than 10% of the company’s global workforce, in response to the deterioration of the market for seismic data seen in the first quarter of 2015. 

Based on preliminary reporting from operating units, TGS expects net revenues for the first quarter of 2015 to be approximately $172 million, about 23% lower than revenues reported for the first quarter of 2014. 

Net revenues were lower than management's expectations due to weaker late sales from the data library in all geographic regions. Demand for seismic data has significantly deteriorated over the first three months of 2015, and the outlook for improvement in the market remains quite uncertain, the company said in a statement. 

TGS is in constant communication with its customers and many of those energy companies have not finalized their spending plans for 2015. From these discussions and an assumption that the price of oil will remain under pressure, TGS expects annual net revenues of approximately $630 million for 2015, down from the $750 million communicated by the company in January.

Operating profit (EBIT) is expected to be negatively affected by the lower revenues; however, higher amortization will be partly compensated for by the effects of the cost reduction program.  

The cost reduction program will position the company for the more challenging seismic market caused by the significant drop in oil price. A key element of this program is a reduction of more than 10% of TGS' global workforce effective from April.

Restructuring charges of approximately $4 million will be booked in the second quarter as a result of this program. The company expects annual cost savings of approximately $10 million as a result of the program.  In addition to the reduction in headcount, the company has taken concrete actions to recognize additional operational cost savings from the original 2015 budget.

Cash flow was strong in the first quarter as cash holdings increased from $256 million at year-end 2014 to $352 million as of March 31. In addition, the company has an undrawn credit facility of $50 million resulting in a total liquidity reserve of $402 million.

The company’s first quarter earnings release is scheduled for April 23.