Norwegian Seismic Specialists TGS and PGS Set to Merge

A PGS seismic vessel - Credit: PGS
A PGS seismic vessel - Credit: PGS

Seismic group TGS, a supplier of key data to the oil industry, has agreed to buy loss-making rival PGS in an all-share deal valued at 9.3 billion Norwegian crowns ($864 million), the two Oslo-listed companies said on Monday.

The groups expect "significant economies of scale" from the combination, with a preliminary estimate of cost cuts amounting to $50 million, they said in a joint statement.

The deal, if approved by regulators, will give TGS ownership of seven modern seismic ships, a significant shift in strategy for the company that has so far relied on chartering vessels from ship owners rather than buying its own.

Collecting offshore seismic data and selling it to energy companies keen to discover oil and gas deposits, known as multi-client business, was long plagued by overcapacity, but there are now fewer owners and fewer vessels available, TGS said.

"The key rationale here is that there are substantial synergies between the two companies, there is going to be really strong multi-client offering and we want to be self-sufficient with vessels," TGS CEO Kristian Johansen told analysts.

TGS, previously praised by analysts for its "assets light, cash rich" strategy, said the company needed to change as the multi-client market had shrunk to about one-third of what it was 10 years ago. 

While PGS is stronger in Europe, TGS' data library is bigger in the U.S. Gulf of Mexico and Brazil. The two have complementary offerings in Africa and the Middle East, they said.

TGS' owners will hold two-thirds of the merged company, paying an estimated 20.7% premium to PGS' closing share price on Sept. 15, they added.

PGS' shares were up 17% at 1215 GMT, while TGS' were up 4%.

The transaction is subject to certain conditions, including shareholder and regulatory approvals.

($1 = 10.7671 Norwegian crowns)

(Reuters - Reporting by Terje Solsvik and Nerijus Adomaitis; Editing by Louise Rasmussen and Mark Potter)

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