Petroleum Geo-Services ASA (PGS) has entered into a Heads of Agreement with the Japanese Ministry of Economy, Trade and Industry (METI) for a long term cooperation agreement, which will include the sale and flag change of the 3D seismic vessel Ramform Victory and the continued provision by PGS of intellectual property and technical and operational services. The Heads of Agreement is subject to completion of satisfactory agreements relating to the sale of the vessel, the licensing of PGS' intangible property and continued PGS services.
The vessel will be used by METI in a planned 10 years seismic campaign to survey approximately 70,000 square kilometers of the Japanese Continental Shelf. The sales price of the vessel including support start up fees is USD 213 million. The sale is preconditioned on a service agreement between PGS and METI, or an organization appointed by METI in agreement with PGS, for technical and operational support providing PGS with an exclusive right to provide such services relating to Ramform Victory during the survey period. The commercial terms of the agreement will be fixed for four years and is expected to give PGS a net pretax cash flow of approximately USD 150 million for the first four years. The service agreement consists of technical support, operation consulting and training, in addition to licensing of various advanced PGS seismic technology products.
METI is to take delivery of Ramform Victory in fourth quarter 2007. It is the intention of PGS to purchase the vessel at the end of the survey period.
Through this project PGS is assisting METI in opening up for seismic surveys in a very interesting area, and at the same time securing both a strong financial return and an excellent position to develop further business.
PGS' President and CEO, Svein Rennemo stated the following:
"The Agreement is a recognition of PGS' unique position in marine seismic acquisition. We see a great potential for future E&P investments in Japanese waters. METI plans to conduct seismic surveying of the Japanese Continental Shelf over a period of approximately ten years on their own risk and benefit. Their choice of our high capacity 3D seismic Ramform vessel for this campaign confirms the competitive strength of our vessel fleet. This partnership is built on the proven track record of the vessel, as well as access to PGS' technology and continued operational and technical support.
We see very robust project economics, both in upfront cash and long term revenues, in addition to significant opportunities for further business development in a promising oil and gas province"
