European Oil Services & Drilling

Equity Research
17 January 2014
European Oil Services & Drilling
Seismic: down, but not out

Over the past few weeks all of the seismic companies under our coverage have announced an update, ranging from utilisation figures to a full corporate restructuring vision. What is clear to us from all of these is that the upwards progression of marine contract pricing has stalled and investors, we believe, are expecting a much flatter environment. It is also clear, however, that the industry has not lost control. Yes, more multi-client activity will enter the mix in low utilisation periods, but aggressive pre-funding levels have not materialised, and capacity is being removed where possible. Hence, while a flat outlook appears a sensible planning assumption in an insipid demand growth environment, what that will look like in a years time, in our view, is more likely to surprise on the upside than the downside. As a result, we believe the seismic industry is down, but not out. With the pure vessel plays PGS and Polarcus trading on 6-8x 2014F PE, we believe that the poor market is largely factored into valuations. It may take indications of a better late northern hemisphere summer season to catalyse share price performance, but with all companies showing strong earnings growth, despite a tepid current environment, we remain comfortable with recommending seismic stocks. Our preferred play is PGS, whose unique vessels appear to us to offer an advantage and whose dividend yield could soon remind investors of its capital discipline. Our least preferred plays are CGG, which despite another restructuring programme is still expecting only to generate below average industry margins, and TGS, which after recent moves is fully factoring in its investment programme, in our opinion. Downgrade Polarcus to Equal Weight: Polarcus has continued to do the right things and we see it as undervalued. However, with a weak current market, we see covenants as tight again and see our earnings out by 26% for the 2014F period. As a result, we downgrade to Equal weight and cut our price target to NOK6.20 from NOK7.00. Flatter outlook: We have moved our contract pricing assumptions to a flatter outlook. Given operational gearing in the service model, this results in an average cut in our earnings estimates for the contract players of 22% in 2014F and 16% in 2015F. PGS remains our preferred play: With a good level of visibility on 2014F capacity, a high-margin fleet, and a balance sheet that we believe can continue to support shareholder returns, PGS is our top pick in the space.
INDUSTRY UPDATE European Oil Services & Drilling
POSITIVE
Unchanged For a full list of our ratings, price target and earnings changes in this report, please see table on page 2. European Oil Services & Drilling Mick Pickup +44 (0)20 3134 6695 mick.pickup@barclays.com Barclays, London Haley Silverman +44 (0)20 7773 4457 haley.silverman@barclays.com Barclays, London
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 35.
Barclays | European Oil Services & Drilling Summary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are shown in bold)
Company Rating Price Old Price Target New EPS FY1 (E) EPS FY2 (E)
Old New 15-Jan-14 European Oil Services & Drilling CGG (CGG FP / GEPH.PA) Petroleum Geo-Services (PGS NO / PGS.OL) Polarcus (PLCS NO / PLCS.OL) TGS (TGS NO / TGS.OL) Pos Pos UW UW OW OW OW EW UW UW 12.53 73.40 4.55 174.00
%Chg Old New %Chg Old New %Chg
19.00 100.00 7.00
15.00 93.00 6.20
-21 -7 -11 -5
0.98 0.77 1.24 1.09 0.08 0.07 2.38 2.53
-21 -12 -12 6
1.74 1.24 1.64 1.47 0.16 0.12 2.62 2.58
-29 -10 -25 -2
190.00 180.00
Source: Barclays Research. Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency. FY1(E): Current fiscal year estimates by Barclays Research. FY2(E): Next fiscal year estimates by Barclays Research. Stock Rating: OW: Overweight; EW: Equal Weight; UW: Underweight; RS: Rating Suspended Industry View: Pos: Positive; Neu: Neutral; Neg: Negative
17 January 2014
Barclays | European Oil Services & Drilling
CONTENTS
Market is not what it was ......................................................................................................................... 4 CGG (UW, PT EUR15 from EUR19)....................................................................................................... 12 PGS (OW, PT NOK 93 from NOK100) .................................................................................................. 16 Polarcus (EW, NOK 6.20 from NOK7) .................................................................................................. 21 TGS (UW, NOK 180, from NOK 190).................................................................................................... 26
17 January 2014
Market is not what it was

Post summer 2013 the indications coming out of the seismic market have become more tepid as some eagerly awaited large contracts got held up and winter demand, as has often happened in the past, began to wane. In addition, the oil industry is on what we view as a renewed health drive. Excess spending is being evaluated and, as has been the case in the past, the seismic industry is again in the firing line. Mixed signals As ever with the seismic industry all is not clear-cut. We see the signals as mixed. Demand for 4Q13 was not as high as expected and 1Q14 appears to be shaping up similarly. This is not an uncommon winter issue. On the positive side, however, some of six major new tenders in the market that were delayed have been awarded and are starting to absorb supply and those contracts that have been signed for 2Q14 and beyond are at improved rates. This is ahead of the summer season which typically squeezes rates. On the negative side, using PGS market that were delayed have been awarded and are starting to absorb supply and those contracts that/y. This chart, however, can be volatile and has fallen, we believe, in the short term as some of the major awards have been signed. In addition, the absolute level is still above that at the end of 2011. Therein lies the contradiction. Yes, the market is not what was once expected. But it is not, in our view, disastrous. US$ demand is still at levels only exceeded in the 2007-09 period and that is largely due to pricing being some 50-100% higher than current levels. In terms of vessel demand, the current market is at or near all-time high levels. Six large sales leads convert into active tenders
3,500 3,000
USD millions
2,500 2,000 1,500 1,000 500 0

Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13
Active tenders All sales leads (inc active tenders)
Source: PGS company data, Barclays Research
Longer-term thesis more in balance
The above talk about current demand is purely short-term. Longer-term we see the shift of seismic into the production arena and the ever-increasing need for higher resolution as sustaining activity and the need to unlock new basins to drive down unit development costs. We expect multiple new basins to open up over the coming years, highlighted in the below chart. This positive trend is currently, we believe, being swamped by small delays that can significantly impact quarterly numbers. These are very likely to be a continued feature for the industry, but we believe the general trend is in the right direction.
17 January 2014
New basins drive future growth
Europe: Barents sea North America: Nova Scotia Central America: Caribbean Russian Arctic: Rosneft & Gazprom new acreage
Mediterranean: Eastern Med & Black Sea East Africa: Mozambique, Tanzania, Kenya West Africa: Namibia, Angola, Gabon and S Africa
South America: Uruguay, Falklands, Brazil, Suriname, & Guyana
Australasia: Myanmar, Australia , Chinese sea
Source: Company data, Barclays Research
Moderate capacity increases mark this cycle as different from previous ones
Importantly, in what we see as a constructive medium-term demand outlook, we see vessel new building activity as rational. In previous cycles, when pricing was improving, we saw 15-35% capacity additions per annum. However, in 2013, there were only two larger 3D vessels entering the fleet, net of two CGG retirements. This leads to what we believe to be about 3% net new capacity globally. In 2014, we expect an improved picture, with four new vessels being offset by three retirements. A net increase of one vessel is the lowest increase that we have recorded. Furthermore, while we expect four net additions by 2015, indications from CGG that it will remove 25% of its capacity by 2016 and PGS removing one vessel at the end of 2015, mean that by 2016 we expect to see a similar size fleet to 2013/14. World marine seismic fleet
70 60 50 40 30 20 10 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014E 2016E
CGGVeritas
WGeco
PGS
Fugro
Polarcus
BGP
Dolphin
Other
Total
17 January 2014
Barclays | European Oil Services & Drilling Effective capacity grows faster The above positive supply-side picture could however be misleading. Firstly, the streamer count is increasing at a faster pace than the vessel count. In 2014, while we see a flat vessel count, we also see a 5% increase in the number of streamers. Secondly, we now believe that this streamer count is no longer a reliable proxy for supply from which we can estimate demand, given utilisation data. This has been highlighted by PGS in its recent presentations, ostensibly in showing the benefits it is receiving from using its Ramform vessels. As a rule of thumb, we would suggest that 10,000km2 requires ca 10 months of vessel time. PGS argues this is the case for a 6-streamer vessel. However, as vessels increase in size the amount of time per survey falls rapidly, such that by the time vessels are the size of its newer Ramform vessels, they require only 102 days. In addition, its Geostreamer adds efficiencies which it believes put it ahead of equivalent vessels in the market. Time efficiency per 10k km2 survey of Ramform Titan class vessels
Days 350 300 250 200 150 100 50 0 6 8 10 12 14 16 18 Streamer count
As a result of increased efficiency, since the average streamer count of the industry has grown from 8.2 per vessel in 2006 to 11.2 in 2013, we have seen ca30% effective capacity creep. Streamer per vessel over time
14 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
In an attempt to show this effect visually we have applied a scale factor to our vessel/streamer count analysis. Assuming a purely arbitrary effective efficiency of 1 for a 6-streamer vessel, increasing to 2 for 18 streamer +, we see that 2013 actually experienced an 8% effective streamer capacity increase versus the 3% vessel capacity addition and 6.5% streamer additions.
17 January 2014 6
Effective streamer count vs the actual streamer count

1,400 1,200 1,000 800 600
Effective vessel count vs the actual vessel count

120 100 80 60 40
400 200 0
20 0
Streamers
Effective streamers
Vessels
Effective vessels
Looking forward, beyond 2014, the effect continues. Over the 2014-16 period we see only one net vessel added, we see the streamer count and effective streamer count increasing by ca10%. Given that we expect capex to continue to increase in the high single-digit region for the medium term, this would imply that the market should increase at a similar rate to the supply side. It does not suggest to us that the market is going to tighten significantly, nor does it suggest it is going to weaken. We have therefore based our medium-term numbers off a flat outlook for unit pricing.
Multi-client on the up, but is the quality there?

All of the above analysis is based on the contract market. We should bear in mind that the multi-client market has been absorbing ca28% of capacity. Multi-client surveys have historically been a key component of seismic companies ability to mitigate the cyclical volatility in their business. As long as it is executed within sound financial rationale, then multi client can provide a more stable earnings stream. In this respect, many companies have talked of a long-run 30-40% allocation to multi-client as the ideal and indeed Polarcus has just had its covenants revised to allow it to extend its activities. This could further aid the perceived imbalance in the market at present. We would not see this as a desperate measure to balance supply and demand of equipment as we believe many investors see it and with good measure given behaviour at the turn of the last decade but rather a mechanism to generate more consistent returns and to provide a base of cash flow should we see a downturn in the market. It could, however, take some time of consistent multiclient results before investors start to believe in it as a credible business model. Indeed, at the moment, we see the companies as trapped. Excess multi-client work in a utilisation update is likely to be seen as negative, as a cry for help on the utilisation front. Then several quarters later if late sales come in, the results are typically seen as a low-quality beat.
17 January 2014
European seismic industry multi-client allocation (includes CGG, PGS and Polarcus)
40% 35% 30% 25% 20% 15% 10% 5% 0%
Two other factors are also at play. First, multi-client appears not only to be used as a utilisation filler, but its use also appears to us to be being driven by the oil companies. Sensing the appetite for multi-client from in both the newly awarded areas of Brazil and in Norway in the Barents Sea, several operators have grouped together to put out a larger tender (see Seismic cooperation in the southeastern Barents Sea (Statoil website)). This by default becomes a more meaningful contract and desire for it should increase. In our view, under the guise of geological understanding and fishery protection, it is an attempt to reduce pricing, by converting what would once have been contract into a multi-client in which the pricing is determined by a pre-funding reverse auction. It presumably also means that the pre-funding is what the pre-funding is. There would appear to us little chance of getting new entrants at a later date before finalisation of the survey. It could also limit the after-sales potential. A second effect, and more positive, is that for CGG multi-client is a mechanism whereby it can utilise the skills it acquired when it bought the Geological and geophysical business of Fugro. With this acquisition, the company has greatly enhanced its sub-surface understanding. As a result, it should be in a better place to determine what seismic to do, thereby de-risking its activities. The above is only one aspect of the multi-client model. The other is that the profitability of it can be variable, especially on a quarterly basis. However, over time it tends to give a more stable return. Indeed, 2Q13 was the fourth highest ever quarter for late sales, on our estimates, and sixth highest for overall multi-client sales, despite lower-than-expected prefunding levels. Furthermore, TGS has just announced that 4Q13 will be its record late sales quarter. This signals to us that the multi-client model is very much alive and kicking.
17 January 2014
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13
8
European seismic sector multi-client revenues

US$mn 800
CGG Marine multi-client pre-funding Polarcus Multi-client pre-funding sales PGS Marine Multi-client pre-funding TGS Net pre-funding CGG Marine multi-client late sales Polarcus Multi-client late sales PGS Marine Multi-client late sales TGS Net late sales
600
400
200
0 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
Source: Company data (all prefunding/late sales definitions are as per company-specific definitions, hence cross comparisons are difficult to make)
A price for everything

The market outlook has deteriorated for seismic as we have moved through 2013 and our expectations for 2014s momentum have waned. That said the seismic stocks have fallen by an average of 24% since the beginning of 2013 (range: 2-44%) versus an average of 4% for the rest of our coverage universe. Largely as consensus estimates have fallen eg CGG 2013F and 2014F EPS estimates have fallen by over 60% since the beginning of 2013. Change in consensus EPS estimates and share price
Change in 2013 consensus EPS CGG PGS Polarcus TGS Average (65)% (22)% (66)% (12)% (41)% Change in 2014 consensus eps (62)% (30)% (58)% (20)% (42)% Change in share price (45)% (23)% (31)% (4)% (26)%
Source: Datastream, since 1/1/13 to present day
In the main the stocks have moved down similar to their earnings cuts, implying that the multiple has only changed slightly. There has been little re-rating as earnings have been cut, implying investors believe the longer-term picture has changed. However, pricing has not collapsed and with the stocks trading at a ca 30% discount to their long-run multiples, we see this as inappropriate.
17 January 2014
Historical 12-month forward PE vs 10-year average

12M Forward PE 35x 30x 25x 20x 15x 10x 5x 0x 2004 2006 2008 CGG 12M Forward PE 25x 20x 15x 10x 5x 0x 2004 2010 2012 2014 12M Forward PE 30x 25x 20x 15x 10x 5x 0x 2004
2006
2008 PGS
2010
2012
2014
CGG Avg 12M Forward PE 10x 8x 6x 4x 2x 0x 2012
PGS Avg
2006
2008 TGS
2010
2012
2014
2013 Polarcus Polarcus Avg
2014
TGS Avg
Source: Datastream, Barclays Research Polarcus PE is a 2-year history against a 2-year average.
While multiples are a good guide, we have always viewed them as a distraction within a highly cyclical business, as they are unlikely to reflect the value of a business on an ongoing basis. Our preferred evaluation metric has long been DCF-based and while we concede that a range of answers can be forthcoming, we view it as the only way to view the types of assumptions that the stocks are factoring in. Our base case DCF, which we use across the Oil Service space, uses a 10% discount rate. For vessel owners in the seismic space we add a further 100bp to reflect the more cyclical nature of earnings and for Polarcus we add a further 200bp to reflect its high gearing and stressed balance sheet. Only for TGS, which has no assets apart from its produce, do we use the base case 10%. In our DCF-based evaluation we use our discrete forecasts until 2015, then apply 10% per annum growth for the 2016-17F period. We then reduce the business at a similar rate until 2019F, at which point we use a (WACC-growth) approach to determine a terminal value using a standard 3% terminal growth rate. We note that this compares to oil industry capex that has grown at over 7% per annum for the past 40 years and is expected to grow by 6.1% in 2014, according to Barclayss Global 2014 E&P Spending Survey.
17 January 2014
10
Barclays | European Oil Services & Drilling DCF-based evaluations

% CGG, EUR PGS, NOK Polarcus, NOK TGS, NOK
Source: Barclays Research
Discount rate 11% 11% 13% 10%
DCF base case (Target price) 15 93 6.2 180 20% 27% 36% 3%
DCF upside 33 150 16 260 163% 104% 252% 49%
DCF downside 11 60 2 110 (12)% (18)% (56)% (37)%
The key for us is the downside potential which, ex TGS, we see as limited. For our downside cases we assume a 5% decline in pricing in 2014F and 2015F and a reduction in margin thereafter the same as the price reduction reduces our 2015F. For the pure vessel owners, this leaves downside potential of ca 20%, versus significant upside. In effect, we see current share prices as factoring in declining prices over the 2014-15F period, contrary to our expectations. Indeed, in this scenario pricing in 2015 would be at levels equivalent to the troughs of 2010. For TGS, we still see significant downside potential, but that is dependent on two factors the level of investment going forward and the pre-funding. Our base case is predicated on US$420-475mn of investment for the 2014-15F period and future investments based on this level. It also expects a return to the 50% pre-funding level from the low 40% range expected in 2013F, due to delays and competition. As a result of this analysis, our preferred play remain PGS. At 7x 2014F PE and with 42% upside potential, we see PGS as harshly treated in 2013F versus its actual performance. For Polarcus, we see the upside potential as significant. However, with high gearing (both operational and financial), negative moves in the market can significantly affect earnings, and subsequently balance sheet strength. In this respect, 26% idle time in 4Q13 on top of a weakening pricing environment have caused us to reduce our 2013F earnings estimates by 12%. In addition, the lack of any meaningful multi-client sales thus far leads us to cut our expectations of multi-clients sales for 2014F, negatively impacting our EPS estimate by 20%. This is turn brings the covenants threshold back into focus in the beginning of 2014F T a situation we feel investors will focus on. As such, our reduced DCF-based price target is now NOK6.2/share. While we admit this still leaves 38% potential upside, the worry for us around sustained negative momentum in the market, and the sensitivity of earnings, leads us to downgrade to Equal Weight.
17 January 2014
11
CGG (UW, PT EUR15 from EUR19)

Another New Vision
CGG gave perhaps the most radical vision for the future as it outlined how it was likely to look in 2016 after a restructuring exercise. Following the acquisition of Fugro's vessels, a move we view as the principal cause of the marine contract market dislocation in 2013, its focus is to become more of a solutions provider. As such, the marine fleet will be rationalised by as much as 25%, with less profitable units removed. Equipment sales and hence profits will grow and Geology, Geophysics & Reservoir division (GGR) will become central delivering not only its own growth, but being at the heart of an enhanced multiclient offering. However, as ever the earnings potential of the business is dominated by the marine fleet and by reducing capacity you reduce the earnings. The margin increase needed to get the business to high single-digit EBIT margin is still some way off where we would expect that division to be. Using the new company proforma vision we cut our earnings estimates by as much as 29% in 2014F and 22% in 2015F. As such we reduce our price target significantly to EUR15/share. With limited upside potential, we remain Underweight. Pro-forma is hardly exciting: The company has not given guidance for 2016, it has given a pro-forma outlook under current pricing conditions. This scenario largely ties in with our assumptions. As a result we cut our 2015 earnings forecasts by over 25%. Essentially, in 2016, CGG expects to earn US$600mn of EBIT, 10% less than what we were expecting in 2014. Not all the plans are in place: While the company has indicated its pro forma vision there are still uncertainties. Capacity in the marine fleet will be reduced by up to 25% but there is no indication of whether this is vessels or streamers or the timing. Furthermore, the presentation talks of a new extended ARGAS (the company's Saudi land joint venture) with no details of the shape or extent of the structure. Equipment holding up: Earlier in 2013 there had been some concerns that the company's Equipment division had peaked. It appears as if the company's view is one of growth as the new 508XT land system is taken up by some of the mega-crews that it sees being awarded in the Middle East. EBIT margins should stay above 28% and with reductions in the marine fleet, the Equipment contribution to group sales should grow back above 28%. GGR at the heart of the business: The acquisition of Fugro's Geology & Geophysical division was a change of direction for the company in 2013. By rolling multi-client into it the company has created a business that goes from the consulting level to the library. The thesis is that the acquired skills will create a much enhanced multi-client offering. However, spending will likely be less than we had expected and, hence, as with TGS, returns thereafter will likely be lower. In addition, pre-funding of 70%, late sales, and investment expectations are in line with our current assumptions, which is a slightly disappointing outlook to us, given the enhanced offering. Earnings estimates cut by 22-29% in 2014-2015F: As a result of flat pricing and lower capacity we are reducing our 2014-2015F EPS estimates by 22-29%, and thus our DCFbased price target to EUR15/share from EUR19/share previously. We remain Underweight.
17 January 2014
12
CGG Veritas - Income statement US$ mn Acquisition GGR Equipment Eliminations Net operating revenues Cost of operations Gross profit Gross profit margin R&D SG&A Other/Goodwill reduction (Loss)/income from ops Financial expenses, net Exchange gains (losses), net Income before tax Income taxes Tax rate, % Minority Interest Equity income Goodwill Adjusted net income Shares issued, ave.,undiluted, mn Shares issued, ave.,diluted, mn EPS, Basic EPS, Diluted Growth, y.o.y. Income analysis: Gross margin EBITDA EBITDA margin Operating margin Pre-tax margin Net margin Tax rate, %
Source: Com pany data, Barclays Research
2011A
2012A
2013F 2,218 1,307 1,087 (793)
2014F 1,970 1,350 1,150 (670) 3,800 (2,910) 890 23% (92) (266) (60) 472 (180) 0 292 (99) 34% 0 28 0 221 176.9 178.2 1.25 1.24 61%
2015F 1,924 1,450 1,270 (624) 4,020 (3,025) 995 25% (102) (261) (60) 572 (170) 0 402 (137) 34% (1) 34 0 298 176.9 178.2 1.69 1.67 35%
2016F 1,704 1,540 1,300 (506) 4,038 (2,961) 1,077 27% (104) (262) (60) 650 (170) 0 480 (163) 34% (1) 34 0 350 176.9 178.2 1.98 1.96 17%
3,184 (2,647) 537 17% (77) (287) 34 208 (174) 0 34 (63) 187% (14) 16 0 (27) 151.8 165.5 (0.18) (0.18) n/a
3,414 (2,685) 729 21% (93) (280) (27) 329 (176) 0 153 (99) 65% (17) 37 0 74 162.1 163.4 0.46 0.45 n/a
3,820 (3,021) 800 21% (113) (326) 49 410 (202) 0 208 (81) 39% (5) 15 0 137 176.9 202.4 0.78 0.77 n/a
17% 836 26% 7% 1% (1)% 187%
21% 1018 30% 10% 4% 2% 65%
21% 1225 32% 11% 5% 4% 39%
23% 1219 32% 12% 8% 6% 34%
25% 1298 32% 14% 10% 7% 34%
27% 1331 33% 16% 12% 9% 34%
17 January 2014
13

CGG Veritas - Cash flow US$ mn Adjusted net income Minorities Adjusted depreciation Change in working capital Other items Cash flow from operations per share Capital expenditure Investment in multi-client Net cash flow from operations Non recurring items: Acquisitions Divestments Proceeds from share issues all other items Surplus/Deficit
2011A (27) 14 629 117 (69) 663 4.4 (366) (203) 94
2012A 74 17 655 61 (12) 796 4.9 (369) (364) 63
2013F 137 5 800 (260) 238 921 5.2 (325) (479) 116
2014F 221 0 719 3 34 977 5.5 (375) (400) 202
2015F 298 1 692 (37) 36 990 5.6 (250) (400) 340
2016F 350 1 647 (3) 38 1,033 5.8 (250) (400) 383
(11) 21 3 9 117
(53) 6 515 45 576
(1,177) 5 1 222 (832)
0 0 0 0 202
0 0 0 0 340
0 0 0 0 383
CGG Veritas - Balance sheet US$ mn Cash Other current assets Current liabilities Net fixed assets Intangibles Other non current assets Long term creditors Capital employed Ordinary shareholders funds Minority interests Short term debt Long term debt Capital employed from debt NBV per share Net debt Net debt per share RoE, % Net debt to equity, % Net debt to debt plus equity, % Return on gross capital employed, %
2011A 531 1,578 (1,089) 1,183 3,553 343 (267) 5,832 3,803 87 71 1,872 5,832 25.1 1411 9.3 (0.7) 36.3 24.2 1.8
2012A 1,520 1,953 (1,170) 1,160 3,350 350 (266) 6,897 4,493 99 52 2,253 6,897 27.7 785 4.8 1.8 17.1 11.4 3.3
2013F 320 1,954 (1,260) 1,765 4,357 350 (207) 7,278 4,632 104 52 2,491 7,278 26.2 2,222 12.6 3.0 46.9 30.5 3.9
2014F 320 1,944 (1,254) 1,863 4,315 350 (148) 7,390 4,853 104 52 2,381 7,390 27.4 2,113 11.9 4.7 42.6 28.6 4.7
2015F 320 2,055 (1,327) 1,876 4,260 350 (148) 7,385 5,151 105 52 2,077 7,385 29.1 1,809 10.2 6.0 34.4 24.5 5.6
2016F 320 2,064 (1,333) 1,934 4,205 350 (148) 7,391 5,501 106 52 1,732 7,391 31.1 1,464 8.3 6.6 26.1 19.8 6.3
17 January 2014
14

European Oil Services & Drilling Industry View: POSITIVE Stock Rating: UNDERWEIGHT 2012A 3,414 1,018 329 153 74 0.45 163.4 N/A 2013E 3,820 1,225 410 208 137 0.77 202.4 N/A 2014E 3,800 1,219 472 292 221 1.24 178.2 N/A 2015E 4,020 1,298 572 402 298 1.67 178.2 N/A CAGR 5.6% 8.4% 20.2% 38.1% 59.0% 54.5% 2.9% N/A Average 31.6 11.8 6.9 4.8 2.1 3.9 4.4 CAGR 8.3% -40.5% 2.1% -2.6% -17.7% -1.2% 4.7% 2.0% 32.1% 9.5% N/A 7.5% N/A N/A 75.3% 75.3% -16.1% Average 21.0 4.1 6.0 0.6 0.8 N/A 25.5 36.0 35.3 Price (15-Jan-2014) EUR 12.53 Price Target EUR 15.00 Why Underweight? Seismic pricing in the short term appears to be under pressure. However, the mediumterm outlook appears to be more robust, supporting stable to increasing prices. However, despite this outlook, we see CGG as less attractive than its other seismic peers given its multiple premium and hence rate the stock Underweight. Upside case EUR 32.97 We assume that marine contract seismic pricing improves at 15% points better than our estimates in 2014 and 2015, towards peak levels seen in 2008. In addition, we factor in 5% per annum faster growth in the equipment sector. Downside case EUR 11.00 We assume that marine contract seismic pricing falls at 10% points worse than our estimates in 2014 and 15% in 2015, towards trough levels seen in 2010. In addition, we factor in 5% per annum further fall in the equipment sector. Upside/Downside scenarios
CGG (GEPH.PA)
Income statement ($mn) Revenue EBITDA EBIT Pre-tax income Net income (adj) EPS (adj) ($) Diluted shares (mn) DPS Margin and return data EBITDA margin (%) EBIT margin (%) Pre-tax margin (%) Net (adj) margin (%) ROA (%) ROE (%) ROACE (%) Balance sheet and cash flow ($mn) Intangible fixed assets Cash and equivalents Total assets Short and long-term debt Other long-term liabilities Total liabilities Shareholders' equity Minorities Net debt/(funds) Capital employed Change in working capital Cash flow from operations Capital expenditure Dividends paid Net cash from operations Free cash flow Net cash surplus/(deficit) Valuation and leverage metrics P/E (adj) (x) EV/EBITDA (x) Equity FCF yield (%) P/BV (x) P/Sales (x) Dividend yield (%) Net debt/capital (%) Total debt/capital (%) Net debt/equity (%) Selected operating metrics Backlog ($mn) Order intake
29.8 9.6 4.5 2.2 1.0 1.8 3.3
32.1 10.7 5.5 3.6 1.6 3.0 3.9
32.1 12.4 7.7 5.8 2.5 4.7 4.7
32.3 14.2 10.0 7.4 3.4 6.0 5.6
3,350 1,520 8,333 2,305 266 3,741 4,493 99 785 5,377 61 796 -733 N/A 63 63 576
4,357 320 8,746 2,543 207 4,010 4,632 104 2,222 6,958 -260 921 -804 0 116 116 -832
4,315 320 8,792 2,433 148 3,835 4,853 104 2,113 7,070 3 977 -775 0 202 202 202
4,260 320 8,860 2,129 148 3,604 5,151 105 1,809 7,065 -37 990 -650 0 340 340 340
37.7 3.8 2.3 0.6 0.9 N/A 14.6 42.9 17.1
22.2 4.4 3.8 0.7 0.8 N/A 31.9 36.5 46.9
13.8 4.3 6.7 0.6 0.8 N/A 29.9 34.4 42.6
10.2 3.8 11.2 0.6 0.8 N/A 25.6 30.1 34.4
POINT Quantitative Equity Scores
Value
Quality
Sentiment
1,240 N/A
N/A N/A
N/A N/A
N/A N/A
Low
High
Source: POINT. The scores are valid as of the date of this report and are independent of the fundamental analysts' views. To view the latest scores, please go to the equity company page on Barclays Live.
Source: Company data, Barclays Research Note: FY End Dec
17 January 2014
15
PGS (OW, PT NOK 93 from NOK100)

Our preferred seismic player
While PGS's 2014 guidance was a touch behind our expectations, it was so only because of lower pricing expectations, the company now basing its assumptions on a slight decline for its remaining capacity. That said, some 60% of 2014 is now booked, highlighting once again to us that PGS has an offering that is valued. With its unique vessels, efficiency benefit and physical broadband solution we see PGS as the least likely to suffer from capacity utilisation issues. While this does not insulate it from the vagaries of pricing movements, it does suggest to us that it is least likely to get caught in the demand droughts that happen periodically. As such, with sector-leading margins, PGS remains our preferred play. With 27% upside potential to our reduced NOK93/share price target, we remain Overweight. The right fleet: As we described earlier, the efficiency of the world fleet is improving, rendering the counting of vessels, or indeed streamers, a virtually meaningless task. PGS is at the forefront of this, building four new Ramform vessels (two still under construction). It is also removing older capacity. As such the company sits at the high end of the efficiency scale (as shown below). At todays costs and at todays pricing level (even though we feel this is potentially too punitive) we find the retirements of low-margin vessels and the additions of the new Ramforms could add 9% to average EBITDA margins per vessel per month. This, of course, assumes PGS is able to book out all its capacity at current pricing levels, which will surely fluctuate over time, but gives us an idea of the value-added capacity additions the company is delivering. PGS fleet averages better margins than industry peers
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Source: PGS company data, Barclays Research
PGS vessels Scheduled Additions Current Average PGS cost
Potential Retirements Current Average Pricing Level Future average PGS cost
Multi-client compares well: We believe PGS has a straightforward approach to multi-client. Both its team and the contract team compete for capacity based on returns. As a result we have seen revenues stabilising and pre-funding levels, although not comparable with those of some of its peers due to definitional differences, have remained robust in the 80-120% range. 2013 pre-funding is expected to be ca 95% and should rise to nearer 100% in 2014. While the fall below 100% in 2013 could be seen as a cause for concern, it is in the face of high multi-client in 4Q13, which took multi-client utilisation to over 50% for the year. This is some way ahead of a more normal 40% that we expect in 2014. More cash returns: Capex has been high over recent years with 2013, for example, likely to be in the US$450-475mn range and 2014 will be US$400-450mn, on our forecasts. This is largely due to the new-build programme, underlying maintenance capex being just
17 January 2014 16
Barclays | European Oil Services & Drilling US$180mn. Post 2015 capex should therefore fall sharply, at which point on relatively flat assumptions, free cash jumps to US$405mn, as the new builds start to contribute. This is a potential 20%. In the meantime we see the potential for enhanced returns. In 2012, the company instigated a dividend distributing 25-50% of earnings. 2013 was at the lower end at 30%, but the company has indicated that enhanced payments could be discussed with the full-year results. In our numbers, we have moved to the upper end of the range, in absolute terms US$0.50, representing 4% yield. Earnings cut by 11-21% in 2014-2015F: While we are still positive on the companys ability to navigate a flat market in 2014 and we feel the market has more than priced in a negative scenario, we conservatively reduce our EPS estimates for 2014-2015F by 11% and 21% respectively. Our reduced DCF-based price target is now NOK93/share from NOK100/share previously, implying 27% upside. Thus we remain Overweight.
17 January 2014
17

PGS - Income statement USD, '000 Marine Contract Seismic Marine Multi-client Sales Marine Data Processing Marine - Other Marine Other Net operating revenues Growth, y-o-y Cost of sales Gross profit Gross profit margin R&D SG&A D&A Impairment Other (Loss)/income from operations Operating profit margin Income (loss) from associated companies Interest income Interest expense Other financial items, net Income before tax Income taxes Tax rate Income from discontinued ops Minority Interest Adjusted net income Growth, y-o-y Shares issued, ave. Weighted shares, ave. EPS, Basic EPS, Diluted DPS, Basic Income analysis: Gross margin EBITDA EBITDA margin Operating margin Pre-tax margin Net margin Tax rate, %
2011A 627,015 501,807 110,031 14,186 1,253,039 260 1,253,299 41% (643,434) 609,865 48.7% (24,281) (50,822) (397,881) (2,583) 4,400 138,698 11% (12,389) (42,170) (19,626) 64,513 (30,045) 47% 589 (1,367) 33,690 (70)% 217,240 217,814 0.16 0.15 0.18
2012A 623,520 728,180 124,421 41,912 1,518,033 251 1,518,284 21% (642,423) 875,861 57.7% (38,323) (61,372) (484,276) 811 1,084 293,785 19% (4,214) (37,787) (23,310) 228,474 (42,933) 19% 2 185,543 451% 216,635 217,468 0.86 0.85 0.26
2013F 725,368 636,073 125,717 25,300 1,512,458 1,512,458 (0)% (616,730) 895,727 59.2% (35,307) (59,163) (430,096) 600 371,761 25% (1,500) 300 (38,400) (1,000) 331,161 (96,900) 29%
2014F 963,215 648,683 132,003 30,000 1,773,901 1,773,901 17% (762,435) 1,011,465 57.0% (35,478) (62,087) (465,112)
2015F 1,236,495 664,901 145,203 30,000 2,076,599 2,076,599 17% (948,247) 1,128,353 54.3% (37,379) (64,375) (492,938)
2016F 1,401,918 717,141 159,723 30,000 2,308,782 2,308,782 11% (1,016,870) 1,291,913 56.0% (41,558) (71,572) (551,572)
448,789 25%
533,661 26%
627,210 27%
(38,000) 410,789 (93,237) 23%
(34,000) 499,661 (99,898) 20%
(34,000) 593,210 (127,963) 22%
234,261 nm 215,072 215,782 1.09 1.09 0.50
317,552 36% 215,072 215,782 1.48 1.47 0.55
399,763 26% 215,072 215,782 1.86 1.85 0.65
465,247 16% 215,072 215,782 2.16 2.16 0.75
49% 534,762 43% 11% 5% 3% 47%
58% 777,459 51% 19% 15% 12% 19%
59% 816,258 54% 25% 22% 15% 29%
57% 913,901 52% 25% 23% 18% 23%
54% 1,026,599 49% 26% 24% 19% 20%
56% 1,178,782 51% 27% 26% 20% 22%
17 January 2014
18

PGS - Cash flow USD, '000 Adjusted net income Minorities Adjusted depreciation Change in working capital Other items Cash flow from operations per share Capital expenditure Investment in multi-client Dividends Net cash flow from operations Non recurring items: Acquisitions Divestments Proceeds from share issues all other items Surplus/Deficit Source: Company data, Barclays Research 29 4,203 (121,486) (139,856) (94) 4,308 7,094 (66,883) (91) (223,929) (112,944) (100,724) 265,414 10,445 (22,602) 2011A 33,690 1,367 397,881 10,638 36,804 480,380 2.21 (299,060) (203,922) 2012A 185,543 (2) 484,276 40,311 42,775 752,903 3.48 (358,465) (297,444) (41,510) 55,484 430,096 (14,032) 11,100 661,426 3.08 (465,000) (369,900) (60,900) (234,374) 769,592 3.58 (430,000) (345,000) (107,536) (112,944) 877,566 4.08 (510,000) (350,000) (118,289) (100,724) 1,005,210 4.67 (230,000) (370,000) (139,797) 265,414 465,112 (13,072) 492,938 (15,135) 551,572 (11,609) 2013F 234,261 2014F 317,552 2015F 399,763 2016F 465,247
PGS - Balance sheet US$ thousands Cash Other current assets Current liabilities Net fixed assets Intangibles Other non current assets Long term creditors Capital employed Ordinary shareholders funds Minority interests Short term debt Long term debt Capital employed from debt No. of shares in issue, mn NBV per share Net debt Net debt per share Ratios RoE, % Net debt to equity, % Net debt to debt plus equity, % ROACE, %
2011A 518,390 442,213 (349,034) 1,292,583 608,698 275,295 (79,874) 2,708,271 1,771,498 192 183,107 753,474 2,708,271 217 8.2 418,191 1.9
2012A 482,624 439,949 (367,913) 1,437,718 664,937 248,755 (67,494) 2,838,576 1,921,720 39 979 915,838 2,838,576 217 8.9 434,193 2.0
2013F 482,624 468,862 (393,239) 1,760,808 746,651 237,655 (67,494) 3,235,867 2,095,081 39 979 1,139,767 3,235,867 217 9.7 658,122 3.0
2014F 482,624 549,909 (461,214) 2,030,577 786,770 237,655 (67,494) 3,558,826 2,305,098 39 979 1,252,711 3,558,826 217 10.6 771,066 3.6
2015F 482,624 643,746 (539,916) 2,366,791 817,617 237,655 (67,494) 3,941,023 2,586,571 39 979 1,353,434 3,941,023 217 11.9 871,789 4.0
2016F 482,624 715,723 (600,283) 2,403,789 829,047 237,655 (67,494) 4,001,060 2,912,021 39 979 1,088,021 4,001,060 217 13.4 606,376 2.8
1.9 23.6 15.4 3.6
10.0 22.6 15.3 8.6
11.7 31.4 20.3 8.7
14.4 33.4 21.7 10.2
16.3 33.7 22.1 11.3
16.9 20.8 15.2 12.3
17 January 2014
19

European Oil Services & Drilling Industry View: POSITIVE Stock Rating: OVERWEIGHT CAGR 11.0% 9.7% 22.0% 29.8% 29.2% 29.5% -0.3% 36.3% Average 51.5 23.7 21.0 16.2 7.5 13.1 11.4 CAGR 7.1% 0.0% 11.6% 13.9% 0.0% 13.2% 10.4% 0.0% 26.2% 13.7% N/A 5.2% N/A N/A N/A -43.4% N/A Average 10.0 3.8 -0.6 1.2 1.5 4.1 23.2 40.1 30.3 Price (15-Jan-2014) NOK 73.40 Price Target NOK 93.00 Why Overweight? PGS is positioned to benefit from the increase we expect in seismic pricing. Additionally, it is strengthening its position in the high end of the market with the construction of new generation Ramform vessels. Upside case NOK 150.00 We assume that marine contract seismic pricing increases at 20% per annum faster than our estimates, towards the peak levels seen in 2008. This then forms a high case for our DCF-based valuation. Downside case NOK 60.00 We assume that marine contract seismic pricing falls at 5% points worse than our estimates in 2014 and 2015, back towards the trough levels of 2010. This then forms a lower base for our DCF-based valuation. Upside/Downside scenarios
Petroleum Geo-Services (PGS.OL)

Income statement ($k) Revenue EBITDA EBIT Pre-tax income Net income (adj) EPS (adj) ($) Diluted shares (k) DPS ($) Margin and return data EBITDA margin (%) EBIT margin (%) Pre-tax margin (%) Net (adj) margin (%) ROA (%) ROE (%) ROACE (%) 2012A 2013E 2014E 2015E 1,518,284 1,512,458 1,773,901 2,076,599 777,459 816,258 913,901 1,026,599 293,785 371,761 448,789 533,661 228,474 331,161 410,789 499,661 234,261 317,552 399,763 185,543 0.85 1.09 1.47 1.85 217,468 215,782 215,782 215,782 0.26 0.50 0.55 0.65
51.2 19.3 15.0 12.2 5.8 10.0 10.5
54.0 24.6 21.9 15.5 6.7 11.7 10.3
51.5 25.3 23.2 17.9 8.2 14.4 11.8
49.4 25.7 24.1 19.3 9.3 16.3 13.0
Balance sheet and cash flow ($k) Intangible fixed assets 664,937 Cash and equivalents 482,624 Total assets 3,273,983 Short and long-term debt 916,817 Other long-term liabilities 67,494 Total liabilities 1,352,224 Shareholders' equity 1,921,720 Minorities 39 Net debt/(funds) ($mn) 434,193 Capital employed 2,355,952 Change in working capital 40,311 Cash flow from operations 752,903 Capital expenditure -655,909 Dividends paid -41,510 Net cash from operations 55,484 Free cash flow 96,994 Net cash surplus/(deficit) -91 Valuation and leverage metrics P/E (adj) (x) EV/EBITDA (x) Equity FCF yield (%) P/BV (x) P/Sales (x) Dividend yield (%) Net debt/capital (%) Total debt/capital (%) Net debt/equity (%)
746,651 482,624 3,696,600 1,140,746 67,494 1,601,479 2,095,081 39 658,122 2,753,243 -14,032 661,426 -834,900 -60,900 -234,374 -173,474 -223,929
786,770 482,624 4,087,535 1,253,690 67,494 1,782,398 2,305,098 39 771,066 3,076,202 -13,072 769,592 -775,000 -107,536 -112,944 -5,408 -112,944
817,617 482,624 4,548,433 1,354,413 67,494 1,961,823 2,586,571 39 871,789 3,458,399 -15,135 877,566 -860,000 -118,289 -100,724 17,566 -100,724
Value
14.1 3.9 3.7 1.4 1.7 2.1 18.4 38.9 22.6
11.1 4.0 -6.7 1.2 1.7 4.1 23.9 41.4 31.4
8.2 3.7 -0.2 1.1 1.5 4.6 25.1 40.8 33.4
6.5 3.4 0.7 1.0 1.3 5.4 25.2 39.2 33.7
Quality
Sentiment
Low
High
Selected operating metrics (NOKmn) Backlog ($mn) 829 Order intake 0

N/A 0
N/A 0
N/A 0
17 January 2014
20
Polarcus (EW, PT NOK 6.20 from NOK7)

Right things, but tough market
Polarcus continues to do the right things, in our opinion. It has focused on debt reduction over the year and renegotiated its covenants, enabling it to take on more, if still small amounts, of multi-client work. However, with high gearing, negative blips in pricing hit the company hard. In this respect 26% idle time in 4Q13 on top of weakened pricing will likely have a large impact on earnings we cut our FY 2013 net income forecast by 12%. In addition, we reduce our estimates for marine late sales, given limited success so far, reducing our 2014F EPS by over 20%, albeit caUS$15mn in absolute terms. The problem that we foresee is that with a weak 4Q13 and likely 1Q14, the companys rolling 12-month debt service ratio covenant will, on our numbers, come under pressure, albeit not broken, as the limit steps up to 2.25x from 2x in 1Q14. This should not be an issue once seasonal pricing hits in the summer months, and given the transitory nature and the relationship the company has with its lenders, we do not see it as an issue. However, with sharply reduced numbers our price target falls to NOK6.20 a share, and while still offering 37% upside potential, with the balance sheet likely to once again be a concern, we downgrade to Equal Weight. Small move, big swings: We have argued in the past that small moves in pricing for Polarcus lead to large swings in earnings, partly because we are dealing with relatively small numbers and partly because of the companys high interest charge. For example, in 2013 we expect over 60% of EBIT to go toward debt service. This burden will reduce over time and the company is making strides to accelerate that where possible, but in the meantime, by moving towards a flatter outlook for pricing, we reduce our estimates sharply. Covenants again: In 3Q13 the company renegotiated its debt covenants. The key is the debt service ratio (EBITDA/(total interest+principal repayments)). To its credit, the company gives its debt service requirement and hence it is purely a matter of looking at the last twelve months EBITDA. Through 2013 the ratio has been running at ca 2.1x versus a limit of 2x. Since we expect pricing to be flat around the turn of the year then as the ratio steps up to 2.25x, a level not recorded in the past twelve months, then the rolling nature of the covenant could become an issue. We would note that this is only transitory and on our numbers the company is slight slightly above it, given a 10% step down in debt service requirements at the same time. In addition, a lot depends on the multi-client late sales. The company now has a library of US$85mn, with a gross investment over US$100mn by year end on our numbers, and the ability now, with revised covenants, to allocate more capacity to the business. As yet, however, late sales have amounted to just US$17mn, albeit, with such a small library sales will predictably be lumpy. Our numbers do include some sales over the 4Q13-1Q14 period, but not to the level that a US$85mn library would imply.
17 January 2014
21
Debt service ratio limits appear achievable

x 4
0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Debt service ratio (EBITDA/int expense)

New Debt service ratio Limit
Earnings cut by 7-26% in 2014-2015F: Due to the operating and financial leverage of this small cap stock, we are cutting our 2014F EPS by 26% and 2015F by 7%. Thus, we are reducing our DCF-based price target to NOK 6.2/share from NOK7/share previously and downgrade to Equal Weight.
17 January 2014
22

Income statement $ mn Contract revenues Multi-client pre-funding sales Multi-client late sales Other income Total revenues Vessel operating expenses SG&A EBITDA Depreciation and Amortisation Impairments and exceptionals EBIT EBIT margin Financial income Financial expense Other financial items Profit before tax Taxation Tax rate, % Minorities Net income reported Net income adjusted Average number of shares Diluted number of shares * EPS, basic EPS, diluted adjusted, US$ EPS, diluted adjusted, NOK
2011A 274,757 20,572 0 3,248 298,577 (188,932) (33,327) 76,318 (60,800) 0 15,518
2012A 495,218 14,818 15,080 4,171 529,287 (312,680) (26,343) 190,264 (91,461) (7,405) 91,398
2013F 504,509 24,153 8,961 529 538,152 (304,207) (30,139) 203,806 (91,268) 0 112,538 20.9% 6,289 (79,114) (73) 39,561 0 0% 0.0 36,255 36,255 507,196 585,562 0.07 0.07 0.4
2014F 493,360 36,000 25,000 0 554,360 (306,714) (28,000) 219,646 (97,461) 0 122,184 22.0% 2,800 (58,080) 0 66,904 (4,683) 7% 0.0 62,221 62,221 507,196 585,562 0.12 0.12 0.7
2015F 503,112 51,000 30,000 0 584,112 (292,635) (30,000) 261,476 (101,440) 0 160,036 27.4% 3,000 (52,774) 0 110,262 (8,270) 8% 0.0 101,993 101,993 507,196 585,562 0.20 0.19 1.1
2016F 523,464 51,000 35,000 0 609,464 (295,135) (30,000) 284,328 (103,690) 0 180,638 29.6% 3,000 (39,502) 0 144,137 (14,414) 10% 0.0 129,723 129,723 507,196 547,870 0.26 0.24 1.5
5,762 (59,472) 6,720 (31,472) (25) 0% 0.0 (31,497) (31,497) 420,790 431,592 (0.07) (0.09) (0.5)
10,093 (93,449) 3,650 11,692 (1,864) 16% 0.0 9,828 9,828 498,863 577,229 0.02 0.02 0.1
Sourc e: Company data, Barclays Research. * excludes warrants and the 2008 convertible, 2011 convertible anti-dilutive in 2011
17 January 2014
23

Cash flow $ mn Adjusted net income Minorities Depreciation & amortisation Change in working capital Other items Cash flow from operations per share Capital expenditure Investment in multi-client Dividends Net cash flow from operations Non recurring items: Acquisitions Divestments Proceeds from share issues all other items Surplus/Deficit
Sourc e: Company data, Barclays Research
2011A (31,497) 0 77,241 (16,315) (35,018) (5,589) (0.0) (299,990) (17,282) 0 (322,861)
2012A 9,828 0 91,461 10,813 24,100 136,202 0.3 (321,749) (41,486) 0 (227,033)
2013F 36,255 0 91,268 (54,833) 58,706 131,396 0.3 (62,119) (45,186) 0 24,091
2014F 62,221 0 97,461 16,981 4,418 176,663 0.3 (44,000) (60,000) 0 72,663
2015F 101,993 0 101,440 21,019 54,233 278,685 0.5 (46,000) (85,000) 0 147,685
2016F 129,723 0 103,690 (1,268) 57,275 289,420 0.6 (46,000) (85,000) 0 158,420
0 0 41,106 (9,853) (291,608)
(4,846) 0 38,935 (6,846) (199,790)
0 128,003 16 (20,208) 131,902
0 0 0 (13,333) 59,330
0 0 0 (13,333) 134,352
0 0 0 (13,333) 145,087
Balance sheet $ mn Cash Other current assets Current liabilities Net fixed assets Other non current assets Other non current liabilities Capital employed Ordinary shareholders funds Minority interests Short term debt Long term debt Capital employed from debt No. of shares in issue NBV per share Net debt (incl leases) Net debt per share Ratios Net debt to equity, % Net debt to debt plus equity, % RoE,% RoACE, %
2011A 84,019 112,406 (58,618) 872,213 28,060 (381) 1,048,881 429,756 0 38,274 580,850 1,048,880 420,790 1.0 535,105 1.3
2012A 52,191 268,001 (89,687) 999,825 0 (185) 1,282,562 481,407 0 109,547 691,607 1,282,561 498,863 1.0 748,963 1.5
2013F 67,012 129,242 (62,036) 987,857 0 (9,257) 1,214,733 523,110 0 36,061 655,563 1,214,733 507,196 1.0 624,611 1.2
2014F 81,818 117,192 (66,967) 963,506 0 4,076 1,232,429 585,330 0 36,061 611,038 1,232,429 507,196 1.2 565,281 1.1
2015F 81,057 116,822 (87,617) 944,966 0 8,494 1,257,960 687,323 0 36,061 534,576 1,257,960 507,196 1.4 489,580 1.0
2016F 125,001 121,893 (91,420) 926,426 0 8,494 1,343,815 817,046 0 36,061 490,708 1,343,815 507,196 1.6 401,768 0.8
124.5 51.0 (7.7) 1.6
155.6 58.4 2.2 6.6
119.4 51.4 7.2 8.7
96.6 45.9 11.2 9.3
71.2 38.9 16.0 11.9
49.2 29.9 17.2 12.5
17 January 2014
24

European Oil Services & Drilling Industry View: POSITIVE Stock Rating: EQUAL WEIGHT 2012A 529,287 190,264 91,398 11,692 9,828 0.02 577,229 0.00 2013E 538,152 203,806 112,538 39,561 36,255 0.07 585,562 0.00 2014E 554,360 219,646 122,184 66,904 62,221 0.12 585,562 0.00 2015E 584,112 261,476 160,036 110,262 101,993 0.19 585,562 0.00 CAGR 3.3% 11.2% 20.5% 111.3% 118.1% 114.7% 0.5% N/A Average 39.6 21.9 10.1 9.3 4.0 9.2 9.7 CAGR 54.7% 15.8% -0.9% -10.7% 0.2% -9.6% 12.6% N/A -13.2% -1.5% 24.8% 27.0% N/A N/A N/A N/A N/A Average 15.0 4.6 0.9 0.7 0.7 0.0 51.5 57.5 110.7 Price (15-Jan-2014) NOK 4.55 Price Target NOK 6.20 Why Equal Weight? Despite short-term pressure on marine contract pricing, we see it continuing to move higher and the company deleveraging rapidly. Upside case NOK 16.00 We assume that marine contract seismic pricing increases 17-20% points per annum more than our estimates in 2014 and 2015, towards peak levels seen in 2008, and this then provides a higher base for our DCF-based valuation. Downside case NOK 2.00 We assume that marine contract seismic pricing falls at 10% points worse than our estimates in 2014 and 2015, towards trough levels seen in 2010, and this then provides a lower base for our DCF-based valuation. Upside/Downside scenarios
Polarcus Ltd. (PLCS.OL)

Income statement ($k) Revenue EBITDA EBIT Pre-tax income Net income (adj) EPS (adj) ($) Diluted shares (k) DPS ($) Margin and return data EBITDA margin (%) EBIT margin (%) Pre-tax margin (%) Net (adj) margin (%) ROA (%) ROE (%) ROACE (%)
35.9 17.3 2.2 1.9 0.8 2.2 7.0
37.9 20.9 7.4 6.7 2.7 7.2 9.2
39.6 22.0 12.1 11.2 4.8 11.2 9.9
44.8 27.4 18.9 17.5 7.7 16.0 12.7
Balance sheet and cash flow ($k) Intangible fixed assets 52,417 101,915 132,805 194,238 Cash and equivalents 52,191 67,012 81,818 81,057 Total assets 1,372,434 1,286,026 1,295,320 1,337,083 Short and long-term debt 801,154 691,624 647,099 570,637 Other long-term liabilities 185 186 186 186 753,846 714,252 658,440 Total liabilities 891,026 Shareholders' equity 481,407 523,110 585,330 687,323 Minorities 0 0 0 0 Net debt/(funds) 748,963 624,611 565,281 489,580 Capital employed 1,230,370 1,147,721 1,150,612 1,176,903 Change in working capital 10,813 -54,833 16,981 21,019 Cash flow from operations 136,202 131,396 176,663 278,685 Capital expenditure -363,235 -107,305 -104,000 -131,000 Dividends paid 0 0 0 0 Net cash from operations -227,033 24,091 72,663 147,685 Free cash flow -227,033 24,091 72,663 147,685 131,902 59,330 134,352 Net cash surplus/(deficit) -199,790 Valuation and leverage metrics P/E (adj) (x) EV/EBITDA (x) Equity FCF yield (%) P/BV (x) P/Sales (x) Dividend yield (%) Net debt/capital (%) Total debt/capital (%) Net debt/equity (%)
Value
38.9 5.9 -60.9 0.8 0.7 0.0 60.9 65.1 155.6
10.8 4.9 6.4 0.7 0.7 0.0 54.4 60.3 119.4
6.3 4.3 19.2 0.6 0.7 0.0 49.1 56.2 96.6
3.9 3.3 38.9 0.6 0.6 0.0 41.6 48.5 71.2
Quality
Sentiment
Low
High
Selected operating metrics ($k) Backlog 265,000 Order intake 0

N/A 0
N/A 0
N/A 0
17 January 2014
25
TGS (UW, PT NOK 180, from NOK 190)

Steady, but investments down
TGS remains, in our opinion, one of the best-run seismic companies. And, following the disappointment of 3Q13, its latest update is encouraging. Late sales in 4Q13 surpassed short-term expectations, bucking what we feel will be the trend elsewhere, highlighting once again, to us that it is the quality of multi-client not the quantity that counts. However, when quality is consistent, for investors it is the quantity that drives share price. Hence, an investment level of US$390-460mn, encompassing our US$450mn estimate, while encouraging that it was not a further disappointment, is still some 20% off where we thought it might be a year ago. Less investment equals less value generation and with limited upside to our reduced NOK180/share price target, we remain Underweight. Investment equals value: We believe TGS is doing the right thing. It has scaled back its investment level, partly in the face of increased competition, and continues to focus on the best return potential projects. Its focus and lack of assets allow it to be rigorous. However, the value of TGS is largely a mathematical exercise. It is to us an investment vehicle with a defined return. That return, while under pressure, appears to be holding, but the investment level has fallen. The top end of the range for 2014 is some 20% lower than guidance for 2013 a year ago. This level, in our opinion, drives the share price and hence, as the chart below shows, we see limited upside potential. TGS total shareholder returns versus investment guidance
16 14 12 10 8 6 4 2 0 100 0 400 300 200 600 500
Guidance mid pnt $mn

Source: Company data, Datastream, Barclays Research
indexed share price
Right areas for late sales: The key to the multi-client business, in our opinion, is having the right data in the right place, at the right time. TGS's business model is dedicated to this. It appears also that 2014 could be good for late sales as well. The announced central Gulf of Mexico sale in March 2014, rounds in Nova Scotia in April 2014, the 23rd round in Norway in 2H14 and the 28th licence round in the UK in 1H14 all bode well. Furthermore, the potential Madagascar round in 1H14 could help the company. Ahead of the curve on vessels for 1H13: From its published activity chart the company looks to us to have been busy in securing early capacity, taking advantage of the weak 4Q13 contract market. Furthermore, the company believes that pricing may wane and help it later in the year. 1Q14 looks particularly busy with five 3D vessels, two 2D vessels and three land crews active. Furthermore, the company has secured capacity for the North Sea summer season, protecting against any price spike that could occur, however unlikely.
17 January 2014
26
Barclays | European Oil Services & Drilling Earnings left largely unchanged: TGSs recent guidance for 2014 was in line with our expectations, leading to minimal EPS changes of a 2% reduction in 2014 and 1% increase in 2015. However, beyond that we have implied a lower level of investments in the medium term, leading to a cut to our DCF-based price target of NOK180/share from NOK190/share previously and we remain Underweight.
Income statement US$ '000 Net late sales Net pre-funding Other (incl. Stingray) Exceptional Total revenues Operating costs EBITDA Multi-client amortisation Other depreciation & amortisation EBIT Net financing income Other financial items Profit before tax Taxation Tax rate, % Minorities Net income reported Net income adjusted Average number of shares Diluted number of shares EPS, basic reported, US$ EPS, diluted reported, US$ EPS, diluted adjusted, US$ EPS, diluted adjusted, NOK DPS, NOK Payout ratio
2010A 380,300 162,700 25,300 0 568,263 (83,496) 484,767 (247,874) (9,785) 227,108 1,452 (815) 227,745 (71,962) 32% 0 155,783 155,368 102,595 104,406 1.52 1.49 1.49 9.0 5.0 55%
2011A 419,400 147,400 41,700 0 608,567 (119,672) 488,895 (241,509) (6,984) 240,401 2,975 (2,229) 241,147 (70,459) 29% 0 170,688 171,125 101,984 103,416 1.67 1.65 1.65 9.3 6.0 64%
2012A 563,825 338,200 30,200 0 932,225 (130,148) 802,090 (387,305) (12,480) 402,305 4,813 432 407,550 (123,017) 30% 0 284,533 284,533 101,827 103,166 2.79 2.76 2.76 16.0 8.0 49%
2013F 644,400 178,400 59,078 0 881,878 (146,557) 735,321 (345,044) (14,453) 375,824 2,559 (4,513) 373,870 (112,612) 30% 0 261,258 261,258 101,827 103,166 2.57 2.53 2.53 14.8 8.5 58%
2014F 645,000 210,000 62,000 0 917,000 (150,000) 767,000 (376,200) (14,000) 376,800 3,700 0 380,500 (114,150) 30% 0 266,350 266,350 101,827 103,166 2.62 2.58 2.58 15.4 8.8 58%
2015F 677,250 237,500 65,100 0 979,850 (155,000) 824,850 (402,490) (14,000) 408,360 4,200 0 412,560 (123,768) 30% 0 288,792 288,792 101,827 103,166 2.84 2.80 2.80 16.7 8.3 50%
17 January 2014
27

Cash flow US$ '000 Adjusted net income Minorities Depreciation & amortisation Change in working capital Other items Cash flow from operations per share Capital expenditure Investment in multi-client Dividends Net cash flow from operations Non recurring items: Acquisitions Divestments Proceeds from share issues all other items Surplus/Deficit
2010A 155,368 0 257,659 24,503 (28,762) 408,768 4.0 (5,201) (271,323) (64,742) 67,502
2011A 171,125 0 248,493 16,182 50,664 486,464 4.8 (13,078) (283,217) (93,407) 96,762
2012A 284,533 0 399,785 (16,168) (5,105) 663,045 6.5 (25,927) (482,691) (103,325) 51,102
2013F 261,258 0 359,497 (4,526) (6,111) 610,118 6.0 (44,000) (436,495) (140,033) (10,410)
2014F 266,350 0 390,200 (3,512) (4,000) 649,038 6.4 (44,000) (420,000) (148,273) 36,764
2015F 288,792 0 416,490 (6,285) (4,500) 694,497 6.8 (25,000) (475,000) (151,163) 43,334
(3,625) 375 (25,875) 1,865 39,867
(43,851) 0 (14,263) 2,677 41,325
(75,750) 0 6,563 4,598 (13,487)
0 0 0 6,111 (4,299)
0 0 0 4,000 40,764
0 0 0 4,500 47,834
Balance sheet US$ '000 Cash Other current assets Current liabilities Net fixed assets Intangibles Other non current assets Other non current liabilities Capital employed Ordinary shareholders funds Minority interests Short term debt Long term debt Capital employed from debt No. of shares in issue NBV per share (US$) Net debt Net debt per share (US$) Ratios RoE,% RoACE, % (gross)
2010A 290,185 312,542 (207,743) 15,245 545,149 53,796 (100,402) 908,772 908,771 0 0 0 908,771 102,595 8.9 (290,185) (2.8)
2011A 335,709 296,698 (210,241) 19,562 644,263 29,331 (142,300) 973,022 973,021 0 0 0 973,021 101,984 9.5 (335,709) (3.3)
2012A 338,673 461,876 (374,525) 32,025 818,390 34,725 (142,804) 1,168,360 1,168,360 0 0 0 1,168,360 101,827 11.5 (338,673) (3.3)
2013F 334,374 418,172 (326,295) 63,072 908,341 34,725 (142,804) 1,289,585 1,289,585 0 0 0 1,289,585 101,827 12.7 (334,374) (3.3)
2014F 375,139 434,679 (339,290) 94,572 950,641 34,725 (142,804) 1,407,662 1,407,662 0 0 0 1,407,662 101,827 13.8 (375,139) (3.7)
2015F 422,973 464,219 (362,545) 107,072 1,021,651 34,725 (142,804) 1,545,291 1,545,291 0 0 0 1,545,291 101,827 15.2 (422,973) (4.2)
17.8 17.7
18.2 18.1
26.6 26.2
21.3 21.4
19.7 19.6
19.6 19.4
17 January 2014
28

European Oil Services & Drilling Industry View: POSITIVE Stock Rating: UNDERWEIGHT 2015E 979,850 824,850 408,360 412,560 288,792 2.80 103,166 8.3 CAGR 1.7% 0.9% 0.5% 0.4% 0.5% 0.5% 0.0% 1.3% Average 84.3 42.1 42.4 29.7 15.8 21.8 30.4 CAGR 7.7% 7.7% 6.8% N/A 0.0% -0.8% 9.8% N/A N/A 10.6% N/A 1.6% N/A N/A -5.3% 8.0% N/A Average 10.8 3.3 5.7 2.2 3.1 4.8 -37.6 0.0 -27.2 Price (15-Jan-2014) NOK 174.00 Price Target NOK 180.00 Why Underweight? Based on our sum-of-the-parts analysis, we believe that there is limited upside to the value attributed to TGS's future investments. Upside case NOK 260.00 Group revenue growth is 10% in 2013 -2015, we assume a long-term sales to capex ratio of 2.2x and the stock trades at a 20% premium to DCF. Downside case NOK 110.00 We assume that TGS will attain a long-term sales to capex ratio of 2.0x. Less impressive growth leads to the stock trading only in line with DCF. Upside/Downside scenarios
TGS-NOPEC Geophysical Company ASA (TGS.OL)

Income statement ($k) Revenue EBITDA EBIT Pre-tax income Net income (adj) EPS (adj) ($) Diluted shares (k) DPS (NOK) Margin and return data EBITDA margin (%) EBIT margin (%) Pre-tax margin (%) Net (adj) margin (%) ROA (%) ROE (%) ROACE (%) 2012A 932,225 802,090 402,305 407,550 284,533 2.76 103,166 8.0 2013E 881,878 735,321 375,824 373,870 261,258 2.53 103,166 8.5 2014E 917,000 767,000 376,800 380,500 266,350 2.58 103,166 8.8
86.0 43.2 43.7 30.5 18.9 26.6 38.9
83.4 42.6 42.4 29.6 15.2 21.3 29.5
83.6 41.1 41.5 29.0 14.6 19.7 26.6
84.2 41.7 42.1 29.5 14.7 19.6 26.6
Balance sheet and cash flow ($k) Intangible fixed assets 818,390 908,341 950,641 1,021,651 Cash and equivalents 338,673 334,374 375,139 422,973 Total assets 1,685,689 1,758,684 1,889,756 2,050,639 Short and long-term debt 0 0 0 0 Other long-term liabilities 142,804 142,804 142,804 142,804 469,099 482,094 505,349 Total liabilities 517,329 Shareholders' equity 1,168,360 1,289,585 1,407,662 1,545,291 Minorities 0 0 0 0 Net debt/(funds) -342,362 -338,063 -378,828 -426,662 951,522 1,028,834 1,118,629 Capital employed 825,998 Change in working capital -16,168 -4,526 -3,512 -6,285 Cash flow from operations 663,045 610,118 649,038 694,497 Capital expenditure -508,618 -480,495 -464,000 -500,000 Dividends paid -103,325 -140,033 -148,273 -151,163 Net cash from operations 51,102 -10,410 36,764 43,334 Free cash flow 154,427 129,623 185,038 194,497 -4,299 40,764 47,834 Net cash surplus/(deficit) -13,487 Valuation and leverage metrics P/E (adj) (x) EV/EBITDA (x) Equity FCF yield (%) P/BV (x) P/Sales (x) Dividend yield (%) Net debt/capital (%) Total debt/capital (%) Net debt/equity (%)
Value
Quality
10.4 3.2 5.3 2.5 3.1 4.6 -41.0 0.0 -29.0
11.3 3.5 4.5 2.3 3.3 4.9 -35.1 0.0 -25.9
11.1 3.3 6.4 2.1 3.2 5.1 -36.5 0.0 -26.6
10.2 3.0 6.7 1.9 3.0 4.8 -37.8 0.0 -27.4
Sentiment
Low
High
Selected operating metrics ($k) Backlog 142,700 Order intake 0

N/A 0
N/A 0
N/A 0
17 January 2014
29

Comparative valuations PE pre g/w - historic at year high Aker Solutions CGGVeritas Hunting Maire Tecnimont Petrofac ex IES Petroleum Geo-Services Polarcus Saipem SBM Offshore Seadrill Subsea 7 SA Technip Tecnicas Reunidas TGS Wood Group AVG (ex Seismic, SDRL, SPM (2013)) EV/EBITDA adj - historic at year high Aker Solutions CGGVeritas Hunting Maire Tecnimont Petrofac Petroleum Geo-Services Polarcus Saipem SBM Offshore Seadrill Subsea 7 SA Technip Tecnicas Reunidas TGS Wood Group AVG (ex Seismic, SDRL, (SPM (2013))
1
2006A 34.8 18.6 16.8 n/a 21.3 n/a 10.4 n/a 24.2 21.8 29.3 18.5 38.3 23.5 15.1 21.4 24.8 2006A 16.2 7.8 7.1 n/a 11.5 9.8 n/a 13.3 11.4 24.5 11.1 13.7 26.2 9.6 10.9 13.1
2007A 21.6 24.7 19.2 39.0 19.3 n/a 11.7 n/a 23.9 21.9 19.4 42.1 56.7 32.8 16.5 23.9 26.3 2007A 13.5 10.8 9.8 20.3 10.8 11.7 n/a 13.6 12.2 18.8 13.2 17.3 29.3 10.6 13.0 14.9
2008A 29.4 15.8 35.9 32.8 15.2 n/a 13.7 n/a 18.6 25.5 nm 16.5 14.7 22.7 9.5 17.6 21.8 2008A 15.2 8.2 11.4 20.9 10.1 8.9 n/a 11.1 13.6 11.0 9.4 7.2 19.8 6.2 10.4 12.0
2009A 9.2 nm 33.8 36.8 15.2 n/a 13.8 nm 14.6 16.5 8.6 12.2 13.0 15.4 11.8 13.1 16.1 2009A 6.9 9.5 8.3 20.3 8.6 6.1 n/a 9.0 7.8 10.2 5.6 4.9 11.3 7.5 7.4 8.0
2010A 17.5 nm 27.1 45.1 19.6 n/a nm nm 19.9 15.2 12.4 21.1 18.8 26.3 15.2 21.8 20.6 2010A 9.8 15.9 10.8 20.8 12.1 12.6 20.1 11.1 7.9 11.4 8.4 8.5 15.2 8.5 10.9 10.7
2011A 43.6 nm 21.1 nm 17.1 14.2 110.6 nm 18.5 nm 20.4 22.1 17.5 19.6 18.4 16.5 18.8 2011A 15.5 12.9 13.3 nm 10.9 13.9 18.0 9.7 8.6 11.9 8.8 8.7 14.9 11.2 11.9 11.5
2012A 16.4 72.6 16.8 nm 15.3 14.3 21.3 64.4 19.5 (16.7) 17.2 16.6 20.4 15.4 12.7 16.3 16.8 2012A 9.1 9.7 10.4 (8.6) 11.3 10.1 7.8 10.2 9.6 13.1 8.0 9.7 11.4 7.8 10.3 10.1
2013F 24.8 39.7 16.5 22.5 14.2 14.5 16.5 18.5 (42.1) 13.2 14.3 25.2 19.6 15.6 15.6 14.1 16.1 2013F 9.8 9.7 9.6 9.8 10.4 8.6 6.8 26.7 8.7 12.4 8.7 9.2 10.4 9.4 9.1 11.3
2014F 14.0 13.1 11.2 8.8 9.8 10.2 8.2 6.2 12.4 7.4 9.4 9.9 11.3 13.7 11.0 9.3 10.8 2014F 7.6 6.6 6.8 7.6 7.0 5.5 4.9 8.1 6.7 9.0 4.2 6.4 8.6 6.5 6.4 6.9
2015F 11.4 9.7 9.9 5.5 8.2 9.2 6.5 3.9 8.9 5.3 8.0 8.3 9.9 12.1 10.2 9.0 8.9 2015F 6.4 5.7 5.8 4.6 5.9 4.9 3.9 5.0 5.4 8.0 3.4 4.6 7.0 5.9 5.3 5.5
Adjusted for cash downpayments - cash level set to 10% of SF where prepayments number not available
Seismic multiples based on EBITDA minus multi-client amortization Source: Company data, Barc lays Research estimates (Seadrill covered by James W est) Price as per 15 January 2014
17 January 2014
30
Barclays | European Oil Services & Drilling Valuation Methodology and Risks
European Oil Services & Drilling Aker Solutions (AKSO NO / AKSO.OL) Valuation Methodology: Our price target for Aker Solutions is derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Margins used for 2016-18F period are comparable to peers. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 11%, more conservative thn the 10% that we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Aker Solutions specifically, some earnings are exposed to lump sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. AMEC plc (AMEC LN / AMEC.L) Valuation Methodology: Rating Suspended Risks which May Impede the Achievement of the Barclays Research Price Target: Rating Suspended CGG (CGG FP / GEPH.PA) Valuation Methodology: CGGVeritas: Our price target for CGGVeritas has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (15% pa) until a turn in 2017 when revenues fall (10% pa) until 2019. Margins used for 2016-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 11%, ahead of the 10% that we use for the sector to account for the extreme cyclicality seen in the seismic industry. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil and Gas equity research teams estimates for future energy CGGVeritas: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For CGGVeritas specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multi-client work, using its own capital. Future sales of this work may materially change results. Hunting (HTG LN / HTG.L) Valuation Methodology: Our price target for Hunting has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (15% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in-line with the 10% that we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual outcomes. All estimates assume no marked changes in the current political landscape. Maire Tecnimont (MT IM / MTCM.MI) Valuation Methodology: Maire Tecnimont: Our price target for Maire Tecnimont has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2012-2014F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2015 when revenues fall (10% pa) until 2017. Margins used for 2015-17F period are comparable to those over the 2006-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 12%, ahead of the 10% that we use for the sector to account for its low free float and liquidity. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Maire Tecnimont specifically, earnings are exposed to lump-sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. Petrofac (PFC LN / PFC.L) Valuation Methodology: Our price target for Petrofac has been derived from a DCF-based methodology. For the non-IES businesses we have used our forecasted cash flows for the 2013-2016F period and thereafter assumed a cyclical growth (15% pa) until a turn in 2017 when revenues fall (15% pa) until 2018. Margins used for 2016-18F period are comparable to those over the 2004-2009 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in line with the 10% that we use for the sector. For IES we have used and asset-by-asset sum-of-the-parts, methodology using DCF(10%) where appropriate on a field based model or book value of non E&P assets. We then apply a 30% premium to DCF ex-IES based on historical trading patterns within the sector and the 0-30% that we have used for the sector. The valuation is then checked against historical trading multiples. 17 January 2014 31
Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Petrofac specifically, E&C earnings are exposed to lump-sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result, there may be periodic swings in profitability. Petroleum Geo-Services (PGS NO / PGS.OL) Valuation Methodology: Our price target for PGS has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2019. Margins used for 2016-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 11%, ahead of the 10% that we use for the sector to account for the volatility seen in Norwegian-listed stocks and extreme cyclicality seen in the seismic industry. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For PGS specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multiclient work, using its own capital. Future sales of this work may materially change results. Polarcus (PLCS NO / PLCS.OL) Valuation Methodology: Our price target for Polarcus has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 13%, ahead of the 10% that we use for the sector to account for the volatility seen in Norwegian-listed stocks, the extreme cyclicality seen in the seismic industry and the low market capitalization of the stock. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Polarcus specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multi-client work, using its own capital. Future sales of this work may materially change results. Saipem (SPM IM / SPMI.MI) Valuation Methodology: Our price target for Saipem has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2018 when revenues fall (5% pa) until 2018. Margins used for 2015-18F period are below those achieved during the 2004-2009 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%. We do not apply a premium to our base-case DCF to reflect the current uncertainty. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil and Gas equity research team's estimates for future energy All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Saipem specifically, earnings are exposed to lump sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. In addition, the company is underinvestigation in Algeria for alleged corrupt practices that could result in material costs being incurred. As a result there may be periodic swings in profitability. SBM Offshore (SBMO NA / SBMO.AS) Valuation Methodology: Our price target for SBM Offshore has been derived from a DCF-based methodology. For the lease fleet we build up cash flows on a contract-by-contract basis and discount at 8.2%. For terminal value we use twice the book value remaining at the end of each contract. For the turnkey division we use a 8.2% discount rate and forecast performance until 2015. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition, workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For SBM Offshore specifically, Turnkey earnings are exposed to lump sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. For the Lease Fleet project execution relies upon the provision of finance, the availability of which may affect the company's ability to do further work. It also relies on the operational efficiency of the fleet. Subsea 7 SA (SUBC NO / SUBC.OL) Valuation Methodology: Our price target for Subsea 7 SA has been derived from a DCF-based methodology. We have used our forecast cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. 17 January 2014 32
Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in oline with the 10% that we use for the sector. We have then applied a 30% premium in-line with what we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays European Oil & Gas equity research teams' estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual outcomes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Subsea 7 SA specifically, earnings are exposed to lump-sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. Furthermore, all marine activities are subject to risk and rely heavily on the operational efficiency of the company's vessels. Technip (TEC FP / TECF.PA) Valuation Methodology: Our price target for Technip has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (15% pa) until a turn in 2017 when revenues fall (10% pa) until 2019. Margins used for 2016-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in-line with the 10% that we use for the sector.The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Technip specifically, earnings are exposed to lump-sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. Furthermore, all marine activities are subject to risk and rely heavily on the operational efficiency of the company's vessels. Tecnicas Reunidas (TRE SM / TRE.MC) Valuation Methodology: Our price target for Tecnicas Reunidas has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Margins used for 2016-18F period are comparable to those over the 2004-2009 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in line with the 10% that we use for the sector. We then apply a 10% premium, in-line with historical trading patterns and the 0-30% that we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Tecnicas Reunidas specifically, earnings are exposed to lump-sum contracts, which if executed incorrectly can produce significant negative margins. In addition backlog award can be lumpy and profit recognition on projects is often in a non-linear fashion. As a result there may be periodic swings in profitability. TGS (TGS NO / TGS.OL) Valuation Methodology: Our price target for TGS has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (5% pa) until 2019. Margins used for 2015-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in line with what we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For TGS specifically investments in multi-client data might not generate the expected amount of sales, which may materially change results. Wood Group (WG/ LN / WG.L) Valuation Methodology: Our price target for Wood Group has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Margins used for 2016-18F period are comparable to those over the 2004-2009 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in line with the 10% that we use for the sector. We have then applied a 30% premium in line with historical trading patterns and the 0-30% that we use for the sector. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Wood Group specifically, some contracts are paid on a pay-for-performance basis. The execution of these projects may materially change profitability. 17 January 2014 33
Source: Barclays Research.
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34
ANALYST(S) CERTIFICATION(S):
We, Mick Pickup and Haley Silverman, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report. The POINT Quantitative Equity Scores (POINT Scores) referenced herein are produced by the firms POINT quantitative model and Barclays hereby certifies that (1) the views expressed in this research report accurately reflect the firm's POINT Scores model and (2) no part of the firm's compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
IMPORTANT DISCLOSURES CONTINUED

Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank PLC and its affiliates (collectively and each individually, "Barclays"). For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays Research Compliance, 745 Seventh Avenue, 14th Floor, New York, NY 10019 or refer to http://publicresearch.barclays.com or call 212-526-1072. The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities. Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA. These analysts may not be associated persons of the member firm and therefore may not be subject to NASD Rule 2711 and incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analysts account. Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from accepting payment or reimbursement by any covered company of their travel expenses for such visits. In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html. In order to access Barclays Research Conflict Management Policy Statement, please refer to: http://group.barclays.com/corporates-and-institutions/research/research-policy. The Corporate and Investment Banking division of Barclays produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise. Primary Stocks (Ticker, Date, Price) CGG (GEPH.PA, 15-Jan-2014, EUR 12.53), Underweight/Positive, D/J/K/L/N Petroleum Geo-Services (PGS.OL, 15-Jan-2014, NOK 73.40), Overweight/Positive, D/J/K/L/M/N Polarcus (PLCS.OL, 15-Jan-2014, NOK 4.55), Equal Weight/Positive, J TGS (TGS.OL, 15-Jan-2014, NOK 174.00), Underweight/Positive, J
Disclosure Legend: A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of the issuer in the previous 12 months. B: An employee of Barclays Bank PLC and/or an affiliate is a director of this issuer. C: Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in equity securities issued by this issuer or one of its affiliates. D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months. E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer within the next 3 months. F: Barclays Bank PLC and/or an affiliate beneficially owned 1% or more of a class of equity securities of the issuer as of the end of the month prior to the research report's issuance. G: One of the analysts on the coverage team (or a member of his or her household) owns shares of the common stock of this issuer. H: This issuer beneficially owns 5% or more of any class of common equity securities of Barclays Bank PLC. I: Barclays Bank PLC and/or an affiliate has a significant financial interest in the securities of this issuer. J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of this issuer. K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from this issuer within the past 12 months. L: This issuer is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. M: This issuer is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. N: This issuer is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC and/or an affiliate. O: Barclays Capital Inc., through Barclays Market Makers, is a Designated Market Maker in this issuer's stock, which is listed on the New York Stock Exchange. At any given time, its associated Designated Market Maker may have "long" or "short" inventory position in the stock; and its 17 January 2014 35

associated Designated Market Maker may be on the opposite side of orders executed on the floor of the New York Stock Exchange in the stock. P: A partner, director or officer of Barclays Capital Canada Inc. has, during the preceding 12 months, provided services to the subject company for remuneration, other than normal course investment advisory or trade execution services. Q: The Corporate and Investment Banking division of Barclays Bank PLC, is a Corporate Broker to this issuer. R: Barclays Capital Canada Inc. and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months. S: Barclays Capital Canada Inc. is a market-maker in an equity or equity related security issued by this issuer.
Guide to the Barclays Fundamental Equity Research Rating System: Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverage universe"). In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone. Stock Rating Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon. Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12month investment horizon. Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon. Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including where the Corporate and Investment Banking Division of Barclays is acting in an advisory capacity in a merger or strategic transaction involving the company. Industry View Positive - industry coverage universe fundamentals/valuations are improving. Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating. Negative - industry coverage universe fundamentals/valuations are deteriorating. Below is the list of companies that constitute the "industry coverage universe": European Oil Services & Drilling Aker Solutions (AKSO.OL) Hunting (HTG.L) Petroleum Geo-Services (PGS.OL) SBM Offshore (SBMO.AS) Tecnicas Reunidas (TRE.MC) Distribution of Ratings: Barclays Equity Research has 2591 companies under coverage. 44% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 47% of companies with this rating are investment banking clients of the Firm. 39% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 42% of companies with this rating are investment banking clients of the Firm. 15% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 40% of companies with this rating are investment banking clients of the Firm. Guide to the Barclays Research Price Target: Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period. Guide to the POINT Quantitative Equity Scores: The POINT Quantitative Equity Scores (POINT Scores) are based on consensus historical data and are independent of the Barclays fundamental analysts views. Each score is composed of a number of standard industry metrics. A high/low Value score indicates attractive/unattractive valuation. Measures of value include P/E, EV/EBITDA and Free Cash Flow. 17 January 2014 36 AMEC plc (AMEC.L) Maire Tecnimont (MTCM.MI) Polarcus (PLCS.OL) Subsea 7 SA (SUBC.OL) TGS (TGS.OL) CGG (GEPH.PA) Petrofac (PFC.L) Saipem (SPMI.MI) Technip (TECF.PA) Wood Group (WG.L)

A high/low Quality score indicates financial statement strength/weakness. Measures of quality include ROIC and corporate default probability. A high/low Sentiment score indicates bullish/bearish market sentiment. Measures of sentiment include price momentum and earnings revisions. These scores are valid as of the date of this report. To view the latest scores, which are updated monthly, click here. For a more detailed description of the underlying methodology for each score, please click here. Barclays offices involved in the production of equity research: London Barclays Bank PLC (Barclays, London) New York Barclays Capital Inc. (BCI, New York) Tokyo Barclays Securities Japan Limited (BSJL, Tokyo) So Paulo Banco Barclays S.A. (BBSA, So Paulo) Hong Kong Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong) Toronto Barclays Capital Canada Inc. (BCCI, Toronto) Johannesburg Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg) Mexico City Barclays Bank Mexico, S.A. (BBMX, Mexico City) Taiwan Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan) Seoul Barclays Capital Securities Limited (BCSL, Seoul) Mumbai Barclays Securities (India) Private Limited (BSIPL, Mumbai) Singapore Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)
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CGG (CGG FP / GEPH.PA)

EUR 12.53 (15-Jan-2014) Rating and Price Target Chart - EUR (as of 15-Jan-2014)
32 30
Stock Rating UNDERWEIGHT Currency=EUR Date 08-Nov-2013 16-Oct-2013 Closing Price 15.79 15.75 18.06 21.30 24.44 24.23 22.78 18.85 21.97 20.80 16.12 21.95 22.02 22.57 25.64 Equal Weight Overweight Overweight Equal Weight Underweight Rating
Industry View POSITIVE
Adjusted Price Target 19.00 20.00 22.00 25.00 29.50 30.53 29.09 27.66 28.62 29.57 29.09 29.57 27.19
28 26 24 22 20 18
01-Mar-2013 10-Jan-2013 06-Nov-2012 25-Sep-2012 30-Jul-2012 11-May-2012 02-Mar-2012
16 14 12 10 Jul- 2011 Jan- 2012 Jul- 2012 Target Price Jan- 2013 Jul- 2013 Jan- 2014
26-Jan-2012 10-Nov-2011 01-Aug-2011 14-Jul-2011 28-Apr-2011 28-Feb-2011
Closing Price
Rating Change
Source: Thomson Reuters, Barclays Research Historical stock prices and price targets may have been adjusted for stock splits and dividends. Source: IDC, Barclays Research
Link to Barclays Live for interactive charting

D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from CGG in the past 12 months. J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of CGG. K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from CGG within the past 12 months. L: CGG is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. N: CGG is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC and/or an affiliate. Valuation Methodology: CGGVeritas: Our price target for CGGVeritas has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (15% pa) until a turn in 2017 when revenues fall (10% pa) until 2019. Margins used for 2016-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 11%, ahead of the 10% that we use for the sector to account for the extreme cyclicality seen in the seismic industry. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil and Gas equity research teams estimates for future energy CGGVeritas: All our estimates are based on Barclays Capital European Oil & Gas equity research teams estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For CGGVeritas specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multi-client work, using its own capital. Future sales of this work may materially change results.
17 January 2014
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Petroleum Geo-Services (PGS NO / PGS.OL)

NOK 73.40 (15-Jan-2014) Rating and Price Target Chart - NOK (as of 15-Jan-2014)
Stock Rating OVERWEIGHT Currency=NOK Date 16-Oct-2013 Closing Price 70.20 84.40 94.95 97.60 90.25 82.30 88.40 Rating *
Adjusted Price Target 100.00 135.00 140.00 135.00 130.00 120.00 110.00
150
30-Apr-2013 15-Feb-2013
125
26-Oct-2012 27-Jul-2012 28-Apr-2011 18-Feb-2011
100
Source: Thomson Reuters, Barclays Research

75
Historical stock prices and price targets may have been adjusted for stock splits and dividends. *The rating for this security remained Overweight during the relevant period.
50
Jul- 2011
Jan- 2012
Jul- 2012
Jan- 2013 Target Price
Jul- 2013
Jan- 2014
Closing Price
Source: IDC, Barclays Research

D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Petroleum Geo-Services in the past 12 months. J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of Petroleum Geo-Services. K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Petroleum Geo-Services within the past 12 months. L: Petroleum Geo-Services is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. M: Petroleum Geo-Services is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. N: Petroleum Geo-Services is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC and/or an affiliate. Valuation Methodology: Our price target for PGS has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2019. Margins used for 2016-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 11%, ahead of the 10% that we use for the sector to account for the volatility seen in Norwegianlisted stocks and extreme cyclicality seen in the seismic industry. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For PGS specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multi-client work, using its own capital. Future sales of this work may materially change results.
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Polarcus (PLCS NO / PLCS.OL)

Stock Rating EQUAL WEIGHT Currency=NOK Date Closing Price 3.85 4.90 6.90 7.08 5.40 5.90 6.20 5.70 3.96 Overweight Rating
Adjusted Price Target 7.00 10.00 11.00 10.50 10.80 10.20 9.60 10.00 9.00
12
16-Oct-2013 25-Jul-2013 13-Feb-2013 10-Jan-2013 01-Aug-2012 30-Apr-2012 15-Mar-2012
10
01-Mar-2012 26-Jan-2012
Source: Thomson Reuters, Barclays Research Historical stock prices and price targets may have been adjusted for stock splits and dividends.
Jul- 2011
Jan- 2012
Jul- 2012 Target Price
Jan- 2013
Jul- 2013
Jan- 2014
Closing Price
Rating Change

J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of Polarcus. Valuation Methodology: Our price target for Polarcus has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (10% pa) until 2018. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 13%, ahead of the 10% that we use for the sector to account for the volatility seen in Norwegian-listed stocks, the extreme cyclicality seen in the seismic industry and the low market capitalization of the stock. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For Polarcus specifically the earnings in seismic companies depend on the supply of new boats. Also the company executes multiclient work, using its own capital. Future sales of this work may materially change results.
17 January 2014
40
TGS (TGS NO / TGS.OL)

250
Stock Rating UNDERWEIGHT Currency=NOK Date 16-Oct-2013 16-Jul-2013 09-Jan-2013 09-Oct-2012 03-Aug-2012 04-May-2012 26-Jan-2012 Closing Price 147.60 190.30 196.50 197.10 174.40 170.50 149.80 Underweight Rating
Adjusted Price Target 190.00 220.00 230.00 225.00 215.00 205.00 180.00
225
200
175
150
Source: Thomson Reuters, Barclays Research Historical stock prices and price targets may have been adjusted for stock splits and dividends.
125
100
75 Jul- 2011 Jan- 2012 Jul- 2012 Target Price Jan- 2013 Jul- 2013 Jan- 2014
Closing Price
Rating Change

J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of TGS. Valuation Methodology: Our price target for TGS has been derived from a DCF-based methodology. We have used our forecasted cash flows for the 2013-2015F period and thereafter assumed a cyclical growth (10% pa) until a turn in 2017 when revenues fall (5% pa) until 2019. Margins used for 2015-19F period are comparable to those over the 2004-2008 period. Our terminal value is then taken on a (WACC-g) basis assuming 3% long-term growth. Our discount rate used is 10%, in line with what we use for the sector. The valuation is then checked against historical trading multiples. Risks which May Impede the Achievement of the Barclays Research Price Target: All our estimates are based on Barclays Capital European Oil & Gas equity research team's estimates for future energy supply-demand patterns, exchange rates, commodity prices and the availability of assets within the oils service industry. These estimates are subject to revision and may be materially different from eventual out comes. In addition workload is executed on a global basis in many regions with unstable regimes. All estimates assume no marked changes in the current political landscape. For TGS specifically investments in multi-client data might not generate the expected amount of sales, which may materially change results.
17 January 2014
41
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