* Strategic acquisition creates second largest provider of onshore
seismic data acquisition services in the world and largest in
Western Hemisphere * Includes extensive North American multi-client
data library * Expected pro-forma combined 2009 revenues of over
$700 million * Transaction expected to be highly accretive to 2010
earnings * Conference call scheduled for Thursday, December 3 at
11:00 a.m. Eastern Time HOUSTON and OSLO, Dec. 3
/PRNewswire-FirstCall/ -- Geokinetics Inc. (NYSE Amex: GOK) and
Petroleum Geo-Services ("PGS") (OSE:PGS) today announced that they
have signed a definitive agreement under which Geokinetics ("the
Company"), a leading provider of seismic data acquisition,
processing and interpretation services, will acquire the onshore
seismic data acquisition and multi-client data library business of
PGS ("PGS Onshore") in a cash and stock transaction valued at
approximately $210 million, on a cash free, debt free basis, which
includes net working capital of $37.5 million. The final purchase
price is subject to certain customary post-closing adjustments. The
transaction is expected to close in the first quarter of 2010 and
is subject to normal closing conditions and regulatory approvals;
there is no financing condition. The combination of Geokinetics and
PGS Onshore will create the second largest provider of onshore
seismic data acquisition services in the world in terms of crew
count and the largest based in the Western Hemisphere. The combined
company will have the assets and technical capabilities to support
up to 38 crews and carry in excess of 207,000 equipment channels
and over 150 vibroseis units; and possess in excess of 6,240 square
miles of multi-client library data upon completion of current
projects in progress. Empowered by a broad range of technologies
that include transition zone ("TZ"), ocean bottom cable ("OBC") and
land vibroseis, the new Geokinetics will be able to compete more
effectively within the entire seismic value-chain of planning,
proprietary and multi-client acquisition, processing and
interpretation services. Furthermore, this acquisition will propel
Geokinetics into new markets including Alaska and Mexico, as well
as certain new countries in the Middle East and North Africa. As a
result, Geokinetics will have a greater geographic reach overall,
with a more significant presence in Africa and Asia and a
leadership position in the Americas. In 2008, PGS Onshore generated
$71.9 million in EBITDA (a non-GAAP financial measure defined
below) on revenues of $278.8 million. In the first nine months of
2009, it generated $9.2 million in EBITDA on revenues of $141.6
million. The 2009 decline in revenues and EBITDA is primarily due
to a substantial drop in multi-client revenues as a result of lower
natural gas prices in North America and a lack of new projects
initiated in 2009. On a pro-forma basis, the new Geokinetics would
be expected to generate in excess of $700 million in revenues for
2009. PGS Onshore had backlog of $196 million as of September 30,
2009, which combined with Geokinetics represents $455 million of
pro-forma combined backlog at September 30, 2009. Geokinetics
anticipates the transaction will be highly accretive to 2010
earnings. Richard F. Miles, President and Chief Executive Officer
of Geokinetics, said, "We are extremely pleased to enter into this
agreement with PGS as it solidifies Geokinetics' position as the
clear leader in the onshore seismic data acquisition business. With
the addition of PGS Onshore's technologies; its broad international
operations capable of working in diverse climate conditions; its
extensive multi-client library providing multi-year potential and a
focus on high-impact drilling areas or areas of high lease
turnover, we will be able to expand our services, accelerate our
entrance into the multi-client business and enhance our position
within the seismic contractor industry. "We expect the combined
company to be better positioned to serve our expanded customer base
as we will have an enhanced ability to redeploy assets into more
attractive markets. Our increased number of crews should also
provide longer term contract opportunities with fewer mobilizations
which should result in better utilization and profitability. In
addition, PGS has invested over $130 million over the last three
years in their 5,500 square miles of multi-client library data and
multi-client technical capabilities, and we believe this high
quality resource will place us in an important segment of the
market in which we have not previously participated in a meaningful
way. "Finally, we look forward to PGS becoming a large shareholder
in Geokinetics, as we believe this will provide numerous
opportunities going forward and should benefit both companies. We
are eager to welcome the PGS Onshore employees into Geokinetics,
and look forward to building a stronger, more competitive
business," concluded Mr. Miles. Jon Erik Reinhardsen, President and
Chief Executive Officer of Petroleum Geo-Services commented, "The
combination of PGS' and Geokinetics' competence and market presence
will create a new force in the onshore seismic industry. As a
future key shareholder, we are excited about the growth potential
and leading market position of the new Geokinetics. This
transaction adds value for our shareholders, our employees and our
customers." Mr. Reinhardsen continues, "At the same time, this
transaction establishes PGS as a focused marine geophysical
company. The strengthened financial position of PGS will further
allow us to continue to develop the most efficient fleet and
leading edge technology in the industry." Following the closing of
the transaction, PGS will become Geokinetics' second-largest
shareholder after Avista Capital Partners. The acquisition is
expected to provide annual synergies in excess of $10 million,
driven mainly by organizational streamlining and cost reductions.
There may be additional synergies via cross-selling opportunities
and additional opportunities for processing behind Geokinetics'
expanded number of crews. Geokinetics expects to begin to
capitalize on these synergies in mid-2010 as the Company starts to
benefit from the integration of the two businesses. Geokinetics has
agreed to finance this acquisition through a combination of cash
and common stock. At closing, Geokinetics will issue PGS
approximately 2.15 million shares, which represents 19.9% of
Geokinetics current number of shares outstanding prior to this
issuance, valued for purposes of the transaction at $12.11 per
share or $26.1 million. The remainder of the purchase price or
$183.9 million will be paid in cash. The Company will have until
February 15, 2010 to close the transaction. The Company has
received a bridge financing commitment from RBC Capital Markets
Corporation and in addition, Geokinetics will also explore various
capital markets financing transactions prior to closing. In
conjunction with the financing of this transaction, Geokinetics
expects to repay the majority, if not all, of its existing
outstanding debt including its revolving credit facility, capital
leases and equipment financings. RBC Capital Markets Corporation
served as Geokinetics' exclusive financial advisor for this
transaction, while Pareto Securities served as advisor to PGS. In
connection with the transaction, the Company has amended its
Preferred Stock to facilitate the financing of the transaction as
follows. The Company's Series B-1 Preferred Stock has been amended
to, among other things, extend the date that its holders may call
for mandatory redemption and the date through which the Company can
elect to pay dividends in kind to a date to be determined between
December 2015 and March 31, 2016, with the exact date to be
determined at the completion of the financing transactions
mentioned above. In addition, the coupon on the Series B-1
Preferred Stock has been amended from 8% to 9 3/4% and the
conversion price has been adjusted from $25 to $20, subject to
certain restrictions. The Company's Series B-2 Preferred Stock will
be exchanged for a new Redeemable Preferred Stock with no common
stock conversion feature. This redeemable preferred stock will have
a coupon of approximately 12%, and will be redeemable at a date to
be determined between December 2015 and March 31, 2016, with the
exact date and coupon to be determined at the completion of the
financing transactions mentioned above. Dividends will be paid in
cash or, if the Company is restricted from paying such dividends,
may accrue up to redemption. In addition, the Company will issue
the holders of its Series B-2 preferred stock 750,000 shares of its
common stock as consideration for the amendments above. ABOUT PGS
ONSHORE The Onshore business of PGS is engaged in seismic
acquisition operations on land, including onshore multi-client
library, and in shallow water and transition zones. With capacity
for up to 13 crews in 10 countries, PGS Onshore has widespread
international operations with exposure in Asia, Africa, and South
America and has an extensive presence in Mexico supported through
long-term contracts. Its geographic capabilities vary from the
severe desert conditions of the Middle East and North Africa to
mountain, jungle and swamp regions where it manages the logistics
of high manpower crews in traditionally challenging environments.
PGS Onshore also operates effectively in the environmentally
sensitive terrain of the Arctic. Its high channel capability allows
the efficient acquisition of extremely high density land surveys,
and its transition zone capabilities enable the recording of
continuous data sets from onshore out to operational streamer
depths. PGS Onshore also has an extensive multi-client library with
over 5,500 square miles mapped, covering Texas, Alaska, Oklahoma
and Wyoming, as well as significant equipment including
approximately 85,000 channels and 84 vibroseis units. ABOUT
PETROLEUM GEO-SERVICES Petroleum Geo-Services is a focused
geophysical company providing a broad range of seismic and
reservoir services, including acquisition, processing,
interpretation and field evaluation. The Company also possesses the
world's most extensive multi-client data library. PGS operates on a
worldwide basis with headquarters in Oslo, Norway. For more
information on Petroleum Geo-Services, visit http://www.pgs.com/.
ABOUT GEOKINETICS Geokinetics is a leading provider of seismic data
acquisition, processing and interpretation services to the oil and
gas industry worldwide with over 25 years of experience operating
in hard to penetrate markets and expertise in tough, challenging
operating environments. It provides seismic data acquisition
services by collecting 2D, 3D and multi-component seismic data in
land, TZ and shallow water OBC environments. In addition, it
performs work for seismic data library companies. Geokinetics
provides seismic data acquisition services in the United States,
Western Canada, the Canadian Arctic, Central and South America,
Africa, the Middle East, Australia, New Zealand and the Far East.
Geokinetics' global strategy and presence allows the easy
redeployment of assets to the most attractive regions. Crews use
the latest technology and most appropriate methodology and
equipment for each operating environment and are able to move
easily between land and TZ environments. With a channel count of
approximately 122,000, it has capacity to operate up to 25 total
crews worldwide. For more information on Geokinetics, visit
http://www.geokinetics.com/. CONFERENCE CALL AND WEBCAST
INFORMATION Geokinetics has scheduled a conference call for
Thursday, December 3, 2009, at 11:00 a.m. Eastern Time. To
participate in the conference call, dial (480) 629-9643 for
international callers, or (877) 941-0843 for domestic callers a few
minutes before the call begins and ask for the Geokinetics
conference call. A replay of the call will be available
approximately two hours after the live broadcast ends and will be
accessible until December 16, 2009. To access the replay, dial
(800) 406-7325 for domestic callers or (303) 590-3030 for
international callers, in both cases using pass code 4189040#. The
webcast may be accessed online through Geokinetics' website at
http://www.geokinetics.com/ in the Investor Relations section. A
webcast archive will also be available at
http://www.geokinetics.com/ shortly after the call and will be
accessible for approximately 90 days. For more information
regarding the conference call, please contact Donna Washburn at
DRG&E at 713-529-6600 or email . Forward-Looking Statements
This press release includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements, other than statements of
historical facts, included in this earnings release that address
activities, events or developments that Geokinetics expects,
believes or anticipates will or may occur in the future are
forward-looking statements. These statements include but are not
limited to statements about the business outlook for the year,
backlog and bid activity, business strategy, related financial
performance and statements with respect to future events. These
statements are based on certain assumptions made by Geokinetics
based on management's experience and perception of historical
trends, industry conditions, market position, future operations,
profitability, liquidity, backlog, capital resources and other
factors believed to be appropriate. Such statements are subject to
a number of assumptions, risks and uncertainties, many of which are
beyond the control of Geokinetics, which may cause actual results
to differ materially from those implied or expressed by the
forward-looking statements. These include risks relating to
financial performance and results, job delays or cancellations,
reductions in oil and gas prices, the continued disruption in
worldwide financial markets, impact from severe weather conditions
and other important factors that could cause actual results to
differ materially from those projected, or backlog not to be
completed, as described in the Company's reports filed with the
Securities and Exchange Commission. Backlog consists of written
orders and estimates of Geokinetics' services which it believes to
be firm, however, in many instances, the contracts are cancelable
by customers so Geokinetics may never realize some or all of its
backlog, which may lead to lower than expected financial
performance. Although Geokinetics believes that the expectations
reflected in such statements are reasonable, it can give no
assurance that such expectations will be correct. All of
Geokinetics' forward-looking statements, whether written or oral,
are expressly qualified by these cautionary statements and any
other cautionary statements that may accompany such forward-looking
statements. Any forward-looking statement speaks only as of the
date on which such statement is made and Geokinetics undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise.
Below are condensed Consolidated Statements of Results of
Operations for PGS Onshore. All amounts are in accordance with
Generally Accepted Accounting Principles (GAAP) of the United
States of America. Contact: Scott A. McCurdy Vice President and CFO
Geokinetics Inc. (713) 850-7600 For the Nine Months Ended September
30, 2009 2008 ---- ---- (In thousands, except per share amounts)
Revenues: Contract $137,555 $148,703 Multi client 4,003 59,350
----- ------ Total revenues 141,558 208,053 Expenses: Operating
expenses 122,265 138,352 Research and development 2,887 16 General
and administrative 7,194 10,708 Depreciation and amortization
15,456 10,504 Amortization of multi client library 3,170 41,259
----- ------ Total expenses 150,972 200,839 ------- ------- (Loss)
income from operations (9,414) 7,214 ------ ----- Other income
(expense): Interest expense, net (7,734) (8,714) Other 1,382
(1,593) ----- ------ Total other income (expense) (6,352) (10,307)
------ ------- Loss before income taxes (15,766) (3,093) (Benefit)
provision for income taxes (2,734) 10,526 ------ ------ Net loss
$(13,032) $(13,619) ======== ======== For the Twelve Months Ended
December 31, 2008 2007 ---- ---- (In thousands, except per share
amounts) Revenues: Contract $210,166 $164,495 Multi client 68,611
81,195 ------ ------ Total revenues 278,777 245,690 Expenses:
Operating expenses 192,950 159,905 Research and development 16 7
General and administrative 13,935 14,412 Depreciation and
amortization 14,913 10,780 Amortization of multi client library
45,927 54,126 ------ ------ Total expenses 267,741 239,230 -------
------- Income from operations 11,036 6,460 ------ ----- Other
income (expense): Interest expense, net (13,357) (12,389) Other
(3,449) (13) ------ --- Total other income (expense) (16,806)
(12,402) ------- ------- Loss before income taxes (5,770) (5,942)
Provision for income taxes 13,483 11,629 ------ ------ Net loss
$(19,253) $(17,571) ======== ======== GAAP Reconciliation The
Company defines EBITDA as Net Income before Taxes, Interest, Other
Income (Expense) (including foreign exchange gains/losses,
gains/losses on sale of equipment and insurance proceeds, warrant
expense and other income/expense), and Depreciation and
Amortization. EBITDA is not a measure of financial performance
derived in accordance with Generally Accepted Accounting Principles
(GAAP) and should not be considered in isolation or as an
alternative to net income as an indication of operating
performance. See below for reconciliation from Net Loss to EBITDA
amounts for the business to be acquired referred to above: For the
Nine Months Ended September 30, ------------------------- 2009 2008
---- ---- (In thousands) Net Loss (13,032) (13,619) (Benefit)
Provision for Income Taxes (2,734) 10,526 Interest Expense, net
7,734 8,714 Other (Income) Expense (as defined above) (1,382) 1,593
Depreciation and Amortization 18,626 51,763 ------ ------ EBITDA
$9,212 $58,977 ====== ======= For the Twelve Months Ended December
31, ------------ 2008 2007 ---- ---- (In thousands) Net Loss
(19,253) (17,571) Provision for Income Taxes 13,483 11,629 Interest
Expense, net 13,357 12,389 Other Expense (as defined above) 3,449
13 Depreciation and Amortization 60,840 64,906 ------ ------ EBITDA
$71,876 $71,366 ======= ======= DATASOURCE: Geokinetics Inc.
CONTACT: Scott A. McCurdy, Vice President and CFO of Geokinetics
Inc., +1-713-850-7600 Web Site: http://www.geokinetics.com/
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