TGS Slumps Most in 2 Years After Cutting Guidance: Oslo Mover

TGS Nopec Geophysical ASA (TGS), Norway’s largest surveyor of underwater oil and gas fields, fell the most in more than two years in Oslo after cutting its full-year guidance for the second time on permitting and project delays.

Shares in the Asker-based company fell as much as 13 percent to 150 kroner, the biggest intraday decline since Aug. 4, 2011, and traded at 151.1 kroner at 10:01 a.m. in the Norwegian capital. That makes TGS the biggest loser today on the Stoxx Europe 600 index.

TGS now sees full-year revenue of $810 million to $870 million, it said in a statement today. That compares with earlier guidance of $920 million to $1 billion, announced on July 8, which had already been cut from an initial $970 million to $1.05 billion.

“This is clearly a big profit warning with significant negative impact on estimates,” Pareto Securities AS said in a note. Lower investments in offshore surveys, particularly off Australia, are to blame, along with the decision to pass up or postpone “certain low pre-funded projects that are seen as having too high risk,” the broker said.

Shares in TGS and Petroleum Geo-Services ASA (PGS), Norway’s second-largest seismic surveyor based on market capitalization, have dropped more than 20 percent since the start of April amid concerns that producers may cut exploration spending as energy prices stagnate.

No Recovery

“It seems TGS’s aggressive growth has come at the expense of returns, and growth looks unsustainable given the current large investment mass and greater competition in the multi-client space,” Danske Bank said on Aug. 2. “Unlike the previous cycle, sales/investments do not appear to be recovering and margins are at risk from faster amortization.”

Shares in seismic surveyors, which use ships to search for petroleum reserves under the seabed, had rallied since mid-2010 as oil producers operating off Africa, Norway and South America increased spending on exploration. Those gains are now at risk as oil prices fail to recover to record levels seen in 2008.

Seismic companies earn money in the multi-client market, where a surveyor builds a data library that’s then sold to explorers, and through specific studies for customers, both of which can be pre-funded.

To contact the reporter on this story: Alastair Reed in Oslo at areed12@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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