Good afternoon, everybody. It's my great pleasure to welcome TGS and Kristian Johansen, the Chief Executive Officer. TGS last week held a Capital Markets Day, following the merger with another company within this space, PGS, creating the largest energy data company, I believe is your new description. So very opportune time to hear from Kristian, and I'm looking forward to hearing your story.
Thank you, Mick, and thank you everyone who is either attending the presentation here or watching the presentation on our webcast. Again, my name is Kristian Johansen, CEO of TGS. Been in that position since 2016, and I'm gonna tell you about the journey that we have been through in terms of consolidating the seismic market and going from a relatively niche player in the asset-light multi-client space to, by far, to a professional, by far the biggest player in a fully integrated company who covers the entire value chain of both new energies and oil and gas data. I'll have you read the forward-looking statements after the presentation, and again, I wanna start with a picture that you probably are quite familiar to, but I wanna reiterate a few of the key points.
I'll start on the left-hand side and looking at oil and gas supply, both historically and estimates going forward. The estimates here, based on oil demand and where oil demand is gonna move going forward, is from OPEC, Exxon, and what we call the IEA STEPS Scenario. I wanna make a few comments about Exxon, because Exxon just released on Monday. A week ago, they came out with a new updated energy outlook, and this slide was made before that. Actually, what Exxon came back with on Monday is a revised estimate, which is far more positive and bullish on the outlook of oil and gas, where they expect that demand for oil and gas in 2050, which is in 25 years, is gonna be about 2% higher than what it is today.
And for gas, the same number is gonna be 21% higher in 2050 than what it is today. And that's quite contradictory to, for example, the numbers that you saw from IEA or a lot of other players. I think Rystad, that at the time, in 2021, said we're gonna have peak oil in 2024 or 2025. But it continues to grow. If you look at supply of both oil and natural gas, you will see that we're already back to above pre-COVID levels. And you see that if you draw a straight kind of trend line through those different figures, you'll see that we follow pretty much the same growth for both oil and gas as we had before COVID.
And I think that's really important, that we are getting more fact-based in terms of where is this market gonna go in the future. And, again, there is no reason to believe that this is gonna flatten out considerably over time, given Exxon's outlook. And then, of course, what you see on the right-hand side of that particular chart is the decline curve, which is steep, and it's particularly steep for the next ten years. And as a result of that, you see that the reserve life of the major IOCs continued to come down, and it's coming down quite significantly. And in the matter of oil, it's going down from thirteen to about nine years, and this is in the matter of only eight years. So it basically declines by about, you know, 20% per year, pretty much.
That's what we've seen for a period of time. Same goes with gas. So although we had a little bit of a recovery in 2023, same picture is true for gas, where reserves are getting smaller and smaller. We don't explore, and as a result of that. And we produce even more, and as a result of that, the reserve lives are coming down year after year. So touch on the most recent trends in terms of energy, and I'll start on the left-hand side with oil and gas, and then I'll touch on seismic, and then last but not least, on the new energy industries. So in terms of the oil and gas industry, there is a tremendous focus on increasing recovery rates, near- field exploration, and reduced cycle time. There is significant M&A activity.
In fact, last year, we had $200 billion worth of E&P deals. It's the highest we've seen in a 10-year period, and we see a gradual increase in exploration spending, but not enough to offset the risks that I highlighted on the previous graph. And wanna go back to the significant M&A activity. This is obviously driven by the fact that reserve life is getting shorter, and what you do is that you buy other companies to sort your own problem, but you don't really sort the big problem, which is the world problem, that we're not gonna have enough oil and gas in the future. But again, record high M&A activity and lots of focus on existing production.
In the seismic industry, which is very much focused on the exploration side, you see the majority of activity in mature basins, of course, so if you go back 10 years, about 70% of seismic business was frontier and 30% was mature. Today, it's flipped, so it's about 70% is now mature, while only 30% is frontier, so significant change in that regard. We see multi-client opportunities, so basically go in and shoot seismic and then license that to multiple parties, but of course, you cannot apply the model the same way over a mature field as you can in a frontier area, and the reason is obviously that in mature fields, you already have companies who've picked up the blocks, and they're pretty much the only player there, and last but not least, you see a significant consolidation in the seismic market.
So over the past four years, we have acquired five or six companies. Another competitor, Shearwater, basically picked up all the companies that used to own seismic vessels, meaning that in the seismic vessel industry, there's only two players, pretty much, and that's TGS and Shearwater. And then in the new energy industry, it's definitely where we see the highest growth potential, but it's coming off a relatively small base. And the reason for that is that energy evolution or energy addition, as I like to call it, drives new data needs, of course. We as an industry can benefit from that because we control and already own a lot of the subsurface data that is out there. And you actually need a lot of subsurface data to succeed, whether it's offshore wind, whether it's deep sea minerals, geothermal, CCS, et cetera.
So about providing secure, affordable, and sustainable energy, and last but not least, again, significant growth opportunities. We have a business in the new energy space. We started out in 20 21 with $7 million worth of revenues. This year, we're probably gonna be at $75 million, say, significant growth, and that's gonna continue to grow in line with the, the need for more clean energy in the future. Gonna go through the journey we've been on for the, for the past three and a half years, and, again, it goes back to this market trends that we see. It starts with a macro trend, which I'm highly convinced, based on the macro data we read, that a company like TGS is gonna be around in many, many decades. But secondly, I'm convinced that you're gonna see a different market going forward.
It's gonna be a market driven by some kind of transition or addition with new energies, but you're still gonna have a lot of need for exploration in oil and gas, and it's gonna be higher than today, according to Exxon. And you're also gonna have a market driven by only a few players who were able to get through this, these challenging times that the industry has been through. But again, our journey started in 2020. At the time, we were a market leader in multi-client, which was just a segment in the seismic industry. And we also had an imaging business with about 200 people doing data processing and making sure that we prepare and interpret the data before we license it to clients. Then in 2021, we acquired a company called 4C Offshore.
We acquired 4C Offshore because we saw the trend of the new energy business starting to grow, and we wanted to get a foothold into that because it fit our core competencies quite well, given that we were basically the biggest subsurface data company out there. But in order to get into the offshore wind space, rather than buying a company that was an operator or a company that was more heavy asset play in the offshore wind space, we actually bought a company that is more like a WoodMac for offshore wind. So 4C is providing data and insights to multiple clients, have about 2000 subscribers. For us, it was a great way to open doors into the offshore wind industry, and it's been a great success since 2021. Then we acquired a company called Prediktor.
This is a company out of Norway that is doing asset management software for mainly the solar business, but also for oil and gas and offshore wind. This company, or this company's software, is installed at two out of the three largest solar parks in the world. That gives us another foothold into the fast-growing new energy business. Acquired a public company or a company that used to be public on the New York Stock Exchange, ION Geophysical, in 2022. ION gave us more multi-client data, and on top of that, imaging, or data processing and software. We just signed a relatively large software deal with one of the super majors last week, and that was based on the software that we actually acquired from ION in 2022.
Then we did Magseis Fairfield in 2023, and we did that because we see the ocean bottom node market being the fastest growing segment of seismic. And Magseis Fairfield was a public company at the time, and we buy them. We bought them at a really attractive multiple, and it gave us a really strong foothold in a market where we had no presence from before.
And then last but not least, the public takeover of PGS that was closed on July first in 2024, announced back in September last year, and gave us a very strong foothold in the 3D streamer market, in addition to further multi-client data, and of course, imaging, which means that TGS today, compared to where we were in 2020 is a completely different company, which pretty much has a market-leading position in every single segment. And again, transferred from a highly successful niche player in the multi-client segment to a fully integrated player that can pretty much provide any data, service or products that an oil and gas or energy company need for their exploration needs. So again, this one is just kind of summarizing the previous slide in terms of our market positions.
But in multi-client, just to give you the perspective, so all the data acquired as multi-client since 2018, so over the past or 2016, so over the past eight years, TGS has invested $4 billion in new seismic data or subsurface data, and that's about 62% of the overall industry. So if you assume that, you know, all the relevant data is data that is shot over the past eight to 10 years, you can probably argue that TGS controls and holds access to more than 60% of all the data. And of course, a significant upside if you're able to develop AI technologies and algorithms that could extract more value out of that data, but a fantastic starting point in that regard.
Streamer acquisition, we have eight of the most modern seismic vessels in the world. They're all built in the period of 2010 to 2016, so basically an average age of about 10 years, and these vessels last for at least 35 years, and there's not gonna be any new builds, as we can see, over the next, you know, decade or so. OBN acquisition, from the acquisition of the company Magseis Fairfield, we control about 40% of the global market for ocean bottom nodes, deep and mid-water, with around 30,000 nodes in inventory, and again, this is the fastest growing segment of seismic as we speak. Advanced imaging, these companies have been doing or this industry has been doing big data for many, many years.
So I remember back in 2017, I think TGS ranked on top 15 of the largest supercomputer users in the world, so we're talking big, big data here. Today, both TGS and then PGS that we acquired on July first are big, big clients of Google, and obviously we see great potential of merging together, take out cost synergies, but also on what we can do together with someone like Google in terms of developing technologies for the future, in terms of getting more efficient. And then New Energy, I touched on that. Merger costs and synergy run rate.
So when we announced the transaction last year, we said that we were gonna have $50-$70 million worth of synergies of and the equity value of TGS was around 660, and if you include the debt, it was like $1.3-$1.4 billion. So synergies, quite significant if you calculate synergies as a percentage of the overall transaction cost. But since then, we've actually updated or upped our synergy estimates twice. So we first, we came out four months ago, and we said it was gonna be between 90 and 110. And then at the Capital Markets Day last week, we came back to the market telling them that we're gonna you can expect to see between 110 and 130 million dollars of annual synergy from this transaction.
So again, a very strong cost synergy case. And just to give you some examples from that. PGS had debt of, gross debt of about $800 million when we acquired them. And for the bond, the $450 million bond, they're paying an interest rate of 14%, and we're gonna go out and refinance that debt in early 2024 or 2025, and obviously see great synergies. One of our competitors, who have far more debt than TGS, came in below 10%, and obviously with a strong balance sheet of TGS, we expect to see significant synergies on the refinancing side. So let me touch on each one of the businesses and just give you a little bit of flavor.
So in terms of the multi-client library, you see the bars on the upper, left-hand corner there, and you see the size of this library, and you see what PGS does to the overall library in terms of adding another about 30% to the library size of TGS, meaning that we have close to $1.2 billion in book value of the combined data library. That's far more than you've seen in quite some time. You've got to go back to Q4 of 2019, and at that point, the library was of a similar size. And then you see the dark line there, which is basically the enterprise value or the trading multiples, enterprise value to MC library, and you see that we've hardly ever been lower in that regard.
And then you see the bar charts at the bottom of the slide, and you see we trade at about 1.8 times our multi-client library. Historically, it's been somewhere between 2.2 and 3.3, depending on what time period you look at. Again, this library has a strong historical performance. Typically, we average a sales to investment of 2x, meaning that when we invest $10 million in the library, we expect to see $20 million in terms of sales. We looked at the seismic 3D vessel fleet that we acquired from PGS. The implied PGS acquisition value as per our purchase price allocation is below $100 million per vessel. New build cost at the time was about $270 million.
Average adjusted new build cost would be around $200 million today, and that's also the replacement cost or call it the broker value of these vessels. So very attractive entry point, obviously, because of some tough times over the past few years in terms of the vessel market. And then in OBN or Ocean Bottom Nodes that I just talked about briefly on one of the previous slides, you see that we have revenues in that business of about $400 million, so slightly north of $400 million expected in 2024, and EBITDA of about $150 million plus or minus, which means that we acquired that company, Magseis Fairfield, at an enterprise value of $238 million.
In terms of EBITDA multiple 2023, it's about 1.8x, and if you do an EBIT multiple on that, it's just north of 4, which tells you how good this acquisition was and the fact that we may be able to basically return that within 4 years after the acquisition was closed. Last but not least, the new energy exposure. Yes, we're coming from a small base, but we had tremendous growth in that business. And you see a business that started out in 2021 with only $7 million worth of revenues, have now passed about $70-$75 million, is where we expect to be in 2024. So again, we're not doing this because of greenwashing. We're doing this because it's a great contribution to cash flow.
You see a pretty strong EBITDA margin for the past two years and a business that is growing fast, that could be a standalone, significant value creator to TGS overall. And then in terms of clear capital allocation priorities going forward, so if you look on the right-hand side and you look at the bar chart, you see the net debt to EBITDA of selected energy service companies. So basically, this would be the Philadelphia Index, and then we've added two seismic companies or competitors. One is Viridien, the French company that used to be CGG, and the other one is Shearwater. So they have debt, net debt to EBITDA of about 2.2-2.7, so relatively high leverage. And then you see TGS at 0.5 after the acquisition of PGS.
That was a quite heavily leveraged company at the time, but of course, because of our strong cash flow and our strong balance sheet, when you combine the two, you're already down to healthy levels of debt, which means that we should be in an excellent position to distribute cash to shareholders going forward. Our goal going forward is that we're gonna aim at reducing the net interest-bearing debt from a level of $417 today to somewhere between $250 and $350. And on top of that, whenever we're in that comfort zone, we will make sure that shareholders get a return in terms of dividends. And we've paid a dividend every single quarter since 2014, when we started or introduced quarterly dividends, but we paid a dividend every year since 2010.
There has not been a single quarter where we held back the dividend because PGS has been a highly cash-generated business. Our goal for the future is that, yes, we're gonna reduce the debt slightly, but as you see on the right-hand side, it's already really low compared to any other player within our space. But on top of that, we're gonna pay, so we're gonna keep our dividend going forward, but on top of that, we're gonna mix it with share buybacks. That is also part of our toolkit, and you will see that starting to increase in 2025 and 2026, or as soon as we get into that kind of comfort zone in terms of net debt of being between 250 and 350. So this is just showing an illustration of the cash flow potential of the combined company.
And in order to do this, we didn't want to give you a guidance of where we wanna be in 2024 in terms of revenues. So we just used an average of 2022 and 2023 for the first two bars on the left-hand side. So this company, if you combine our revenues back in 2022 and 2023, and you do a simple average of that, we're somewhere around $1.8 billion, so close to $2 billion. And then you see how it builds down in terms of adding CapEx and cost components on top of that. So we have multi-client investment is the first box. Again, we use the average of 2022 and 2023.
And then when you move to the third box, you look at where we are today or what the current run rate is today for these two companies. So again, you see we build it down with our current cost base. We build it further down with the maintenance CapEx, the net interest as of today, so basically based on PGS, it's very high interest. And you get to a low point, and then you start building up from there, and you get the synergies that we have promised the market somewhere between a hundred and ten and a hundred and thirty, which takes you to a cash flow potential, pre-tax, standalone, after synergies of around three fifty-ish or three hundred.
And then you see how the upside, whether we apply 2019 to the first box there on revenues, where the market was better, then you'll see significant upside on the free cash flow. So growing from a level of around 350 up to 500-ish. Again, it's not a guidance of where we will be, and it doesn't give any timing of that, but it uses some historical data in terms of the revenue factors, and then it uses the current cost data, and then it shows you what the potential of this business should be going forward. Okay, so we strongly believe that this is a compelling energy investment case. Number one, it's a unique play of increasing exploration activity.
It's probably the play in terms of if you want to get exposure, if you believe that exploration will have to come back based on my first slide, which shows the decline rate and the fact that Exxon believes that oil demand is gonna be higher in 2050 versus today, then TGS is a unique play on that. We're still relatively early in the exploration cycle, and seismic, there is no substitute for seismic. So basically no risk that, you know, within the next ten years, someone is gonna come up with technologies that allows you not to buy seismic. We're a preferred partner through the entire value chain. We're the only company in our space that can basically provide data from A to Z.
We have great exposure to the rapidly growing energy evolution-based industries, attractive and industry-leading assets, as you saw in my previous slide, where we basically paid less than $100 million per vessel versus a new build cost of $250 million, and a strong balance sheet and cash generation capacity. So in summary, we've executed an ambitious consolidation plan to address changes in the marketplace. Very opportunistic, driven by a very strong balance sheet at a time when we were the only one who had a strong balance sheet. Leading positions in all segments and a strong track record of integration. We've done quite a few of these in the past. Clear near-term priorities of realizing synergies, reducing debt, and becoming the preferred partner, and increasing shareholder returns over time.
Again, last but not least, ambitious growth targets for the new energy business and well-positioned to capitalize in further growth in exploration spending. So that summarizes my presentation. I still have five minutes, so I'll hand it over to you, Mick, and I assume you're gonna facilitate the Q&A.
Yeah, Kristian, can I just start off with, one of the pushbacks I get is there's been integrated seismic companies before, and they all went down the disintegration route.
Yeah.
You are bucking the trend. So why are you different?
Yeah, I mean, it's a great question. I mean, when we Both SLB and CGG decided to follow the TGS route to say, "Hey, we wanna go asset light," because it's clear that that's where you get the good returns, and they both did. And they did that in, I guess, 2018 and 2019 . And then in 2022 , we decided that we're gonna go the other way around. And yeah, I mean, it's an interesting question. I'm convinced that we did the right thing, and for one reason. When they were fully integrated players, there were eight different seismic companies who held 65 different vessels. While today, there's 2 seismic companies holding 15 vessels. So it's basically a duopoly in the seismic space.
The acquisition phase of seismic has a duopoly, and when you have such a high market share that we had, you know, we didn't have any choice. I think it was a great opportunity to kind of lock in that market, and I think they will probably regret their actions, but time will show.
On the multi-client, you talked about we're in the early innings of green shoots. Can you explain where you're seeing activity? And also, secondly, how do you compete against your peer in that group? Because at that group, multi-client seems to be the one that has the most leverage-
Hmm.
given the fixed cost nature of the business.
Yeah. Yeah, I think the hot basins right now. I think if I go really broad, I would say South Atlantic, so anything that goes, you know, Brazil, Guyana, Uruguay, Suriname, you know, that basin is very hot. And then on the other side of that basin, you'll find Namibia, you find South Africa, and Nigeria, Angola, et cetera. I mean, that's where a lot of activity finds place. Can't be more specific than that because that's probably the most important thing that we do, and it's a secret. But again, a lot of activity is finding place there. Second hot spot right now is Asia, around, you know, Indonesia, India, Malaysia. There's quite a lot of activity there. It's driven by the fact that these countries are extremely population rich.
They see population growth, and they have no energy. So India, for example, imports about 85% of their energy needs. There is an enormous pressure to find a petroleum basin, of course. So that probably summarizes where we see most of the activity right now. In terms of how do we differentiate and how do we make sure that we stay competitive, I think part of it is that we've secured all the assets now. I mean, we can do anything. We can go to an Exxon or a Shell and say, "Whatever exploration challenge you have, we can sort it all because we have a whole toolkit." There's no other company who has a whole toolkit. Secondly, it's about having access to the underlying data. It's an enormous advantage.
When there was a discovery in Namibia, then we already had a lot of that basin covered by data, and having that kind of first-mover advantage is super important. Does that come out in pricing power? I think where you may have pricing power, and this is an industry that doesn't, unfortunately, have a lot of pricing power, but I think where you may eventually have a little bit of pricing power is from the asset side, because there are fewer and fewer assets, and the assets are held by fewer and fewer companies. And all you need is a little bit of an uptick in exploration spending, and it will get tight, for sure.
That's kind of, you know, going back to why do we go asset heavy when everybody else went asset light four or five years ago. Well, the world is completely different. All we need now is a slight pickup in overall demand, and you will see things are getting tight. Yeah, should we expect more exploration, was the question. Again, absolutely. I mean, we've had some exploration success in countries like Suriname, Guyana, Namibia, even Mozambique. But if you looked at the slide, the percent decline trend continues to go down, right? Because we produce so much right now, everybody's so focused on maximizing production and forget the fact that you need to renew those barrels.
And again, my guess and my big bet is that companies will realize that, Wall Street will realize that, and Wall Street will start questioning these companies who has an average reserve life of seven years, and then you have a model that shows production for the next thirty years. I mean, it doesn't add up. So you're gonna challenge them, and you're gonna say, "Hey, what do you plan to do after 2030 ? Because that's the point when you run out of oil and gas." And then there's gonna be a shift back to exploration spending, and again, no other company is better positioned for that shift than TGS. I'm out of time. Thank you very much for the attention. Thank you.