Good morning and welcome to your TGS Q2 2025 results presentation. My name is Bård Stenberg, Vice President of Investor Relations and Business Intelligence in TGS. Today's presentation will be given by CEO Kristian Johansen and CFO Sven Børre Larsen. I would also like to draw your attention to the cautionary statement showing on the screen and also available in today's presentation and earnings release. You can start typing in questions during the presentation, and we will address your questions after management's concluding remarks. With that, I give the word to you, Kristian.
Thank you, Bård, and welcome everyone to TGS's Q2 2025 earnings release. I'm going to hit the highlights right away, and I'm going to start with two bullet points that probably are in the categories of explanations rather than excuses for what we would consider a relatively weak quarter. The first one is we had multi-client revenues below expectations due to low library sales. If you remember back to the end of Q2 of 2025, we had a rather weak and volatile macro environment where the oil price dropped from about $76- $66 during the last 10 days of the quarter. That may have had an impact on our end-of-quarter sales. It shouldn't be used as an excuse, but we definitely had lower than expected library sales.
As you all know, we typically make a lot of our library data licensing over the last 7- 10 days of any given quarter. In addition to that, we had contract revenues negatively impacted by operational challenges on one of our projects in Asia. We also had lower contribution from JV partners on multi-client projects where we typically hve a 50/50 split between our JV partners. Altogether, we had total revenues of $308 million that compared to $381 million in Q2 of last year. We had an EBITDA of $153 million compared to $175 million in the same quarter of last year. That means that we actually had an improved EBITDA margin in Q2 this year compared to last year. It improved from 46% in Q2 of 2024 to 50% this quarter. We also had a positive free cash flow, free cash flow of $11 million before dividend.
We're also continuing to do business optimization, which means that we see lower costs. We have cost-cutting initiatives on top of our synergy plan that we launched last year. In addition to that, we're announcing today that we're also adjusting the vessel capacity to how we see the market right now, which means that we go down from seven to six vessels. In addition to that, we're selling two of the stacked vessels. I will come back to that later in the presentation. Last but not least, we're maintaining a dividend of $0.155 per share, as you've seen in previous quarters as well. If we go to the business update and start with the data acquisition activity that we had in Q2, I'm not going to touch on every project here.
I'm just going to conclude that we continue to have a diversified activity level in terms of both new energy operations, OBN contracts, and multi-client, and the same on the streamer side. It ranges from California and West and all the way to India in East. You see a lot of activity this quarter, particularly in Norway and Northern Europe. You see activity in Brazil, Argentina, and the Gulf of Mexico. If I touch on some of these projects and start with the financials and start with multi-client. We had multi-client sales of $137 million. That compares to $191 million in Q2 of last year. Again, not a great quarter for multi-client. I think both we and the market were surprised by the low activity level that we saw in the last 10 days of the quarter.
Some of that could be explained by lower or more volatility in the market overall with an oil price that dropped by 15%-20%. It shouldn't be used as an excuse. We're clearly disappointed about our library sales in Q2. Multi-client investments were $114 million versus $92 million last year, came in slightly higher than we expected. This is due to partners and JV partners who elected not to take their 50% ownership. As a result, TGS took advantage of that and we get a higher equity in some of these JV partner projects where typically we would have 50%. Now in the projects that we're doing in Q2, we have between 70% and 100%, which may bode well for future earnings, but it hits our investments in Q2.
Investments are higher and then contract revenues are obviously lower because typically we record these revenues from partners as contract revenues or contribution to contract revenues. As you see, sales to investment last 12 months is still very healthy. We're at 2.0, which is in line with our historical average, actually slightly better. You see that it's also an improvement from Q2 of 2024. What that tells you is that yes, this quarter was not great, but if you look at the last four quarters combined, we have strong performance on the multi-client side. I think we've beaten our own expectations and market expectations on multi-client for the past three quarters, but this quarter we clearly didn't. In terms of key projects and announcements in Q2, we completed the Amendment 4 OBN project in the Gulf of Mexico.
This is an ultra-long offset over legacy streamer data, and this is a 100% TGS project. In the past, you've seen a lot of projects together with Western G Corp SLB, where we each have 50%, but this again is a 100% TGS project. We commenced a project also in the Gulf of Mexico called Laconia phase II. This is in collaboration with Viridian. Normally, that would also be a 50/50 joint venture. In this particular case, it's 70% TGS and 30% Viridian. TGS is taking advantage of a rather strong balance sheet and ability to take a higher equity in some of these projects in basins where we have proven success, such as the Gulf of Mexico and Brazil. We moved to Argentina and the Malvinas Basin, where we had a Phase III of the Malvinas campaign that completed.
We now have 25,000 sq km of data coverage in the Malvinas Basin of Argentina. Argentina is a country where I'm actually quite optimistic for the future. We've seen high above surface risk in the past or political risk. That has come down and the geology is very promising. Our clients are quite excited about our database in Argentina going forward. We're expanding the Equatorial Margin campaign offshore Brazil. This is another area where we have had a successful licensing round happening in the quarter. We saw great interest. We even saw some of the big super majors from the U.S. now paying big fees to get into the Equatorial Margin together with Petrobras. This is an area where TGS has jump-started and where we already have built a significant database. This is one of the last big frontier basins of the world.
Both we and our clients are very excited about what we're doing there right now. This is an area that TGS has permits to do more. We will continue to be rather busy in the Equatorial Margin for the next 12- 18 months. We also had a licensing round in the Gulf of Mexico announced this quarter. A lot of people have been waiting for that. It's a great testament to the current government that they want to get back to oil and gas and they want to increase domestic production of oil and gas. That obviously starts with both onshore lower 48s, but also with the Gulf of Mexico. If we move on and look at the historical multi-client performance, you see that it's been quite steady in terms of sales to investments.
It was slightly lower in Q2 this year, but there's nothing in the market where we see that this shouldn't continue to be relatively strong over time. We continue to set a target of 2x on our multi-client projects. I think, as you see, for the last four quarters, we're just in line with that target. We also look at the, I talked about the oil price development in the latter part of Q2. You clearly see here that the oil price is dropping from a level of $76- $78 and all the way down to the mid-$60s during the past or last 10 days of the quarter, which is obviously not a great background for doing big data purchases. Again, we were caught by surprise that we had lower sales than we expected. We don't think this is a permanent issue.
We think it's more of a temporary issue. Obviously, I'm not going to stand here promising that it's going to come back next quarter or the quarter after that. We don't see any long-term permanent changes in appetite for data, rather than the opposite. If we move on to contract, we had OBN contract revenues of about $88 million in Q2. That compares to $93 million, so pretty much flat from last year. Streamer contract revenues dropped from $128 million- $115 million. The utilization of the streamer fleet was quite good this quarter, but we had relatively low revenues, which means that we had operational issues and low productivity on one of our projects in Asia, which I have already talked about and which I will come back to.
Overall, gross revenues of $203 million versus $221 million in the same quarter of last year, and an EBITDA margin of about 25%. That's slightly up from Q2 of 2024. We've been awarded a shallow water OBN contract in Trinidad. That commenced acquisition in Q2. We have several 4D contracts offshore Norway that have commenced during the quarter. We've also been awarded and commenced a 4D contract offshore Egypt. We have encountered challenging operational conditions and high standby time on a streamer contract in Asia. As a result of that, we have decided to take that vessel out of the area and the bad weather. It will probably be out for between two and three months. We'll come back and finish that survey. Some of the backlog, which I will come back to, will move from or shift from Q3- Q4 as a result of that.
It's not going to change. The overall project is going to have the same size, but hopefully, and most likely, much stronger productivity when we get back there. On the new energy solution side, relatively flat numbers. Contract revenues were 16 last quarter and then of last year and then 15 in Q2 of 2025. We had slightly better multi-client revenues, up from 3- 4, which is driven by one of our acquired companies where revenues are recognized as multi-client. Total revenues were flat at 18 and a quite significant improvement of the EBITDA margin from 20%- 31% due to very good cost control and taking some actions on the cost base based on the weakness that we've seen in the market, particularly in the U.S. We have been awarded an ultra-high resolution contract in offshore Norway that commenced acquisition in July.
There was successful completion of a similar project in the U.K. in the quarter. We have also entered into a collaboration with a big client to drive digital transformation in CCS operations, a quite exciting collaboration with Equinor in that regard. If we move to probably the most positive this quarter in terms of the business unit performance, our imaging and technology division had a very strong quarter. We have gross imaging revenues now of 32, which is up from 25 in the same quarter of last year. We have almost doubled our external imaging revenues from 10- 19. I think I said last quarter that our goal is to get somewhere north of 75 on annual revenues for our imaging business, and as you see, we have a run rate now that more than takes us to 75.
Our goal is to continue to grow this business quite significantly going forward, and we are going to grow that business with strong margins. We had 40% EBITDA margin in Q2 of 2025, and that compares to - 7% in Q2 of last year. There are a lot of positives now on the imaging and technology side, partly because we've seen very positive market reactions to the introduction of our EFWI. We have seen a significant reduction at the same time of HPC costs from added scale and renegotiation with some of our big suppliers in that area. Our EBITDA again, $12.7 million, so it starts to really pay off also in terms of profitability on the imaging side. I'll hand it over to Sven now. He's going to cover the financials, and then I will be back talking about the outlook after Sven has completed his part. Thank you very much.
Thank you for that, Kristian. Good morning to everyone. I'll go through the revenue first on the top left-hand chart on this page. As Kristian has gone through all the categories of revenue already, I'll do that rather quickly. We had $308 million of total produced revenue in Q2 of 2025. That is significantly down, obviously, both compared to Q1 2025 and also 19% down compared to the same quarter of last year on a pro forma basis, which was at $381 million. Looking at the operating expenses, we had net operating expenses of $155 million booked in this quarter. This consisted of $236 million of gross operating expenses. We capitalized $81 million of that to our multi-client library mostly, which led to these net operating expenses of $155 million. In the same quarter of last year, the pro forma gross operating expenses were up at $268 million.
We capitalized $62 million, which led to $206 million in net operating expenses in the same quarter of last year. We are significantly down on both gross operating expenses and also net operating expenses compared to the same quarter of last year. If you're then looking at our depreciation and amortization chart on the bottom left-hand side, you see that we had amortization of $109 million in this quarter compared to $115 million in the same quarter of last year. This consisted of straight-line amortization of $63 million, and the remaining balance was accelerated amortization. We then had net depreciation of $65 million. This consisted of gross depreciation of $75 million. We capitalized $10 million of depreciation on our vessels to the multi-client library. That gave us this $65 million of net depreciation in the quarter.
All in all, this gave us a negative EBIT of $22 million in the quarter compared to $8 million positive in the same quarter of last year on a pro forma basis. This shows the produced P&L already gone through most of the details. $308 million of revenues, cost of sales $76 million, personnel cost $57 million, and other operational costs $22 million on a net basis, which gave us an EBITDA of $153 million. Subtracting amortization and depreciation gave us this EBIT of - $22 million in this quarter. To the cash flow, showing here the cash flow on a produced basis. The produced EBITDA was, as I've said, $153 million. We subtract the paid taxes of $23 million. Paid taxes was relatively high in Q2 and was also relatively high in Q3, which means that we are up at $50 million on a year-to-date basis.
The paid taxes is quite difficult to estimate from quarter- to- quarter and period- to- period because it depends heavily on our revenue mix. We do not pay any corporate taxes in Norway due to the tax losses or the losses carried forward. We do still pay withholding taxes and certain local taxes in some of the countries where we operate. When we generate revenue in these countries, we will typically pay more. When we generate revenues in certain other countries, we will typically pay less in tax. We do expect to pay less tax in the second half of the year. As I said, it's a somewhat uncertain number. This led to, after adjusting for changes in balance sheet items, cash flow from operations of $179 million.
We invested $115 million or $114 million in our multi-client library this quarter, adjusting for the non-cash capitalization of multi-client investments, which is related to the depreciation of the vessels and also adjusting for the multi-client investments that were paid in other periods. We ended up with paid multi-client investments of $104 million. We had capex of $24 million. We received a bit of interest leading to total cash flow from investment activities of $126 million. We had a net change in interest-bearing debt and leasing of $10 million negative in the quarter. We paid interest of $7 million and dividend payments of $30 million, which gave us cash flow from financing activities of $48 million negative. All in all, this led to a fairly neutral net cash flow, while also adjusting for currency movements.
We had a cash balance of $167 million at the end of the quarter, which was more or less unchanged from the situation at 31st of March. We're showing here some expectations for our cash flow, excluding networking capital and excluding dividends at the current run rate or for 2025, essentially. We've guided for gross opex of $950 million, which we reduced this quarter from previously approximately $1 billion. We've said that we are going to invest $425 million- $475 million into our multi-client library. The midpoint of that is $450 million. We've said that the internal portion of this should be approximately 70%. If you take $315 million, then 70% of $450 million as capitalization of gross opex and depreciation. Add on capex of $135 million, which is in line with what we have guided for. We have expected total lease payments of $120 million.
This means that it will be lower in the second half than it was in the first half, given the current plans that we have for renewals of leases. We have interest payments of roughly $45 million, and tax payments, which here is listed at $65 million. As I alluded to, it's a quite uncertain number and dependent on the revenue mix. This means that we have a total cash outflow, before any net working capital movements and also before dividends, of roughly or less than $1.5 billion, $1.45 billion. Of course, the net cash flow will depend on where we end up with revenues, which, as you know, can be quite volatile and somewhat unpredictable. The balance sheet remains strong. We had, as I said, cash of $167 million at the end of the quarter, and we had net debt, which was just below $480 million.
This means that we continue to pay a dividend of $0.155 per share in the quarter. The ex-date is a week from now on the 24th of July, and the payment date will be three weeks from now on the 7th of August. This means that we have now returned more than $1.6 billion to our shareholders through dividends and buybacks since we started to pay dividend back in 2010. By that, I'll leave the word back to you, Kristian.
Thank you, Sven. My first outlook slide is quite familiar to all of you. It shows the declining reserve life and low historical reserve replacement ratios. As you see here, the reserve life for oil is gradually coming down for the past 10 years, actually coming down from a level of north of 13. We're just sitting at around nine right now. If you go behind the numbers, several IOCs have reserve life of about 7 years. At the same time, the average three-year rolling reserve replacement ratio is only 40%. That means that with the current exploration success that these guys have had, you only have 12 years until you run out of oil and gas unless you either spend more or you have more success on your exploration campaigns.
When you look at the valuation of some of these players, the DCF model obviously goes much further than 2037. I also think that most of us will now finally agree that there will still be a significant need for oil and gas in 2037. At current, some of the IOCs with a current level of reserve replacement and the current level of production will run out of oil in about 12- 13 years. Exploration will have to increase to secure sufficient energy reserves for the future. We strongly believe frontier and deepwater are proven to offer the highest exploration upside. As we all know, success in deepwater exploration requires high-quality seismic. TGS, fortunately, has around 60% or north of 60% of all that seismic measured by our library size. If we move on to the 3D streamer contract tender statistics, it doesn't look great.
You see a quite sharp decline from what we saw last quarter. The trend line is still slightly positive. We expect the trend line to continue to be positive. We think Q2 normally marks some kind of a low point in terms of contract tender activity. We saw that last year. A lot of you were concerned when we presented the merger with PGS and the fact that PGS had very low order inflow in Q2 of last year. We see the same this year. If you remember last year, we saw a sharp increase in Q3 and early Q4. Without promising that that's going to happen this year, what I can say is that we have a lot of discussions with clients. It's a combination of new contracts, converted contracts, long-term contracts, and a mix of all three. Overall, we think that this will gradually improve.
The dotted line you see here, which is a trend line going all the way back to January 2019, we continue to believe that that will be increasing or show a positive outlook going forward. What is important in a market like that is obviously discipline, price discipline. What we see is relatively stable streamer margins for the last 24 months. We obviously believe that the integrated business model that we have enables us to be very competitive in terms of winning new work and winning some of that work where we combine both OBN capacity, streamer capacity with obviously multi-client. If we move on to the OBN markets, again, 2025 is probably going to be, and this is the overall market size, we think 2025 is going to be more similar to 2023. It's going to be down from 2024.
It's too early to say how 2026 is going to play out. Obviously, the OBN market is driven by a rather fragmented supply side. Where we see the biggest difference on streamer and OBN is that on the OBN side, it's a very fragmented supply. On the streamer side, we only have two players. On the OBN market, we see a very variable degree of discipline. We obviously see some of the work that has been won in Brazil at very low pricing. Some of that work hasn't even started yet. In the meantime, you may have had some inflationary pressure too. We are following some of that very closely. In the meantime, TGS is doing whatever it takes in terms of staying competitive, reducing our cost base, and making sure that we can be competitive with the four crews that we have.
I will come back to some of the actions that we're taking in that regard as well. We are reducing vessel capacity and we're addressing the market conditions and we're doing this pretty much as we speak. Number one, we have reached an agreement for selling the RAMFORM Explorer and the RAMFORM Valiant. These are two vessels that have been stacked for quite some time, but obviously, there is stacking cost related to this. We don't give them away, so there is a purchase price behind this, although it's relatively low. More importantly, the sales contract prohibits a buyer to use this vessel for the seismic market. They will be out of competition for the future. In addition to that, we're stacking the RAMFORM Vanguard. This is a vessel that has been used for a combination of oil and gas and streamer seismic, but also for the offshore wind market.
We see a weakness in both markets. As a result, we take out or we stack the RAMFORM Vanguard. If there is a need, we will serve that need from one of the other vessels. TGS will now go down and reduce capacity from seven to six vessels, sending a message to the overall market that we are going to be disciplined. If clients are not willing to commit to our seismic vessels, we don't see a purpose of just keeping this and keeping that cost base while we're waiting for commitment. We will take out that capacity and are very clear and sending a very clear message to the market that our intention is to be disciplined going forward in both the seismic market for oil and gas, but also for offshore wind.
On the OBN side, all the OBN vessels are chartered, but these are chartered as a combination of long-term and short-term. With the current outlook for the OBN market, we are going to let some of these charters expire. There are quite a few charters coming up over the next 6- 12 months. You can probably expect that TGS will let these charters go and reduce the leasing costs going forward, reduce the number of chartered vessels. We will be in the spot market because we think that spot market is going to improve quite significantly because we see weakness in that market going forward as well. At the same time, we're working intensively with new technologies on the OBN side. It's not necessarily technologies on the OBN itself, but there are different ways to be more efficient both on the source side and the ROV side.
We're looking at electrical ROVs. We're looking at new source technologies that can be far more efficient than we've done in the past. We're looking at far fewer people on the vessels than what you've seen in the past. We're looking at different types of vessels that we're going to use in the OBN market going forward compared to what we've done in the past. It may not be great news for the suppliers of source and ROV vessels. Again, for our cost base going forward and our competitiveness in the OBN market, you will see TGS take the necessary actions to be profitable going forward. A summary of the market segment development: if you look at all the five different segments, and we start with multi-client, again, Q2 was not great. I'm the first one to admit that.
We actually continue to see a positive trend in terms of frontier interest. That was behind my comment initially that we were surprised because we had quite a few deals in the making. We had very interesting and good discussions with some of our clients towards the end of Q2, which did not play out in terms of getting deals signed. We still have very positive discussions with clients who want to get back to frontier and want to spend more now on frontier because they see the macro slides that I have just been referring to in terms of reserve life and lack of aspiration success in the past. There is encouraging news flow in terms of licensing rounds both in the Gulf of Mexico and Brazil. Short-term licensing activity is, of course, vulnerable to oil price volatility. I think we got a sharp reminder of that in Q2.
It is just the fact that we have fewer and larger clients versus 10 years ago. That may play out in bigger deals. Fewer and bigger deals with fewer and bigger companies. It is quite obvious. What happens then is that you get some volatility in the quarterly results. Overall, you should continue to see strong profitability. Our target remains 2x on our multi-client projects. On the streamer contract market, again, very consolidated supply side. Pricing remains stable. We are being disciplined. We are stacking vessels that are not being fully utilized. We are capitalizing on the integrated model to build strategic relationships, win long-term contracts, and obviously bid very selectively on work. On the OBN contract side, again, a more fragmented supply side, a variable degree of discipline is probably fair to say. We see a volume decline in the market from 2024 to 2025.
I touched on some of the initiatives that we will obviously have to come back to the market with in terms of making a shift in terms of technology, making sure that our source efforts and the ROV efforts can be more efficient in the future, testing out new concepts in that regard. That also means that we are going to reduce the current leasing costs and let some of these long-term agreements go when they expire. On the imaging side, a very competitive market for low-end imaging solutions, but fortunately, we do not really compete in that market. We are actually talking to clients who are seeking more competition in the high-end segment where there are fewer players. TGS has now finally established itself in that market, proven by significant growth in the proprietary market and combined with strong margins.
On the new energy solution side, again, revenues were flat year- on- year. We see a continued positive development of the acquired businesses. We see some lumpiness in terms of ultra-high resolution work, which is mainly seasonal. It's mainly around the North Sea rather than Western Hemisphere where we see lower activity. If we move to 2025 guidance, our multi-client investment is still going to be around $425 million- $475 million. It's unchanged from last quarter. Approximately 70% of the investment is expected to be acquired with TGS's own capacity. On the CapEx side, we're guiding about $135 million. It's unchanged. In addition to that, there is approximately $10 million of integration-related CapEx. What I can say is that we turn every stone in terms of where we can see efficiency gains and where we can see savings, whether it's CapEx or OpEx.
We're not ready to change our guidance on CapEx, but I can guarantee you that we're looking very carefully at every single cost item in terms of CapEx. On the gross operating costs, on the OpEx side, we're actually announcing a further reduction on the operating costs. Our target is now $950 million of gross costs for the year, which is down from about $1 billion in the previous guidance. That continues to come down. I'm extremely pleased about the team in terms of what we've done in terms of getting more efficient, getting costs out of the system, and making sure that our margins are safeguarded in that regard. On the utilization side, we expect improved utilization of 3D streamer fleet. Q2 was good in terms of utilization. Q3 doesn't look as good.
We're still hopeful that Q4 will come back at a higher level than Q3, such that the full year we expect improved utilization for our 3D streamer fleet. On the OBN side, we expect lower acquisition activity compared to 2024, both for the entire market, but also for TGS specifically. We don't have any intention to be undisciplined and fight for work with negative margins or extremely low margins. That's not the recipe for success in the seismic market. On the order backlog and inflow side, if we start with the inflow, you see the inflow is sharply down. It's at $133 million for the quarter. You see how that compares to previous Q2s. You also see that Q2 is usually a seasonal low.
Although I'm not very pleased with $133 for Q2, what you've seen through history is that we have a tendency to have higher inflow both in Q3 and Q4 than what we have in Q2. We hope to see the same this year. If you look at the overall backlog, it's reduced from $600- $425. Some of you may be a bit nervous about that number. You may even expect that to be coming further down. I think some of that is seasonality. I think I've touched on that in terms of we were also a bit concerned at the same moment last year. We had a very nice buildup of backlog during the fall season.
In terms of what we have and where we have line of sight right now, there are some big multi-client projects, some projects that we have even started and where we expect obviously pre-funding to be signed quite imminent and where we expect that obviously to have a quite significant impact on total backlog. In addition to that, we see long-term contracts. I heard one of our competitors was talking about quite a few long-term contracts that are out in the market. Of course, we are invited to compete for that. We're looking very carefully at that in terms of securing some of that stuff that goes over many calendar years, both on the OBN side, but also on the streamer side. That's obviously where TGS is very competitive.
If you look at the expected timing of the contract backlog, you see that on the right-hand side on the pie charts. I think the next slide will probably give you an even better picture of that. This shows the booked streamer work and the booked OBN work respectively. Given the sales cycles that we have, where streamer work typically has a sales cycle of 2.5-4 months and OBN work probably twice that, four to seven months of a sales cycle, you wouldn't expect to see a significant change to Q3. Q3 is pretty much what it is. It's not great on the streamer side and neither on the OBN side. Q4, we expect it to be quite significantly better when we get three months into the future. Obviously, this is where sales cycles, we still have time to sign up work for Q4.
We have a long list of opportunities that we are pursuing as we speak. At current, we expect the streamer work to be in line with or probably higher. We expect it to be higher in Q4 than we show in Q3. On the OBN work, there is not a whole lot of upside to what we're showing here. There may be some multi-client work that we will start in Q4 that is not reflected in the bar chart to the left here. Overall, the Q3 streamer markets, we see contract work in Norway and Egypt. We've taken a two to three month pause in the acquisition activity on a project in Asia. That backlog is moved from Q3- Q4. We're doing multi-client in Brazil. On the OBN side, contract work in Gulf of Mexico, Norway, and Trinidad, and then multi-client work in the Gulf of Mexico.
We expect multi-client investments for Q3 to come slightly down from Q2, where we had $114 million. In Q3, it's probably going to be around $90 million as it looks right now. The utilization expectation is 65% for vessels in Q3, and then a normalized OBN crew count of about 2.5 for Q3. If we move on to the summary, we had total revenues of $308 million. We're not pleased about the revenues this quarter. I think I have addressed the key reasons for that and obviously some initiatives that we are taking in terms of turning that negative trend. EBITDA is actually pretty good. It's $153 million. It's an EBITDA margin that has improved from Q2 of 2024.
This has improved because of sharp cost cutting and an organization who's been extremely cost-conscious since early April when we had the combination of tariffs hitting the demand side and the OPEC Plus decision to increase production hitting the supply side. Cash flow of about $11 million, so positive cash flow despite a very disappointing quarter on the revenue side. We're continuing to do business optimization. The key highlight of this quarter is that we're adjusting vessel capacity to the market. We're staying disciplined. We're sending a signal to the market that we remain disciplined, that we want to make sure that we stack capacity that no one is using. Short-term market development is sensitive to oil price. The long-term market outlook remains positive, and nothing has changed in our belief in the long-term outlook for the market despite a dip in Q2.
Last but not least, we're maintaining the dividend of $0.155 per share. With that, I'm going to ask Sven to come up and help me with responding to questions. Bård is going to read the questions to us, which we will address simultaneously. Thank you very much.
Yes, we have a couple of questions from the people on the webcast. First one is from Jørgen Lande in Danske Bank. Good morning. Can you elaborate on the timing of the vessel sale and also the stacking of the Vanguard?
Yeah, I mean, the sale of the vessels will happen pretty much over the next couple of weeks. The contracts are pretty much agreed on, and there may be some final signatures to be done, but that's going to happen over the next few weeks. In terms of Vanguard, she's working as we speak, but only for weeks. We'll take her out as soon as the summer season is over in Europe.
Very good. Next question is from Lukas Dahl in Arctic Securities, and that's for you from Børre. You are above your net interest-bearing debt target. How does that stack against your dividend strategy?
Yeah, what we said is that our intention is to maintain the current dividend level stable until we are down at that level. Of course, with a weak Q2, it will obviously push the time when we potentially get down there a bit out in time. Our goal remains intact.
Lukas Dahl has another question. That's more for you, Kristian. What's driving the demand decline in the OBN market? He assumes that the OBN market should be tied to production in the oil and gas industry.
Yeah, I mean, the overall weakness we see right now is probably more timing than it is a permanent weakness in the market. I think that, as Lukas rightly pointed out, this is very much related to production and is related to production optimization. That market is relatively stable. Some of that work has been pushed into 2026. There are big projects in Brazil, for example, that have been delayed. We're not overly concerned about demand in the OBN market. We also think there is some hidden demand out there. Overall, we will see that OBN costs will continue to come down, and we will be more competitive also on exploration projects. That's going to be a key driver for the future, driving growth in that market. Personally, I'm probably more concerned about supply in that market. There is probably oversupply given the current level of demand.
Even if you see growth in demand going forward, which we expect to see, I think the supply is probably there's too much fragmentation in that market and too low discipline. Overall, we think the long-term trend for OBN continues to be positive and probably driven by a relatively stable 4D market and then driven by production and then increase in the exploration part of that market going forward as cost is coming down.
We have a series of questions from John Olaisen in ABG Sundal Collier. Who are you selling the RAMFORM Valiant and RAMFORM Explorer to? Can you indicate the price you get for the vessels?
Yeah, we can't disclose who the buyer is. What we can say is that the vessels are going to be used outside the seismic market. There is a restriction in that regard. In terms of the purchase price, we're talking low single-digit millions. We're not doing this to strengthen our balance sheet. We're doing this to strengthen the overall market and making sure that we get the right balance between supply and demand in the market.
In terms of synergy, CE is wondering if you can provide an update on the synergy effects of the $110 million- $130 million that we have indicated. What's the status?
Yeah, the status is that we're pretty close to being there. We still have some work to do in terms of particularly, there are some integration tasks that take longer time, typically related to systems and software alignment. We're pretty close to that range as we speak. The last bit will take a bit of time until we have full alignment on things like ERP systems and HPC in the cloud and stuff like that.
Next question is for you, Kristian. In terms of multi-client, is it natural to expect a jump in Q3 late sales as a result of the U.S. Gulf licensing round? Also, in terms of transfer fees in the second half of the year, what do you expect?
Yeah, I'm not going to be standing here and predicting or promising higher late sales because I was wrong as we were all in Q2. We thought Q2 was going to be far better than it was, and then we got a painful reminder that this market has low visibility and it's very vulnerable to changes in the overall market environment. I think when you look into, I would rather say second half rather than quarterly specific. In the second half, yeah, there's a couple of transfer fees out there. One of them is probably quite sizable and is related obviously to the Chevron Hess transaction, which we still don't know whether it's going to happen. If it's going to happen, it may actually happen in the second half of this year rather than next year.
Other than that, there's a couple of transfer fees in the category of probably $0- $10 million for TGS, which is also probably going to trigger some sales in Q3 and/or Q4. Overall, I mean, typically when we have a bad late sales quarter, we have a tendency to come back. If this is driven by the oil price and driven by macro, obviously we need to cross fingers and hope that the overall environment will improve in Q3 and Q4. Again, as I've said multiple times, our long-term view of the market hasn't changed. There's significant opportunities out there, both on the contract side and on the multi-client side. Q2 was a big disappointment in terms of getting that closed towards the end of the quarter for multiple reasons.
Continuing on, Mr. Olaisen's list of questions. On the OBN side, you mentioned that you will let some capacity go. Does that mean that you will reduce the number of crews, which currently stands at four?
Not necessarily, but when we look into the amount of work that we have right now and what we're planning to do for 2024, 2026, it will probably be more of a shift in terms of we're trying to get more efficient, trying to use source and ROV vessels across multiple projects rather than getting two for every single project and following the project. We are looking at efficiency gains. We see that a lot of these kind of long-term contracts, we may not need them for the future. We may see different types of vessels in the future. We may see vessels that are not necessarily unmanned, but they're definitely more light in terms of what needs to be or the human resources that you need on the vessel.
Obviously, looking at ways to get more efficient and particularly to drive that innovation in the exploration market, to add growth on top of the 4D market. We need to get more efficient. The way to get more efficient is probably not the node in itself. It's more about the way you do it and the way you perform your operations. That's where we see some benefits. We will come back and talk about this when we've run some of these pilots that we're working on right now.
Next question comes from Ole Martin Rødland in Pareto Securities. Partners withdrawing from the multi-client JV projects. Was it your decision to continue as you still expected these to be good projects, or had costs already incurred, so effects of postponing was limited?
No, it's an interesting point you're bringing up. Number one, TGS has a history of investing countercyclically and taking risk when no one else is willing to take that risk and share that with us. I think that's part of the reason to our success. That continues to be part of our DNA. When you add the fact that we're becoming more asset heavy to that, which means that sometimes it may make a lot of sense to continue a project in Brazil despite the fact that your partner doesn't want to be part of it or despite the fact that you may not have the final signature in place in terms of pre-funding, we're still happy to do that kind of stuff and to capitalize on that situation rather than showing weakness and pausing stuff like that.
I think this is a great example of TGS kind of combining our DNA from the multi-client side over 40 years of successful operations with being more asset heavy and making sure that we can utilize assets at the same time and taking advantage of a strong balance sheet to be able to do that when no one else has a willingness or a capacity to do it.
Following up on that, in terms of the expected returns on these surveys, do we expect a similar sales investment target of 2x at these surveys? Also, will you rethink the collaboration with partners in the future in terms of the experience from Q2?
In terms of the overall return, yeah, absolutely. I mean, we're talking about we wouldn't do this in areas where we don't have a proven success. The areas we're talking about here and projects that we were impacted by the fact that partners said we don't want to be part of this right now, there are two regions. Number one is Brazil’s Equatorial Margin, where we are very happy to continue to acquire seismic. The licensing round that was announced quite recently or held quite recently was a great success, where Chevron and Exxon paid big fees to get into some of that acreage where we have been operating now for about a year. We have no hesitations to carry on with a higher equity in those projects because of the proven success that we have in Brazil. Gulf of Mexico, same thing. We're happy to be 100%.
We're happy to do 50% JVs. Our goal is to be in the Gulf of Mexico for the long term. This is what has built the TGS you see today. We're going to continue to invest there, whether it's 50% or 100% equity.
OK. We are coming to an end on the questions on the web. Unless there are any last-minute questions from anyone, I'll leave the word to you, Kristian, for your concluding remarks.
Thank you, Bård, and thank you, Sven, and thank you for everyone who followed our earnings release on the web. Overall, again, we're not pleased about Q2. It came in lower than we expected. The good thing here is that we're taking actions. We're taking actions pretty much immediately in terms of getting our cost base down, getting control of vessel capacity, showing a very disciplined approach in terms of stacking and selling vessels, also new strategies on the OBN side in terms of reducing the leasing costs going forward and making sure that we can introduce even more efficient ways to do that for the future. I want to wish you all a great summer. I think for the first time in many years, Norway has a temperature that is quite similar to Houston. It's great to be here. I wish you all a great summer vacation.
I hope to see you back when we report our Q3 presentation later this fall. Thank you very much.