Morning and good afternoon everyone, welcome to this investor conference call. It's July 5th, the reason for our call today is obviously our announcements last week or three announcements of three acquisitions by TGS. We're extremely excited about these transactions, and we believe that it puts us in a unique position for the coming upcycle in the overall energy industry. The plan today is to take you through a presentation where we go through each one of these transactions in more detail, and then we're gonna open up for questions and answers after that. My name is Kristian Johansen, I'm the CEO of TGS, and with me on the call today I also have Sven Børre Larsen, our CFO.
If you go to slide two in the slide package that you have received, it's a forward-looking statement, so I encourage you to read that when the presentation is over. I'm not gonna go through it in much detail. Just wanna kick it off with slide three, which talks about positioning TGS for the next energy upcycle, and this is really what I was alluding to in the start of my presentation today. We've already seen the early signs of an energy upcycle, and we think this will continue. We think there are really strong drivers in the society right now why there will be a higher demand for energy in the future, and while oil and gas cannot carry the burden itself.
If you start on the first pillar here, energy demand continues to rise, and energy security is becoming more critical. I think our clients are focusing now on cheaper, faster, and cleaner, and that again means that there will still be strong demand for oil and gas. There's also gonna be a strong demand for other energy sources. We already saw that in Q1, and I think that 2022 and the next couple of years will further emphasize how important energy security is, how energy security have become in the society today. We've seen big changes in terms of nations taking a very different stand on the need to be energy dependent, and we think that trend is just gonna continue going forward. Number two, significant underinvestment in oil and gas.
Exploration spending is actually down 76% since peak, and that forces higher spending, not only on oil and gas in the future, but on all energy sources. We wanna position TGS as a company who can provide data and insight to all these different sources of energy in the future. Number three, recent exploration success drives frontier investments and licensing activity. We already saw signs of that in Q1, where we had significant increase in our sales in, particularly in the South Atlantic region, and particularly in the areas such as Africa, where we haven't seen much demand over the past few years, and we really see a comeback in these areas now. We think frontier is back on the agenda for our clients, and we see higher licensing activity in 2022 than we've seen ever since pre-COVID. Number four is a different driver as well.
Price volatility triggers demand for data and insights across the energy industries and sources. So energy, that volatility will remain high in the future. There is no question about that. Energy prices will remain high, but the volatility is also gonna be really high and w ith increased volatility you will also see that data and insight becomes more critical. Again, that's what we're trying to tell you today, is that TGS is now building a company where we're gonna be placed across the energy space and provide these critical sources of data and insights to our clients, whether that's an oil and gas client or it's clients outside the traditional oil and gas space. Then the last but not least, the client's cash flows support higher spending. Our clients have benefited from very high energy prices over the past 12 months.
Next in line are companies providing services, data and insights, and that goes along the entire energy sector. It's not only oil and gas, but it's also the other parts of the sector. If you go to the next slide, on slide four, I'm gonna talk about our strategic agenda. This was presented in the Capital Markets Day in February 20, 2021. As you probably understand, I mean, it's a coincidence that we announced three transactions in one week. Obviously, we've been working on these transactions for quite some time, and it was actually kicked off in February of 2021 when we announced our strategy. The strategy or the strategic priorities at the time that was presented to the market were basically split in profitable growth, where you have three pillars.
You have the ambition of becoming a technology leader, where there are two pillars related to that, and then a further diversification of the business. I will go through them, one by one, and also talk about how the different acquisitions we announced last week fit to our long-term strategy. The first one is related to new technologies and mature basins. This is. It's been high on the agenda for TGS for the past few years, in line with seeing more mature areas being developed and more activity around what we call ILX, or infrastructure-led exploration. Magseis Fairfield has been our supplier on three out of four of the OBN projects that we've been carrying out in the U.S. Gulf of Mexico and the North Sea, and we see that trend continue.
We think that being able to do OBN surveys or carry out OBN surveys in a multi-client fashion will improve the margins not only for the multi-client company, but also for the acquisition company. This is one of the main reasons why we're announcing the acquisition, or the plan to acquire Magseis Fairfield. We think there is a great match. We think that it's gonna improve our multi-client business due to better survey design planning and higher operational efficiency. It will also provide cost synergies, of course. Those cost synergies are probably around $7 million-$9 million per annum. It will position TGS to the ILX market and 4D opportunities, and these are segments of the market where you see a strong combination of growth and stability going forward.
Last but not least, it will generate more business and opportunities for our imaging team, where TGS together with ION, which I will come back to, have a strong reputation and track record. That's the main reason why we announced the acquisition of Magseis last week. Secondly, a second pillar to our strategy is to strengthen our position in the South Atlantic. You all remember that we acquired Spectrum back in 2019, and it was for the same reason. We really see that the highest growth is coming from the South Atlantic, and South Atlantic being the Latin America, Brazil, Argentina, Suriname, and you name it. On the other side of the basin, you have West Africa, where we also see a significant improvement in activity.
Both these acquisitions, both ION and Magseis Fairfield, will position TGS even stronger in the South Atlantic area. ION because they have a big data library there, which improves the position of TGS in terms of existing data. Magseis Fairfield because we've seen that the core of the main part of the multi-client activity has been in U.S. Gulf of Mexico and Norway in the past. Going forward, we'll see a significant uptick in activity in Brazil as well, and we think a lot of that is gonna take place as multi-client surveys. Why multi-client? Well, because you create bigger surveys, and by doing bigger surveys, you get a higher operational efficiency, and you get lower unit cost. We think that's a win-win for both TGS and Magseis.
In other words, Magseis can help TGS get better in converting multi-client, but TGS can also help Magseis in improving their margins going forward. The third pillar is further growth onshore, and we didn't address that through the acquisitions that we announced last week. What I can say is that we also bid or submitted a bid for ION's onshore data library, but we were not successful because we didn't meet the price expectations of other bidders. It shows that there is discipline. We walk away from a deal when we think the price is too high. In this regard, we ended up with the offshore data library and the processing business because we felt that was the one that was most important for TGS going forward.
We also have an ambition of becoming a technology leader, and there are two pillars related to that strategy, and one is to expand the value chain through data and analytics. Prediktor will be a second software and development hub, and we're adding about 40 people in Norway, and we're adding that to a group of about the same size in Houston. Now we have basically two big hubs for software development that really expand our value chain in data and analytics. In that regard, Prediktor fits really well, not only with our strategy of new energy solutions but also in terms of our data and analytics and software development strategy. Imaging quality and reputation is critical going forward.
If we go back to the first pillar where we talk about new technologies and mature basins, as we get closer to the reservoirs, imaging quality and reputation gets even more critical. With these acquisitions that we announced last week, we can take a big step up in terms of imaging quality. ION has for many years been one of the more respected processing companies in our industry. In fact, they've been ranking just as high and perhaps even higher than TGS in the past. By adding ION's processing business to the existing TGS business, we think we have a winning combination. Magseis Fairfield is gonna generate traffic to that imaging group.
While we aim to be one of the key providers of OBN processing in the future together with ION, Magseis Fairfield is gonna provide a lot of the data that feeds into the machinery in terms of our processing business. In other words, both these transactions make a significant step up in terms of our imaging quality, which is critical going forward in our industry. Last but not least, diversification. We're talking about data offering towards other energy-related industries. When we talk about other energy-related industries, we talk about CCS, deep sea minerals, geothermal, wind, and solar. When we announced our strategy back in February 2021, we said we already have data for CCS. Well, with the acquisition of Magseis, we're gonna get even stronger because we're also gonna have 4D capacity in terms of CCS.
In terms of deep sea minerals, Magseis is also gonna improve our current offering where we already have data. In geothermal, TGS already have organic offering, so we already have an atlas for geothermal opportunities onshore U.S. that had been released about six months ago. The last two pieces are wind and solar. As you remember, we added a company called 4C Offshore last year, and 4C is basically an insight company for offshore wind.
In addition to that, we have developed our own organic products and which we call Wind AXIOM, which is together with 4C is gonna be an insight to companies within offshore wind that provide them the right tool in terms of making the right decisions about where to put their offshore wind installations and how to do it. There was a gap in our portfolio because we didn't really have an offering in solar. Predictor is gonna fill that gap, and we will come back to that later in the presentation. In other words, the strategic agenda that was announced in February 2021, in many ways we've ticked off a lot of boxes by announcing these three transactions last week. What I highlight today is that these transactions fit perfectly into that strategy.
These transactions have been planned for quite some time, and it's just great, and I'm extremely excited to announce it now and basically tick off the boxes in terms of improving TGS and make TGS even more competitive in the future. Let's talk about the different transactions. Magseis is the first one and is the first one we announced last Tuesday. It clearly strengthens our position towards ILX and 4D, and these are probably the fastest growing and the more stable areas of seismic going forward. Start with the description. Magseis is the world's leading OBN acquisition company. They have a really strong position in TGS core markets. As I said, the core markets have until recently been Norway and U.S. Gulf of Mexico, but we also see a great opportunity to increase our presence in Brazil going forward.
Talking about the South Atlantic strategy, you will see a lot of new OBN projects in South Atlantic in general. I think countries like Guyana, for example, Suriname going forward, Argentina could be an opportunity, but Brazil is probably gonna be the core market for the next few years. We offered or we launched an offer to acquire all the outstanding shares on 29th of June 2022, and I will come back to the regulatory process until closing on that transaction. Strategic rationale, I kind of discussed that in my intro, but let me just go through the highlights there. Number one, it strengthen TGS multi-client business towards ILX and converted contracts. Further, it positions TGS for post-production seismic and 4D. These are areas where TGS hasn't had a product offering in the past.
Number three, it further enhanced TGS position in OBN processing, which is another important part of our strategic priorities. Last but not least, it also improve our exposure towards energy transition related industries like offshore wind, CCS, and deep sea minerals. We're extremely excited about the opportunity, and we think that Magseis will fill in a lot of gaps for TGS. We think, as I said, that Magseis will make TGS a better company, and we will also make Magseis a better company with better margins going forward because we should be able to reduce the unit cost by generating and creating larger projects and footprints. Now a quick look at the market. We see a significant increase in demand for ocean bottom node data. E&P companies are strengthening their focus on cycle time cost. It's all about cycle time these days.
That means that a higher share of demand for seismic data is driven by infrastructure-led exploration and production. Along with the recent improvement we've seen in frontier, we think this is gonna be a winning combination. We also see an increasing amount of surveys that are being carried out as converted contracts, and that gives higher IRR and lower sales to cost. OBN, as you can see on the bar chart on the right-hand side, has been gaining market share of overall seismic spending over time, and we think that's gonna continue. You see the market share as the line on the bar chart there, and you see that the market share of OBN versus total seismic spending has increased from below 12% in 2016 to above 31% today.
It's a significant increase where about 1/3 of the surveys being carried out in the market today are being carried out as OBN. We see the same trend in multi-client. Although the traditional TGS multi-client projects that are mainly frontier, they won't really be impacted by this. The converted contracts where you acquire data over held acreage, you will see a significant increase over time in the market share of OBN versus streamer seismic. Again, I think this graph and bar chart kind of speaks for itself in terms of the opportunity that we see and again, the opportunity that we see in terms of combining these companies, making a stronger TGS but also making a stronger Magseis over time. The second transaction we announced was ION.
ION used to be a public company in the U.S. They went bankrupt a few months ago, and they're going through a Chapter 11 process or have been going through a Chapter 11 process since then. They're considered the number five multi-client company globally. They're asset light, very similar to TGS, and have a particularly strong position in Africa and Latin America, which you will see on the next slide. All of ION's offshore multi-client data, both 3D and 2D, and the processing business acquired is acquired as part of the Chapter 11 process, and the closing is expected in late July. In terms of the strategic rationale, it will increase TGS global 3D and 2D footprint by 29% in 3D and 14% in 2D, and we're talking volumes only here.
It will be a significant strengthening of the key frontier areas in the South Atlantic basins, and as I said previously, you know, frontier is definitely coming back. We are very positive to the development in frontier, and the key areas in frontier in the world today are in the South Atlantic basins on both sides of the margin, both Latin America and West Africa. I think a lot of people when I read their reports being published after the acquisition of ION, a lot of people talk about this as a data library acquisition. Well, there is so much more than that. We are buying a data processing company as well, and the data processing company has IP, they have proprietary technologies in both software and hardware, and it's an extremely well-positioned processing company that would fit well with TGS.
We would pick the best from both worlds in terms of technologies going forward, and we think there will obviously be massive synergies by combining the two companies. In that regard, this is so much more than buying a multi-client data library. In fact, if we were to look at the price of the two different areas, it would probably be closer to 50-50 in terms of how we would price the multi-client data library versus the processing organization. Processing organization also comes with a backlog of work that they have. I mean, ION has been bigger than TGS historically in the proprietary processing market, and this is obviously a trend that we wanna continue going forward.
We wanna do more proprietary processing because we see that there is a need, especially in terms of OBN, where we see, you know, great growth in terms of data being processed. The next slide is just giving you an illustration about how big this data library is compared to TGS. It will expand our global footprint by 29% in terms of 3D, and 14% in terms of 2D. You see that this is mainly coming from North America, Latin America, and Africa, Middle East. Pretty much along that same Atlantic margin where you see most of the exploration activity these days.
North America is gonna increase our 2D footprint by 11%, our 3D footprint by 16%, and if you go further south in Latin America, you will see that it's gonna increase our 2D footprint by 46% and our 3D footprint by 238%. The reason for that is that ION has been reprocessing a lot of public data along the Latin American margin. These are surveys where ION has been extremely successful in the past, and we're gonna continue that going forward. In terms of Africa, Middle East, you see that it increases our 2D footprint by about a third and our 3D footprint by about 13%. Europe and Asia Pacific is less relevant in this regard. They don't really have a big library there.
As you know, TGS has a big library both in Europe and in Asia Pacific. In other words, it's a great match. It fits really well with our strategy of strengthening our South Atlantic offering and we're extremely excited about this opportunity as well, of course. In particular, we're excited about these opportunities together because we think they fill in each other really well. It doesn't mean that we wouldn't have bought ION if we didn't do Magseis and the other way around, but it means that combining these two transactions, we think will lead to a lot of synergies as well.
In terms of frontier exploration, because ION's data library is definitely quite frontier, kind of similar to TGS in that regard, we've definitely seen that IOCs are increasingly interested in frontier basins, particularly the South Atlantic Basin. We've seen several large discoveries in these areas so far this year, so I can mention obviously Suriname, I can mention Namibia, I can mention Australia as examples of that, and it's not all about finding new oil, it's also about finding new oil that it has low emissions. In that regard, we think a lot of the frontier discoveries that we've seen so far this year have been quite promising. Licensing round activity is getting back to normal.
Again, as I said, the licensing round activity expected for 2022, it's pretty much back to the pre-COVID levels, and we think 2023 will continue that positive trend. We've seen significant underinvestment in new oil and gas in the past. That creates a need for catching up over the coming years, and we already see that, and we hear that from our clients. As an example of that, our late sales increased by 218% year-on-year in Q1 of 2022, and it's not a secret that the market expects Q2 to be quite good for the seismic industry, as well. We think that frontier is coming back.
We think that the activity level in frontier basins is gonna be higher in 2022, but 2023 will definitely be a step up versus 2022 as well. If you look at the chart on the right-hand side, you see that the orange line there is total liquids demand estimated by JP Morgan from now until 2030, and you see a quite significant gap in 2030 between liquids demand and liquids supply. Even that, if you look at the estimates on US shale, you see an enormous growth. We haven't seen that yet, and if you speak to the US shale player, they say that they're probably not gonna be able to cover that growth.
There is a downside risk to that, and that downside risk is going obviously gonna be an upside risk to the oil price. In that regard, we concur with JP Morgan who says that the super cycle will play out as supply growth continues to lag demand going forward. Last acquisition that we announced last week, this is Prediktor. Prediktor is an important building block in our renewable strategy. It's a leading provider of asset management and real-time data management solutions to renewable and energy asset owners. Prediktor software and systems are already being utilized on a large variety of assets and I can mention two of them.
Benban, which is the largest solar park in the world in Egypt, has Prediktor systems installed. The Prediktor systems will also be installed on the Dogger Bank in the UK. This is a company that, although they're relatively small compared to TGS, and a relatively small acquisition, they have a really good footprint already in a rapidly growing solar industry. Not only do they have a strong presence in solar energy, but they also deliver solutions to other types of industrial assets, and examples of that could be wind energy and even oil and gas. Company is based in Fredrikstad in Norway and has about 40 employees. As I said, they're gonna fill two important roles for TGS.
One is obviously being part of our new energy solutions business, and the second one is that it's really gonna create a second software hub in Norway on top of what we already have in Houston. Strategic rationale of Prediktor is gonna be an important building block in our vision to become an integrated provider of high quality and insights to the renewable industry. As I said, there was a little bit of a gap in solar. While we basically fill all the other parts of the renewable energy industries, we had a gap in solar, and Prediktor is filling that gap for us, of course. It significantly strengthens our data analytics capabilities and, as I've mentioned a couple of times, establishing a second software development hub in Norway.
Again, we think that TGS can help accelerate Prediktor's go-to-market strategy, and it's quite unique. I mean, TGS does business in more than 30 countries across the world and obviously we've been used to opening doors in new countries now for about 40 years. Obviously we have market presence, and we have people who know how to get into new areas and establish businesses in new areas. We think, in that regard, TGS can do a great job in terms of accelerate Prediktor's go-to-market strategy. Just a quick look at the market as well. Number one, we see a significant increase in the share of intermittent energy, and intermittent energy is mainly solar and wind.
You see how the market share in terms of total electricity supply improves or increases from about 10% in 2020 to more than 60% in 2050. 2030 is about 35%. We see a significant growth in solar obviously going forward, which you can see on the right-hand side where we see a compounded annual growth rate of 11.7% for solar, and this compares to, for example, 8.1% for wind. Solar is expected to grow more than any other energy sources, and TGS want to be part of that growth story, of course. The next steps in terms of timing, we start with Magseis. The offer will be launched during August, and the offer period will probably be somewhere between two and four weeks.
We expect clearance through the applicable competition authorities, if any, over the next few months. We obviously expect necessary consents for change of control, and then closing expected early fall 2022. In terms of ION, the sale hearing in bankruptcy court is scheduled for July 18, so just in a couple of weeks. We expect closing just shortly thereafter, and assuming no third party objections raised to delay closing of that transaction. Then the Prediktor transaction is already closed, and we're starting the integration and collaboration, as we speak. In summary, we are delivering on the strategic agenda supported by M&A.
We have announced a voluntary offer to acquire all the outstanding shares in Magseis, position TGS uniquely for ILX and 4D, further enhance our position in OBN processing, and it also improves our exposure towards offshore wind, CCS, and deep sea minerals. The acquisition of ION adding to TGS' already strong presence in frontier basins, particularly the South Atlantic. It further enhances our data processing offering, and it obviously offers attractive financial return potential, which all of these transactions obviously does. Of course, it goes without saying that buying assets from a bankruptcy process, you don't pay a premium on your assets, of course. In terms of Prediktor, it's an important building block in a strategy towards energy transition-related industries, and it enhances our data and analytics capabilities.
I think as a closing remarks, I would just say that until recently, we've been the undisputed global leader in frontier multi-client geophysical data, and we've had an ambition to grow that into the renewable markets as well. After closing these transactions, TGS can offer an even stronger multi-client library, a leading position in converted contracts where OBN is gaining market share rapidly, and a position in production seismic and 4D. This is all supported by further strengthening our data processing business. On top of that, we have a solid portfolio of new energy-related businesses, with these transactions filling gaps within solar, Prediktor, and CCS, deep sea minerals and wind for Magseis. With that, I wanna open up for questions and leave the floor to the operator, please.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press five star on your keypad. To withdraw your question, please press five star again. To ask a question on the webcast page, you can use the Ask a Question button. We'll have a brief pause while questions are being registered. Our first question is from Christopher Møllerløkken. Your line will now be unmuted.
Thank you. This is Christopher Møllerløkken from SpareBank 1 Markets. On the offer you've launched on Magseis Fairfield, that's you've had a 90% threshold. If you fail to achieve that, would you say it's more likely that you'll be a major shareholder of Magseis Fairfield, or would you rather walk away from the offer? Thank you.
Thanks, Christopher. Well, what I can say is that we don't plan to fail. Our plan is to get 90%. We already have great support from the largest shareholders, and combined, they hold about 35% of the shares. We think we're gonna get there. We think our offer is very competitive, and we don't really have a plan B in that regard. I mean, obviously, we need to discuss that if that should be the case, but so far, we feel very good about our offer, and we feel like we're gonna get to 90%.
You obviously know the thresholds, you know the threshold of 50.1%, you know the threshold of 2/3 where you can merge the companies and obviously 90% where there is a mandatory. I think in general, we don't plan to fail, and we don't see a reason to do that.
Thank you. You also mentioned on the call that your offer on the onshore part of the ION Library didn't meet the seller's expectations. Do you know if anybody else has bid on that or if that remains in the asset bankruptcy update of ION?
No, I think that's gonna end up with another player.
Okay. Thank you.
Thank you. As a reminder, if you wish to ask a question for the speakers, please press five star on your telephone keypad. You can also use the Ask a Question button on the webcast page. Our next question is from the line of John from ABG. Go ahead, your line will now be unmuted.
Good afternoon, gentlemen. In a cyclical industry, the rule of thumb is to do acquisition in the early part of the cycle, which you're doing now, and I find that quite interesting. I was just wondering, are there more opportunities like this in your pipeline? Are we likely to see more acquisitions from TGS?
Yeah, you can never rule that out. What I can rule out and what I can promise is that there's not gonna be three acquisitions this week and not even next week. I think in general, yeah, we strongly believe that this market will have to be consolidated. We think that there are still too many players. We think that scale is important. We think in particular between multi-client and OBN, we think there's a great opportunity to combining forces and create bigger projects, which again will reduce the unit cost. I can never rule out that there will be more acquisitions, but as of now, we're quite satisfied with what we delivered on last week.
Right. A couple of detailed questions on ION. The last reported quarterly numbers from ION was Q3 last year, and if I remember correctly, the book value of the library was $45 million-$50 million. I wonder if you could give me an indication of what the current book value is, and also secondly, you might have said this, but what's the acquisition date? From what time do the revenue from TGS?
I think the last reported book value we've seen is $57 million for the multi-client library. But then obviously there is some value in software and hardware and IP and that kind of stuff that we acquired too. But I think 57 is the book value of the multi-client library. In terms of the effective date, the effective date is July 1st. We will, given that the transaction will be announced or formally approved on the 18th of July, expect to get the revenues from July 1st.
Did you say $57 million? And at what time was that? Sorry.
$57 million was the book value of the library as of today, or the last reported value of the book value. We will get the revenues from the ION Library from July 1st this year.
Thank you. You haven't published how much you paid for the ION Library. Is it possible to give us some indication of this? I mean, it's just.
No, we haven't published that. I think, you know, I can probably indicate that it's been a few tens. More than 10 for sure, but less than 50. You will see when we release our cash flow statement in Q3, of course, you know, what we pay for these acquisitions, but you won't get the details.
Oh, oh. All right. Thank you. That's all for me. Thank you.
Thanks, John.
Thank you. As a reminder, if you wish to ask a question for the speakers, please press five star on your telephone keypad. We'll have a further pause while questions are being registered. As there appear to be no further questions on the telephone line, I will give the word back to the speakers.
Yes, Sven, you have a few questions that you have received through the web, so why don't you read them up, and then I'll answer them.
Yeah. First, we have a question from Andreas Bäckström about the price book ratio for other ION assets. I guess implicitly we have already answered that. And also he follows up with a question that reads: After the Spectrum acquisition in 2019, Kristian mentioned that he thought TGS investment capacity was around $500 million on average. What do you think TGS long-term investment capacity is in today's condition?
Yeah, I think I can probably recall that we said $500 million in investment capacity at the time, but I mean, things have obviously changed since then, and partly because of vessel rates and rates have come down significantly. We pay less for our new acquisitions than we did back then. That will obviously change going forward. We see higher rates, both in terms of OBN and in terms of streamer seismic. Yeah, I think that number or that estimate probably pretty much stays the same, you know, in a good cycle and if the market continues to improve. I mean, I think there is a possibility at least to invest in that range.
A third question from Andreas Bäckström. The seismic market keeps consolidating. Doesn't that work a bit against the asset-light multi-client model? Do you see any necessary strategic shift that you will need to do when you're now starting to own your own technology, rather than renting vessels or technology?
I think that's always been, you know, high on our list of strategic priorities, is to secure access to supply at reasonable prices. You know, when we do this acquisition, we do it partly because we want to secure supply, but the most important thing is that we see great business opportunities and we see that we can pobably improve the performance of Magseis can improve the performance of TGS, particularly in converted contracts. On the vessel side, in the streamer market, we already have a long-term collaboration with PGS, where we have secured a vessel for the next year or close to two years and at predefined rates.
We will always look at those opportunities going forward in terms of making sure that we have access and number two, that we have access at reasonable economics. That will always be our strategy, and it doesn't really change with the acquisition of Magseis. I also think it's important to say that Magseis is, although not as asset light as TGS, it's still considered relatively asset light compared to most of the streamer companies because Magseis doesn't own the vessels. They charter vessels and they charter them on long-term lease, kind of similar to what we do with PGS in the streamer market.
There are a few questions from David Giovinazzi. First, does OBN service compare to traditional 3D service changes revenue profitability and/or capital requirements?
I think what is important to state in that regard is our traditional multi-client business is mainly streamer seismic, and it's mainly frontier. That business is not gonna change at all. You know, those teams who run that business today, they're gonna continue to keep their eyes on the ball, and they're gonna do that as they've always done. Where we see an opportunity to improve both our margins and Magseis margin is in what we call the Converted Contract Markets, where, you know, by owning Magseis and controlling Magseis, we would be able to start survey design at a much earlier stage. We would do much better planning of the different projects and in that regard, we would see operational efficiencies and higher margins going forward.
I don't think the traditional multi-client business of TGS is not gonna change. Converted Contract is gonna change for the better. In addition to that, we obviously get a strong footprint in these rapidly growing and stable areas of ILX and 4D. In that regard, I see a lot of win-wins in this acquisition.
He follows up with, Is the expectation going forward that OBN will take market share not only in ILX and production, but also for frontier exploration?
I don't think so. I think it goes back to my previous answer, is that it's not gonna change the frontier business. We're not gonna use OBN for frontier areas. It's mainly a product that you use on either existing production or in areas that have already been picked up and controlled by oil companies. In that regard, it's gonna be conversion contracts and proprietary, of course.
We have a question from Erik [Shelvan], which reads. The growth potential in Magseis as a standalone company is much higher than for TGS as a whole. If the acquisition of Magseis Fairfield goes through, why should the existing Magseis investors remain investors in TGS?
Well, I wouldn't necessarily agree that the growth opportunity is so much bigger in Magseis. We see as I went through on the call today, we see a great opportunity for growth in Frontier now. We definitely saw in Q1 where we had a like sales revenue growth of 238%, if I remember correctly. I mean, we see great growth opportunities in our traditional business. We see great opportunities for Magseis too, and we've obviously looked at the pipeline for 2023 and it looks really promising. So we think this is a good mix of two companies. Why should you stay invested in TGS? Well, I mean there's multiple reasons for that. I think you will see good growth together with Magseis.
You will see synergies from the Magseis acquisition and you will obviously get a dividend as well which TGS has been paying ever since 2010 on a quarterly basis.
On that note, Kristian, there is also a question from [Peter Vatsan] on how these transactions will affect the TGS dividend. You may just take that at the same time.
Yeah. It's not gonna impact the dividend. Of course, there is a little bit of a dilution on our stock, so we're printing 10% new shares, so we will pay a 10% higher dividend, anything else equal. It's not gonna impact the dividend going forward in that regard.
Chris Egger is asking, "Is the Gemini source technology part of the ION transaction?
Yes. The Gemini source is part of the ION transaction, and that's a low frequency source that we are very excited about and that Magseis also will obviously benefit significantly from. It is part of that.
A question from Oliver [Massager]. He has several questions, but I think most of them has been answered. He's also asking, "What do you mean by Converted Contracts?" That may be a good idea to clarify.
Sure. Yeah. A conventional contract is, if you go back 10 years in the history of seismic, then most of the seismic acquisition was either carried out as proprietary, so basically meaning that a vessel company would enter into a contract with an oil company and they would acquire that data for the oil company on a proprietary basis. It would be a contract between the two. The other part of the business was multi-client, which means that the multi-client companies such as TGS would go out and acquire data using someone else's vessel and then licensing that data to multiple parties. Usually you would do that ahead of a licensing round, so you would typically do that, like, two years before a licensing round.
You would process the data and then you would license that to multiple companies who are bidding in the licensing round. Committed contracts are somewhere in between. It means that typically the blocks have already been awarded, so there's already been a licensing round. There could be one, two or three companies holding that acreage, and then a company like TGS would still go out and carry out the survey in the multi-client model. There will be fewer prospective companies, and there will typically be higher pre-funding to go out and do that job. Typically in financial terms you would have a higher IRR, but you would have a lower sales to cost because you have fewer clients.
We have a question from Evan Nauma. Question, I guess we've got a lot over the past few days. Could you explain the rationale for buying Magseis instead of just continue being a customer of Magseis?
Sure. I mean that's a great question and I think I kind of touched on that today. I mean in the past, and you've seen TGS for many years being completely asset light and relying on the market to provide capacity for our surveys. I think in general the reason why we go one step further in terms of our strategies is, number one, we think that Magseis can improve our multi-client business because we can start earlier, you know, better survey design planning, higher operational efficiency in the surveys. Rather than being tendering out and dealing with different suppliers, we can basically go together with one and work very closely. That you could probably do without owning the company.
You could enter into a strategic collaboration, but then you wouldn't get the cost synergies of a transaction, which I think are quite significant. We're talking about $7 million-$9 million per annum. We also want to not only improve our multi-client offering and converted-wave offering, but we see a great business opportunity in the ILX market and 4D opportunities for OBN, and that would not be possible without owning the company. Last but not least, it will definitely generate more business and opportunities for our imaging team where we now with the acquisition of ION has strengthened that offering quite significant. It's a great question to ask. I understand why we're getting the question, but I think we have a very strong rationale for taking one extra step there.
We think, you know, at the end of the day, we think this is a better opportunity for our shareholders rather than getting an extra dividend for our cash.
We have a question from Lukas Daul in Arctic Securities. Do you expect the OBN offering to smoothen your earnings volatility?
I think it's gonna improve the volatility or lower the volatility going forward. I think if you look at the pipeline and the backlog of Magseis and other OBN companies, you see that it's quite healthy. We think in that regard it would probably serve as a kind of stability or a stabilizer to TGS, you know, historically and relatively volatile earnings. I think I have to say that over the past few years it's been stabilizing quite a bit due to our size, and now with the acquisition of ION too, we get even bigger and the standard deviation of our result gets lower.
There is a question from William [Reed] Will ION employees be transferred to TGS on the acquisition of the business?
Yes. That's part of the transaction agreement, is that we're gonna take over a number of people. That number of people has been defined as at least 60-65, out of about 130 that used to work for ION when the company went into Chapter 11. Yes, the plan is to take over quite a few employees and very talented and capable employees, I will have to say.
a question from Mindaugas Česnavičius . Since Prediktor is mostly present in solar PV, could you share your future vision of TGS in the solar industry?
Yeah. I mean, our vision and our ambition in that regard is that we're gonna have offerings that over time is gonna reflect the overall energy mix. If you assume today that fossil fuels would be, or oil and gas would be, you know, let's say 60%, and you have, you know, 3% in solar and 3% in wind, then our ambition is that that's obviously gonna change over time, but our offering is also gonna change over time in line with the energy mix.
Our vision is basically, you know, we turned 40 years last year, and our ambition is that TGS is gonna be around in 40 years from now, and by doing that and making sure that we are around, that we are a relevant company, we also need to grow into the new energy spaces and renewable industries. In that regard, you know, getting into solar is a very important milestone, partly because solar has great growth projections going forward, but also because Prediktor is a great company. That's basically our plan, that we're gonna reflect the overall energy mix over the next few decades.
There is several other questions being posted here, but I think most of them has, or all of them has actually been answered already. No more questions on the web, Kristian .
Well, thank you. Thank you very much, and thank you for attending this call. I think it was important to go through our strategy and going through our direction going forward. Again, I would just have to say once again that we're extremely excited about these opportunities. We're extremely excited about having the opportunity to pursue these opportunities at, as John said, at an early part of the cycle. Thanks to our strong balance sheet and we are able to do that. As I said, we can now offer a stronger multi-client library. We can offer a leading position in converted-wave contracts. But we can also offer products and services to production sites making 4D capabilities where TGS has never been a player in the past.
We're stronger in our data processing going forward with the acquisition of ION. On top of that, we have a solid portfolio of new energy-related businesses where obviously, Prediktor fills a gap in terms of solar. I can't say how excited I am about these opportunities, and I hope you share that view. Thank you very much for the attention today, and we'll speak soon at our Q2 presentation in late July. Thank you very much.