Hello, and welcome to the TGS Q2 Earnings Release Call for 2021. Throughout this call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. Just to remind you, this conference call is being recorded. Today I am pleased to present Kristian Johansen, CEO. Please begin your meeting.
Thank you very much. Good morning and afternoon, everyone, and welcome to TGS Q2 Earnings Release. My name is Kristian Johansen, I'm the CEO of TGS, and with me today I have Fredrik Amundsen, our CFO, and Sven Børre Larsen, our head of strategy. Q2 was another challenging quarter for TGS. Although oil prices are strong, exploration spending remains limited outside of commitments made prior to the downturn. E&P companies continue to prioritize de-leveraging their balance sheets, and we expect this to continue until strategies are revisited and new budgets are set. Here are the financial highlights of the quarter with a focus on segment numbers rather than IFRS that you can find in the earnings release document posted at tgs.com. Net segment revenues amounted to $54 million in Q2 of 2021, and that compares to $96 million in Q2 of last year.
Be aware that was the quarter where we invested more than twice the amount that we did this quarter. Segment EBITDA was $32 million versus $56 million in the same quarter of 2020. While the segment operating result amounted to negative $25 million compared to negative $85 million in Q2 of last year. Free cash flow amounted to $18 million in Q2 of 2021, and this is up from negative $10 million in Q2 of last year. After the shareholder distribution of about $20 million and spending $24 million in relation to mergers and acquisitions this quarter, the cash balance totaled $223 million at the 30th of June. The solid financial position allows TGS to maintain the quarterly dividend at $0.14 per share, or dollars per share, and continue its share repurchasing program with a remaining value of up to $14 million.
On a separate note, we executed on our fourth M&A transaction with an offshore wind with our acquisition of a U.K. company, 4C Offshore, that was closed during Q2. The plan is that this acquisition will be a building block for both organic and inorganic initiatives, both within wind, but also other parts of energy transition-related businesses, as presented at our capital markets day in early February. Going forward, the market for subsurface data and insights is expected to remain challenging in the near term, and this will influence the company's appetite for risk related to multi-client investments. However, I believe we put the trough behind us. Our investments for the second half of 2021 are expected to increase from the historically low levels of the first half of 2021.
We already have announced projects in Canada, which take full effect alongside ongoing acquisition in Latin America and a project in Malaysia announced this morning, as you may have seen. These projects have healthy pre-funding and satisfy our strict requirement for client funding before taking on risk. Despite near-term challenges, we remain confident that demand for multi-client data will remain solid for decades. This belief is supported by positive indications on new lead sales in Gulf of Mexico, although it is uncertain as to the potential terms of such lead sales and when they will actually take place. In the current market, the pickup in demand and timing of late sales remains uncertain. TGS is therefore pleased to have no interest-bearing debt and a net cash position of about $223 million, in addition to another $100 million of an undrawn credit facility.
This facilitates the flexibility needed in the prevailing market.
Our strategy in the current market remains firm and can be summarized as follows. Number one, cash is king. Targeting industry-leading shareholder distribution for the future. Number two, risk mitigation from both client interaction and also risk-sharing with suppliers. Number three, extensive use of partnerships, as you saw from the announcement this morning of a project together with PGS and WesternGeco, and continuing to pursue consolidation opportunities as well. Last but not least, capitalize on new growth opportunities related to data insights for renewables. I will now turn it back to the operator, who will facilitate the Q&A session. Thank you.
Thank you. Ladies and gentlemen, if you do wish to ask a question, press zero one on your telephone keypad now. That is one one to register for a question. There will be a brief pause while questions are being registered. I remind you that if you want to ask a question, you will have to press zero one on your telephone keypad now. We have a question from the line of John Olaisen from ABG. Please go ahead.
John may be muted. I cannot hear anything.
Can you hear me now?
Yes.
Yep. Sorry about that. I was actually muted. I just wanted the project in Asia that you're doing with WesternGeco and PGS. Could you just remind me, please, is this the third year? I just was wondering. If I remember correctly, you didn't participate the two first phases. Just wondering if that correct, and I just wonder what has made you participate now if you didn't participate in the first phases please?
Yeah, you're right. Probably two and a half years ago, we announced a collaboration with WesternGeco and PGS in the area. Since then, I think at least one of the companies have done at least one survey. You're right, we didn't participate in the first two programs. The reason for that is that we look at these programs independently, and they need to satisfy a requirement for a decent pre-funding and obviously late sales and the first two didn't, and this one does. Hence we're part of it one. So it's solely a independent assessment of the business cases.
May I ask what kind of pre-funding that you have now on this project?
Yeah, we can't disclose that, and that's in agreement with our partners, but it's definitely higher than what the average from what you will see from PGS this year. It's typically in line with what you see when we do our onshore programs or seismic over HHI converter contracts.
Also may I ask you, going forward, when should we expect big new projects from TGS? Which regions are we likely to see there? Not necessarily in Q3 or Q4 for that matter, but for the next 24 months, which regions are you considering doing bigger surveys, taking on new surveys and bigger surveys going forward?
I think that I cannot give you a precise answer to that. What I can say is that we're doing screening of all our markets, and I think where you will see activity from TGS in the future is very much in line with our long-term strategy, would be Latin America with probably a main focus of Brazil. You will see that TGS will continue to be active in the US Gulf of Mexico, mainly in OBN rather than streamer seismic. You will see continued shore investments, which you will see in Q3 as well, Northwest Europe. To answer your question, I think we're probably somewhere along the Latin American margin or US Gulf of Mexico.
The TGS late sales seems to be holding up better than the other seismic companies, and they argue that it's because they have a multi-client library located in more mature regions with 4D and 4C. I just wonder, do you see the same thing, that the mature regions are holding up better? Also, going forward, are we more likely to see TGS non-exclusive investing in more mature regions with 4D and 4C and ocean bottom seismic for that matter, or are you holding on to frontier exploration as the main focus?
Well, I think first of all, when you look at results and you compare different companies, you probably need to look at more than one or two corners. You know them better than anyone, John, I think.
Secondly to that question, I think there is definitely a shift towards more what we call ILX or infrastructure-led exploration right now.
A lot of these programs that are being carried out as we speak have been committed probably two or three years ago, so before the COVID and the downturn. Discretionary spending is probably at a record low level, as you can see from our results. I think when some of these jobs that were committed back in 2018 and 2019, when some of these jobs are done, you will see some of the budgets shift back to more discretionary spending, which is I think a lot of us would benefit from. It's not like the majors have cut their overall seismic budget by 80%-90%. It's more that the shifts in their budgets have been towards infrastructure-led exploration that they pretty much had to do because it's part of historical commitments made. I think that's really important to understand.
For PGS, I don't see a significant shift. I think there is more mature areas today than it was two or three years ago, for sure. Obviously with the acquisition of Spectrum, we inherited a lot of frontier data.
I still think Gulf of Mexico is a rather mature area. You will see quite a lot of activity from TGS in Gulf of Mexico. That deal is also possible. That deal is considered quite mature. That's another important market to TGS.
Just a final quick question on your last comment. Do you experience that oil companies are eager to get back to the Gulf of Mexico for exploring once the Biden moratorium, so to speak, is lifted?
Yeah, absolutely. I think there's a lot of oil companies who are just waiting to get more clarity on the administration strategy. We are ready to start investing whenever that happens because, obviously with the current oil price, and the attractiveness of the U.S. Gulf of Mexico oil, there's hopefully a lot of money waiting to be put into play there.
Thank you very much.
Thank you, John.
As a final reminder, if you would like to ask a question, press zero one on your telephone keypad now. There are no further questions at this time. I hand back to the speakers.
All right. Thank you for your attention today. As mentioned, our strategy remains firm and based on dialogue with our largest customers, we remain confident that we will ultimately see a recovery of the market. Meanwhile, our asset-light business model, robust balance sheet, and strong cash flow enable us to take advantage of strategic opportunities both in our subsurface data business and in our New Energy Solutions segment. Thanks. Hope to see you again at the Q3 earnings release later this fall. Bye.