The first quarter figures from TGS were in line with what the analysts expected. Earnings before depreciation and amortization (EBITDA) ended up at 143 million dollars, which was well above the result in the same period last year and four percent above the Bloomberg consensus, but the company still had to book a loss of 21 million dollars before tax.
Steffen Evjen in DNB Markets believes that the analysts will hang on to weaker prospects going forward so that the consensus estimates end up being cut. At the same time, he predicts weaker utilization for the boats coming in from PGS, and therefore sees few reasons to buy the TGS share in the short term.
The purchase of the competitor is still being processed by the British competition authorities and the second quarter will probably be the first time that TGS and PGS present figures as a merged company.
Evjen maintains the hold recommendation on the TGS share and cuts the price target to NOK 125 from NOK 130, according to an update to the brokerage house’s clients. The previous closing price was NOK 123.
Cuts course targets
For its part, PGS delivered weaker than expected with EBITDA seven percent below the consensus collected by the company itself.
Evjen calculates that the seismic company will have a negative underlying cash flow in 2024 and believes that the company’s fleet utilization will be weak in the second quarter, due, among other things, to shipyard downtime.
They also note that the boat “Ramform Vanguard” will most likely be used for work in offshore wind, which makes a lower contribution to EBITDA from the third quarter.
“We believe this will raise questions about the demand for traditional streamer seismic”, write the analysts.
DNB Markets maintains the hold recommendation on PGS as well, but cuts the price target to NOK 8.5. By comparison, the share price closed at NOK 8 on Wednesday.
