TGS ASA (TGS) Earnings Call Transcript

Good morning, and welcome to the Q1 2023 Earnings Release from TGS. My name is Kristian Johansen. I'm the CEO of TGS. And with me today, we have our CFO, Sven Borre Larsen, who's going to go through the financial section of the presentation. So I'll start by referring to our forward-looking statements that you can read after the presentation and then hit the financial highlights right away. So we had total POC revenues of $229 million in the quarter. That compares to about $114 million in Q1 of 2022, so an increase of about 100%. We had late sales of $46 million in Q1. That's down relative to $76 million in the same quarter of last year, and this is partly due to the transfer fees that we collected in Q1 of 2022. We had early sales of $98 million compared to $34 million, so almost a 300% increase from Q1 of 2022. And then we're also really pleased to see that our Acquisition Business Unit, so the former Magseis Fairfield had net revenues of $79 million, but gross revenues of $97 million in the quarter, and that's an 18% growth in net revenues and the corresponding growth in gross revenues is about 26% year-on-year. We had an EBITDA of about $119 million in Q1 that compares to about $83 million in the same quarter of last year. We had a very strong free cash flow in Q1, $106 million, and that compares to $26 million in Q1 of last year. Finally, and last but not least, we see a continued momentum in contract inflow. We had $248 million in new contracts signed in Q1 2023. So we clearly see a continued recovery in sales and contract inflow, and I think this slide does a good job in terms of highlighting that. So number one is that you see a 30% year-on-year increase in POC multi-client revenues. And then on the right-hand side, you see a 113% increase in pro forma contract inflow for TGS. So although late sales came in slightly lower than most of you expected and lower than I expected as well for Q1. I think these slides really highlight the fact that the industry is still growing, and it's growing at high multiples as we speak. And I think this slide also shows you that. So this slide is showing the activity level for Q1, and it's a combination of multi-client activity, acquisition activity for our OBN crews and DES, so Digital Energy Solutions activity in the quarter. And if we start on the left-hand side, start at the top there. We see an onshore project called MC or an MC project called Beyond Far East. That's a Permian project. It's one of the first onshore acquisition projects we've done in a long time. So we're starting recording there sometime this summer or fall. We have a LiDAR bouy project in the New York Bight, where we have 4 of these LiDAR bouys already placed in a very active area now for offshore wind. We had 2 OBN multi-client projects in the U.S. Gulf of Mexico, Amendment 2 an Engagement 3, and you will continue to see new OBN projects in the U.S. Gulf of Mexico in line with our strategy of really covering our underlying vast data now with OBN data. We had a crew, an OBN crew in Guyana in the quarter, and that's part of a long-term contract, which means that we're going to stay in Guyana for quite some time. And then finally, we had 2 multi-client surveys in Brazil. We had one in the Foz do Amazonas. And then we had one in Santos Sul further south in Brazil. I'm glad to see more activity in Norway as well. We had an OBN crew in Norway during the quarter. We also had reservoir monitoring activity in Norway. And then finally, in Denmark, we were part of the Greensand CCS project that we completed during Q1. If you move further east, starting with Bangladesh, it's one of these areas that are still considered very frontier and TGS is out there together with SLB, acquiring 2D data in Bangladesh, a very promising area. We have OBN activity or had OBN activity in Malaysia during the quarter. We had a multi-client survey that we completed in -- on the West Coast of Australia, which is called Capreolus. So in summary, it's probably the highest activity level that we've ever seen. And you see that from our investments in the quarter 2. It's been record high activity level, and this is obviously what's going to produce late sales going forward so very optimistic in terms of the activity level in Q1. And as you've seen from our annual guidance, that's just going to continue throughout the year with high investments and lots of interesting projects and a lot of OBN as part of that mix and obviously, the part of the rationale for the acquisition of Magseis. Now talking about Magseis Fairfield, the Acquisition Business Unit which is now called so it used to be the former Magseis Fairfield. We call it Acquisition now. It's a separate business unit within TGS. They're off to a very good start, and we're very pleased to see that. We had a strong revenue growth of 18% in the quarter. And as I said, if you adjust for the eliminations of internal revenues, we had a growth of 26% year-on-year with our Acquisition Business Unit. We had a positive EBIT margin and a free -- positive free cash flow in Q1, and that's particularly impressive given the history of the company and the history of losses. And it has strengthened our belief that we can turn this into a profitable business already in 2023. So that's really good to see. We got a great backlog, acquisition backlog of about $283 million as we speak, and that number continues to go up because we have a strong pipeline of new opportunities as well. The synergy realization is ahead of plan. Right now, we have realized about $7.5 million of synergies from the transaction. Obviously, it comes at a cost too and Sven will go through some of that one-off cost that we're charging relative to the synergy takeouts. But it's really good to see that we're ahead of the plan, and we think we're going to take out synergies in total of somewhere between 10 and $15 million, probably in the higher end of that range. And again, we're on track or slightly ahead of our plans in terms of synergy realization from Magseis Fairfield. We get a new organizational structure. So Carel Hooijkaas, the former CEO of Magseis Fairfield is heading our Acquisition Business Unit. And he's got a new team consisting of former TGS operational people and former Magseis Fairfield people, and we think we get a winning combination there. And again, we're very optimistic to the future of that business, and we feel the timing of that acquisition was as good as it gets. Last but not least, and this is obviously important in an Acquisition Business Unit, continued safe operations where we track pretty much in the upper 10% or 15% of the industry in terms of our safety results. And then the DES, our Digital Energy Solutions, which consists of a lot of our renewable activities, you see strong growth. We have revenue growth of 63% year-on-year from Q1. And if you adjust for acquisitions, the pro forma corresponding number is about 40%, but still a very impressive growth rate in our DES business. I talked about the LiDAR bouy campaigns that are progressing well. We now have 4 LiDAR bouys in the New York Bight. There is going to be more or more LiDAR bouys added. We've just gone through a strategy in that regard, and we're ready to place out new LiDAR bouys in line with our strategy of what we've done in seismic over the years. We apply exactly the same business model where the LiDAR bouy would be basically the same as a seismic vessel. It's out there and collecting data for about 12 months, and then we're licensing this data to multiple clients. We get good prefunding on the projects, and we expect strong late sales as well as long as you have all these awards that you see, particularly in the New York Bight, but you will see this growing all over the world in the future. 4C Offshore, our intelligence company that we acquired back in 2021 continues to show profitable growth so very happy about the acquisition of 4C. We see CCUS opportunities materializing in North America, particularly based on the Inflation Reduction Act that Biden announced more than half a year ago now, but that's really put the entire industry on steroids in terms of activity level so quite optimistic about the future of that as well and then very strong customer engagement. We just got back from a Wind Conference in Copenhagen and were far better attended than most of the oil and gas conferences that we visit. So really, really good to see that this industry is growing fast and a high acceptance of our products that we bring to the market. The team has done an excellent job in really putting TGS on the map, also on the offshore wind industry. And you see the revenues on the right-hand side, where you see the growth, but you also see that this starts to become quite a material part of the overall revenues. And if you apply the industry growth to this number, you will see that over time, this is going to be quite a sizable business for TGS. It's also good to see that we continue to perform well on the ESG area. This just shows that we're a great place to work. We just was a winner of something called the ALLY Grit Awards in Houston. And then we are a member of the Bloomberg Gender Equality Index, meaning that we satisfy the criteria of a balanced workforce, which is obviously critical for an international company like TGS. So with that, I want to hand it over to Sven Borre, who's going to go through the financials, and then I'll come back and talk about the outlook. Thank you very much.

Thank you for that, Kristian, and good morning to you all. As we indicated during our Capital Markets Day in March, we are going to -- in the analysis part of the financial presentation, we're going to focus on percentage of completion revenues where early sales are recognized or measured in accordance with percentage of completion of the different projects that we are doing at each and every point in time, whereas the P&L account, balance sheet and cash flow will still be in accordance obviously with the IFRS standards. So on this page here we have listed our POC revenues by type or by kind of the commercial nature of the revenue streams. So starting with early sales on the top left-hand corner, we had high early sales, strong increase sequentially and also year-on-year in early sales, and that obviously has to do with the strong order inflow that we experienced during the second half of last year and also in Q1 of this year, which has resulted in a steep increase in our multi-client investments. And that, of course, gives us a correspondingly steep increase in POC early sales. So $98 million recognized in Q1 2023. Late sales, as Kristian already alluded to were a bit weak in the quarter and also weaker than we anticipated ourselves at the beginning of the quarter and which was also obviously weaker than the analysts in the market expecting. And you can only speculate on the reasons for that. But of course, the financial turmoil related to banks in the U.S. and Europe didn't -- it wasn't positive to put it that way towards the end of the quarter, but it's obviously difficult to quantify the effect. And also when you compare to -- with the same -- with the numbers for the same quarter of last year, you need to bear in mind that we had substantial transfer fees booked in Q1 of 2022. So all-in-all, a fairly weak late sales number in Q1. Proprietary sales, $86 million. This includes, obviously, the Acquisition Business Unit that makes up the majority of that, but it's also some revenues related to proprietary imaging projects included and also some proprietary revenues from our Digital Energy Solutions business included in this number. So this is -- we obviously see a steep increase here since Magseis was not included in the comparables for Q1 of 2022 so $86 million in this quarter in proprietary sales. This gave us total revenues, total POC revenues of $229 million in the quarter, and that is essentially a doubling from what we had in the same quarter of last year. But if you look at it on a pro forma basis and include the net revenues of Magseis, in Q1 2022, the underlying growth was about 27%. And then we look at the POC revenues by business unit. In the first chart on the top left-hand side, we have lumped Multi-client and Imaging together. They had $138 million combined in POC revenues compared to $107 million in the second quarter of last year. Then you see Digital Energy Solutions. We're really happy to see a strong growth there. Parts of it, roughly 20 percentage points of the 63% year-on-year growth is related to the acquisition of Prediktor that we closed in July, which means that organic growth accounts for roughly 40% of -- or we had roughly 40% of year-over-year growth in -- organically in the Digital Energy Solutions business. Looking at the Acquisition Business Unit, which essentially consists of Magseis, we had $79 million of net revenues. And then we had $18 million of work that the Acquisition Business Unit conducted on behalf of our own multi-client business. And that was obviously related to the Amendment 2 project that we conducted in -- or that we did in Gulf of Mexico during the quarter. We are also going to do a little bit of internal work in Q2. So it should be $6 million, $7 million of eliminations in Q2. But apart from that, we haven't really booked any internal work for the remainder of the year. So the elimination part of this chart should be much smaller going forward. And again, total revenue $229 million, as I already alluded to on the previous page. Then looking at operating costs, cost of goods sold were $58 million in the quarter, and this is obviously tightly linked to the proprietary revenues. So if you look at cost of goods sold, it accounted for 67% of proprietary revenues this quarter. That's probably a little bit higher than we expect going forward. So this percentage number should probably be in the low 60s going forward. Personnel cost was $31 million in the quarter. Here, you should note that we had roughly $2.4 million of non-recurring restructuring charges, severance packages and things like that related to the Magseis integration process. So the underlying personnel cost was somewhat below $30 million. And as we said on the Capital Markets Day in March, we expect this to be plus/minus $30 million as a quarterly run rate going forward. Other operating costs were $21 million in this quarter, and this includes $5.5 million of non-recurring restructuring charges, mostly onerous lease provisions related to office contracts that we no longer need in the combined business. So here, we expect this number or this -- the quarterly run rate to be a little bit below $20 million per quarter going forward. This gave us a POC EBITDA of $119 million, and this is to be compared with $83 million in the same quarter of last year. And then as we also discussed on the Capital Markets Day, we have introduced a POC amortization number. And we show that on the chart on the top left-hand side. So you see at the lower part of the bars, they are -- represent a straight line amortization, which is the same in POC and in the IFRS world. And as you can see, this is a fairly stable number going forward. It doesn't move much from quarter-to-quarter. It can move obviously depending on new projects that are completed and other projects that are becoming fully written down during a certain quarter. But it should be reasonably stable from quarter-to-quarter. And then we have the POC accelerated amortization chart. This number is calculated by measuring the accelerated IFRS amortization in accordance with POC on the individual projects. And this will jump around a little bit dependent on where early sales are in each and every quarter. It can, in certain circumstances, also be affected by extraordinarily high late sales on certain projects, but that's not going to happen every quarter. So we'll discuss that as it happens. But if I was an analyst and wanted to estimate this going forward, I would link it to early sales as a percentage of early sales. So this quarter, it was 37%. And I would think that it's going to be 40-something percent on a normalized basis going forward, although be prepared that it may jump around a little bit from quarter-to-quarter. So this quarter in total had $76 million of POC amortization, and this is to be compared with $58 million in the same quarter of [ last ]. And then depreciation on the top right-hand chart is obviously going significantly up due to the inclusion of Magseis Fairfield. So we booked $19 million in this quarter. And that obviously also should be fairly representative for the run rate going forward. And this gave us a POC operating result of $25 million this quarter compared to $21 million in the same quarter of last year. And then the multi-client investments, as I said initially, we are quite high in the quarter, $133 million, and we had an early sales rate of 73%. We stick to our guidance. As you may remember, we updated the guidance on March 7 in connection with our Capital Markets Day where we said that we expect it to be about $350 million and we stick to that guidance. And we expect early sales rates to be minimum 70% for the year as a whole. But it will be a front-end loaded investment profile where it should decline gradually in the coming quarters. Then we have provided here a bridge between POC revenues and IFRS revenues. As we already discussed, POC revenues were $229 million in the quarter. And then we recognized $42 million of revenues related to projects that were completed during the quarter or performance obligations that we met on WIP or Work in Progress projects during the quarter. And then we had $98 million of revenues recognized on a POC basis in the quarter, which resulted in IFRS revenues of $173 million in the quarter. And you can find the $173 million here in the P&L on the total revenues line there. So that's the bridge between POC and IFRS. The cost elements are the same in the POC world and IFRS world. So this gave us an IFRS EBITDA of $63.5 million. And you can see that the straight line amortization is $39.6 million, which is the same as we looked at in the -- on the POC charts, whereas accelerated amortization is different. It was $12.2 million in IFRS in the quarter. Then we had depreciation of $18.5 million, which is the same which gave us an operating result of minus $6.8 million in the quarter. As you can see, we had $6.1 million negative in net financial items. This is partially due to some one-off effects, partially due to currency movements, and we expect it to be somewhat lower than this or a somewhat lower negative figure going forward. Also as we have now completed the refinancing of the old Magseis facility and with TGS credit rating, we obviously get a lower interest rate from -- basically from May 1 and going forward. So tracking tax or adding tax cost of -- or a positive tax contribution of $4.2 million under a net income of minus $8.7 million in our IFRS accounts which corresponds to a negative $0.07 per share in EPS in the quarter. Looking at the balance sheet, it's not much to say here, others than concluding that the balance sheet remains strong. The $45 million of interest -- net interest-bearing debt is included in current liabilities in the balance sheet as of March 31 because we triggered the change of control clause in Magseis loan agreement when we acquired them. But as I said, we concluded the refinancing at the end of April. So it's now considered to be noncurrent liabilities going forward. Looking at the cash flow statement; we had strong cash flow from operations in the quarter, and that is obviously mainly related to the strong late sales that we had in Q4. As you know, we collect a lot of the late sales that we have in any given quarter in the quarter afterwards since a lot of the late sales is happening in the last month of the quarter. Also, you should note that the investments in multi-client library, the cash investments in multi-client library were only $67 million in the quarter. And as you -- as we saw earlier, the capitalized investments in the multi-client library were $133 million in the quarter, which means that it's been a payable buildup during the quarter, which means that although we had very strong cash flow in Q1, we expect to see a much lower negative cash flow in Q2. So you should see that the net cash flow is significantly negative in Q2 then we expect it to be fairly neutral in Q3 and then quite positive again in Q4. So net cash flow from investing activities were minus $72 million in Q1. And then we had minus $85 million of net cash flow related to financing activities. This includes $11.6 million of lease payments related to vessel contracts that Magseis or our Acquisition Business Unit s have and also the acquisition of the remaining Magseis shares of $54.4 million is booked as a financing activity. It's basically buying out the minority interest that we had at December 31. So this gave us a fairly strong net cash flow in the quarter despite the investments in Magseis shares and despite the dividend payment, we had net cash flow of $20.6 million in the quarter, which gave us a cash balance of $208 million at the end of the quarter. And obviously, the strong cash flow and the solid balance sheet allows us to continue to pay a dividend despite increasing our investments quite significantly. So the board has once again resolved to pay $0.14 per share as dividend in Q2. The ex-date due to public holidays and so on in Norway next week, will be on May 22 and the payment date will be June 5. And with that, I hand the word back to you, Kristian.

Thank you, Sven Borre. And I'm just going to talk about the outlook for the remainder of the year and obviously, the years to come after that. But I think in general, after the quarter ended, and we were a bit disappointed about the late sales, and I actually met with 6 or 7 of our largest clients and asked them what happened in late Q1, we typically see a big pickup in late sales. And it's interesting to hear their reaction because their reaction is that we spent a lot of money with TGS in Q1. Why are you complaining? And the fact is that they don't distinguish between late sales and prefunding or new commitments to new surveys. They just look at what kind of commitments they are making to us. And they felt like in Q1, they've made larger commitments to TGS, and they've done in a very, very long time, and they told me that there are -- there has been no changes whatsoever in terms of their spending plans for the future. And I think that leads me to the first slide here, which shows that the year-on-year change in E&P CapEx was 32% in Q1 of 2023. It's up from 21% in Q4 so a very strong increase in terms of E&P CapEx. And if you look at the multi-client spending and you look at the year-on-year increase in multi-client spending, you see that it was lagging the overall E&P spending, which is not unusual because we're more exposed to the exploration area. But in general, you now see that it's really picking up, and we see a stronger year-on-year growth in multi-client spending that we see in overall E&P CapEx, which is a very strong sign. So again, our clients have not changed their view on the markets. They're committed to invest -- they're committed to invest in TGS data, and they were surprised about my question about why don't you buy more? So I think that's a really important distinction for you guys to be aware of is that our clients don't look at whether they spend money on old data or new data or new commitments for the future. They look at what they're committing overall, and that number was really good in Q1. That's also highlighted by the license round activity that we see in 2023 and onwards. I mean there is a record high number of licensing rounds. If we start in the North America, you see Canada, you see U.S. Gulf of Mexico. That's going to be the last lease sale of the current 5-year plan. Then there is a new 5-year plan in the making right now. That may take a bit of time to finish that plan, but we think that if there's not going to be a lease sale in 2024, we surely think is going to happen in 2025, and keep in mind that the service that we are acquiring in the U.S. Gulf of Mexico now are not really impacted by lease sales because these surveys are mainly over held acreage, and we have very strong prefunding on the surveys, and I expect the late sales will continue to tick in, and we haven't seen any reduction in that in the recent months. In Latin America, we have the Permanent Offer round in Brazil. We have rounds in Suriname, Guyana, Barbados, Trinidad, Uruguay and Argentina. And the good news is that TGS is present in all these countries. We have a lot of data in Latin America, and we're probably strongly positioned for this than any one of our peers. Europe, we have the APA round in Norway. And then if you move to Africa, which is also really interesting, you see a sharp pickup in activity. You see countries like Angola, Egypt, Gabon, Ghana, Lebanon, etcetera, etcetera. I'm not going to go through all of them. I'm going to talk a little bit about Liberia where you saw Exxon picked up some blocks in Liberia, and they made an agreement with the government in Liberia. And you know what happens when some of these Americans enter into a new country where there has been limited exploration activity for a while the other guys tend to follow. So I think that's a really, really good news for Liberia. We see high activity in Nigeria with TGS data. We see Senegal, Sierra Leone and Somalia, where a combination of TGS and Spectrum had a lot of data already. So we're very well-positioned for the uptick that we see now in Africa. And then if you move further east and you look at Asia-Pacific, countries like India, Indonesia, Malaysia and Bangladesh have these perfect combination of a very high population, a fast-growing population and a huge need for energy. So the push now to do more exploration in some of these countries is just enormous as we speak. And again, these are countries where TGS already has a strong database. These are countries where TGS is doing a lot of reprocessing of that data to make sure that we're well prepared for the uptick that you see in the activity level. So it's a very interesting slide to look at, and it makes us really optimistic about the future, whether it's 2023 or the years following 2023. I want to turn back to our acquisition business, and this is the activity plan for the remainder of 2023 for the former Magseis Fairfield and now the Acquisition Business Unit s. As you see, it's pretty much filled up for the remainder of the year. The ZXPLR number one is fully booked for the remainder of the year. It's going to work in Guyana. You see ZXPLR 2, there is a gap in Q4, but obviously, that's -- we're part of a number of tendering rounds as we speak. And then obviously, we have multi-client projects that are competing with some of these tenders to get the capacity. Just what we thought and just what we planned for when we acquired Magseis is we should have this combination of a strong proprietary market, but we also have these multi-client projects that are being lined up now for more acquisition activity, particularly in the U.S. Gulf of Mexico. Z700 had a relatively open Q1, but then you see activity is filling up. So we're filled up until the end of Q3, and we think that's going to -- that's -- we were part of tender rounds as we speak on that one as well, which means that we're probably going to fill that over the next few months. The Mass crews has been busy in Africa, Middle East, Asia-Pacific, it's moving to Europe, and then it's moving to the U.S. Gulf of Mexico to do a proprietary contract that we awarded quite recently. We have full utilization, long-term contracts on our reservoir monitoring crews. And it's also great to see that we see a pickup in activity related to renewables where we basically filled up our capacity in Q1 of 2023. So very much according to our plan and probably slightly ahead of the plan that we announced after we acquired Magseis Fairfield. That leads me to the contract backflow and inflow. So we have a backlog of -- in the acquisition backlog of $283 million. I'm now at the lower left corner of the slide so $283 million in acquisition. In addition to that, we have $183 million in multi-client backlog. So the total of that is about $470 million. And then we have an additional $175 million of IFRS backlog, so projects that have not been recognized revenues from in the IFRS accounts. The contract inflow was particularly strong in the quarter. Sven touched on that with $250 million. And you see 3 quarters in a row with very strong contract inflow, which, of course, means that we are very confident in terms of our overall guidance on investments for 2023. I'm not going to spend too much time on the timing of the expected recognition of the multi-client backlog, but you can see the pie chart to the right here and obviously make up your own numbers in terms of what you expect from prefunding in the next couple of quarters. So we certainly believe we have a compelling investment case. It's a combination of a sharp expected recovery in E&P spending, which I think you've seen on some of our slides today. We are ready to capitalize on the M&As and investments that we've done during the down cycle. TGS has been known to take some risk and make countercyclical investments in the down cycles. We did that this time, too, and we're extremely pleased about our position as we enter into a better market. The OBN margin improvement and free cash flow, again, we reported in Q1 a positive margin and a positive free cash flow from our Magseis business, so the Acquisition Business Unit. Very pleased on that. We're capitalizing on the energy evolution with a 63% growth within our DES business, which is a promising growth rate and which I'm feeling very, very certain that we're going to continue to see growth in our new energy business, which is great to see. And everything backed by a very strong financial strength and obviously, our balance sheet. So that leads me to the summary of today's presentation. So we had total POC revenues, $229 million. It's up by about 100% compared to last year. We had late sales. We've discussed that. Yes, it was slightly weaker than we expected and weaker than you expected, but we had early sales of $98 million, which is about 3x of what we had last year, and we had the Acquisition Business Unit that is showing profitability and strong growth. EBITDA of $119 million, very strong cash flow, $106 million and then continued momentum in terms of contract inflow and about $250 million of new contracts signed in the quarter. So with that, I want to leave it to questions and open up for questions here and also from the people who are watching us on the webcast. So Sven will come up and go through those questions. So any questions from the room here?

We'll start with Christopher.

Christopher from SB1. Just 2 questions. First, could you indicate the EBITDA contribution from the acquisition business in Q1? And secondly, I know late sales are back-end loaded, but could you give some flavor on how you've experienced second quarter so far?

Why don't you take the first one? I'll take the second one.

Yes. So the EBITDA contribution from the Acquisition Business Unit was probably around roughly $14 million, $15 million, I would say. I haven't done the exact calculation, so -- but that should be around that level.

And then on late sales, let's go back because I'm not going to answer your question specifically, as you know. But I think what I can do is to give you some indication. So in Q1, again, it was slightly disappointing compared to our expectations. Part of the reason for that was that Q4 in 2022 was way better than we expected. So if you look at the 2 quarters overall, we're actually quite pleased with the late sales. But I think what happened in Q4 is that we had really, really good and big sales to our super major clients and IOCs so really strong in that regard. So that also means that we should expect to get a lower contribution from those guys in Q1 because they're working their data, and they have less capacity than they did in the past to work all these data. So they acquired massive amounts of data in Q4. So we were actually dependent -- more dependent on NOCs in Q1. And as you know, with NOC, some of these processes takes much longer than with IOCs. And we had a little bit of that that was delayed and it was pushed into Q2. Some of that has already been closed in Q2. We think most of it will eventually be closed in Q2, but we're not in full control of the timing of such deals. So that's partly the answer to your question. Next question, John and Kim both had their hands up.

It's John from ABG. Kristian, we are all looking closely to late sales and particularly in the interim, maybe too much. But anyway, like near term is an important indication for the medium term as well. And you said that Q1 -- the oil companies told you that in Q1, they spend a lot of money with you guys, but you're reinvesting so much so they spend it on multi-client pre-fundings that are late sales. I just wonder in Q2, your multi-client investment level is going to be high in Q2 as well. Is that -- is that an indication that late sales also will be suffering like losing market share, so to speak in Q2?

We don't have any reason to believe that. And I think if you look at some of our competitors in Q1, they also posted relatively weak late sales. And I think if you look at our percentage of the overall market, it was actually pretty good. Our market share of late sales was actually really good in Q1. We were far better than our peers. But I think going into Q2, we don't expect to see any -- I mean there is no reason to believe that it's going to be lower than what we thought at the beginning of the year. So we have no data points that indicate that.

And let me just add also mean on that topic that when you look at Q2 late sales, you have to also remember that comparables for Q2 last year contained quite significant transfer fees. So that's really important to bear in mind.

Yes. I think if you look at the overall industry and the transfer fees collected back in, I'm not going to touch on TGS transfer fees, but I think the overall industry, we're talking about a few hundred million dollars, right? And we were probably number 3 or 4 of those players in terms of collecting that transfer fee. So it's a very unusual Q2 of 2022, but you know that.

For sure. But do you have any transfer fees in your backlog now?

We always have 2 or 3 potential transfer fees that we are discussing. And as you know, and you probably saw that from one of our peers who reported quite recently, I mean clients are not easy. It's not -- they're not easy to deal with, even if it's contractually obligated to transfer the data. I mean, there are still tough discussions to be had. And I think what we've been very clear on our TGS is that we're not going to give away anything because if it is a contractual commitment, we're really going to push that hard, and that may sometimes have an impact on the timing of collecting that. We never recognize the transfer fee until it is collected by the way. But I think in general, I think there's perhaps one or 2 that could happen in either Q2 or Q3. It's lower visibility right now than we had at the same time last year because last year, we had some of those big transactions taking place, one in Norway and one mainly in the U.S. Gulf of Mexico.

And the ones you're mentioning, is that like could happen? Is that like you potentially could look at the revenues or is it like an oil M&A can that take?

No, it's more of a transactions that have happened and then we have discussions with the clients, whether they're either going to turn back the data or they're going to take it all and they're going to pay us or are they going to negotiate some kind of?

Is it material? Potentially material?

We're talking about 5% to 10%.

And then if I may, a couple of questions on the OBN business. When it comes to short term here as well, is the integral of the backlog slide, a good indication of revenues for Q2? The backlog slide that you showed on the outlook for the OBN. Is it integral, of course, like integral over the flat columns and indication of the revenues?

Yes. For the OBN business or the acquisition business, you should look at the chart, the activity chart that we provided. And yes, you see the backlog number and then you kind of can figure out an approximate distribution of that backlog by looking at the contract chart that we provided. So that's probably the best way of looking at it.