TGS ASA

OSE:TGS

Earnings Call Transcript 2018-Q1

[Kristian Kuvaas Johansen]

Good morning, and welcome to TGS Q1 2018 Earnings Release Presentation. My name is Kristian Johansen, I am the CEO of TGS. And with me today, I have Sven Børre Larsen, who's our Chief Financial Officer. As you know, effective Q1 this year, TGS will be preannouncing quarterly segment revenues no later than the sixth trading day of quarter close. And our revenues for Q1 are therefore already known to the markets, I think most of you seem to be quite pleased about that, and we're obviously very pleased as well. So after drawing your attention to the forward-looking statements, I'm pleased to confirm that we had a very strong financial performance in Q1. Numbers, which are based on segment reporting rather than the new IFRS 15 standard are as follows: Q1 net revenues of $135 million, that's up 56% from $86 million in Q1 of last year. Our late sales was particularly strong at $115 million, that's up 67% from the same quarter of last year. In fact this is the third strongest Q1 late sales that TGS has ever had. Net prefunding revenues of $18 million were up 15% from the $15 million that we had in Q1 of last year, and that's funding 57% of our operational multi-client investments of $31 million in the quarter. Operating profit for the quarter was $25 million after an impairment of about $10 million that was due to regulatory change in New Zealand, where the authorities have stopped awarding new exploration licenses, and as a result, we took an impairment of a survey that we did in New Zealand a couple of years ago. Our free cash flow was $71 million, that compares to $74 million in the same quarter of last year. So our business continues to generate a lot of free cash flow. And that again is positive for our dividend, so our quarterly dividend is maintained at $0.20 per share, and that's up 33% from Q1 of 2017. Going back to our cash position, we had a cash balance of slightly above $300 million after Q1, and in addition to that we have a $75 million RCF that we obviously haven't drawn on. So in summary, we've seen improved market conditions driven by higher by oil price and improved cash flow among our key clients. I'll take you through the operational highlights first. So if you look at our Q1 2018 operations, you'll see that we have 3 onshore crews active during the quarter. There's one smaller survey Dawson in Canada, that's in British Columbia in Canada. And then we have the SCOOP and STACK crew once again operating for TGS, that's in the Anadarko Basin in Oklahoma, and then we continue acquiring new seismic in the Permian, where we also had a crew in Q1. And we had a survey -- a 3D survey in the U.S. Gulf of Mexico deepwater with, where we used Polarcus Asima. We had a multibeam and coring program starting in Brazil, and we had 2 vessels for Fugro operating in Brazil throughout the quarter. And then we had a Chinese vessel working for a collaboration or joint venture between Schlumberger and TGS in the Red Sea of Egypt. Going to the specific projects in the U.S. Gulf of Mexico, we're continuing to reprocess our fusion dataset. This is a big dataset consisting of about 27,000 square kilometers and it's in the Mississippi Canyon of the U.S. Gulf of Mexico, and you can see Fusion on the map there. It covers a big area of about 1,166 OCS blocks, and this is data that was acquired by Schlumberger and TGS in the period of 2008 to 2012. So this a project where we have greater expectations and clients keep coming back to TGS to buy more data. And the reimaging of that is about 95% complete and we'll finish in mid-2018 and deliver it to the clients at that around that time. And we also announced a new project in the U.S. Gulf of Mexico. This is in the deepwater area. You see the orange on the map. This is Alonso 3D. It's a 6,172 square kilometer multi-client 3D. This is in the Atwater Valley and Lloyd Ridge protraction areas, and acquisition of this project is expected to complete in Q2 of 2018. And I think this project is a very good signal that the market is coming back in the U.S. Gulf of Mexico. This is a project where we have very decent prefunding from clients, and it's an area that is considered deepwater and highly unexplored compared to the core Mississippi Canyon area where we have a lot of data from before. Then we have the Egypt project. It's in the Red Sea. Have 10,000 kilometer collaboration 2D project with Schlumberger. We have 15 years of exclusivity in Egypt, so it's a great country in terms -- or a great region in terms of our multi-client business model. We completed this project in Q1. But as you see from the map, this is a big area. We have multi-clients rights to about 70,000 square kilometers. There may still be new projects coming up in this area of the world as well. And then we have Brazil, we have talked a lot about Brazil, and Brazil is a very hot area. I'm pleased to announce that TGS is back in Brazil. We're doing a big multibeam project in Brazil. This is a 200,000 square kilometer multibeam and seep study. It covers the Campos and Santos Basins, offshore Brazil. Complements the extensive library that we already have there, but there is a lot of seismic data in Brazil, but we see great interest for this product that is slightly different from the core seismic offering that we usually offer our clients. We commenced acquisition in late Q1, and we will start with the coring operations and geochemistry analysis sometime in Q2 as you will see from the rest of the schedule. Data will be available in Q4 this year over the Round 16 licensing areas that will be awarded next year and final results are expected to be available in late 2019. And then going to our onshore activity in the quarter, so you'll see we had 4 surveys, starting with the Permian where we have West Lindsey. That completed in Q1. That we discussed last time. Then we have Sanderson, which is a similar size project. It's about 464 square kilometers. This is our third 3D in the Permian as you see from the map, and the acquisition of Sanderson is expected to complete sometime in Q2 this year. In the SCOOP and STACK as you see in the lower right-hand corner of the slide, you see that we have built an extensive database over time. We started our Hackberry project in 2018. We will complete the acquisition in Q3 of this year. This is a big project. It's 777 square kilometers, highly prefunded project, a very low downside risk and it fits really well with the overall database that we've built now in the SCOOP and STACK. And we believe strongly that the SCOOP and STACK, we will see a significant growth there. I'm not necessarily saying that Permian will flatten out or go down, but we think that SCOOP and STACK is the next very interesting basin in terms of onshore exploration in the U.S. And we had a smaller survey in Canada. It's called Dawson 3D. It's 70 square kilometer, and this is in the British Columbia, and acquisition of this project is completed, started and completed in Q1. So with that, I will hand it over to our CFO Sven Børre Larsen, who is going to go through the financials, and then I will come back and talk about the outlook. Thank you very much.

[Sven Børre Larsen, Chief Financial Officer]

Thank you for that, Kristian, and good morning to everyone. I will start on Slide 11. As many of you may know we will have to -- or we have had to implement the IFRS 15 accounting standard for revenue recognition from 1st of January 2018, and this has significant implications for TGS and the rest of the multi-client industry, whereas we therefore have recognized revenues on projects that are in progress on a percentage-of-completion basis. We now have to postpone all revenue recognition until those projects are completed out of processing. And that could be 9, 12 and even up to 24 months after we have completed those projects. And also you will see that we will not amortize anything on those projects until they are completed. For internal segment reporting and management purposes, we will continue to use this percentage of completion method for revenue recognition, and also in the external reporting, we will mostly focus on this segment reporting methodology as we believe that provides the best picture of the underlying performance and the value creation of the business. But of course, we will also show the statutory IFRS accounts. Then looking at net revenues, and on this slide you'll see we have highlighted that it's based on this segment reporting, which means that it's based on the old percentage of completion methodology. Starting with late sales on the top left-hand, slightly higher, the $115 million of late sales in the quarter, which is 67% above Q1 of 2017, and this is actually the third best first quarter ever in terms of late sales only beaten by 2013 and 2014. And what we -- what's particularly encouraging is that we find the quality of the numbers to be quite strong with a broadly-based improvement across service, across customers and across regions and so on. So it's indeed a very strong late sales number for the first quarter. Prefunding revenues continue to remain low as a result of the low investments, of course. $18 million in this quarter, which is a 15% increase compared to Q1 of 2017. Then looking at proprietary revenue on the bottom left-hand chart, $2.3 million recognized in Q1 2018 is 17% better than we had in the same quarter of last year. And going forward, you should expect this run rate of about $2 million per quarter to continue for the next few quarters at least. All in all, this gave total revenues of $135 million for the quarter, 56% above the same quarter of last year. Then looking at the breakdown of net revenues. First, by business unit on the left-hand side. North and South America, NSA accounted for 43% of net revenues in Q1; Europe, 35%; Africa, Middle East, Asia Pacific accounted for 8% and others accounted for 14% during the quarter. And then we look by this -- at the split by technology on the right-hand side, 19% of revenues came from 2D service, and 3D accounted for 69% and Geological Products and Services accounted for 12% in the quarter. Looking at the operating expenses first here on Slide #14 on the top left-hand side. We had $22 million of operating cost in the quarter, which is an increase of 15% year-on-year. By far, most of this increase is related to the bonus payments to the employees. We have our quarterly bonus scheme based on the operating results of the company. And of course, when the operating result increases, the bonus payments are also increasing, which is -- so it's essentially a good thing. Then looking at amortization on the top right-hand chart. $84 million of amortization in the quarter is an increase of 35% year-on-year. Including in this $84 million is approximately $10 million of impairments recognized in the quarter, which is mainly related to this New Zealand situation as Kristian described, where the government has announced that they will cease award of new offshore permits or exploration permits going forward. Then looking at operating profit or EBIT $25 million in the quarter, which corresponds to a margin of 18%. In Q1, we normally have strong cash flow as we collect all the sales from Q4, which normally is seasonally strong and as investments also normally are seasonally low in Q1. So Q1 2018 is not an exception, and we had a strong free cash flow of $71 million in the quarter. Looking at multi-client library. As you see, still prepared on this segment reporting basis. First on operational investments and prefunding ratio on the top left-hand chart, we invested $31 million in new service in the quarter and this was prefunded 57% by our customers. Then looking at the net book value on the top right-hand chart. The declining trend in the net book value continues as you can read from the chart, as we are continuing to amortize more than we invest. And this is largely a result of the low day rates we see in the Western markets. So we pay less per unit of data that we shoot. So at the end of the quarter, we had $750 million of net book value, which compared to $799 million at the end of 2017. Then looking at investments and net book value by year of completion on the bottom left-hand chart. As always, the historical investments are represented by the blue bars, whereas the diamonds tell us where the net book value currently are sitting. As you can see, we have a healthy library, and you see we regard the impairment risk to be low. But as always, we are exposed to these kind of special events like the New Zealand issue. But we do not foresee or see the risk of any sort of larger market-based impairments to be imminent. Then net revenues and net book value by year of completion on the bottom right-hand chart. This is a fairly normal picture this quarter, so I'm not going to spend a lot of time on that other than noting that older service, older than 2014 accounted for 11% of revenues in this quarter. Moving through the income statement. Again, prepared on segment reporting basis. Net operating revenues $134.8 million compared to $86.2 million in Q1 of 2017 subtracting amortization of $83.6 million, personnel cost of $15.5 million, other operating cost of $8.3 million and depreciation of $2.3 million, we ended up with operating profit of $24.9 million for the first quarter of 2018, which compares to $1.9 million in the first quarter of 2017. Net financial items were negative this quarter by $0.2 million, which gave us a pretax profit of $24.7 million compared to $2.7 million in the same quarter of last year. The tax rate is continuing to jump around with the NOK/dollar exchange rate movements. In this quarter, the dollar has depreciated quite significantly versus the Norwegian kroner, which means that we've had a taxable profit in our a parent company in Norway on intercompany balances. This is, of course, eliminated on a group level, but it brings up the effective tax rate. But it had no immediate impact on payable taxes. So it's kind of a technicality. So this tax rate of 47% and gave us $11.5 million of tax cost in the quarter, which resulted in net income of $13.2 million versus $1.6 million in Q1 of 2017. EPS, USD 0.13 versus USD 0.02 in the same quarter of last year. Moving to the cash flow statement, $102.5 million of cash flow from operations. Negative cash flow of $34 million from our investment activities and minus $16.8 million on the financing -- related to financing activities, largely driven by the dividend payments of course, gave us a net cash flow of $51.8 million in the quarter. Then moving to the balance sheet, you will note that this balance sheet that we're showing here is prepared on the IFRS basis as we will not continue to show the segment reporting balance sheet going forward. As we will see there, for instance, that the multi-client library shows $840 million instead of the $750 million that we talked about earlier, because we've had to reverse some of the amortization that we had done previously when we converted to this new accounting standard. But as you can see, the liquidity remains the same, $302 million of cash in addition to the revolving credit facilities that we have available to us. This gives us, of course, a very strong and comfortable liquidity situation. You will also note that the equity ratio is 75% in the quarter, which is down from 84% when using the segment reporting methodology. And the reason for this is that this new revenue recognition standard blows up or increases the total balance at the same time as the equity is slightly lower as we postpone profit recognition on service that are in progress until they are completed, but still, a very, a very strong balance sheet. Then finally, I will talk a little bit about the dividends. So the board has resolved to continue to pay a dividend of USD 0.20 per share corresponding to NOK 1.62 in this quarter. This dividend will be paid -- or the share will pay [ ex-dividend ] on 16th of May and the payment date is set at 30th of May. And by that, I'll leave the word back to you Kristian.

[Kristian Kuvaas Johansen]

Thank you very much. So I'll go to the outlook section of the presentation. And if we start by the fundamentals, we can clearly see that they have improved in terms of a significantly higher oil price. If you start on the left-hand side of the slide you see that the oil price going from the trough in February 2016 at about $27 and then close of yesterday at about $76.5. So there is clearly a very strong momentum in the oil price, and if you combine that for the fact that the E&P companies' breakeven cost level has come down significantly. If you look at the different segments, E&P International, Majors, North America and NOC, you see that they've all been able to reduce the breakeven cost level of between 50% and -- or 33% and 50% over the past 2 years, which is clearly very impressive, and that again has a strong impact on the free cash flow. You see that free cash flow of these Supermajors were negative in both 2015 and 2016. It was positive in the period of 2010 to 2014. But it was nowhere near what we're seeing today at an oil price that is lower than what we saw back in 2014 as an example. So this is obviously, a great fundamental for our business. And if we go to the next slide, and we look at the individual companies and how they have developed from Q1 2016 to the same quarter of 2018, you see that the free cash flow have increased tremendously over those 2 years. There's only one company on this slide that still has a negative free cash flow, that's BP. But you see a significant positive momentum in their ability to generate cash in this environment. And if you look at all the other companies on this slide, they will say that they see significant operational improvement, they see their costs coming down significantly in line with an oil price that is obviously in a very healthy territory right now. And that again, has a very positive impact on seismic spendings. So if you look at the seismic spendings since Q1 of 2014 on a quarterly basis, you see that if we just focus on Q1 on the left-hand side, you see the gray bars there, you see a negative trend from Q1 of '14 until Q1 of 2016, and then you see a clear positive trend from '16 through '17 and then you see a significant growth in '18 compared to '17. And this is the aggregate multi-client sales from the industry. I think if you look at TGS' year-on-year performance, it's actually even better than that or significantly better than that. But the whole industry has certainly benefited from, as I showed you, the combination of a higher oil price, lower costs and a significant improved cash flow among our clients. And if you just look at the year-on-year growth on the right-hand side, you will see that we're now into the fifth quarter of significant year-on-year growth. You see the industry as a whole has shown year-on-year growth of between 10% and 30% for the last 5 quarters. And obviously, as you saw in our numbers where we have a late sales that has improved by 67%, it shows through that TGS is kind of leading the group in terms of the year-on-year growth. So going through the slides is kind of hard to find good arguments for being too cautious or too conservative on the market outlook. But we always look for reasons why we still need to be cautious, and then summarizing some of the factors that drive the oil price right now and some of the negative factors that we should also be aware of. If we start on the left-hand side of the slide, it's a very positive global demand outlook. We've seen the latest numbers from China very positive, and we see -- quite regularly we see that the research institutes, they bias our estimates upwards in terms of global demand. And I guess the latest number now is between 1.2 million and 1.4 million barrels per day in terms of growth, which is obviously very positive. The second positive thing is that the U.S. inventories are below the 5-year average. And although, it is expected that we see significant production growth in late 2018 and throughout 2019, it's still a very positive starting point that the inventories are at the low level now in the U.S. OPEC and Russia seems to have good compliance with the quotas that have been agreed on. So that's obviously a very positive factor for the oil price. Venezuela production continues to decline. Pipeline constraints in the Permian, you've obviously heard about that, and although there will be new capacity on-stream in mid-2019, at current there is some capacity constraints, which again has a positive impact on the oil price. And then finally, yesterday you all heard the news Trump delivered on his promises to withdraw from the Iran nuclear deal, and again, that has a very positive impact on the oil price. Oil price came up late yesterday or late last night to a level of $76.5, and we think that this may obviously have a positive impact short-term, because Iran is a big producer and we're talking probably somewhere between 400 and 1 million barrels per day in restrictions in terms of export on oil from Iran. Then on the cautious side, there may be long-term negative impact from the potential U.S. /China tariffs. U.S. unconventional growth is accelerating or we expect it to be accelerating, and I will come back to that. And obviously, the quotas of OPEC and Russia are expected to -- not necessarily expected to expire, I mean they could be renewed. But at current, they will expire at the end of 2018. So that kind of summarizes the macro picture as it is right now. But again, there's more positive than negative factors on this, but we should also be a bit cautious in terms of the impact of some of the negative ones. And that leads me to the right-hand side of the slide, and this is the latest forecast from EIA in terms of their short-term energy outlook. This report we actually received yesterday, but it was 2 hours before the announcement of Iran. So Iran is obviously going to change that picture slightly. And what EIA said as of yesterday, is that we are building some oversupply into 2000 -- in late 2018 and throughout 2019. So that blue bar on this graph basically says that there is more supply than demand, and the reason for that oversupply is the latest production figures and the latest production estimates from the Permian. But if you look at the look at the numbers here, you can see that the oversupply is somewhere between 0.5 and 1, and if we look at Iran and the impact that Iran may have on this, we expect that -- in the next report from EIA, we expect that blue bars to be far lower and potentially some of them will be red as well. So that kind of summarizes how we see the market. Again, it's hard to be too bearish about the market, and especially after a record strong quarter. But we should always look for negative signals too in a market that is very cyclical. Our backlog, if you look at the backlog over the past 3 or 4 quarters, it's relatively low in historical context, and that's fair. If you look at the numbers and if you compare it to the recent highs back in 2014 and 2015, that's just a fact. But again, if you compare the numbers, you should be aware that the cost of the backlog is significantly down. So the cost of the backlog now is probably somewhere between 50% and 70% lower than it was back in 2014 and 2015. Meaning that you can -- if you want to have comparable numbers, you almost have to multiply it by somewhere between 2 and 2.5 in order to get comparable numbers. So we're not very concerned about the backlog. It's fair to say that it's harder to get prefunding for new projects, and we see that from competitors too. We see a lot of competitors who either do risk-sharing projects or they do unfunded projects because clients are still a bit resistant in terms of funding or making long-term commitments. But we've seen that before too, we've seen that in any upcycle. We see that late sales -- multi-client late sales picks up very, very fast. And then it takes a while before oil companies get used to making their long-term commitments again. So we think that over time that will change, and we also think that there are new projects that we haven't announced yet that will have a positive impact on the backlog. So we'll come back to that in the next quarterly presentation. If you look at the project schedule, I have been through most of the projects on this list. You see that 2D activity or others, that's mainly multibeam activity in Brazil. The Egypt project is completed. If you look at 3D, the list is rather short right now. But again, I think it won't come as a big surprise to you if we announced a project in Canada, I mean, we've been talking about that for quite some time. We've been in Canada for the last 7 seasons, we've been shooting 3D for the last 3 or 4, and I would be very surprised if we don't end up shooting at least -- or using at least 1 vessel perhaps 2 vessels in Canada for the summer season. So we're in the final stages of negotiations with the clients and getting prefunding for those projects. And obviously, that will be -- we will update you on that as soon as we have the final signatures from clients. And then on the onshore side, you see that is quite -- we're quite busy in onshore. We have already completed the West Lindsey project in the Permian. Working on Sanderson and Hackberry as we speak, and then you see we also have announced projects for Q2, Q3 and Q4. So we expect the onshore activity to remain quite high for TGS. And again, these projects are highly prefunded. They have a very good combination of prefunding and expected return, which means that the IRR of these projects are very competitive to the offshore projects and sometimes even better. License round activity and our positioning. You see all the blue marks on the map that is our global data library, which is one of the largest -- if not the largest in the whole industry. And you see the license rounds that are coming up in 2018. I'm not going to go through that in detail, because you can read it from the slides, but obviously, the big license rounds coming up in 2018, if we start in the Western Hemisphere, it's Brazil of course. We are very optimistic in regards to the 16th Round in Brazil. We have rounds coming up in Canada, which is good, because we have that big database in Canada. U.S. Gulf of Mexico was -- for some people would say, it was disappointing that the number of companies were only 33 going up from 27 the previous year. But actually what we see in our sales statistics and what we see in terms of the meeting activity now in the U.S. Gulf of Mexico, there is reason to be more optimistic on the outlook for U.S. Gulf of Mexico as well. There is lot of activity right now, and clearly the Supermajors have a long-term view, but we also see smaller companies either buying assets or consolidating or buying data because of future license rounds. So we are quite optimistic in regards to the Western Hemisphere as a whole. In terms of Africa, Middle East and Asia Pacific, the good news here is that Sierra Leone will have their fourth round in June 2018, so the bids are due in about a month. And then we also see some activity in Australia and Indonesia although at a lower level compared to the Western Hemisphere and Africa. In Europe and Russia, we have the APA announcement that is expected to come out in Q2, and then we're obviously waiting for the awards of the 24th Round in Europe or in Norway, which we expect some time during the summer, usually that happen sometime in June. And we have the 31st Round in U.K. and there's also a round or bids due in the Greenland license round at the end of 2018. So that summarizes the license round activity and our positioning, which we think is very good. And what remains is to summarize the presentations. Again, we had a very strong Q1 '18 performance, I think we surprised most of you with very strong late sales. I have to be honest and say it surprised me as well. But we're getting used to that. We had a very strong Q4, a very strong Q1, and we think that we have a very well-positioned library for future license rounds. And for the activity pickup that we expect to see in the market. Our revenues are $135 million. EBIT of $25 million, but again, we had an extraordinary impairment this quarter of about $10 million. But an EBIT margin of 18% is something we're very pleased about. Free cash flow of $71 million. Free cash flow continues to be very, very strong, and if you look at the vessel schedule and what we plan to invest in Q2, you will see that free cash flow will continue to be very strong in Q2, and we expect that to increase, so the cash balance of $302 million will continue to go higher and higher, which is obviously very positive. Quarterly dividend of $0.20 per share. And again, we see an improved market driven by higher oil price and improved cash flow. We think the latest announcement yesterday about Iran will provide further support to the oil price short-term. So that is good for us, which again means that the seismic spending, which has been on a growing trend, will probably continue to be like that with the current oil price. We will continue to do preannouncing or preannounce our quarterly segment numbers no later than the sixth trading day on the Oslo Stock Exchange. We announce our revenues and then we come back and we announce the full report as regular. Our guidance is unchanged. We have announced the guidance of multi-client investments of about $260 million for the full year. Additional investments obviously for some -- from some of these risk-sharing arrangements. Prefunding in the range of 45% to 50%. And then an amortization of approximately $310 million. So that summarizes the presentation. I would like to take your questions, and have Sven Børre come up and join me for that. So thank you very much.

[Operator]

[Operator Instructions]

[Christopher Møllerløkken, Research Analyst]

Christopher from Carnegie. The impairment you made in the first quarter in New Zealand, has that library now been fully impaired? Or is there anything remaining book value?

[Sven Børre Larsen, Chief Financial Officer]

It's come to 0.

[Christopher Møllerløkken, Research Analyst]

And in terms of the clients that purchased data in the first quarter, you said it was broad-based. But did you see any difference versus the different types of oil companies, the international oil companies or the majors versus the smaller independents?

[Kristian Kuvaas Johansen]

I don't think there was a clear trend in Q1. I think what characterizes Q1, which we are obviously very pleased about this that there were no particular big deals, there were no transfer fees, there were no extraordinary deals. But we had a lot of smaller deals. It was a very busy quarter for our sales force, because we had clients that haven't [ portrayed on ] quite some time, who came back and is becoming more optimistic on the market and have a better cash flow. So I don't think there is a particular segment where we see a significant increase. But I think you see from the numbers that both Europe and the North and South America was very strong. North and South America was mainly driven by the U.S. Gulf of Mexico, and we had some good sales in Canada too, and then Europe was very strong and some of that is related to the license round activity that is coming up in Q2 this year.

[Christopher Møllerløkken, Research Analyst]

And final question, you do expect also strong cash flow in the second quarter, and you see an improving seismic market. How does the board consider dividends or use of cash in terms of priorities for TGS going forward?

[Kristian Kuvaas Johansen]

We're always discussing the dividend. I think most shareholders are quite pleased about the level where the dividend is right now. But we obviously, -- we have very strong cash balance, and we would obviously look at should we increase our dividend, and then we need to look at that compared to other good acquisition opportunities, so should we be more aggressive in terms of making new investments to get prepared for an upcycle again. So I mean, that's a discussion we have in every board meeting. And obviously, management spends a lot of time on looking at that. I think we're quite pleased about where the dividend is at current. We want to have some gunpowder in this market whether it's for acquisitions or organic growth. And I think that answers your question.

[Unknown Analyst]

[indiscernible] Markets. Kristian you definitely highlighted that the market is recovering and you were surprised by the high sales. So in terms of like -- when we see a recovering market, how should we think about prefunding ratios? Are the companies more willing to prefund the service? Or should we expect that to stay flat even this environment?

[Kristian Kuvaas Johansen]

I think in terms of what we've guided, in terms of prefunding ratio, we feel quite comfortable about that, and I think you'll always have to look about what is the composition of projects that we're doing. So this year we do quite a lot of onshore, and onshore typically has higher prefunding than offshore. I think it's fair to say that offshore has been very challenging to get prefunding. It's kind of a combination of some of our peers being quite aggressive in shooting with no prefunding, which we don't want to do, and it's not because our cash situation; that is more about we want to have that quality stand from the clients before you start shooting a survey. And it obviously gives you more leverage when you start discussing pricing too compared to do a project with no prefunding and then you go out and try to sell it. So we are very disciplined in terms of taking on new projects with low prefunding or no prefunding. We try to avoid that. And again, we've seen in previous cycles that late sales picks up before the commitments in terms of prefunding, and we hope that's the case in 2018 and '19 as well. And you've seen that from some of the peers as well, prefunding is a bit more challenging in this environment, but we think that's more a question of time rather than a new trend.

[Unknown Analyst]

And then in terms of year-over-year revenue growth, it was 56% and total revenue on 67% on late sales. Is that the trend we should expect to continue into second quarter?

[Kristian Kuvaas Johansen]

The standard answer to that is that we cannot comment on it. I don't see any reason why that trend with late sales should all of a sudden turn very negative given the current oil price environment. So I think there is -- again, we're not going to take a lot of risk in acquiring new projects with no prefunding, which means that there shouldn't be significant upside to the investment guidance for the year. We feel very confident about our guidance both in terms of investment and prefunding where it is today, and then I think where we may surprise, so where we may feel very strong at the current [indiscernible] is on the late sales.

[Sven Børre Larsen, Chief Financial Officer]

I don't think you should apply 67% on all the products going forward to put it that way. But the trend is obviously positive.

[Kristian Kuvaas Johansen]

So we have some questions from the web. There is one question on the New Zealand situation. Question is, the New Zealand situation is obviously unique, but these things often get traction. Are there any other regions where you are seeing any moves? And/or you are reassessing your involvement going forward? I think the question kind of answers itself. It is a very unique situation. It came out of the blue that the New Zealand authorities decided that they will not award any new exploration licenses. We had a survey that we shot a couple years ago that still had some remaining book value, and we felt that although this is likely to appealed, we felt that it's better to be prudent and write it off this quarter. We don't see any other regions where that is very likely to happen. And in general, we feel very confident about the size of the library and the performance of the library. If you look at our late sales this quarter, and if you multiply it by 4, which may be a very conservative assumption, the yield of the current library is probably about 50% plus, which I don't know any other oil service companies who can have a yield like that quarter after quarter. So we're not very concerned about our -- the size of the library. There's another question from Gregory Brown from Crédit Suisse. He says, are you seeing any vessel day rate inflation in particular for any service you intend to shoot in the winter? Can you comment on the prefunding rates for North American onshore surveys versus the offshore market? So in terms of vessel, day rate inflation, we don't see any inflation. In terms of what we have secured already, we don't see any changes in pricing. We still think that the contract market for seismic is very challenging, and it kind of mirrors what I said about getting prefunding for new projects. It seems like clients are still a bit reluctant to make long-term commitments, but they are very keen to buy existing data, which is obviously good for us. And then it's probably a question of time when this turns into a more positive environment. But we don't see any vessel day rate inflation and we're certainly not very concerned about the access to vessels or pricing of vessels for the foreseeable future. In terms of the prefunding rates for North American onshore services versus the offshore market, we don't want to be very specific on that, and that's due to the competitive reasons, of course. But in general, these service have a higher-than-average prefunding. So if our average prefunding is between 45 and 50, you should assume that these projects have a higher general prefunding. Any other questions from the group?

[Sondre Dale Stormyr, Senior Analyst of Oil Service]

Sondre from Danske Bank. There's been a lot of focus on the vessel market implications from Schlumberger exit from data acquisition, but it also seems they're not going to invest much in the multi-client business this year. How do you sort of -- what's your latest view on that situation? And are you sort of seeing a pretty competent competitor in that market not really being there this year and maybe next year?

[Kristian Kuvaas Johansen]

Well, I think you have as much information as we have on that subject. I mean, what we hear is that they have kind of guided $50 million to $100 million of investments, if I believe what the analysts are saying, which is obviously significantly down from previous years. If you go back a couple of years, that same number was probably somewhere between $500 million and $800 million per year. So in that regard, it's obviously very positive for us because it's quite challenging, competitors now seem to be scaling back their activity in short-term. I don't necessarily think that that's the case long-term. I think you will see WesternGeco in the market doing multi-client surveys, wanting to be like TGS because they have seen such tremendous cash generation ability for TGS. So I would be surprised if you -- if the $50 million to $100 million is sustainable going forward, because you need to reinvest in your data library in order to keep it fresh and continue to sell. But that's -- again, we don't have any more information than you have on that particular subject. I think we have no further questions. So with that, I will thank you for your attention, and hope to see you back after our Q2 reporting. Thank you very much