TGS ASA

OSE:TGS

Earnings Call Transcript 2021-Q1

[Kristian Kuvaas Johansen, Chief Executive Officer]

Good morning, and welcome to TGS Q1 2021 Earnings Release. My name is Kristian Johansen, I'm the CEO of TGS. And with me today, I have Fredrik Amundsen, our CFO; and I also have Jan Schoolmeesters, who's the EVP of Operations & New Energy Solutions. I would like to draw your attention to the forward-looking statements that you can read, and then we go to the financial highlights of Q1. As we presented on the sixth business day of the new quarter, we had Q1 2021 net revenues of about $75 million. And this is based on the segment reporting rather than the IFRS accounts that you can see in the earnings release document that we posted this morning. We had late sales of about $45 million, and we had prefunding of our new investments of about $25 million in Q1. As a result of lower OpEx and CapEx, we had very strong cash flow in Q1, so we had a free cash flow before dividend and share buybacks of about $84 million. That means that our cash balance were about $254 million at the end of the quarter and that comes in addition to an undrawn credit facility of $100 million. In total, we have liquidity of $354 million at the end of Q1. That is supporting a dividend payment USD 0.14 per share. And in addition to that, our buyback program continues with an additional $17.3 million left to spend. The weak market conditions that we saw in Q1 are expected to continue for 2021 despite positive oil price momentum. The reason for that, you may have seen, is that clients are prioritizing dividends and the deleveraging of their balance sheet rather than exploration right now. As a result, you will see lower multiclient investments from TGS and more risk share until we see a permanent pickup of activity in the market. That means that we expect to see new multiclient investments for 2021 in the range of about $150 million to $180 million. Lower investments is positive for our free cash flow, and that will continue to be strong for the remaining 3 quarters. And again, that allows strategic investments and M&A that we are extremely pleased to announce this morning. So TGS is progressing as planned in the execution of a New Energy Solutions business plan as we presented in the Capital Markets Day on the 12th of February 2021. We're extremely pleased to announce the acquisition of 4C Offshore in the U.K. today. This acquisition establishes TGS as one of the leading providers of market intelligence and research services related to offshore wind. Together with several ongoing organic initiatives, the acquisition of 4C is an important step in establishing the leading ecosystem for data and insight for decision-making processes in industries related to the energy transition. Going forward, we will continue combining the development of relevant products from the vast subsurface data library with acquisitions and partnerships to populate the above-surface part of the offering. On the next bullet point, TGS is pleased to support the establishment of a new vessel company, PXGEO, with a long-term vessel commitment in return for securing capacity at competitive rates. We follow the consolidation activities within the more asset-heavy part of the industry. And while we're not particularly concerned about access to supply, we're generally in favor of a competitive market, hence, introducing a sixth player makes a lot of sense, both for TGS and our clients. So looking at our key projects in Q1 2021. If we start on the left-hand side, we have the Malvinas 3D in Argentina. During Q1, we did the acquisition of the 17,800-square kilometer 3D multiclient survey. It was completed in Q1, and the data here covers the highly prospective Malvina basin that has now been acquired over 2 seasons. Final data from this survey is expected in Q1 of 2022. Then we delay a survey in Brazil called Espirito Santo. This is a 3D survey covering about 1,347 square kilometers of the Espirito Santo basin offshore Brazil. The survey was commenced in Q1 and completed acquisition on April 12. Fast-track data from this survey is expected in Q4 of 2021, and we're processing this using our Dynamic Matching Full wave inversion. And then last but not least, we started a new survey in Brazil. This is a 2D survey called Pelotas on the 4th of April, so just after the end of the quarter. This is an 8,550-kilometer 2D survey. The new data set will complement the existing 2D coverage in the area and allow for better prospect mapping for our clients. The depth imaged products will be available in early Q3 just in time for the 17th Brazil license round this year. It should also be mentioned that 2 of these projects, both the projects in Brazil, are acquired in collaboration with our vessel supplier in risk-share model, as I discussed on one of my previous slides. So with that, I'm going to hand it over to Fredrik Amundsen, who's going to go through the financials.

[Fredrik Amundsen, Chief Financial Officer]

Thank you, Kristian. Each quarter, we point out that the implementation of IFRS 15 and the change revenue recognition principles has led TGS to focus on segment reporting in its presentations. Segment reporting is what TGS has used for its internal management reporting and we will continue to focus on segment reporting in this presentation, but we will gradually shift our focus towards IFRS going forward. With increasing reporting requirements under IFRS and the forthcoming implementation of the European single electronic format, we see the need to change our reporting. We are defining alternative performance measures that can support the IFRS figures as an alternative to the full segment reporting. These will be focused on cash flow, backlog, operational progress and return on investments. When we can conclude on the appropriate APMs, we will move our focus to IFRS figures in all our communication. But we expect to provide traditional segment numbers throughout 2021, at minimum in an appendix to the presentations. For Q1, we do, however, remain focused on the segment reporting in the presented slides. Today, we present Q1 revenue of $75 million, in line with the preliminary earnings update provided April 13. We are pleased to report prefunding revenues of $25 million, funding 68% of the operational investments that came in at $37 million. Prefunding revenue was 69% below Q1 2020 when we acquired several large programs in Latin America, but grew 92% sequentially from Q4 2020. Late sales came in at $45 million in a continued challenging market where our clients prioritized deleveraging their balance sheet with excess cash from improved oil price. Disappointing sales in Europe was in part offset by somewhat better sales in onshore U.S., but overall spending remains muted. Proprietary revenue grew to $4.8 million in the first quarter as we see an increased interest in our processing services. The top left graph shows our development of operational cost. Our operational costs came in at $22 million for Q1, which is slightly higher than the expected when travel restrictions prevail, as they do. The increased cost is partly due to increased proprietary activity in Imaging, thus lower capitalization of the personnel cost and partly a result of employee bonus accruals for the first quarter. Amortization is coming down to $67 million on the back of impairments recognized in the fourth quarter. Amortization still remains high in percentage of sales as the sales mix is dominated of projects in progress and limited sales of the library. Consequently, the earnings before interest and tax is coming in at negative $20 million despite an EBITDA margin of 68% or $51.3 million. As mentioned, operational investments for the quarter were $37 million with prefunding levels in relation to total investments of 68%. The second season Malvinas project in Argentina was completed in the quarter, along with the Espirito Santos 3D in Brazil, which continued into April. In addition, a significant number of surveys were completed in processing and are now ready for the market. As a side note, this is the reason why IFRS revenue is coming in as high as $186 million for the first quarter because under IFRS, revenue is recognized when performance obligations are met. The income statements summarize the presented highlights: revenues of $74.8 million, EBITDA is coming in at $51.3 million while amortization of the library provides a result before taxes of negative $20 million. The tax rate for the first quarter is coming in at 10%, which appears low. The tax rate is a blended outcome of losses recognized in tax jurisdictions with 21% to 22% tax rate, offset by the profits in jurisdictions with 34% tax. Moving on to the balance sheet. We are ending the quarter with a strong cash position of $254 million as we decreased our outstanding accounts receivable through strong collections. The multiclient library is coming down 29% from $841.9 million in Q1 2020 to $593.6 million in Q1 2021, based on the recent lower investment activity and the previously reported impairments. The company holds no debt and maintains a $100 million undrawn revolving credit facility. And ending Q1, we had an equity ratio of 81%. Cash from operations was $108.9 million for the first quarter, and our free cash flow after investments in the multiclient library was $83.9 million. We're very pleased to see a strong cash flow that fuels our strategic initiatives and continued returns to our shareholders. In Q1, we paid $16.4 million in dividend and repurchased 160,000 shares under the company's share buyback program for $2.7 million. Net change in cash was $57.8 million. And as previously stated, our ending cash balance was $253.5 million. Our revenue backlog ending Q1 2021 was $82 million, down 8% from $89 million at the beginning of the quarter. Our revenue backlog is influenced by the market for new multiclient investments. We observed some converted contract activity materializing in the marketplace, but continue to see pressure on commercial terms that challenge these opportunities near term. As addressed in our earnings release, we are revising our multiclient investment guidance based on the challenging market and point out that Q2 multiclient investments is expected around $30 million. I would want to note that our investments into New Energy Solutions, as communicated in our press release on the 4C acquisition, will add to this investment number. Despite a very challenging market, we are pleased that the company's strong balance sheet and a cash flow generation enables a stable dividend at $0.14 to be paid June 2. In addition to this, we will continue to buy back shares under the authority granted by the Board. The Board has authorized a $20 million share buyback program, of which the company already has fulfilled $2.7 million of this. The program will be completed by May 2022. Combining the dividend and the buyback, the yield is approximately 5%. With those remarks, I thank you for your attention and hand it back over to Kristian, our CEO.

[Kristian Kuvaas Johansen, Chief Executive Officer]

Thank you, Fredrik. So let's have a look at the market outlook. What this slide is showing is that there is a disconnect between the oil price and exploration spending as measured by 12-month aggregate multiclient seismic spend. As you can see from the chart, there has been a very strong correlation in the past. In fact, we're looking at this chart and any upswing in the oil price has been followed by an immediate positive change in seismic spending historically, particularly late sales. Starting in late 2020, the oil price has seen a strong development, and it's now back to the pre-COVID levels of 2019 where TGS actually had its best year ever. The question is, why is there such a disconnect? And does this signal a more structural change in the way E&P companies look at exploration in the future? And the next slide is showing that clients' preferences are changing, at least temporary. And we've split the clients in 3 different groups. So you have the major international oil companies, so the super majors; you have the NOCs; and you have the smaller independents. And if you look at their behavior in this market, it's actually quite different. So if we start with the major international oil companies, they have a very strong budget discipline at current. Basically, what they're telling us is that they set their budgets back in October, November 2020 at the time the oil price was around $40-ish, and they stick to their budget. It means that any incremental cash flow will be allocated to deleveraging their balance sheets and shareholder returns rather than increase E&P spending. We also see that some of these companies, and in particular, the European companies, are transforming from oil and gas companies into broader energy companies. Their exploration is now focused on near infrastructure and selected proven greenfield areas. In terms of when do we expect the budgets to come back and when do we expect spending to come up, from this particular group, we think that's going to be 2022 is going to be the first opportunity. We think 2021 basically is going to stay where it is today and we don't see any significant uptick in spending, perhaps a little bit in Q4. So what happens is that some of these old companies get the next year's budget approved and they get to spend some of that in Q4. But that will probably be the earliest where we see kind of a pickup in activity from the major international. The NOCs are different. They are increasing their international presence. In many ways, they do that on behalf of some of these major international oil companies. So what they do is that they pick up acreage that some of these IOCs are leaving or exiting. We also see a more stable exploration spending from some of these companies. It's quite stable, it doesn't change a lot from year-to-year and it's less dependent on the short-term fluctuations in the oil price. And the interesting thing is that we see that they also have less in-house capacity, which means that there is more potential for a vendor like ourselves. So we can actually increase the scope of services to some of these companies. So that is definitely an opportunity for the future. And then the big swing factor here would be the smaller independents. They're still exploring, but often with a very regional focus. Their opportunity set is now growing as the IOCs are exiting prolific basins. So some of these smaller independents, they pick up new acreage and they pick up new basins based on the strategy of the IOCs. And then they tend to have lower -- or less focus on renewables and alternative energy, meaning that when the oil price and if the oil price stays where it is today with close to $70 per barrel, you are likely to see increased activity from this group. This group will typically be active in the U.S. Gulf of Mexico. Some of these companies would be in Brazil as well. They will definitely be in Norway, U.K., certain areas of Africa and let's not forget U.S. onshore where some of these independent oil companies are famous for coming back every time the oil price goes above $60 or $70. And you see -- on the right-hand side, you see some of the statements that some of these IOCs have been making quite recently. And then I want to draw your attention to the last comment, which is at the bottom right-hand side of the slide where it says, "Our Board has mandated us to get ready for another super cycle." This is a statement from a CEO of a small independent that used to be quite a sizable client of TGS. So there is obviously different camps, different priorities and different levels of spending as we're exposed to right now. But we think going 1 or 2 years into the future, we think we will see all these different companies will actually come back with higher explorations then. We move to the next slide. The vessel market is definitely becoming more concentrated. The number of available vessels have been reduced from 65 to 26 in less than 5 years. This is obviously following the seismic spending, which has dropped even more. But you've also seen not only fewer vessels, but you've seen a significant concentration in terms of the number of companies who are owning these vessels. So the recent consolidation in the vessel market means that the leading player is now controlling almost 60% of supply. But there is 5 players controlling the remaining 42% of the market. And risk-sharing, as we have talked a lot about today, continues to be available for a company like TGS. Again, I just want to highlight that we announced today that we're entering into a long-term agreement with PXGEO to secure capacity at competitive rates. It's not because we feel like access to supply is difficult in the current market, but we feel like this is a great hedge and we feel like this adds more competitive dynamics to the market. Let's have a look at our 2021 investments and where they are coming from. As I said in my introduction, you will see lower organic multiclient investments from TGS until we see a more permanent pickup in market activity. There are basically 3 reasons for that. Number one, as we have discussed today, we're utilizing risk-share opportunities when we can. That means that we're working closely with vessel companies to have them cover part of their costs -- their own costs, typically 50% to 70%, and get paid when we sell the data. That means that we capitalize only part of the investments, realize a higher return on capital and can still share some upside with a vessel company. The amount of data we're getting is the same, but the dollar value invested and capitalized is obviously far less. Number two, in a market like this, we're partnering more frequently. For 2021, I actually expect more than half of our projects to be in a JV with others. That will be, for example, Canada with PGS. It could be Gulf of Mexico with Schlumberger and a few other areas that we have not yet disclosed, but where we are likely to invest in the second half of the year but we're likely to invest together with some of our peers. This is again to share the risk in a market that is still proven to be back at where it is. And last but not least, as Fredrik said, we've seen some of the so-called converted contracts be tendered at very unfavorable terms, where the client is basically getting all the benefits from a contract model, such as exclusivity to data, but to a multiclient price. And that's a path that we cannot go and we'd rather put our money elsewhere such as M&A, as we have discussed today, dividends and our share buybacks. So as you see from the bar chart in the lower right corner, our Q2 investments are going to be around $30 million before we step up in Q3 and Q4. And we're going to end up somewhere between $150 million and $180 million for the full year. Just want to repeat some of the long-term energy market trends, so we discussed at the Capital Markets Day a couple of months ago. So number one, oil and gas will remain very important in the long term. We don't question that at all. It's going to be somewhere between 46% and 54% of the energy mix 2 decades from now according to IEA. And in fact, I've never seen a report on analysis from anyone expecting oil and gas to make up less than 45% of the energy mix in 20 years. Decline in consumption of oil is to be partly offset by relative stability of gas demand. And then we see a strong growth in renewables to replace coal in the long term. Talking about renewable energy, we see strong growth here, of course, according to IEA. There's the annual compounded annual growth rate is going to be somewhere between 7.5% and 10%. And as we have discussed today and as we have presented this morning, we want to be part of this. We've already made the first acquisition in this space with 4C, who is a wind intelligence company. And then last but not least, we also see great growth and great growth potential in CCS. That is going to be an important enabler for the energy transition. The growth here is probably going to be somewhere between 6% and 8% per year for the next 20 years. And again, this is a prerequisite for meeting the goals of the Paris Agreement. So we feel like with the strategy that we have launched at the Capital Markets Day, what we have done since then and all the progress that have been made since then, which Jan Schoolmeesters is going to go through later in this presentation, we are extremely well positioned in all these 3 areas of growth opportunity for a company like TGS. And that takes me to the strategic priorities. If we start at the top of the list, and you are quite familiar to this already, so I'm not going to spend too much time. But number one is new technologies in mature basins. This is our OBN program that we have successfully launched and carried out in the U.S. Gulf of Mexico and there will be additional programs launched either in the second half of this year or early next year. We're strengthening our position in the South Atlantic. As you saw from our investments in Q1, all the investments in Q1 are in South Atlantic and actually in Latin America. And this is the reason we acquired Spectrum, and this is the reason why TGS is now a market leader in the rapidly growing area of Latin America. And then further growth onshore. This is probably the most volatile part of our business, but we know that when things are looking really bad and the oil price is starting to climb up again, we see some of these companies have an enormous capacity in terms of getting back and starting drilling again. So we think that that's going to happen again, and this is something we obviously want to be part of. Then our technology strategy, expanding value chain through data and analytics. We talked about this in the Capital Markets Day, and you've all seen our collaboration that we have together with PGS and CGG in terms of offering a cloud-based ecosystem where we all put our data and we make it very easily available for our clients to access both for visualization of data, but also for interpretation of the data. Imaging quality and reputation is critical as all companies are getting closer to their reservoir and there is more focus on infrastructure-led exploration. We have made significant improvements in our imaging reputation, and that will continue as we go into 2021 and 2022. And then last but not least, as we discussed on the Capital Markets Day, capitalizing on data library to create exploration upside, mainly through ARLAS. And then the last one, which is data offering towards other energy-related industries, which Jan Schoolmeesters is going to talk more about now. So with that, I will hand it over to Jan, who's going to talk about the strategic update and where we are on the New Energy Solutions initiatives.

[Jan Schoolmeesters]

Thank you very much. Thank you, Kristian. Before going deeper into the strategic update, it is good to put some perspective on how we see the energy landscape develop in the next 2 decades. And for this, we've taken the IEA Sustainable Development Scenarios and we compare it to the energy mix today. So if you look on the left-hand side, you see that the oil and gas component of the energy mix is somewhat over 50% with a modest contribution of renewables. But if you fast-forward 20 years, then you can see that oil and gas is below the 50% mark, but as Kristian mentioned earlier, still a very fundamental component of the energy mix going forward. The renewables have grown quite significantly at the expense of coal and other and somewhat of oil. But what this doesn't show is that also the energy demand probably has increased quite significantly by 2040. So that means that the pie chart actually is bigger, so we expect oil and gas to have similar type of contributions as today, but the renewables will be a big year-on-year growth. So that gives unique opportunities for TGS to consider the mix of services and the mix of revenues associated with it. And that's why we came with the New Energy Solutions focus to also capture the renewables market and to make sure we can have relevant services there. So we will transform TGS of today as a leading subsurface data company into a leading energy data company. So we're going to add different data types that are relevant more for the wind, the solar and the geothermal segments. We will continue to be asset-light and a multiclient business model will be still the model that we go for, but it will also have new types of data acquisitions, like, for instance, wind measurements. At the moment, the revenues of TGS are consisting over 95% from oil and gas, and we aim to have a revenue mix that is much more toward the figure on the right-hand side. So the renewables will be a considerable component of the revenues going forward. We are focused on carbon neutrality. So we have already gained quite a good progress here by utilizing cloud compute, which is carbon neutral compared to our traditional on-prem compute. So we're making good advances towards carbon neutrality in 2040. And with the different segments of data that we provide with renewables data, with also more recurring data request for 4D monitoring, we can see that we will see a higher portion of recurring revenues in 2040 compared to 2020. So with this as the background, let me now update you on the progress that we have made in the New Energy Solutions business unit. So this was announced at the Capital Markets Day in February and we have segmented it in 5 different parts. So we have the carbon storage, the geothermal, deep sea minerals, wind and solar. And if you go to the left-hand side, carbon storage, geothermal, deep sea minerals, it's all very much subsurface-driven. And with our library of 40 years, we have an extremely strong position in these segments. If you go further to the right, then we have a bigger hurdle to overcome. And that's why there's more room for M&A to get some critical mass there. But let me start on the left-hand side. So on the carbon storage, we have continued the strong traction that we've seen over the past 2 years, and we have materialized the data sale in Q1 that was specifically for CCS purposes. And this data sale also triggered a reprocessing project together with the client to create a better understanding of the reservoir and the future for the monitoring requirements. We also work hard on using our extensive well database, combined with seismic, to create CO2 storage atlases. And those are methods to categorize the reservoir and the seals in different areas, the seal to capture the CO2. And those combinations give good overview of where you should focus for CCS storage. Finally, we are focusing a lot on developing advanced Distributed Acoustic Sensing Processing technology. Now what that is, it means that there is fiber optics installed in a well and we see this as a technology that's developing quickly now, and we see big operators asking for this. So we believe this is very relevant for CCS, but also for normal 4D reservoir monitoring solutions. So we put a lot of emphasis on this. We develop advanced algorithms and we are continuing to drive that effort because we do believe that this is a potential disruptive type technology for 4D monitoring. If we go to the right, to geothermal, we continue to work with our extensive well database and using predictive types of AI to make sure that we can have temperature coverage over complete basins. So we can predict temperatures away from the well using AI and that gives enhanced temperature models. And with that, we can assess wells for repurposing. So we have hydrocarbon wells that are coming to the end of their lifetime and we can see with the temperature profiles, which might be suitable for repurposing the geothermal energy production. This has created some attention from local energy suppliers and that's why we also have seen a successful well data sale to a utilities company in Texas. We continue to build further on these applications, and we're also sourcing our data in new emerging markets. So it's exciting opportunities there. There's a lot of momentum now and interest in geothermal, and it has a good support from some of the new big players in that field like Chevron, BP and others. If we move to deep sea minerals. There, we are really focused on developing a complete geophysical value chain or the -- for the exploration of these minerals. What we believe is that seismic should be the tool of choice to initially map where these minerals are. And we've demonstrated that this works by using a specific [ deca ] source. So it's a seismic technology, where we have a high-density type source that we use to map and structure high-frequency instances. So we got a very good structural image of the hydrocarbon -- sorry, the hydrothermal vents. And with that, we can then go for different types of geophysical technologies afterwards like for instance, EM, but also using AUVs over the prospects. So we're working closely with vendors to cover the complete value chain so that we have complete answers for investors in deep sea minerals. Going over to wind. Really excited about the 4C Offshore acquisition. That's going to be a step-change for us. This was an area where we started working on organic project development, and we continue to do so, but this is where we have little existing data beforehand. So having 4C Offshore now, a strong brand in the wind segment is going to be key for us to keep growing and to keep advancing in this area. But on top of that, let me first touch upon the organic projects that we're working on. So we do build wind resource assessments ahead of data rounds -- of licensing rounds. What we do there is really to make sure that we have improved modeling of wind resources. And with that, you get better data and better data leads to better investment decisions. So if you then also can explore opportunities to do real measurements to have, for instance, LiDAR buoy measurements in certain areas of interest, then you can really high grade the wind data and fine-tune the resource assessment. On the solar segment, we are reviewing potential M&A candidates there. And it's really focused there to have data providers that can lead to better insights. For that, we utilize the platform solution. There's a lot of different types of data, low quality, high quality. It's very unstructured. It's very unorganized in lots of cases. And we see that organizing that data better, working with providers that can do this will help to make data accessible for the wide variety of solar park operators that are out there. So we are looking closely on how can we make our ecosystem more relevant, more user-friendly in this case and that we can organize data and develop specialized applications on the back of this. So on the next slide, we go into the acquisition of 4C and this is really a big step change for TGS. 4C Offshore is known for its high quality data and they have a very dedicated staff that is looking at the complete value chain for wind offshore, including construction, heavy maintenance. They also have marine cable consultancy, submarine cables. It's a wide breadth of services that 4C Offshore brings. And it fits perfectly with our ambition. We want to become a leading provider in the new energy space. We want to make sure that we can help our customers to go from data to insights and to make sure that we cover the whole value chain, and that's what 4C Offshore is already doing. So at a glance, they're based in Lowestoft in the U.K., which is one of the renewable hubs in the U.K. and in Europe. It has a leading interactive marketing intelligence platform. So it's very much aligned with our philosophy of making sure that the client has a smooth experience in terms of assessing data in terms of using applications. So they're providing a software-as-a-solutions offering for offshore wind and offshore grid sectors. And it's a very complete database that they have, not only of the offshore wind farms, but also the various projects, the vendors, the license rounds, logistics around it, subsea cables, et cetera. Now on top of that, having that market intelligence, they also do bespoke research for -- and tailor-made analysis on behalf of customers. And they have a marine cable consultancy, where they provide advice and support for the assurance of high-quality project delivery for cable and pipeline projects. With a subscription-based model, they have about 80% of the sales from subscriptions, and they have a very loyal and growing client database. So this is going to be in a very important building block in the execution of the New Energy Solutions strategy that we have. It is asset-light, it's very customer focused, it's very focused on quality and these are all the traits that we have in TGS as well. So we see this as an extremely good fit for advancing our strategy. So on top of that, we also highlighted at the Capital Markets Day that we're going to do organic growth. We're going to have certain solutions that we provide, but we also want to work with industry expertise and with some of our clients to make sure that we can offer the best possible product. So we have quite a few new partnerships and collaborations that we announced. First is in the carbon storage with Horisont Energi. And Horisont Energi is a carbon technology company that transform gas into ammonia and they store the resulting CO2 in reservoirs. So we're working with them to -- on the data that they have over the Norwegian continental shelf to basically do a classification of the right type of reservoir characteristics, identify the right type of reservoirs and monitoring solutions. So I mentioned, for instance, the fiber optic type monitoring solution that could be applied. Those are research projects that we're kicking off with Horisont Energi. With an E&P super major, we do joint research on the suitability of different data types for monitoring. We look at 2D data, we look at 3D data, we look at other data sets. And we work closely with their expertise and our expertise to make sure that we get a full classification of how data can be used cost effectively and with the right type of results. With Canadian Discovery, we're focusing on building a regional CO2 storage risk assessment atlas in North America. So I mentioned that previously that these storage atlases are really interesting because they help our customers to zoom in on relevant reservoirs where you have good reservoir conditions, but also a good seal to cap in the CO2. And Canadian Discovery has a lot of experience and expertise in that regard, and we bring in a lot of our data and geological experience as well. For geothermal, we're working together with Eavor Technologies. They've been providing a lot of valuable input on how we can create more value out of the new geothermal data products that we made based on our well database. Eavor Technologies is having a closed-loop system and they have some of the big players that have invested recently in them. So a very fast-growing type of segment there. For wind, we're working together with a renewable energy company to better understand what data requirements they have for their development purposes. And it's also very relevant for us to understand better what data needs are there before an auction takes place: can we find ways to high-grade data further, can we make sure that the investment decisions are more accurate. So that's very important to work with the wind development company and make sure we have a proper understanding there. One of the important foundations on the NES efforts is the ecosystem. So that's really our digital platform through which we interact with customers through which we solve use cases. And for that, we have a partnership with one of the biggest providers in the industry of IT and software-as-a-solution companies, and that's Cognizant. So they will also provide as part of the arrangement access to some of their clients that are in the renewable industry. So we make sure that what we develop is an interactive platform that's very suitable and tailor-made for our clients. And to go a little bit deeper into that because it's such an important topic for us, I show this diagram of this ecosystem. So at the core of it is a data lake. It's very important in order to optimize data insights, you need to have a very organized type of data lake, which you have the various types of data, but it can easily be accessed and they can be accessed through AI-type applications as well. So that can be TGS data, that can be public data, but also partner data and customer data. That's all confidential. It's all protected through entitlements. And it's cloud agnostic on top of that. And then we -- what we do is we look at the use cases. We try to understand better what do our customers need, where can we provide them with better solutions. Then we work our way backwards to try and develop the apps that grab the relevant data, optimize the output so that we can solve these use cases. And that's what we're interactively developing now. We are developing these apps together with Cognizant, and as I mentioned, with input from clients. So aiming to provide software-as-a-service solution, using these use cases for all the 5 segments. So again, this is an important building block for our business unit, and this will be developed in the coming months. And with that, I would like to hand it back to Kristian for the summary.

[Kristian Kuvaas Johansen, Chief Executive Officer]

Thank you, Jan. So let's just go through the summary of today's presentation. So again, Q1 2021 net revenues of about $75 million; a free cash flow of about $84 million, which yields a strong return to shareholders through a quarterly dividend that we maintain at USD 0.14 per share. In addition to that, we bought back 160,000 shares under our share buyback program, which will continue, of course, in Q2. Then we have updated our 2021 financial guidance today. So multiclient investments are expected to be somewhere between $150 million and $180 million, and that's from more risk-sharing, more joint ventures. And last but not least, taking a cautious stand on new investments unless clients are backing us with good prefunding. We continue to outperform as a sector in terms of cash flow and return on capital employed, and that's obviously our goal for the future as well. And last but not least, our goal of industry-leading distribution to shareholders remains strong. I'm extremely excited of delivering on our diversification strategy -- or at least the first step on that strategy, so we announced the acquisition of 4C today. That provides exposure to the rapidly growing wind energy data and insights. And as Jan said today, we've also signed strategic partnerships within other focus areas for New Energy Solutions. So with that, I want to thank you for your attention this morning. Hopefully, we get to see each other later this year. Stay safe, and have a great day.