UPDATE 2-PGS 2011 outlook disappoints, shares dip

* PGS sees 2011 EBITDA of $500 million, up from 2010

* 2011 guidance below Thomson Reuters StarMine f’cast

* PGS to propose 2011 dividend of 1.1 NOK per share

* Shares fall 2.1 percent

(Adds CEO, analyst, share reaction, details)

By Victoria Klesty

OSLO, Dec 14 (BestGrowthStock) – Norwegian oil services company
Petroleum Geo-Services (PGS.OL: ) said it would begin paying
dividends next year, the latest sign of a buoyant outlook for
offshore oil exploration, in spite of BP’s (BP.L: ) oil spill.

However, PGS, which runs a fleet of ships that map out the
rock layers beneath the seabed by seismic scans to find oil and
gas deposits, issued weaker earnings guidance for 2011 than
analysts had forecast, hitting its shares.

PGS said it would pay a dividend for the first time since
2007 and expects to hand out about $40 million to shareholders
in 2012, based on 2011 earnings, or about 1.1 Norwegian crowns
per share, adding it intends to distribute 25 to 50 percent of
future net income as dividends.

The dividend move echoes a series of recent oil services
industry mergers which continue to point to a confident outlook
for offshore oil and gas exploration, which some analysts said
could be hit by BP’s Gulf of Mexico oil spill this summer.

On Monday, U.S. conglomerate GE (GE.N: ) said it had agreed a
$1.3 billion takeover of offshore drilling pipe maker Wellstream
(WSML.L: ), while Aberdeen-based Wood Group (WDGJY.PK: ) said it had
agreed a $955 million deal to buy unlisted rival PSN. [ID:nSGE6BC05T]

PGS said it was “entering 2011 with a resilient order book”
and that there was stable marine contract pricing for booked
work while the prospect pipeline was good.

Nonetheless, shares in PGS were down 2.1 percent to 78.6
crowns by 0840 GMT, underperforming a 0.2 percent drop in the
Oslo benchmark index (.OSEBX: ).

SLOWER RECOVERY

PGS said it saw 2011 EBITDA of $500 million.

That fell short of analysts’ mean forecast for $573.8
million in 2011, according to estimates from Thomson Reuters
StarMine.

PGS’s news comes with oil prices near $90 a barrel for the
first time in two years.

The sector is still awaiting a full rebound though. Last
week, Norway’s flagshp oilfield engineering services provider
Aker Solutions (AKSO.OL: ) warned that tenders and project
startups for its subsea and drilling operations were taking
time. [ID:nLDE6B70VN]

PGS repeated its 2010 guidance for $450 million.

“It seem to me the recovery in the seismic industry has
taken a bit longer than I had expected given how long we have
had an oil price of 80-90 dollars,” said Simmons & Company
analyst Ian Macpherson.

“The 2011 guidance was a bit below consensus which is why
the share is down in Oslo,” he added.

With the Gulf of Mexico on hold, Brazil is seen as an
opportune market. PGS Chief Executive Jon Erik Reinhardsen said
Brazil, representing 15 percent of company revenue this year,
would be PGS’s most important market going forward.

“We see… a phenomenally growing need for production
seismic as we move forward in Brazil,” he said.

It said it saw capital investments, excluding new builds, of
$180 million in 2011.

It added it expected multi-client cash investments in the
range of $180-200 million.

It added costs were set to increase next year due to rising
fuel costs and research and development spending, along with an
increase in yard stays from vessel upgrades and the GeoStreamer
rollout.
(Additional reporting by Henrik Stolen; Editing by Mike Nesbit)

UPDATE 2-PGS 2011 outlook disappoints, shares dip