TGS: Contract Wins And Index Removal Will Shape Balanced Forward Outlook

Analysts have lowered their price target on TGS to NOK 70 from NOK 88, reflecting a slightly higher discount rate and a modestly richer future P E multiple. Together, these factors point to a less favorable risk reward profile.

Analyst Commentary

Analysts have adopted a more cautious stance on TGS following the latest reassessment of its valuation and growth outlook, with the reduced price target reflecting concerns around both execution risk and the sustainability of earnings.

While the headline rating shift signals a more defensive positioning, views remain mixed, with some highlighting potential upside if the company can deliver on cost discipline and capital allocation, and others stressing downside risk if industry conditions fail to improve as expected.

Bullish Takeaways

• Bullish analysts see the NOK 70 price target as already embedding a meaningful risk discount, suggesting limited downside if execution remains broadly on track.
• They note that even with the lower target, TGS could trade at a modest premium to certain peers, which they argue is justified by its data library, balance sheet strength, and optionality in future project awards.
• Supporters highlight that a richer forward P/E multiple assumes some earnings recovery, leaving room for upside if demand for subsurface data normalizes faster than currently modeled.
• They also point to management’s track record of cost control and disciplined capital allocation as potential catalysts for re-rating if the macro backdrop stabilizes.

Bearish Takeaways

• Bearish analysts argue that the downgrade better reflects the risk that TGS may struggle to consistently meet growth expectations in a more volatile spending environment among exploration and production customers.
• They caution that the richer future P/E multiple leaves less margin for error on execution, especially if project delays or weaker late sales pressure near-term earnings.
• Concerns also center on the cyclicality of TGS’s end markets, with the lower target implying reduced confidence that current cash flows can be sustained through potential downturns.
• Bearish analysts additionally flag that, at the revised target, the risk-reward profile is no longer compelling versus other energy- and data-exposed names that offer similar or better growth at comparable valuations.

What's in the News

• Signed a three-year capacity agreement with Chevron for marine streamer and OBN acquisition services, with a minimum firm commitment of 18 months and immediate collaboration via the St Malo 4D OBN reservoir monitoring contract in the Gulf of America (Client Announcements)
• Secured long-term extensions from a major international energy company for PRM and 4D OBN reservoir monitoring and source services on the Norwegian continental shelf, with firm terms to 2030 and options to extend to 2035 (Client Announcements)
• Launched the Amendment West 1 multi-client ultra-long offset OBN survey in the Gulf of America. This expands node coverage by over 5,400 square kilometers using Gemini enhanced frequency source and ZXPLRe nodes, with acquisition running to mid-March 2026 (Client Announcements)
• Announced major new multi-client 3D seismic projects offshore Brazil, including Pelotas Norte Phase I and PAMA Phase II. Together these projects add more than 26,000 square kilometers of GeoStreamer-based coverage ahead of upcoming bid and license rounds (Product-Related Announcements)
• Removed from the Euronext 150 Index and dropped from the Oslo OBX Total Return Index, indicating a reduced presence in key equity benchmarks (Index Constituent Drops)

Valuation Changes

• Fair Value: Unchanged at NOK 87.90, indicating no revision to the underlying long term intrinsic value estimate.
• Discount Rate: Risen slightly from 7.20 percent to approximately 7.21 percent. This implies a marginally higher required return and modestly lower present value of future cash flows.
• Revenue Growth: Essentially unchanged at around minus 4.43 percent. This signals a stable view on near term top line contraction.
• Net Profit Margin: Stable at roughly 7.45 percent, reflecting no material change in expected profitability levels.
• Future P/E: Risen slightly from about 18.31x to 18.53x. This indicates a modestly richer valuation multiple applied to forward earnings.