Arrow Prospectus - PGS

ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING
9. THE CAPITAL OF THE COMPANY
9.1 CASH FLOWS
9.1.1 Background
Arrow will require capital to fund newbuildings, conversions, debt service and potential acquisitions. Arrow
anticipates that by taking into account generally expected market conditions, internally generated cash flow,
funds raised from the Offering and borrowings under the bank facilities, the funds will be sufficient to fulfil the
commitments referred to under section 9.6 “Investments”.
It is the Company’s intention to fund its future capital requirements initially through borrowings under the
Company’s bank facilities and to repay those borrowings from time to time with funds from operations. The
Company believes that funds from operations, funds available under its bank facilities and funds from the
Offering will be sufficient to support the Company’s growth strategy, which may, in addition to newbuildings
and conversions, include the acquisition of existing vessels. The adequacy of available funds will depend on
many factors, including the further growth of the business, capital expenditures, market development,
competition and potential acquisitions. Accordingly, the Company may require additional funds and seek to raise
such funds through issuing new equity and debt.
Arrow aims to have a stable, long-term funding structure, which is based on mortgage loans to the vessel-owning
companies backed by parent company guarantees, in order to secure competitive margins.
The funding of the Company is described in detail in section 9.3 “Capitalisation and indebtedness”, section 9.4
“Changes in capitalisation since 31 March 2007” and section 9.5 “Borrowings”.
Arrow Seismic has since inception been in an investment phase and has during 2006 responded to a strong
growth in the marine seismic market growing its fleet of vessels and new buildings from three to nine vessels,
whereof four state-of-the-art high capacity new buildings due for delivery in 2008/09 and three cargo vessels
planned converted into 2D/Source vessels in 2007/08, bringing the total investment programme to about USD
600 million since incorporation.
To supply Arrow with the equity required to finance the investment in the two first new buildings, Arrow
arranged a private offering of about USD 50 million in February 2006.
Late 2005 the Group entered into an agreement for USD 170 million in long-term mortgage financing of the
“Geo Atlantic” and the two first seismic new buildings due for delivery in 2008. In September 2006, the Group
entered into an agreement for USD 13.5 million in long-term mortgage financing of the acquired vessel “CGG
Laurentian”.
By the end of the first half of 2007 the Group expects to sign agreements for the refinancing of the above
mentioned facilities and long term financing of the last two new buildings expected for delivery in 2009 and the
three cargo vessels planned for conversion to 2D/Source in 2007/2008.
The Company has mid April issued a six month NOK 275 million commercial paper. The company expects to
refinance the commercial paper partly through a share issue in combination with an IPO.
Based on these funding activities, the Group will secure full financing of its newbuilding and conversion
programme. The debt will be based on a long-term funding structure with an average duration of about 9 years
which is based on mortgage loans to the vessel-owning companies backed by parent company guarantees from
the Company. The lenders are reputable Norwegian and international shipping banks.
Based on existing long term charter parties for “Geo Atlantic” and “CGG Laurentian”, the Company expects that
it from Q1 2007 will have a solid cash flow from operating activities of about USD 15 million per year. This
cash flow will be further improved from Q1 2008 when the company expects to take delivery of newbuild 532
on a 3 year time charter.
Finally, the Company expects to secure employment for vessels currently open for contract at rates which further
will improve the operating cash flow.
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