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Disrupting Decision-making
Barclay’s CEO Energy-Power Conference
September 5, 2018
Disclaimers
2
Forward-Looking Statements
The information herein contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may include information and other statements that
are not of historical fact. Actual results may vary materially from those described in these forward-looking statements. All forward-looking
statements reflect numerous assumptions and involve a number of risks and uncertainties. These risks and uncertainties include the risks
associated with the timing and development of ION Geophysical Corporation's products and services; pricing pressure; decreased
demand; changes in oil prices; and political, execution, regulatory, and currency risks. These risks and uncertainties also include risks
associated with the WesternGeco litigation and other related proceedings. We cannot predict the outcome of this litigation or the related
proceedings. For additional information regarding these various risks and uncertainties, including the WesternGeco litigation, see our
Form 10-K for the year ended December 31, 2017, filed on February 8, 2018. Additional risk factors, which could affect actual results, are
disclosed by the Company in its fillings with the Securities and Exchange Commission ("SEC"), including its Form 10-K, Form 10-Qs and
Form 8-Ks filed during the year. The Company expressly disclaims any obligation to revise or update any forward-looking statements.
Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures. These measures should not be considered in isolation or as a
substitute for measures prepared in accordance with GAAP. These non-GAAP measures should be evaluated only in connection with our
GAAP results, including those in our Form 10-K. Reconciliations of these non-GAAP measures to the most directly comparable GAAP
measures are in the appendix.
ION at a Glance
50 years in business
23 years on the NYSE (ticker: IO)
$400B E&P market
$198M 2017 revenue
$64M 2017 Adjusted EBITDA
500 employees
8% revenues invested in R&D
500 patents and pending applications
3
Delivering the power of data-driven decision-making
Technology leader with a history of innovation
Aligning offerings to select growing E&P and adjacent markets
Asset light with creative business models and high returns
HEADQUARTERS
HOUSTON,TEXAS
ABOUT
Please see the appendix for reconciliations to comparable GAAP measures.
At ION, we Deliver the Power of Data-driven Decision-making
4
Powering data-driven decisions>>
Improving E&P decision-making
Enhancing reservoir management
Optimizing offshore operations
We develop and leverage innovative technologies,
creating value through data capture, analysis and
optimization to enhance critical decision-making,
enabling superior returns.
ION is Organized into Three Business Segments
5
E&P Technology & Services Operations OptimizationOcean Bottom
Integrated Technologies
Create digital data assets and
deliver services that improve
decision-making, mitigate risk and
maximize portfolio value.
Develop mission-critical subscription
offerings and engineering services
that enable operational control and
optimization.
Integrate ION’s advanced
technologies to accelerate data
capture and delivery for enhanced
reservoir decision-making, and
improved returns.
E&P Technology & Services
6
E&P Technology & Services Operations OptimizationOcean Bottom
Integrated Technologies
Create digital data assets and deliver services that improve
decision-making, mitigate risk and maximize portfolio value.
E&P Advisors
Provide technical, commercial and
strategic advice to evaluate and market
oil and gas opportunities/assets world-
wide, sharing in the value we create.
Imaging Services
Combine leading technologies and
experience to maximize image quality,
delivering enhanced subsurface
characterization.
Multi-client Data Library
Leverage world-class geoscience skills to
create global digital data assets that we
license to multiple E&P companies to
optimize their investment decisions.
Operations Optimization
7
Develop mission-critical subscription offerings and engineering
services that enable operational control and optimization.
Devices
Develop intelligent devices controlled by
our software to optimize operations.
Software
Leverage leading data integration
platform to control and optimize
operations in real-time.
E&P Technology & Services Operations OptimizationOcean Bottom
Integrated Technologies
Offshore Services
Our experts deliver in-field optimization
services, equipment maintenance and
training to get the most out of our offerings.
Ocean Bottom Integrated Technologies
8
Integrate ION’s advanced
technologies to accelerate OBS
data capture and delivery for
enhanced reservoir decision-
making, and improved returns.
E&P Technology & Services Operations OptimizationOcean Bottom
Integrated Technologies
Growing, production-focused
$1B ocean bottom seismic
(OBS) market
4Sea system delivers step
change in image quality, cost,
QHSE and turnaround time
Asset light recurring revenue
business model shares in the
value our technology delivers
Where the E&P Life Cycle is Today
Higher oil prices improve cash flow
Cash flow growth allows increased investment
Higher reinvestment grows production
Prices drop, hurting cash flow
Cash flow declines, forces spending cuts
Cash flow growth allows increased investment
2015 2016 20172011 2012 2013 20142010 2018 20202019
Higher reinvestment grows production
Low reinvestment hurts production
Production growth outpaces demand
Landscape
Today
9 Sources: IHS, Morgan Stanley
Higher oil prices improve cash flow
Production undershoots demand
E&P market recovering: healthy global demand and moderated supply
Operational cash flow growth: provides opportunity for increased investment
Strong Demand Growth, Supply Increasingly ChallengedBy 2025, Rystad estimates 35 mbbl/d of new supply is required to meet demand
10
Global liquids*production
Million bbl/d
20
40
60
80
100
120
0
1980 1990 2000 2010
Global liquids
production 1980-2016Real decline
ForecastHistory
~1%
To meet demand in
2025, the industry
needs to achieve 10
mbbl/d net growth
50
25
25
Most will
come from
brownfields
New
fields
35 mbbl/d from
new fields
10
Replace
50
mmbbl/d
of decline
Infill,
workover
and
IOR**
Declin
era
tes
Future sources
Source: Rystad Energy *Liquids includes crude oil, condensate, NGLs and refinery gains; **IOR = increased oil recovery
• OPEC routinely
under producing
• Rising shale costs
and infrastructure
constraints
• After years of
over-supply, we
could be heading
for a supply crunch
Unsustainably Low Conventional Resource Replacement RatesIncreasing requirement to re-invest in conventional resources
11
0%
50%
100%
150%
2008 2010 2012 2014 2016 2018
Conventional RRR
0%
100%
200%
300%
400%
500%
600%
700%
2008 2010 2012 2014 2016 2018
Shale RRR
9%ShaleShort-cycled, low-costnewcomer
40%OPEC
51%ROWLong cycledand rational
Politically driven
behavior96.7
mmbbld
2017
Global Average RRR <100% since 2013 and 81% in 2017
Source: Rystad Energy
ION Programs Well Positioned for Upcoming License RoundsClients looking to replace reserves and restructure portfolios w/ lower cost resources
12
Active Licensing Rounds
LEGEND
3D Programs
BasinSPAN
In Progress
ION DATA LIBRARY
ION programs are relevant to 63 of the 111 active or
anticipated offshore license rounds in 2018-2019.
Source: ION, July 2018
BasinSPAN Programs Value Proposition
13
Represent an efficient investment in risk mitigation
– Frontier exploration / entering new basins
– Evaluating new acreage – farm-in opportunities
– Long term regional strategy
Access terms licensing round commitments
– 2D seismic:
$1 million to $20 million
– 3D seismic commitments:
$5 million to >$100 million
– Well commitments:
1 to 3 well commitments
$60 million to $150 million each
– Signing bonuses:
Tens to hundreds of millions of dollars
– Production sharing, tax, royalties
Regional
Basin
Knowledge
BasinSPAN Expl 2D HD 2D 3D Drilling
Risk
Cost
$500
$250
$750
$0
Trap,
Charge,
Reservoir
Risk
Risk
Risk
The Truth
Risk
HC
Volume &
Fluid Type
$200
$100
$50
$150
$0
$1,000
Risk
($ in
mill
ion
s)
Value of Knowledge
Multi-Client Data Library
ION’s rigorous project selection process yields multi-client data that
continues to generate revenue long after completion of the original project
14
($ in millions)
Note: Vintage year represents the year that a program was complete (year data went “on-the-shelf”)
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Vintage 2007 & Prior Vintage 2008 Vintage 2009 Vintage 2010 Vintage 2011 Vintage 2012
Vintage 2013 Vintage 2014 Vintage 2015 Vintage 2016 Vintage 2017 & WIP
E&P Technology & Services: Quality of RevenueBiggest driver of our business in the near-term
15
E&P Advisors
• Further penetration of consulting
services along with emergence of
success-based business models
• Consulting services 1.2-1.5X
• Success-based services 3-10X+
Multi-client Programs
• Earning 3-10X+ multiple on
asset investments
• Reprocessing and new
acquisition projects
• Growth engine near-term
Imaging Services
• Historically low margin business
with low cash generation
• Intentionally re-allocated resources
to support higher return businesses
• Proprietary work is high end,
keeping tools sharp
0
50
100
FY13 FY14 FY15 FY16 FY17
Imaging Services Revenue ($M)
0
5
10
15
20
FY16 FY17
E&P Advisors Revenue ($M)
Success-based Services Consulting Services
0
100
200
300
FY09 FY11 FY13 FY15 FY17
Multi-client Program Revenue ($M)
Multi-client 2D Example: Yucatan ProgramFirst Glimpse of Hydrocarbon Potential
Data has been selected from the UT data base (red lines –
approx. 9,300miles /15,000 kms) for “YucatánSPAN” and will be
incorporated into the GoM SPAN programs.
CHALLENGE
• It was becoming clear Mexico was going
to open up for international investment
and E&P companies needed to quickly
evaluate the potential of this area
SOLUTION
RESULTS
• Leveraged existing regional knowledge
base and data set in US Gulf of Mexico
• Integrated and reimaged 1970’s academic
data using our cutting-edge algorithms and
Gulf of Mexico expertise
• Generated $41M revenue in 2 years, >10X
return less royalty
• Unique insight gained from program was
used to drive ION’s Mexico strategy0
10
20
30
40
50
2013 2014 2015 2016
Yucatan Financials
Revenue
Existing ION Data
Yucatan Program
Mill
ion
s
16
Multi-client 3D Example: Campeche ProgramMoving Closer to the Reservoir
17
Data has been selected from the UT data base (red lines –
approx. 9,300miles /15,000 kms) for “YucatánSPAN” and will be
incorporated into the GoM SPAN programs.
CHALLENGE
• Quickly and cost-effectively deliver 3D
seismic data insights prior to bid round
• Complex geology
• Competitive landscape
SOLUTION
RESULTS
• Reprocess 20 legacy data sets as a multi-
client product in unprecedented turnaround
time by leveraging ION’s unique and
proprietary software platform
• Imaging Services + E&P Advisors + Ventures
• Project size equivalent to South Carolina
• Data available for investment decisions
• Significant imaging uplift to inform E&P
investment decisions for multiple years
• Plan to exceed initial $60-80M revenue
projections, has long-term sales potential
Data processed by ION in partnership with Schlumberger
Campeche Program Offshore Mexico
ION proprietary imaging supported Talos’ >1B discovery
Campeche 3D
Reimaging Program
E&P Advisors Example: Tanzania License Round ManagementAttracting Maximum Investment
18
-
10
20
30
40
50
60
2012 2013 2014
Revenue
Data has been selected from the UT data base (red lines –
approx. 9,300miles /15,000 kms) for “YucatánSPAN” and will be
incorporated into the GoM SPAN programs.
CHALLENGE
• Tanzanian government wanted to attract
maximum investment in an upcoming
license round
SOLUTION
RESULTS
• Leveraged our expertise and advisory
services to:
• evaluate data to recommend block
sizes, locations and commercial value
• prescribe and acquire additional data
• promote the license round
• 2 blocks carved out for Tanzania to operate
• 5 / 8 blocks awarded, generating significant
investment to Tanzania
• Generated $52M ION revenue from
Tanzania bid round package and program
sale, >3X returns less royalty
4th Tanzania
Offshore License
Round 2013-15
8 blocks on offer
Tanzania 4 & Bid Round Data Package Financials
Mill
ion
s
Exciting Opportunities in Data-Driven Decision Optimization
19
ION >> Powering data-driven decisions
Broadened market:
Moved closer to the
reservoir, diversifying
into adjacent markets
Streamlined business:
Reduced costs and
focused on offerings with
highest return potential
Exploration recovery:
Impending resumption
in spending to replace
conventional resources
Scalable model:
Fixed costs with high
leverage and potential
to generate EBITDA
Evolution of the Cycle
21 Source: Bloomberg, Morgan Stanley
Initial Rebalancing (H2 2016):
• Inventory levels reduce
• Oil prices start to improve
Recovery (2017)
• Balance sheets start to repair
• E&P spending increases
Seismic spend will
be delayed relative to
E&P spend recovery
Key Leading Indicators of Market Recovery
We are seeing improvements in all four key leading indicators
Historical E&P Spending
22 Source: Barclay’s
23
ION FY 2017 Financial Highlights
$33 $34173
198
$0
$50
$100
$150
$200
$250
FY16 FY17
Revenue ($m)
OBITOps OptimizationE&P T&S
11
64
$0
$10
$20
$30
$40
$50
$60
$70
FY16 FY17
Adjusted EBITDA ($m)
(5.80)
(1.61)
$(6.00)
$(5.00)
$(4.00)
$(3.00)
$(2.00)
$(1.00)
$-
FY16 FY17
Adjusted EPS
(66)
(19)
-$70
-$60
-$50
-$40
-$30
-$20
-$10
$0
FY16 FY17
Adjusted Net Loss ($m)
Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures. See the appendix for reconciliations to their comparable GAAP measures.
Revenue of $198m
– Up 14% vs FY16
Up 45%, excluding Ocean Bottom Integrated Technologies
– YoY improvements driven by continued sales of 3D multi-
client reimaging programs and newly launched programs
Net loss of $30m in FY17 vs $65m in FY16
Adjusted net loss of $19m in FY17 vs $66m in FY16
Adjusted EPS of ($1.61) in FY17 vs ($5.80) in FY16
Adjusted EBITDA of $64m vs $11m in FY16
24
ION 1H-18 Financial Highlights
$33 $34
Revenue down 26% vs 1H-17
– E&P Technology & Services down 30%
– Operations Optimization down 13%
– No Ocean Bottom Integrated Technologies revenues
Net loss of $44m vs $34m in 1H-17
Adjusted net loss of $41m vs $29m in 1H-17
Adjusted EPS of $(3.03) vs $(2.43) one year ago
Adjusted EBITDA of $(8m) vs $14m in prior year
79
58
$0
$30
$60
$90
1H-17 1H-18
Revenue ($m)
OBITOps OptimizationE&P T&S
14
(8)
-$10
-$5
$0
$5
$10
$15
1H-17 1H-18
Adjusted EBITDA ($m)
(2.43)
(3.03)
$(3.50)
$(3.00)
$(2.50)
$(2.00)
$(1.50)
$(1.00)
$(0.50)
$-
1H-17 1H-18
Adjusted EPS
(29)
(41)
-$50
-$40
-$30
-$20
-$10
$0
1H-17 1H-18
Adjusted Net Loss ($m)
Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures. See the appendix for reconciliations to their comparable GAAP measures.
ION Financial HighlightsCash Flow $m
25
FY16 FY17 1H-17 1H-18
Net income (loss) $ (64.7) $ (29.4) $(33.0) $(43.8)
Non-cash adjustments 58.8 68.5 36.2 24.5
Working capital 7.5 (11.1) 0.3 19.1
Net cash from operations 1.6 28.0 3.5 (0.2)
Multi-client investment (14.9) (23.7) (8.5) (13.8)
PP&E capital expenditures (1.5) (1.1) (0.9) (0.4)
Other investing activities 2.7 - - -
Net cash from investing activities (13.6) (24.8) (9.4) (14.2)
Payment to repurchase bonds (15.0) - (3.2) (29.7)
Costs associated with issuance of debt (6.7) (0.1) - -
Net Proceeds from issuance of stock - - - 47.2
Repurchase of common stock (1.0) - - -
Borrowings under revolving credit facility 10.0 - - (10.0)
Other financing activities (8.9) (3.5) (0.3) (1.1)
Net cash from financing activities (21.6) (3.6) (3.5) 6.4
Effect of change on f/x 1.4 (0.3) (0.2) 0.3
Net change in cash (32.3) (0.6) (9.5) (7.7)
Cash & restricted cash (beg. of period) 84.9 52.7 53.4 52.4
Cash & restricted cash (end of period) $ 52.7 $ 52.1 $43.9 $44.7
FY17
– Net cash flows from operations of $28m vs $2m in
FY16
– Total net cash flows of $(1m) vs $(32m) in FY16
– Total liquidity (cash & revolver availability) of $68m at
Dec-17
1H-18
– Net cash flows from operations of $0m in 1H-18 vs
$4m in prior year
– Total net cash flows (including investing & financing
activities) of $(8m) in 1H-18 vs $(10m) in prior year
– Total liquidity of $67m at Q2-18, consisting of $44m
cash and $23m of available and undrawn borrowing
capacity under credit facility
– Current debt outstanding of $0.5m
– Long-term debt of $121m due December 2021
– Total net debt of $73m
Reconciliation of Non-GAAP Financial MeasuresAdjusted EBITDA (in thousands)
26
Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be
considered in isolation from or as a substitute for net income (loss) or cash flow measures prepared in accordance with generally
accepted accounting principles or as a measure of profitability or liquidity. Adjusted EBITDA may not be comparable to other similarly
titled measures of other companies. The Company has included Adjusted EBITDA as a supplemental disclosure because its
management believes that Adjusted EBITDA provides investors a helpful measure for comparing its operating performance with the
performance of other companies that have different financing and capital structures or tax rates.
Twelve Months Ended December 31, Six Months Ended June 30,
2017 2016 2018 2017
Net loss $ (29,377 ) $ (64,727 ) $ (43,839 ) $ (33,049 )
Interest expense, net 16,709 18,485 6,747 8,705
Income tax expense (benefit) 24 4,421 1,226 1,984
Depreciation and amortization expense 65,998 55,310 24,335 30,963
Accrual (reduction) of loss contingency related to legal proceedings 5,000 (1,168 ) — 5,000
Loss on bond exchange — 2,182 — —
Recovery of INOVA bad debts — (3,983 ) — —
Stock appreciation rights expense 6,141 — 3,738 —
Adjusted EBITDA $ 64,495 $ 10,520 $ (7,793) $ 13,603
Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
As Reported
Special
Items As Adjusted As Reported Special
Items As Adjusted
Net revenues $ 58,251 $ — $ 58,251 $ 78,557 $ — $ 78,557
Cost of sales 52,915 — 52,915 56,838 — 56,838
Gross profit 5,336 — 5,336 21,719 — 21,719
Operating expenses 40,495 (3,738) (1) 36,757 39,203 — 39,203
Loss from operations (35,159 ) 3,738 (31,421 ) (17,484 ) — (17,484 )
Interest expense, net (6,747 ) — (6,747 ) (8,705 ) — (8,705 )
Other income (expense), net (707 ) — (707 ) (4,876 ) 5,000 (2) 124
Income tax expense 1,226 — 1,226 1,984 1,984
Net loss (43,839 ) 3,738 (40,101 ) (33,049 ) 5,000 (28,049 )
Net income attributable to
noncontrolling interest (453 ) —
(453 ) (734 ) —
(734 )
Net loss attributable to ION $ (44,292 ) $ 3,738 $ (40,554 ) $ (33,783 ) $ 5,000 $ (28,783 )
Net loss per share:
Basic $ (3.31 ) $ (3.03 ) $ (2.85 ) $ (2.43 )
Diluted $ (3.31 ) $ (3.03 ) $ (2.85 ) $ (2.43 )
Reconciliation of Non-GAAP Financial MeasuresAdjusted Net Income (Loss) (in thousands)
27
The financial results are reported in accordance with GAAP. However, management believes that certain non-GAAP performance measures may
provide users of this financial information, additional meaningful comparisons between current results and results in prior operating periods. This
adjusted income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for
income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP.
(1) Represents stock appreciation right awards expense(2) Represents an accrual related to the WesternGeco legal contingency during the first quarter 2017(3) Represents severance charges during the second quarter 2016(4) Represents $1.2 million reduction in the WesternGeco legal contingency and $4.0 million recovery of INOVA bad debts, partially offset by a $2.2
million loss on extinguishment of debt associated with the Company's second quarter 2016 bond exchange
Twelve Months Ended December 31, 2017 Twelve Months Ended December 31, 2016
As Reported Special
Items As Adjusted As Reported Special
Items As Adjusted
Net revenues $ 197,554 $ — $ 197,554 $ 172,808 $ — $ 172,808
Cost of sales 121,915 — 121,915 136,776 (1,077 ) (3) 135,699
Gross profit 75,639 — 75,639 36,032 1,077 37,109
Operating expenses 84,338 (6,141 ) (1) 78,197 79,203 (932 ) (3) 78,271
Loss from operations (8,699 ) 6,141 (2,558 ) (43,171 ) 2,009 (41,162 )
Interest expense, net (16,709 ) — (16,709 ) (18,485 ) — (18,485 )
Other income (expense), net (3,945 ) 5,000 (2) 1,055 1,350 (2,969 ) (4) (1,619 )
Income tax expense 24 — 24 4,421 — 4,421
Net loss (29,377 ) 11,141 (18,236 ) (64,727 ) (960 ) (65,687 )
Net income attributable to
noncontrolling interests (865 ) —
(865 ) (421 ) —
(421 )
Net loss attributable to ION $ (30,242 ) $ 11,141 $ (19,101 ) $ (65,148 ) $ (960 ) $ (66,108 )
Net loss per share:
Basic $ (2.55 ) $ (1.61 ) $ (5.71 ) $ (5.80 )
Diluted $ (2.55 ) $ (1.61 ) $ (5.71 ) $ (5.80 )
Multi-client Process
28
Acquire permit to conduct survey from
government or secure rights to reprocess
existing survey
Seek client interest in program & secure
underwriting (discounted rate for early commitment)
Design the survey with input from
underwriters, local stakeholders &
geological experts
Sanction the program if underwriting >75% of investment and looks
promising
Oversee survey acquisition by third
party contractor
Receive, process, and interpret the data
Survey “goes on the shelf” when processing
and interpretation is complete
Clients can purchase data library off the
shelf
Data is fully amortized after 4 years, but we often have marketing
rights for 10 years