Fitch Downgrades Petroleum Geo-Services ASA's Sr Unsec Debt To 'CCC'.

Business Editors

CHICAGO--(BUSINESS WIRE)--Nov. 25, 2002

Fitch Ratings has downgraded Petroleum Geo-Services ASA (PGO) senior unsecured debt rating to 'CCC' from 'B' and downgraded PGO's trust preferred securities to 'CCC-' from 'B-'. The Rating Outlook remains Negative.

The downgrade of PGO's ratings is subsequent to the company's recent announcement that based on preliminary information it estimates that it will realize one-time non-cash charges in the third quarter of 2002, plus impairment of goodwill, which in total are likely to be in the estimated range of $1.1-1.2 billion. These third quarter charges relate primarily to writedowns of the value of PGO's investments in its Banff FPSO vessel, its seismic data library and its Atlantis subsidiary. Shareholders' equity would be negatively impacted by the impairment of goodwill estimated at roughly $180-$200 million.

In connection with the one-time charges and impairment described above, PGO has commenced discussions with various creditors to obtain waivers of financial covenant defaults that might result from such charges and impairment. While there can be no assurances, management is optimistic that its effected creditors will waive the financial covenants which PGO violated with its latest writedown. Although PGO is current on all payment obligations under its indebtedness, Fitch is not as optimistic as management that it will get its lines of credit extended under similar terms to its existing facility. Fitch also has concerns that PGO will not complete asset sales necessary to retire maturing debt, namely the $250 million 6.25% senior notes due November 2003.

The ratings remain on Rating Outlook Negative reflecting the potential for a prolonged weak seismic pricing environment. While PGO has a good seismic backlog, the industry continues to experience soft demand for marine seismic data and weak margins due to excess capacity of marine vessels and streamers. In the near term this could delay PGO's efforts to reduce the company's debt obligations beyond the level expected from the sale of non-core assets.

PGO is a technologically focused oilfield service company principally involved in two businesses: geophysical seismic services and production services. PGO acquires, processes, manages and markets 3D, time-lapse and multicomponent seismic data. This data is used by oil and gas companies in exploration for new reserves, development of existing reservoirs and management of producing oil and gas fields.

In its production services business PGO own and operates four floating, production storage and offloading vessels (FPSOs) and operates numerous offshore production facilities for oil and gas companies to produce from offshore fields more cost effectively.