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Integra brochure
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November 09, 2011

Integra Group announces a business combination

NEITHER THIS PRESS RELEASE NOR ANY PART OR COPY OF IT MAY BE TAKEN OR TRANSMITTED INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE RUSSIAN FEDERATION OR DISTRIBUTED DIRECTLY OR INDIRECTLY OR REDISTRIBUTED INTO THE UNITED STATES, AUSTRALIA, JAPAN OR THE RUSSIAN FEDERATION OR TO ANY RESIDENT THEREOF.


Integra Group announces a business combination of its formation evaluation segment with Geotech Holding.
Intention to seek admission of GDRs of the combined business to the London Stock Exchange and to spin-off securities in the combined business to eligible holders of Integra Group shares and GDRs.

Introduction
Integra Group (LSE: INTE) (“Integra Group” or the “Company”) announces that Integra Group, Schlumberger Oilfield Holdings Limited (“Schlumberger”), Geotech Oil Services Holding Limited (“GOSH”) and IG Seismic Services Limited (“IGSS”) have entered into a conditional agreement to combine IGSS, the entity through which Integra Group and Schlumberger conduct their land and transition zone seismic joint venture in Russia and the CIS, with GOSH's seismic business, conducted through Geotech Holding JSC (“Geotech Holding”). The combination will be effected through the transfer by GOSH of 99% of the issued share capital of Geotech Holding to IGSS in exchange for newly issued shares in IGSS (the “Transaction”). Following completion of the Transaction (“Completion”), Integra Group will hold 36%, Schlumberger will hold 12%, and GOSH will hold 52% of the entire enlarged issued share capital of IGSS.
Completion is expected to occur in December 2011, subject to satisfaction of certain conditions, including approval of the Transaction by Integra Group shareholders at the Extraordinary General Meeting of Integra Group which is expected to be held on 5 December 2011 and the receipt of certain anti-trust approvals.

Anticipated Benefits of the Transaction
It is expected that the Transaction will create one of the largest land seismic companies globally, with a leading position in the Russian and CIS market and access to all the key customers and provinces in the region. The combined seismic business will offer high quality seismic acquisition, data processing and interpretation services and will benefit from the wider application of IGSS’s transition zone capabilities and access to certain interpretation and land seismic and data processing software (Omega 2 and Petrel, both of which are trademarks of Schlumberger group) from the Schlumberger group as well as the right to use Schlumberger group’s proprietary “UniQ” technology and tailored training. The access to the defined Schlumberger group proprietary technologies and training is expected to add significant value to the services being delivered to clients.
Annual cost savings of over US$15MM are expected to be achieved from optimisation of logistical and maintenance facilities and other overheads in the second year from Completion, and further revenue and cost benefits are also expected from improved asset utilisation and logistics.

Proposed Admission and Proposed Dividend in Specie
In connection with the Transaction, Integra Group, Schlumberger, GOSH and IGSS have also agreed that, following Completion, IGSS will seek admission of its shares in the form of global depositary receipts (“GDRs”) to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's market for listed securities (“Proposed Admission”). It is currently targeted that Proposed Admission will occur by 30 September 2012. At the same time as Proposed Admission, Integra Group will spin-off the shares in IGSS held by Integra Group at Completion to its eligible shareholders and will procure the distribution of GDRs representing IGSS shares to the eligible holders of its GDRs in proportion to such shareholders’ and Integra Group GDR holders’ respective holdings in Integra Group (the “Proposed Dividend in Specie”). Simultaneously with the Proposed Dividend in Specie GOSH intends to spin-off shares in IGSS acquired by GOSH at Completion to its shareholders.
The securities underlying the Proposed Dividend in Specie will only be transferred, distributed or delivered, directly or indirectly, within the United States to qualified institutional buyers (or "QIBs"), as defined in Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to another exemption from, or in transactions not subject to, registration under the Securities Act, and to persons outside the United States in offshore transactions in reliance upon Regulation S of the Securities Act, except that distributions to residents of or persons located within the Russian Federation will be restricted to Russian qualified investors as defined under Russian law. In order to receive the Proposed Dividend in Specie, holders of Integra Group GDRs and Integra Group shareholders will be required to make certain representations, warranties and confirmations regarding their eligibility to receive such Proposed Dividend in Specie prior to the date of Proposed Admission. Integra Group will communicate separately with Integra Group GDR holders and shareholders prior to Proposed Admission to determine eligibility to receive the Proposed Dividend in Specie. Those holders of Integra Group GDRs who cannot or do not make such representations, warranties and confirmations will have their securities sold with the net sale proceeds being remitted to such holders according to their proportionate share in the net sale proceeds.

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Antonio Campo, CEO of Integra Group, commented:
“The creation of IGSS brought together Integra Group’s vast experience in Russia and the CIS with the unique seismic technology and expertise of Schlumberger. The combination of IGSS with Geotech Holding will create one of the largest land and transition zone seismic companies in the world, which will be ideally placed to benefit from the attractive trends in the Russian and CIS seismic markets as well as from the substantial synergy potential and economies of scale from the combination of two of the leading players in the industry.
“Following completion of the transaction, we intend to focus on continuing to expand Integra Group’s position as a leading provider of well construction, production and completion services and engineering and IPM solutions in Russia, offering a suite of complementary services and solutions for all stages of a reservoir’s life cycle to our clients.
“Following completion of the transaction, the proposed admission of IGSS and the proposed dividend in specie to be made by Integra Group, two focused listed pure-play oilfield service businesses will be created.”

Nikolay Levitskiy, President of Geotech Holding, commented:
“We have built Geotech Holding into one of the leading seismic companies in Russia, with strong market positions and infrastructure in all of Russia’s most important provinces and relationships with the key state-owned and private-sector oil and gas companies and Russian government agencies responsible for state-funded geological exploration.
“We share with IGSS’ shareholders a vision of creating a leading seismic player in the Russia and CIS seismic market, and see this transaction as an exciting opportunity for IGSS and Geotech Holding’s shareholders to share in the significant value creation potential from the combination of the two companies. Through this combination and the strategic support of Schlumberger we will be able to offer best-in-class service to all our clients delivered with our combined financial strength and the flexibility to serve our clients wherever and whenever.”

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Background to Geotech Holding
Geotech Holding is one of the leading land seismic companies in Russia. As of 30 June 2011, Geotech Holding had mobilised 51 seismic crews in Russia and is present in all of Russia’s key hydrocarbon provinces. In 2010 the revenues of GOSH’s geophysical works segment were US$343 MM and Adjusted EBITDA was US$89 MM. Geotech Holding includes some of the longest-established seismic businesses in Russia, and has strong relationships developed over many years with state-owned and private oil and gas companies as well as the Russian government agencies responsible for state-funded geological exploration.

Background to IGSS
IGSS is one of the leading land and transition zone seismic companies in Russia and the CIS. Pursuant to the land and transition zone seismic joint venture of Integra Group and Schlumberger, created in 2010, Integra Group indirectly holds 75% and Schlumberger holds 25% of the entire issued share capital of IGSS. As at 30 June 2011, IGSS had mobilised 32 seismic crews. IGSS conducts its seismic business principally in Russia, as well as in Kazakhstan and Uzbekistan. IGSS reported consolidated revenues of US$223 MM and consolidated Adjusted EBITDA of US$39 MM in 2010. IGSS has strong relationships with state-owned and private oil and gas companies in its countries of operations, developed through the long history of co-operation between these companies and Integra Group, Schlumberger, and IGSS’ subsidiaries in Russia and the CIS.

Advisors
In connection with the Transaction, Proposed Admission and the Proposed Dividend in Specie, Integra Group is advised by Morgan Stanley and Dewey & LeBoeuf LLP and Geotech Holding is advised by J.P. Morgan and Latham & Watkins LLP.

Shareholder Approval
The Transaction is subject to approval by Integra Group shareholders at the Extraordinary General Meeting which is to be held on 5 December 2011. Integra Group will distribute to all shareholders (and all eligible holders of GDRs via JPMorgan as depositary bank) a notification of Extraordinary General Meeting on 9 November 2011 setting forth the details for the meeting and the relevant record date. No approval from Integra Group shareholders is required with respect to Proposed Admission and the Proposed Dividend in Specie.
A circular containing details of the Transaction, Proposed Admission and the Proposed Dividend in Specie and details of the Extraordinary General Meeting will be published on Integra Group’s website at http://www.integra.ru/eng/investors/corporate_actions/. Access to this document is subject to certain restrictions.

Conference Call
Management of Integra Group and Geotech Holding will host a conference call for investors and analysts followed by a Q&A session.

Date: Thursday, November 10, 2011
Time: 14:00 GMT
Conference ID: 26634774
UK international tel.: +44 1452 555 566

             
A slide presentation of this event will be available from the Corporate Actions section of Integra Group’s web site at http://www.integra.ru/eng/investors/corporate_actions/. Participation in this conference call and access to the slide presentation will be subject to certain restrictions.

Contacts
For further information, please contact:
Integra:
Andrey Machanskis
Head of Investor Relations
Tel. +7 495 933 0621
amachanskis@integra.ru

Geotech Holding:
Denis Cherednichenko
Vice President for Corporate Development and Investment
Tel. +7 495 580 78 82
dcherednichenko@geotechcom.ru

Presentation of Adjusted EBITDA
Adjusted EBITDA of IGSS is calculated as profit (loss) from continuing operations before finance income (expense), exchange gains (losses), current and deferred income taxes, depreciation and amortisation, impairment, write-off or disposal of property, plant and equipment or intangible assets, gains (losses) on acquisition and disposal of any interest in subsidiaries or associates, impairment of goodwill, share-based compensation, consultancy fees payable to Integra Group excluding IGSS and its subsidiaries, extraordinary losses and profit and loss attributable to non-controlling interest. Adjusted EBITDA of IGSS includes attributed directly corporate overheads.
The Adjusted EBITDA calculation of GOSH's geophysical works segment presented in the financial statements of GOSH for the relevant periods differs from the Adjusted EBITDA calculation for GOSH’s geophysical works segment presented in this announcement in that certain adjustments have been made to the calculation presented in this announcement in order to conform the method of calculation of the Adjusted EBITDA for GOSH’s geophysical works segment to the method used by IGSS in calculating its Adjusted EBITDA. Therefore, for the purposes of the Adjusted EBITDA calculation presented in this announcement, GOSH has used the same method for calculating the Adjusted EBITDA for its geophysical works segment as the method used by IGSS except that the Adjusted EBITDA for GOSH’s geophysical works segment presented in this announcement includes indirect corporate overheads whereas the Adjusted EBITDA of IGSS does not include indirect corporate overheads.

Forward Looking Statements
Certain statements contained in this announcement in respect of Integra Group, IGSS, Schlumberger, GOSH and Geotech Holding (collectively, the “Parties”) constitute "forward-looking statements". These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Parties’ control and all of which are based on the Parties’ current beliefs and expectations about future events. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates", "plans", "assumes" or "anticipates" or, in each case, their negative or other variations or comparable terminology. All statements (other than statements of historical facts) including, without limitation, those regarding Integra Group, IGSS and GOSH historical financial positions, results of operations, liquidity, prospects, growth, business strategy, plans and objectives of management for the future operations (including development plans and objectives relating to the Parties’ respective businesses) are forward-looking statements.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of each Party, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Parties’ present and future business strategies and the environment in which the Parties will operate in the future. Such risks, uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements.

The forward-looking statements contained in this document speak only as at the date of this document. Except to the extent required by applicable law, the Financial Services Authority (“FSA”), the London Stock Exchange, the Listing Rules or the Disclosure Rules and Transparency Rules of the FSA, Integra Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this document to reflect any change in Integra Group’s or any other Party’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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IMPORTANT NOTICE
THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO PURCHASE, OTHERWISE ACQUIRE, SUBSCRIBE FOR, SELL, OTHERWISE DISPOSE OF OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO SELL, OTHERWISE DISPOSE OF, ISSUE, PURCHASE, OTHERWISE ACQUIRE OR SUBSCRIBE FOR ANY SECURITY IN ANY JURISDICTION, NOR SHOULD ANY PART OF IT NOR THE FACT OF ITS DISTRIBUTION FORM PART OF OR BE RELIED ON IN CONNECTION WITH ANY CONTRACT OR INVESTMENT DECISION RELATING THERETO, NOR DOES IT CONSTITUTE A RECOMMENDATION REGARDING THE SECURITIES OF INTEGRA GROUP OR IGSS.
THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES. NEITHER THIS ANNOUNCEMENT NOR ANY COPY OF IT MAY BE TAKEN OR DISTRIBUTED OR PUBLISHED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES. THE MATERIAL SET FORTH HEREIN IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, OR THE LAWS OF ANY STATE OF THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS. THERE WILL BE NO PUBLIC OFFER OF SECURITIES IN THE UNITED STATES.
THE INFORMATION CONTAINED HEREIN IS NOT AN OFFER, OR AN INVITATION TO MAKE ANY OFFER, SELL, PURCHASE, EXCHANGE OR TRANSFER ANY SECURITIES IN RUSSIA OR TO OR FOR THE BENEFIT OF ANY RUSSIAN PERSON, AND DOES NOT CONSTITUTE AN ADVERTISEMENT OR OFFERING OF SECURITIES IN RUSSIA WITHIN THE MEANING OF RUSSIAN SECURITIES LAWS AND MUST NOT BE PASSED ON TO THIRD PARTIES OR OTHERWISE BE MADE PUBLICLY AVAILABLE IN RUSSIA. THE SECURITIES ARE NOT INTENDED FOR “OFFERING”, “PLACEMENT” OR “CIRCULATION” IN RUSSIA, EXCEPT AS PERMITTED BY RUSSIAN LAW (EACH AS DEFINED IN RUSSIAN SECURITIES LAWS).
ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE SECURITIES LAWS OF ANY SUCH JURISDICTION.