EMGS sells more 3D EM data. Posts 2Q loss on impairment

Electromagnetic Geoservices ASA (EMGS) has entered into two new data licensing agreements with two oil companies for the provision of 3D EM data from EMGS’ multi-client data library over the Barents Sea and the Norwegian Sea worth $1.6 million.

The multi-client revenues, which are a combination of pre-funding and late sales, will be booked in the third quarter 2015, the company said on Thursday. The deal follows a similar agreement announced by EMGS on Wednesday, when the Norway-based provider said it had signed a new data licensing agreement with an oil company for the provision of 3D EM data from the multi-client data library over the Barents Sea. 

2Q loss

Separately, EMGS on Thursday posted its results for the second quarter of 2015. Revenues were $12.1 million in the second quarter 2015, down from $42.5 million in the second quarter 2014.

Contract sales ended at $4.8 million, while sales from the multi-client library ended at $7.3 million. EMGS said that the results were negatively affected by extraordinary costs related to the company’s cost reduction program.  Also, EMGS said, an impairment of goodwill related to the OHM acquisition in 2011 of $14.4 million resulted in a net loss for the second quarter 2015 of $26.0 million.

“In the second quarter we were, as expected, more affected by the challenging market conditions than in the previous quarter. We had planned for a higher contract utilisation in the quarter, but negotiations were delayed. During the quarter, we have therefore invested in what we consider to be good and timely multi-client projects, as we see these as important for the future development of our Company,” says CEO of EMGS, Bjarte Bruheim.

Hard to predict the market outlook

During the quarter, EMGS implemented a 20% workforce reduction and a reduction from three to four vessels by taking out the EM Leader from mid-May. In addition, the company announced that the capital expenditures for 2015 would be reduced.

The company’s three other vessels were mainly operating on multi-client projects in Norway, US Gulf of Mexico and in Indonesia.

In the second half of 2015, EMGS will perform the announced contract work for an oil company in Malaysia and re-start its work for Pemex in Mexico. The company also expects further contract work in Asia.

“The market outlook is currently hard to predict. Contract negotiations are delayed and the oil companies’ spending and budgets are further revised and reduced. As a consequence, EMGS Board and management will continue the work to reduce the Company’s cost level and capital expenditures. Still, the Company experiences good progress on the adoption of the EM technology. The interest from oil companies is increasing, although challenged by reduced budgets. The continuous pressure on these companies to cut costs and increase efficiency, also require them to improve their success rates in exploration,” EMGS said in the 2Q results statement.