Moody’s Downgrades Seismic Players

Plunging oil prices are moving oil companies to cut spending on exploration activity, presenting a major challenge for seismic companies globally as the most volatile and cyclical segment of the oilfield services industry, says Moody’s Investors Service in a new report published today.

We do not expect a significant recovery for seismic companies in the near term, especially as oil prices remain volatile,” says Eric Kang, a Moody’s Analyst. “Spending on seismic is typically the first item that oil companies cut and the last they reinstate when they resume investing.”

The 55% plunge in benchmark crude prices from June 2014 to March 2015 has made oil companies more cautious of offshore exploration activity, seeking to align their spending with diminished cash flow expectations. Moody’s anticipates at least a 15% drop in offshore upstream investments in 2015, which would continue the downward trend that started in mid-2013.

As seismic companies focus on maximising capacity bookings to preserve jobs and vessel utilisation, contract-seismic prices will likely fall more sharply in 2015 than they did last year whilst pricing pressures for multi-client sales will be less severe but multi-client late sales volumes will remain difficult to predict.

Owing to the continuing market challenges, Moody’s has downgraded two of the largest global players CGG to B1 from Ba3 and Petroleum Geo-Services to Ba3 from Ba2, with negative outlooks. According to Moody’s, both companies’ credit profiles are likely to weaken further in 2015, with limited prospects for improvement in 2016.