PGS narrows loss as revenues sink on low pricing

Petroleum Geo-Services (PGS), a marine geophysical company, narrowed its fourth quarter 2016 loss while its revenues dropped by 33 pct due to low contract pricing. 

In its quarterly report on Thursday, the geophysical company posted a smaller net loss for the fourth quarter of 2016 totaling $156.1 million, versus $334.6 million in the year-before period. PGS’ net loss before tax for 4Q 2016 was $118.7 million, compared to $357.1 million in the prior-year quarter.

The company recorded impairment charges, excluding impairment of MultiClient library, of $12 million for the full year 2016 and $7.8 million in 4Q 2016, primarily relating to adjustments to the expected schedule for returning cold-stacked vessels to operation.

Jon Erik Reinhardsen, PGS President and Chief Executive Officer, said: “As a result of low activity levels and continued excess supply of vessels, the marine contract market remained challenging through 2016.”

Further, PGS’ revenues during the last quarter of 2016 decreased by $75.2 million, or 33%, totaling $154.1 million, compared to $229.3 million in the corresponding period of 2015. This reflects a 33% reduction in marine contract revenues and a 38% reduction in total MultiClient revenues.

Lower marine contract revenues in 4Q 2016, compared to 4Q 2015, were due to low pricing for contract work, more nonchargeable vessel time and limited capacity allocated to marine contract activities, PGS explained.

MultiClient pre-funding revenues decreased $47.1 million in 4Q 2016, or 48%, compared to 4Q 2015, owing to less capacity used for MultiClient surveys and weaker sales from surveys in the processing phase.

MultiClient late sales revenues in 4Q 2016 decreased by $15.1 million, or 22%, compared to 4Q 2015. MultiClient sales vary significantly between quarters and regions and the company said it had relatively greater success in realizing sales in 3Q than it had in 4Q.

More stable oil price ‘to benefit seismic market’

Going forward, PGS said it expects the higher and more stable oil price and improved cash flow among clients, combined with an increasing constraint on available streamers in the industry, to benefit the marine 3D seismic market fundamentals. The company expects the volume of marine 3D seismic acquired by the industry to increase in 2017 compared to 2016, partly driven by an expected increase of 4D streamer monitoring surveys and more MultiClient 3D projects.

Based on the current operational projections and with reference to disclosed risk factors, PGS stated it expects full year 2017 gross cash cost to be approximately $700 million. According to the company, the increase from 2016 is primarily driven by more operated capacity and an expected increase in fuel prices, partly offset by further cost reductions.

MultiClient cash investments are expected to be approximately $275 million, with a pre-funding level of approximately 100%. Approximately 55% of the 2017 active 3D vessel time is expected to be allocated to MultiClient acquisition.

Capital expenditure is expected to be approximately $150 million, of which approximately $85 million relates to completion of the new build Ramform Hyperion, which is currently under construction at the shipyard Mitsubishi Heavy Industries Shipbuilding in Japan. It is scheduled to be delivered in March 2017.

The order book totaled $215 million at December 31, 2016 (including $113 million relating to MultiClient), compared to $190 million at September 30, 2016 and $240 million at December 31, 2015.

Offshore Energy Today Staff