PGS Reorganizing Business
Norwegian seismic player Petroleum Geo-Services (PGS) is changing its company model to adjust to weaker and more uncertain than before seismic market as it saw its loss widened at $190 million for the quarter ended September 30, 2017 from $29 million same time last year.
The new organization should build on the two business areas: Sales & Services and Operations & Technology.
PGS expects the overall gross cash cost for the company to be reduced by at least $100 million in 2018, which should be sufficient to deliver positive cash flow after debt servicing next year, assuming a similar market in 2018 as in 2017.
Going forward, PGS intends to operate a fleet of eight vessels, of which two will be used selectively to address demand swings and market seasonality. The cost base for the company will be reduced to a baseline of six vessels, while the flexible capacity will be managed and crewed by a combination of regular and temporary employees.
“This downturn has been longer and lower than anyone anticipated. We think the worst is behind us, but I cannot bet the Company on a market recovery. We need to change what we can control ourselves. The reorganization, combined with more flexible vessel capacity makes us better positioned to address the current market environment and improve cash flow and profitability,” says Rune Olav Pedersen, President & CEO of PGS.
Fewer business areas will result in a reduction of the executive management team, from six to four. Sverre Strandenes, currently EVP MultiClient, will be EVP and responsible for Sales & Services, while Per Arild Reksnes, currently EVP Operations, will be EVP and lead Operations & Technology. Gottfred Langseth will continue as EVP & CFO.
Centralize – Simplify – Streamline Into Two Business Areas
Sales & Services will contain three departments: Sales, New Ventures and Imaging. Sales will promote and sell all products and services through a coordinated customer and marketing approach. New Ventures will be responsible for building new MultiClient programs worldwide and evaluate other cash generating opportunities across the PGS product lines, including strategic positioning in new basins. Imaging is producing the final seismic data to internal and external customers. Imaging will become more closely integrated with all of PGS business activities. The external focus will be on the high-end markets.
Operations & Technology will include the following six departments: Project Planning & Bidding, Project Delivery, Maritime, Technical, Operations Geophysics and Geoscience & Engineering. Project Planning & Bidding will plan and calculate all acquisition surveys and prepare bids for proprietary work. Project Delivery will be responsible for execution of all seismic acquisition projects. Maritime, Technical, and Operations Geophysics will jointly manage and operate our vessels, seismic equipment and technology. Geoscience & Engineering develops new technologies that improve operational efficiency and imaging quality.
The company plans to implement the new structure by year-end 2017. Restructuring cost is estimated to be approximately $40 – 50 million and is expected to be recorded mainly in Q4 2017.