PGS sinks to loss in 3Q
Petroleum Geo-Services (PGS), a geophysical company that provides a range of seismic and reservoir service, on Friday reported a loss of $110 million for the third quarter of 2015, compared to a profit of $8.4 million in the same period last year.
The company also posted a drop in revenues as its third quarter 2015 revenues were $225.7 million, compared to $394.2 million in Q3 2014.
In addition, PGS posted EBITDA of $115.3 million, versus $181.7 million in Q3 2014.
Jon Erik Reinhardsen, President and Chief Executive Officer, said: “MultiClient pre-funding revenues for the first three quarters were solid at $282.4 million, with a corresponding pre-funding level of 121% highlighting the attractiveness of our projects, and the reduced earnings volatility we get from our increased MultiClient focus.
“Despite a sequential improvement in the marine contract EBIT margin, we experienced a further market deterioration over the summer, mainly driven by intense competition in preparation for the weaker winter season. Contract revenues and margin through Q4 and Q1 will be adversely impacted.”
Reinhardsen added: “We have taken further steps to adapt to the current challenging market environment. We have negotiated an amendment to the financial covenants for our Revolving Credit Facility, creating significantly more headroom and preserving our strong liquidity reserve. We continue to cut costs and reduce capital expenditures to optimize cash flow. With the cold-stacking of Ramform Viking and other initiatives taken in Q3, our estimated cost reduction for 2015 is now increased to approximately $320 million. We have implemented a significant reduction of 2015 CAPEX and further, benefiting 2016 CAPEX, agreed with the shipyard to postpone the delivery of Ramform Hyperion to Q1 2017, subject to approval from the ECA financing banks.
“In order to position our fleet for the future and address the industry’s vessel oversupply, we have entered into agreements to charter the two vessels Sanco Sword and Sanco Swift, both among the most competitive conventional vessels in the seismic industry.”
The low oil price, reduced oil company spending and intense competition for work among seismic companies impact pricing and utilization negatively, the company said. PGS expects market uncertainty and low earnings visibility to continue well into 2016, said the seismic player.
Based on the current operational projections and with reference to disclosed risk factors, PGS expects full year 2015 EBITDA to be approximately $500 million.
MultiClient cash investments are expected to be approximately $285 million, with a pre-funding level above 100%.
PGS says that somewhat above 50% of active 3D capacity is expected to be used for MultiClient in 2015.
Capital expenditures are estimated to be approximately $175 million, of which approximately $130 million is for the new builds Ramform Tethys and Ramform Hyperion.
The order book totalled $245 million at September 30, 2015 (including $103 million of committed pre-funding on MultiClient projects), compared to $259 million at June 30, 2015 and $466 million at September 30, 2014.
As of October 19, 2015 approximately 85% of available capacity (which excludes stacked vessels) for Q4 is booked, with corresponding numbers for Q1 2016, Q2 2016 and Q3 2016 being approximately 50%, 55% and 10%, respectively.