Sharp deterioration of oil services market drags EMGS down

The low oil price has resulted in a substantial decline in the E&P spending, and a corresponding sharp deterioration of the market for geophysical services, Electromagnetic Geoservices (EMGS), a Norwegian geophysical services company, said on Thursday. 

During 2015, EMGS implemented cost reduction measures and completed a financial restructuring to improve the company’s financial position, but the ever changing exogenous factors in the industry will impact the business and risk factors going forward and they represent added uncertainties, the geophysical services company further added.

The market outlook for oil services is challenging and characterised by high uncertainty. Oil companies have continued to announce further reductions in their spending for 2016 compared to 2015 as a response to the sharp decline in oil price. However, EMGS said, although challenged by the reduced budgets, the interest in the EM technology from the oil companies is healthy.

Most of the cost reduction measures announced in 2015 have been implemented and, EMGS noted, the company expects the measures to have full effect from the second quarter of 2016. Capital investments are mainly limited to the joint industry project.

EMGS sees red in 4Q

EMGS’ net loss for the fourth quarter of 2015 ended at $24.1 million, down from an income of $13.1 million in the same period last year.

Further, EMGS recorded revenues of $20.5 million in the fourth quarter 2015, down from $52.5 million in the fourth quarter 2014.

According to the company, the results were negatively affected by announced restructuring charges related to the company’s cost reduction program. EBITDA ended with a negative $8 million and the company has done multi-client impairments of $8.6 million in the fourth quarter.

Contract sales for the 4Q 2015 ended at $9 million, while sales from the multi-client library ended at $11.5 million in the quarter. For the fourth quarter 2014, the contract sales totalled $25.5 million and the multi-client sales amounted to $27 million.

The company recorded 9.0 vessel months in the fourth quarter of 2015 as opposed to 9.9 in the fourth quarter of 2014. Vessel utilisation came in at 21% in the last quarter of 2015, where all utilised time was allocated to contract work. For the corresponding period in 2014, the company had a total utilisation of 63%, with 39% allocated to contract and 24% to multi-client programmes.

New CEO steps in

In November 2015, EMGS announced that it had appointed Christiaan A. Vermeijden as new Chief Executive Officer (CEO) of the company. Vermeijden started in his position as CEO of EMGS on February 1, 2016. He comes from the position as Global Offshore Geotechnical Director of Fugro N.V.

Commenting on his appointment and the company’s results, Vermeijden said: “I am pleased to have started at EMGS. The low oil price presents a challenge as exploration budgets continue to come down. However, with the adoption of our technology on the rise, EMGS continues to be well positioned within the industry.

“I am encouraged by the healthy amount of business opportunities, even though our customers tend to delay decisions to award work closer to the start-up of the surveys.”

EMGS said that,  based on the current operational forecast, it expects to operate two vessels in 2016 with an option to include a third vessel if certain prospects materialise. The company also added it expects to keep one vessel in Asia throughout 2016, while the other vessel is expected to operate in Europe and the Americas.

Offshore Energy Today Staff