TGS to slash spending over lower activity
Norwegian seismic surveyor TGS has seen its 4Q 2015 revenues more than halved from the same period last year and expects its multi-client investments to be slashed by more than 50 percent due to lower activity.
Based on a preliminary review of sales and investments, the company reported net operating revenues for the fourth quarter of 2015 of approximately $131 million, which is down 56% when compared to the same period last year.
In addition, TGS’ expected 2015 full year revenues are approximately $612 million, down 33% from 2014.
According to the Norwegian seismic provider, the weak market conditions are expected to continue in 2016. Consequently, TGS says it is planning for a lower activity level.
TGS expects multi-client investments of approximately $220 million and multi-client investments are expected to be prefunded 45 to 50%.
As announced in December 2015, the accounting practice with respect to amortization of the multi-client library will change with effect from January 1, 2016. In accordance with the new policy TGS estimates multi-client amortization of close to $290 million in 2016. An expected impact of the new accounting practice will be more predictable and less volatile quarterly normal amortization of the data library, TGS said.
“TGS’ 2016 operational multi-client investments will be reduced by more than 50% compared to 2015. This is partly a result of lower cost of acquiring seismic data as average vessel day rates will be substantially lower than in 2015. Furthermore, the activity level will be reduced as oil companies have become less willing to prefund new surveys,” commented Robert Hobbs, CEO, TGS.
Hobbs continued: “As a result of the weak market conditions there is higher uncertainty than usual with respect to late sales of seismic data. Late sales are normally heavily dependent on oil companies’ E&P spending. This relationship will continue in 2016 and as a result, TGS expects late sales to move in line with or slightly better than general E&P spending trends.
“However, the significant reduction in investments combined with the effect from the cost cutting measures implemented last year should support positive cash flow development despite the challenging environment.”