PGS Posts Lower Revenues, Increases CAPEX

Norwegian seismic survey firm Petroleum Geo-Services ASA expects market uncertainty and low earnings to continue through 2016. The low oil price and subsequent reduction in energy firm spending have impacted seismic demand and pricing negatively over the past year and PGS believes the trend will linger over the next 12 months.

The oil and gas services company posted revenues of $961.9 million in 2015, compared to $1.453 billion the year before, and earnings at the EBITDA level of $484.5 million, compared to $702.6 million in 2014. PGS’ capital expenditures in 2015 totalled $165.7 million, although the group has increased its 2016 CAPEX to approximately $250 million, of which, around $180 million is for the new builds Ramform Tethys and Ramform Hyperion. In December last year, PGS revealed that it would be growing its CAPEX to $240 million in 2016.

PGS President and Chief Executive Officer Jon Erik Reinhardsen commented in a company statement:

“The marine seismic contract market deteriorated significantly during 2015 and has become extremely challenging. In this uncertain market environment we have during 2015 focused on cash flow and increased our liquidity reserve. We have implemented substantial reductions of cost and capital expenditures, taken proactive steps to address oversupply and further increased our productivity leadership and fleet flexibility.

“2016 will be another difficult year for the seismic industry.  We continue to focus on what we can control, including customer relations, costs, maintaining a financially sound balance sheet and capitalizing on the youngest and most productive fleet in the industry.  Our fleet productivity will further improve when we take delivery of the Ramform Tethys in late Q1. I am convinced PGS is well positioned to manage the challenging market."



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Steven | Feb. 16, 2016
2016 will be a difficult year for PGS. Vessel efficiency is not as important as vessel utilization. PGS has too many vessels to operate and cannot really stack anymore, unless they simply stack and make payments on the leased vessels from Sanco and Apollo. The new build Titan vessels cost $285 USD million each. There is a limit to how low these can be priced to still be profitable. The have postponed Tethys to end of Q1 2016 and are fuzzy about the status of the Sanco vessel while Vanguard completes dedicated work. What we know is that there is far from 100% utilization as Q4 2015 operated 73% of the fleet. This number could get lower when Tethys is officially added. Beyond this, there are culture issues and allegations of corruption where a EVP General Counsel has been recently appointed.


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