Increased tendering and upcoming licensing rounds buoy seismic vessel market
Leading marine seismic survey companies Polarcus and PGS have spoken of improved tender activity and greater optimism about the market next year
Depressed demand for marine seismic activity is usually the first sign of a downturn in the offshore oil and gas market. Equally, improved demand for marine seismic projects often signals the beginning of an upturn in the market.
Both companies have described increased levels of tendering activity, and both have significantly reduced their cost base in recent months. Polarcus said overall marine seismic activity is picking up, and PGS has described an increase in demand for multiclient work of the type in which it specialises and in production seismic projects.
Speaking at the recent Pareto Securities Oil & Offshore Conference, representatives of leading marine seismic firms Polarcus and PGS both had cautiously optimistic things to say.
Polarcus CEO Duncan Eley noted that the oil price has stabilised and oil companies have been sanctioning projects based on their capex guidance at the beginning of 2017. It said tender activity has increased from their previously low levels, and Q3 2017 saw Polarcus receive the greatest number of tenders since Q2 2015.
The company said there has been a 50% increase in square km of surveys tendered to date in 2017 compared to 2016. “Activity is returning to new and dormant basins,” said the company, noting that this year has also seen the most West African tenders issued since 2014, and elsewhere, the Guyana-Suriname Basin continues to draw interest from major oil companies.
Polarcus believes it is well placed to respond to new tenders having reduced its gross cost of sales to an all-time low level in Q2 2017. In that quarter, its gross cost of sales fell 10% compared to Q1 2017.
In a presentation at the conference, the company said E&P companies were now consistently cash positive. It also noted that seismic vessel supply has continued to reduce as tender activity increased.
For its part, PGS said its focus on multiclient business had brought greater stability to its performance despite the highly cyclical nature of the market. The proportion of its work that is multiclient will continue to increase going forward, and its revenues are currently dominated by multiclient projects.
The company said it “retains flexibility to leverage a recovery in the marine contract market” as oil companies invest more in producing fields and fields under development.
It anticipates that the number of production seismic (4D) projects will more than double in 2017 compared to 2016 and is expected to increase further in 2018. PGS said 4D activity is increasing in the North Sea, West Africa and Brazil, and it will conduct more than 50% of global 4D surveys for 2017. PGS is well positioned in the 4D market, and around 35% of 2017 contract revenues are expected to come from 4D.
PGS said it was working on a number of encouraging leads for development in 2018 with growing demand for marine seismic being driven by positioning for strategically important licence rounds, seismic commitments in E&P licences, a significant increase in production seismic – especially in the North Sea, West Africa and Brazil – and ongoing growth in multiclient activity, which is expected to continue to increase.
In the introduction to its most recent seismic vessel register, Clarksons Research noted that weak E&P spending continued to negatively impact the seismic survey vessel market, with around 29% of seismic and geophysical survey vessels laid up as of the beginning of June 2017.