PGS: Seismic market weaker in 2021, but gradually recovering

Norway-based Petroleum Geo-Services (PGS) has reported an almost $6 million decrease in segment revenues in 2021 compared to 2020 due to, as the company says, the overall seismic market being “weaker”.

Segment revenues and other income reached $590 million in 2021, compared to $595.9 million in 2020, which included $38.8 million of Covid-19 related government grants.

Segment EBITDA also saw a drop, standing at $320.2 million, compared to $397.7 million in 2020, which was impacted by a significant change of activity mix with less MultiClient and more contract acquisition, PGS said.

“The overall seismic market was weaker in 2021 than in 2020 and our peers generally reported lower revenues. However, the market started to recover, and we delivered higher revenues compared to 2020, when adjusting for Covid-19 related government grants received in 2020,” PGS president and CEO Rune Olav Pedersen said.

“The recovery is primarily driven by more activity and improving prices in the contract market. We achieved a 42% increase in our contract revenues.”

According to PGS, clients are increasingly focusing on proven hydrocarbon areas and extracting more resources from producing fields, which positively impacts demand for proprietary contract work.

To position for changing customer behavior, the Norwegian company said it had revised and updated its strategy. The plan is to continue developing its position in the near-field exploration and production (4D) seismic markets and targetting the ongoing energy transition with the New Energy business established early last year.

PGS stated it had identified carbon capture and storage (CCS), offshore wind and marine minerals as markets where it can use its expertise to solve industry challenges and build a significant business.

Several CCS-specific MultiClient sales have already been made, and PGS secured two seismic acquisition surveys for CCS projects in 2022 – a 3D acquisition scope over the Endurance reservoir offshore the UK, as well as a contract in support of the Northern Lights project in Norway.

“Development of the MultiClient market has been more mixed. Total industry MultiClient revenues and investments were down compared to 2020. However, it is encouraging to report the highest MultiClient revenues in the industry. Our MultiClient pre-funding level was 105% and our late sales increased by more than 30%, compared to 2020,” Pedersen added.

“We returned to generating positive net cash flow after debt service in 2021 and we achieved a cash flow before financing activities of $155 million for the full year 2021. The guided increase of gross cash cost and capital expenditures for 2022 reflects a higher planned activity level and we expect to continue to improve cash flow generation from revenue increase compared to 2021.”

PGS expects global energy consumption to continue to increase longer-term with oil and gas remaining an important part of the energy mix as the global energy transition evolves.

Offshore reserves will be vital for future energy supply and support demand for marine seismic services, the company said, emphasizing that the seismic market is slowly recovering, and the positive trend is expected to continue in 2022 due to increasing investments among energy companies.

The seismic acquisition market is also likely to benefit from low vessel supply operating in the international market. In 2022, PGS expects to see an increasing demand for seismic acquisition services related to carbon capture and storage projects.