Polarcus Sinks in Q3

Oslo-listed seismic player Polarcus has slipped into the red as revenue slumped on a market slowdown due to cost-cutting by oil companies.

The company recorded a net loss of USD 8.9 million in Q3 2014 compared to a net profit of USD 19.9 million in Q3 2013.

Basic and diluted EPS were negative USD 0.018 in Q3 2014 compared to basic EPS of USD 0.039 in Q3 2013 and diluted EPS of USD 0.038 in the same quarter.

Revenues decreased by 15% to USD 114.3 million in Q3 2014 compared to USD 133.7 million in Q3 2013 due to a decrease in contract revenue. Contract revenue decreased by 24% to USD 98.4 million in Q3 2014 compared to USD 129.9 million in Q3 2013 due to a decrease in proprietary contract revenues.

Proprietary contract revenue decreased by 28% to USD 83.0 million in Q3 2014 compared to USD 114.9 million in Q3 2013, excluding reimbursables. The number of days on proprietary contract decreased by 30% as a consequence of less contract utilization in Q3 2014 compared to Q3 2013.

EBITDA for the quarter decreased by 24% to USD 43.4 million compared to USD 57.1 million in the same quarter last year. EBITDA margin decreased to 38% in Q3 2014 compared to 43% in Q3 2013.

The quarter was marked by a significant weakening of the seismic market, which has created uncertainty and negative market sentiment with pressure on utilization and pricing. Despite the tough competition, the Company has secured high backlog, giving good visibility well into 2015.

The challenging market resulted in lower utilization, which caused a fall in contract revenue in Q3 2014 compared to the same quarter the previous year. Despite this, the Company continued to record strong cash generation, recording higher cash from operations compared to the same quarter last year.

However, multi-client revenue was USD 13.3 million in Q3 2014 compared to USD 3.3 million in Q3 2013. The fleet allocation to multi-client projects increased to 22% in Q3 2014 compared to 10% in Q3 2013. Multi-client cash investment was USD 19.5 million in Q3 2014 compared to USD 11.3 million in Q3 2013. Multi-client prefunding revenue for the period increased to USD 12.1 million compared to USD 3.2 million in Q3 2013.

Commenting on the results, Rolf Rønningen, CEO Polarcus, said: “The lower oil price and consequent reduced exploration spend by our clients is resulting in a highly competitive market landscape. Our determined focus on securing contracts has seen our backlog grow to record levels whilst our pre-emptive cost reduction program initiated in the quarter will improve margins going forward and help buttress the Company against the prevailing market headwinds.”