With the oil and gas industry devastated by the impact of the Covid-19 global pandemic, companies offering geoscience services have announced plans to cut-back spending.
With the oil and gas industry devastated by the impact of the Covid-19 global pandemic, companies offering geoscience services have announced plans to cut-back spending.
PGS, CGG, TGS, Polarcus and ION are among the companies to have announced measures including spending cuts, cold stacking vessels and staff cuts with negotiations for future projects on hold and some cancelled.
PGS said that it was implementing ‘substantial cost and capital expenditure measures to meet an expected significant revenue reduction’ but that in the short term it had been able to continue vessel operations without interruptions and had not experienced cancellations of any active contracts. ‘Short-term, severe logistical challenges caused by travel restrictions and quarantine provisions impacting crew-changes have been resolved by cancelling all crew changes since March 18, with all crews continuing on a second full rotation. The extended crew periods will start coming to an end in the latter part of April, and the company believes it will be able to find viable methods for crew rotations.
However, it added ‘most processes to conclude contract negotiations have since early March been substantially delayed or resulted in postponement of projects’. As a result, the company is cold-stacking two of its eight 3D vessels early in Q2 after completion of current projects.
TGS has decided to reduce 2020 multi-client investments to approximately $325 million from an original guidance of approximately $450 million. Through centralization of offices, a global salary freeze and temporary cessation of bonuses, TGS expects a reduction in cash operating cost of approximately 35% year on year.
The company said in a statement: ‘Exploration spending can to a certain degree be considered discretionary, hence there is an expectation that the company’s subsurface data products will be subject to significant spending cuts. As a result, TGS expects a very challenging market in 2020, where data licensing and pre-commitments to new projects may be deferred until clients have more visibility of an improvement in market conditions.’
CGG said that the company was continuing to operate as normal, but that all financial guidance for 2020 was no longer valid. ‘The vast majority of our employees are telecommuting and are productive. In Geoscience, we continue to deliver projects on time and our data centres are all 1 8
operational. Multi-client programmes in Brazil, UK, US and Australia are ongoing. Equipment manufacturing plants in France and the US were shut down on March 19, while our plant in China resumed normal production after closing for two weeks in January.
‘However, given the magnitude of economic impact to our businesses, the financial objectives communicated on March 6, 2020, which were based on a $55-65/bbl Brent oil price, are no longer effective.‘
Polarcus has announced a $15 million cost reduction plan, which includes a combination of redundancies, a 25% reduction in basic salary at senior levels and a 15% reduction in the remainder of the company. No bonuses will be paid.
Polarcus is reducing general and administrative costs by approximately $1.5 million and reducing cash capex by approximately $7 million. Further cash savings are expected to be realised through warm stacking vessels in between projects.
Since 16 March 2020, all onshore personnel have been working from home. Offshore, Polarcus has implemented health screening for all crew prior to travelling from home, immediately before joining a vessel and at regular intervals throughout operations offshore. ‘All Polarcus vessels carry medical teams onboard with fully equipped hospital facilities and the ability to isolate crew members if required,’ it said.
ION Geophysical is reducing personnel expenses by more than $13 million. ION executives are taking a 20% base salary reduction and a tiered reduction scheme is being cascaded to the rest of the workforce. Some $5 million will be saved by curtailing the use of external contractors.
The company has scaled back 2020 capex estimates to $20-$35 million, down from its initial estimate of $35-$50 million to reflect both reduced seismic demand and travel/ border restrictions impacting new data acquisition offshore. The majority of the spending cut relates to investments in the multi-client data library.
