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Seismic firms increasingly bullish on exploration, as forecasts are adjusted
Marine seismic companies says their customers know renewed exploration activity is essential
Recent months have not been easy for marine seismic companies, but they are confident that even if the oil price does not improve in a sustained manner, their clients, the energy companies, will have to start contracting for more exploration activity soon, even if they face an uncomfortable choice between reducing dividends and share buybacks.
TGS chief executive, Kristian Johansen, is particularly bullish about the need for a new round of exploration activity. In a Q4 2025 results presentation in February 2026, Mr Johansen noted that the International Energy Agency (IEA) has significantly revised some of the assumptions in its latest World Energy Outlook (WEO).
In the IEA’s 2025 WEO, oil and gas demand does not peak in 2030, as the IEA had asserted a year earlier. In fact, the 2025 WEO assumes higher demand for all fossil fuels in the near and longer term, compared with the 2024 WEO, mainly at the expense of renewables, where growth is slower than originally anticipated. “These numbers change every year, but this is obviously quite a significant change,” Mr Johansen said. “It provides a very positive outlook for a company like ours that is heavy on exploration.
“The energy majors know they are facing an exploration challenge,” said Mr Johansen. “They are highlighting the fact that reservoir life is getting shorter. There are super majors with reserves of only around six or seven years left,” he said, “and they have a reserve replacement ratio of about 20-25%. It means that within 10 or 12 years, they would run out of oil if they are not successful in replacing those reserves.”
As Mr Johansen noted, the industry has been talking about this for several years, but he believes it is getting very close to a situation where TGS’s customers will have to ramp up their exploration activity quite significantly, compared with what they were discussing a year or a couple of years ago.
“We hear this from the oil companies, from earnings calls, from chief executives,” said Mr Johansen. “They are preparing the investor community for the fact that they need to explore more, and that they need to allocate more capex to exploration in the future,” Mr Johansen said, quoting several chief executives at the oil majors.
These include Wael Sawan, chief executive at Shell, “We are less pleased with the fact that we haven’t found the bigger plays that allow us to potentially create big new hubs. That’s the space we need to continue to work on to improve,” TGS’s investor presentation has him saying. Likewise, Equinor chief executive, Anders Opedal, is quoted as saying, “Now, the focus is to deliver on that growth, finding more attractive exploration opportunities within those selected areas,” and Chevron chief executive, Mike Wirth, is quoted as saying, “We need to ramp up some of the exploration activity beyond just the focus on near infrastructure opportunities. We’ll move to a more balanced approach of mature areas that are well known and also early entry into high-impact frontier areas.”
“All of them are talking about exploration, of course, but also about the need to do exploration in frontier areas,” said Mr Johansen, although as he admitted, the problem for the oil companies recently has been low oil prices and cash flow-limiting momentum.
The low oil price in recent months has not stopped Chevron from planning for exploration activity; however, as Mr Johansen noted, the company has recently signed a three-year agreement with Chevron, which he said includes exploring new areas where oil has not yet been found, rather than exploring further in areas where they are already working.
“Dividends, share buybacks and capex – if you assume that the oil price is going to stay where it is today, then one of the three has to give. Exploration is becoming essential, which comes out of capex, so it’s either going to have to be dividends, or it may be share buybacks, which we think is going to happen,” Mr Johansen explained. “In fact, we have already seen a couple of companies announce that they are going to reduce buybacks compared with previous years, because they need to free up capital to spend on future growth.”
Another marine seismic leader, Shearwater Geoservices, also believes that oil companies will have to do something soon about reserve replacement, and will be forced to take action on exploration, but is less bullish than Mr Johansen, at least for the time being.
Shearwater has been treading water to some extent, cutting costs and reducing headcount as it awaits an uptick in exploration activity. In its most recent investor presentation, it said it plans to continue to focus on cost reduction and on reducing its headcount until oil companies transition from talking about reserve replacement to actually doing something about it. Like TGS, the latest investor report from Shearwater Geoservices highlighted the fact that conventional discoveries are at cyclical lows and reserve replacement levels are well below decline rates, and that the energy majors are signalling the need for increased exploration to sustain long-term production.
Announcing results for Q4 2025 and preliminary results for the full year, Shearwater said that, as anticipated, marine seismic activity in Q4 2025 remained low as muted intake and uncertainty related to project timing continued to weigh on fleet scheduling and profitability. Shearwater chief executive, Irene Basili, said, “While marine acquisition activity remained low in the quarter, strong multi‑client revenues drove a significant improvement in our results, underscoring the value‑creation potential of our multi‑client strategy.”
She continued, “Recent client discussions increasingly emphasise reserve replacement, which is encouraging for the industry’s long‑term fundamentals because, over time, rebuilding reserves to sustain production and energy security will require renewed investment in seismic acquisition and imaging, which is fully aligned with our strategic direction.”
“However,” she said, “to date, this shift has not translated into increased activity in our tendering pipeline, and we therefore expect the sideways‑trending market and competitive landscape to continue into 2026.”
Against this backdrop, Ms Basili said Shearwater has taken ‘decisive measures’ to strengthen liquidity, simplify the organisation and deliver material cost reductions to improve cash-flow development.
The company said its headcount reductions, implemented in 2025, ‘while demanding,’ were necessary to streamline the organisation and align the company’s cost base with near‑term market conditions. “Together with broader cost‑reduction initiatives, structural efficiency measures, and the continued expansion of our multi‑client portfolio, these actions position Shearwater well for a future market recovery and long‑term value creation,” Ms Basili said.
Shearwater said it is continuing to strengthen its position in deepwater ocean bottom seismic, supported by the broad client adoption of the Pearl node platform, with SW Tasman. This has enabled the company to generate a continuous project pipeline exceeding 24 months.
The company’s multi‑client business model remains key to its success, having increased backlog, broadened the revenue base, and built a profitable, cash‑generative library. “Building on this position of strength, we are prioritising growth in the converted contract market while remaining selective in pursuing high‑quality multi‑client investments,” Ms Basili said.
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