TGS signals gradual improvement in seismic services

TGS-Nopec Geophysical encountered moderate recovery in survey activity in Q4 2020, but anticipates taking a non-cash impairment of up to US$90M on its seismic data library.

TGS chief executive Kristian Johansen said there were signs of recovery in demand for seismic surveys and library data, but he signalled caution to shareholders.

“As expected, we saw a seasonal uptick in the activity level during Q4 2020 and we are pleased to report a 61% sequential growth in late sales,” said Mr Johansen.

TGS management anticipates net segment revenues for Q4 2020 to be around US$118M.

“While we continue to see signs of a gradual improvement, partly driven by a higher oil price, we remain cautious about the speed of a recovery, with only modest changes to exploration and production spending expected for 2021,” said Mr Johansen.

“As a result of lowered long-term oil price assumptions, most of our largest clients have announced significant impairments and exploration write-offs during the past year,” he added. “Lower oil price assumptions, capital constraints and more focused exploration strategies are expected to cause longer payback times for certain multi-client surveys, particularly in frontier areas with a lack of infrastructure and/or exposure to recent geopolitical changes,” Mr Johansen explained.

As a result, TGS is carrying out a thorough assessment of the accounting value of its seismic survey data library.

TGS said a preliminary assessment indicates a non-cash impairment of between US$70-90M in Q4 2020, although the review is ongoing. More details are expected when TGS announces its Q4 2020 and full year results on 11 February 2021.

Rival seismic survey provider and vessel owner Polarcus reported a small improvement in vessel utilisation during the final few months of 2020, with utilisation for all of its assets at 65% during Q4 2020, up from 61% for the whole of 2020. However, it was lower than 71% reported for Q4 2019.

During Q4 2020, 26% of the time Polarcus’ fleet was on standby and another 9% it was in transit between work. This data excluded Polarcus Nadia, which has been laid up since April 2015 and Polarcus Amani, as it was stacked in September 2020.

Offshore activity and services demand will be debated in depth during Riviera’s Offshore Webinar Week, from 19 January 2020 - use this link for more details and to register for these webinars