PGS announces 1Q20 results

Highlights

• Segment revenues of US$168.3 million, compared to US$141.9 million in 1Q19.
• Segment EBITDA of US$80.5 million, compared to US$66.6 million in 1Q19.
• Segment EBIT (excluding impairments and other charges) loss of US$15.8 million, compared to a loss of US$29.3 million in 1Q19.
• Contract revenues of US$85.4 million, compared to US$44.3 million in 1Q19.
• Cash flow from operations of US$176 million, compared to US$119.4 million in 1Q19.
• As reported revenues according to IFRS of US$128.8 million and an EBIT loss of US$80.2 million, after impairments of US$51.4 million, compared to US$129.3 million and EBIT loss of US$42.5 million, respectively, in 1Q19.
• Successful completion of refinancing and equity raise.
• Implementing cost and CAPEX reduction to address an uncertain market outlook.

PGS expects the revised and lower investment plans among energy companies to significantly reduce demand for seismic services in 2020, and likely into 2021. The company believes the extreme imbalances in the oil market are temporary. When the pandemic crisis is over, energy consumption will resume with oil and gas continuing to play a key role in the energy mix. Offshore reserves will be vital for future supply and support the demand for marine seismic services. The expected future recovery of the seismic industry is likely to be strengthened further by another round of industry capacity reductions and a pent-up exploration and production demand.

Based on current operational projections, with six vessels in operation in the third quarter and five vessels in operation for the remaining part of 2020, and with reference to disclosed risk factors, PGS expects full year 2020 gross cash costs to be below US$500 million.

2020 multi-client cash investments are expected to be US$150-200 million.

Approximately 50% of 2020 active 3D vessel time is currently expected to be allocated to multi-client acquisition.

CAPEX for 2020 is expected to be below US$50 million.

The order book totalled US$217 million at 31 March 2020 (including US$89 million relating to multi-client). The order book was US$322 million at 31 December 2019 and US$238 million at 31 March 2019.

Rune Olav Pedersen, President and CEO, said: “High vessel utilisation and good operational performance secured solid contract revenues in 1Q20. Our MultiClient business entered the quarter with a solid project pipeline. However, it has been difficult to secure more commitments to ongoing projects and conclude MultiClient data library sales processes due to the Covid-19 pandemic and the oil price reduction. Further, MultiClient revenues were negatively impacted by delays of Government block awards, where specifically pre-funding for one of our ongoing MultiClient projects is contingent on final block ratification.

The low oil price has led energy companies to scale back near term investment plans significantly, and 2020 will be very challenging for the seismic industry. We are adjusting our vessel capacity to the lower demand by cold-stacking two vessels now in 2Q20, and we expect to warm-stack one additional vessel in 3Q20. Going forward, further capacity reductions will be continuously evaluated, and we are prepared to react quickly.

We are reducing cost and capital expenditures significantly. In addition to the vessel adjustments, our cost reduction will comprise of a combination of temporary lay-offs, cancellation of 2020 bonus plans, salary freeze and numerous other cost initiatives as we adjust to a lower activity level. Our full year gross cash cost will reduce by at least US$100 million, with further measures being considered depending on market development, compared to our initial 2020 guidance. Capital expenditures will be reduced by at least US$30 million, with investments relating to items we consider strategically important or critical for business continuity.

We completed a successful refinancing at the start of the year. With a strong positive cash flow in 1Q20, we have further reduced net interest bearing debt by US$130 million and increased the liquidity reserve to US$266.9 million. Our efforts to reduce cost and capital expenditures aim at being cash flow positive before debt repayments going forward. However, in order to maintain a strong liquidity position while experiencing uncertain market conditions, we are reviewing alternatives to preserve our liquidity including potential extensions of the scheduled reduction of our revolving credit facility, amortisation holidays and other debt related initiatives.”

Read the article online at: https://www.oilfieldtechnology.com/exploration/24042020/pgs-announces-1q20-results/