The numbers say it all — the seismic industry has sailed from the doldrums into the maelstrom. Based on figures from “World Geophysical News,” some regions of the world — Africa, the CIS and Europe — have seen crew counts increase by more than 50% in the last year. Other regions have seen more modest increases, but the fact is that the industry has done a complete flip-flop from just 2 or 3 years ago — overcapacity has become undercapacity, spec datasets that were once written off as just gathering dust are now selling like hotcakes and even the most curmudgeonly geophysical contractor has to grudgingly admit that times are, in fact, pretty darned good.

This odd market dynamic can’t, of course, last — basic laws of supply and demand will see to

Figure 1. A CGGVeritas Vibroseis survey in Tunisia deploying Sercel Nomad 65 vibrators. (Photo courtesy of CGGVeritas)
that. Voids don’t last long because new entrants find ways to fill them. Add to that the number of folks who have been laid off in the seismic industry in recent times, and there’s a ready roster of experienced personnel willing to re-enter the segment under a new logo. Seismic is a hot commodity in the investment world as well. Said Rick Donoghue, vice president of marketing and sales for Wavefield Inseis, “It is a completely different story now compared to a few years ago, when it required a very hard sell to get investors to back the seismic industry.”

Salad days
With that kind of investment muscle to rely on, new companies are popping up like toadstools after a rainstorm, and established companies are investing billions in new boats and high-tech equipment. While some might caution that too much frenzied building will lead to the overcapacity issues of the late 1990s, most seem to agree that the market dynamics are completely different this time around.

A few facts support that conclusion:
• Oil and gas are, simply put, a lot harder to find these days. Seismic is enjoying a resurgence as a tool that can be used for both broad-brush exploration and for more precise reservoir delineation. Reserve replacement has been the main impetus driving the current exploration cycle. “Overall investment in exploration has been below the level needed to meet the future production demands,” said Dalton Boutte, president of WesternGeco. Added Allen Brooks, a managing director of Parks Paton Hoepfl & Brown, “Oil companies understand that once they invest in finding an oil and gas field, that comes at some cost. To the extent that they can get more out than they thought, that’s the cheapest oil and gas they’ll ever find.”

• Demand is on the rise. “We’re teetering right now on kind of an unstable area where a little bit of supply disruption causes a huge swing in price, and that tells me we’re getting darned close to where the price is going to be set by demand, not by supply constraints,” said Dave Johnson, chief executive officer of Geokinetics. “That’s not like anything we’ve seen. The supply has always been constrained by governments — the Texas Railroad Commission, Organization of the Petroleum Exporting Countries, or just Saudi all by itself. I don’t think they’re going to be able to do that anymore.”

• What those governments can control is access to acreage. “Another driver is the increasingly constrained access for international oil companies with respect to the high-growth regions of the world — the Middle East, Russia, Latin America, etc.,” said Bill Herbert, managing director and co-head of research for Simmons & Co. Added Boutte, “They have reverted back to well known and established basins such as the Gulf of Mexico.” But in these areas, it will be the more difficult and complex reservoirs that will be the challenge. Because of the geological complexity of these areas, our customers continually ask for better imaging technologies.

• Technology improvements fuel a need for more equipment investments. Wide-azimuth towed-streamer acquisition, for example, uses three to six times as many vessels as conventional towed-streamer surveys and is expected to absorb much of the additional capacity coming onstream in the next 2 years. And operators are asking for higher channel count on most surveys because it provides much better resolution.

With these drivers in place, an increased need for seismic is a trend that’s likely to continue for some time. “Today the fundamentals are very good,” said Richard Degner, president and chief executive officer of Global Geophysical Services Inc. “You need a lot more geophysics to extract US $100 oil than $10 oil. The relative value of geophysics in the exploration and production upstream will increase as the world’s hydrocarbon basins mature.”

New fish in the sea
With the money and the drivers in place, new entrants are rushing in to take up some of the s
Figure 2. A conceptual drawing of three new SCAN Geophysical vessels. Despite increasing marine capacity, new techniques such as wide-azimuth surveying are expected to keep demand high. (Image courtesy of SCAN Geophysical)
lack. In general they can be broken into land and marine companies, but past that it’s hard to lump them too generically other than to note that the leaders of each company have vowed not to make the same mistakes that their former parent companies made in the ’90s.
“The seismic sector has been the most cyclical and the one that’s been the least profitable,” Brooks joked. “There’s something genetic — they can’t stand prosperity.”

So while WesternGeco, CGGVeritas and PGS continue to tweak the “full-service seismic” business model, several newer companies are finding niches that they consider to be underserved. In the marine sector, some of the new names are Wavefield Inseis, SCAN Geophysical and Eastern Echo.

Of these, only Wavefield seems ready to take on the big boys. The company was formed after CGG bought Multiwave Geophysical. Many of the Multiwave principals felt their vision could be better served by launching out on their own. They formed Wavefield, which later merged with Inseis.

The company recently went public, and its goals are not being kept a secret. “We’ve made it very clear to our client base and our investors that we’re going to be a major, full-service provider in the marine market,” Donoghue said. “The main push is to try to bridge some of the supply-demand gap by getting our fleet out there in as short a time as possible and try to ride this current wave through to some point in the future.”

From the outset Wavefield’s plan has been to use the streamer market to generate enough cash flow to allow the company to eventually move in other directions. “We don’t want to be in a cyclical market solely, so we are looking at non-cyclical technologies that will help even out the ups and downs,” he said. One of those directions is permanent monitoring, and the company has purchased a percentage of a company called Optoplan, which helped Weatherford commercialize Clarion, its fiber-optic downhole seismic sensor system. Wavefield and Optoplan have jointly developed Optowave, a multicomponent (4-C)/4-D system that can be permanently installed on the seafloor. Farther into the future is a planned move into the electromagnetics market. That will give Wavefield the same capabilities as much larger companies such as WesternGeco and PGS.

“The whole strategy has been to compete at every level, barring land, with the likes of WesternGeco,” Donoghue said.

(At press time it was announced that Wavefield Inseis and TGS-NOPEC are entering into merger discussions.)

SCAN formed fairly recently as well, with some former PGS employees at the helm. Founder Lars John Frigstad also was lured by the marine streamer market while working on a shallowwater concept. SCAN is not planning to be another mega-marine company with the biggest vessels in the market but rather work with a fleet of eight to 10 streamer vessels with smaller investments and more cost-efficient production. Frigstad expects that the average survey size will be smaller in the future.

There is definitely demand for these smaller surveys, not only for reservoir-scope surveys but also for areas like the North Sea that have smaller blocks then the Gulf of Mexico or Brazil. New acquisition methods like 4-D seismic and wide/multi-azimuth seismic will also focus on smaller survey size.

Currently the company has one high-end 2-D vessel and one 3-D streamer vessel along with ocean bottom cable (OBC) capabilities. It is converting one and building three additional 3-D vessels, each of which will have an eight-streamer capacity.

Finally there is Eastern Echo, a company so new that its first vessel won’t be completed until 2008. But the company has solid plans going forward. Its vision is to become “the leader in clean, safe and effective marine data acquisition and through this become the client’s natural choice.”

The company aims to meet this goal by investing only in newbuilds “to achieve the latest standards and innovations regarding safe operation for personnel and environment.” It also boasts a new bow design for added safety, environmental compliance and crew comfort. And it hopes to attract and retain top-quality people.

Land lovers
Other start-ups are happy to leave the marine environment to the mega-companies and focus on land and transition zone work. Recently two companies have emerged in North America that have grown with astonishing rapidity — Global Geophysical and Geokinetics.
Their growth strategies are quite different. Global has grown organically, securing funding from a variety of founders and investing in brand-new equipment. It launched its first crew in May 2005 and its 12th in August 2007.

Like many other “new” companies, Global is led by industry veterans who’ve taken advantage of the changing climate to try something different. Degner was with Western Geophysical, then with PGS before founding Global in 2004.

When asked if he was nervous about the future of the industry, Degner replied, “One of our board members reminds me that Western Geophysical was profitable every quarter, even though the ’80s and ’90s weren’t good years. They did it by running a tight organization and managing their costs.”

He was also encouraged by his experience at PGS. During his years there he focused on building a strong land business, PGS Onshore. During PGS’ restructuring Degner even offered to do a leveraged buyout of the onshore business but was turned down.

“I was building PGS Onshore from 2000 to 2003, and we built a viable company during a difficult period,” he said. “We are now building Global organically from scratch and rewarding our people with ownership, so we are able to maintain a consistent employee-owned culture focused on organizational performance.”

He added that there is a significant difference between running land operations versus
Figure 3. A Spectraseis crew plans a passive low-frequency spectral analysis survey in the Swiss Alps. (Photo courtesy of Spectraseis)
marine operations (besides the obvious, of course). “In marine it’s a repeatable mechanical process, very procedurally driven. Onshore it’s more about leadership, where project management and disciplined execution are important in the midst of complicated and ever-changing environments. It can be complicated logistically, but our ability to put out new crews is tied to the experience of our people.”

Geokinetics has been on a similarly furious growth curve, going from two crews in 2005 to 22 crews today. Rather than building organically, Johnson chose to build through acquisition, purchasing Trace Energy, a small land company mostly active in Canada, in 2005
and more recently acquiring Grant Geophysical, a worldwide provider of land and transition-zone seismic, in September 2006. In both cases the sum was greater than the total of the parts.

“Trace was in some markets we weren’t in,” he said. “We really didn’t take anything away from each other, and we added more territory.” Adding Grant brought in an international component and exposed the company to drivers outside of the North American natural gas market. “It’s a broader and more distributed customer base, more diverse,” Johnson said.
While he continues to look for additional acquisitions, Johnson is focusing on organic growth as well. He plans to have funneled $100 million in growth capital into the company by the end of 2008, which will help fund four to six new crews and provide high-channel upgrades for another six.

Despite the company’s recent arrival as a major player, Johnson said Geokinetics is near the top of the land seismic business. “I think our growth rate has been higher than the big guys, and quite honestly they’re focused on the marine side,” he said. “There’s a huge effort to build new boats and invest in new technology. I’m very happy for them to focus on that. We’ll focus on what we do best, which is land and shallow marine.”

Technology players
Investment dollars are also available for those companies that have a new idea, at least as long as they can convince the investment community that their new idea works. One such company is RXT (Reservoir Exploration Technology), which has found its niche in seafloor seismic. Founded in 2002 with a management team with a combined 150 years of seismic experience, the company is making a name for itself by focusing on new technology, namely I/O’s VectorSeis Ocean (VSO). RXT is the only company using this 4-C OBC system.

Bergen Oilfield Services AS (BOS) has established partnerships with technology developers to bring new technology into commercial operations. Among these developers are Spectraseis and Stingray Geophysical. Spectraseis specializes in passive low-frequency spectral analysis, based on the observation that low-frequency waves are shaped into coherent patterns above hydrocarbon-bearing reservoirs. The company has signed contracts with Petrobras, Kuwait Oil Company, Statoil, Ecopetrol and two Saudi Aramco joint ventures. It’s also recently completed land surveys for Pemex in Mexico and Hydro in Libya, and earlier this year it successfully completed the first offshore test of its technology.

Stingray, a spin-out from QinetiQ in the United Kingdom, is chasing the burgeoning permanent monitoring market by introducing fiber-optic seismic sensors that can be plowed or jetted into the seafloor and left in place, offering up the ability to conduct 4-D/4-C surveys at will. It has recently commercialized its Fosar system, comprising passive fiber-optic sensors in a modular, scalable and flexible system.

Embracing the concept of seabed nodal systems, SeaBird Exploration, through its daughter company Seabed Geophysical, offers two such systems, CASE (Cableless Seismic System) and CASE Abyss, for deepwater applications. The value case for this technology reads like a geophysicist’s wish list:
• Full-azimuth, wide-offset distribution mapping;
• No holes, infill or data degradation;
• Compressional and shear wave responses that are insensitive to water depth or seabed topography;
• Accurate, repeatable receiver positioning and orientation;
• Repeatable, low-distortion seismic vector response; and
• Reliable receiver ghost and water-layer reverberation suppression.

The old guard
With all of this focus on new players, it might seem that the well-established seismic companies might be losing their edge. But this pool is big enough for everyone to play in.
The merger of CGG and Veritas resulted in the creation of CGGVeritas, and the company has a positive outlook. Robert Brunck, chairman and chief executive officer of CGGVeritas, said that new and advanced technologies like wide-azimuth acquisition and imaging will help to absorb excess vessel capacity. “The first wide-azimuth survey was shot in the Gulf of Mexico by CGGVeritas in 2005, and there are now 11 surveys ongoing or planned as other contractors follow,” he said.

Altogether, he added, he feels that strong demand, low reserve replacement rates and increased depletion rates will help maintain robust conditions into 2009. “Within these market conditions, we feel the market has the ability to absorb about 60 to 65 high-end vessels,” he said. “We’re also seeing a shift in the marketplace towards an increase in multiclient activity.”

C. Richard Price, executive vice president of the company’s Marine Acquisition Product Line, reiterated that the CGGVeritas fleet is not only the largest but is also the most flexible in terms of streamer capacity and towing configurations. “This high number of vessels allows us to position them strategically around the world, practically eliminating the need for long transits and thereby optimizing our capability to meet market requirements and increase available time,” Price said.

Boutte said his company is bringing on two new Q seismic vessels in the near future, bringing the total to nine by 2009. WesternGeco is also rolling out its sixth and seventh Q-Land systems this year. “We’re quite pleased with the uptake of Q technology in the marketplace,” he said. “The differentiation that it has brought has encouraged us to invest further in game changing technology.”

Overall, it’s possible to survive in the seismic industry in the worst of times, and it’s possible to earn enormous amounts of money in the best. But companies will need to keep their eyes on carefully considered strategies to remain competitive.

“The western companies are going to work on their technology — transition zone, [WesternGeco’s] Q technology, permanent monitoring, new streamer technology, OBC,” said Brooks. “They’re going to find their business niches and exploit those rather than compete against cheap labor and cost of equipment.

“I think we’re going to see a more global industry with many more local competitors trying to find their niches and hoping that the pie will continue to expand.”