Hebron. Libra. West White Rose. These are all huge offshore fields that have come onstream recently. At some point in their lives they all relied on marine seismic acquisition to make them a reality.
And there’s the rub. A lack of exploration has severely affected the major marine seismic contractors. Meaning that oil companies that hope to continue to announce these achievements might find that there are no contractors left to help them find these riches.
A recent report from IHS Markit noted that the tight inventory of deepwater E&P assets is driving prices higher.
“Reduced exploration spending means fewer worldclass deepwater assets [are] for sale, while the number of shallow-water assets has declined,” the report stated. “This lack of deepwater asset inventory is challenging E&P operators who seek to acquire assets … to secure development funds or de-risk their portfolios.”
“Low oil prices have significantly reduced operator spending on exploration, particularly in [deep water], which is very costly,” according to Cindy Giglio, CFA, senior analyst at IHS Markit and author of the IHS Markit “M&A Topical Insight—Potential for Change in Offshore Dynamics Report.”
“This means fewer deepwater discoveries are made and even fewer world-class assets become available for sale or acquisition,” she said. “As a result, those quality deepwater assets that do become available are commanding premium prices.”
This is good news for those E&P companies that have assets for sale. It’s not very good news, however, for the marine seismic contractors who help those companies find these assets in the first place. CGG, for instance, had to undergo major restructuring in 2017 to stay in business. A Nov. 13, 2017, press release announced the approval of its financial restructuring plan.
“This favorable vote is a new key step forward in the implementation of our financial restructuring,” said CEO Jean-Georges Malcor. “This financial restructuring will allow us to have a financial structure tailored to the difficult market conditions that we are currently facing.”
Things are not any happier at PGS. The Norwegian company underwent a refinancing at the beginning of 2017, raising about $225 million and authorizing a subsequent offering that was oversubscribed by 223%. But by year-end 2017 there were rumors of additional problems.
Given the advances in marine seismic sensing recently, including nodal technology, broadband seismic and other innovations, I think there’s a serious focus on getting the same, or better, information in a more cost-effective way. But without serious investment from the oil and gas companies, there might not be anyone left to provide the service.
Rhonda Duey’s Exploration Technologies column originally appeared in the January 2018 edition of E&P.