Oslo-listed seismic player, Petroleum Geo-Services (PGS), slid into the red during the fourth quarter as the company falls victim to weaker seismic market and impairments, despite revenue growth.
In Q4 2014 revenues increased by $70.6 million, or 20%, compared to Q4 2013, mainly driven by higher marine contract revenues and MultiClient late sales revenues.n Q4.
However, in Q42014, the company recorded an impairment charge of $39.7 million. For the full year 2014 the impairment charge was $73.8 million. According to PGS, the impairments in 2014 relate to vessels and equipment and were triggered by vessel retirement and stacking of older and less productive vessels,and a weaker near-term outlook for pricing and utilization.
For the fourth quarter 2014, the company reported a net loss of $85.5 million, compared to a net profit of $30.1 million same time last year. Net income for the full year was a negative $42.8 million, versus $238.3 net profit in 2013.
PGS’ full year 2014 revenues decreased $47.8 million, or 3%, compared to 2013 ($1,453.8 million, compared to $1,501.6 million in 2013). The reduction is mainly due to a 19% reduction of MultiClient pre-funding revenues compared to 2013, partially offset by increased marine contract revenues.
In 2014 the MultiClient pre-funding revenues were lower than planned for the Triton survey in the Gulf of Mexico, where the Company experienced a wait-and-see attitude among clients due to an overlapping survey from a competitor. The total pre-funding level for the full year ended at 84%, lower than the initial guidance of the year of approximately 100% due to the Triton survey as well as some delayed revenues on MultiClient projects acquired in Q4.
Marine contract revenues in Q42014 increased by $50.1 million, or 41%, compared to Q42013. The increase came from more capacity allocated to contract work. Average pricing achieved in Q42014 was lower than for Q42013, and the non-chargeable vessel time was higher. The EBIT margin for marine contract acquisition work was approximately break even in Q42014, down from 27% in Q32014, and 22% in Q42013. The marine contract EBIT margin will fluctuate from quarter to quarter influenced by factors such as vessel scheduling, vessel transits, project specific variables and market conditions.
Reported net operating expenses for the Group (before depreciation, amortization and impairments) in Q42014 were $59.9 million higher than in Q42013, reflecting in part less cost being capitalized to the MultiClient library. Despite the increase in PGS 3D capacity the Company was able to hold the cost base flat due to PGS delivering beyond expectations on the cost reduction program in 2014. The company also said it will be implementing additional cost reduction measures in 2015.
The order book totalled $410 million at December 31, 2014, (including $220 million of committed pre-funding on MultiClient projects), compared to $466 million at September 30, 2014 and $669 million at December 31, 2013.
The main capital expenditures in Q42014 and the full year 2014 were related to the new build program and seismic equipment.
“The sharp oil price decline since mid-June2014 has resulted in a more cautious spending pattern among oil companies impacting seismic bidding, pricing and utilization negatively. PGS expects market uncertainty and low earnings visibility to continue throughout 2015. Based on the current operational projections and with reference to the aforementioned risk factors, PGS expects full year 2015 EBITDA to be in the range of $550-700 million,” the company said in a statement.