Petroleum Geo-Services ASA has announced that the third quarter of 2014 has seen deteriorating market conditions, including a weakening of the oil price.
According to the company, cautious spending behaviour among oil companies is still negatively impacting bidding activity and pricing levels for marine contract work and making utilisation and vessel logistics even more challenging. The general market uncertainty may further impact demand for PGS’s MultiClient library data towards the end of the year.
Looking at the numbers, the company hopes to report consolidated Q3 2014 revenues of around $395 million; EBITDA of $180 million and EBIT excluding impairment charges of $75 million.
The company expects impairment charges of approximately $20-25 million. The quarter is also impacted by a primarily non-cash exchange rate loss of $8 million and exploration expenses in Azimuth Ltd. of $8 million. The exchange rate loss relates to the stronger USD and the effect on legal deposits in Brazilian Real. The stronger USD, which also increases the deferred tax expense in the quarter by approximately $7 million since most deferred tax assets are in Norwegian Kroner, will have a positive impact on the company's cost base going forward.
PGS Apollo also began a five-year classing in late Q3, which was previously planned for early 2015, reducing earnings capacity somewhat in Q3 and Q4.
Third quarter cash flow provided by operating activities is scheduled to be approximately $230 million, giving a cash flow after capital expenditures and before financing activities of approximately $75 million. According to PGS, a solid cash flow combined with a strong balance sheet means it is “well positioned to handle the challenging market environment.”
Subsequent to Q3, PGS got confirmation of pre-funding for the Triton GeoStreamer full azimuth MultiClient survey in the Gulf of Mexico. The company has confirmed pre-funding for the fourth quarter of 2014 as $60 million (excluding Triton). PGS says it “is confident that the total pre-funding revenues for Q4 will exceed $100 million.”
Booking of Q4 3D capacity has increased from 70 percent in early September to now approximately 90 percent, with approximately 80 percent of active 3D capacity scheduled for Marine contract acquisition work. PGS marine contract revenues for the remainder of the year therefore carry less uncertainty. Q4 operational performance and MultiClient late sales remain as the main variables for the full year.
Taking all factors into account PGS has revised its full year 2014 EBITDA guidance to be approximately $725 million.