Seismic industry to suffer most from COVID-19

Oil&Gas Materials 21 April 2020 11:14 (UTC +04:00)
Seismic industry to suffer most from COVID-19

BAKU, Azerbaijan, Apr.21

By Leman Zeynalova – Trend:

Seismic will suffer the most in supply industry as a result of COVID-19 pandemic, Trend reports with reference to Rystad Energy analysis.

The revenues of seismic industry are estimated to fall this year by 51 percent in a $30 Brent scenario and by 77 percent if the Brent falls to $20, compared to levels seen in 2019.

The company believes that forecasts are driven largely by considerable revisions in exploration spending from the exploration and production operators and delayed licensing rounds by many governments across the world in response to low oil prices.

“Under the new market dynamics, we expect exploration spending to drop by more than 20 percent from its 2019 levels, with at least a 12 percent decline seen by offshore exploration drilling alone,” reads the report.

Within exploration activities, the hardest-hit area will be the acquisition of new geological and geophysical studies in recently acquired blocks and work on yet-to-be-approved exploration wells, said Rystad Energy.

“As for the ongoing offshore projects, logistical challenges caused by travel restrictions and quarantine rules are impacting crew changes for offshore vessels and could result in completion delays that could severely hit the balance sheets of small and medium-sized companies,” the report says.

Rystad Energy Oilfield Service Analyst Binny Bagga said that seismic companies across the board have started to adjust their business plans to better prepare themselves for this downturn. “Most companies have implemented cost-cutting measures which include layoffs, furloughs, cold stacking of vessels and general cost reductions.”

In general, the company expects multi-client seismic companies to be able to adjust to the current downturn more efficiently than the seismic data acquisition companies.

On the other hand, companies which operate on the contract data acquisition model with their own fleets, are likely to be severely impacted, with some contracts already getting canceled and further activity expected to decline, according to the company. “It could become tough for these companies to maintain their fleet.”

“There are turbulent times ahead for small and mid-sized businesses that are heavily invested in offshore acquisition as they are more likely to become victims of bankruptcies and distressed asset sales. To survive, the market may come back again to lower contract pricing and vessel charter rates for some time, as the service companies will prioritize to cover their operating costs,“ Bagga concludes.


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