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UPDATE 2-Oil hunter PGS lifted by leap in industry spend
February 20, 2012 / 8:51 AM / 6 years ago

UPDATE 2-Oil hunter PGS lifted by leap in industry spend

* Surveying for oil to become more profitable - CEO

* “Incredibly positive” outlook, says analyst

* Q4 EBITDA $145 mln vs forecast $126 mln

* 2012 EBITDA seen up 22-31 pct despite weak Q1

* Shares up 9 percent (Adds CEO quotes, analyst, details, background, shares)

By Walter Gibbs and Henrik Stolen

OSLO, Feb 20 (Reuters) - A jump in spending by oil companies looking for new reserves is set to create a surge in demand, and higher prices, for Norway’s Petroleum Geo-Services , whose technologies are used to find oil, it said on Monday.

Offshore survey demand has reached levels last seen in 2007, before the finance crisis and then BP’s 2010 Deepwater Horizon blowout in the U.S. Gulf of Mexico caused demand to plunge, PGS Chief Executive Jon Erik Reinhardsen said.

“We see bidding activity increasing sharply,” he told reporters and analysts.

Top oil companies like BP, Royal Dutch Shell and Total have announced big increases in capital spending in recent weeks as they step up the hunt for new reserves.

Industry experts who project a 10-percent rise in exploraton-and-production spending by oil companies in 2012 may be positively surprised, Reinhardsen said.

“We have seen companies upping their spending estimates even further,” he said, noting by comparison that global seismic survey capacity was to grow six percent in both 2012 and 2013.

At 1145 GMT, PGS’s shares were up 9 percent at 87.5 crowns, a six-month high, after rising from 53.75 crowns on Dec. 15.

Shares in the sector have run up, sparked by a bullish view of 2012 that PGS unveiled on Dec. 16 and subsequent positive comments from Schlumberger’s WesternGeco unit and TGS of Norway.

“This is incredibly positive,” said Fondsfinans analyst Paal Dahl. “I don’t think PGS has been so positive about market prospects in the past three or four years.”

The bullish outlook came as PGS, whose ship crews bounce sound waves off the seabed in a search for oil and gas reservoirs, posted surprisingly strong fourth-quarter results.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came to $145 million in the quarter, while analysts in a Reuters poll had forecast an average $126 million after PGS lowered guidance in December.

That brought EBITDA for all of 2011 to $534.8 million, producing an EBIT margin of 11 percent. The company reiterated its guidance for 2012 EBITDA of $650-700 million, with an EBIT margin of between 10 and 15 percent.

PGS has traditionally specialised in conducting seismic surveys on exclusive contracts, but vessel oversupply has pushed PGS toward multi-client sales in recent quarters - a profitable change of tactic, it said.

“Strong Q4 multi-client late sales revenues offset the weak utilization and productivity for marine contract work in the quarter,” Reinhardsen said.

“Late sales revenues in 2011 were by far the best in PGS’ history.”

He said 2012 has opened weakly, as forecast, due to price pressure, idle vessels and fleet repositioning. But a demand surge would soon begin to change that, he said, especially in PGS’s higher-margin contract business.

“There will be a shortness for capacity for the northern areas this summer and we see that in the pricing,” he said, referring to the North Sea and the Barents Sea, where a series of discoveries has buoyed optimism, as well as Greenland.

Demand was also expected to take off in Angolan waters and the U.S. Gulf of Mexico, where the Obama administration has resumed lease sales after a pause to recover from the Deepwater Horizon accident.

France’s CGG Veritas reports March 1.

$1 = 5.6918 Norwegian krones Reporting by Oslo newsroom; Editing by Jon Loades-Carter and Mark Potter

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