* PGS issues nearly 10 pct in new shares at 4 pct discount
* PGS to build 2 new seismic vessels with funds
* Investment follows capacity increases by big oil drillers
* Shares stable around issue price despite falling market
By Wojciech Moskwa and Mikael Holter
OSLO, Nov 16 Norwegian oil services provider
Petroleum Geo-Services (PGS.OL) issued on Tuesday $275 million
in shares to expand its fleet, betting on a strong recovery in
the market for seismic scans in search of oil and gas.
PGS shares were down 4.2 percent to 82.95 crowns at 0951 GMT
after dipping as much as 5 percent. In a sign of confidence in
the company, they hovered around the issue price of 83 crowns
despite a 1 percent fall on Oslo's .OSEBX index.
PGS's issue comes amidst a sharp rise in demand for offshore
oil services following the restart of deepwater drilling in the
Gulf of Mexico after BP's (BP.L) well blowout and oil spill.
Transocean (RIG.N), the world's largest offshore rig
contractor, and No.2 deepwater drilling group Seadrill (SDRL.OL)
have both announced new rig investments in past days as demand
picks up. [ID:nN15272493] [ID:nLDE6AA0BL]
"PGS sees that the market has bottomed out and is choosing
to expand its fleet," said Ole Andre Hagen, analyst at
"I think it's positive although I know that some worry about
overcapacity (in the seismic fleet)."
PGS said it would use the proceeds from the issue, which
amount to 9.99 percent of its outstanding shares prior to the
placement, to build two high-end Ramford-class seismic vessels.
"The purpose of the private placement is to position PGS for
future growth," PGS Chief Executive Jon Erik Reinhardsen said.
Some analysts said that the cyclical seismic market would
not show much sign of improvement in upcoming quarters and
remains oversupplied with new vessels ordered before the-2008
financial crisis and oil price slide.
"There is not much improvement (in the seismic market)
expected for the first half of 2011. We assume that there will
be a better second half and further improvement in 2012," said
Paul Dahl, an analyst at First Securities.
"There is still overcapacity. It is exciting to see how much
demand will grow and if it manages to absorb all the capacity
... especially how much the Gulf of Mexico can absorb."
Bouncing soundwaves off the sea bottom, seismic vessels scan
for potential oil and gas deposits underneath.
New technology allows high-density scans that give greater
certainty about the potential of hydrocarbons or allows
producers to closely monitor reservoirs as fields are depleted,
curbing drilling risks and allowing greater production.
($1=5.804 Norwegian Crown)
(Editing by Jon Loades-Carter)