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UPDATE 2-Seismic oil explorers hit after TGS warns on revenue
October 8, 2013 / 7:16 AM / 4 years ago

UPDATE 2-Seismic oil explorers hit after TGS warns on revenue

* 2013 revenue seen at $810-$870 mln vs fcast $920 mln-$1 bln

* Pre-funding ratio seen in lower end of guidance

* Latest sign that oil companies’ capital spending boom may be over

* Shares across seismic sector hit (Adds CFO comment, rival firm’s CEO, analyst, updates shares)

By Gwladys Fouche and Henrik Stolen

OSLO, Oct 8 (Reuters) - Seismic surveyor TGS lowered its full-year revenue guidance for the second time in three months on Tuesday, hitting shares across the sector on rising concerns that a decade-long boom in oil firms’ capital spending may be at an end.

Oslo-listed TGS, which maps the seabed looking for oil and gas deposits, said net revenue for the year was seen between $810 million and $870 million, below earlier forecasts for $920 million to $1 billion as oil firms delay projects.

“Today’s warning suggests a far sharper deterioration in the market outlook than the caution provided three months ago,” JPMorgan said in a note to clients. “(This) will have a negative read-across to other seismic companies.”

“Given the very sudden and dramatic change to company guidance, the risk attached to 2014 estimates will remain high, in our view,” it added.

The latest announcement hit the shares of several seismic companies. TGS fell 14.1 percent at 1031 GMT, hitting its lowest level since June 2012 while rivals PGS fell 7.2 percent EMGS was down 3.7 percent and Dolphin Group fell 6.9 percent.

Oil and gas firms have recently been cutting investments to try to improve profits and save cash for dividends, due to rising costs impacting profit margins.

Suppliers and analysts expect investment growth by oil firms to slow sharply this year and in 2014, in line with a projected fall in oil prices. The spending boom has squeezed budgets and forced companies to sell assets and issue debt to pay dividends.

TGS cited delays to projects in Australia, due to stronger environmental regulations, and to projects in the United States that had been expected in the third quarter and were now forecast for 2014, its chief financial officer told Reuters.

“We also see slightly higher competition from ships doing seismic mapping without pre-funding in place,” Kristian Johansen said. “We don’t want to do this. We don’t want to weaken pre-funding financing or our dividend.”

TGS’s pre-funding ratio for 2013 - a key indicator that measures the amount of money oil firms put upfront to finance seismic surveys - was near the lower end of previous guidance of 40 to 50 percent.

For the third quarter, that indicator was at 39 percent.

Smaller seismic company Dolphin Group shared TGS’s outlook, its chief executive told Reuters.

“They (oil companies) delay projects and wait to make decisions, but we see that underlying demand remains healthy but that we will experience a seasonal dip in the fourth quarter and first quarter,” said CEO Atle Jacobsen.

“The market will in our opinion be back to a more normal balance in the second quarter.” (Addition reporting by Terje Solsvik and Ole Petter Skonnord; Editing by David Cowell and David Evans)

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