Seeking to cope with changing seismic market fundamentals, marine geophysical firm Petroleum Geo-Services (PGS) will centralize and streamline its operations, resulting in a reduction in its executive management team.
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| PGS' Ramform Tethys. Source: PGS. |
The company will now be comprised of two business areas: sales & services and operations & technology. Sales & services will contain three departments: sales, new ventures and imaging. Operations & technology will include the following six departments: project planning & bidding, project delivery, maritime, technical, operations geophysics and geoscience & engineering.
As a result of the restructuring, PGS‘s executive management team will be reduced from six to four. Sverre Strandenes, currently EVP MultiClient, will be EVP and responsible for Sales & Services, while Per Arild Reksnes, currently EVP Operations, will be EVP and lead Operations & Technology. Gottfred Langseth will continue as EVP & CFO.
The company plans to implement the new structure by year-end 2017. Restructuring cost is estimated to be approximately $40 - 50 million and is expected to be recorded mainly in Q4 2017.
PGS still plans to operate a fleet of eight vessels, but has reduced the cost base for its vessel fleet from eight to six. Two of the vessels will be used selectively to address demand swings and market seasonality; this flexible capacity will be managed and crewed by a combination of regular and temporary employees. The company also has coldstacked 6 3D vessels, meaning it is well-positioned to take advantage of a market recovery, according to PGS’ 3Q 2017 earnings presentation.
The marine geophysical market is smaller, weaker and more uncertain than before, and the multiclient share of acquisition has increased considerably, PGS said in a 26 October press statement. At the same time the world has become more digital and clients have centralized their decision making process.
"This downturn has been longer and lower than anyone anticipated. We think the worst is behind us, but I cannot bet the company on a market recovery. We need to change what we can control ourselves. The reorganization, combined with more flexible vessel capacity makes us better positioned to address the current market environment and improve cash flow and profitability," says Rune Olav Pedersen, president & CEO of PGS, in a 26 October press statement.
PGS expects the overall gross cash cost for the company to be reduced by at least $100 million in 2018, which should be sufficient to deliver positive cash flow after debt servicing next year, assuming a similar market in 2018 as in 2017, the company said.
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