Electromagnetic Geoservices (EMGS) announced a cost reduction program that will generate cuts in its fleet, workforce, and capital expenditures, which the company is blaming on challenging market conditions.
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The EM Leader. From EMGS. |
EMGS took a massive dive of nearly 72% from US$42.5 million in 2Q 2014 to $12.1 million is 2Q 2015.
During the quarter, EMGS implemented its cost reduction program that includes a reduction from four to three vessels, by removing the EM Leader in mid-May. The company’s three other vessels operated on multi-client projects in Norway, Gulf of Mexico, and Indonesia during 2Q 2015.
Contract sales were at $4.8 million for the period, while sales from the multi-client library ended at $7.3 million. The results were negatively affected by extraordinary costs related to the company's cost reduction program, EMGS said.
"In the second quarter we were, as expected, more affected by the challenging market conditions than in the previous quarter. We had planned for a higher contract utilization in the quarter, but negotiations were delayed. During the quarter, we have therefore invested in what we consider to be good and timely multi-client projects, as we see these as important for the future development of our company," Bjarte Bruheim, EMGS CEO said.
Due to the cost reduction program the company will also see a 20% reduction in its workforce, and a reduction in its capital expenditures for the rest of the year.
“The market outlook is currently hard to predict. Contract negotiations are delayed and the oil companies' spending and budgets are further revised and reduced. As a consequence, EMGS board and management will continue the work to reduce the company's cost level and capital expenditures,” EMGS said.
In 2H 2015, the company’s contract with Mexico’s PEMEX will begin, in addition to a $4.2 million contract offshore Malaysia with an oil company. EMGS said it expects a contract for work in Asia as well.
The company also entered into two data licensing agreements worth about $1.6 million with two oil companies for the provision of 3D EM data from EMGS' multi-client data library over the Barents Sea and the Norwegian Sea.
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