Moody’s Investors Service said in its latest report that plunging oil prices that are moving oil companies to cut spending on exploration activity, present a major challenge for seismic companies globally, as the most volatile and cyclical segment of the oilfield services industry.
Eric Kang , a Moody’s analyst, said: “We do not expect a significant recovery for seismic companies in the near term, especially as oil prices remain volatile. Spending on seismic is typically the first item that oil companies cut and the last they reinstate when they resume investing.”
According to Moody’s, the 55% plunge in benchmark crude prices from June 2014 to March 2015 has made oil companies more cautious of offshore exploration activity, seeking to align their spending with reduced cash flow expectations. In the report, Moody’s says it expects at least a 15% drop in offshore upstream investments in 2015 which would continue the downward trend that started in mid-2013.
Moody’s predicts that as seismic companies focus on maximising capacity bookings to keep jobs and vessel utilisation, contract-seismic prices will likely fall more sharply in 2015 than they did last year. Also, pricing pressures for multi-client sales will be less severe but multi-client late sales volumes will remain difficult to predict.
Moody’s also announced that, owing to the continuing market challenges, it has downgraded two of the largest global players – CGG SA to B1 from Ba3 and Petroleum Geo-Services ASA to Ba3 from Ba2, with negative outlooks. Moody’s says that both companies’ credit profiles are likely to weaken further in 2015, with limited prospects for improvement in 2016.
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