Norwegian seismic services company EMGS has noted an extremely low vessel utilization for the first quarter of 2020 due to project cancellations, which ensued following the recent oil price drop and the coronavirus pandemic. As a result, one of EMGS’ vessels is up for a cold-stack.
Although EMGS’ vessel utilization for the quarter was higher than in the corresponding quarter in 2019, the company still recorded a mere 26 per cent vessel utilization in 1Q 2020.
The first quarter of the year remains to be a painful part of the year for EMGS since last year’s quarterly utilization stood at only 11 per cent.
In an update on Tuesday, EMGS said that the Atlantic Guardian vessel had spent the beginning of the first quarter completing the confirmed work for Pemex in Mexico.
The vessel later started preparations for a proprietary survey offshore Mauritania and Senegal awarded by BP last summer . At the time, the seismic firm did not say which project BP was hiring the company for, but the contract was most likely related to BP’s Tortue Ahmeyim project, according to the description by EMGS.
However, EMGS said on Tuesday that, during the quarter, it had received a notification about the postponement of the project. Therefore, the Atlantic Guardian started transit towards Norway for an eventual cold stack. The vessel’s utilization for the first quarter was 40 per cent.
EMGS has subsequently been notified by the customer that the project is terminated, and it will receive a contractual fee of around $2 million in this connection.
Although not explicitly stated by EMGS, the cancellation is likely related to oil and gas operators’ recent actions to reduce spending due to the current challenges in the market. These types of actions directly affect the services providers like EMGS. BP revealed its own plan to secure the company’s stability with a 25% reduction in capex in a statement last week.
Another vessel utilized by the seismic company, the Petrel Explorer, started the first quarter transiting towards Mexico in preparation for additional acquisition work connected to a two-year acquisition contract with Pemex.
However, upon notification by the customer in February that no additional acquisition work would be forthcoming in the near to medium future, the Petrel Explorer transited to Norway to begin acquisition on a pre-funded multi-client survey in Norway. The vessel’s utilization for the first quarter was 11 per cent.
It is worth noting that SeaBird Exploration received a notice of extension last month for the Petrel Explorer seismic vessel. Under the extension, the vessel will stay with EMGS until May 31, 2020.
Evidence of services industry already being heavily affected by the current market disruption became clear in late March when EMGS said it was starting to operate in a low-cost setup to preserve sufficient liquidity. Due to these measures, EMGS is only keeping a skeleton crew .
Offshore Energy Today has also recently reported on other seismic companies receiving cancellations. Axxis Geo Solutions, Polarcus, and SeaBird each received cancellations for their respective projects.