CGG’s Norwegian
purchase signals hot market for marine seismic

Compagnie Generale de Geophysique (CGG) last month outbid rival geophysical contractor Fugro to take over Norwegian company Exploration Resources, which recently merged with the rapidly growing seismic survey company Multiwave Geophysical, based in Bergen, Norway.

The move means a significant expansion in capacity for CGG and raises a number of questions, specifically about the future of a joint venture between Exploration Resources and Fugro and the status of an Exploration Resources’ commitment to buy a state-of-the-art seismic streamer acquisition system from Input/Output (I/O). More generally, with memories of the last downturn in the marine seismic business still fresh in many people’s minds, it is being asked whether the purchase of Exploration Resources heralds the start of a new race for additional capacity to meet rising demand for marine seismic services worldwide.

Exploration Resources emerged as a significant presence in the marine seismic market following a split from Norwegian-based Rieber Shipping last March, when all the seismic activities were spun off to Exploration Resources. The activities of Exploration Resources consist of towed streamer seismic, both contract based and multiclient, and seabed operations consisting of 4C and SeaBed Logging (ElectroMagnetics), operations performed by its Multiwave subsidiary.

By next year when Exploration Resources’ current growth plans have been realized, CGG will see an increase of three vessels in its 3D seismic fleet and the foundation of a new 2D seismic fleet of four seismic vessels. CGG believes that adding 2D capacity to its marine seismic fleet will help it to serve the emerging demand for multi-azimuth/multi-component operations and provide ‘source’ vessels for 4D projects where undershooting is required in congested areas.

Robert Brunck, CGG chairman and CEO, admitted that the purchase of Exploration Resources came at a time when the industry faced ‘under capacity’ at the current point of the business cycle. A year ago he said the industry did need consolidation and CGG had tried to be an actor in those moves. He referred to the company’s talks with Petroleum Geo-Services (PGS) a year or so ago when it was in financial trouble and to CGG’s participation for a time as a shareholder in PGS.

Brunck said the immediate spark for the purchase of Exploration Resources was the offer in mid August made by Fugro. The Dutch company announced on 15 August that it would offer NOK290 per share for all the shares in Exploration Resources listed on the Oslo Stock Exchange. The proposed acquisition was intended to enhance Fugro’s operations in the marine seismic market and to improve service levels on a global basis. It also made sense in terms of the 2003 joint venture nearing its three year conclusion under which Fugro marketed the vessels and supplied geophysical services, seismic crewing, and operations to Exploration Resources.

Gert-Jan Kramer, CEO of Fugro, said at the time of his company’s offer: ‘The proposed acquisition will enable Fugro to meet its growth objectives in a responsible manner through acquisition of an existing fleet rather than through construction or commissioning of new vessels, which would add to global capacity and so potentially weaken the market.’

In the event CGG trumped Fugro by first acquiring 60% of the share capital of Exploration Resources at NOK340 per share and by the end of August paying the same price for over 90% of the shares. Fugro decided not to raise its offer in view of the price being paid by CGG, but to turn to its alternative strategic plan of continuing the activities of its own fleet (Fugro-Geoteam) and in due course replacing the Exploration Resources vessels.
In the first pronouncements on its purchase, CGG’s top management declined to speculate on what would happen to the Fugro joint venture.

The other immediate question was the status of the newly signed contract between Exploration Resources and Input/Output, a main competitor to CGG’s seismic acquisition manufacturing subsidiary Sercel in both marine and land seismic operations. On 23 August I-O announced Exploration Resources’s purchase of a comprehensive marine streamer technology upgrade suite for its C-Orion vessel, making it the first seismic vessel to be fully outfitted with I/O's latest suite of streamer technology. The C-Orion had been outfitted with previous versions of I/O technology while acquiring 2D seismic data for Multiwave Geophysical and others over the last several years.

The technology upgrades feature 70 km of I/O's recently introduced MSX Solid streamer and an advanced DigiCOURSE streamer positioning system, arguably making the vessel one of the most technically advanced 3D and 4D seismic vessels in the world. Initial components of the upgrade were expected to be delivered during the third quarter of 2005. Total value for the entire technology suite was put at around $20 million.

C-Orion will be the first vessel configured to accept I/O's new DigiFIN streamer steering system when it becomes available next year. DigiFIN controls the lateral position of streamer cables allowing more streamers to be deployed closer together without the risk of entanglement. More densely spaced streamers result in an improved seismic image, and DigiFIN also enables shorter line changes when the vessel turns, which dramatically increases productivity for the vessel operator.

Christophe Pettanati of CGG said that he had no immediate opinion about the I-O contract, but industry sources suggest that the deal will not be affected by the purchase of Exploration Resources. Inside I-O, the sale agreement is considered significant as it signals to potential customers that its latest technology offering is regarded as competitive at a time when the demand for streamer-based acquisition systems is expected to increase.

Confirmation of the increased interest in streamer acquisition came early last month from PGS. It has decided to convert its current 4C ocean bottom crew operation, including the vessels Ocean Explorer and Falcon, to towed streamer vessels. The third vessel used in the OBC operation, Bergen Surveyor, is on a short term lease and will be returned to its owners. The conversion is expected to start around year end 2005, and no personnel reductions are expected.

PGS said the move will add one more six streamer 3D vessel (Ocean Explorer) and a 2D vessel (Falcon) to PGS' streamer fleet, increasing its streamer capacity and flexibility in the strengthening streamer market. The company expects the conversion when completed to improve EBIT and operating cash flow by more than $10 million annually compared with continued 4C operation.. The conversion will require a one time investment of approximately $16 million mostly relating to streamers and depreciation/write off of 4C equipment of approximately $6 million. According to the company, it intends to retain a presence in the 4C market in the form of employee know-how and technology allowing for a future re-entry to the market.
Source: "First Break", October, 2005

More info...

21.10.05 Rieber Shipping has decided to rebuild "Polar King".
Rieber Shipping has decided to rebuild the cable layer "Polar King" into a multi streamer state-of-the-art 3D seismic vessel. Rieber Shipping has entered a into a time charter agreement for the vessel with Fugro Geoteam AS.
The vessel was built in 2000, and it was designed by Multi Maritime AS.
Rieber Shipping has also chosen Multi Maritime AS for the design and engineering for the rebuilding project.
The rebuilding is estimated to be finalised in the second quarter of 2006, and it has an estimated cost of NOK 175 million.
Multi Maritime AS is a privately owned company, established in 1983. Both the company and its founders grew up in an active shipbuilding environment in Forde, western Norway. From first beginnings working on chemical tankers, Multi Maritime has grown into a multi-skilled consultancy, employing a staff of highly qualified technicians and engineers and with a worldwide client portfolio.
Beginning with specialist chemical tankers and the offshore support vessels needed for Norway's growing oil and gas industry, Multi Maritime has spent more than twenty years developing an ever widening portfolio of projects for specialised vessels, including specialised cargo vessels, vehicle and passenger vessels, offshore support vessels, high-speed vessels, icebreakers and submersible heavy lift barges.
Our horizons have expanded from western Norway, throughout Scandinavia, to work with owners and shipbuilders as far afield as Poland, Russia and China.
Multi Maritime is a consultancy for the third millennium - with its roots in practical ship building.
Source: Multi Maritime AS

17.10.05 Fugro strengthens position in seismic market.
Leidschendam, the Netherlands, 17 Oct 2005.
Fugro has signed a long term charter agreement with Rieber Shipping ASA, Norway, for the vessel "Polar King".
This vessel built in 2000, will be converted for 3D seismic acquisition and will be able to tow eight to ten long offset streamers (up to 9 kilometres length). The ship will be ready for deployment in May 2006. This charter is part of Fugro’s plan to partly replace, modernise and expand the fleet of six seismic vessels that Fugro currently deploys.
In the current strong and growing seismic market, it is Fugro’s objective to operate with a fleet of approximately eight ships, some owned and some chartered, as of mid 2006.
Fugro has already placed orders for two sets of 3D streamers, one of which is for the ‘Polar King’.
Fugro’s expansion plan for its fleet features the addition of modern seismic vessels that are efficient and economic to operate and meet the highest safety and environmental standards.
Source : Fugro N.V.

25.08.05 Exploration Resources Invests in the C-Orion.
Input/Output, Inc. announced today that Exploration Resources, a marine seismic services contractor and vessel owner headquartered in Bergen, Norway, has purchased a comprehensive marine streamer technology upgrade suite for their C-Orion vessel, making it the first seismic vessel to be fully outfitted with I/O's latest suite of streamer technology. The C-Orion had been outfitted with previous versions of I/O technology while acquiring 2D seismic data for Multiwave Geophysical and others over the last several years.
The technology upgrades, featuring seventy kilometers of I/O's recently introduced MSX Solid(TM) streamer and an advanced DigiCOURSE(R) streamer positioning system, will make the C-Orion one of the most technically advanced 3D and 4D seismic vessels in the world. The initial components of the upgrade are expected to be delivered during the third quarter of 2005. Total value for the entire technology suite is approximately $20 million.
Bjarte Fageraas, CEO of Exploration Resources, commented, "I/O provides innovative technologies that help set ExRe apart from our competitors. With this streamer system, we will be able to offer oil and gas companies a cost-effective solution for acquiring high quality, highly-repeatable seismic data with fewer concerns about operational downtime. The C-Orion has moved into the top echelon of marine streamer vessels, which will allow us to deliver significant value to our shareholders and our customers. I/O has always provided us with outstanding support and maintains a reputation in the industry for standing firmly behind their technologies throughout the entire product lifecycle. The integrated streamer solution offered by I/O is unique in the industry and, besides the technological benefits, gives us a one-stop support function."
Bob Peebler, President and CEO of I/O, stated, "Our strategy is to deliver advanced marine imaging technologies that address the most difficult geophysical challenges worldwide. Outfitting the C-Orion with our latest suite of advanced streamer technologies supports our strategy of bringing innovative solutions to market in partnership with innovative customers. The sale to ExRe will provide I/O with our first opportunity to deploy our advanced marine streamer solution on a single vessel."
Chuck Ledet, Vice President of Marine Imaging Systems at I/O, added, "This upgrade is also exciting for us because the C-Orion will be the first vessel configured to accept I/O's revolutionary DigiFIN(TM) streamer steering system when it becomes available next year. I/O is designing DigiFIN with the ultimate goals of helping seismic contractors improve their productivity and deliver enhanced image quality to the oil and gas companies. We look forward to working closely with ExRe's technical team to deploy this innovative technology."
DigiFIN controls the lateral position of streamer cables, which allows more streamers to be deployed closer together without the risk of entanglement. More densely spaced streamers result in an improved seismic image. DigiFIN also enables shorter line changes when the vessel turns, which dramatically increases productivity for the vessel operator.
The upgrade includes several other cutting-edge I/O technologies. The company's MSX Solid streamer enables low-noise data acquisition and reduces downtime associated with weather, delivering an improved seismic image in less time. The DigiRANGE II(TM) acoustic positioning system includes acoustic cross-bracing along the full length of the streamers. MSX Solid, DigiRANGE II, and DigiFIN are featured components of I/O's Digi4D(TM) streamer imaging solution for high quality, highly repeatable time-lapse seismic data acquisition in the marine environment.
The ExRe upgrade suite also includes energy sources comprising of I/O Sleeve Guns and DigiSHOT(R) digital source controllers. Integrated navigation and binning systems have been supplied by Concept Systems, a wholly-owned subsidiary of I/O. The software provided by Concept Systems acts as a data integration platform, pulling together disparate data streams from the various seismic subsystems to ensure better seismic images with reduced HSE risk and cycle time.
Source: Input/Output, Inc.