Service sector finances

Financial reporting from the oilfield service sector shows signs of a slight recovery. But some CEO’s complain that their clients, while themselves rolling in cash are still not signing the checks. PDM reports on third quarter financials from Roxar, PGS and Paradigm, and half year results for CGG.


Paradigm Geophysical reports 10% revenue growth for third quarter 2000 as compared to one year ago. Total revenues for the quarter reached $14.3 million, and revenues for the year-to-date have reached $42.4 million, 11% up on last year. Last year was a record year for Services revenue for the company at $12.5 million for the year-to-date, 46 percent up on the year. A trend expected to continue next year according to Chairman Eldad Weiss who commented “This is the fourth quarter of positive earnings, with operating costs each quarter this year holding steady. We consider the current global infrastructure to be adequate to support an even higher level of product sales. The quarter was characterized by significant activity in strengthening our product offerings and our strategic alliances, through the Flagship, Chevron, Total Fina Elf and Sysdrill agreements. Winning the TGS-NOPEC services contract (see opposite page) and the continuing demand for our services by the oil and gas industry reinforces Paradigm’s strong market position as the leading complete geoscience solution provider to the industry.”


Norwegian Roxar generated earnings before tax of NOK 6.2 million for third quarter 2000 compared to a loss of 2.4 million for the same period in 1999. Total revenues for the quarter were 107 million NOK against 80 million for the same period in 1999. Revenues were NOK 294 million, year to date September compared to NOK 281 million in 1999. Roxar’s operating earnings for the period were 5.4 million compared to a loss of 2.8 million for the same period in 1999. Software and Services had an excellent quarter due to strong software sales throughout the quarter. Major new contracts were awarded from Statoil, Norsk Hydro and BP, and sale of new licenses is up by almost 70% compared to the previous year. The services business was steady in the quarter and the margins continued to improve. The company expects software sales to remain strong in 4Q 2000.


CGG’s consolidated results for the first half of 2000 show “a market still awaiting a true upturn.” CGG has decreased its operating loss compared to the same periods last year, and increasing its order book by more than 70% since December 1999. Revenues for first half 2000 were €295.5 million, up 19 % on the first half of 1999. Operating result was a €11.1 million loss, a significant improvement from the two preceding half years, respectively negative at €23.7 and €32.4 million. The operating loss results principally from the low volume of activity in Land seismic acquisition during the first half combined with difficulties on certain large contracts, all other divisions having achieved positive results. The business in the first half of 2000 still suffered from the crisis affecting the oil services industry, and most particularly the seismic sector, since late 1998, in spite of hydrocarbon prices which have returned to high levels for more than a year. Most of the major operators have not yet really resumed their investment programs, simply generating a volume of activity which has stopped further market deterioration, and possibly generated some improvement in specific geographical areas or business sectors, allowing to foresee the prospect of a coming recovery.


The Processing-Reservoir SBU’s sales remained stable at Euro 53.4 million (USD 50.9 million) compared to both previous half years, reflective of the currently sluggish conditions prevailing in the conventional processing market especially in Europe. The Group is improving its position in the high end segments of Imaging and 4D. Chairman Robert Brunck stated “We are still coping with a paradoxical market where our clients’ situation has drastically improved during these past months, but where the same clients are only slowly resuming investing. CGG has already accomplished so much particularly in the last month with our restructuring, the reinforcement of our balance sheet, and the conclusion of four successive strategic transactions. I am confident that we shall be able to fully reap the fruits of recovery, whenever such recovery materializes.”


Petroleum Geo-Services (PGS) reported 2000 third quarter revenue of $246.9 million, an increase of 12% over the same period of the previous year. Third quarter operating profit was $50.4 million, representing a 20% operating profit margin versus a 21% operating profit margin (before unusual items) for the 1999 third quarter. Reidar Michaelsen, Chairman of the Board and Chief Executive Officer, stated, “Oil and gas companies have started increasing exploration and production spending. We expect to continue expanding our production and geophysical services businesses through deployment of our production expertise and our advanced geophysical technology. Specifically, geophysical products such as our PetroTrac suite of advanced reservoir technologies and our extensive inventory of multi-client 3D data covering some of the most prospective regions in the world should position PGS to capture a growing share of this higher spending.” Geophysical services revenue was $122.1 million for the quarter, an increase of 10% over the same period of 1999, yielding an operating profit of $16.3 million. Multi-client sales revenue for the period totaled $62.2 million. The increase in geophysical services revenue primarily reflects improved pricing levels in the contract segment of the market. Demand for our multi-client 3D data has remained steady.

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