Norwegian seismic specialist TGS-NOPEC (TGSN) is expanding into logging with the acquisition of Houston-based A2D Technologies. TGSN will pay A2D shareholders $22 million, $15.5 million in cash and $6.5 million in TGSN shares. A2D supplies oil companies with a range of services, data and software applications for well logs. A2D began delivering log data via the Internet in 1997 and today, 40% of revenue comes from online sales.
TGSN CEO Hank Hamilton said, “A2D’s business model is similar to ours. We both focus on creating quality, non-exclusive geoscience data products that can be licensed to multiple clients. A2D has done an excellent job in developing this market in the US and we look forward to helping A2D internationalize its effort. We see significant synergies through bundling our current products and services as well as the creation of new integrated products.”
John Adamick VP of Business Development for TGSN described the acquisition as an important component of TGSN’s growth strategy to create, manage and market upstream information with a multi-client business model. TGSN’s seismic library comprises some 1.7 million km 2D data along with 77,000 km sq of 3D. TGSN plans to internationalize A2D’s offering.
A2D CEO David Armitage estimates that around 6 million paper
well logs have been released world-wide. Under 25% of these are in digital form.
A2D currently digitizes 60,000 logs and 50 million curve feet per month - round
the clock in the US and India. For Armitage, A2D is a “global manufacturer
TGSN CFO Arne Helland is planning some creative accounting on the acquisition. A2D currently expenses the cost of building its seismic library. TGSN’s advisors believe that this understates the true value of the company and have recommended capitalizing these costs.
This restatement will lead to profit growth, as the cost of data store creation is now amortized over seven years. A2D has been doing well for the past three years, recording annual revenues of $7.1 million in 1999, $9.6 million in 2000, and $12.6 million in 2001.
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