Petroleum Geo-Services: Set Sail For Profit
Sep. 11, 2014 4:44 AM ET | About: Petroleum Geo-Services ASA ADR (PGSVY) by: Grant Payne
Disclosure: The author is long PGSVY. (More...)
Summary
• The company trades at less than book value, and roughly 6 times normalized earnings. The dividend will pay you to wait.
• Demand is stable. Marine seismic surveying is an imperative for offshore oil drilling.
• The recent decline from soft MultiClient business is a blip against the long run of an unpredictable and cyclical business.
The world needs energy, and the best answer to that need is oil. Oil demand is projected to grow 41% by 2035. Oil production companies are finding, developing, and producing from oil wells in all terrains and countries across the globe. With the Deepwater Horizon spill still fresh in the mind of the industry, seismic surveying to see just what is going on below the seafloor is as exigent as oxygen; especially considering the fact that fracking is still relatively new to offshore applications. Thus setting the stage for Petroleum Geo-Services (OTCPK:PGSVY), a marine seismic surveying company.
Company Introduction
Petroleum Geo-Services is based in Oslo, Norway, has 16 surveying ships to its name, and operates in over 25 countries. Its survey regions include South America, the Gulf of Mexico, Northwest Europe, the Middle East and Mediterranean, Sub Sahara Africa, Russian and CIS, Asia Pacific, Eastern Canada, and Greenland. It has three main business segments in the marine seismic surveying industry.
The Marine Contract segment creates seismic data for oil and gas exploration and production companies, this segment represented 45% of 2013 revenues. Basically they survey targeted regions at the behest of the contract company based on their needs.
The MultiClient segment initiates and manages seismic surveys, which PGS acquires, processes, markets and sells to non-exclusive customers. In this case they go out on their own and conduct surveys to add to their MultiClient library which they then sell later. Much of the time their surveys are pre funded by industry, and the industry participants that provide pre funding have 'first dibs' on the final product. This segment also represented 45% of 2013 revenues.
The Imaging segment processes seismic data for PGS' MultiClient library and for external clients' contracted seismic data. Imaging also manages R&D activities. This segment represented 8% of 2013 revenues.
The last segment is Operations which plays a support role for the other segments.