June 8, 2020: Oslo, Norway, PGS implements further cost reductions to bring annual gross cash cost run-rate to approximately $400 million through staff reductions, re-organization, consolidation of offices, re-negotiation of service agreements and other cost measures.
The Covid-19 pandemic and related disruption in the oil market have caused unprecedented challenges for the seismic industry and will temporarily cause a significant reduction of activity levels. PGS is responding to this challenge by further adjusting its cost base to the lower activity level while retaining its core global capabilities and ability to scale up when demand resumes.
PGS has earlier announced stacking of three out of the eight 3D vessels operated at the start of the year, and several other cost measures. The Company will now take steps to address the lower market activity by further streamlining its organization and reducing office-based personnel by approximately 40%, including reductions already implemented.
In combination with other cost measures, this is expected to reduce the Company’s annual gross cash cost run rate to approximately $400 million compared to approximately $600 million as guided at the start of 2020. The corresponding gross cash costs for 2020 are estimated to be approximately $460 million, excluding severance and other restructuring costs of approximately $30 million expected to be recognized in Q2 and Q3 2020. The annual gross cash cost run rate is based on operating five 3D vessels. The Company is prepared to adjust operated vessel capacity and offshore crew levels further if required.
As part of streamlining of the organization, all commercial activities, including the current New Ventures unit, will be combined into one business unit, Sales & Services, which will be headed by Nathan Oliver. Berit Osnes who currently leads New Ventures will take a key management role in Sales & Services following re-organization. The new organization is expected to be implemented August 1, 2020.
“The current market situation is very challenging for the seismic industry. We are addressing the activity reduction and low visibility by adjusting operations and cost. We will scale down our organization significantly while retaining our core capabilities and scalability to be in position to take advantage of what we believe will be an improving market following the current crisis.
PGS has a strong market position and a resilient operating model and organization. I am proud of how our employees are responding to yet another challenging period for the industry. The PGS workforce has demonstrated strong commitment and ability to adapt during previous organizational restructures, and I am confident we will see the same during the weeks and months to come,” says President & CEO Rune Olav Pedersen.
PGS ASA and its subsidiaries (“PGS” or "the Company") is a focused marine geophysical company that provides a broad range of seismic and reservoir services, including acquisition, imaging, interpretation, and field evaluation. The Company MultiClient data library is among the largest in the seismic industry, with modern 3D coverage in all significant offshore hydrocarbon provinces of the world. The Company operates on a worldwide basis with headquarters in Oslo, Norway and the PGS share is listed on the Oslo stock exchange (OSE: PGS). For more information on PGS visit www.pgs.com.
The information included herein contains certain forward-looking statements that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future. These statements are based on various assumptions made by the Company, which are beyond its control and are subject to certain additional risks and uncertainties. The Company is subject to a large number of risk factors including but not limited to the demand for seismic services, the demand for data from our multi-client data library, the attractiveness of our technology, unpredictable changes in governmental regulations affecting our markets and extreme weather conditions. For a further description of other relevant risk factors we refer to our Annual Report for 2019. As a result of these and other risk factors, actual events and our actual results may differ materially from those indicated in or implied by such forward-looking statements. The reservation is also made that inaccuracies or mistakes may occur in the information given above about current status of the Company or its business. Any reliance on the information above is at the risk of the reader, and PGS disclaims any and all liability in this respect.