Petroleum Geo-Services faces serious liquidity issues in the next 12 to 18 months from scheduled maturities of more than $800 million of debt in a seismic market that remains soft, warns Geoff Kieburtz, oilfield-service analyst for Salomon Smith Barney Inc. PGS and Veritas DGC recently canceled a merger they had been planning for months. PGS will receive a $7.5-million break-up fee from Veritas. "Veritas had badly wanted to complete the deal, as consolidation appears to be necessary in the seismic industry," Kieburtz says. "However, souring market conditions-in seismic and in the capital markets-prevented receipt of the equity financing the new company needed to reduce its leverage." PGS generated sufficient cash flow during first-half 2002 to support normal capital outlays and its multiclient library, according to PGS chairman and chief executive officer Reidar Michaelsen. However, the delay in the sale of the Atlantis gas development project in the Arabian Gulf has resulted in additional capital outlays related to those operations that PGS had to fund from cash on hand and its revolving credit facility, he adds. PGS and Sinochem are continuing to work on the Atlantis sale, although both companies have the right to terminate the agreement. Michaelsen says PGS does not expect to complete the sale in the immediate future. "Regardless of our current credit ratings, which we will work to restore over time, we have favorable banking relationships and believe that the strength of our business, together with our focus on cost reduction and cash flow generation, will provide positive options to address our 2003 debt maturities," he says. The deal with Veritas quickly faced problems when PGS was unable to complete the sale of the Atlantis assets. "Although there were obvious benefits in the proposed Veritas merger from an industrial logic standpoint, we have had to prepare a contingent stand-alone business plan, focusing on cost reduction and cash flow generation," says Michaelsen. The company reported net losses for the second quarter and first half.
Recommended Reading
CNX, Appalachia Peers Defer Completions as NatGas Prices Languish
2024-04-25 - Henry Hub blues: CNX Resources and other Appalachia producers are slashing production and deferring well completions as natural gas spot prices hover near record lows.
Chevron’s Tengiz Oil Field Operations Start Up in Kazakhstan
2024-04-25 - The final phase of Chevron’s project will produce about 260,000 bbl/d.
Rhino Taps Halliburton for Namibia Well Work
2024-04-24 - Halliburton’s deepwater integrated multi-well construction contract for a block in the Orange Basin starts later this year.
Halliburton’s Low-key M&A Strategy Remains Unchanged
2024-04-23 - Halliburton CEO Jeff Miller says expected organic growth generates more shareholder value than following consolidation trends, such as chief rival SLB’s plans to buy ChampionX.
Deepwater Roundup 2024: Americas
2024-04-23 - The final part of Hart Energy E&P’s Deepwater Roundup focuses on projects coming online in the Americas from 2023 until the end of the decade.