Nothing like dropping a tantalizing bombshell on the eve of a major trade show. In an announcement that initially took the industry by surprise, ION announced Oct. 23 that it was forming a joint venture (JV) with BGP, the world's largest land seismic contractor and owned by CNPC, one of China's national oil companies. The announcement came right before the annual meeting of the Society of Exploration Geophysicists (SEG). I used the word "initially" because, upon further reflection, this decision starts to make pretty good sense. I talked to Bob Peebler during SEG about the rationale behind the JV, and from his standpoint, there are two solid reasons for the move. Firstly, ION has never had a service arm, unlike its rival Sercel, and this makes it difficult to do full-scale testing of new land equipment without seeking out a like-minded operator (think BP and Apache with FireFly). Secondly, ION's purchase of Aram last year came at what turned out to be a horrible time, leaving the company saddled with unmanageable debt. The JV will enhance ION's financial position significantly, with total cash proceeds of $175 million from BGP. BGP, in turn, will receive a 51% interest in the JV and about 16.66% interest in ION. Prior to the JV closing, ION will also receive up to $40 million of bridge financing arranged by BGP. At the closing ION will refinance and reduce its long-term debt and receive an expanded replacement revolving line of credit. Overall, after closing ION expects to have more than $100 million in liquidity from cash and spare capacity on its revolving line of credit. Peebler said that the two companies have been talking for a couple of years about a possible alliance. While BGP is by far the largest land contractor, with 113 crews, it doesn't do much in the way of R&D, and he said that ION's innovative technology ideas "piqued their interest." When the economic meltdown came in fall of 2008, the financial implications of such an alliance also gained importance, he said. Talks started in earnest in June, and by late October the deal was finalized. The JV will be a standalone company with its own board of directors, Peebler said. Rumors about ION's balance sheet have been flying since the bottom dropped out of the market, and at SEG talk was that BGP was buying 51% of the entire company, not just the JV. But Peebler insisted this wasn't some sort of fire sale but rather a serendipitous aligning of the planets. "This company is in a better position than it's ever been," he said.