Oil has flirted with 30-plus bucks a barrel, gasoline prices have soared into the stratosphere, one presidential candidate wants to open the long-off-limits Arctic National Wildlife Refuge to E&P while his opposition spouts the time-worn rhetoric about Big Oil gouging the public.
Whew, it must be rock 'n roll time in the Oil Patch. Right?
Well, that depends in large measure on which part of that Patch we're talking about.
Even though E&P activity in general has taken a giant step beyond the dormancy of the not-so-distant past, the pervasive mood in the seismic industry is eerily low-key.
In fact, there's folks aplenty singing the blues
"There's not really good news," said Steve Ludlow, vice chairman at Veritas DGC. "We've had no rapid uptick in spending on exploration or on the use of seismic for reservoir analysis.
"Although we're seeing good sales, or licensing of data, proprietary work is few and far between," he added, "and definitely there's over-capacity."
So, you ask, if seismic data are the backbone of the E&P industry, what's causing the disconnect between current high commodity prices and seismic activity?
Waiting for the Trickle-Down
For starters, there are vast amounts of speculative (non-exclusive) seismic data already available in various parts of the world, much of which was in the acquisition stage just as prices spiraled downward a couple of years ago.
Much of these data are currently languishing on the shelves of the contractors, and data that were licensed may not have been tested yet by the drill bit. The considerable seismic data inventory from South Louisiana's highly-touted transition zone is a good "for instance."
With an awareness that the unexpected happens just when you least expect it, the E&P companies are showing caution in setting and allocating budgets. They're in a catch-up mode at the moment.
"The oil companies are drilling what they had and getting healthy now," said Steve Mitchell, vice-president of operations at Fairfield Industries, "and this has to happen before seismic can improve."
Ludlow expressed similar thoughts.
"The majors are raking in the profits over last year," he said, "but they're not spending any more now than a year ago. They're investing in a lot of drilling to drill and complete wells to bring $30 oil to the balance sheet. And they're also paying down debt and buying back stock, which doesn't drive the need for seismic data."
The ongoing merger mania is taking its toll on seismic as well, according to Ludlow. With all sorts of assets to digest and manage and take care of, this puts seismic on the back burner for the companies involved.
Of course, mergers are not the exclusive domain of the E&P companies. Seismic industry giants Schlumberger Geco-Prakla and Western Geophysical recently announced they're combining forces in the form of a joint venture.
Industry watchers won't have long to wait to determine the impact of this alliance.
"We anticipate the deal to be consummated in the fourth quarter," said Will Forrest, vice-president of land and transition zone operations at Western Geophysical, "and we can't really comment on it because of the anti-trust caution that everybody is following. As far as our customers are concerned, it's business as usual right now for these two companies."
Mitchell emphasized stable -- not necessarily high -- oil prices are a key factor for improvement in the seismic business and in the oil and gas industry overall.
He's not alone with this opinion.
"I think an oil price north of $20 is good, but oil over $22 is bad for business and detrimental to the whole economy," Ludlow said. He pointed specifically to the crash of the Southeast Asian economy that caused the most recent harsh downturn in the oil and gas industry.
"Southeast Asia is a big importer and has a big impact on the world, so expensive oil is not the answer."
Reasons to Smile
Despite the angst among the seismic data gatherers, all is not gloom and doom.
Brazil has been a hotbed of seismic activity recently, although that has calmed somewhat while the oil companies consume the new data and wait for the next round of leasing activity.
And Canada, with both its shallow and deep gas plays, has been a bright spot during the dark days, according to Ludlow.
Also BP Amoco announced in mid-July it will raise capital spending to $13.5 billion a year with the goal of upping production of 4 to 8 percent, with a focus on Trinidad and the deep Gulf of Mexico. Other majors are expected to follow suit.
Indeed, the rosy expectations for natural gas are sparking excitement in the domestic U.S. E&P industry, including the seismic sector. Prices at more than $4/Mcf and forecasts for continued escalation in demand likely will translate into a boost for the bottom line at a number of companies.
"There are significant issues with natural gas," Mitchell said. "The deliverability issue is looming, we're not gaining on storage, and demand will stay because it's the cleanest burning fuel.
"I think we're going to see gas exploration pick up," he said, "with deeper drilling for gas on land and the shelf."
There's mounting interest on the part of the oil companies in more sophisticated seismic technology such as multicomponent, or 4-C/3-D seismic, which bodes well for the seismic data gatherers. But there are problems to be overcome, such as price and a dearth of commercially available interpretation software.
There are the ubiquitous doubters who say the improved data won't justify the additional acquisition cost, particularly in areas where 3-D programs and surveys already exist.
Still, Mitchell noted a recent Houston Geological Society function featuring a 4-C/3-D presentation was SRO.
Here Comes the Sun?
It's long been said it's darkest before the dawn. Perhaps this cliché is now germane to the seismic data industry where, despite the ongoing struggle by the companies to remain solvent, there is a note of optimism about the future.
"There will be increased exploration because we're going to have to catch up in this area," said Bert Chenin, marketing vice-president at CGG.
He pegs two culprits as contributors to the current relatively low level of exploration activity:
Still, he has no doubts there will be a turnaround in the exploration side of the business and noted, "There's still a lot of future for seismic since it's still the primary tool for exploration."
"There's two ways to increase reserves; either buy them or use the drill bit," Mitchell said, "and the drill bit requires seismic data."
A crucial factor for the seismic players and their industry compadres is for OPEC et al to keep their act together to prevent another cratering in oil prices. The current effort to tweak production to bring prices off the highs of late spring and early summer, however, doesn't appear to be a cause for consternation.
"High oil prices haven't impacted our industry the way we wish they would," Chenin said, "so if they go down some, it's no big deal for us.
"Time is the important factor."