Consider the geophysics sector of the industry a shrink-to-fit enterprise where misery might be starting to bring its own relief, and business is improving after recent years of financial ups and downs.
With, admittedly, more downs than ups.
The biggest seismic-provider companies reported improving results in their first-half 2022 financials, but the ongoing exploration slump claimed another victim earlier this year.
ION Geophysical Corp. filed for bankruptcy protection in April to restructure almost $150 million in debt, after months of looking for and failing to find strategic alternatives. That continued the sector’s trend of shrinkage and asset movements following the 2015 energy industry nosedive.
Higher oil and gas prices this year have brought either a spark of enthusiasm or a glimmer of hope to many geophysical companies. And the technical side of geophysics has continued to advance strongly despite the business challenges.
Tech Advances
Christopher Liner, a former president of the Society of Exploration Geophysicists, has had a career of more than 40 years in geophysics, including industry positions with Western Geophysical, Conoco and Saudi Aramco.
He’s also held professorships at the University of Tulsa, the University of Houston and the University of Arkansas, where he was recently named interim associate dean in the Fulbright College of Arts and Sciences, after serving as chair of the college’s geosciences department since 2016.
“Many schools, including ours, need to show students that geoscience is still relevant to world energy. We feel like we’ve got a great story to tell our students.”
“From a technology point of view, there’s a lot of great things going on. I just see tremendous progress going on all the way around,” Liner said.
He cited several areas of recent developments in geophysics:
- Advances in 3-D seismic velocity modeling from full waveform inversion
- Big Data, machine learning, neural networks
- Multiple frequencies, multiple offsets, multiple azimuths
Reservoir modeling and imaging, including work related to porosity and permeability, “has really taken off in the past eight to 10 years,” Liner noted.
“The FWI velocity model itself is of high enough quality where, particularly in the near surface, you can see extraordinary geological detail,” he said.
Industry Shrinkage
By contrast, the prevailing business environment has been challenging for the geophysical sector for several years, tied to both a depressed oil and gas industry and reduced exploration activity. Hope for a recovery in 2018-19 fell apart in the global pandemic.
“It’s been difficult, particularly for the big seismic acquisition providers. For example, Schlumberger, which had bought WesternGeco, got completely out of the seismic acquisition business,” Liner said.
Schlumberger and Baker Hughes created WesternGeco in 2000 by combining Schlumberger’s GECO-Prakla geophysical operations with Western Atlas, a Baker Hughes division. In 2006, Schlumberger acquired 100 percent of WesternGeco for $2.4 billion.
As the acquisition business waned, Schlumberger sold off the company to Shearwater GeoServices in 2018 and took more than $1.1 billion in restructuring expenses.
“That was a huge business decision, as you can imagine,” Liner observed.
Following the Ion Geophysical bankruptcy, energy data and analytics firm TGS announced in September it had acquired ION’s multi-client and processing business.
That included substantially all of the company’s offshore multiclient data library, data processing and imaging capabilities, intellectual property and Gemini Extended Frequency Source technology and equipment. CGG’s Sercel sensing and monitoring division was the successful bidder for the acquisition of ION’s software business.
Closures, divestitures and asset sales have helped the sector shrink into a better fit with industry activity levels and available spending. In its investor presentation, marine geophysical company PGS reported that the sector could deploy almost 60 large, sea-going vessels with streamers to acquire offshore 3-D seismic a decade ago during the oil-price boom.
Today that number is closer to 14 or 15 3-D vessels, almost all operated by PGS or Shearwater.
A Rising Tide
Post-pandemic oil and gas price increases have put most geophysics companies on a better financial footing. TGS reported operating revenues of $362.3 million and net income of over $46.3 million in the first half of this year, compared with a net loss of $2.8 million in the first half of 2021.
CGG reported its first-half operating revenues increased to $403.6 million from $380.2 million a year earlier, and PGS announced its first-half revenues and other income grew to $409.9 million compared with $351.7 million in the year-earlier period.
Liner said he noticed a recently improved environment for the geophysical business while attending the AAPG-SEG IMAGE ’22 conference in Houston, with microseismic companies and other service providers on the uptick.
“It’s all tied to the oil and gas price. Right now, for geopolitical reasons, the price is high. Price is the tide that lifts all boats,” he said.
New Areas of Opportunity
Looking forward, carbon capture and sequestration is emerging as a promising area of opportunity for the geophysical sector, from the earliest stages of feasibility assessment and site selection to continuous storage-reservoir monitoring.
Geophysics can play a role in identifying possible injection-target reservoirs, managing the CO2 injection process, assessing ongoing CO2 storage capability and long-term monitoring of permanent storage – defined as storing 99 percent of injected CO2 for 100 years.
Another emerging trend is an increased interest in applying geophysics to help identify and assess deposits of rare or strategic minerals, as well as gold and other precious metals.
This longstanding practice is getting new attention today because of the importance of crucial minerals for high-tech, electric-vehicle batteries, turbines and other applications related to climate action.
In June, the U.S. Interior Department announced that more than $74.6 million will be distributed in 30 states to invest in geoscience data collection, mapping, data preservation and scientific interpretation of areas with potential for critical minerals.
Funding from last year’s Infrastructure Investment and Jobs Act will account for $64 million in that effort under the U.S. Geological Survey Earth Mapping Resources Initiative, part of a broader $510.7 million investment to support USGS, Interior noted.
The Survey has already announced airborne magnetic and radiometric surveys in several states and areas related to the 50 minerals on its 2022 final list of critical minerals.
“What they’re finding is that there are (deposits of) critical minerals out there that people didn’t know about,” Liner said.
In geophysical education, Liner noted that geoscience enrollment in U.S. colleges “had a big bump up in 2014-15 and has been on the decline since then.”
“Many schools, including ours, need to show students that geoscience is still relevant to world energy. We feel like we’ve got a great story to tell our students,” Liner said. “To a student I would say, geophysics and geology have a place in the world to be a part of the solution and not part of the problem.”