Petroleum Geo-Services ASA, Norway’s second-largest surveyor of underwater oil and gas fields, fell the most in more than two months in Oslo after Bank of America Merrill Lynch said seismic demand will probably stall.
The shares lost as much as 3.9 percent, the biggest intraday drop since June 24, and traded 3.6 percent lower at 78.90 knoner as of 10:18 a.m. BofAML downgraded the stock to underperform from neutral and cut its price target to 70 kroner.
“We downgrade the seismic segment on our increasing lack of confidence that the recovery in seismic can make material progress in the face of a number of headwinds for demand and pricing,” BofAML said in a note today. “Competition is increasing across the industry, pricing expectations are being scaled back and we question the level of exploration capex for data acquisition going forward.”
PGS said last month it expected marine contract prices to be 10 percent to 15 percent higher this year than in 2012. It based its forecast on stronger demand from companies exploring in deep waters off Africa, South America and Norway as traditional fields go into decline.
“For pricing, the upward momentum seen in 2012 and early 2013 looks to be stalling, particularly as we move in to 2014, and the vacuum of commentary from companies regarding pricing and activity for next year heightens our concern,” BofAML said. “Backlog coverage remains poor, and is currently pointing to limited capacity constraints and a real lack of pricing power across the industry.”
TGS Nopec Geophysical Co., Norway’s largest seismic surveyor in terms of market value, fell as much as 1.7 percent to 181.1 kroner, the lowest intraday level since Aug. 7. The stock traded 1.5 percent lower as of 10:21 a.m.
PGS, based in Lysaker, has 14 seismic vessels in operation and four due for delivery in the next two years.