Petroleum Geo-Services ASA reduced its earnings target for this year by as much as 5.9 percent as Norway’s second-largest seismic surveyor of offshore oil and gas deposits sees explorers’ curbs on spending pushing down prices.
It expects earnings before interest, taxes, depreciation and amortization of $800 million to $850 million, from $850 million earlier, Lysaker-based PGS said today in a statement.
Prices will be “flat” for sold capacity and “slightly lower” for unsold capacity next year, the company said.
“Oil companies’ focus on cash preservation reduces short term seismic growth,” it said in presentation material. Lower spending is reducing and delaying sales from its data library and first-quarter profit will be hit by “market softness.”
Oil-service companies including surveyors are suffering from falling demand as explorers cut back in the face of rising spending and costs. CGG SA, the largest seismic company, slumped 17 percent in Paris trading yesterday, the most in five years, as it cut its 2013 profit forecast, weighing on industry stocks.
PGS rose 2.2 percent to 66.50 kroner by 11:26 a.m. in Oslo, paring yesterday’s 4.7 percent loss to the lowest in two years.
“We believe the estimate cuts for 2014 at this point are somewhat better than feared,” Joergen Andreas Lande, an analyst at RS Platou Markets AS, wrote in an e-mailed note. “At the same time, it is clear that pricing is softening.”
PGS’s Ebitda will grow to $900 million to $950 million in 2014, with capital expenditure seen weakening to $400 million to $450 million, from as much as $475 million this year, it said.
The company will focus on preserving cash to pay dividends, Chief Executive Officer Jon Erik Reinhardsen said in an Oslo presentation, reiterating a target to pay out 25 percent to 50 percent of earnings to shareholders over time. Dividends will be higher than for 2012, he said in an interview, declining to elaborate as the board will propose a figure in February.
Dividends are seen at 2.3 kroner, up from the 1.65 kroner a share paid in May, according to Bloomberg’s BDVD estimate.
Demand and prices for seismic surveys may rise after 2014, the CEO said. “The world needs significantly more discoveries of oil reserves,” he said in the interview. “Investors will focus on oil companies that deliver growth.”