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Toward a New Horizon in the Marine Seismic Streamer Industry

WesternGeco Seismic Vessel Amazon Warrior

Toward a New Horizon in the Marine Seismic Streamer Industry

 Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

This challenging commercial environment is clearly reflected in the financial statements of standalone acquisition players who are either at or close to bankruptcy, heavily burdened by weak cash flow and high debt….While these stand-alone acquisition players have no other choice than to stay in and fight on to avoid bankruptcy while hoping for a better future, we at Schlumberger do have a choice and we chose to exit the commoditized land and marine acquisition business. ~ Paal Kibsgaard, Schlumberger’s CEO, 19 January 2018 E&P article

Leaders keep their eyes on the horizon, not just on the bottom line. ~ Warren Bennis

I was in the process of preparing to write another blog article in anticipation of the release of Q4 2017 and full year financials from a conglomerate offshore market players when I learned of Schlumberger’s decision to exit the land and marine data acquisition business.  Schlumberger’s CEO, Paal Kibsgaard’s sober analysis of the seismic acquisition market was refreshing in its honesty and should resonate throughout the industry.  I began working in the marine seismic business in 1998 on board the M/V Western Atlas. I was lured by the 6-week rotation schedule that, I hoped, would allow me to travel and see the world.  (I saw the Gulf of Mexico with Western Atlas, but the industry has taken me around the globe.)  I worked for Western Atlas, an offspring of Western Geophysical.  Western Atlas merged with Baker Hughes later on, and then merged with Geco-Prakla to become WesternGeco (WG).  WG was subsequently absorbed by Schlumberger.  The marine seismic business has always been tumultuous.  WG was the arm of Schlumberger mostly identified with the marine and onshore seismic acquisition business, where they have occupied a forefront position.  WG introduced their two Amazon-class vessels into the fledgling market, Amazon Warrior (2014) and Amazon Conqueror  (2015).  In 2013, WG had introduced their high-technology IsoMetrix™ 4-component streamer commercially.  More recently, it was announced that the US Supreme Court would consider Schlumberger/WG’s claim of technology infringement.  Thus, in many ways, WG has left an indelible impression on the marine seismic acquisition market, regardless.  It will be interesting to learn how their resources and technology will be dispersed into the new market reality that will follow their exit.  In many ways, it is hard to conceive of such a market without WGs presence in acquisition.

The recent Q4 2017 vessel utilization numbers were published at the start of 2018 for two pure play marine seismic streamer vessel operators.  WG had operated several marine seismic streamer vessels prior to the mid-2014 crash in oil prices, but stacked many of them.  WG no longer publishes vessel utilization numbers, since WG is a relatively small component of Schlumberger.  Thus, it would have been difficult to gauge the health of the marine seismic acquisition sector through analyzing Schlumberger/WG anyhow.  CGG also reduced their fleet to become more diversified geoscience company.  CGG filed for bankruptcy and reorganized and now has much less presence in the marine seismic streamer acquisition market, as well.  Many of my blog article posts, which began in 2015, have concentrated on pure play marine seismic streamer company performance to understand the health of the deep water exploration and development sector.  Polarcus’ Q4 2017 vessel utilization was 68% and the other company listed 46%, and has further stated that they will reduce their seismic 3D streamer fleet from eight (8) to six (6) operating vessels.  Seismic streamer vessels are the data acquisition platforms and therefore the main revenue generators, or the revenue losers, for marine seismic exploration companies.  So, while we all must await the Q4 2017 and full year 2017 financials to be released, Q4 2017 cannot be a banner quarter for either of them, based on these already released vessel allocation numbers.  Schlumberger/WGs decision to exit the marine and onshore seismic acquisition markets punctuates that no robust resurgence in deep water exploration is anticipated.

On 12 January 2018, the price of oil edged over $70 USD/bbl for the first time in over three years.  This generated some excitement, but this news was obviously not viewed as a life-line for marine seismic service companies.  In previous blog posts, I mentioned that deep water exploration and development required a risk threshold of a minimum oil price of $70 USD/bbl.  Therefore, every dollar above that threshold would represent an opportunity for revenue generation.  However, marine seismic exploration players know that oil eking over such an arbitrary economic threshold is not going to create a bonanza of deep water exploration.  Every dollar over that arbitrary price may open up more money making opportunities for both license operators and exploration companies.  At the same time, every company has their own unique cost base dependent on their business model and objectives which dictates how their resources are managed.   This enterprise specific cost base is much different than any project related cost adjustments related to a seismic survey areas geology and geopolitics.  The $70 USD/bbl oil price threshold mostly speaks to market stability that supports minimal revenue generating opportunities.  The problem is that minimal revenue generating opportunities are not necessarily enough to pay off debt generated from new build programs and past lean quarters.  When businesses are growing, new assets and improvements are paid for not only by the revenue they generate, but also through the revenue generation of the older assets.  With so many vessels stacked, revenue has to now be generated through fewer opportunities.  At the same time, this reduced revenue flow has to pay for the fewer newer and more expensive vessels working for minimal profit.

You can have data without information, but you cannot have information without data. ~ Daniel Keys Moran

 

It doesn’t matter much where your company sits in its industry ecosystem, nor how vertically or horizontally integrated it is – what matters is its relative ‘share of customer value’ in the final product or solution, and its cost of producing that value. ~ Gary Hamel

Even before the crash in oil prices mid-2014, the marine seismic streamer market really had too many vessels in operation for the required survey work.  Because of this vessel over-capacity, many oil and gas (O&G) concession operators became more selective in terms of their requirements in vessel and equipment specifications.  For example, several operators would not allow a survey vessel older than twenty (20) years to be tendered in any data acquisition proposal unless such vessels were specially built for marine seismic streamer surveys.  O&G operators also had similar age requirements for support vessels.  These requirements recognized the underlying health and safety, as well as operational efficiency benefits delivered by purpose-built vessels.  However, such requirements are also indicative of operators having the ability to require high standards while also being able to reach their exploration objectives and seize opportunities with a sufficient number of vessels which could efficiently complete surveys affordably.  More in-sea instruments being deployed prompted development of improved streamer and source positioning control technologies, which also soon became a requirement for several tenders. 

O&G operators, through demanding more stringent vessel and equipment requirements, in certain respects, encouraged the building of newer and more efficient wide-tow capable vessels, as well as the development of supporting technologies.  As was also mentioned in previous posts, marine seismic streamer service companies having the ability to complete surveys in less time mostly benefits the operators of the survey area more than the seismic service provider.  Vessels sometimes need to re-survey areas for a variety of reasons related to unpredictable weather and currents.  When streamers and sources are not positioned correctly, the subsurface cannot be imaged correctly.  Data imaging is dependent on correctly discerning the position and geometry between the seismic source (air guns) and the receivers held within the streamer cables. Wide-tow capable vessels towing more streamers (sensors) created new issues in terms of acquiring the correct data.  A certain amount of in-fill, as it is referred to, was always anticipated and calculated into the bid tenders.  Of course, eliminating in-fill was beneficial to the service provider and operators in terms of time-savings in operating the survey vessel.  Especially, in a highly competitive vessel over-capacity market with low profit margins, the use of such technologies became imperative to be commercially successful.

It was recently broadcast (12 January 2018) that the US Supreme Court will consider the issue and ramifications of the unfair global use of intellectual property.  This case has to do with WGs Q-Marine™ streamer control devices and ION Geophysical (ION) infringement on the patented technology from their development and sale of DigiFin™ (4 patented technologies).  The question revolves around recovering $93 million USD from ION for foreign contracts.  ION contends that WG cannot recoup lost profits for the overseas use of ION’s products by ION’s customers, and that lost-profits can only be recouped from a direct competitor.  This will be an interesting decision and there are obviously certain merits to both sides, otherwise it would not be heard by the US Supreme Court.  I prepared marine seismic acquisition proposals for projects offshore the continent of Africa for a UK affiliate of a Norway based company.  This company developed a proprietary dual-sensor broadband capable streamer technology.  However, because operators wanted bidding on a level playing field, such innovative technology could not be bid in some cases until “broadband” was also an offering of competitors in the bidding process.  Operators resist requesting unique proprietary technologies because they are no longer a competitive bid.  So when operators are requiring streamer control capability, they are not intentionally requesting a proprietary technology.  Marine seismic service provider bids needed to offer Q-Marine™ or DigiFin™ capability within their bid proposals.  However, it was not necessarily regarded as the proprietary technology that won the bid, so much as an adjunct technology to meet the base operator specifications.  Operators actually need to also be aware of the specifications that they are requesting and what technologies are available to meet such requirements.

Every exit is an entry somewhere else. ~ Tom Stoppard

If you go long on seismic companies at this point you might want to ask yourself what Schlumberger’s management knows that you don’t?  ~ Jeremy Punnett, Stamford Maritime

In many respects, Schlumberger’s exit from marine and land seismic acquisition markets points to the deficiency in the current business model used.  While data is necessary in the search for resources, the burden of the cyclic nature of the market is placed mostly on the data acquisition service providers.  But, service providers are just that.  Operators define the services that they need or want.  Operators decide the age of vessels used and even the breadth of solutions tendered.  What Schlumberger has learned, as well as the other seismic acquisition service providers, is that there is a gap between what customers ask for and how much they are willing to pay for it:

Kibsgaard added that the company’s customers are not willing to “pay a premium for differentiated seismic measurement and surveys” and “clearly believe that generic technology and performance is sufficient.” This creates a low technical barrier for smaller players to enter the segment, which keeps demand in a chronic state of overcapacity, he said, adding the company’s seismic acquisition business cannot provide the desired full-cycle returns for Schlumberger or compete internally for funding. ~ 19 January 2018 E&P article

 

The current procurement process operators use to obtain services needs reformation and improvement.  New technologies and solutions are simply being created too rapidly for old and stale procurement models based on a apples-to-apples competitive bidding process.  What Kibsgaard is stating is what I learned tendering bids with a breakthrough technology waiting to be offered.  Service providers cannot reap the timely benefits from their out-of-the-box solutions, but have to wait for competitors to “catch-up.”   Only then, when the market is commoditized and when the only basis for award can be determined to be the final cost of an apple.  (I speak to this dilemma within my blog article, Upstream Exploration and the Paradox of Choice (10-May-2015).)  However, when the economics suits operators, such requirements can be relaxed or ignored.  If the technology has a lower-cost baseline, then, and only then, is the novel solution acceptable for consideration.

What does Schlumberger’s exit from the marine seismic acquisition market say about the markets future?  I do not know.  But, the WG fleet is composed of many seismic streamer purpose built vessels which they can divest from.  These vessels could enter the market at some point, in the same way that other stacked vessels could, potentially, when the market turns.  Perhaps WG will license and sell equipment, like their Q-Marine™ and maybe even IsoMetrix™?  In the near term for this low-cost commoditized market, companies introducing innovative technologies will be stressed even more.  The marine seismic acquisition business model is built around time-efficiently acquiring large swaths of (broad) band data from arrays of 12-16 8000 meter streamers (100 m separation) towed behind large purpose built vessels.  These vast amounts of data will be processed on super-computers.  Companies pioneering new solutions through committed research and development do not really occupy the low-end/low-cost spectrum of the marine seismic streamer acquisition market.  Currently, the majority of customers do occupy this space.  On the other hand, WGs exit could send high-end customers to seek such technologies from other seismic acquisition companies.  Will there be enough demand for wide-tow vessels towing only innovative broadband streamer technology?  Polarcus and Shearwater GeoServices (SG) will fight for the lower end, but new high capacity vessels entering the market will now be a threat for all pure-play players.  I still believe that the broadband streamer developer’s chartering of two high-capacity seismic streamer vessels following Dolphin Geophysical’s demise was because of the threat of wide-tow price competition.   Broadband acquisition is more operationally expensive.  Wide-tow is how to stay cost competitive with high-end equipment or innovative geometries.

The commoditized marine seismic streamer acquisition market will be a lowest-price wins game for the foreseeable future.  Clearly, WG/Schlumberger is betting on the added-value component of the market attached to raw data acquisition: data processing, imaging, and analysis.  WG does not see the money-making opportunities in acquiring high-end raw data.  It was somewhat surprising, as a former data processing geophysicist, to see a marine seismic data acquisition leader restructure-out their data imaging division.  Enhanced data processing and imaging is, of course, a huge value-added aspect of any proprietary streamer or data acquisition technology.  Some players made calculations and decisions about the market and waited until only recently to down size their operational marine seismic streamer vessel fleets, when other players, such as WG and CGG, did so in early 2015.  Being a pioneer means blazing your own course to follow.  There is obviously no single reason for Schlumberger exiting the onshore and offshore seismic acquisition market.  Recently, the Amazon Warrior halted acquisition due to protests from activists, such as Greenpeace, against the use of seismic air guns and their impact on marine life and cetaceans.  In the USA, the President Trump administration has relaxed restrictions for exploration and development offshore.  Many states and officials do not agree with these policies, and likewise, there are USA activists preparing to fight opening up their offshore waters, many adjacent to tourist laden beaches, to offshore O&G exploration and development.  A company the size of Schlumberger is obviously a big target for such protests.  And when the business unit at the forefront of the controversy is also not generating revenue, an exit from such market conditions is even easier to reconcile.  What is certain is that WGs exit from marine acquisition will impact the market in some measurable way.  It is time for a new business model for data acquisition services.  Perhaps WGs exit as a seismic acquisition service provider will force such a conversation sooner than later.

You change your business plan to anticipate and adapt to changes in the marketplace. ~ Jon Feltheimer

If we have data, let’s look at data. If all we have are opinions, let’s go with mine. ~ Jim Barksdale

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The Longer and Lower Wave of the Marine Seismic Streamer Market

The Longer and Lower Wave of the Marine Seismic Streamer Market

Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

What is in store in 2018 for the Marine Seismic Streamer Market?

The industry has changed drastically over the last few years. The oil companies demand competitive and flexible solutions and the providers that can offer that in the most cost efficient way will capture market share. ~ Irene Waage Basili, CEO Shearwater GeoServices

Flexible capacity is the new euphemism which has been conceived to explain the main problem in the marine seismic streamer market sector.  It translates to seismic streamer vessel over-capacity.  This was the topic of my first blog post, The Seismic Vessel Over-Capacity Problem (5-May-2015)Flexible capacity is really seismic vessels equipped to explore on short notice, but currently without solid order books to keep them in operation.  While people may be waiting for a resurgence in oil prices from its plunge in mid-2014, there will be no parallel improvement in the marine seismic streamer sector.  While oil prices may encourage exploration, such an infusion of capital for exploration will be spread out, for one thing.   When oil prices do rise again, customers will have an entirely new field of marine (and land) geophysical exploration options which did not exists when oil prices were higher.  Innovation that reduces costs will always be in fashion.  Also, the flexible and stacked capacity is almost equal to the current active operating capacity.  I believe that this vessel capacity will be absorbed into the market before any substantial price increase for marine seismic streamer services is realized.   Just as innovation and technology spurred competition in the hey-day of oil prices exceeding $100 USD /bbl, the same spirit of competition is adjusting to the current market.  Like the Iguana’s of the Galapagos adaptation to their perilous environment, the longer and lower slump in exploration has changed the marine seismic market completely and created new demands, risks, and opportunities for service providers.  It is not just about vessel capacity, but a paradigm shift in how to optimize the entire value chain from acquisition to imaging.  Only technology that delivers the needs of customers will prosper.  Some historically stalwart technology and techniques may no longer be in fashion for the current marine seismic streamer market.

Matters of the marine seismic sector have been monitored and written about since 2015 through www.MarineSeismicSurvey.com website blog articles.  I began working in the marine seismic industry in 1997 and these blogs represent my impressions of the industry.  Also, follow @MarineSeismicPM Twitter™ feeds for offshore and seismic news. The blogs have mostly concentrated on the marine seismic streamer market.  This market sector is analyzed as an indicator of the overall health of the deep water offshore oil and gas industry.  Marine geophysical data acquisition is the first step in any offshore project (concession) development.  Within these blog articles, pure play marine seismic streamer service providers, Polarcus and Dolphin Geophysical / Shearwater GeoServices have dominated the most analysis.  However, more diversified companies, such as Schlumberger’s WesternGeco (WG) and CGG also significantly impact the marine seismic streamer market.  WG and CGG had operated the largest marine seismic streamer vessel fleets prior to the mid-2014 collapse in oil prices.  The global marine seismic streamer vessel fleet has been substantially reduced from its mid-2014 levels.  Within the most recent blog article post, The End of Wide-Tow Streamer Seismic?, it was noted that one major marine seismic company has actually maintained the largest operational marine seismic streamer vessel fleets since the collapse.  When overly ambitious Dolphin Geophysical (Dolphin) was pushed into insolvency and unable to maintain their Sanco Shipping (Sanco) charters of wide tow Sanco Swift and Sanco Sword, a similarly ambitious competitor took over the Dolphin charters, as well, preparing for a marine seismic streamer market resurgence.

What seems evidently clear to most all oil and gas market observers is that past marine seismic business models simply do not apply in this new market reality.  Even those with many years of experience in the marine seismic streamer sector didn’t foresee an impending collapse or its repercussions.  At the same time, while the price of oil may be a key incentive for marine geophysical exploration, success has never been a guarantee for providers of offshore geophysical services, even when oil prices were high.  While this current downturn may have turned out to be longer and lower than many anticipated, one major player, especially, seems to have been behind the eight ball in their strategy following the collapse.   Vessels are expensive to operate and that is why vessel utilization numbers impact earnings for vessel owner/operators.  This is also why vessels are taken out of operation and stacked.  Keeping vessels equipped for operations is much more expensive than storing at a dock.   The largest marine seismic streamer fleets prior to the collapse in oil prices were operated by CGG and Schlumberger’s WesternGeco (WG).  WG introduced new build Amazon-class vessels into the fledgling market.  CGG bought the marine seismic streamer business from Fugro Geoscience in late 2012 and gained capacity that way.  WG does not publicly disclose which vessels are operating. CGG now operates five (5) streamer vessels according to the most recent Q3 2017 report.  (CGG’s website displays four (4).)   One pure-play player had ordered four (4) humongous new build vesselsThe first two were put into operation prior to the collapse in oil prices.  They did delay the delivery of their final two new-builds.  What also perplexed some was management’s decision to also assume the Sanco Shipping vessel charters of now insolvent competitor Dolphin Geophysical.  This positioned the company to have the largest operating marine seismic streamer fleet.  Apparently, company executives were planning for resurgence in demand that never arrived.   The main point is that CGG and WG had reduced their fleets significantly long before their competitors decision to reduce their operating fleet to six (6) streamer vessels was announced during their Q3 2017 financials.  For a more complete view of vessel operations, Searcher Seismic’s SeisIntel™ application does track the global seismic streamer fleet activity.

With 4 vessels in the global spot market, it is important to strategically manage the vessel schedule and the global distribution. ~ Duncan Eley, Polarcus CEO, Q3 2017 Earnings Presentation

 

Even with all the effort which has been made by the industry, there are still too many vessels for the volume of activity which is being offered. ~ Jean-Georges Malcor, CEO CGG (Q3 2017)

Prior to the seismic streamer market disintegration, Polarcus and Dolphin Geophysical (Dolphin) operated relatively small seismic streamer fleets.  Both Polarcus and Dolphin competed exclusively in the marine seismic streamer market.  Dolphin was a relative new-comer to the market and also was anticipating growth opportunities.  Dolphin especially was affected by the dramatic decline in oil prices which halted deep water exploration programs.  In a growth market of opportunities, operating small fleets was actually a commercial disadvantage in terms of servicing global demand.  It costs money to move vessels to projects in what is termed transit costs.  Currently, the operating marine seismic streamer fleets competing in this market are more in parity such that no one service provider can really offer global coverage.  However, while the global marine seismic streamer vessel fleet has been greatly reduced in number, the vessels which remain in operation to service the global marine seismic streamer market are bigger and capable of towing more streamers.  The two humongous new-builds, Sanco Sword, and the two Amazon class vessels, all with greater towing capacity, were introduced into the market up through the beginning of 2017.  So, the number of geophysical equipment instruments in the water acquiring data has actually not fallen as drastically as the number of operating vessels.  In the current market, a global fleet which has new wide-tow streamer vessels actually benefits customers economically much more than it does the vessel owners.  The real impact on the market is that the current global fleet can complete surveys faster because it is composed of larger vessels.   But, this is only part of the picture.

Marine seismic streamer vessels are the principal asset and liability of marine seismic streamer data acquisition companies.  When Dolphin went into insolvency a competitor assumed its Sanco charters.  However, Dolphin had also been chartering vessels from GC Reiber Shipping (GC).  Vessel owner GC created a geophysical seismic streamer company,  Shearwater GeoServices (SG), from Dolphin’s remnant geophysical data acquisition and processing capability and talent.   In a robust market, vessels operate to generate revenue.  However, reducing the number of vessels operating is a way to reduce losses, since idle vessels cost money.  Vessels with no crew but with equipment are the flexible capacity.  Polarcus has bare-back charter leases on two of its vessels, but in certain respects maintained its fleet pretty well in through the downturn and posted some impressive vessel utilization rates.  SG essentially is back into Dolphin’s niche, minus the Sanco vessels but operating the Polar Empress.  One fleet dominates the wide-tow category with its four humongous vessels.  However, while Polarcus and SG fleets are still not capable of towing the same number of streamers, Polarcus and Dolphin/SG have actually managed to have towed some of the largest areal streamer spreads.  Initially, Dolphin achieved this through increasing the distance between streamers.  However, Polarcus and SG now offer wide-spreads with improved cross line sampling through their Polarcus’ XArray™ and SGs FlexiSource™ acquisition techniques.  This is a significant development that seems to attract customers in a low-cost maximum coverage environment.

Those aware of geophysical seismic data processing importance in the seismic data value chain know that whenever marginal data is acquired, it becomes the job of data processing techniques to remove unwanted signal (noise) and extract as much value as possible from the data.  Vessels are considerably more expensive to operate than computer systems applying complex algorithms.  Not so long ago, marine seismic streamer companies had to negotiate expensive time-sharing arrangements between vessels acquiring seismic data proximate to each other.  The air gun source from another survey could impact the signal being used to acquire data.  This seismic interference caused problems in further data processing and imaging which form the maps used in drilling for oil.   More capable computers applying complex algorithms can now be used to separate-out such seismic interference.  More importantly, taken to the next level, similar algorithms are now being applied to remove overlapping air gun source data from subsequent survey shots.  The common convention for seismic streamer data acquisition has been to use a dual-source, flip-flop, technique for efficiency.  The flip-flop method allows continuous data acquisition by allowing air pressure to develop for the next shot; shot àrecharge àshot.  However, being able to acquire simultaneous source data reduces the data acquisition time.  It also affects the source-receiver midpoint geometry and record length.  These parameters are what define the point being imaged.  Smaller vessels can tow fewer streamers but space them wider.  So, while the wide-tow pioneer holds the record for the most equipment being towed, Polarcus holds the record for towing the largest areal spread.

I think it’s pretty evident that the shallow water is going to come back a lot quicker compared to I would say an overall ramp in deep water activity. ~ Paal Kibsgaard, Chairman and CEO Schlumberger (Q3 2017)

I’d just like to mention that the reason why the winter season is going to be still — that’s our view, still difficult for the data acquisition business, is that we are still operating in the market which is over supplied. Even with all the effort which has been made by the industry, there are still too many vessels for the volume of activity which is being offered. ~ Jean-Georges Malcor, CEO CGG (Q3 2017)

Increasing the number of sources reduces data acquisition time and also the amount of equipment to manage during a project.  Acquiring seismic data with multiple air gun sources and fewer seismic streamers changes traditional geometry requirements.  It also places more importance on post-acquisition data processing needed to clean the data and also the forward processing algorithms applied for the new geometry.  This is significant, in my view.  In 2007 a major step-changing dual-sensor streamer was introduced into the market.   This broadband streamer technology became a commercial 3D acquisition offering in 2009.  This streamer is able to acquire dual-sensor (conventional hydrophone + particle velocity sensor) data, as is done with (older) seabed seismic acquisition techniques.  (These day’s seabed seismic nodes acquire mostly 4-component data.)  By combining dual-sensor data, broadband data is acquired.  WG introduced their 4-component streamer, IsoMetrix™, in 2013.  Other companies have now also developed and introduced multi-sensor streamer technology into the market.  These are amazing technologies and several articles have been written about the imaging possibilities possible from data acquired using multiple sensors.  The same can be said for advances in sea bed seismic technologies and techniques.  But, this articles focus is on the current marine seismic streamer market where near-term costs, and not necessarily the full downstream potential realized from their data, is prioritized.  Multi-component streamers, or even streamer depth manipulation acquisition techniques using single sensor (hydrophone) streamers, are operationally more expensive and demanding than single-sensor streamer acquisition  Having a large spread of multi-sensor streamers operating optimally requires attention and maintenance in-sea.  Multi-sensor streamers need to be kept clean, and this is additional risk exposure for all stakeholders.  Without debating data quality issues, multi-source techniques with reduced streamer exposure for wide spreads is another win for customers in need of cost saving operation strategies.  However, the problem still remains that towing large areal spreads is not as beneficial for surveyors as it is for customers who do not have to worry about keeping their vessel fleets working.

So, there still remains a marine seismic streamer vessel over-capacity problem for a combination of reasons.   In the current environment, cost is the priority because there is no immediate profit-making incentive.  Marine seismic streamer vessels are expensive to operate.  So, acquiring data must be as efficient as possible.  But, what exactly does efficient mean in this current market?    Fewer opportunities mean fewer vessels are needed.  More expensive vessels are completing survey more quickly for modest profit margins.  The marine seismic business is as competitive as any and has seen providers of these services come and go throughout the years.  Before the collapse, the oil price marker for deep water field exploration and development seemed to be set within the sector for oil prices needing to be above $70 USD / bbl.  But, geophysical exploration costs are a relatively small percentage of overall deep water field development.  On the other hand, carrying out geophysical exploration is a first-phase commitment made by operators of offshore leases.  Based on these dynamics, investment in deep water assets will be minimized until any substantive spending can show a positive return.  For this reason, deep water exploration will likely be one of the last oil and gas markets to return to growth.   This places pure-play providers of deep water geophysical exploration services, such as seismic streamer, in a precarious position.  The successful business model for marine seismic streamer data acquisition and processing in the future still remains unclear.  Obviously, the number of profit bearing opportunities is more when oil prices are higher than the base development cost threshold.  On the other hand, with oil priced below the base development cost threshold, there is essentially no near-term profit making incentives for frontier exploration.

The main incentive for operators to explore is concession commitments and to possess risk-opportunity data for analysis.  There may be profit making opportunities further down the line, in terms of what development costs are relative to projections for sustained oil prices.  However, even if the threshold oil price of $70 USD / bbl moves lower, oil from deep water assets will remain among the most expensive to develop.  Oil will need to be priced above the threshold for a sustained period before there is any real growth in demand for deep water seismic streamer exploration.  Also, when cost is a priority over time, an older and less expensive vessel operating longer can be competitive.  Finally, to top it off, even if the threshold price of oil has headed down because of improved processes and technology, deep water field development will continue to be some of the most expensive.  When oil is sustained over the threshold, then the market will first absorb the flexible and stacked capacity before there is any substantial increase in vessel utilization rates.  Bear in mind, the different marine seismic streamer service providers have varied commercial commitments and structures also.  So, a profitable project for one service provider may not be a profitable project for another.  The appetite for cost-efficient and time-efficient acquisition will not be lost by customers.  The diversity in what is offered to customers in combining both novel acquisition techniques with innovative data processing and imaging solutions will provide customers with an abundance of choices.  The marine seismic streamer sector will remain soft.  Currently, there still remains too much global marine seismic streamer vessel capacity in operation.  Because of the variety of solutions available, vessel utilization will not necessarily be distributed proportionally to the different service providers.  It will be driven on the near term cost value to customers.  The marine seismic streamer market may have passed the lowest point of the trough.  However, marine seismic streamer service providers will never see the kind of activity that existed before mid-2014.  Both the problems and solutions are very different now.

There is a lot of seasonality in the vessel market. So obviously, Q1 and Q4, is usually a very good period to pick up a vessel. ~ Kristian Kuvaas Johansen, TGS-NOPEC CEO (Q3 2017)

Speculative markets have always been vulnerable to illusion. But seeing the folly in markets provides no clear advantage in forecasting outcomes, because changes in the force of the illusion are difficult to predict. ~ Robert J. Shiller

The End of Wide-Tow Streamer Seismic?


Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

Horse sense is the thing a horse has which keeps it from betting on people. ~ W. C. Fields

You cannot beat a roulette table unless you steal money from it. ~ Albert Einstein

In some East Asian cultures the number “four” is considered unlucky.  Whether a number is considered lucky or unlucky can depend on whether the number’s name sounds similar to other words with positive or negative meanings. In Japanese, the word for the number “four” sounds similar to the word for “death.”   Never do things in fours.  But, if you do, change the sound.  Instead the fourth floor, be floor 3A.  Perspective is everything.  The geophysical exploration service sector is known to be cyclic, and so perhaps market prediction is more like a game of roulette than straight poker.  Many marine seismic streamer acquisition companies have placed their bet on wide-tow and invested in expensive new-build seismic streamer vessel programs.  The real question is, knowing what we know now, is wide-tow streamer acquisition still a sound bet when the final count is made?

Anyone in the oil exploration business knows that even when applying the latest technologies and methods a little extra luck can’t be a bad thing, especially when the game is cyclic exploration roulette.  The predominance of the wide-tow streamer seismic acquisition model is established.   The industry has always bet on wide-tow marine seismic streamer acquisition, and vessel streamer tow capacity has steadily increased over the years.  Since the collapse in oil prices in mid-2014, once again explorers have had to confront the unpredictability in oil prices and sow losses from such bets.  Dolphin Geophysical entered the marine seismic streamer market in 2011 with the same heady optimism.  They entered into a charter agreement with Sanco Shipping ASA to take delivery of wide-tow capable Sanco Swift in 2013, as well as Sanco Sword in 2014.  Schlumberger’s WesternGeco also added Amazon Warrior in 2014 and Amazon Conquerer in 2015.  And CGG grew its fleet in 2012 through acquiring the Fugro Geoscience streamer fleet as Fugro decided to abandon this market sector.  Dolphin Geophysical folded in late 2015 and WesternGeco and CGG dramatically reduced their fleets following the crash in oil prices.  Most marine seismic streamer players were also betting on the wide-tow business model and planned their expansions and new build programs accordingly prior to the decline in oil prices mid-2014.  However, one player stands alone in only minimally reducing their fleet and even toking on new charters.

Table 1

Table 2

How wonderful that we have met with a paradox. Now we have some hope of making progress. ~ Niels Bohr

 

In the realm of ideas everything depends on enthusiasm… in the real world all rests on perseverance. ~ Johann Wolfgang von Goethe

The demand for seismic streamer acquisition broadband data was ushered into the market through remarkably engineering multi-sensor cables historically applied in seabed seismic operations into towed streamers.  But, multi-sensor streamers – towed cables – broadband is but one acquisition approach.  Other innovative geophysical exploration companies developed their own broadband seismic streamer acquisition techniques to serve the new demand for broadband.  The market would not allow a single proprietor solution.  The competitive market wants choice for acceptable solutions.  Advances in operational streamer control and positioning systems have also seen levels of innovation which usher in the practicality of refined traditional approaches to achieve seismic streamer broadband acquisition.  The traditional seismic experiment that has defined the market, and more importantly what customers request in the form of tenders, has remained less flexible than the innovative environment they are immersed in.  New ideas are often curtailed by the procurement bureaucracy which holds onto traditional solutions to solve new problems.  This is discussed with the blog post, Upstream Exploration and the Paradox of Choice (10-May-2015).  Crisis always upends norms, for better or worse.  Innovations in marine seismic data processing and imaging technology has also unleashed new approaches and possibilities.  Innovations outside the traditional boundaries of market sectors have now encroached on the market share of marine seismic streamer acquisition.  Most notably, this is seen in the improvements and innovations in seabed seismic.

The economics of marine seismic streamer wide-tow are easy enough to understand.  The principal cost of a marine seismic survey has traditionally been tied directly to the cost of operating the marine seismic (streamer) vessels.  There are often support vessels also employed to support the technical data acquisition operations.  This cost is colloquially referred to as the project “day rate” for operations.  Marine seismic streamer vessels must be powerful enough to tow both the seismic source arrays and instrumented cables – streamers – at the same time.  This is what makes marine seismic streamer acquisition so time efficient.  Narrow azimuth marine seismic streamer employs a single vessel in operations.  These streamer spreads cover a large area.  The larger the area, the more data that can be acquired in less time with a wider the spread.  So, the reasoning goes, if the vessel is operating, tow as many streamers as possible as long as the operation cost for the vessel remains is less than the earned efficiency benefit of time or money to the customer.  This is market dynamic written about in the blog post, Marine Seismic Streamer Time and Money 2016 (6-Oct-2016)This business model can be called the reduced vessel utilization model.  If most of the cost is due to vessel operation, then reducing the use of the vessel will reduce project cost.  This model implies an operational cost base balance (similar vessel cost base) and a growth market that also prioritizes time savings.

Seabed seismic operations have traditionally involved multiple vessels, at least one vessel for the seismic source (high-pressure air guns) and another to lay cables and record data.  The operations also were more time consuming.  Seabed seismic has not had the same limitations of bandwidth which towed streamer seismic has had.  (The frequency loss in streamer seismic is a product of the depth under the water surface which streamers are towed.)  Seabed seismic has acquired multi-sensor broadband data for a long time.  Seabed seismic data has not had the same issues of azimuth and offset limitations which narrow azimuth seismic streamer acquisition has because of the inherent geometric limitations of towing source and streamers together.  In seabed seismic, the sensors are stationary and the source moves.  Years ago, seabed seismic was mostly ocean bottom cable (OBC) operations.  Long cables were laid on the seabed and then retrieved following passes of the source vessel.  Nowadays, the seismic sensors can be detached from cables.  Individual nodes can be placed by smaller autonomous underwater vehicles (AUVs).  As day rates have moved upward for wide-tow streamer acquisition, much in part to the cost of operating the larger and elaborately equipped vessels, day rates and efficiency gains in seabed seismic operations are not as comparatively expensive as they once were.  Simply, seabed seismic is encroaching on the marine seismic streamer market share.

Cutting prices or putting things on sale is not sustainable business strategy. ~ Howard Schultz

When you start losing market share, it’s really tough to gain it back; you need the product portfolio and presence in many markets. ~ Hans Vestberg

The first seismic vessel I worked on was the 4-streamer Western Atlas (1998)The first ocean bottom cable vessel that I worked on was the Dickerson Tide offshore India (~2000)Neither of these vessels had a swimming pool.  To be fair, the wide-tow seismic streamer vessel did not have a swimming pool either.  But, the living conditions on that vessel were several grades above both the Dickerson Tide and Western Atlas.  I have never been on a Titan class vessel.  But, from swimming pools to ball courts, living conditions for rotation work assignments are likely much more comfortable and healthier than my first offshore experiences in the business.  Wide-tow streamer acquisition is most advantageous for large rectangular shaped survey areas with no obstructions.  Frontier areas.  Finding the technical experts to work on long projects offshore is made easier when living conditions are of a high standard.  Even this view is indicative of an expanding market in need of the most experienced professionals.  Those days are behind and not every survey is in such a frontier area.  Many explorers are interested in smaller surveys over mature fields with vessel traffic and offshore structure obstructions all around.  In these areas, wide-tow streamer acquisition is prohibitive because the spread must maintain a safe distance from these obstructions.  Project survey areas must be large enough so that streamers and their accompanying equipment doesn’t have to be deployed and retrieved too frequently.  So wide-tow marine acquisition is not always well suited for multiple smaller sized surveys.  In general, wide-tow capable vessels are more expensive to operate.  They are most profitable when operating at capacity.  This is where the time and cost efficiencies are realized.

The reduced vessel utilization model is customer focused and not vessel operator focused.  The benefit of completing surveys more quickly mostly benefits the customer.  At the end of the day, unused capacity is expensive and unsustainable in a normal competitive market.  Vessel utilization is sometimes shared publicly by vessel operators.  The real issue is capacity utilization as it relates to the cost base of the operating assets.  If 100 streamers need to be deployed at $10,000 USD a day to break even, then 80 streamers would need to be deployed at $12,500 USD a day to break even.  With only 50 streamers deployed, the break even rate would be $20,000 USD a day.  When margins are low and if the market is only paying $13,000 a day, the ramifications are that the operator will lose money.  Also, if the operational costs do not cover the financing commitments, which may actually be used to facilitate an artificially low operational cost base, the vessel utilization model is not sustainable.  The main problem with wide-tow marine seismic is that the bet was placed long before the wheels of the market began spinning.  The investment for large wide-tow capable vessels was determined before mid-2014 and no one – seismic vessel operators or license operators – could even predict the market which those vessels would enter.  License operators cannot afford to engage in frivolous exploration spending.  License operators also cannot really afford a future without a viable marine seismic exploration industry.  But, that does not mean that a pre-2014 global fleet has to return.  Technology always determines options.  The question is whether wide-tow seismic will deliver the solutions to license operator exploration problems?

Markets are shaped by the decisions made by the management of the principal market players.  The company with the largest marine seismic streamer fleet is betting on strong demand for wide-tow streamer seismic data acquisition.  It is clear that most marine seismic streamer vessel operators miscalculated their bets over two-years ago with their investments in new builds and subsequent stacking several vessels.  The industry once again was caught flat-footed when oil prices collapsed mid-2014.  The operational streamer count has not changed as much as the vessel count has since before the crash.  This is because seismic acquisition companies retain their largest and most productive and efficient vessels.  The wide-tow model still dominates the marine seismic streamer business model.

The volatility and uncertainty in the geophysical exploration sector driven by oil prices makes even more sense when people consider the high risk toleration of explorers and pioneers.  Such risk taking compels the industry to repeatedly pay the price of rash decision making driven by an uncertain market.  The main drawback from such risk taking is its impact on the health and safety of employees.  The unpredictable cyclic oil exploration market is exacerbated by the unpredicatable and chaotic responses made during volatile market conditionss.  These conditions  feed on each other.  In the end, the rise or fall of the marine seismic streamer sector will depend mostly on the decisions made by the leaders of companies within that market.  It is their intelligent decisions and steady leadership which determines enterprise performance.

The gambling known as business looks with austere disfavor upon the business known as gambling. ~ Ambrose Bierce


Resilience is all about being able to overcome the unexpected. Sustainability is about survival. The goal of resilience is to thrive. ~ Jamais Cascio

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Riding the Wave of Uncertainty in the Marine Seismic Value Chain

Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

What Will Customers of Marine Seismic Value Most in 2017?

Today the whole business is too much about procurement. It is very, very difficult today in the current circumstances to be in a position where we can value the technology, where we can value the innovation. At the end of the day [the] best value for money in the current circumstances means best prices, full stop. ~ Jean-Georges Malcor, CGG CEO

Opportunity arises for the prepared mind ~ Louis Pasteur (chemist and microbiologist)

In the recent article, CGG CEO: It’s All About Price , Jean-Georges Malcor assesses the current upstream O&G market environment for geoscience services.  When service company executives talk of price thresholds as the main determinant of customer choice, it points to a commoditized market environment for products or services.  In my blog post, Upstream Exploration and the Paradox of Choice (12-May-2015), I discussed the dilemma of O&G operator procurement practices which seek standardized solutions from multiple service providers.  When comparing apples to apples, choice can be reduced to just lowest price.  Reducing the complexities of project requirements through standardization of products and services is simpler, for one thing.  However, it also is a way of providing a level playing field for service providers to compete and reducing opportunities of favoritism.  Technological solutions become commoditized while operational health and safety, quality, and turn-around time become the differentiators.  The value differentiator from innovative technical solutions is lost within this procurement standardization processes.

In the past two years since the collapse in oil prices, service providers have been coming to terms with a prolonged period of time with oil prices below $70 USD/bbl.  The $70 USD/bbl price was the industries tacit price limit required to support profitable deep water project exploration and development.  Recent hedge fund predictions forecast oil rising to $70 USD/bbl by the end of 2017, as mid-November 2016 crude oil market prices were around $43 USD/bbl.  Norway’s Petroleum and Energy Ministry has recognized and become concerned over this new market reality as international companies are considering leaving Norway and selling assets to smaller, less financially resilient, oil explorers and private equity firms.  This has brought a warning to international companies that they may remain liable for the close down costs of assets in the event that new owners are not be able to handle operation expenses.  Oil and gas exploration and development market is well known for its ups and downs.  For the past two years, the industry has been trying to assess what kind of downturn this is.  Notwithstanding the geopolitics and technology differences that define each peak and slump in the O&G market, companies are coming to the realization of a prolonged period of low oil prices seems in the horizon perhaps more similar to the downturn and oil glut which occurred in the 1980s.

There was robust exploration and development following the OPEC instigated crisis in the 1970s, where there was over-supply and then a subsequent collapse in oil prices.   Between 1973-74 the real price of crude oil more than tripled. After declining slightly in 1975-78, it doubled again between 1979-80.  However, between 1981-85 the price of oil declined nearly 40% and then collapsed by nearly 50% during the first half of 1986.  This compares to the more recent crisis where international crude oil benchmark Brent fell 76% from June 19, 2014, when it traded at $115.06, to January 20, 2016, when it closed at $27.88.  The inflation adjusted average cost for the of oil from Q1 1974 through Q2 2015 has been calculated to be $53.12 USD/bbl.  However, if one studies a graph of oil prices over this period, because of oil price volatility, actual prices rarely match this average.  Nevertheless, the $53 USD/bbl historical average price is still ~25% lower than the $70 USD/bbl threshold thought to be needed for much of the commercially viable deep water field development.  Expensive areas to develop in both Asia and Africa will likely especially be affected in the near term.  This market environment therefore indicates that the industry must operate much differently going forward.  A paradigm change from the current business model is needed and this starts with how O&G companies assess their needs and value exploration and development in such a way to leverage innovation instead of standardizing it. 

There are four principles to understand about differentiation and the buying factors that go beyond price: They always exist; they have economic value; they vary by customer; and they change with time, because yesterday’s differentiators can be tomorrow’s commodity. ~ Dick Kallage, Differentiating in a commoditized market

Standardization leads to rigidity, and rigidity causes things to break. ~ Bill James

Rig counts are sensitive to price changes and generally excellent indicators of future oil production and general market health.  Operating rigs often represents how confident oil and gas operators feel about the exploration environment.  Rig count is also used to gauge activity levels for oil field service companies.  Global deep water drilling demand has experienced year-on-year decline since 2013, creating an oversupply of floating drilling assets and unparalleled idling and stacking.  This coincides in some ways with marine geophysical exploration, mainly seismic, which most often proceeds to mitigate risks for more expensive drilling campaigns.  During the Q1 2016, twenty-six (26) were stacked.  Almost one-hundred (100) have been stacked in the past 12-months.  About half of the stacked rigs are older and would have most likely been taken out of operation indefinitely.  However, about 40% of the stacked rigs are amongst the newest and commanded the highest rates.  For the past 18-months, my blog has been evaluating the 3D marine seismic streamer fleet as a measure of the health within the marine geophysical exploration sector.  Similar to rig count, many streamer vessels have been stacked since the downturn in oil prices mid-2014.  While the differences are many between rigs and vessels, the marine seismic 3D sector has also been stacking older vessels.  However, as a global fleet, the newer vessels capable of wide tow have been retained.  In my most recent blog, Marine Seismic Streamer Time and Money 2016 , I propose that the preference of customers hiring wide-tow capable vessels, which can complete surveys more quickly, is now more dependent on the day-rate whereby time constraints are less rigid in a sluggish and vessel over-capacity market.  Widest tow may not be lowest cost per square kilometer acquisition for newer and more expensive to operate vessels because time savings is not commanding the same premium it did in a robust exploration environment.

Malcor suggests that the last period of time the market was favorable was in 2012.  I disagree somewhat.  Fugro’s acquisition by CGG in early 2013 points to this fact.  Fugro had actually established a niche market in high-risk frontier exploration markets, such as east Africa.  Exploration opportunities had been on the decline to the extent that other players understood that they needed to compete in these high-risk arenas to keep vessels busy.  In 2010, new player, Dolphin Geophysical, entered the 3D marine seismic streamer market with the belief that this was a growing market.  Unfortunately, Dolphin Geophysical became insolvent December 2015.  Dolphin Geophysical entered into the low-cost end of the market.  They chartered their vessels from GC Reiber and just prior to their demise had agreed to charter two high-capacity vessels from Sanco Shipping ASA (Sanco).  In hindsight, Dolphin Geophysical was perhaps too ambitious in their growth predictions.  Like the industry, they did not foresee the collapse in oil prices mid-2014.  Dolphin Geophysical’s two Sanco charters were taken over by a competitor.  GC Reiber continued to operate their vessels through a Dolphin Geophysical affiliate.  Recently, GC Reiber joined with Rasmussengruppen AS to create Shearwater GeoServices.  This is an interesting marriage.  Rasmussengruppen AS operates tankers and marine transportation services.  In a current marine geophysical exploration market with razor thin margins, approaching cost savings from the vessel operations and support side makes sense.  Fuel and supplies are always issues for operating a seismic fleet. In fact, it is these costs which are the most expensive part of services offered to customers, as is related in day-rates.  Shearwater GeoServices will be focused on cost of data acquisition operations.  They will likely work to expand their data processing and imaging capabilities.  Clearly, there are geoscientists available to support this initiative in the current environment.  If Shearwater GeoServices can be a low-cost provider of data acquisition services, this may make them especially appealing in such a price-sensitive market.

One seismic streamer vessel operator has continued to grow their operational streamer capacity from pre-collapse levels.  While they have stacked older vessels, this has been done while taking on high-capacity charters and the construction of new builds.  Schlumberger’s marine seismic component, WesternGeco, commissioned two new build Amazon Class vessels that also entered the market in the depressed conditions.  No market player was without some form of optimism.  Both CGG and WesternGeco stacked multiple vessels.  Polarcus once commanded one of the smaller 3D seismic streamer fleets and has stacked only one of their 3D streamer vessels.  This is how the marine seismic streamer market players have panned out the past two years.  New builds have entered the market, but mostly vessels have been stacked reducing operational streamer vessels, and to a lesser extent, operational streamer numbers.  This is because by in large newer vessels were built to tow more streamers.  However, the time efficiency advantage decreases as the number of nominal tow capacity increases.  In other words, the benefit of towing 10-streamers over 8-streamers is essentially 25% reduction in time.  Towing 12-streamers over 10-streamers provides a 20% reduction in project time.  In a price-sensitive market environment, seismic company vessel cost base needs to be within the project time benefit range in cost savings.  It’s all about the cost to survey an area.  Broadband? Which kind?  Value enhancing differentiators are especially difficult to market for proprietary contract surveys which are often put out to tender with standardized guidelines used for awarding work.

Business is other people’s money. ~ Delphine de Girardin

Their new label became “private equity,” a name that turns the facts upside-down: A purchase of a business by these firms almost invariably results in dramatic reductions in the equity portion of the acquiree’s capital structure compared to that previously existing. ~ Warren Buffet on the evils of private equity.

Successful marine geophysical exploration, and subsequent drilling operations, showcase unparalleled scientific, engineering, technical, and operational prowess, to be sure.  However, as a business enterprise, geophysical exploration’s effective use of complex science and technology is constrained by the same principles as any company providing goods and/or services to customers.  This means it does not really matter whether the enterprise is involved in providing paperclips or satellite components.  Enterprises need to generate profit.  The question is how can the same equipment and business model paradigms generate profit after a substantial decline in the price of the target commodity?  In this respect, the success of marine geophysical exploration pursuits rests more so on the value that banks, private equity, and investors place into such pursuits.  The elegance and intricate use of science and technology is often lost in the complexity assembled within hedge funds and international tax schemes.  Dolphin Geophysical’s insolvency provided an equipment bargain opportunity for Polarcus.  It also resulted in TGS-Nopec and other players are expanding their multiclient data offerings.  CGG SA also told investors earlier this month that they are considering plans to restructure debt.  However, none of these financial maneuvers fundamentally change the marine geophysical exploration market itself, so much as help geophysical exploration companies continue another day or financial quarter.  The uncertainty for all new-builds is will they be able to generate the margins needed to accommodate their debt in only two years?  This would require a significantly more favorable market for marine seismic streamer services.

Since financiers may be dictating exploration terms as much as geoscientists, the market seems to favor the lowest cost base to deliver the stated requirements to fulfill base license terms and conditions.  There is no incentive to explore for $70 USD/bbl oil when Brent Crude is trading at less than $50 USD/bbl.  The cost of oil is the main driver for exploration budgets of operators.  In spite of the amazing data acquisition and processing / imaging technologies which have been developed in the past few years, the near-term future would seem to favor service providers with the lowest cost base and final price to accommodate the minimum contractual license commitments which operators have agreed to.  Even renegotiating contract terms and postponing exploration until a significant increase in return is foreseen may be the answer.  As a geophysicist who is enthralled by new technologies and used to prepare tenders for marine seismic/EM data acquisition and processing, I see a market that will not provide reasonable returns on the research, development (R&D), and deployment of such technologies lasting for some time.  The market does not seem to favor service providers getting their due return on R&D technologies, such as multi-sensor streamers such as WesternGeco’s IsoMetrix™ and even improved dual-sensor broadband streamer technology.  On the other hand, Polarcus XArray™ technology which effectively reduces operational exposure of equipment (extra source and reduced deployed streamers) while reducing acquisition time would be desirable in a cost sensitive environment.  This is how I see the market.  Geophysical service providers will be most effective if they can reduce the base cost of operations at the front-end of the value chain.  However, this places most pressure on enterprises which have invested heavily on new vessels and technologies that mostly accentuate their data acquisition focused products and services.  At the core is what solutions operators allow service providers to propose, especially within the proprietary contract side of the business.  Operators need to improve their procurement processes to better leverage service companies innovative solutions.  Simple and easy solutions may not be the best answer.

Even if oil does go to over $70 USD/bbl, this will not immediately impact vessel day rates significantly.   There is a lot of unused – stacked – capacity which would be able to enter the market when conditions change.  Essentially, an entire extra global fleet of marine seismic vessels are currently stacked.  They are stacked for a reason. If the vessels are sold or leased, then they could potentially enter the market as low-cost competition.  Obviously, the charter rates were not negligible to Dolphin Geophysical and are part of the reason why Sanco terminated the charters due to non-payment prior to Dolphin Geophysical’s insolvency filing.  Shearwater GeoServices, as a vessel owner, can enter the low-cost end of the market.  This is how Dolphin Geophysical started too.  Since most geophysical companies have significantly reduced fleets, the advantage of global fleet placement of vessels to reduce transit costs from job-to-job is more equalized amongst the different companies.  The problem with technology too is that it changes rapidly.  But, more relevant is that in a cost sensitive environment where vessel utilization is of principal importance, it is difficult to find customers to pay for much beyond the vessel cost base.  Acquisition or operation based data improvement is more expensive than post-acquisition data processing that may also enhance the quality and grade of acquired data.  With so much streamer vessel capacity currently idle, there will be no immediate or significant change in day rates for a period of time, perhaps even beyond 2020.  Any dramatic change in oil prices would initially absorb stacked vessels, especially the newer ones, back into the market.  Cost will continue to be the driver until there are prolonged oil prices above the $70 USD / bbl threshold.  My belief is that the cost constraint supersedes the time constraint in this market.  The main cost saving to O&G operators will come from lower cost-base vessels utilized in more operationally innovative and efficient ways.  Operational efficiency in acquiring data for less cost is how banker-led data acquisition will manage the plunge in oil prices.

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. ~ Bill Gates

I think, particularly in our tech industry, this is an industry that has violent innovation and then commoditization, and it’s a cycle of innovation/commoditization. ~ Ginni Rometty

Marine Seismic Streamer Time and Money 2016

mss-pm-triangle

Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

How the Market Has Changed and Where it is Headed After Q3 2016

If You Got the Money I’ve Got The Time ~ Willie Nelson Song

Today’s scientists have substituted mathematics for experiments, and they wander off through equation after equation, and eventually build a structure which has no relation to reality. ~ Nikola Tesla

In project management lexicon, there are three constraints which combine to determine the priorities, trajectory, and success of a project.  The triple constraint triangle legs are time, cost, and scope.  This triangle is also referred to as the project management triangle.  (Actually, the names of the legs of the can differ, as well.)  Fundamentally, however, the axiom holds that only two of the three constraints can be achieved for a given project.  If the requirement for the project is a high standard completed quickly, then the cost will be more.  If the requirement for the project is a fast time of completion and a low cost, then the scope or deliverable will be compromised.  Finally, if the scope requirement is high quality for low cost, the project will take longer.  This is predicated on the understanding that the constraints are fixed toward the goal and optimization to meet the scope requirements which fluctuates for each project.  The customer defines the priority of these constraints and because of this all grades of value creation are produced to satisfy the variety of customer priorities and capitalize on the current market.  The collapse in oil prices and their anticipated, albeit prolonged, resurgence has fundamentally changed customer priorities and how their interests are best served.  This is clearly the case with the marine seismic streamer market which is defined through the planning and execution of projects where equipment and personnel resources migrate from one project to meet one set of requirements and then to another project with different ones.  The market has changed dramatically and therefore so has the time and money equation.

Since oil prices plummeted in mid-2014, the current operating global marine seismic streamer fleet has been continually adjusting in pursuit of market stabilization.  Market stabilization would mean a global fleet of seismic vessels that would satisfy the global demand for offshore operator’s projects.  In such a market, operators would require enough seismic streamer survey services to keep vessels busy and allow service providers to make a profit.  (The industry is still awaiting this mythical balanced market.)  Truth is that dynamic markets driven by competition and innovation are always in flux.  Competition within the markets introduce new strategies and technologies, as well as new players.  The oil and gas industry is defined by boom and busts cycles.  A major collapse in the industry happened in the early-mid 1980s in the US.  However, there was not a substantial marine seismic fleet then.  Again, around 1999, there was also another down-cycle that affected marine seismic streamer vessel utilization.  So, the marine seismic streamer market has seen companies come and go.  In the past, companies have often absorbed vessels through mergers or acquisitions of fleets.  This had meant that the global fleet continued to increase overall while the number and names of service providers changed.  Technology improved, capability to drill in deeper water corresponded with more and larger survey sizes.  New vessels were introduced that could tow more streamer capacity and therefore complete surveys more quickly.  While oil prices topped over $100 USD / bbl in the expanding market, the low-threshold of $70 USD/bbl  was considered acceptable for growth.  Oil prices have remained well below $70 USD /bbl for over 18 months.

The market for marine seismic streamer surveys was expanding, which provided the incentive for new players and/or vessels to compete.  In this market environment, there was demand for marine seismic streamer services.  Also, new players and vessels were introduced which then provided operator’s more choices.  My first blog was posted 15-May-2015 and was titled The Seismic Vessel Over-Capacity Problem (originally posted on LinkedIn™ Pulse).  The article explains that too many marine seismic streamer vessels had entered the market which had already been changing prior to the collapse in oil prices in mid-2014.  Some market correction was inevitable when the rate of expansion and opportunities reduced.  New companies, as well as the established players, introduced new vessels, methodologies, and technologies.  However, in spite of the capital investments and improvements in capabilities and efficiency the profit margins for services decreased.  The time-cost equation for the pre-collapse market was built on a continuous areal increase in demand for marine seismic streamer services where time was the prioritized constraint.  The main expense for these services is the vessel day rate.  Essentially, all terms and conditions pivot around how many days a vessel will be needed to complete the project.  In this environment, increasing the vessel streamer tow-capacity meant that more area could be surveyed in less time.  However, there are different ways of looking at this.  The table below shows a rough estimate performance improvement with added streamers.  From Table 1, a vessel towing 10-streamers compared to a vessel capable of towing 14-streamers could  complete a survey in about 71% of the time.   Time is money.

mss-pt

In the future, instead of striving to be right at a high cost, it will be more appropriate to be flexible and plural at a lower cost. If you cannot accurately predict the future then you must flexibly be prepared to deal with various possible futures. ~ Edward de Bono

Obviously, the highest type of efficiency is that which can utilize existing material to the best advantage. ~ Jawaharlal Nehru

Another incentive to completing a project more quickly, of course, is that there is reduced exposure-time risks from delays.  There are some geographic areas where there are defined windows that only allow successful operations to acquire quality data that can be used for imaging the subsurface.  This may be because of weather, currents, or marine life migrations, to name a few.  Regardless, when streamers are operating, the equipment needs to be monitored and maintained.  Ideally, seismic streamer operations want to have customers paying for their vessels and streamers as many days as possible.  The geographic location of one project to the next is important because it costs both time and money to move vessels, equipment, and other resources from one location to another and start new projects.  This transit time is expensive, especially in a low profit margin environment.  Vessels are using fuel but mostly are not operating as seismic data acquisition platforms, which is their value-creation function.  In the expanding market, service providers fleet size mattered.  To reduce the expense of vessel transits project campaigns could be planned regionally.  For instance, there are always anticipated migrations southward from northern climes, such as the North Sea, to projects in the warmer and milder south each year.  Because of the extra cost due to transits, the expanding market also made it more difficult for companies operating smaller fleets to compete because of the costs incurred going to new projects.  A series of short duration projects would most affect service provider’s through additional transit costs. 

Offshore operators may not admit it now, but service providers were actually optimizing both the project time constraint and cost constraint prior to the decline in oil prices.  This was due to the hyper-competition brought about by the vessel streamer capacity that was being added into 2014.  In fact, several companies, including, WesternGeco (WG), and Dolphin Geophysical (Dolphin) all added high-capacity vessels into their operational fleets following the collapse in oil prices mid-2014.  (CGG had also acquired relatively new capacity through their acquisition of Fugro Geoscience prior to the collapse.)  Table 1 shows that the project time benefit from towing 12-streamers rather than 10-streamers (20%) is more than the respective gains of towing 14-streamers rather than 12-streamers (16.7%), and the actual gains are even less for 16-streamers versus 14-streamers (14.3%).   The new-builds added to the global fleet were high-capacity vessels, but each addition of two-streamers tow capability yields less efficiency benefit.  In a low-margin pricing environment tow-capacity offered a pricing buffer.  If the table is considered as cost rather than project time, then a vessel capable of towing 14-streamers had a 16% cost buffer over a 12-streamer vessel to work with.  Of course, there were increased operational costs with added streamers as well.  Aside from just the actual cost of the streamers themselves, the cost of peripheral positioning equipment which accompanies the streamers is significant.  Operating and maintaining larger spreads with a variety of specialized equipment adds costs.  Operationally, wide spreads require vessels with a lot of power to tow many streamers and also larger deflectors to maintain the width and separation of individual streamers during the project.  The main cost for marine seismic streamer operation are the vessels themselves.

The increase in the global fleet’s vessel streamer tow capability effectively reduced the duration of projects for customers.  However, the net-benefit of the additional tow-capacity is reduced as the number of towed streamers increases, especially when considering the cost of new streamer along with all of the required peripheral equipment.  The net-benefit is also reduced because of the operational and maintenance issues, but perhaps this is balanced out by less environmental exposure risks, especially in the realm of health and safety.  It is the equipped vessel which commands the rate.  This equipment includes the streamers themselves along with the positioning – navigation – equipment.  The seismic and positioning data needed for processing and imaging the subsurface is the customer deliverable.  This is what’s acquired with the vessel and other equipment.  As streamer-spreads have become wider and longer, equipment improvements in maintaining streamer and source positioning, along with the way such copious amounts of data are recorded and stored, have been simultaneously developed and improved.  The objective for all of these improvements is to acquire data which will provide information to direct drilling campaigns.  It’s about the data.  To this end, another problem that is exacerbated with towing wider spreads is the loss of near-offset data.  Seismic data is imaged by the mid-point between the seismic source (i.e., air guns) and the seismic sensors within the streamers.  As the extent of the seismic streamer spreads got wider, this mid-point increased as well thus losing the ability to image well between the source and front-end receivers, or near-offset data, needed for the imaging of shallow targets.  Also, in congested areas, fields with infrastructure such as drilling platforms, larger spreads may be problematic for maneuvering the vessel and streamers.

When our maps do not fit the territory, when we act as if our inferences are factual knowledge, we prepare ourselves for a world that isn’t there. If this happens often enough, the inevitable result is frustration and an ever-increasing tendency to warp the territory to fit our maps. We see what we want to see, and the more we see it, the more likely we are to reinforce this distorted perception, in the familiar circular and spiral feedback pattern. ~ Professor Harry L. Weinberg

Knowing where things are, and why, is essential to rational decision making ~ Jack Dangermond, Environmental Systems Research Institute (ESRI)

 

Time efficiency has paralleled cost efficiency in the marine seismic streamer acquisition market, thus incentivizing adding new-builds capable of wide-tow/large spreads.  In an expanding market with limited vessels, service providers could charge a time premium on their wide-tow capable vessels.  However, in an over-capacity market with several wide-tow capable vessels to choose from, cost efficiency is prioritized.  Cost efficiency boils down to the value of time versus the savings in costs.  If vessel cost base paralleled the project time gains in Table 1.0, then customers would be willing to pay 16% more in vessel costs for a completing the project 16% faster.  This would make time neutral, which may happen with a short project.  Since the collapse in oil prices mid-2014, cost has certainly become the more dominant constraint for most customers.  New vessels are expensive.  In reality, there is no parallel between cost and time, not even within a single seismic service provider, much less between competitors.  Cost base is essentially cost of operating a vessel.  Newer vessels likely cost more than older vessels.

One seismic players high-end price for a new-build (2013) high-capacity vessel capable of towing 18-streamers at 100 meter separation was in the neighborhood of $285 USD million.  The same company also signed a lease-back agreement for and older 10-streamer vessel for $80 USD million.  Table 1 shows that older vessel would take approximently 1.8 the amount of time to complete a project, but the cost (base) of the high-capacity new-build is about 3.56 the amount of the older vessel.  These new-builds were contracted when the market was expanding whereas the older vessel was leased-back following the plunge.  So, do the vessels that were contracted to be built in an expanding market still hold the same value after the collapse?  Probably not.  Nevertheless, vessels were purchased on the high-side of the curve.

After the market collapsed, service providers began to take the older and less expensive vessels out of the market and cold-stacked them.  They did not sell-them (and flood the market with low-cost competition).   Dolphin was the newest player into the expanding seismic market and the first to enter into insolvency after the crash.  Dolphin was expanding and had leased two new vessels, Sanco Sword and Sanco Swift, from Sanco Shipping ASA (Sanco).  Polarcus was able to purchase the streamer package from insolvent Dolphin for a song.  Cost is a priority.  Even though there are many fewer vessels in operation than there were at the start of 2014, several tabled projects have been due to prior license agreement commitments.  Offshore operators do not want to throw money away and likely want the “best data” that they can™.  However, as I wrote about in, Upstream Exploration and the Paradox of Choice, many strides have been made in both the acquisition and processing/imaging of seismic data.  The main milestone, in my view, has been the commoditization of broadband marine seismic streamer data.  Most of the innovative acquisition techniques are accompanied with designed processing and imaging.  In the world of competitive bidding, commoditization of requirements comes at the expense of differentiation such that cost remains a priority.   Even though service provider’s have reduced their fleet sizes, there remain limited deep water projects planned.  There needs to be a sustained period with oil prices over $70 USD/bbl for any real jump-start demand for marine seismic streamer surveys.  The global fleet had been growing faster than the rate of opportunities into 2014.   The fleet will continue to grow until Ramform Hyperion begins operations Q1 2017.  Streamer capacity utilization will be the most important performance indicator for service provider’s.  In a mixed fleet of 2D/3D and varied streamer tow capacity, vessel utilization alone is not enough to benchmark performance.  For instance, a 2D vessel working and a 12-streamer vessel stationary could be described as 50% vessel utilization.  The only benefit of a wide-tow vessel is if it is towing its maximum capable capacity.  If a vessel does not achieve that, then it is under-performing and not using its performance buffer.  A better indicator of fleet performance would be fleet streamer capacity utilization as mostly reflected by the use of the high-end and wide-tow fleet – the newer and more expensive vessels capable of towing more streamers.

Since cost is such a priority and so much of marine seismic streamer acquisition is directly related to the large streamer vessel, there is more interest in other marine seismic acquisition techniques, such as ocean bottom cable and nodes.  This reality has influenced an already staggering marine seismic market.  However, if time no longer is a premium or priority, these methods offer alternatives especially in areas where the operational time advantage is not as beneficial, especially congested areas.  More bang for the buck is what is needed.  Polarcus’ XArray™ reduces streamers and adds a source which reduces the tow-weight and drag from streamers for one thing.  The principle of reciprocity ensures that the point images between source and streamer receiver is the same as the point streamer receiver and source.  The ability to remove subsequent shot data in processing allows for additional sources with reasonably spaced shot intervals.  CGG can utilize less expensive older vessels to tow the source in the middle of the spread and accompany the streamer vessel in their TopSeis™ technique to help image near offsets.  So, there continue to be many new offerings for customers to consider.  However, many operators are skeptical of tendering new technologies in general because of the risk.  Strong EM pulses have been known to disable or destroy electronic systems.  This is what I studied in college.  Towed EM, which acquires data simultaneous to seismic data, would have fundamentally different electronic geophysical and positioning measurement systems operating at the same time.  What noise or interference one system imposes on the other would need to be evaluated.  Gravity data has already routinely been acquired with seismic.  Introducing multiple seismic sensors, now 4C with WG IsoMetrix™, into a towed streamer has showed the benefits of broadband data.  At the same time, each sensor introduces new types of noise, maintenance, and data processing issues.  Solving the same issues between EM and seismic means multiple geophysical data sets simultaneously and shows great promise.  In the expanding market, many new methods and technologies were developed.  The challenge in a cost sensitive environment is to employ the new technologies in an effective way to reduce the cost and risks to offshore operators because few will want to take additional risks with so much market uncertainty in the horizon already.

History in its broadest aspect is a record of man’s migrations from one environment to another. ~ Ellsworth Huntington

 There are three types of innovations that affect jobs and capital: empowering innovations, sustaining innovations and efficiency innovations. ~ Clayton M. Christensen

Waiting for the Rainbow in the Marine Seismic Streamer Market (3-August-2016)

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Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

Innovation, Differentiation and the Future of the Marine Seismic Streamer Market

Ah, I’d love to wear a rainbow every day, And tell the world that everything’s OK, But I’ll try to carry off a little darkness on my back, ‘Till things are brighter, I’m the Man In Black. ~ Johnny Cash, Man in Black

Reason is the natural order of truth; but imagination is the organ of meaning. ~ C. S. Lewis

An oil and gas operator company’s SVP of Exploration visits a convention where there are two geophysical service contractors.  Employees from one service contractor always tell the truth, and members of the other service contractor always lie.  The SVP enters at the doorway of the venue and needs to know how to navigate to avoid the service contractor that will provide a very costly and high risk project.  Of course, the SVP wants to choose the contractor that will allow the operator to plan a very efficient project that the operator company needs to be successful.  The operator’s future viability is at stake and rests upon the projects outcome.  At the entrance is a representative of each service contractor, but the SVP cannot tell which contractor each belongs to.  What question should the SVP ask to find the path to project success?  The SVP only needs to talk to one of the service contractor representatives.  What is important is that the SVP phrases a question such that the response will be the same from both service company representatives: a question that incorporates how a representative of the service company not answering would respond to the same question.  The SVP could ask one of the service company representatives: which way would the other service company representative tell the SVP to go to get to the booth of the honest service company?  If the SVP queries the representative from the honest service company, the representative would reply the other service company would tell you to go to the booth on the left.  If the SVP queries the representative from the dishonest service company, the representative would reply that the representative from the other service company would also tell the SVP to go to the booth on the left.  The SVP knows to visit the booth on the right, where the honest service company representatives are.  The key to risk mitigation is asking the right questions more so than just accepting the answers to the questions themselves. (Some readers may recognize the O & G operator company focused story as a rendition of the classic Island with Truth-tellers logic problem.) 

From reading the recent article, Seismic Specialists Sense Light at the End of the Tunnel combined with another article (not related to the marine seismic industry), Optimists and Pessimists, I considered how to frame an analysis of the current marine seismic market.  Optimism and pessimism are risk-based views that are both subjective and contextual.  Optimism and pessimism should both be fact-based views.  What may seem dangerous to one decision-maker may be viewed as an opportunity for another.  The substantive facts of the situation can be the same, but the viewpoint is different based on the separate realities and perspective of decision-makers.  Optimists see opportunity where pessimists don’t.  When the traditional market is not revealing opportunity, optimists will look to change that reality through some kind of market disruption. There is power in positive thinking, but the importance of thinking – strategy and planning – cannot be understated.  True optimism or pessimism must be grounded in reality and the strategic vision to navigate through that reality.  Hollow predictions based wholly on hope or despair are more lottery than strategic vision.

Within the article, Seismic Specialists Sense Light at the End of the Tunnel, the CEOs share their views on the future of the marine seismic streamer market These two companies have also been the focus of marine seismic streamer market analysis which I have written and posted on LinkedIn™ over the past year.  Both are pure play marine seismic streamer data acquisition and processing service providers with the same customer base, in many respects.  However, since the dramatic drop in oil prices the marine seismic streamer fleet has been decimated.  The majority of the reductions have come from the companies that once commanded the largest fleets.  CGG and Schlumberger’s WesternGeco (WG) significantly reduced their presence in the marine seismic streamer market and made the largest slashes to their fleets.  However, both still do continue to operate smaller fleets of marine seismic streamer vessels.  Dolphin Group ASA (Dolphin) collapsed into insolvency.  Dolphin had operated chartered vessels from GC Reiber and Sanco Shipping ASA.  Dolphin Geophysical is now a subsidiary of vessel owner GC Reiber.  BGP had operated a modest seismic streamer fleet in comparison prior to the price collapse.  They have maintained their fleet, but also like Schlumberger and CGG had been more diversified beyond marine seismic streamer services.  Marine seismic streamer vessels are expensive to operate and maintain.  The decline in oil projects precipitated by the decline in oil prices reduced the number of deep water exploration projects substantially.  This impacted the companies with the larger fleets especially hard.

The Global 3D Marine Seismic Streamer Fleet

While it is true that both serve the same customer base, there is no simple apple-to-apple comparison between these two companies.  While trust is an essential criteria for any SVP of Exploration (fictional or real) to consider when contracting a service provider, there are different solutions being offered to solve the operator’s particular problem which includes several specific components of consideration.  There is no simple binary – true/false – answer in choosing between two principal companies to solve a complex problem.  Add to this that there are several alternative solutions available.  For simplicity, however, these two companies can provide different perspectives of the marine seismic streamer market to extrapolate from.  The stark differences in how these two companies approach this current market are first apparent from looking at their fleets and different operational strategies.  The classic delta-shaped hull of the Ramform design, which defines one fleet, contrasts with the X-bow™ design of the the other fleet.  The one design looks made for wide-tow operations.  The back decks are equipped with many streamer reels.  (Actually, these reels mostly are to accommodate HD3D acquisition.)  In HD3D acquisition more closely spaced streamers are towed for a denser dataset.  Wide-tow acquisition is more so facilitated through the use of “doors” which are towed to the port and starboard of the streamer spread to maintain its width.  Polarcus actually has operated the widest, and largest by area, spread.  Polarcus’ Xarray™ solves the data density equation through employing fewer streamers and adding more sources.  Interference from the more closely spaced shots are removed through data processing.

Efficiency innovations arise in industries that already exist. They provide existing goods and services at much lower costs. They are not empowering. Efficiency innovators become the low cost providers within an existing framework. ~ Clayton Christensen

Progress is measured by the degree of differentiation within a society. ~ Herbert Read

Operating more streamers in the water has been at the crux of the marine seismic streamer operational efficiency equation.  Maintaining the proper relationship between source and receiver requires additional technology to maintain the geometry of the streamer spread.  Marine seismic spread positioning – navigation – has also developed over the years.  More streamers in operation also require more in-sea equipment to control the spread.  This additional equipment must be monitored and maintained during acquisition, along with the streamers themselves.  Prior to 2007, streamers contained single-component hydrophone receivers.  Two-component dual-sensor receiver changed this norm.  The combined attributes of the hydrophone and particle-velocity sensor is what ushered in the broadband revolution.  The reflected energy from the air-water interface cancels signal creating a notch (ghost-notch) of lost frequency content.  The ghost-notch is depth-dependent, but occurs at different bandwidths for different type sensors.  In response to the development of dual-sensor towed streamer technology, other contractors developed depth-varying hydrophone-only solutions employing the improved streamer control equipment.  Data processing techniques to accommodate the new geometries were also created with the improvements in computer power and algorithms. Now there are four-component streamers (WG/IsoMetrix™) in the market.  More equipment in the water has created more noise to affect the streamer sensors.  Multiple sensor streamers are especially sensitive to a greater range of signal-impacting noise and therefore streamers must be kept clean and free of foul/barnacles.  Larger spreads also require more fuel usage due to the added drag from more equipment.  Less equipment to manage in the water also can reduce HSEQ exposure risks.  Polarcus is reducing in-sea equipment and fuel usage and forwarding environmentally conscious efficiency.  Traditional players maintain traditional geometries and data-rich (two-component) datasets.  This demonstrates fundamentally differently solutions to solve customer problems.

There was over-capacity in the marine seismic streamer market prior to the collapse in oil prices.  However, profit margins were competitively lower than service companies would have wanted them to be to operate their expensive fleets.  Because of the expense of operating marine seismic streamer vessels, the survey vessels themselves became larger and capable of towing more streamers.  This translated into acquiring more geophysical data within less time.  The cost savings of operating an expensive vessel for less time could be passed onto customers.  This proved to be a winning solution when the price of oil was around $100 USD/bbl and there were a pipeline of exploration projects.  However, the equilibrium that the marine seismic streamer sector has been seeking for is there to be an ample number of projects being tendered or data sets required to keep the operational global marine seismic streamer fleet busy working for profit.  When oil prices declined, so did the required projects.  There were not enough projects to occupy a large global fleet which led to seismic streamer vessel owners cold-stacking (de-rigging and parking) vessels to balance the vessel supply with the declining demand for surveys.  There are less surveys in the pipe-line, while at the same time seismic streamer companies are asked to complete surveys more quickly.  This has led to innovations pressing the thresholds of operational capability, but also financial losses.  Completing projects quickly simple means there needs to be more jobs in the pipe-line for balance.  This has not happened.

Cold stacking high-capacity marine seismic streamer vessels and keeping them out of the market is not the same dynamic as if the vessels were not actually built and capable of operating within weeks.  There is so much flex-capacity in the market right now that it makes the supply side of the market elastic.  There will for some time be personnel that can be on-lined relatively quickly.  People who have worked five-week on/off vessel rotations for years do not forget what they once had mastered in months.  It can take months or years to design and bring a new-build into the market.  (CGG averted this waiting window through acquiring Fugro’s fleet.  In fact, much vessel capacity has been acquired through purchase of companies that had originally contracted for the new builds.)  Dolphin had only recently chartered high-capacity new builds before the price collapse and their subsequent insolvency.  WG had also introduced Amazon Class new builds into the market.  But, most notably, four high-capacity marine seismic streamer vessel new-builds were introduced into a more balmy and bright market outlook.  Several players introduced new builds into the marine seismic streamer market following the oil price collapse.  There remains a lot of idle capacity.

Confidence isn’t optimism or pessimism, and it’s not a character attribute. It’s the expectation of a positive outcome. ~ Rosabeth Moss Kanter

Pessimism and optimism are slammed up against each other in my records, the tension between them is where it’s all at. It’s what lights the fire. ~ Bruce Springsteen

The caution for a balanced market can be phrased in this way: when the market does turn the corner, there will likely not be a long a period of low survey vessel supply to allow higher price margins for a long enough period of time to recoup the substantial losses that have been incurred following the collapse in oil prices. (Sorry to be the man in black.)  On the demand side things are also not looking too positive, as there doesn’t appear to be much movement toward the magic market equilibrium either.  However, I believe that this business model has become less advantageous in a low project demand and high vessel supply environment that has defined the market since the collapse.  Further, the operating capacity has been reduced through the cold-stacking of some relatively new and high-capacity vessels.  These vessels are just looking for the right conditions to be re-introduced into the market.  Many of these vessels are specialty built for seismic data acquisition and can therefore be re-introduced and also meet stringent customer HSEQ requirements.  When money can be made from the vessels in dock, they will compete the current global fleet.  When the profit margins are very low or non-existent and simply minimizing losses, of course there is no reason to commission the vessels into operation.  Only when profits are again achievable will there be an incentive to re-introduce the idle capacity.  But, that point is not universal.  The cost-base for profit of one company may be very different for that of another.

On the project supply side of the equation, the overall O & G industry is awaiting stabilization in oil prices for a reasonable continual time-frame.  Oil prices dipped below $40 USD/bbl for the first time since April 2016.  Exploration has always been tied to oil prices during previous cycles.  Most exploration and field development in offshore-deepwater projects recently has been tied to prior offshore license commitments.  The oil majors have posted losses.  Their new reality is explained within Here’s How Exxon Mobil, Royal Dutch Shell, BP Are Affected by Low Oil Prices The article predicts that a recovery is not anywhere near.  The main customers of marine seismic streamer services are looking to cut costs and benefit from the synergies of acquisitions and merges.  In the past, companies have been able to offset losses in the upstream segment through increased activity in downstream segment.  But, there is an oil glut that has oil-tankers filled with crude waiting for some destination to offload the stuff!  The incentive for exploration under these circumstances is not too great.  When capacity is in stable demand, projects can be planned and tendered well in advance.  But, when prices are unstable and there is enough marine seismic streamer vessel capacity waiting for projects, operators do not need to tender and commit to projects too early.  In the past, depending on requirements, projects would be tendered 3-6 months in advance.  Now, there is less lead time coupled with uncertainty if there will even be a project tendered.  For the marine seismic streamer market to come into balance would require more projects to be planned for the upcoming Q3/Q4 2016 period compared to the Q1/Q2 2016 period.

As for the prediction of seismic specialists who also happen to be CEOs, the view of the market must be one that entices the investment of both capital and patience.  On the other hand, this analysis arrives from the viewpoint of an objective consultant who knows the industry but is not beholden to be a cheer-leader either.  The marine seismic streamer market has endured a tempest.  The destruction is visible in its wake: stacked vessel capacity, losses and debt, and disenfranchised workers.  There will be no quick or easy return to how the market was before mid-2014, just as the new-roof will never look entirely as the old roof did before the storm blew it away.  The market dynamic is forever different moving forward.  Both the business model requirements and technological solutions have changed.  Only prices need to stabilize within a reasonable (but, what’s reasonable?) range for over a quarter to be useful in the corporate planning world.  Demand for projects will be the bear-minimum until then.  On the other hand, operators will need to consider the variety of technologies and balance them with long-term objectives.  Oil companies also being short on capital will make them favor low cost-base service providers.  Marine seismic service providers will need to show the value that will be realized and change the view of the cost-base formula.  I predict a slow rise in oil prices which will translate on almost stable demand.  But, since new vessels are still being introduced, it will equate to slightly less demand for the global fleet.  The main concern for service providers will remain vessel utilization rates which will be stressed due to customer’s favoring operational efficiency with derivative being lower cost to them.  There is sun and a rainbow, but the clean-up is only just beginning.  As for which contractor the SVP of Exploration should choose?  Simple, the one that demonstrates trust.

After every storm the sun will smile; for every problem there is a solution, and the soul’s indefeasible duty is to be of good cheer. ~ William R. Alger

When did the future switch from being a promise to a threat? ~ Chuck Palahniuk 

Will Marine Geophysical Exploration Rise Again? (5-June-2016)

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Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

A Look into the Future of the Marine Seismic 3D Streamer Market

Markets change, tastes change, so the companies and the individuals who choose to compete in those markets must change. ~ An Wang

Growth is never by mere chance; it is the result of forces working together. ~ James Cash Penney 

There is an outwardly projected optimism in the upstream geophysical exploration industry. It is displayed by geophysical exploration companies with events like the 78th EAGE Conference & Exhibition 2016 that was just held in Vienna, Austria from 30-May to 2-Jun 2016. However, the geophysical exploration industry has been sobering to the reality of a prolonged downturn in offshore oil and gas concession operator spending. Oil prices recently rose above the $50 USD/bbl mark. But, invigorating the industry to pre-2014 levels where oil prices stayed comfortably around $100 USD/bbl, will not happen for some time. Deepwater exploration is built around sustained prices over $70 USD/bbl. The problem is that the 3D marine seismic streamer sector has had over-capacity – too many vessels to complete the required demand for surveys at comfortable margins – for some time. This reality has created a very competitive sector with reduced margins and losses. For many upstream focused enterprises at geophysical exploration marketing venues there will be speculation and tales about who has been vanquished and who has remained since the last annual meeting. The reductions in most company’s personnel and market capitalization will make it difficult for those attending to count on meeting with former colleagues and business partners. There are thousands of justifications to be made as to why this year is a good time to engage in geophysical exploration where vessels are available at cost. However, axing profit margins along with staff is the product of reduced opportunities more than anything else. New strategies must be developed for this new type of dip in the historically cyclic geophysical exploration sector.

The last European Association of Geoscientists and Engineers (EAGE) Conference & Exhibition that I attended was the 2013 event in London. Most of the day that I attended was spent at the front of the company booth (of my former employer). However, I am always very interested in the talks, presentations, and booths of market players. In the 2013 market sector environment, attendees and professionals saw a lot innovation and growth built around different broadband data acquisition and data processing techniques. Product differentiation built around proprietary approaches was promoted to entice new customers. A little over a year ago, I began writing on LinkedIn™ (LI). My first posted article on LI was, The Seismic Vessel Over-Capacity Problem (First post, 5-May-2015)My follow-up to that article was Upstream Exploration and the Paradox of Choice (10-May-2015),  More recently, I posted Multi-Proprietary Marine Seismic (7-December-2015). These posts, one may note, were all written following the major decline in oil prices.  These boom and bust oil and gas industry cycles have defined the geophysical exploration industry for years.  However, this cycle is different, particularly for the marine seismic streamer sector.

In the past several months the sector has seen a significant decline in the number of operating 3D seismic streamer vessels to adjust to the reduced demand for marine seismic services. This has begged the question, what kind of demand will their be from offshore concession/block operators?  What is most valued in this market?   Some views on this were shared within the posted articles.

To touch on some of the observation made in the previous posts:

  • There were too many 3D marine seismic vessels in the market which were already forcing low price margins prior to the mid-2014 decline in oil prices
  • Operator tendering processes are prefaced on comparative technologies which make introducing new commercial technology difficult.
  • Broadband seismic has become the new standard offering. However, the data acquisition and processing techniques used can be very different for different contractors.
  • Contractor service company proprietary technology differentiation based on their own broadband techniques has contributed to the expansion of the multi-client space.
  • Cooperation between operator data acquisition and processing requirements could reduce overall acquisition and processing costs for each operator and data ownership could be retained.
  • In an over-capacity and low demand market, the speed of acquisition – vessel streamer tow capacity – does not command the same premium or benefit. Vessel utilization is the key commercial indices to track for service companies.
  • Seismic data processing technology can separate overlapping source shot interference data leading to new acquisition techniques allowing more sources to be towed with wider streamer separations towing fewer streamers with reduced loss of coverage.

The significant decline in the 3D marine seismic streamer fleet since the mid-2014 decline in oil prices has upended the sector, to be certain. Since the decline, the 3D marine seismic streamer fleet has been very volatile.  There have been fleet adjustments throughout the financial quarters.

CGG reduced its fleet and capacity from 23 to 5 vessels. Schlumberger’s WesternGeco (WG) has also reduced their fleet and adjusted their marine seismic business plan. WG, as a part of Schlumberger, is not pressured solely by the decline in demand for marine seismic services, but has exposure in many parts of the value chain. Nevertheless, the over-capacity issue has impacted WG. Both WG and CGG have moved towards a revised fleet and services strategy with less emphasis on marine seismic services. Dolphin Energy ASA (Dolphin) is in bankruptcy. However, GC Reiber ASA, owner of the vessels once operated by Dolphin Geophysical subsequently acquired Dolphin Geophysical as a subsidiary, which places the GC Reiber purpose built seismic vessels back onto the market. The Polarcus fleet has been stable for a few quarters. However, they also purchased equipment from bankrupt Dolphin. The current – 2016 – 3D marine seismic streamer now looks something like this:

The belief – hope – among marine exploration companies is that the reduction in the global 3D seismic streamer fleet will now come into balance with a demand for marine seismic streamer 3D surveys.  The reduced number of operational 3D seismic vessels will be aligned with the reduced number of acquisition projects. There has been some indication that margins are improving.  However, the latest global fleet adjustments were only finalized end of Q1 2016.  Reported vessel utilization rates still indicate operational 3D seismic vessel over-capacity for the current demand.  Some acquisition projects were planned before the decline and were not terminated.  This meant projects planned for Q3 and Q4 2014 continued.  The full breadth and longevity of the steep decline were not fully realized until the quarters which followed.  Operators also had commitments for exploration attached to their license agreements which created some opportunities.  Unbound exploration was put on hold by most operators.  In the current market, projects are not even getting off the drawing board.  Operator drilling rig contracts are now being paid-off early.  Abandoning drilling programs at the cost of the rig is preferable to sinking the additional capital into projects with no future of being profitable in the low price environment.  Cutting losses as opposed to making profit is the current survival climate.  Operator geophysical exploration projects most often precede rig contracts.

Deep water drilling rig contracts are more costly than marine exploration vessel contracts.  However, both are often considered on a daily-rate cost base.  The trend in 3D marine seismic streamer vessels was toward wide-tow capability.  Purpose-built vessels capable of towing more streamers were designed to complete surveys in less time.  So, for instance, a vessel towing 12-streamers could be competitive with an operational cost base 20% higher than a vessel capable of towing only 10-streamers.  A vessel capable of towing 14-streamers could be competitive with an operational cost base 40% higher than a 10-streamer vessel.  Completing surveys faster can also reduce equipment exposure and technical down-time as well as standby time due to weather, marine fauna, cetaceans, vessel traffic, or even other marine geophysical operations, to name a few.  On the other hand, turning-time is longer with a larger spread.  The shape and areal size of the survey, geographical location, and prevailing currents can impact vessel spread performance as well.  As the global fleet tow-capacity increased, the advantage of towing additional streamers decreases.  For example, a vessel towing 14-streamers could be competitive with an operational cost base 16.7% higher than a vessel capable of towing 12-streamers.  Of course, cost base is directly related to the cost to the vessel owner/operator.  Newer special built vessels cost more and likely have a higher cost base to the vessel owner or operator who charters the vessel. This has had many upstream companies involved in debt restructuring, cooperation agreements and creative investment schemes to weather the new market dynamics.

Completing projects faster in an over-capacity market is not really advantageous for vessel owners/operators.  Owners/operators need to keep vessels with paid work as many days as possible.  Each day without a paying customer is a negative to the effective profit margin.  With less projects this is more difficult.  Steaming from one job to the next or maintenance port calls eat away at profitability as well.  Companies with larger fleets, especially with uniform equipment and similar vessel (capability), have always had the advantage of strategic vessel placement to cover global projects and minimize steaming.  Smaller fleet size will likely increase steaming costs.  But, a strategically located operational vessel with no work is even more costly than steaming.  This is why so many vessels have been stacked – taken out of operation – during the past couple of years.  Purchasers of marine seismic acquisition services – block operators – are faced with their own economic pressures which have forced marine seismic survey companies to innovate less expensive products and services.  As discussed, vessel streamer towing capability has been the most obvious way to approach the problem of efficiency and reduce the days (charged at day rates) a survey takes to complete.  However, improved data processing capability has combined with innovative geometries.  The development of dual-sensor (hydrophone – particle velocity) streamers ushered in a demand for broadband data.  However, competitors created single-sensor (hydrophone) only solutions which varied the depth of receivers and also filled-in the ghost-notch created when upcoming signal interferes with down-going signal, effectively cancelling out a portion of the bandwidth acquired.  The ghost is depth dependent and varying the depth effectively broadens the bandwidth of the effective acquired data.   But, depth also effects different frequencies for hydrophones and particle velocity sensors.  So, combining the signals effectively also broadens the bandwidth of acquired data.  Improvements in the equipment and processing of the data made this possible.

There are two possible outcomes: if the result confirms the hypothesis, then you’ve made a measurement. If the result is contrary to the hypothesis, then you’ve made a discovery. ~ Enrico Fermi

Without change there is no innovation, creativity, or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable. ~ William Pollard

Seismic data acquisition can be compared to mowing a lawn, in simple terms anyhow.  The width of the blade will define how many passes are required to complete a survey.  A rectangular lawn is easier to mow than an odd-shaped one, which also applies to marine seismic streamer acquisition.  However, what is lost in the comparison is that the data is being acquired differently.  What is actually being measured is the signal from a point within an area, or bin, which it is called in the business.  The bin size is determined from the spacing of the receivers along each streamer cable and the spacing between each streamer.  The point within the bin is determined by the mid-point distance between a receiver and the source.  If one source is used, then a line of points is created for each streamer.  If two sources are used, then two lines are created for each streamer, alternating between each source (called flip-flop).  Now, three sources (Polarcus) are being used which effectively creates three lines for each streamer.  In times past, the limiting factor has been the timing of source shots – arrays of synchronized firings of air guns.  There had to be a space in time between shots to prevent the signal from one shot from interfering with the previous shot.  However, technology and data processing techniques can now separate the shots to allow more shots and less time.  This has effectively changed the vessel towing capacity advantage of larger vessels.  Towing wide with fewer streamers spaced farther apart while using more sources has introduced a time-saving alternative acquisition method to compete with larger wide tow vessel acquisition.  It is the combination of new acquisition and data processing capabilities that can address overlapping sources and interpolate data have come together to provide operators with cost-effective solutions.

However, service providers must introduce innovation as product and service differentiation somewhat cautiously.  This is an issue that operators and national oil companies (NOC) especially need to review.  Innovation is needed to improve productivity and costs, especially now.  Every operator and NOC wants to save on costs.  But, the competitive bidding process is designed for directly comparable products and services.  It is crucial in developing markets, especially, to have an above board bidding and contracting process.  High dollar O&G and construction projects are just too susceptible to corrupt practices without strong controls and compliance programs in place.  This starts at the bidding stage.  Not so long ago broadband data was a special alternative offering outside the main tender project scope and specifications.  It was only after seismic broadband data solutions were developed by multiple companies that broadband could be requested in a competitive tender process.  Even though venders techniques for seismic broadband data differ significantly, in the competitive bidding process multiple companies must be able to offer a solution.

The next disruption, I believe, will be simultaneous acquisition 3D seismic streamer data and electromagnetic (EM) data.  Just as the dual-sensor streamer which ushered the commodification of seismic broadband data, towed EM technology has been introduced.  A patent dispute with Electromagnetic Geo-Services (EMGS) which will allow EMGS to provide towed EM services has also been settled.  Conceivably, EMGS could team with GC Reiber/Dolphin (hypothetical) and offer both EM and seismic streamer data.  It is paradoxical, but to expand into a market driven by competitive bidding for products and services, having a monopoly on technology and capability encumbers development opportunities.  Vessels are the expensive part of marine geophysical surveys.  Being able to provide operators with more data – seismic, EM, and gravity – in one pass could be very desirable from a cost position.  But, this will require operators to not only see the potential, but also prepare a commercial environment where such disruption is allowed.  In the future of marine geophysical exploration multiple geophysical data sets will be combined and processed to constrain and better resolve parameters and previously unknown properties to image the subsurface more effectively and efficiently.  However, to realize this potential requires resilience and investment by operators who can see opportunity and profit in continuing to develop deep water reserves.  When marine seismic 3D streamer rises from this current trough it will become marine 3D geophysical data.  It is a future that innovation and technology will build together, but with fewer vessels.

We must keep on trying to solve problems, one by one, stage by stage, if not on the basis of confidence and cooperation, at least on that of mutual toleration and self-interest. ~ Lester B. Pearson

We have all kinds of limitations as human beings. I mean we can’t see the whole electromagnetic spectrum; we can’t see the very small; we can’t see the very far. So we compensate for these short comings with technological scaffoldings. The microscope allows us to extend our vision into the micro-sphere. ~ Jason Silva

Why Enterprise Compliance Programs Fail (24-April-2016)

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A Systems Management Solution

They say that structure is freedom, and in a sense it is. When you’re dealing with multiple constraints, you have to figure out what you can get out of that. ~ Demetri Martin

A culture is like an immune system. It operates through the laws of systems, just like a body. If a body has an infection, the immune system deals with it. Similarly, a group enforces its norms, either actively or passively. ~ Henry Cloud

Quality is consistently delivering intended outcomes. From this perspective, a quality management system (QMS) is really about delivering products and services in compliance to the internal or external customer. All enterprises are systems where the output is the byproduct of interrelationships, interconnections and dependencies of processes and resources. In the myopic view of quality, the focus is on the final product or service deliverable that the customer pays-for within specification, budget, and time. When the significance of workplace culture and its effect on the output of a system is considered, the impact of enterprise compliance is clearly significant. Culture is defined by the interaction of practiced values, processes and resources that constrain and form decisions. Hence, every decision is a risk proportional to the certainties in the cultural decision making processes. Corporate compliance relies on having optimized policies, procedures and processes which will detect and prevent violations of applicable law, regulations, rules, and ethical standards by employees, agents and other stakeholders. Therefore, corporate compliance is threaded throughout every connection within the system. Because corporate compliance connects every node in the system, as shared values or corporate culture, it is in reality the principal enterprise risk where compliance risk, integrity risk, and reputation risk are all components which greatly affect operational risks. The new ISO 9001:2015 Quality Management System standard emphasizes risk-based thinking. Enterprise risks needs to be de-compartmentalized and assessed in context to the entire system and enterprise objectives. When risk is assessed as individual components of departments and group expertise without context to their interdependencies and influence on overall department and market performance, the system is corrupted and the deliverable to all stakeholders is compromised. Quality cannot exists where there is weak corporate governance and compliance. Quality and compliance are inextricably dependent on each other.

Compliance is too often inappropriately relegated to the executive team and legal arms of an organization external to the principal business operations that frame governance compliance decisions. There is much literature discussing the failures of enterprise compliance programs and enterprise corruption. The current paradigm to remedy enterprise compliance failures is built around training and awareness measures for employees which exposes individuals to the legal and policy limits of behavior. Of course, the workforce must understand the constraints of compliant behavior. But, understanding the limits of compliant behavior in of itself will not really change non-compliant behavior measurably or successfully. Simply identifying non-compliance is tantamount to placing signs on a production line stating “zero defects” or affixing safety posters that say “don’t get hurt on the job.” Such accruements are ineffective and likely do more harm than good. Compliance must be regarded as the desired outcome of the managed system in the same way omitting rework and building quality into the processes is the objective of a quality management or safety management system. The principal problem with any non-compliant system – a system which produces the unwanted outcome – is the management paradigm which guides too many enterprises. It is the top-down management of fear that perpetuates the fallacy that compliance performance is a worker-based problem. Quality guru and management consultant W. Edward Deming demonstrated that performance is grounded in the constraints which management imposes. Top management decides how and why processes and resources are developed and used to achieve intended outcomes. Governance compliance, just as quality, safety or environment compliance, is a culture issue which is driven by top management. In Deming’s famous Red Bead Experiment, it was demonstrated time and again that performance is attributable to the managed system 85-99% and only the remainder to the employee. Compliance unequivocally is a management based problem, as is enterprise risk, for the most part.  Compliance and quality are actions and not outcomes.

Risk comes from not knowing what you’re doing. ~ Warren Buffett

Anything that is wasted effort represents wasted time. The best management of our time thus becomes linked inseparably with the best utilization of our efforts. ~ Ted Engstrom

In systems management, the objective is to develop processes which eliminate the opportunity for undesirable outcomes. However, this requires a thorough understanding the inter-dependencies of processes and resources. An action which eliminates an outcome in one area may create negative outcomes in another. A common example is the elimination of using knives in offshore operations as much as possible due to the number of workplace mishaps which they contribute to. However, during an emergency evacuation (e.g., Deepwater Horizon) not having a sharp knife easily accessible to cut the tether to a life boat adds time and risks to a safe emergency evacuation. This is an example of compartmentalized risk-based thinking. The most effective remedy for this risk paradox is de-compartmentalized knowledge-sharing throughout the enterprise. This simply is not the reality of top-down driven mandates. Decisions are most effective when they are driven by common knowledge of processes and constraints. It is why there are emergency drills. This is how enterprises mitigate operational risks successfully. The same concept applies to enterprise compliance. There is no compliance without engagement. Simply publishing or being familiar with correct actions is not the same as behaving correctly. Corporate compliance requires stakeholders to be both aware of and abide by internal policies and procedures designed to prevent and detect violations. Compliance risk is sometimes referred to as integrity risk. A corporate culture of integrity is critical to achieving sustainable growth. High levels of trust and reputation make it easier to operate throughout the enterprise. This is the undeniable connection that threads every decision and process change or improvement. A reputation of trust is valuable in business. Far too many operational enterprise decisions are made without direct consideration or reference to policies and laws. The acute interdependencies of enterprise governance to operational process performance is hardly recognized. Further, there are often no transparent processes of control which actually govern – constrain – decision-making on matters of compliance and enterprise governance. Thus, in a poorly managed system, non-compliance is usually only arbitrarily detected, much less corrected. The same holds true for quality, safety, and environment enterprise systems.

Management controls the processes and resources that truly determine enterprise performance which make the enterprise unique. This means that management of the enterprise creates the environment where non-compliance is either rare to where it is all but a foregone conclusion. Compliance programs that focus on worker training without recognizing the overwhelming influence of the enterprise management will fail. Programs that direct responsibility for non-compliance on those within the system are misaligned and driven by fear. Compliance success rests with authoritative decision making power. Successful systems share knowledge and are transparent. Decision making hierarchy is flat, because the basis and power to make decisions is shared knowledge and objectives. Non-compliant enterprises are often composed of siloes and have dysfunctional communication flow. They are not transparent. Decisions that are driven by hierarchal perceptions and manipulations rather than the broad analytics of process and resource interaction will likely not deliver compliant behavior, even when well-intended. Unconstrained decision-making without pre-determined limits foment corrupt cultures. Developing processes that remove the opportunity of non-compliance should be the objective. Compliance training should be focused on both the constraints as well as improving enterprise processes. But, there must be guidance and engagement from top-management. Compliance must be viewed as a desired outcome of a managed system and not an advertising gimmick. The reason that many compliance programs fail is because there is no real accountability. Simply, compliance programs fail because a common misguided paradigm.

If you want small changes in your life, work on your attitude. But if you want big and primary changes, work on your paradigm. ~ Stephen Covey

Excellent firms don’t believe in excellence – only in constant improvement and constant change. ~ Tom Peters

Our Deepwater Horizon (4-April-2016)

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Risk: Why the Modern Enterprise Must Change the Way that Decisions are Made

Why are we in this mess, now facing the prospect of economic armageddon? It’s because the prevailing characteristic has been greed. ~ Jeremy Paxman

Know your enemy and know yourself and you can fight a hundred battles without disaster. ~ Sun Tzu 

The trailer has come out for the new movie Deepwater Horizon (2016). Unlike the fiction in the movie Armageddon (1998) which glorified oil rig workers as saving the planet earth from destruction by an asteroid the size of Texas(!). The events surrounding the largest oilfield environmental disaster of all times will be more down to earth. But, the truth is that oil rig workers likely could have prevented this disaster had they been listened to more closely, worked together more cooperatively, and had their collective reporting information compiled and shared better. This fact holds true for workers within all complex enterprises. This is the greatest problem with the modern complex workplace where copious amounts of data are collected and stored, but improperly shared and processed to become knowledge. The most significant modern day risk for man-caused disaster is a management problem wrapped around a paradigm which adheres to the false-truth that concentrated decision making by an isolated (and often highly paid) few will be able to address complex problems correctly and in a timely manner without the contextually correct input from afield. Just like a modern day fire-safety system that shuts down some processes while simultaneously starting others automatically based on environmental data, more emphasis needs to be on understanding processes and their impact on the entire enterprise. The real role of management is to improve processes based on the outcomes and not make decisions literally from the seat of their pants, or change outcomes – data – to cover the seat of their pants, as too often happens. The Deepwater Horizon disaster was not a single impact event like an unexpected asteroid from the heavens, but was the aggregate outcome of many shortcuts, uninformed, and even intentionally bad decisions that combined like straw filling a bag until the last piece of straw finally breaks the camel’s back. Most man-caused catastrophes of magnitude happen because of corrupted processes and controls that render the intended designed outcome unattainable.  Not only unattainable, but unstable and unpredictable.  Some unintended negative outcome was all but inevitable.

Deepwater Horizon was a disaster of cinematic magnitude and therefore has become a case study for risk management. Unlike other high-visibility disasters, such as the Space Shuttle Challenger, there are several deepwater platforms operating globally. This means that the potential of more, and maybe even worse, environmental disasters is still present. Unless there is a fundamental shift in how complex projects are managed, the risk will continue to exist. Risk is always a management issue. Management creates the workplace culture through defining the processes and resources required to deliver products and services. Work is performed within these constraints where workers are within the system, whether it be safety, environment, or quality as stated objectives – usually all. Management establishes the infrastructure for communication-flow and knowledge-sharing necessary to make the best decisions. The technical feat of deepwater drilling operations should not be understated. In terms of technology, it certainly rivals space programs. Drilling operations through thousands of meters of water and earth while maintaining just the right balance of heat and pressure throughout the endeavor is complex and technologically challenging. For this reason, a number of technological advancements in equipment and processes have been developed to safeguard operations from catastrophe. At the focus of the Deepwater Horizon disaster was the failure of the blowout preventer (BOP). Oilfield blowouts occur when the underground pressure overwhelms the weight of the column of drilling fluid above the drill bit. It is very difficult to control the pressures encountered during drilling and specially formulated mud is used. An uncontrolled release of pressure can cause fire and explosion. The first BOP valve was designed in 1922. Prior to this invention terrestrial blowouts were allowed until pressure reduced to a level that would allow capping the well. At depth and underwater similar principles apply, but are more challenging to control. Thus, the BOP valve alone is not the only defense against a blowout. A variety of environmental and equipment measurements are made through the course of operations to evaluate the integrity and overall safety of the operations. Reports about the disaster indicated that alarms and warning systems had been disabled prior to the blowout as well.

Deepwater Horizon was actually a manifestation – albeit a catastrophic one – of how close many operations are to disaster when protocols are ignored or changed without proper evaluation and analysis. Central to this is a management paradigm which is practiced in many enterprises that cannot address complex risk operations effectively. While the vast majority of enterprises are not executing operations where error in decision making can result in a disaster of the proportion of Deepwater Horizon, operational failures which can negatively impact operations and enterprise performance happen with relative frequency. Perhaps, it is the redundancy in processes designed to detect and offset catastrophes that allows this complacency. The problem of adjusting procedures and protocols is wide-spread. We call them “short-cuts” which need to be taken because those writing the processes and protocols do not really understand what happens “on-sight.” This is a localized and simple view of risk. Movies about the everyday of the modern workplace would be mundane. When they do reach the screen it is often in the genre of comedy. Unfortunately, many do not pay attention to how in-sync the comedic view of the prevalent management paradigm is with eventual disaster. Every decision is a risk. Decisions define enterprise culture. Leadership establishes culture through its management and process of decision making. A safety culture, environmental culture, and quality culture are realized by how processes and protocols are managed, reported, and analyzed. The paradigm depicted on video is “fear-based” management which categorically reduces the opportunity to make the most appropriate safety, environmental, and quality based decisions. It is a management paradigm that puts into place uncontrolled and unstable processes that produce unpredictable outcomes. Like the planet Mars, many modern workplaces are surrounded by dread and fear (moons Phobos and Deimos).

Whenever there is fear, you will get wrong figures. ~ W. Edward Deming

Danger will come upon us when it will. We can’t stop it. We can only try to be prepared. There’s no point in looking ahead to that danger and suffering its effects even before it comes to us. ~ Chitra Banerjee Divakaruni, The Conch Bearer

Enterprises must be considered and evaluated as a system. Most enterprises are in fact systems of interdependent and interrelated elements that are constructed for the purpose of achieving some desired outcome. The elements continually influence one another. The use of resources are often defined within processes which operate concurrently within the system. The inter-dependency of processes and resources throughout the system means that they are never truly isolated. One may be able to operate a motor vehicle with one flat tire, but the vehicle will not perform optimally. However, if the flat tire is completely removed it is likely that the vehicle will not operate at all. Elements of a system will also not function independently because of this interdependence. Systems must be designed with purpose and managed to achieve optimal outcome. Certain aspects of the system are temporal. A project, by Project Management Institute (PMI) definition, is a temporary endeavor with a defined beginning and end (in time of completion) undertaken to create a unique product, service or result. Deepwater Horizon was a platform designed to be able to complete any number of desired outcomes. However, its use was defined by the scope and objectives of the particular outcomes which the operator customer wished to achieve. Simply, the license operator had a job to complete and the contractor committed to endeavor to complete that job using Deepwater Horizon with attached appropriate processes and resources. While many of the capabilities and constraints were pre-determined by the appropriate processes and resources, the actual project scope of the endeavor was unique and defined by the license operator. A linear or Cartesian paradigm tends to separate process outcomes. A system thinking perspective should analyze holistically. Said another way, the Cartesian paradigm removes the tire because the tire is damaged and its functional interdependency within the system is not understood. The system thinking perspective understands that the tire cannot be repaired without impacting the overall performance of the system. The job of management is to optimize the entire system.

Knowledge is required to optimize a system. The prevalent management paradigm reinforces that authoritative position in the hierarchy equates to knowledge. Those at the top-levels may have access to more information to inform their decisions. However, the rapidity of changing events cannot cope with a linear-downward decision making processes. Decision making processes must be defined, but also dynamic. Decisions must be based on the aggregate of correct knowledge from throughout the system. Knowledge should also be viewed from the context of the system and interdependencies and not isolated. Experience obviously should be used to develop processes. However, top-down decision making processes cannot adequately address unique project circumstances. Individuals accessing the same knowledge base and well thought out processes should arrive to the same decisions as managers at different location.  The difference will be on-site decisions will be more efficient.  Data and processes should drive the decision making, not hierarchy. Management must monitor the processes and outcomes and through the use of data and understanding interdependencies improve performance and not accept shortcuts. Decision making in absence of knowledge is high-stakes guessing. Most everybody will now agree that disabling an alarm system is a bad idea. On the other hand, false alarms wake-up workers depriving them of sleep which can also impact safety, quality, and environment integrated systems performance. The alarm system should have been improved and not disabled without a contingency in place.

Fire drills are practiced repeatedly so that decisions are automatic. When multiple processes fail to provide valid outputs, decision making cannot be simple nor automatic. In crisis, practiced conditions may often not be what is realized anyhow. But, when multiple processes fail throughout operations no degree of preparedness determined through safety drills is valid. Even though safety drills are a common practice, they are practiced with assumptions. What the Deepwater Horizon events demonstrated was that much of what was practiced did not matter. The movie likely highlights the disaster which occurs when expected conditions of preparedness contradict the reality of multiple and simultaneous process  and subsequent equipment failures. The objective of often redundant processes is to avoid a complete system breakdown. The reason Deepwater Horizon was such a disaster is that the system cannot anticipate that so many of the “alarms” were ignored. System breakdowns point to poor system control. System control comes from knowledge and understanding not only how well processes are performing, but also the ramifications of processes not performing. On an offshore oil rig, a system breakdown leads to environmental disaster and loss of life. But, any uncontrolled system reacts unpredictably. Too many hedged unstable financial instruments embedded throughout a banking sector that ignores traditional “alarms” can collapse global financial institutions and create an economic crisis. Failing to consider all the environmental data and performance constraints of important system components can result in catastrophic failure and explosion of an otherwise well engineered space vehicle. Management focus should be in data collection and analysis that informs decisions, not the other way around. Too many enterprise decisions are being made without full understanding of the processes that define performance. Also, there often are peripheral and unaccounted influences that dominate the decision making prior to a disaster. These influences build-up due to non-optimal performance anchored in poor process control and analysis. In the bottom-line world of business, this influence almost always is connected to money.

Rational behavior requires theory. Reactive behavior requires only reflex action. ~ W. Edward Deming

Because if you’re prepared and you know what it takes, it’s not a risk. You just have to figure out how to get there. There is always a way to get there. ~ Mark Cuban

Money often becomes a principal, albeit undocumented, influence in decision making, especially within poorly controlled systems. This reality is seldom acknowledged, which often makes its impact even more nefarious. Decisions are supposed to be aligned to processes and constraints, such as being legal and adhering to enterprise policies and values. In the world of contract, products and services are agreed to be delivered within threshold requirements. In my experience, there are often different tenders submitted for a project. One tender is requested to address the operational and technical expertise to carry out the work by the contractor. Another tender is requested to address the financial and commercial commitment for services. These combine to put a value on solving a certain problem for the customer. The customer may tell the contractor what weight they place on certain operational capabilities or commercial terms which will combine to form their final decision for award. The expectation is that the product and/or service can be delivered according to what the tender related. Quality is tantamount to variation. One could say that the ability to deliver exactly what the customer requested at the cost that was designated would be very high quality indeed – zero variation. But, complex projects have pressures from many directions which make actual delivery and cost differ from the planned delivery and cost. If processes and the system are well understood and aligned to contract terms and conditions, these differences may not always be neutral, but benefit one party over the other. For example, waiting for the delivery of a crucial machine part may cost the operator or cost the contractor, or cost may be split evenly. It depends on the commercial terms. On the other hand, the requirements for functioning alarm systems and other defined processes should not be impacted. If processes are developed, monitored, analyzed, and improved they are also usually well understood and stable. This means that the estimated performance will not vary too much from the actual performance. However, when processes are not understood or adhered to variation is exacerbated. In these all too common scenarios estimated performance will be way off from actual performance causing cost pressures. The optimized system is always the highest quality, most safe, and environmentally conscientious system which meets the project requirements and delivers the most benefit.

The problem arises when processes are compromised for cost based reasons. Such decisions actually degrade the system performance because processes are interdependent. How decisions are made speaks directly to enterprise culture and values and how decisions are prioritized. Ironically, the best way to offset cost overruns and poor performance is through managing and improving processes and the system. The best way to improve the processes and change the constraints is through better understanding of the system. The number one reason provided for project failure is poor communication. What this is saying is that knowledge does not get where it is needed to improve performance and outcome. It also likely points to a poor understanding of the system, which points to non-optimal outcome. It was common knowledge aboard offshore oil rigs that employees who invoked their right to stop work when unsafe conditions occurred resulting in discontinued operations would be targeted to be let go – lose their jobs – eventually. After heated discussion, the Deepwater Horizon rig manager succumbed to the decision of the customer representative which elevated risk of a blowout. The central consideration was to expedite the completion of a project which was 5-6 weeks over schedule and allow the platform to be moved to another project. Time is money for offshore projects especially. Of course it is. But, should it be? There are multiple agreements that are violated when processes and procedures are not adhered to and safety equipment not functioning. Contracts are predicated on the safety, quality, and environmental equipment and processes operating in accordance to design and procedures. Personnel and their specific function and responsibility are often also included within the contract. Why then can management circumvent specified contractual provisions? They really shouldn’t be able to. Managing the system and processes optimally based on knowledge should form decisions, because if the system is truly managed well and optimized the course of action should be clear and also honor the contract.

Many organizations believe that their principal responsibility is to make profit for shareholders. They forget the part about staying within the rules of the game. Too many decisions are made which do not adhere to those rules. The rules are skewed to allow hierarchal authoritative power to make decisions without knowledge to form the best decisions. And bad decisions are the result. When knowledge is shared and accessible throughout the system and not held within silos of company divisions or subcontractors, operations are safer, environmentally astute, and produce lower variation outcomes – better quality. When systems are gamed, outcomes are less predictable and higher variation. Knowledge shared and guided toward improvements mitigate risks. Risk is uncertainty. The more knowledge available to form the best decisions will reduce risks. Decisions must adhere to values which consistently prioritize them. This provides system stability and reduces outcome variation. Management should not be deciding when a tire needs to be inflated or changed. Management’s key role is optimizing the processes and resources so that any driver who has the knowledge and follows the defined processes can make the same decision independently. Such decision making is more efficient. Do not impede safety, environment, and quality performance by fear. It will be counter-productive in the long-run. Provide a conduit for improvement and engage. Complex systems require optimal knowledge sharing and decision making at each connection. The offshore sector is emphasizing the need to reduce costs. This can only be accomplished through system optimization and not circumventing well thought-out processes and protocols.

Everyone has the right to call time out for safety. But, you do it, your’e gonna get let off. You know … you’re gonna get fired. They are not gonna fire you for that, but they are gonna find a way to eventually get rid of you. ~ Daniel Barron III, Deepwater Horizon disaster survivor

There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. ~ Milton Friedmand

The Decimation of the Marine Seismic Streamer Armada (16-March-2016)

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Content Revised 13 November 2013 by Request of Company to Remove their Named Reference

What is the Future of Marine Seismic Streamer Acquisition?

The history of life is a tale of decimation and later stabilization of few surviving anatomies, not a story of steady expansion and progress. ~ Stephen Jay Gould

Capitalism without bankruptcy is like Christianity without hell. ~ Frank Borman

Last year (5-May-2015) I wrote an article on LinkedIn Pulse™ The Seismic Vessel Over-Capacity Problem to frame the unique issues of the marine seismic streamer sector from the broader oil and gas sector. The article initiated my writing pastime and has been followed by different articles concentrating on this sector where I had worked since 1997 and continue to follow today:

The current O&G downturn is now being compared, in some ways anyhow, to the slump during the 1980s. The marine seismic sector hardly existed in the 1980s. And so this downturn is unique from that perspective. There is a historical correlation between oil price and exploration activity. Through the years that I have worked in the marine seismic sector, since 1997, there have been many technology developments along with companies to provide marine seismic surveys. Marine seismic companies come and go. It is a very competitive business. Marine exploration must deal with weather, currents and tides that create limited time windows of opportunity for data acquisition. In the drive for competitive advantage vessels have been designed to tow more streamers and acquire more data under more extreme environmental conditions in a shorter time span. Time is money and the cost per square kilometers of data acquired is reduced by completing surveys more quickly. But, the standard of what constitutes “good” data has also moved ahead. In a stable supply-demand scenario, vessel availability to accommodate these windows of opportunity is critical. Accommodating these requirements could command a premium. But, vessel over-capacity does not allow for as high a premium. The other issue is that new technology and computing algorithms allow for multiple vessels to acquire proximate to one another and not interfere as much. There is less “time-sharing” required by vessels in the same exploration area so multiple vessels can all work with less down time within these windows. In one of the active areas for marine seismic exploration, offshore Myanmar, three vessel spread records have been made during 2015. However, this mostly means that surveys can be done more quickly with less vessels working. The truth is that there has been a marine seismic streamer vessel capacity problem long before the collapse in oil prices that occurred in the middle of 2014. But, what we have now is declined demand combining with vessel and technology problems that exacerbate the problem. It will be a long 2016 in the marine seismic sector.

Within the previously posted articles I had concentrated on marine seismic streamer pure players, Polarcus, and Dolphin Geophysical (Dolphin) to gauge offshore exploration. Schlumberger’s WesternGeco fleet capacity is significant enough to impact the marine seismic market sector, to be sure. However, because of Schlumberger’s size and operational services diversity, WesternGeco vessel utilization can be more strategic. Schlumberger has several revenue streams beyond the marine seismic streamer sector. This may be one of the reasons that WesternGeco does not broadcast their fleet or report utilization numbers. At the same time, it is a market that WesternGeco competes in. WesternGeco added two new build Amazon class vessels.  CGGVeritas bought Fugro Geoscience and assumed ownership their 3D streamer fleet of vessels in early 2013. After this acquisition the company renamed to CGG. Dolphin had brought in high-capacity charter capacity through Sanco Shipping. Polarcus’ fleet did not add capacity since the decline. There are other players offering 3D seismic that in some ways are even more relevant now. But, the main point to be made is that there was a lot of capacity being added at a time of over-capacity. There likely would have been less cost-efficient vessels taken out of operation once all the new builds and added capacity competed. But, the decline in oil prices and exploration spending expedited the process of attrition.  This is most certain.

The marine seismic streamer fleet has been decimated from its pre-slump count before mid-2014.  If and when conditions do change WesternGeco will be able to reintroduce capacity.  CGG went from operating twenty-two (22) seismic vessels after obtaining Fugro Geoscience to only five vessels targeted by end of Q1 2016. CGG have stacked vessels since announcing their plan for a reduced fleet during 2015. CGG is also embarking on a new diversified business and has stopped reporting vessel utilization statistics. CGGs buying Fugro Geoscience eliminated competition and added newer more efficient vessels into their fleet at the time of growth without the wait time of new builds. They clearly were not the only bullish marine seismic vessel operator. Dolphin saw both its rise and fall in a relatively short time span. Dolphin started in 2010 and in December 2015, parent Dolphin Group ASA filed for bankruptcy in Norway. Liquidation has now began in its Singapore affiliate.  However, Dolphin is still involved in some operations through its other affiliates outside of Norway. In 2011, GEO Expro ran the article, Do We Need Another Seismic Company?  Dolphin grew rapidly and had impressive accomplishments in acquisition. The article reiterates the volatile nature of the marine seismic streamer sector. Polarcus did reduce its fleet after the decline and stacked one of its vessels. Like all the players, marine seismic streamer vessel operators especially have reduced cost, head counts, and sought more capital and better terms to survive.

Change:

Everyone has a plan ’till they get punched in the mouth. ~ Mike Tyson

Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. ~ Peter Drucker

Dolphin’s fleet expansion was in many ways necessary to be a global player. Smaller fleets have the problem of losing money through long steams. One aspect of a uniform fleet is that operators may not have too much opposition to contractors who switch similar, but strategically located, vessels to perform work. However, if the technical specifications differ too much, the entire contract and technical considerations may need to be reviewed for the operator to honor such a switch.

The three principally 3D marine seismic streamer companies that owned/chartered and operated their streamer vessels were generally analyzed in previous articles: Dolphin, Polarcus, and (). There were always caveats to the analysis which ostensibly left out significant capacity. But, it was food for thought, anyhow. It is not really a surprise that one of the three players did not make it through this significant downturn. After all, many marine seismic companies have faded into memory before. While it would have been nice to see the competition of business models and solutions reduce their fleets all in a similar balanced way, the odds, just from a historical perspective, were greatly against such a scenario. Survival has had much more to do with company debt re-structuring and credit instruments to weather the downturn than geophysics, as such. Business is business after all. Dolphin is out, although its previously chartered GC Reiber vessel will be acquiring for a multiclient project (Searcher Seismic).  And WesternGeco will continue to manage a strategic fleet within its more vast O&G service offerings. Most everyone seems reconciled to accept that operator exploration spending will be significantly reduced as the forecast of lower oil prices in prolonged. Speaking generally, operators may put projects out to tender 3 months before acquisition in order to secure vessels are available for their planned projects. When oil prices plunged, some projects were already in the pipeline and had been committed to. As prices continued to remain low and at uncertain levels, planned projects are likely shelved.  For offshore exploration, the exceptions are attached to license commitments.  However, some operators have pulled-out of offshore contracts and taken the loss rather than pursue the expensive offshore projects.  Few, if any, adventurous projects are being considered. O&G operators have piled losses from the steep decline in oil prices and they now have to consider exploration spending very carefully in order to not lose license opportunities, meet current commitments, and reduce exploration risks.

Polarcus will operate five vessels.  What Dolphin demonstrated while it was in operation was an ability to tow wide configurations with fewer streamers, but with wider streamer separations. Polarcus’ fleet is uniformly composed of X-Bow designed vessels. Polarcus recently set the areal largest configuration with 10-streamers at 200 meter streamer separation. For frontier type acquisition certain operators apparently are satisfied with broader spacing and reduced resolution for final imaging. On the other hand, processing algorithms with interpolation can enhance final deliverables. Also, algorithms to isolate / remove source artifacts on shot records allows for longer records being recorded. Such source processing has advanced the standard dual-array source configuration that allowed two (2) subsurface data lines for each streamer (mid-point between source and receiver on streamer) to where three sources can be used creating three (3) subsurface data lines for each streamer. This is another acquisition method that is challenging previous data acquisition and processing techniques.

You can never plan the future by the past. ~ Edmund Burke

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. ~ Sun Tzu

Records are only set if customers are paying for such a configuration. Polarcus set the current record of 10 streamers at 200 meter separation for the largest spread. Using three sources instead of two used for the standard “flip-flop” source acquisition, sub-line data acquisition improved 50%. As for broadband acquisition, the industry answered to the dual sensor broadband with depth-varying hydrophone techniques to eliminate the receiver “ghost” caused when the down-going signal reflected from the air-water interface cancels the up-going signal. The “ghost-notch” is related to the tow depth of a hydrophone only streamer. Better streamer control technology made this possible. In the current climate, operators seem to want to meet their acquisition commitments, but also reduce costs and will look at new acquisition and data processing solutions.

It is important to note that Dolphin could not secure enough work with those vessels in the relatively short time they operated them to turn a corner in profit or efficiency. Polarcus also had impairments as a result of significant financial restructuring. However, their fleet has mostly remained stable enough to find meaning in utilization numbers. No player in the marine seismic streamer sector performed exceptionally well from a shareholder perspective. This is also the case for most O&G companies. When the unexpected happens it can hide bad strategy or simply make good strategy bad for the crisis situation. Also, there is no getting around the fact that expensive new builds will have more difficulty making high margins in a low spending market. What in fact is the value of a $285 million USD vessel purchased when oil traded at over $100 / bbl at this point in time? Who knows? Polarcus stated that they are much stronger since restructuring and have booked work for six months into 2016. Polarcus reiterated significant cost pressures and low tender activity for 2016 at the ABG Sundal Collier Oil Service Conference (10 March 2016).

Finally, for those who have been kind enough to read my articles published through LinkedIn Pulse™, you are likely aware that I am a USA citizen who worked in England. My writing began as an effort to regain my identity from my former employer deliberately undermined me, bullied and defamed me. When I complained, the prescribed process which I was entitled to under employment contract to address these issues was obstructed. For whatever reason, there was a collective effort to make my life miserable and end my career.

Each time that I write a critical article and identify bullies, readers and myself expect some reaction those responsible. It never happens.  When a foreigner complains about workplace bullying, the full wrath of executives befalls them. The last thing that the bullies could have expected is being called-out on their home turf. Nothing has begun because no executive has spoken. And so nothing has finished either.  You cannot separate enterprise culture from performance too long. Toxic organizations have a way of killing their targets and themselves.  They decide what is a “safe” workplace. The same people make all of these decisions. It will be difficult because the foundation and values that inform decisions are not reliable. So, chaotic results are almost expected. When a company decides to take the actor who forged documents in their conspiracy and make him a spokesperson against corruption in the corporate publication, hypocrisy and deceit are limitless. You can hardly trust anything. I don’t anyhow. However, such a climate is tragic for the marine seismic streamer market and the geophysical industry. To a very large extent the recovery of the marine seismic streamer sector is determined by decisions of executives in the principal companies. Honest professional livelihood depends on sound and ethical leadership. It is in the best interest of the industry that decision makers are ethical and sound navigators. And we should not admonish and dispense of true professionals at the expense of retaining a corrupt status quo. After all, it is the integrity and professionalism which gives the industry its credibility to crunch numbers through complex algorithms that create the images and maps that are at its foundation. All but a few want 2016 to end with the moral compass fully engaged and directing the industry forward.

There is no compromise when it comes to corruption. You have to fight it. ~ A. K. Antony

Rather fail with honor than succeed by fraud. ~ Sophocles

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