Marine Seismic Survey

Offshore Oil and Gas Exploration News and Posts

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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

Workplace Bullying is an Agency Problem and Often a Crime (1-February-2016)

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How the Hierarchal Management Paradigm Facilitates Workplace Bullying and Corruption

Qualification: I have no legal credentials and by no means should this article be regarded as though I do. The Agency Problem is being viewed as a layman from a systems thinking perspective. Corruption is always an Agency Problem. Workplace bullying is an undesirable management outcome from the standpoint of the enterprise (i.e., fictitious legal person – corporation). At the same time, the prevalence of workplace bullying indicates it is actually a desired self-interested outcome of certain agents. This conflict between enterprise objective interests and agent self-interests is an Agency Problem (in the view of this author). However, I would be very glad to hear comments about this from compliance and legal professionals, as well as others. – Steven D. Kalavity  

Criminals usually prey on weakness. They can smell it. ~ Steven Seagal

Bullies are always cowards at heart and may be credited with a pretty safe instinct in scenting their prey. ~ Anna Julia Cooper

Most any target of workplace bullying can easily understand how workplace bullying is corrupt and even criminal activity. There is no single legal definition, but an example of a working definition for workplace bullying is conduct that cannot be objectively justified by a reasonable code of conduct, and whose likely or actual cumulative effect is to threaten, undermine, constrain, humiliate or harm another person or their property, reputation, self-esteem, self-confidence or ability to perform. The ability to perform optimally is clearly the domain and primary responsibility of management. Contemporary literature is replete and nearly conclusive that workplace bullying is bad for business performance. Any intentional interference with this crucial and fundamental objective should sound the alarm to any responsible and conscientious enterprise executive management team. Why doesn’t it? Workplace bullying has been designated the silent epidemic, as it negatively impacts workplaces in every sector of the global economy. This reality points to a conclusion that workplace bullying is a byproduct of the prevalent corrupted hierarchal-authoritative management paradigm where agency actual authority is too often misused. Enterprise governance policy and procedures establish the processes of how decisions are supposed to be made. Every decision is a risk and so the process and constraints which form the decision-making processes define outcome, as well as the enterprise business culture itself. In the article, What Was Volkswagen Thinking?” , author Jerry Useem concludes that culture is the product of decisions. The prevalent hierarchal management paradigm which concentrates the influence of decisions by virtue of authoritative power of a few, and not policy or process performance, is at the root of many of the ills that infect the workplace, such as corruption, fraud, and workplace violence. Similarly, workplace bullying is an Agency Problem whereby agents act beyond their actual defined and prescribed authority contrary to the best interests of the enterprise. Further, workplace bullying is an Agency Problem especially in hierarchal systems with multiple agents assumed to be acting in the best interests of the enterprise. With disproportionate actual authoritative power comes disproportionate levels of responsibility. Workplace bullying is not an individual agent problem. It is a regime or group problem at the very least starting where authoritative decision-making power is most concentrated. In corrupt enterprises, internal governance is ineffectual and therefore toxic behavior becomes epidemic without external constraints imposed (i.e., laws/regulation). Fair markets are predicated on all players playing by the same rules. As with the Butterfly Effect, a single mishandled breach can become a tsunami of enterprise corruption that impacts many interrelated market sectors.

Those opposed to legislation against workplace bullying believe that laws to address workplace bullying directly would undermine business operations. Workplace bullying would need to be well defined, and even then could invite legal or tort claims which could hamper business and the broader free-market ideal. The prevailing view is that business enterprises should be free to define internally – within the scope of the business entity – how products and services are delivered through the enterprises management of resources. Thus, to a very large extent, enterprises tend to be self-governing. The presumption is that the enterprise will properly govern their internal practices. But, this presumption is very often false. Simply, while it is the principal task and responsibility of executive management to make certain that resources are utilized according to defined policy and processes, management is seldom held accountable to such specific measures. Without such a basis, how is the difference between good management and bad management even determined? Most often good management or bad management is arbitrarily decided or tied to enterprise share value performance, rather than the analysis of the processes that actually deliver share value. The primary measure of performance should be based on the adherence and analysis of corporate governance policy and procedures. And then the only way to validate such performance is through well thought out measures and analysis. Otherwise, looking at only the points on the board without understanding the rules and objectives of the game is ludicrous. Executive management establishes the policy, processes, and resource allocation required to deliver its products and services to market within compliance to internal governance and external laws. This is the main role of corporate management. How well enterprises manage these interrelated functions is the baseline to profitability in a fair and free market, and not an aside.

A principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf. A corporation is a fictitious legal person. In a principal-agent relationship, agents, such as key executives, are to act on behalf of the corporate enterprise. Agents should not have a conflict of interest with the principal in carrying out their duties. The problem of motivating the agent to act on behalf of the principal is known as an Agency Problem. Agency Problems arise when the incentives between the agent and the principal are not perfectly aligned and conflicts of interest arise. In the corporate agent arrangement self-interests can become in conflict with the policy and principles of the fictitious legal person. The definition of corruption is the abuse of entrusted power. The great fallacy that guides many enterprise agents (high-level executives especially) is that their decision making authority is bounded only by their hierarchal position in respect to the organization. However, their actual authority is vested through corporate charter which is tied to local legal requirements in addition to internal governance policy and procedures. Internal governance and compliance programs do not work for corrupted regimes for the simple reason that self-interested authoritative power is not inclined to impeach their own authoritatively derived decisions. Authoritative power also has the ability to surround themselves with those who they like and comply with and support their own self-interests. Without a verifiable and stable process to gauge performance, performance becomes just a popularity contest decided by those with authoritative power. (“Performance” can be correlated most closely to the relationship between the appraised and the appraiser.) Targets of workplace bullying are vulnerable in such regimes because decisions are allowed to be driven by self-interests and not the actual power vested to them through their agency. This concept manifest itself in devices such as the annual performance appraisal given to for employees. The systems perspective which relies on process control and analysis applies to quality management, and is also applicable to enterprise governance.

Quality guru W. Edward Deming admonished annual performance appraisals categorically, calling such practices a deadly disease for enterprises. Deming studied organizations as a system to be optimized for performance. Deming constructed the Red Bead Experiment which clearly demonstrated several points about bad management practices. Through the use of statistical theory, Deming showed that worker performance was constrained by the system comprised of the physical environment, psychological environment, and of course the processes and interaction of human and non-human resources. Time after time it was shown in real-time that undesired outcome could be attributed to the system 85-99+% of the time and the remainder could be attributed to the employee. However, many organizations punish certain employees instead improving management and the system. This is management by fear, which is a derivative of the misuse of position. It is irrational and biased decision-making with no verifiable basis. It causes chaos in enterprises with its associated unpredictable outcome. It is the no-win situation that too many targets of workplace bullying are placed in. Management is supposed to be improving the production of goods and services through their understanding of the system and processes. This is their fundamental responsibility through their agency and actual authoritative power. Performance management is most often employee focused and not system focused. As such, performance management is very susceptible to the influences of corrupted authoritative power which is subjectively biased with self-interest above enterprise interest. This relates to workplace bullying directly because performance is the ruse often used to facilitate a targets exit. As written in previous posts, the ambush meeting (as described by Dr. Gary Namie, Researcher and Founder of the Workplace Bullying Institute) is the nefarious mechanism used by workplace bullies to expedite a targets exit. Note, workplace bullies are not individuals. They are regimes that cooperate for the regimes interests above the enterprise interests. The intention of the workplace bully is to force the target out of their job. Performance is a legal justification to terminate employment in most jurisdictions. But, performance must be fairly qualified somehow. It seldom is. Too often the only qualification of performance is the subjective edict of the supervisor. In corrupt systems with little process control it is almost certain that performance is not adequately measured or reasonably ascertained. This is especially true of knowledge work. Progressive organizations have finally started to abandon these destructive devices of misused authority driving  “performance” decisions.

Fighting means you could lose. Bullying means you can’t. A bully wants to beat somebody; he doesn’t want to fight somebody. ~ Andrew Vachss

A bad system will beat a good person every time. ~ W. Edwards Deming

Workplace bullying has often been an issue handled (incorrectly, yet by design) through enterprise human resources (HR) functions. As the WBI video states, a high level representative from HR is usually present at the all too common ambush meeting. In this respect, again, regimes cooperate to bypass reasonable practices, and use intimidation and surprise to exercise their abuse of position. HR operates at the behest of senior executives whose collective decisions form the enterprise culture. The prevalent use of this workplace bully tactic also indicates that it is an intentional debasement, as it most likely is not a documented or authorized enterprise procedure. The cooperation of agents to misuse their authoritative position could also be called a conspiracy. This practice of the ambush meeting seems to be allowed and exercised by too many enterprise executives. It is a product of a hierarchal paradigm that allows self-interested decision-making to trump agency authorized decision-making processes. It is then corruption and a form of conspiracy to defraud. Beyond this, workplace bullying is also recognized as a form of psychological violence. What else can one call such an unreasonable surprise tactic in a workplace? Again, such intentional tactics are used to destabilize and distress targets. Going back to the provided definition, workplace bullying is conduct that cannot be objectively justified by a reasonable code of conduct. The ambush meeting represents the culmination of working in a corruptly managed environment. Such an intentionally abusive work environment causes distress as well as a variety of physical effects. Targets of workplace bullying can suffer chronic fatigue syndrome, anxiety, lowered resistance and increased susceptibility to colds, flu, fever and viruses. Workplace bully targets have reported high blood pressure, migraine headaches, back ache, chest pains, hormone disturbances, physical numbness, irritable bowel syndrome, thyroid problems, skin irritations and ulcers. Targets of workplace bullying have a greater risk of heart disease. Vindictive workplace bullies – of which there are many – who evict targets from their current employment also impact future job opportunities. Whistle-blowers are routinely bullied out their careers. Workplace bullying exacts a physical, mental, and financial toll on targets and it is perpetrated by corrupt authoritative power which mistreats employees, and rejects enterprise policy and procedures out of self-interest. It should be a crime, but it must also in all cases be an Agency Problem. Corrupt and toxic enterprise cultures are a product of decisions. There needs to be a change in how decisions are allowed to be made.

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Enterprise governance compliance officers are familiar with the Fraud Triangle. The first problem with internal compliance officers is that they are vested and empowered by the regime. While their agency is to uphold internal compliance and not protect management malfeasance, there is often self-interest in play which affect their decisions. In fact, the abuse of position is a category of fraud. The Fraud Triangle can also be called the Wrong-doing Triangle (in this article, anyhow). Again, corruption is always an Agency Problem. For an employee (agent) to do the wrong thing three elements must exists together: motivation, rationalization, and opportunity. These three components are the legs of the Wrong-doing Triangle. The system controls all of these to some extent, but especially opportunity. Executive management, those with the required level of decision making authority, control the performance environment through its resource allocation and use. The Wrong-Doing Triangle can also describe how faulty products or services are output from the system. A quality management system or safety management systems constrains outcomes by reducing or removing the opportunity for the undesirable outcome. This is reducing the risk of undesirable outcomes from the system. This is the same objective for corporate governance compliance systems. There is always a cost-benefit equation to performance which induces employees to take shortcuts which can impact quality and safety outcomes. Ideally, the easiest and most efficient way of doing something should be incorporated into the process and avenues to not follow the process should be more difficult and less efficient. If the likelihood of agents being caught and disciplined were significantly high enough, then compliance programs would be much more successful. Overlooking management failure to abide by policy and procedures, carry out thorough investigations, and otherwise execute governance policy fairly and indiscriminately is either negligence or corruption, but it’s always an Agency Problem. Agents are improperly allowed to make decisions with perceived authority that oversteps the bounds of their actual authority. An agent’s actual authority is legally constrained by enterprise charter, policies, procedures, and local laws and not share value.  The United States of America was formed from understanding the many problems of tyrannical rule. The tendency for authoritative power to become corrupt was also well known.  The abuse of concentrated power was the basis from which the new country created a democratic system which divided power into three branches of government.

It won’t do away with hierarchy totally, but the principal leader will be the person who most exemplifies the kind of organization and behavior required who is best able to create the conditions such organizations require. ~ Dee Hock

Because power corrupts, society’s demands for moral authority and character increase as the importance of the position increases. ~ John Adams

Concentrated hierarchical based organizations not only debases the democratic and free-market ideals, they contribute to the disparity of wealth and the decrease in productivity of the enterprises which they command. Corporate senior executives are the elite in terms of pay and authoritative power. But, they are too often only held accountable to investors. This is a false measure. Simply put, enterprise governance compliance is not a priority to corrupt and abusive regimes and it never has been. Self-interested authoritative power always trumps benign enterprise ideology. And actually, we have a good idea why.   Following the atrocities of World War II the world wondered what conditions would allow normal people to support such horrific abuse of fellow human beings. In an attempt to answer this question, in 1963 Yale researcher Stanley Milgram conducted experiments that demonstrated that ordinary people are inclined to follow orders given to them by a person with authoritative power, even to the extent of injuring and killing a human being. The Milgram Experiment has been replicated many times in many different countries.   In 1971, the researcher Philip Zimbardo followed Milgram’s study with his famous Stanford Prison Experiment which demonstrated how roles defined behavior. Student subjects were randomly placed into roles as either guard or prisoner. Zimbardo acted as warden and allowed the guards to self-govern as they saw fit, excepting that no physical punishment was permitted. Guards with the authoritative power to collectively determine treatment with few constraints imposed soon began behaving in cruel, dehumanizing and sadistic ways. Prisoners suffered intense psychological stress reactions from obeying the demeaning orders from the guards. At the same time, prisoners also became less compassionate toward one another and complied with the guards. Resisters of the dehumanizing treatment were ostracized by fellow prisoners. The experiment was ended in six days. Follow-up studies have concluded that the constraints imposed by the authoritative power in the onset of the experiment can affect results. Said another way, as a systems thinker, established controls and constraints effect outcome.

Enterprises are abstract legal persons operated by many self-interested agents. As the enterprise extent and diversity expands, the odds of aligning these varied interests with those of the legal entity without strong external constraints of the authority that allows their existence is slim. We know this. Leadership defines culture through the action of their decisions. Authoritative power makes decisions and defines what is allowed. It very clearly is projected from where the authoritative decision-making power is most concentrated – at the top of the hierarchy. The decisions made at the top are too often not aligned to the culture described in their corporate responsibility brochures or more importantly within the enterprise bylaws and policies. The reason is really simple and applies to all types of non-compliance, from quality control, safety, and enterprise governance. Outcomes, the measure of performance, must be defined through stable and verifiable processes. Local laws and enterprise process and procedures must always usurp the decision-making process and take it away from self-interested agents who abuse their bestowed trust and authority. Audits and punishments for these regimes must be justified, but be handled external to the enterprise. Breaking the rules of a public trust is a public concern, which is what agency is really about. It should not be so easy and frivolous to breach bylaws and policy for something as innocuous as share value.  The best way to reduce wrong-doing is through developing a system of transparency with routine checks that will reveal the negative outcomes so that processes can be improved. The only real measure of performance is derived from both the appropriate data as well as its appropriate analysis. Agent decisions need to be aligned to processes constrained by local laws and corporate bylaws and policy. An agents legal decision-making authoritative power simply is not authorized beyond this already broad scope. Workplace bullying is an Agency Problem and often a crime because there is no greater self-interest than exercising cruel and health-damaging control through unauthorized power. Internal governance compliance mechanisms are ineffective in most organizations because without external constraints agents are very corruptible. There needs to be external data-based validation to qualify agent decision making. The position on a hierarchal chart cannot mean more than the laws and policies which formed the actual fictitious legal person in the first place. The system should not have the allowance for the abuse of authoritative power built into it. It is no wonder that enterprise wrong-doing is at epidemic levels.  Corrupt and toxic enterprise culture is a product of agency authoritative decision making. We need to change how such decisions are allowed to be made so that they are better aligned with that of the enterprise mandates.

When your values are clear to you, making decisions becomes easier. ~ Roy E. Disney

Whoever fights monsters should see to it that in the process he does not become a monster. ~ Friedrich Nietzsche

Total debt for Dolphin bankruptcies : 6.43 billion – Google Translate (23-January-2016)

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http://maritime.no/nyheter/samlet-gjeld-etter-dolphin-konkursene-643-milliarder/

I did a quick Google Translate from Norwegian to English – Steven Kalavity

The trustee keeps the light on at the Bergen office , to ensure continued operation in the foreign companies . He has the old management and banks lag.

In order to hedge most of Dolphin – estate bankruptcy , banks have transferred assets to a British company , Polar Ship Invest .

The company is owned by GC Rieber Shipping, and controls Dolphins British business, writes Financial newspaper.

Tuesday wrote Maritime.no that Dolphin Group ASA had 1.77 billion in debt, including 900 million in unsecured bonds, when it was opened bankruptcy of the company.

Status in the wholly owned subsidiary Dolphin Geophysical AS, which finishes with itself bankrupt the same day , is even more discouraging.

“The board has stated that the total debt is NOK . 4653217000 , “the ruling said from Oslo City Court .

Together owe Thus mother and daughter 6.43 billion, according to the Board of Directors of the two companies .

– Should ensure values

The amount is many times higher than what the trustee can hope to realize values in bankruptcy estates .

“The court finds that the asset has a value which is substantially lower than the total debt , so the company is insufficiency ,” the ruling said .

Trustee Havard Wiker has not yet overview of the structure of the debt and assets of the company .

– At this stage, the total size of the debt of little importance for our work. We will ensure that no values are lost , he says to Maritime.no .

Turns not light in Bergen

The first days after the bankruptcy , he has used to get overview, negotiate with banks and ensure that no foreign companies to Dolphin to a halt (see facts) .

Dolphin Geophysical AS has about one billion in bank debt , preferably to DNB and SR Bank

Trustee Havard Wiker have – We have agreed to conduct parts of the group continue to keep the wheels turning , and the banks have guaranteed the estate costs. The agreement runs until we agree on nothing else , says Wiker .

The trustee has not turned off the lights at Dolphins offices in Bergen and Oslo .

– The foreign companies to Dolphin is not directly affected by bankruptcies in Norway , but they are influenced by them because they greatly need administrative assistance from Bergen , he said.

The entrepreneur working on for Dolphin

Therefore , he has asked the management of Dolphin continue to run the company .

– We must use the management company to the operational bit. Then our task to supervise them and get information about numbers here , says Wiker .

Thus, among others Erik Hokholt , founder and CFO until Monday this week, still working for the company he was with and listed for exactly five years ago.

– A small group of us have been asked to assist the bankruptcy estate to secure values in Dolphin. This is a very important work with regard to all the creditors here, says Hokholt to Maritime.no.

Seismic equipment may be worth 1/3

Since the Dolphin do not own their ships themselves, the values primarily in the seismic equipment and the seismic library

September 30 this year put Dolphin, according to the latest quarterly report on streamers and other equipment to a new price of 3.38 billion.

The book value was set at 2.23 billion after-downs and amortization.

Analysts Maritime.no’ve talked to, however, estimate that the real value is much lower, because of the low activity in the seismic market.

Estimates range between 850 and 1.75 billion Norwegian kroner.

The boats work continues

The majority of the equipment is still in use in the three GC Rieber carriers, which is still in operation for the company.

According trustee Wiker going ships continue to work until further notice.

More of this? Equal Maritime.no on Facebook!

– We have a contract in Colombia, which we conduct. This has been going on for a while, and it would be foolish to end it.

The latest contract, for nine months in India from November this year, he still has not decided what to do with.

Sure value of seismic library

With banks on teams and equipment in use, raising hopes of avoiding bankruptcy pricing

The second card Dolphin sits with when it comes to values, the multi-client library with seismic data.

This was stated to have a value of $ 164 million, equivalent to 1.43 billion at the previous quarterly reporting.

It was after after the value was written down by approximately NOK 175 million.

Also this record estimates analysts Maritime.no’ve talked to in reality be significantly less worthwhile.

The lowest estimates creeps down to 310 million Norwegian kroner.

Kredittblokkert since last summer

The only certainty about debt in the Dolphin, is that it far exceeds the value.

By the last quarter reporting was the interest bearing debt stated to be approximately 2.2 billion Norwegian kroner.

Last Dolphin raised money in the market, in April this year, by issuing seven million new shares.

Since summer, Dolphins access to borrowed funds in practice, been nonexistent.

Thus there is no reason to believe that the interest-bearing debt has increased particularly since September this year.

Significant intercompany debt

With 2.2 billion in fixed-income, external debt for the group as a whole, and 6.43 billion in debt for the two bankruptcy estates alone, the intercompany debt is estimated to be 4 billion class.

This debt not stated in the quarterly reports, but we take a look at the financial statements for Dolphin Geophysical AS for 2014 makes it clear that the company owed 1.36 billion for the other companies in the group, including the parent company, a year ago.

Multi-Proprietary Marine Seismic (7-December-2015)

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A Business Model for Cooperation and Knowledge Sharing is the Future

Operational excellence remains a greater imperative than most companies and most executives acknowledge ~ Gene Tyndall in Supercharging Supply Chains

Problems are excellent guides to improvement, but only if the real problem is identified. ~ Paraphrased from The Toyota Way to Lean Leadership

For some time now, the initial phase of the geophysical data acquisition and processing value chain has been packaged into two business models: proprietary contract and multi-client. For proprietary contract models, operators are typically directly involved in the different steps of the value creation from designing the survey, specifying objectives, and then being more closely involved in overseeing that their contractual objectives and requirements are satisfied. In proprietary models, license operators own the data. The multi-client business model usually undertakes larger geophysical data acquisition and processing projects and then distributes the costs over time among different customers who wish to make use of the data. In the multi-client model, the service provider owns the data and certain products derived from the data. The marine geophysical data acquisition and processing business space is currently dominated by a variety of multi-client business models which have begun to obscure a clear delineation from proprietary contract business models. Current vessel and equipment capabilities are aligned toward larger survey size to be most resource cost-efficient. In spite of the cost-efficiency of larger surveys on scale, such larger surveys are still expensive in total. The capital commitments for larger surveys point toward a hybrid of these two models driven by license operators more so than seismic service companies. In a multi-proprietary model operators in adjacent or proximate licenses would more closely cooperate and coordinate the planning and parameterization of larger geophysical data acquisition and processing projects outside the direct purview of the seismic service company. Operators would retain data ownership and determine data sharing schemes to improve imaging over the proximate licenses. Operators would then be able to more easily explore and test different data processing solutions than those bundled by single seismic data acquisition and processing companies and deterministically study and compare the stochastic processing results from the variety of service provided solutions through a combined operator tender process.

In large part, the convergence of these business models has been driven by technology and innovations within the multi-client space where different business players highlight their own unique internal capabilities, resources, and processes creating a number of different customer-focused solutions. Products have evolved from different proprietary technologies and algorithms which have created commercial differentiators. However, the predominant catalyst driving these differentiators in the marine seismic streamer sector was the advent of broadband marine seismic streamer data as a commoditized offering. How is this so? Broadband seismic data is desirable for a number of reasons. However, acquiring broadband data in the marine environment had always been encumbered by the loss of frequency which was a product of the signal reflecting back from the air-water interface and cancelling out a frequency band which is dependent on the water depth of the receiver and source. This frequency loss is referred to as ghost-notch. Marine seismic data acquisition involves using a submerged seismic source and streamer cables containing several receiver sensors. To broaden the bandwidth for single-sensor hydrophone data, vertically displaced streamers could measure at different depths. Combining the data would provide broadband data. In ocean-bottom seismic (OBS), multiple-sensors (hydrophone + particle velocity) had been used to provide broadband data. The different sensor types have the ghost-notch in different frequency bands. Through combining the signal of the different sensors, a broadband signal could be recorded. In OBS seismic operations, the sensors remain stationary while the source moves. In seismic streamer operations both the source and sensors move. In 2007, a dual-sensor streamer was introduced commercially for 2D data acquisition projects, followed in 2009 with 3D data acquisition capability. The dual-sensor streamer could record broadband while moving, and this was a step-change technology.

Because of the proprietary nature of the dual-sensor capability, competitors begin developing and offering different depth-varying single-sensor hydrophone seismic data acquisition and processing techniques which also provided broadband data. Improved solid-filled streamers coupled with better streamer control devices made depth-varying streamer acquisition operationally and commercially achievable. The competitive bidding process of proprietary contract work makes it problematic for a service provider to offer a new technology and unique solution. Operators would not be able to require broadband data acquisition in competitive bidding if only one contractor offered it. So, now a variety of broadband acquisition solutions are offered to meet operator broadband data requirements, including different depth-varying techniques, as well as four-component and dual-component streamers developed and offered by the different marine seismic streamer service competitors. The different acquisition techniques to acquire broadband data have leant themselves to a variety of seismic data processing and imaging solutions that address the particular challenges and benefits which each data acquisition methods holds. This competitive environment has led to service providers bundling marine seismic acquisition with their subsequent proprietary data processing and imaging solutions. Algorithmic data processing solutions in different computationally intensive domains, such as Ƭ-p, have also been developed to provide broadband data from single-sensor hydrophones towed at uniform depth adding to the pool of choices for broadband data. Broadband data has become the new normal requirement of operators. Broadband data has become commoditized even though the varieties of broadband data are acquired and processed very differently through black-box proprietary algorithms with little external oversight, especially in the multi-client model.

The only thing that will redeem mankind is cooperation. ~ Bertrand Russell

If you are not willing to risk the unusual, you will have to settle for the ordinary. ~ Jim Rohn

Offshore oil and gas exploration is guided through the administering of agreements over defined areas. The terms of these licensing agreements can vary greatly between countries based on sovereign interests and priorities. Generally, such licensing agreements are entered into through a competitive bidding round whereby individual operators or a consortium of operators agree to meet the objective commitments that the licensor has outlined. Of course, the end objective is to locate and develop offshore oil and gas reserves. Therefore, the terms of the license generally outline requirements over the block which works toward that objective. Geophysical data acquisition is a most usually a requirement. Subsequent exploration drilling is more capital intensive and geophysical data is regarded as primary risk mitigation in the exploration and production of offshore resources value chain. Geophysical seismic exploration dominates the geophysical exploration arena. However, gravity and electromagnetic geophysical technologies are also used in tandem or in addition. Within these broad definitions of seismic, gravity, and electromagnetic exploration techniques, different ways of acquiring data, measuring and processing such data properties have been developed. Therefore, the next great step-change in this value chain will be in the concurrent data processing and shared parameterization between the different methods and datasets into a final consolidated geophysical data volume. (But, this concept will be left for another prose.)

In the depressed oil and gas business sector many seismic exploration projects are only being undertaken because of license requirements which were predetermined during the time that the price for oil was much higher. Many operators are increasingly concerned with meeting their basic license commitments rather than investing in more expensive technologically focused higher-valued solutions. The significant decline in oil price has also deterred investment in offshore licenses. Uncertainty on the licensing terms and conditions, as well as global political and economic volatility has increased investment risks. Against this backdrop of reduced revenues, capital expenditure (CAPEX) has also been reduced by International Oil Companies (IOCs) as well as National Oil Companies (NOCs) with budget cuts being concentrated on exploration spending. Because of this, the sentiment is that frontier exploration in new license blocks will be postponed. The industry seems to be forecasting average Brent crude to be trading between $55-$60 USD/bbl through 2016. Clearly, the minimum capital expenditure for seismic acquisition which meets license requirements is what cash-sensitive operators will be seeking, likely in addition to better terms and conditions respective of the current environment. As time passes, this will likely translate into fewer exploration opportunities driven by licensee commitments with investment being steered toward fewer lower risks opportunities in regions with the most favorable license terms.

Operators are looking to service providers to deliver significant costs savings. However, the marine seismic streamer fleet is likely approaching some of the lowest margins ever, if they have not already been reached. Many marine seismic streamer focused companies have been losing money. Vessel over-capacity has placed significant pressure on the marine seismic streamer sector forcing several fleet reductions since the precipitous decline in oil prices began the middle of 2014. It is generally believed that more reductions are still needed in the global marine seismic streamer fleet to balance the current over-capacity dilemma. A significant benefit to operators has been the fierce competition and variety of innovative solutions available to meet their requirements. Many operators who manage several licenses prefer an environment that provides such variety and consciously award work to different service providers to maintain it. The danger is that one of the marine seismic streamer focused companies will collapse or be taken-over by a competitor. Such an event will reduce capacity, but also reduce solutions with the desired goal to improve pricing levels. This has already played-out with one company taking over charters for Sanco Shipping vessels Sanco Sword and Sanco Swift after financially distressed competitor Dolphin Geophysical (Dolphin) went in default. This has already led to the operators having to award work to a less preferred contractor. An optimistic player has also announced its interest in assuming competitors assets to balance the market. The long-term consequence of losing one of the service providers, as opposed to balancing the vessel-streamer over-capacity is that there will be fewer solutions available to operators in the long-run. Also, competition has demonstrated robust innovation and favorable pricing. Therefore, long-term cost savings to license operators for marine seismic streamer services must come from another avenue.

Because operators have become more familiar with the various solutions offered by the different marine seismic streamer companies, they also understand processes and want to exercise more control over the data. This tendency leans toward a proprietary business model. At the same time, operators will want the advantages of distributed risks and reduced capital investment which traditional multi-client models provide. A hybrid of these models where operators in adjacent or proximate licenses cooperate in the planning and parameterization of larger geophysical data acquisition and processing projects outside the direct purview of the seismic service company is another approach. Operators would retain data ownership and be able to more easily explore different data processing solutions than those bundled by single seismic data acquisition and processing. Larger jobs also help contractors with smaller fleets where global coverage and long transits between smaller jobs quickly reduce profit margins. The dominance, and perhaps over-saturation, of the multi-client model is related to both the novelty of newly developed data acquisition and processing solutions which are tied to proprietary technology and techniques as well as the cost of large surveys. The greatest risk of marine seismic projects – or any commercial venture – is management. This is where the greatest gains and losses are made: through the decisions of management. Assuming control along with the risks is the greatest cost savings, provided good management practices and decisions prevail. Quite simply, the proprietary model affords more direct control over the project outcome by the operator. But, the operator also often assumes more risks (and opportunities) with this control.

Risk is uncertainty. Reducing uncertainty reduces risks through improving the decision making process. The multi-client models great benefit is providing regional as well as operator specific dataset to inform decisions to regional stakeholders. Proprietary datasets are not always shared between operator licensees. However, in many ways, this model of competition which limits cooperation does not match what is known about geology or current exploration and drilling technologies. Country borders and subsequently derived offshore license borders are politically defined entities. The geological formations and reservoirs formed irrespective to these ephemeral borders which are just a blip on the geological time scale. The best decisions would come from sharing information across the borders, especially in the areas of data processing aperture. Further, the depth of current reservoirs and the technologies such as horizontal drilling obfuscate the meaning of such linearly defined borders anyhow. Improved computing capability can better handle larger data volume size. Data imaging will take into account more regional geophysical data, as it does with multi-client models, but parameterization and testing will be reviewed and approved by the cooperating operators. Larger surveys where operator proprietary interests are common would cooperate to commission vessels for longer periods of time and then would have the benefit of scale. It would also provide a certain guarantee to vessel operators. Mobilization and configuration changes would need to be managed, but combining such activities would reduce overall costs of data acquisition and data processing projects. Improved decisions will come from shared knowledge and cooperation. This will optimize the opportunities for intended outcome. The knowledge risk management concept relies on improving knowledge management and knowledge sharing which reduces uncertainty. This in turn affects better decisions. Knowledge sharing translates into communication. Poor communication is given as the number one reason for project failure. Borders, business models, and management systems are created for commercial objectives. It is easier to change the approach to managing these than to change the geology. And this is where the cost-savings and other benefits will come from.

I’m a great believer that any tool that enhances communication has profound effects in terms of how people can learn from each other, and how they can achieve the kind of freedoms that they’re interested in. ~ Bill Gates

The most powerful force ever known on this planet is human cooperation – a force for construction and destruction. ~ Jonathan Haidt 

Oil, IS and Why I have No Fear of Muslims (30-November-2015)

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What Being a U.S.A. Citizen Working in Seismic Exploration and Living Overseas has Taught Me about Culture and Tolerance

 

When religion and politics travel in the same cart, the riders believe nothing can stand in their way. ~ Frank Herbert, Dune

I am a Buddhist and I believe in praying. But humans have created this problem, and now we are asking God to solve it. ~ Dalai Lama

Most understand the significance of petroleum and its connection to politics and the running of the modern world’s economies.  Perhaps fewer comprehend its impact on the regional culture and environment.  The “spice” Melange, which is regarded by many as a metaphor for oil in author Frank Herbert’s science-fiction novel Dune, was at the center of galactic commerce and conflict.  Frontiers of oil exploration very often coincide with areas of international geopolitical and cultural tension and dispute.  On earth, one of the oldest petroleum industries started in Burma – current Myanmar – which exported crude oil as early as 1853.  In the current depressed petroleum-economic climate, there is on-going seismic exploration offshore Myanmar.  The previously reclusive and sanctioned government of Myanmar has further opened-up to international business by signing deals with foreign energy companies for exploration.  When I had visited Yangon years before, the U.S. Embassy was closed and protected by a wall.  U.S. visitors were told to go to the nearby U.K. Embassy for any problems.  I visited the old city of Bagan and took a trip down the Irrawaddy River and it was wonderful experience as a tourist.  I am living just south of the Myanmar border in Thailand these days.  The geographic region “Burma” had separated from India in 1935, but was still under the control of the British Empire.  Japan’s interest in the region during the onset of WWII was for raw materials and rail transport into China.  The modern name, Myanmar, reflects the rejection of the colonial naming which referenced the regional dominant culture.  Myanmar still struggles for its own cultural identity apart from the Indians who streamed into Burma to aid and support the building of the new colony, as well as the British, Chinese and other dominant National influences.

Myanmar’s neighbor, Thailand, proudly exists as a political anomaly in the region.  Thailand was never formally colonized by European powers.  Prior to colonization of its neighbors, the political map was defined historically through a series of invasions and retreats of the different regional kingdoms.  The Theravada Buddhists religious influence is apparent in the many temples that dawn the landscape.  Near the borders and away from influences of the dominant regional language and culture, Hill Tribes wear different fashion, speak different languages and traditionally practice a version of Animism, but also get the attention now of both Christian and Muslim missionaries in addition to the Buddhists.  This cultural anecdote has been played over time on every continent.  A dominant foreign culture overshadows the regional cultural textures and differences of the indigenous peoples.  Within these textures are the established rivalries and alliances which existed long before.  They seem not to exist when viewed casually from a safe cultural distance that ignores the colored histories and instead supplants a new normalcy.  Thailand has assimilated to become a destination for tourists where Western culture and franchises blend with the traditional culture.  Myanmar had resisted such a blend.  Thailand’s King Mongkut (Rama IV) is highly regarded as a wise leader who bargained to learn the language and customs of Great Britain, while retaining national sovereignty.  This leader and his accomplishments have been reduced to a man who learned such sensibilities from a woman who was hired to teach English to his Court.  Anna and the King of Siam, a semi-historical version of this history has been written by the teacher, Anna Leonowens.  However, that an English woman was involved in the Kingly business of Siam – now Thailand – is rejected and the story, along with its several adaptations, is rejected by the Thai people.  Sometimes dominant cultures overlook the histories before their influence changed the cultural landscape.

While working within the marine seismic business over the years, I have lived and worked in many places which were considered dangerous.  Perhaps my wanderlust and curiosity provided me with a halo such that I never really felt too much in danger.  My first overseas offshore assignment took me to the United Arab Emirates, Abu Dhabi.  Abu Dhabi is an Emirate which recognizes Islam as the official State religion, and the calls to prayer throughout the day remind everyone of this.  Because of visa issues, the vessel crew had 3-5 day stays in the city prior to boarding the vessel and working on the project.  The Company did place some restrictions on activities during the waiting period, but there was still the opportunity to get to know the city a little.  The large project offshore Abu Dhabi lasted quite a long time, and at some point I required an update on my offshore safety certificates.  The extended stay in Abu Dhabi allowed me the time to take the courses there.  My co-workers did not need courses and so I took the course outside the group.   As it happened, the course was almost canceled because of low attendance.  But, as there were two us who could share and practice the lessons together, the course continued.  My classmate was an Iranian.   There was little time to speak of politics or religion.  We did not really consider any problems beyond cooperating to solve the practiced offshore safety lesson requirements.  An American (USA) and Iranian were the only two class participants.  We both successfully completed the course only through working together.  Neither of us could have completed the course alone.  In our daily work lives we mostly need to concentrate and cooperate on the immediate issues at hand, and as interesting and significant as politics and religion is to one’s personal lives, their consideration while working is minimal while navigating and processing shot-point data.  I had different onshore assignment processing seismic data at the office in Abu Dhabi where I also interacted with a variety of Nationalities and religions.

I had just arrived to Da Lat, Viet Nam and had wandered into a coffee shop when I was told that the World Trade Center buildings in New York, U.S. had been destroyed along with the Pentagon building! The coffee shop staff had recognized that I was an American (U.S.).  I was in disbelief.  Probably for the first time during my travels abroad, I actually took a taxi specifically to find an internet café as soon as possible to learn more details.  While this was my first visit to Da Lat, I had traveled through Viet Nam before during my time off the vessels.  Throughout my journeys to the different tourist exhibits on prior trips, I had experienced the sobering encounter with the U.S. – my country – history of its past military adventures within that country from their perspectives.  I had seen many photos and displays of equipment and destruction, and visited arrays of tunnels dug during the conflict.  The Viet Nam people – at least through the government tourist sites – seemed to separate the people of the U.S. from its government.  Many seemed to have forgiven the U.S. adventures.  President Clinton had visited and there was hope for the future of Viet Nam re-entering the family of nations for trade and tourism.  The people of Viet Nam were generally concerned and sympathetic toward me and the loss to the USA on 9-11, while at the same time vivid memories were preserved of a less-than-gentle past.

I was working offshore Saudi Arabia near the border with Kuwait when there was the build-up and preparation for military action in Iraq which followed 9-11.  The seismic and support vessels had to pass by several naval vessels – hospital and support ships – on the way to the survey site.  Some of the crew had opted out of that assignment and did not make it to this project rotation.  Military aircraft were seen and heard flying above.  There had been a series of conditions that were put in place to determine whether the project work would even continue.  Whether or not the action was affirmed, or other military activity which escalated the dangers to crew defined the criteria of whether the survey would be completed.  Many of the conditions were in fact violated with the risks being re-evaluated and conditions reset.  Many of the crew were upset, but the rotation completed.  Travel onshore within the country was monitored and secured for the mostly Western crew.  While on the vessels, I worked among individuals from many different countries with different religions, including Islam.  Muslims were co-workers, vessel crew, client representatives, and clients themselves.  The projects were purposed to provide seismic maps to locate oil and gas reserves, and not to hash-out international relations beyond cooperating to complete the project.  Nevertheless, it would have been impossible to ignore the political environment and ramifications surrounding that geophysical survey project especially.

There are two traditions in Northern Ireland. There are two main religious denominations. But there is only one true moral denomination. And it wants peace. ~ David Trimble

Local content carries an expansive meaning, but within the oil and gas industry it is generally recognized as an intervention by a national government aimed at ensuring that the majority of the goods and services required at each stage of the oil and gas value chain are locally supplied. ~ Jubilee Easo and Angela Wallace

On the way to one of my first rotation assignments onshore in Luanda, Angola, the flight was delayed en route (for lack of fuel, of all things), and so there was some chance to get to know other passengers beyond those seated nearby on the plane.  I met South African “miners” who were also delayed.  Not thinking too much beyond simple pleasantries, I assumed they too were involved in mineral exploration of a different sort.  But, these “miners” were on their way to Angola missioned to find undetonated munitions from the long civil war which finally ended in 2002.  Angola had become a Cold War battlefield for over 26 years.  Security for foreign workers was an important consideration given the history.  As a geophysicist and former backpacker who had trekked through many countries, I never felt any danger.  The Luanda seismic data processing center was a friendly mix of Irish, Dutch, Italian, Egyptian, Greek, English, and myself, U.S.A., amongst the Angolan hosts.  The most tension that I ever felt around me while in Angola was during the World Cup competition.  I never really engaged in political discussions while working within the country.  On the other hand, the level of my Portuguese challenged complicated conversation of any local topic.  However, Angola, with its rapid rise as a significant oil producer on the African continent, has not diversified its economy so much and so the drop in oil prices has had an impact.  The office dynamic in Lagos, Nigeria was similarly filled with diversity.  In addition to the international diversity, the office also included Christian and Muslim Nigerians cooperating and working together.  Foreign companies who want contracts for work within both Angola and Nigeria do so under the agreement to provide “local content” or in other words train, develop, and employ people and businesses from the local culture.  Countries now do not want to be culturally dominated and overwhelmed by foreign interests above their own National interests and fend off complete corporate colonization.

Following many rotation assignments on vessels and in West Africa, my first “stationary” assignment was at a seismic data processing center in Kuala Lumpur (KL), Malaysia.  The Petronas Towers is an indicator of the significance of the petroleum industry to Malaysia.  KL is a very culturally diverse city.  While the majority of Malaysians are Muslims, many cultures and religions are officially recognized.  There are more public holiday’s there than any other country where I had worked.  Although, European Union membership mandates a mandatory five-week holiday schedule.  The blend of Asian and Western influence is felt throughout the city.  Like so many countries, including the U.S., one of Malaysia’s celebration days is for when they gained their independence from Great Britain.  The other public holiday’s honor Islam, Chinese, and India traditions.  KL hosts a truly global workforce, many from the oil and gas sector.  As a U.S. citizen, I understood that the hosts in the countries where I worked had different political views from that of the government of the U.S., especially concerning some of the anti-Islamic rhetoric which was a back-drop to the U.S. – my country of citizenship – led invasions of predominantly Islamic dominated countries.  But, just as in Viet Nam, people separate national leadership ideology from that of their citizens.  Perhaps it is because within most countries, citizens deal with the textured differences which are part of their local and national political experience outside the dominant culture.  And this is what one can learn when they place themselves apart from the hegemonic perspective.

It seems too often that people pretend amiability on the big things outside because it is easier than dealing with acrimony in the small differences within.  The ideals of the U.S., through its Constitution, profess religious freedom and tolerance.  While Christianity is the numerically largest classified religion within the U.S., there are hundreds of denominations – types – of Christianity with their own churches which populate every city. Each denomination professes its own unique interpretation of the Gospel and The Holy Bible.  Some interpretations are much different from others, to the extent that within the U.S. and abroad some denominations that also identify as Christian may not consider the others Christian at all!  All U.S. religions are then layered over indigenous beliefs.  In fact, to the extent that Islam honors Jesus as a prophet born of the similarly highly regarded virgin mother, some practicing denominations of Islam on the other side of the world may be closer ideologically, in many significant ways, to one’s own beliefs than those professed by the church across the street.   And of course, the U.S. also is home to a vast population who originned from many different countries and/or who practiced many different non-Christian religions.  And then there are the textures beyond religious affiliation.  Sentiments and resentments from the U.S. War between the Northern and Southern States or Civil War, persists over 150 years from when it was finished.  There are two main political parties, Republicans and Democrats, which compete to hold power within the country.  The Republicans are Conservative, whereas the Democrats are Progressive.  Some profess the balance of power which is derived from States Rights, while another may say it comes from the Central – Federal Government.  These are the textures within the dominant culture (and military) on the globe.  The stated foreign and domestic political strategy and objectives of each party are much different, while the elections which determine which policies prevail may be numerically very close.  And the truth is that every country or religion has a diversity expanding from its own central or professed ideology which intersects and diverges through the cultures which surround it.  And this is why one should have no fear of Muslims.  There is no ubiquitous Islam in the same way that there is no ubiquitous Christian.  These are but surface identifiers which cover textured layers of diversity.  The points of contention are in the details.

Identifiers not attached to actions espoused in the ideology should not count for too much.  If one identifies as a Christian, then certain emulation of the actions of Jesus Christ is expected, not necessarily the wearing of a cross necklace or tattoo.  There are many proclaimed Christians incarcerated for violent non-Christian actions.  The infamous corporate swindler Enron professed core values of Communication, Respect, and Integrity.  Yet, Enron’s own CEO Jeffrey Skilling was convicted on not abiding by those values, amongst other things.  Self-proclaimed identifiers are just that.  I have lived and worked amongst many Muslims and have been treated respectfully and ethically.  I can say the same about Christians, Hindus, and Buddhists.  I have worked within countries whose political history and ideology more closely identifies with the U.S. and for corporate entities espousing lofty ideals, and yet I have been treated horribly.  IS and Al Queda both self-identify as Muslims.  Both denounce U.S. politics, militarism, and culture.  However, underneath the identifier “Muslim”, IS and Al Queda disagree ideologically in several significant ways.  And what does this tell us?  It tells us that identifying and labelling by a broad brush of religious affiliation tells us very little about the individuals or groups culture, beliefs and motivators similar to identifying an individual or group as “Christian”, “Hindu” or “Buddhist”.  It is a shiny easy to spot veneer covering a complex conglomerate of different textures.  But, both the significant problems as well as their solutions exist below that veneer.  There may be many points of disagreement, just as there are many points of commonality.  Without understanding this, a solution or point of agreement for some may differ significantly from others with the same religious affiliation.

Oil reservoirs form below in the subsurface rock formations and trespass the geographic political borders above them.  Oil is also a global commodity for energy production and economic growth.   Because of this, oil and gas exploration becomes not only dependent on the interpretation of geological intricacies which encase the commodity, but more so on the political and cultural environment which define and govern its exploration and exploitation.  More and more nations want sovereignty and control over the development and access to this resource.  An animosity or fear of Muslims is foolish and counterproductive for those involved in oil exploration and production.  Muslims occupy the political space.  The regional and cultural tensions within the political borders of countries such as Nigeria illustrate this.  Nigeria militant group Boko Haram, which translates to English as Western education is forbidden, originally affiliated itself with Al Queda.  However, recently Boko Haram pledged allegiance to the Islamic State (IS).  This is significant because it underscores the ideological and objective differences between the two Islamic groups.  Both Islam aligned groups oppose Western ideology, but also oppose each other because their interpretations of Islam are unique.  Such differences complicate situations in Syria, for instance, where there are no clear or congruent policies which coincide with Western dominated interests.  Both Islamic groups partially fund their activities through the theft of oil in the regions of conflict.  If Western countries conflate Islam through combining both Al Queda and IS as the same Islam when they clearly are not, then more moderate Muslims who wish to be part of the global community are left with little alternative than to stand against such overly simplistic rhetoric.  What is lost with poor generalization is the many textures and differences within Islam.  The West should understand such generalizations simply through reviewing their tumultuous histories of challenging dominant Christian denominations to form their own.  I have no fear of Muslims or Islam because such emotion is too general and rebuts personal experience.  Like oil exploration, the difference is in better understanding the details.  Let’s not forget that.

Those who say religion has nothing to do with politics do not know what religion is. ~ Mahatma Gandhi

We tend to become like the worst in those we oppose. ~ Frank Herbert

3D Marine Seismic and the Problem with Vessel Efficiency (9-November-2015)

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

Seeing Green in a Sea of 3D Marine Seismic Blues

Volatility may be rising simply because investors must digest more information every day. ~ Alex Berenson

However beautiful the strategy, you should occasionally look at the results. ~ Winston Churchill

Marine 3D Seismic company Polarcus “threaded the needle.”  In difficult market conditions combining 3D vessel over-capacity, low oil prices and anticipation of subsequent reduced exploration spending, Polarcus delivered strong vessel utilization and profit.  How did Polarcus pull it off?  Polarcus’ relatively new CEO, Rod Starr, is clearly a big part of the reason.  He was recruited from TGS-Nopec and began his tenure with Polarcus only last February 2015.  So, kudos to him and his team.  The industry is most likely both impressed and envious of Polarcus’ performance following marine seismic 3D streamer competitor’s earnings meetings for Q3 2015.  Dolphin, performed with negative earnings and were having difficulties meeting the terms for the chartered vessels which allowed Sanco to pursue other agreements.  In another move, Dolphin is evaluating the possible sale of their multiclient library to generate much needed capital.  CGG announced that they would further reduce their fleet to five vessels, down from nine (9), and would reduce personnel by an additional 13%.  CGG’s joint-venture Seabed GeoSolutions performed positively.  CGG will reorganize and reduce their interest in contract acquisition and concentrate on high value multiclient projects.  CGG in their transition process will move away from its emphasis as a seismic acquisition company to becoming an integrated geoscience company.

Even Polarcus’ Starr seemed cautiously optimistic about the future, recognizing that duplicating or surpassing Q3 2015 performance would be challenging, at least in the near-term.  Most marine seismic acquisition companies are recognizing the reality of a prolonged downturn in exploration spending which will continue to severally impact the marine seismic sector.  At the end of Q2 2015 there was a belief that there were about 7-8 (12-streamer) vessels over-capacity in the depressed 3D acquisition market.  Even with the announced reductions there will still be over-capacity, based on earlier predictions, as conditions have continued to head south for the overall O & G industry.  This has made Polarcus’ accomplishment just that much more remarkable.  There is substantial uncertainty in the marine seismic sector.  Right now, the industry’s top executives seem to be investing a lot time and energy in negotiations with financers to subcontractors to arrange better terms which will help them weather the current storm.  With so much volatility, there is virtually no way to predict outcome with any meaningful precision.  Organizations that have a good understanding of their fundamental processes and expected outcomes will be better equipped to navigate these uncertainties.  But, with so many additional changes of personnel and equipment, along with the deteriorating market conditions, there is always increased risks exposure due to the changes made surrounded by such turbulence.

Marine 3D seismic streamer acquisition companies figured out some time ago that towing more streamers would reduce data acquisition time and operational and commercial risk exposure.  By this conventional wisdom, it was reasoned that towing capacity improved efficiency and would reduce the overall project cost.  This is only true to a point.  Investor’s, especially, are interested in knowing what the prevailing day rates for operational seismic vessels are.  Day rates are contingent on many factors, from regional geology and project objectives, geographic location, logistical infrastructure, environmental concerns, and non-seismic maritime activities, to name a few.  All of the fore-mentioned aspects of any project can vary significantly and impact the day rate.  Marine seismic company presenters are unable to answer the “day rate” question simply because it is the variation of project objectives and risks which determine the value of the day rates.  What perhaps is better understood is the vessel cost base.  For instance, charter terms and loan payments are more fixed.  Fixed expenses are predictable.  However, many seismic companies have been visiting investors, banks and lenders to try to renegotiate these terms.  Every home budgeter understands that when expenses exceed income measures need to be taken because such a situation is unsustainable in the long term.  So, the effort is being made to keep expenses down to address the lower spending levels of customers.  Even the vessel cost base is in flux when such term negotiations are in play.  However, there are covenant restrictions which also need to be considered along with renegotiating terms.

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

Dominant companies have a special responsibility to ensure that the way they do business doesn’t prevent competition… and does not harm consumers and innovation. ~ Mario Monti

Vessel towing capacity is really only a money maker for seismic companies if it is used and paid for.  There are conditions where there are time-windows when marine seismic acquisition can be carried-out, such as in the North Sea.  When vessels are in short supply and their also is a time window for data acquisition, high tow-capacity vessels can address these concerns and command a higher day rate due to the value of saving time, which can translate into saving money.  But, this is also dependent on the day rate which is influenced by the daily cost base of the operating vessel.  Also, not every contract is priced as a day rate.  Many are priced on an area rate, such as square kilometer rate, for example.  Most contracts have provisions for non-productive time, such as acquisition delays due to bad weather or cetacean migrations, as additional examples.  How such additional costs are distributed also impacts the overall project profitability.  The reality is that even with a relatively high day rate, if a project is completed without another project for the vessel to go to, the daily cost base expense accumulates.  This is why vessel utilization is so important.  Overall profitability is dependent on keeping the vessels busy.  Vessels without projects planned for them lose significant money.  It is cheaper to stack the vessels than to maintain and operate them without a project.  If the vessel cost base is lower, then the customer day rate will also be reduced.

With abundant vessel capacity, offshore license operator companies with seismic streamer data acquisition project requirements now have broader time windows to complete their surveys.  There is less pressure to complete the survey within a time window because enough vessels are not attached to projects.  As long as a lower streamer capacity vessel can complete the survey within the time window, as well as keep its rates per square kilometer lower, vessels with less towing capacity can win work.  If a 12-streamer vessel rate is less than 2/3 the rate of a 16-streamer vessel, for instance, then the two are competitive, bearing in mind the additional risk exposure which may be handled within the contract terms.  Cost pressure may devalue seismic data acquisition and data processing differentiators as well.  If the newer and more expensive higher-end capacity vessels cannot command a premium rate for efficiency, then they lose much of their competitive advantage.   In an over-capacity market, it is vessel utilization which holds the trump card, not towing efficiency.  Finishing work for a paying client with no immediate project to go to, or a long transit, is expensive, especially for the new builds which were commissioned before the dramatic down-turn in oil prices and exploration spending.

The issue is that cost base is being addressed through better charter or lending terms because margins are low, or maybe even negative.  But, depending on charter or lending terms, each marine streamer vessel has to have a low cost base to be competitive.  If operational cost base is at a very low margin, then idle vessels are essentially money losers and have to be stacked.  Stacking will also reduce future CAPEX because working equipment can be used to service vessels retained for operations.  Polarcus brought up this point during their Q3 2015 presentation.  Other players also mentioned that they will use the streamers and equipment from their stacked vessels to equip the leased Sanco vessels, barring no interruption in that transaction.  Dolphin had recently engaged both RC Greiber and Sanco regarding charter terms for their vessels.  Apparently, Dolphin did not make enough profit for the two Sanco vessels to meet their charter agreement terms.  This allowed Sanco the opportunity to charter.

Everyone – especially Dolphin – can bet that the Sanco vessels were not being chartered for free.  We will see in the coming months as the strategy affects the market.  Vessel efficiency is not needed as much as a low cost base in a sustained over-capacity market.  Even with stacked vessels, there seem to be plenty of vessels available to meet the time windows that projects require, in most cases.  Further, exploration programs are usually planned for months in advance.  The charter terms and other payments which establish the cost base combine with tow-capacity and efficiency to create value.  If there is a large differential in the cost base for higher tow-capacity vessels, then there may be no cost savings from completing projects more quickly for the customer.

It is a double-edged sword.  Vessels that can tow large streamer spreads will finish projects more quickly.  However, unless there is another project in-line to go to, there is no substantive financial benefit from such efficiency to the seismic company.  Transits cost time and fuel.  The ideal scenario is to have large projects proximate to each other which use essentially the same streamer configurations and sources.  Such opportunities are rare.  Polarcus has focused on the fundamentals of a fuel efficient uniform fleet where vessels parity allows more flexibility in switching vessels, if necessary, where vessels are closer to projects.  This reduces transit time without impacting technical specifications and objectives negatively.  This strategy was successful for Q3 2015.  CGG, along with Schlumberger’s WesternGeco will focus more on multiclient projects and value added products.  WesternGeco technology is also being used by Dolphin.  Polarcus is focused and not involved with side-shows.  This will help them for Q4 and beyond.  In a tempest, it is the fundamentals that work best to navigate.  It looks as though the storm will continue several more months.

What’s past is prologue.  ~ William Shakespeare, The Tempest

We sail within a vast sphere, ever drifting in uncertainty, driven from end to end. ~ Blaise Pascal

Not So Fast! A Battle for 3D Marine Seismic Vessel Capacity? (Updated) [28-October-2015]

Content Revised 14 November 2013 by Request of Company to Remove their Named Reference

Another Quick-Look Near-Term Analysis of the 3D Marine Seismic Market

Previous Post:  Big News in 3D Marine Seismic.  Will Less Mean More?

Marine seismic company Dolphin Group (Dolphin) delivered their Q3 2015 earnings on 28 October 2015.  Dolphin mentioned that it had received a notice of time charter termination for two vessels, Sanco Swift and Sanco Sword, from the owner of the vessels, Sanco Shipping AS (Sanco).  While there was no reason given for the announcement by Dolphin, it is speculated that Dolphin was in charter default.  However, it was stated by Dolphin that they had reserved the right to have the cancellation reviewed.  Wait a minute here!  On 23 October 2015 marine seismic sector rival made a surprise announcement during their Q3 2015 earnings release.  I was stated that they had entered into favorable lease terms for both Sanco Swift and Sanco Sword and would be cold stacking to of their older vessels.  This was in addition to the already announced stacking of another older vessel.  So, what is going on?  Dolphin did not provide vessel utilization / allocation percentages for their fleet during Q3 2015, but indicated that their vessel utilization was negatively impacted by operating permits and delayed contract start-up.  However, what can be assumed is that Dolphin experienced revenue generation problems to the extent that it concerned Sanco Shipping AS enough to venture into negotiations to charter vessels to a rival.  Vessel utilization was weighted toward multiclient projects for Dolphin in Q3 2015.

It was stated that the charter agreement entered into with Sanco Shipping AS would be CAPEX neutral by saving maintenance costs on its older vessels.  There are a couple of mysteries regarding these Sanco vessels.  The main question is how a company that cannot keep its current fleet busy was able to take on the Sanco vessels.  When asked about this, the CEO only said, “Now, what I can say is that Sanco came in a position where they had a right to cancel and we took that opportunity.”  More than that is beyond what we can answer that’s a question to Dolphin or Sanco for that matter.”  Of course, the other question is why really would anyone want to add more capacity to their fleet when there is overall 3D streamer vessel over-capacity and they had fairly low vessel utilization, especially in proprietary contract work?

Additionally, while the company postponed delivery of their fourth and final ultra high-capacity vessel until Q1 2017, they are still scheduled to receive the third new build in Q1 2016.  This will leave them with a number of vessels to find work for in a market which many believe will be very soft until 2017.  By their own estimate, there will still be over-capacity in the market even after cold-stacking their vessels. older. And by chartering the additional Sanco vessels they will have more streamer capacity than before the agreement.  The company also stated that their future will be aimed at chartering vessel capacity and not owning vessel capacity.  Not withstanding the fact that they are the only main player still building and adding significant new capacity beyond their new – disputed – charter agreement with Sanco.  Vessel utilization numbers can also be deceptive in a non-uniform fleet with both 2D and 3D vessels.  A more useful percentage would be the streamer utilization.  A primarily 3D company with work for their 2D vessels, but no work for the same number of 3D vessels would provide the same allocation percentage.

I believe that the ambitious company wants to control and dominate the top-end 3D seismic vessel capacity market and knock-out competition.  The Sanco Swift and Sanco Sword are both capable of towing wide streamer arrays matching their new builds.  In fact, under Dolphin management, the Sanco Sword established a tow-width record.  This in spite of the ultra high-capacity vessels much wider back deck than the contested Sanco vessels.  The 16 streamer @ 100 meter separation spreads are also more efficient and cost effective than the older 12 streamer @ 100 meter separation spread capability.  The Sanco vessels compete directly with the new builds and threaten the primacy in wide-tow capability.

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The fact that competitors are both vying for the same Sanco vessels makes for an interesting Q4 2015 and beyond.  There is vessel over-capacity in the 3D marine seismic streamer market.  There will still be over-capacity even with older vessels being cold stacked.  Who loses vessels is now the question.  One company is betting that controlling the upper-end capacity market will put them in a dominant position and that the competition will be forced to deplete their fleets for the weakened market.  It is a gamble.  And it is now more complicated as Dolphin looks prepared to challenge their competitors plans for the Sanco vessels. Exciting Q4 2015, I guess.  Or as it was written in an e-mail to me, “it’s carnage in boat land!”

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