Crosstalk

BY ANDREW McBARNET

B U S I N E S S • P E O P L E • T E C H N O L O G Y

Dividing up the spoils and more

‘Another one bites the dust’ is the irresistible refrain of the 1980 chart-topping song by Queen. It rather sums up the unfortunate sale of ION Geophysical assets in a month that also saw TGS’s surprising move into the seabed seismic operational space. In the light of such significant market disruption, the imponderable questions are what’s next? and indeed who’s next?

But first, a nod to the fateful story of ION Geophysical. A brutal obituary might conclude that it acquired a string of quality assets but failed to convert them into the persuasive integrated offering to the oil industry that successive managements had aimed for. Lack of capital and the fickle seismic services market were undoubtedly contributing factors. Two or three years ago Chris Usher, who in 2019 took over as CEO, was belatedly pushing the ‘One ION’ idea.

Founded in 1968 as Input/Output (changed to ION Geophysical in 2007), it became a public company in 1991 as the unquestioned leading land seismic equipment supplier with its System One acquisition system. In 1995 marine products and vibrator trucks bought from Western Atlas were introduced plus in 1998 the DigiCourse range of streamer control and positioning devices. Around this time it also acquired two land seismic software companies Green Mountain Geophysics and Compuseis and, in 2001, the Pelton line of vibrator control accessories was added. However, the market downturn in 1999/2000 took its toll along with the impact of a declining but competitive land seismic technology market. The company was floundering when Bob Peebler arrived in 2003 to inject new energy although never achieving the integrated solutions he envisaged during the several years he was heading the company. His landmark purchases were Concept Systems, a navigation and positioning software company, and seismic data processor GX Technology. During the Peebler era the company dabbled in truly innovative seabed seismic and cableless land seismic technology but ultimately came up short.

In 2010, ION divested its entire land seismic business to Inova Geophysical, a joint venture between BGP (51%) and

ION (49%), since 2019 fully owned by BGP. The deal included Aram Systems, a rival Canadian manufacturer that had been quite expensively acquired only two years previously. ION’s 2022 bankruptcy effectively exposed how easily its main revenue sectors could be separated and sold off and just how valuable these might be in other hands. In the auction of the spoils, still to be ratified, CGG’s Sercel Sensing and Monitoring division looks to have a winner as successful bidder for ION’s software business. This presumably includes products developed by ION Concept Systems in Edinburgh including Orca, arguably the industry standard in towed-streamer command and control software used on 2D, 3D, high-resolution and multi-vessel seismic programmes. The combination of Orca ‘Around the turn of the and the company’s own SeaPro navigation century the company and positioning offerings will give Sercel a dominant position in the sector. lost its way.’ However, in line with CGG’s ‘Beyond the Core’ diversification strategy, ION’s Marlin software may be the real prize in terms of future potential development. It is said to be the only commercially available marine management system that combines temporal project planning with 3D spatial situational awareness. It integrates AIS, GPS, GIS, MetOcean and visual data between onshore operations, offshore structures and other vessels to create a common operational picture of any given theatre of operations. MarlinPort has been particularly successful in offering better understanding of harbour ship activity from a safety, efficiency and environmental perspective. Over its history ION built up a significant multi-client library. It had considerable success with its BasinSPAN mult-client surveys conducted in many prospective areas using a long offset and depth imaging to 40 km to provide a regional crustal-scale framework of PSTM and PSDM data for basin-scale geological studies, understanding petroleum 3D systems, and basin modelling. Fairfield Geotechnologies beat TGS to win the right to take ION’s US onshore multi-client datasets along with the offshore GulfSPAN and FloridaSPAN datasets. However, TGS is to pick up the rest of

ION’s global offshore multi-client data library consisting of more seabed seismic multi-client surveys more thoroughly without the than 637,000 km of 2D and over 317,000 km2 of 3D multi-client hassle of finding and negotiating an operator for the survey. There seismic data in major offshore petroleum provinces worldwide. are cost benefits in this estimated at between $7 and $9 million

In addition, TGS is buying ION’s well-regarded data process- a year. The strategy also fits with the company’s expectation ing capabilities built on its original GX Technology acquisition 15 of more ‘converted contracts’, meaning fewer potential clients or so years ago. This will enable TGS to significantly enhance the providing higher prefunding but lower sales to cost. processing of its multi-client survey data, but also allow the com- But there is also a lot to be sceptical about. The seismic pany to market more aggressively its data processing capabilities. business has seen so many asset purchases transacted when market

The saying ‘luck is what happens when preparation meets expectations are high only to see things fall apart at the first sign of opportunity’, usually attributed to the Stoic philosopher Seneca, a downturn. In the past TGS has been asset light and able to escape seems to apply to TGS in buying the ION businesses. The the burden of vessel and equipment ownership. Furthermore it has company was perfectly positioned for this growth by acquisition. been able to invest in its multi-client library at lower cost when

However, the coincidental outright purchase announced in contractors have struggled to keep their vessels working. late June of seabed seismic contractor Magseis Fairfield marks a Now that TGS is part of the OBN market as an operator and stunning change of course. Apart from one brief flirtation, TGS equipment supplier, everything changes. It will be in direct compehas for two decades steadfastly shunned the overhead and oper- tition with existing survey operators and their technology offerings, ational issues of owning seismic vessels and not to mention any newcomers attracted by equipment. This enabled it to prosper like no ‘Magseis Fairfield today’s optimistic market talk and the relatively other company in the sector by commissioning low cost of entry compared, for example, with multi-client surveys, and in some years actually purchase marks a towed-streamer acquisition. Magseis Fairfield being the largest customer for marine seismic stunning change as the largest and most established player in surveys. Many say that TGS dodged the bullet in of course’ the field seems to have little to fear in the short term from rivals such as Shearwater 2007 when its offer to buy marine seismic GeoServices, PXGeo, or PGS should it enter contractor Wavefield Inseis came to grief. At the time, this out of the fray. For the time being there seems to be enough work to go character move was widely interpreted as a bid to ensure vessel around and reportedly the demand for nodes could easily exceed availability for its multi-client business during a boom period of supply by next year. intense competition between contractors. CGG eventually bought That said TGS has to commit resources to research and the assets a year later for a greatly reduced amount and was development to keep in the game, and who knows where that may miserably rewarded by a major collapse in the market leaving the lead and at what cost. Magseis Fairfield itself was born less than company’s fleet operations uncomfortably exposed. four years ago out of a defensive merger between two companies

TGS is right to insist that market conditions have changed so with very different cultures and OBN solutions. Whether all the significantly since 2007-8 that comparisons with the Wavefield integration challenges have been resolved is unclear, and the Inseis episode do not apply. For a start, this is a straight purchase profitability of the merger is unproven. unlike the Wavefield Inseis merger proposal. Even so, securing TGS will surely have taken all the naysaying into account capacity looks like a key factor in the Magseis Fairfield deal. The before making its move. OBN business will form only a minor demand for node-based seabed surveys has increased to the point part of the company’s overall business at a time when it is seeking that they comprise more than 30% and counting of all marine to diversify in a number of directions. seismic surveys, and TGS wants to maximise its exposure. It Last month the company announced the acquisition of Predikhas its eye particularly on opportunities offshore South America tor, a Norwegian company supplying asset management and and West Africa. The company also believes that ocean bottom real-time data management solutions to renewable and energy node (OBN) surveys offer a more stable market to ride the cycle asset owners around the world. Since 1995 the company is said to because they are associated with meeting routine 4D monitoring have carried out thousands of installations on industrial and energy requirements and low risk near field exploration. Further down assets enabling data-driven, automated operational solutions. the road it sees OBN playing a part in technologies such as off- The Prediktor purchase provides an indication of the direction shore wind farms and carbon capture and storage, again offsetting that TGS is taking with its New Energy Solutions initiative. The the highs and lows of marine seismic demand. company is targeting opportunities opening up as the focus turns

What better solution than to own Magseis Fairfield, the increasingly to energy transition. It is following closely developlargest operator in the business with a major track record in the ments in carbon storage, geothermal and deep-sea mining. US Gulf of Mexico and the North Sea, is how TGS seems to be Meantime expect more consolidation moves in the seismic thinking. It allows the company to plan and develop its future sector.

Views expressed in Crosstalk are solely those of the author, who can be contacted at andrew@andrewmcbarnet.com.