Revenues could fall by 51% compared with 2019 levels at a Brent crude price of $30 a barrel, and by a massive 77% if the benchmark crude price falls further to $20.
In some bad news for the sector just hours after the Rystad analysis was issued a rout in the oil market saw the Brent crude price standing at $25.57 per barrel on Monday and the US WTI price collapsed into negative territory for the first time ever closing the day with a settlement price of -$37.63 per barrel. This development means that the world is now awash with oil that nobody needs or wants and storage capacity is close to full.
Based on revisions to spending by companies engaged in the E&P sector and delays imposed by governments as a result of the oil price collapse, Rystad expects exploration spending to fall by more than 20% year-on-year, with at least a 12% decline in offshore exploration drilling alone. Seismic work on geological and geophysical studies relating to newly acquired blocks and yet-to-be-approved exploration wells are likely to be hardest hit, the company said.
The most vulnerable are seismic vessel owners that offer contract data acquisition with their own vessels. Some of these contracts are already being cancelled and maintaining a fleet of such specialised vessels could become very challenging, Rystad commented. Other survey firms which have adopted ‘asset-light’ models and undertake multi-client surveys should be able to adapt to demand swings more easily, thereby controlling activity levels and protecting cash flow.
“Seismic companies across the board have started to adjust their business plans to better prepare themselves for this downturn,” said Binny Bagga, a Rystad Energy Oilfield Service Analyst. “Most companies have implemented cost-cutting measures which include lay-offs, furloughs, cold-stacking of vessels and general cost reductions.”
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