Otto eyes upswing in seismic buy
Singapore-based ship builder and offshore support vessel owner Otto Marine has acquired a 74% stake in new start-up Reflect Geophysical, with an eye on the next upswing in the seismic market in 2010.
The deal marks Otto’s first foray into oil and gas exploration and production, Otto Marine’s group managing director, Lee Kok Wah said.
Lee sees the acquisition as a timely move given a recovery in the seismic market after a drastic slowdown over the last 12 months.
Reflect is managed by a team of industry veterans with extensive experience in Asia and headed by ex-CGG Veritas executive, David Lamb.
The deal with Otto provides for the management team of Reflect to own a combined 26% interest and to raise the stake to 40%.
Reflect will be run as an independent unit although Otto will be represented on the board of the seismic outfit.
Otto’s acquisition provides access to shipbuilding and ship repair facilities.
These services could be tapped on to support Reflect’s seismic operations if they are priced at competitive rates, Reflect’s chief David Lamb said.
The seismic market was not spared the brunt as oil and gas operators cut back on exploration and production spend on a sudden plunge in oil prices and an economic downturn since the second half of 2008.
However, Lamb said a recovery is in sight as operators seek to fulfill outstanding work commitments in 2010.
His view is backed by a Pareto Securities report, which showed 67% of 23 oil and gas companies surveyed are set to increase seismic activity next year despite flat exploration and production spend in 2010.
Day rates have also hit rock bottom and will see improvement both in the 2D and 3D markets in 2010, Lamb said.
Lamb expects the 3D seismic demand to pick up faster than 2D in Asia as operators set out to delineate drilling prospects.
The average survey required for each offshore concession is estimated to be around 200 square kilometres to 400 square kilometres, a suitable work volume for a four-streamer vessel, he said.
Reflect has contracted a four-streamer seismic vessel from Norway’s Norfield Shipping.
The vessel to be renamed Reflect Resolution is on time charter with Reflect for a firm period of two years plus options for at least another two years’ extension.
In early November, the four-year-old vessel sailed for New Zealand waters where it is set to acquire over 7000 kilometres of line seismic for the New Zealand Crown Minerals.
The first part of the survey conducted in the Pegasus basin will see the acquisition of 3000 kilometres and is expected to wrap up next month. The vessel will then move on to the Great South basin to shoot another 4000 kilometres of seismic. The entire campaign is targeted for completion in January.
The contract for the shoot is valued at $10 million or $1000 per line kilometre, significantly higher than the market average of $500 per line kilometre due partly to labour requirements in the Australian and New Zealand sectors, according to Lamb.
Lamb is looking at securing further seismic contracts in the New Zealand waters during the current weather window and work in the Southeast Asian region thereafter.
Norwegian financial institution Pareto Securities serves as the financial adviser in facilitating the joint venture deal between Reflect and Otto Marine.