WesternGeco to close seismic land operations in US Lower 48, Canada

Oct. 21, 2002
London-based seismic joint venture WesternGeco said Monday that it would close down its land operations in the US Lower 48 and in Canada.

By OGJ editors

HOUSTON, Oct. 21 -- London-based seismic joint venture WesternGeco—owned through a 70:30 respective partnership of Schlumberger Ltd. and Baker Hughes Inc.—said Monday that it would close down its land operations in the US Lower 48 and in Canada. By yearend, the JV said that 1,200 employees would be affected worldwide. The venture said that land operations would, however, "continue in Alaska and Mexico, as well as other economically viable areas worldwide."

Earlier this month, Schlumberger reported that the seismic JV, which holds the moniker of the world's largest seismic service company, would likely incur a loss for the third quarter. Schlumberger's share of the loss was $15 million, it said. "The expected improvements in marine seismic profitability in the Northern Hemisphere did not materialize due to the continued softness in proprietary marine pricing," Schlumberger said.

WesternGeco was formed in mid-2000 through the combination of the seismic fleets, data processing assets, surveys, and other assets of Schlumberger's Geco-Prakla unit with Baker Hughes's Western Geophysical unit (OGJ, June 12, 2000, p. 28).

WesternGeco said that the move was part of its plan to reduce its focus on "conventional seismic operations, which have been severely impacted by commodity pricing, excess risk, and difficult terms over the last 10 years." The company also will hasten its move toward the production side of the exploration and production business, it said, "providing comprehensive seismic-based reservoir information solutions to the engineering and production asset teams."

WesternGeco Pres. Gary Jones said, "The action we've taken is an inevitable result of the high-risk, no-return state of affairs in the seismic industry."

Reaction
WesternGeco's decision to close down some of its ailing operations were viewed positively by at least one analyst.

"We think these are positive steps," said Banc of America Securities LLC analyst James K. Wicklund in a research note. "Anytime a management recognizes a problem and attempts to correct it, that is a positive effort," he said, adding, "We are not convinced that operating results, at least over the next several quarters, will be incrementally positive other than the cost reductions associated with such a dramatic drop in headcount."

Wicklund noted, "This is not so much an indictment of management efforts as a shift in the business model of the industry." The analyst said that the current seismic business model is "flawed" and "the structure of the industry must change to be successful."