Annual Report 2011 - PGS

Board of Directors’ report
Efforts initiated in 2010 to raise the HSEQ
competence and awareness in the Company
continued in 2011. Several training initiatives
were implemented.
In 2011, PGS total activity (core fleet vessels and
PGS offices) comprised 11,773,684 man-hours.
Compared with the 11,786,931 man-hours
recorded in 2010.
The PGS organization (core fleet vessels and
PGS offices) experienced the following health
and safety incident levels:
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Zero fatalities, compared with zero in 2010
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11 Lost Time Incidents, compared with seven
in 2010
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Three Restricted Work Day Cases, compared
with 10 in 2010
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Three Medical Treatment Cases, compared
with six in 2010
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Five High Potential Incidents, compared with
five in 2010.
The overall Lost Time Incident Frequency (LTIF)
increased to 0.93 per million man-hours in
2011, compared with 0.59 in 2010. The Total
Recordable Case Frequency (TRCF) decreased,
to 1.44 per million man-hours from 1.94 in 2010.
PGS will during 2012 issue its first publication
summarizing our efforts as regards Corporate
Responsibility. The Corporate Responsibility
Framework consists of four fundamental
building blocks: People, Environment, Conduct
and Stakeholder engagement.
In 2012 PGS will initiate a process to gain
certification under the ISO 14001 (International
Standards Organization Environment
Management) standard. The aim is to obtain
certification by end December 2012.
Markets and Main Businesses
PGS is one of the three largest participants in
the global marine 3D seismic market, with a
market share in excess of 20 percent.
Capital expenditures for exploration and
production by oil companies continued to
increase in 2011, driving demand for seismic
services. The year 2011 was historic in that the
average price of oil exceeded $100 per barrel.
Stable, high oil prices promote continued
exploration and production spending.
Additional main drivers were a considerable
need to explore and develop new areas, secure
an acceptable replacement of reserves, and
obtain enhanced oil recovery from producing
fields.
The macro environment was volatile in 2011,
fueled primarily by the sovereign debt crisis
in Europe and social unrest in the Arab world.
Despite this turbulence, most seismic buyers
maintained a long-term planning horizon and
the market has not seen any significant change
in how customers operate.
However, annual demand growth of 10-
15 percent, measured in terms of square
kilometers of acquired seismic, has not
been sufficient to improve market prices.
Overcapacity in the seismic market prevailed
in 2011. During the year, capacity increased by
approximately seven percent, as measured by
number of streamers. While such expansion
may not seem excessive, when added to the
surge in capacity in 2010, the aggregate supply
increase outpaced the demand growth over the
same period. The supply growth in 2010 relates
largely to capacity ordered before the market
downturn late 2008 and which entered service
some two years later.
Access to acreage has been another limiting
factor. The Macondo incident in the Gulf of
Mexico in April 2010 put a halt to offshore
US market activity. Repositioning of seismic
capacity from the Gulf of Mexico to other
markets pressured the supply/demand balance.
A similar, but not as prominent downturn
occurred in 2011 when civil unrest began
in Egypt and Libya, which in turn led to a
reduction in seismic work in the Mediterranean.
Despite an unfavorable supply/demand balance,
PGS has been able to avoid idle time for its
3D vessels by continually adjusting capacity
deployment to adapt to the Company’s order
book and by capitalizing on its industry leading
technology. Further, PGS staff demonstrated
considerable success in being able to build
additional continuity into the fleet order book.
Throughout 2011, order book status was
maintained at approximately five to six months
of production, which generally provided an
adequate planning and scheduling horizon.
For Marine Contract work PGS achieved
an average operating profit margin of
approximately four percent for the full year
2011. The figure was below the Company’s
target of 10-15 percent. Oil prices increased
significantly during the first quarter of 2011.
Whilst a higher oil price is a positive factor
longer term, driving seismic spending among
oil companies, short term, it has a negative
impact on margins, due to its immediate impact
on fuel cost. The significant weakening of the
US dollar in the first half of 2011 also squeezed
margins, as most revenues are in US dollars,
while a significant part of expenses is in other
currencies.
In addition to the unfavorable development
of key exogenous factors, resource utilization
and productivity in the second half of 2011
were weak as a result of extended yard stays,
unfavorable weather conditions, and downtime
caused by maritime issues.
PGS Annual Report 2011 57