Geokinetics to Acquire Onshore Seismic Business of PGS

December 5, 2009 at 2:32 am Leave a comment

Geokinetics Inc. and Petroleum Geo-Services (PGS) have signed a definitive agreement under which Geokinetics, provider of seismic data acquisition, processing and interpretation services, will acquire the onshore seismic data acquisition and multi-client data library business of PGS (PGS Onshore) in a cash and stock transaction valued at nearly $210 million, on a cash-free, debt-free basis, which includes net working capital of $37.5 million. The final purchase price is subject to customary post-closing adjustments. The transaction is expected to close in the first quarter of 2010 and is subject to normal closing conditions and regulatory approvals.

            The combination of Geokinetics and PGS Onshore will create the second largest provider of onshore seismic data acquisition services in the world in terms of crew count and the largest based in the Western Hemisphere. The combined company will have the assets and technical capabilities to support up to 38 crews and carry in excess of 207,000 equipment channels and over 150 vibroseis units; and possess in excess of 6,240 sq miles of multi-client library data upon completion of current projects in progress. Empowered by a broad range of technologies that include transition zone (TZ), ocean bottom cable (OBC) and land vibroseis, the new Geokinetics will be able to compete more effectively within the entire seismic value chain of planning, proprietary and multi-client acquisition, processing and interpretation services. Furthermore, this acquisition will propel Geokinetics into new markets, including Alaska and Mexico, as well as certain new countries in the Middle East and North Africa.

            On a pro-forma basis, the new Geokinetics would be expected to generate in excess of $700 million in revenues for 2009. PGS Onshore had backlog of $196 million as of September 30, 2009, and combined with Geokinetics backlog totals $455 million. Geokinetics anticipates the transaction will be highly accretive to 2010 earnings.

            Richard Miles, President and CEO of Geokinetics, said: “We expect the combined company to be better positioned to serve our expanded customer base as we will have an enhanced ability to redeploy assets into more attractive markets. Our increased number of crews should also provide longer term contract opportunities with fewer mobilizations, which should result in better utilization and profitability. In addition, PGS has invested over $130 million over the last three years in their 5,500 sq miles of multi-client library data and multi-client technical capabilities, and we believe this high-quality resource will place us in an important segment of the market in which we have not previously participated in a meaningful way. We look forward to PGS becoming a large shareholder in Geokinetics, as we believe this will provide numerous opportunities going forward and should benefit both companies. We are eager to welcome the PGS Onshore employees into Geokinetics, and look forward to building a stronger, more competitive business.”

            Jon Erik Reinhardsen, President and CEO of Petroleum Geo-Services, commented: “The combination of PGS’ and Geokinetics’ competence and market presence will create a new force in the onshore seismic industry. As a future key shareholder, we are excited about the growth potential and leading market position of the new Geokinetics. This transaction adds value for our shareholders, our employees and our customers. At the same time, this transaction establishes PGS as a focused marine geophysical company. The strengthened financial position of PGS will further allow us to continue to develop the most efficient fleet and leading-edge technology in the industry.”

            Following the closing of the transaction, PGS will become Geokinetics’ second-largest shareholder after Avista Capital Partners. The acquisition is expected to provide annual synergies in excess of $10 million, driven mainly by organizational streamlining and cost reductions. There may be additional synergies via cross-selling opportunities and additional opportunities for processing behind Geokinetics’ expanded number of crews. Geokinetics expects to begin to capitalize on these synergies in mid-2010 as the company starts to benefit from the integration of the two businesses.

            Geokinetics has agreed to finance this acquisition through a combination of cash and common stock. At closing, Geokinetics will issue PGS approximately 2.15 million shares, which represents 19.9% of outstanding Geokinetics shares, valued for purposes of the transaction at $12.11 per share or $26.1 million. The remainder of the purchase price or $183.9 million will be paid in cash. The company will have until February 15, 2010, to close the transaction.


Entry filed under: Geoscience & Exploration Solutions, News Flash. Tags: , , , , .

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