Schlumberger Goes 'Asset-Light' In Marine Seismic

Jan. 22, 2018 10:54 AM ETSchlumberger Limited (SLB)14 Comments
Richard Zeits profile picture
Richard Zeits


  • WesternGeco is among the leader in marine seismic.
  • The sector's challenges are a mirror reflection of the competition between the lower-cost supply from the Middle East and shale oil and the higher-cost supply from deepwater.
  • Schlumberger's decision to sell one of its crown jewels deserves attention.
  • The move may signal a cautious view on the pace of recovery in deepwater exploration.

(Image: WesternGeco's Amazon-class seismic acquisition vessel the Amazon Warrior)

In a significant decision, Schlumberger (NYSE:SLB) announced last week that it is exiting the seismic acquisition business, shifting to what the company referred to as "asset-light model" for its WesternGeco division.

Schlumberger indicated that WesternGeco has already stopped participating in bidding on new contracts and its equipment would be called back after completing the company's ongoing contractual commitments.

The company stated that it is evaluating options for divesting the business but recognized that the divestiture process could take some time, given the depressed state of the seismic market.

WesternGeco has been one of the largest players in the marine seismic industry, and the company's exit from seismic acquisition is an event that will impact the competitive landscape. Given the very high quality of the assets designated for sale, potential acquirers are presented with a unique opportunity. However, given the overcapacity and weak financial state of WesternGeco's major competitors, Schlumberger recognizes that it may have difficulty finding a buyer and end up selling the business to a new market entrant.

Based on the $1.1 billion write-off being recognized, Schlumberger is not expecting to recover its investment in full.

A Tough Market

This is a second major restructuring at WesternGeco in three years. Those readers who follow the marine seismic industry closely are well aware that this segment has undergone a remarkable technological transformation but has also suffered from overcapacity and fierce competition, even before the downturn in oil started.

At the peak of the previous oil upcycle, which started in 2005 and lasted for almost a decade through mid-2014, the offshore exploration sector appeared to be in the best shape it had ever been. Oil prices had remained close to $100 per barrel for several years. The deepwater drilling fleet was fully utilized and rapidly growing. Newbuild drillships

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This article was written by

Richard Zeits profile picture
Richard Zeits is an Oil & Gas industry analyst and consultant. His background includes fourteen years as Energy industry-focused investment banker, portfolio manager and senior investment analyst with bulge bracket firms in New York. Zeits Energy Analytics use elaborate proprietary analytics and data bases to provide in-depth industry research, market intelligence, and forecasting.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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