Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successfully mobilized the Atlantic Guardian after a long idle period and completed a fully prefunded multiclient survey in the North Sea.
- Started acquisition on the fully-prefunded Petrobras' multiclient survey in the Espirito Santo Basin, offshore Brazil, with a contract value of $11.7 million.
- EMGS does not require a lengthy environmental permitting process for EM surveys in Brazil, unlike seismic companies, which can face significant delays.
- The company has a strong track record in predicting the presence or absence of hydrocarbons in the Jurassic section in the Barents Sea, with a 100% success rate.
- Despite a reduction in cash, the financial position remains strong with an available cash balance of $8.7 million.
Negative Points
- Revenues during the quarter were only $239,000, a significant decrease from previous quarters.
- EBITDA came in at negative $2 million, and adjusted EBITDA was negative $3.8 million, indicating financial challenges.
- Operational cost base increased to $4.1 million in the first quarter, up from $2.9 million in the fourth quarter, primarily due to the Atlantic Guardian being in operation.
- Free cash decreased by $1.6 million in the first quarter, ending at $8.7 million.
- Interest expenses on the convertible bond and other interest expenses amounted to $0.8 million in the first quarter, further impacting cash flow.
Q & A Highlights
Q: Can you provide more details on the financial impact of the North Sea multiclient survey?
A: Bjorn Lindhom, CEO: The revenues from the North Sea multiclient survey, amounting to USD 2.7 million, will be recognized in the second quarter upon data delivery, in accordance with IFRS 15 accounting rules. We capitalized USD 1.2 million in expenses related to this survey during the first quarter.
Q: What is the current status and outlook for the Brazil operations?
A: Bjorn Lindhom, CEO: The Atlantic Guardian arrived in Brazil at the end of April and started the fully-prefunded Petrobras' multiclient survey in the Espirito Santo Basin on May 1. The contract value is USD 11.7 million, and we expect the acquisition to take approximately two months.
Q: How does the environmental permitting process in Brazil affect your operations?
A: Bjorn Lindhom, CEO: In Brazil, EM surveys do not require a lengthy environmental permitting process like seismic and drilling activities. We have a permit waiver and can inform IBAMA of our activities after the fact, which significantly reduces delays.
Q: Can you elaborate on the financial performance for the first quarter?
A: Anders Eimstad, CFO: Total revenue for the first quarter was USD 239,000, with an EBITDA of negative USD 2 million and an adjusted EBITDA of negative USD 3.8 million. The operational cost base was USD 4.1 million, primarily due to the Atlantic Guardian being in operation.
Q: What is the current cash position and how has it changed over the quarter?
A: Anders Eimstad, CFO: The free cash balance at the end of the first quarter was USD 8.7 million, a decrease of USD 1.6 million from the previous quarter. This decrease was mainly due to negative EBITDA, vessel and office leases, and capitalized multiclient expenses.
Q: What are the future plans for operations in Norway?
A: Bjorn Lindhom, CEO: We plan to return to Norway in the third quarter to acquire several additional surveys in the Barents Sea. These surveys have not yet been announced, but we expect to make announcements during the second quarter.
Q: Can you provide more details on the upcoming wells in the Barents Sea?
A: Bjorn Lindhom, CEO: Three wells will be drilled by AkerBP in the Wisting area, targeting the Jurassic section. These wells are Ferdinand Nord, Hassel, and Viasat. EM has had a 100% success rate in predicting hydrocarbons in this area, and we believe these wells have a high chance of success.
Q: How has the operational cost base evolved over the quarter?
A: Anders Eimstad, CFO: The operational cost base increased to USD 4.1 million in the first quarter from USD 2.9 million in the fourth quarter, mainly due to the Atlantic Guardian being in operation. The capitalized multiclient expenses for the quarter were USD 1.1 million.
Q: What are the key factors affecting the free cash movement in the first quarter?
A: Anders Eimstad, CFO: The key factors include a negative EBITDA of USD 2 million, vessel and office leases reducing cash by USD 0.7 million, and capitalized multiclient expenses reducing cash by USD 1.1 million. However, decreases in trade receivables and increases in trade payables and other working capital components partially offset these reductions.
Q: What is the outlook for the Triassic section in the Barents Sea?
A: Bjorn Lindhom, CEO: The Triassic section has proven to be enigmatic with limited success. However, it holds some of the most interesting undrilled EM anomalies in the Barents Sea. While high risk, it presents significant potential for future exploration.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
