Seismic services player Electromagnetic Geoservices (EMGS) has been forced to take immediate action and implement a cost-cutting program due to the detrimental effect of Pemex’s decision not to award it any more work under a two-year acquisition program from last year.
EMGS said on Thursday that it had been advised by Pemex that the company would not, in the near to medium future, receive additional acquisition work under the two-year acquisition contract announced to the market on June 4, 2019.
To remind, EMGS was in June 2019 awarded the final contract for a multi-year survey with the Mexican oil company Pemex. The two-year contract in the Gulf of Mexico had a value of approx. $73.3 million with a minimum value of approx. $29.3 million.
It is the company’s understanding that the customer’s decision is related to its own strategic priorities, and not related to EMGS’ performance under the contract, EMGS clarified.
The company has previously assumed that substantial new acquisition work under the two-year contract would be forthcoming within the near future.
According to EMGS, the decision by the customer not to order additional acquisition work, at least for the near to medium future, will have a material detrimental effect on the company’s revenue and profitability going forward.
The board of directors of the company is evaluating all strategic options available. The company will immediately initiate a comprehensive cost reduction program to adjust its operational cost base to the new confirmed backlog level.
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