2 September 2008
Trading Update
In its announcement dated 22 April 2008, OHM said that in the first half to 28 February 2008, the Company had experienced difficult and testing trading circumstances. These difficult trading conditions have continued with demand for surveys remaining at a relatively low level. Data Library sales have however made a strong contribution in the second half to 31 August 2008. This contribution would have been greater but for the delay in the announcement of the Norwegian 20th Licensing Round, where together with TGS Nopec we have seismic and data packages over 13 key prospects. This delay is likely to move some expected sales to fiscal year 2009.
The Directors have long viewed that recurring revenues from data library sales are a key part of OHM’s future revenue stream and as each year goes by the OHM Data Library grows larger. OHM is actively reviewing a number of other exciting data library opportunities and will proceed with each when its prefunding meets our internal requirements.
The North Sea Spring/Summer season provided less proprietary survey work than hoped for and there are still delays to the award of substantial contracts elsewhere. Delays in permitting, especially in Norway where fisheries approvals are now taking the full length of the review period, impacted on our ability to run programs one after the other which adversely affected our utilisation. More pleasing is the recent award of a key program in the North Sea for a significant adopter coming to the technology for the first time adding to the six new users OHM worked for in the second half of this year. This confirms our faith that adoption of the technology continues.
We now have two CSEM specific vessels on contract, the OHM Express and the OHM Leader which was delivered recently. To reduce costs, steps are under way to sub charter the OHM Leader to an ROV operator until CSEM demand levels rise adequately.
In the last year, our nearest competitor has had five vessels available for work, while OHM has had two available. The combined vessel utilisation figures are unacceptably low and suggest there is over capacity in this area. OHM understands that its nearest competitor is making moves to reduce capacity and seeks to play a role in achieving market balance by temporarily sub-contracting OHM Leader.
Despite the prevailing difficult trading circumstances CSEM continues to deliver value to its users. In shallow waters, in the North Sea, we have recently seen excellent correlation between the CSEM prediction and well results. We have also been using EM technology to image sediments below the basalts on the Atlantic Margin in areas where seismic has been unable to give reliable information. Every line of our regional sub basalt data library programs has already made sales and we expect them to form the core of a regional library in this area which will have a long shelf life. We see further exciting potential to apply this technology to subsalt imaging opening up CSEM markets in a number of key new areas.
Our operations group continue to make significant progress in increasing our competitiveness through improving the efficiency of CSEM operations with measurable improvements in equipment reliability and in speed of survey execution.
The integration and repositioning of the Rock Solid Images business is close to complete, and the recent award of a major contract to support the development of the Jubilee field in Ghana resulted from successful advanced data analysis during the exploration phase. Rock Solid Image’s growing reputation for delivering effective technical solutions in this exciting new play fairway has also generated a significant number of orders from other players on this trend, contributing to a growing order book for their services.
The Company expects to report revenues in the range of £5.9 to £6.3 million pounds with a pre tax loss in the range £5.0 to £5.3 million for the six months to 31 August 2008 putting revenues for the year in the range from £10.6 to £11.0 million and the annual pre tax loss in the £9.0 to £9.3 million range. The Company has cash in hand in excess of £8 Million and no borrowings as at 31 August 2008. Final results are expected to be released on Tuesday 25th of November 2008.
Dave Pratt, OHM’s Executive Chairman, said:
“CSEM technology is proven to work and I remain optimistic about the eventual wholehearted adoption by industry although adoption is frustratingly slow. Our Data Library is growing well and our research on the integration of seismic and CSEM together with sales channel opportunities emerging from the CGGVeritas alliance will provide opportunities to sell added value services.”
Contact for further information:
Offshore Hydrocarbon Mapping plc
www.ohmsurveys.com
Dave Pratt – Executive Chairman
0870 429 6581
Bob Auckland – Finance Director
0870 429 6581
KBC Peel Hunt (Broker and NOMAD)
Julian Blunt / David Anderson
020 7418 8900
Aquila Financial Ltd (PR)
www.aquila-financial.com
Peter Reilly
0118 979 4100
Notes for editors:
Controlled Source Electro-Magnetic imaging (CSEM) is potentially the most important new technology in the field of offshore oil & gas exploration since the advent of 3D seismic some twenty years ago. CSEM is an innovative offshore geophysical technique, employing electromagnetic remote-sensing technology to detect the presence and extent of hydrocarbon accumulations below the seabed.
The CSEM survey uses a dipole source that is towed just above the seafloor to transmit an electromagnetic field into the earth. This field is modified by the presence of subsurface resistive layers and these changes are detected and logged by an array of receivers placed on the seabed. Because hydrocarbon-bearing formations are highly resistive compared with surrounding formations, a CSEM survey can indicate the presence of oil and gas in offshore situations.
CSEM imaging can significantly reduce the risk of drilling dry exploration wells creating considerable value for oil & gas explorers.
The technique was first used offshore Angola in 2000 and has since become a key deepwater exploration tool for the major oil companies. Very high success rates have been quoted by these companies, particularly when the results of a CSEM survey have been integrated with seismic interpretation.
Offshore Hydrocarbon Mapping plc listed on London Stock Exchange (AIM:OHM) in March 2004.
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