Our customers include national and international oil companies and independent
oil and gas exploration and production companies. Our revenues are derived from
a concentrated customer base; however, we are not substantially dependent on
any one customer. Based on the nature of our contracts and customer projects,
our significant customers can and typically do change from year to year and
the largest customers in any one year may not be indicative of the largest customers
in the future. Our customers, Alaskan Seismic Ventures, Repsol, Prosper Energy
Systems Group Sdn Bhd (Malaysia), and BP Exploration, Repsol and Pluspetrol,
that individually exceeded 10% of our consolidated revenue.
We conduct data acquisition services under master service agreements with our
customers that set forth certain obligations of our customers and us. A supplemental
agreement setting forth the terms of a specific project, which may be canceled
by either party on short notice, is entered into for every data acquisition
project. The supplemental agreements are either “turnkey” agreements
that provide for a fixed fee to be paid to us for each unit of data acquired,
or “term” agreements that provide for a fixed hourly, daily or monthly
fee during the term of the project. Turnkey agreements generally mean more profit
potential, but involve more risks due to potential crew downtimes or operational
delays. Under term agreements, we are ensured a more consistent revenue stream
with improved protection from crew downtime or operational delays, but with
a decreased profit potential.
Our contracts for proprietary seismic data acquisition services reflect a high
proportion of turnkey contracts, which is preferred by our customers because
it shifts much of the business interruption risk onto us; however, it provides
us with the greatest opportunity to maximize the advantage we have from being
a full-service provider and the operational efficiencies created by our vertical
integration. We attempt to negotiate on a project-by-project basis some level
of weather downtime protection within the turnkey agreements and increasingly
use hybrid contracts where we may share with our customers a certain degree
of the risks for certain business interruptions, such as weather, community
relations and permitting delays, that are outside of our control.
Our backlog estimates represent those projects for which a customer has executed
a contract or signed a binding letter of award. Our backlog can vary significantly
from time to time, particularly if the backlog is made up of multi-year contracts
with some of our more significant customers. Backlog estimates are based on
a number of assumptions and estimates including assumptions related to foreign
exchange rates and proportionate performance of contracts. The realization of
our backlog estimates is further affected by our performance under term rate
contracts, as the early or late completion of a project under term rate contracts
will generally result in decreased or increased, as the case may be, revenues
derived from those projects. Contracts for services are also occasionally modified
by mutual consent and often can be terminated for convenience by the customer.
Because of potential changes in the scope or schedule of our customers’
projects, and the possibility of early termination of customer contracts, we
cannot predict with certainty when or if our backlog will be realized. Material
delays, payment defaults or cancellations on the underlying contracts could
reduce the amount of backlog currently reported and, consequently, could inhibit
the conversion of that backlog into revenues. In addition, worsening overall
market conditions are likely to result in further reductions of backlog, which
will impact our financial performance.
Our services are marketed from our various offices around the world. We have
a corporate business development and marketing staff and also have local managers
who interact with customers in each country of operations. Through these customer
interactions, we are able to remain updated on a customer’s upcoming projects
in the area and to work with the customer on projects in other countries.
Contracts are obtained either by direct negotiation with a prospective customer
or through competitive bidding in response to invitations to bid. Most of our
revenue historically has been generated through repeat customer sales and new
sales to customers referred by existing and past customers. In addition, a significant
portion of our engagements results from competitive bidding. Contracts are awarded
primarily on the basis of price, experience, availability, technological expertise
and reputation for dependability and safety. With the involvement and review
of senior management, bids are prepared by knowledgeable regional operations
managers who understand their respective markets, customers and operating conditions
and who communicate directly with existing and target customers during the bid
preparation process.
We also work closely with customers on a direct award basis to plan particular
seismic data acquisition projects. Due to the complexity of the areas where
we do business, these projects can take a number of months in planning and consulting
with the customer on exploration goals and parameters of the projects to fit
within a particular budget. By working closely with the customer, we are able
to acquire seismic data for a project efficiently and within the customer’s
required timeframe.
Seismic data acquisition services are performed outdoors and, consequently,
are subject to weather and seasonality. Particularly in Alaska and Canada, the
primary season for seismic data acquisition is during the winter, from approximately
December to April, since much of the terrain for seismic data acquisition cannot
be accessed until the ground has frozen. The weather conditions during this
time of year can affect the timing and efficiency of operations. In addition,
this prime season can be shortened by warmer weather conditions.
In South America and Southeast Asia, our operations are affected by the periods
of heavy rain in the areas where seismic operations are conducted. Specifically,
the jungle areas of Colombia, Bolivia and Peru are affected by heavy rain during
certain parts of the year so we must either avoid taking projects during these
time periods or limit the weather risk in a particular customer contract. Many
of the heavy rain periods in South America, though, are during the high season
for Alaska and Canada, and there are opportunities to maximize the utilization
of equipment and personnel by moving them between these regions to take advantage
of the different high seasons.
In all areas of operation, the weather is an uncontrollable factor that affects
our operations at various times of the year. We try to minimize these risks
during the bidding process by utilizing the expertise of our personnel as to
the weather in a particular area and through the negotiation of downtime clauses
in our contracts with our customers. Due to the unpredictability of weather
conditions, there may be times when adverse conditions substantially affect
our operations and the financial results of a particular project may be impacted.
