Moscow. December 27. INTERFAX.RU — The outgoing year has become a period of recovery growth for the domestic oilfield services industry. After the pandemic and the departure of foreign contractors, subsoil users have significantly increased demand for services in the field of oil and gas production. According to Rosstat, in the first nine months, spending on these purposes reached 1.9 trillion rubles, which is 10% more than in the same period last year.
Replenishment of the resource base remains one of the main tasks of Russian oil companies. Roman Panov, president of Geotek, which is at a new stage of its development, spoke in an interview with Interfax about how fully domestic oilfield service contractors are able to cover the demand for relevant services, and what they still have to succeed in.
— Roman Sergeevich, at the end of last year, Geotek changed its owner. How has the company's work changed in 2023?
— With the arrival of the new owner, all processes within the company have stabilized, starting from the management structure, resolving issues related to the settlement of debt obligations and ending with a completely different approach to the implementation of the investment program and working with customers. These are key factors that, of course, affect the quality of the asset itself.
The company is currently one of the key performers of work in the oilfield services segment. All customers with whom the company has historically worked, today confirm a stable demand for our services. This allows us to confidently look at the prospects for implementing the production program at least over a three-year period.
— It is no secret that Geotek is now part of the Gazprombank Group. At first glance, the asset looks non-core for it.
— The asset is managed by a closed-end mutual fund, which is part of the Gazprombank Group. At the same time, Gazprombank systematically implements programs to support and develop industrial assets in a wide variety of industries in Russia. It cannot be said that investments in this area could be called non-core for the bank. The situation is absolutely the opposite.
— One of the visible changes that has happened to Geotech is the change of name: the word seismic exploration has disappeared from the brand. Does this mean that the company is looking at new directions in oil services?
— Today the market is in which new niches are emerging, including those related to ensure the technological sovereignty of the country is a unique situation is developing And Geotech , having a good customer base, having a high-quality regional presence and accumulated experience in high-tech segments, is looking at such directions. Diversification by types of services in current conditions is one of elements of the company's development strategy.
At the same time, a good synergistic effect arises with companies that are within the Group's perimeter. There is good added value here both in terms of equipment production and in terms of the possibility of using production complexes that other enterprises have.
— But will seismic exploration remain the main focus?
— Yes, of course. Seismicity is a basic part for us. We have the competencies that currently allow us to focus specifically on elements related to high-tech areas of seismicity. First of all, — This is work in the transit zones of the shelf, high-density seismicity. In fact, today's development of the Caspian region and those transit parties that work for customers in this region, they provide a unique service: both in quality, and in equipment, and in regional presence. Also, these are the capacities that are deployed today in Yamal, since the main program for conducting geological exploration will be concentrated, including in this region. And Eastern Siberia. This is what the seismic exploration part is focused on today.
An absolute advantage is the ability to produce our own equipment. In Tyumen, we have a plant for the production of pulse sources. This is a good competitive technology for seismic exploration, which we have localized by 95%.This is production, including of our own components, which allows us to provide the market with not only services related to seismic exploration by traditional methods, but also with pulse ones. And this year we launched production of a new line, have already tested it with customers at contracted sites and the results show a very good effect.
— Let's return to the question of production a little later, now I would like to ask about the financial position of the company. What results are you finishing the current year with?
— The company is finishing this year on a stable footing. We expect EBITDA to be slightly less than 1 billion rubles, net profit to be about 200 million rubles. We managed to balance the portfolio by contract base this year in such a way that we received a sufficient volume of operating flow from the core business, which would allow us to further form a stable contract base.
We successfully passed the 2023 contracting period - more than 35% of new contracts available on the market were contracted by Geotek, so the next year is already being formed on this base and provides stable forecast indicators for revenue. It will amount to about 11-12 billion rubles, and the EBITDA indicator will be twice as high as the 2023 result.
At the same time, the results of previous years, of course, were not brilliant. A large volume of debt burden did not allow the holding to achieve optimal operational efficiency. This also held back the implementation of the investment program. This year, we launched it - a program related, first of all, to the renewal of the equipment fleet. In total, this is about 5 billion rubles, of which 3.5 billion are already the funds that are currently being developed.
The investment program is formed for the growing portfolio and for the requirements of companies related to the service life of equipment. Over the short term, this investment volume is sufficient to meet the needs for meeting demand for the portfolio, and over a three- to five-year horizon, we will lay down supporting investments, on average somewhere around 10% of revenue.
— And how has the debt burden changed?
— The debt burden is currently acceptable. If we take the net debt/EBITDA ratio, then according to the forecast for 2024 it should not exceed the ratio of 2 — comfortable level to continue to provide the investment program.
— You already mentioned the order portfolio. Could you tell what is its structure, to what are dominant in it are seismic exploration services?
— The order portfolio is fairly balanced. We work for all key customers, and there is no critical dependence on any of them. Today, services related to field seismic surveys are the main ones from the point of view of operational activities. At the same time, the company has a large volume of processing capacities, that is, data processing, their interpretation, which allows providing customers with a comprehensive service. Now work is underway in the direction of possible diversification, including in the high-tech service segment.
The company is represented in all the largest oil and gas provinces, but I would call Eastern Siberia the main region for contract execution: Irkutsk Region, Krasnoyarsk Territory, Yakutia. In addition, it is worth noting Yamal, Tyumen Region and the Volga region. We work practically from Astrakhan to Yakutia, and a big advantage of this year was the ability to balance the portfolio by seasonality in order to ensure the loading of production capacities both in the summer field season and in the winter. This, of course, made it possible to avoid a sharp decline in production in the summer.
Among the customers of our services in Eastern Siberia are Rosneft and Irkutsk Oil Company. In Yamal, Gazprom Neft, NOVATEK, Gazprom. The formed portfolio of orders of Geotek currently amounts to about 25 billion rubles. We are now entering the contracting period of 2024, we see that the demand in the market is quite large, and in this part the growth rate of the portfolio, in our opinion, will be approximately 10-15% per year.
— But all that you are now listed are domestic partners. Is there any interest from Geotech services?
— There is interest. Currently, the company operates in CIS countries: primarily, Kazakhstan and Uzbekistan. We have quite a unique experience of working in the Caspian region, especially what is related to the so-called transit zone - land-shelf transition. The company has accumulated extensive experience of working in foreign markets, including India, the Middle East, and Latin America. The demand on the market today for such services is quite high. The market is competitive, but given the accumulated experience and the level of customers, we look with optimism, including at the markets of foreign countries: not only the CIS countries, but, for example, at the markets of the Middle East, as well as Southeast Asia - India, Indonesia, Vietnam. These are the countries that are currently ramping up work to build up their resource base.
— What share do transit zone projects occupy in the overall portfolio?
— About 20%. These contracts are primarily distributed in the Caspian region. A complex type of work, not typical for mining companies. Usually, the main capacities are formed either on the land part or on the shelf part. It is easier to develop, there is no influence of shallow water and all the difficulties associated with hydrocarbon production in these regions, but it is clear that the resource base is deteriorating or shifting, so the issue of work in transit zones is becoming increasingly relevant. There are very few companies in the world that can perform such types of work.
— How has the domestic oilfield services market gone through the last two years, how has it adapted to the new realities? What are the remaining pressing issues?
— I don't think these can be problems because a problem is something that cannot be solved. When It can be solved with the resources that are still available to us, it is not a problem, but a challenge.
Today, Russian companies have many more opportunities on the domestic market than they had before. This is due to a number of circumstances, including the reduction in the presence of foreign companies. This is a unique time to increase both competencies and the share of domestic equipment production, and, in general, presence in high-tech segments.
There is a lot of focus on the part of the government — The Ministry of Industry and Trade, the Ministry of Energy - in terms of support measures that are implemented in relation to oilfield service companies, primarily in terms of localization of equipment production. If, for example, in 2014 the share of Russian oilfield services in the high-tech segment was about 40-45%, then, it seems to me, at the present moment the figures have grown to 60-70%. And this trend will probably continue, it seems very natural to me.
At the same time, the key issue today is shifting towards electronics, especially microelectronics, but even in this direction, systematic work is underway, which, in my opinion, should definitely give its effect within three to five years.
— Do you feel a shortage of components in this area in your work? Are there any difficulties with the supply of microelectronics from abroad, with inflated prices from counterparties?
— Over the past two years, all Russian manufacturers have found ways to adapt to current conditions and set up supply channels for both equipment and components in such a way as to minimize the restrictions that apply to us.
Firstly, it should be said that technologies in microelectronics are not unique. Secondly, they have exactly the same competitive environment. In fact, equipment for the oilfield services segment is produced in sufficient quantities in the Asian region. For example, we already have established partnerships with suppliers from Southeast Asia.
We are now looking towards localizing entire areas of production of a number of equipment, which would allow us to provide it for the Russian market.Our plant in Tyumen is engaged in, among other things, repair and maintenance of geophysical equipment. We already produce or use Russian or foreign components for part of the electronic base, but assemble it in the Russian Federation. For example, all the electronics in our pulse sources are domestic.
— And as for other components, are you planning to build new lines within your production?
— I don’t think we need to go down this path. Rather, we are building cooperation with Russian microelectronics manufacturers and setting up an order based on the fact that we are one of the key consumers on the market. Since we are forming it, it means that we have the opportunity to ensure demand for a certain type of product and build cooperation chains with Russian manufacturers.
— Microelectronics is one story. Other problems of the domestic oilfield service are also known - the hydraulic fracturing fleet, rotary-steerable systems, but, perhaps, for Geotek The most immediate challenge is the creation of domestic software and technologies in the field of telemetry. You have a subsidiary, Geoprime, which has certain experience in this area. Is there a desire to occupy this still vacant niche?
— Here much will depend on the demand generated by domestic companies, and the types of equipment that we can offer as analogues, to what extent they will be adapted and acceptable for the Russian market.
It may not be necessary to have 100% of your own equipment, your own technologies and component base, because there are individual parts that are competitive on the international market. But in terms of critical technologies, which are unconditional, the level of Russian production should be high enough. In my opinion, the ratio of 75% to 25% should provide the necessary level of technological sovereignty.
The market does not stand still, there is an exchange of information and developments with other manufacturing countries. Of course, there will be situations when foreign partner companies will develop new technologies that we, for example, do not have.not yet, and the opposite situation. At the moment, as it seems to me, the biggest issue is related to software systems. This is not even a question of equipment production, but a question of software development and implementation. This is a serious task that the industry has been solving for the last 10-15 years, and, probably, this is the main challenge that we will face in the next five years.
You mentioned Geoprime. It is, indeed, one of the leaders of the Russian market in terms of data processing, interpretation and storage, modeling of field development, and so on. At the moment, there are our own developments, including those related to a software suite. But here the question is about a systematic approach that would allow us to solve not only the segment related to geological exploration and preparation for production, but also the issue of further management of production operations. Here, the implementation of the task associated with the creation of our own software suite is a matter of cooperation not only between companies like Geotek, but also between subsoil user companies.
The developments that Geotek already has are a commercial story, but, of course, all processes are still based on software products developed by non-Russian companies. It seems to me that at the current pace of work in the oilfield services complex, we will need about five years to create our own software that would match the best global analogues.
— How do you assess the current demand for oilfield services on the Russian market? We see that our production has decreased, primarily due to restrictions within the OPEC+ framework, we see the impact of sanctions on oil sales. How do subsoil users react to this? Are they looking at the future?
—They are definitely looking at the future, since the resource base needs to be replenished. There is a redistribution from the point of view of opening new projects towards intensifying production at current ones, including due to the possibilities of using modern technologies. It is clear that from the point of view of large capital investments, all customers are quite cautious in making decisions, but we will see, for example, in terms of the market volume next year, at least those plans,which we will see from key subsoil user companies, this is growth in our segment of about 10-15% in demand. And this is an objective reality, because these are the consequences of deferred investments after the "covid" years of 2020-2021, and 2022, when there was also a drawdown.
It cannot be said that Russia has significantly reduced production volumes compared to previous periods. Yes, there is a certain adjustment, but it is caused by the market situation, and the price of oil, and access to technology, and the postponement of the commissioning of new facilities. The oilfield services segment is one of the drivers of the industry, because there is a need to improve the efficiency of using the current fund, there is a need for faster commissioning of facilities that are already on the balance sheet. We see the market response, so, in my opinion, the growth in the provision of services next year will be around 10-12%, and, probably, such rates will be maintained in the next few years.
All companies are looking at development prospects, strengthening the resource base, ensuring their long-term contractual obligations for hydrocarbon supplies. Oil production has fluctuated in recent years, but these are not critical figures. To ensure and maintain such figures, the volume of oilfield services will certainly increase.
All companies are looking at development prospects, strengthening the resource base, ensuring their long-term contractual obligations for hydrocarbon supplies. Oil production has fluctuated in recent years, but these are not critical figures. To ensure and maintain such figures, the volume of oilfield services will certainly increase.
All companies are looking at development prospects, strengthening the resource base, ensuring their long-term contractual obligations for hydrocarbon supplies. Oil production has fluctuated in recent years, but these are not critical figures. To ensure and maintain such figures, the volume of oilfield services will certainly increase.
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