Q2 2021 ION Geophysical Corp Earnings Call
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Greetings and welcome to the Ion Geophysical second quarter earnings Conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the <unk>.
Formal presentation, if anyone should require assistance during the conference. Please press Star then zero on your telephone.
As a reminder, this conference call is being recorded it is now my pleasure to introduce your host Rachel White, Vice President Investor Relations. Thank you you may begin.
Good morning, and welcome to the Ion <unk> second quarter 2021 earnings Conference call. We appreciate your joining us today as indicated on slide two our hosts today are Chris <unk>, President and Chief Executive Officer, and Mike Morrison Executive Vice President and Chief Financial Officer, who will be using slides to accompany today's call, which are accessible via link on our web.
<unk> Dot com. There you will also find a replay of today's call will begin let me remind you that certain statements made during this call may constitute forward looking statements.
These statements are subject to various risks and uncertainties, including those detailed in our latest 10-K and other SEC filings, which may cause our results or performance to differ materially from those projected in these statements. Our remarks. Today May also include non-GAAP financial measures additional details regarding these non-GAAP financial measures, including reconciliation to the most direct.
Comparable GAAP financial measures can be found in our earnings release issued yesterday.
I'll now turn the call over to Chris who will begin on slide four.
Thank you Rachel good morning, everyone and thanks again for joining us in our prepared.
Remarks today, we will discuss our financial results strategy execution progress and outlook for both the energy and maritime operations market.
I will also describe our promising new energy transportation sustainability and digitalization strategies for today's rapidly evolving market.
Yeah.
We delivered a 40% sequential improvement in revenues during the second quarter.
<unk> EBITDA was slightly positive benefiting from the over $40 billion of cost reductions for 2020 that remained intact.
Second significantly larger phase of our North Sea <unk> program is proceeding ahead of schedule and we made great progress on our maritime digitalization strategy in new markets. During second quarter in April we completed our bond exchange and rights offering, which Mike will describe shortly.
Before I get to the operational highlights of the quarter I will describe the market dynamics and our strategy for both the energy and maritime operations industry.
The global economy is improving and commodity prices have rebounded nearly 50% this year above pre pandemic levels with Brent crude currently around $70 a barrel.
However, our corresponding market is expected to remain challenging in the near term is that energy companies capital discipline remains firmly in place with a priority on cash flow generation. The majority of spending today is tied to legacy projects and existing commitments with very limited discretionary Bob on the <unk>.
Positive side analysts predict minimum.
Downside risks to the current seismic spending level above $50 a barrel, we still believe discretionary spending will eventually return about $50 a barrel and we are selectively investing where we anticipate that capital will be directed.
We expect data purchases largely be aligned with lower risk higher return strategies focused on improving basin infrastructure led exploration that leverages existing nearby facility.
Italy, even in this uncertain environment, we are seeing early movers start to strategically purchase data again, our customer our customer mix is also changing a greater shift in investments in renewables, creating opportunities for independents and national oil companies to fill the void.
Investment in the energy transition is rapidly approaching that of traditional oil and gas. We are focused on helping companies efficiently find and develop energy resources with lower emissions with environmental impact whether its more traditional sources our renewable one.
For example, our data is already being used to help evaluate potential site for carbon storage to help.
Climate change.
Even the most aggressive energy transition scenarios offshore oil and gas is expected to remain an important part of the energy production mix needed to meet global demand for at least the next few decades.
We expect the seismic market will continue gradually improving and that our strategic decision to participate in the <unk> new acquisition multi client market will enable us to capture market share even without an improvement in industry conditions.
That said we are also focused on rapidly diversifying outside of energy into much larger markets, where we can increase the stability and share of recurring software revenue in our business.
Our strategy is to empower clients to sustainably use marine resources and combat climate change through our technology.
Our focus on optimizing important management energy logistics and maritime digitalization market.
And these large capital intensive industries, there are significantly utilization opportunities to enable smarter safer management of maritime assets and people and reduce environmental impact and greenhouse gas emissions.
In our E&P technology, <unk> services business multi client revenue to improve sequentially, primarily due to starting our mid North Sea high <unk> multi client program and an increase in data library sales.
<unk> this portfolio pivot towards <unk>, which initially commenced three three D re imaging chips are new product investment closer to the reservoir.
<unk> spend tends to be more consistent and programs have larger scale revenue and earnings potential.
And the last five years, our <unk> data library has grown nearly 10% from approximately 4000 square kilometers to 400000 square kilometers today.
Essentially all of the <unk> investment in basins that are well positioned to support the E&P sector and the energy transition touches with RSC and offshore Brazil like.
By comparison, our <unk> data library increased 35% during the same timeframe.
The UK remains attractive for investment with one of the highest global returns per barrel until recently parts of this exercise play in the North Sea had been largely overlooked because biotech technology wasn't able to properly resolve this complex variable play our mid North Sea high free program demonstrates how new Paul high quality data and unlock the potential of promising new.
Acreage in May we started the second significantly larger base of our mid North Sea high multi client program. We're pleased to be partnering with shearwater again on the data acquisition, which upon completion in late September we will increase the survey areas six fold.
We deployed our proprietary digital technologies to collect the data in a more efficient eco friendly manner. Prior to the survey start we evaluated several time at motion technologies, and Macy's and survey the design the survey in the most efficient manner.
Then in the field Orca incorporated impact from Ocean currents into the survey plans to optimally acquire the lines on an order that maximizes efficiency, while minimizing emissions. In addition.
Marlin, we are collaborating with fisheries to minimize disruption to both operations by coordinating vessel and equipment movement. The combination resulted in about 25% time savings on the first phase of our bid varsity high program.
Our team is actively cultivating additional <unk> program opportunities almost all our multi client programs and progress consists of <unk> data. In addition to the North Sea. We are continuing to expand the highly successful patrolling up really re imaging data set offshore Brazil.
Our carbon footprint per dollar of revenue is significantly less than our peers, principally due to a re imaging emphasis and highly efficient proprietary software infrastructure maximizes the quality and insights of existing subsurface data.
In addition, we continued to benefit commercially from a global data collaboration with PGS withheld, which helped diversify both companies' geographic exposure to opportunities globally, while also increasing sales efficiency.
Our innovative Gemini extended frequency stores continued to perform extraordinarily well during the quarter as we wrapped up its first proprietary deployment shell nearly doubled the initial program size offshore Egypt and highlighted Gemini his role in enhancing exploration insight and a more eco friendly manner. The innovative acquisition design compared with Gemini delivered they expect.
That uplift in low frequency content in this large long enough that survey.
Many attractive geographies for continued investment in complex geological setting where more accurate imaging of the subsurface is essential for effective resource development industry demand for low frequency data continues to build as clients recognize the value. It provides in revolve survey decides to take advantage of new technologies, such as Gemini we have submitted several proposals for <unk>.
Additional Gemini deployments on both multi client and proprietary project.
In the quarter. We were also approached by customers to tender vertical seismic profiling VSP production applications of our stores.
We continue to commit the majority of ion imaging capacity to distinguish our multi client offerings, while deploring, while deploying the balance of resources on challenging proprietary projects that help maintain our top tier capability.
During the quarter, we secured the first project commitment under the multiyear umbrella contract with an energy major we mentioned on last quarter's conference call.
Operations optimization revenues improved during the quarter.
Second during the second quarter, consistent with offshore seismic activity improving seasonally.
Perfect tender activity is increasing primarily for production focused contract work.
The multiyear command and control of subscriptions and routine equipment spares and repairs business provide a level of stability for this business segment.
<unk> services engagements of ion anywhere continue to enable clients to overcome covid 19 operational access challenges a significant departure from what was historically an in person services led business for iOS.
We continue to advance our diversification strategy and numerically markets across software and devices.
And our software group the Marlin smart port deployments across nearly 28 UK ports continues to receive positive client feedback on the value of our software delivers such as enhancing decision, making be a simple visual dashboard based on the local success in the U K our business development team recently expanded and increased the outreach in North America, Latin America and Africa.
The climate Smart digital infrastructure, we are promoting with U S Department of Commerce support is garnering significant interest for country scale digitalization solutions spanning maritime detection important management and illegal fishing within initial engagement focus on coastal Africa. These multimillion dollar government projects are well aligned with the qualification criteria for <unk>.
<unk> bank financing and introductions have already been made to more than 15 countries.
Our technology is focused on creating high value information that drives efficiency and related resource utilization and reduction in some agency exposure and greenhouse gas emission for example in the energy logistics market.
Just development effort is to analyze plan versus the actual supply vessel scheduled identifying opportunities for clients to minimize fuel consumption decreased emissions and operate with just in time efficiency.
On the range of use cases, we've uncovered in magnitude of efficiency and environmental benefits. Our technology can deliver we are optimistic about accelerating adoption.
Yeah.
Our devices diversification strategy is to develop real time monitoring solutions that improve the safety and environmental compliance of offshore oil and gas operations from well abandonment to carbon storage application.
Alert Leverages, our core competencies from the seabed seismic world and target the grilling market associated with sustainability in line with our strategy to provide decision support data and analytics.
Our expectation is that regulators will drive adoption of proactive monitoring systems that provide more frequent accurate measurements to assure safe operating environment. We are systematically working to understand the challenges and requirements of these systems in various geographies well alert conversations have advanced beyond our initial target market receiving positive feedback in a number of regulatory environments and <unk>.
So.
We started developing a full scale prototype with that I'll turn it over to Mike to walk us through the financials, and then I'll wrap up before taking questions.
Thanks, Chris Good morning, everyone. Our second quarter revenues of 20 million improved 40% sequentially. Adjusted EBITDA was slightly positive compared to negative $7 million in the first quarter.
E&P technology <unk> services segment revenues of $12 million increased by 62% sequentially, primarily due to starting the second phase of our mid North Sea high <unk> multi client program and an increase in <unk> data library sales.
Operations optimization segment revenues of 8 million improved 18% from the first quarter due to increased production focus seismic vessel activity offshore.
Backlog, which consist of commitments for multi client programs and proprietary imaging and reservoir services work was $14 million a quarter in the sequential.
Decline was driven in part by revenue recognition on our mid North Sea High <unk> multi client program as acquisition proceeded ahead of schedule this quarter.
As a result of our lower first half revenues, we expect it to consume cash during the quarter. Our cash balance was 27 million at quarter end, including $20 million, we drew on our revolver last year, our total liquidity defined as the combination of our cash balance and our available borrowing capacity under our revolving credit facility was $33 million.
As we reported last call in April we successfully completed our bond restructuring and concurrent rights offerings.
The deal extended our bond maturity of four years with the convertible feature that provides a path to convert the debt to equity in coming years.
In the rights offering shareholders exercised subscription rights totaling $42 million purchasing either new notes for common stock.
In total $116 million in new notes and 11 million shares of common stock were issued that generated $14 million in net proceeds for the company.
$7 million of old notes remain outstanding and due in December 2021.
Sure.
While we completed these favorable transactions and revenues improved sequentially the timing of the market recovery remains uncertain and revenues for the first half of 2021 were lower than expected.
These lower than planned revenues will have an impact on second half cash collections necessary to fund our operations and to meet our debt and other obligations. Therefore, triggering a going concern issue for Ireland.
We continually evaluate conditions in the capital markets and we'll continue to explore additional funding opportunities through private or public equity transactions debt financing or other capital sources, such as the sale of non strategic assets to meet our ongoing cash needs in.
In addition in the third quarter, we are implementing a significant cost reduction program building on the over $40 million eliminated last year in an effort to continue to rightsize, our business, while still being able to capitalize on evolving market opportunities where.
We're targeting approximately 15% to $20 million in annualized savings through a combination of both short term and long term initiatives.
These efforts continue our focus on supporting and strategically growing our business, while maintaining capital discipline.
We reinvigorated efforts to close to 12 million sale of our 49% equity stake in the non strategic and Nova joint venture with BGP by bringing additional interested parties to the table to increased competition and accelerate closure, we will continue to evaluate other non strategic asset sales and pursue additional sources of government relief such.
Employee retention credits during the second quarter, the 7 million PPP loan we received last year was fully forget them.
Our top fiscal focus remains supporting cash managing liquidity in the current uncertain macroeconomic environment.
In July we submitted a preliminary epsilon in anticipation of a potential public offering of our common stock while the S. One remains on file there are several variables to consider such as macro factors in our share price to date, we have decided not to issue our common stock at these price levels, but will continue to monitor market conditions.
<unk> with that I'll turn it back to Chris.
Thanks, Mike.
Today's rapidly evolving landscape, we're focused on empowering clients to operate more efficiently and sustainably our offshore data and digitalization technologies are key ingredients for enabling the sustainable use of marine resources combating climate change and optimizing traditional MVP development, while supporting the transition to renewable resources.
Both business segments are making progress penetrating much larger addressable market, our <unk> strategy shifts our offerings closer to the reservoir, where capital is flowing the programs have greater earnings potential.
The second phase of our mid North Sea High program is a hallmark of our <unk> new acquisition multi client market entry strategy and we look forward to launching additional programs as funding coalesces.
We described increasing traction around our maturing marlin platform through trial tenders and broader government initiatives. We continue to increase brand awareness in new target markets refined new customer acquisition strategy and expand sales coverage to overcome crossing the chasm challenges we.
We are laser focused on strategy execution prioritizing deals that frontload cash and projects with scale such as the African government Maritime digitalization outreach, we're looking to accelerate speed to market indoor enhance our offerings through strategic partnerships for instance, the global <unk> data library deal with Pizza on a radical sequencing culture is focused on doing fewer things better.
And minimizing distractions, we expect momentum to continue building as the year unfolds and are committed to continuing to right size the business to provide sufficient runway for successful diversification effort.
Seismic market continues to recover.
With that I will turn it back to the operator for Q&A.
Yeah.
And thank you.
Ladies and gentlemen at this time, we will be conducting a question and answer session. If you have a question. Please press Star then the one key on your telephone.
<unk> been answered or you wish to remove yourself from the queue. Please press the pound key.
First question comes from Jeffrey Campbell from Alliance Global Partners. Your line is now open.
Good morning.
Good morning.
My first question is could you provide some color on where you are seeking further cost reductions.
I made reference to it that'd be helpful.
Sure Jeff Thanks for asking the question so.
One of.
The biggest things we're going to be looking at is our real estate footprint.
The pandemic is of course totally changed the way.
Most companies and certainly ourselves think about.
On premises office space, we have quite a lot in Houston and also in other parts of the world. So we are we've been in motion on a process to.
We reduced substantially our footprint move to more a hybrid with people coming part time to the office part time remote remote working has worked extremely well for us during the pandemic.
And continues to do so and so we will be shifting that as fast as we can we're working with brokers to.
To find ways to do that.
Certainly in our headquarters in Houston, where we have a lot of space, but other parts of the world as well.
And then other things will be.
Looking at the Consol.
Consolidating supply chain looking at.
Human resources elements will be part of that as well we need to look at all aspects of the business.
Okay, No that's very helpful.
I appreciate the color on the remote.
And then the other noted and just one more piece of that I mean, we did mentioned divestments.
No.
Some of that is cash generation divesting.
Actually parts of our technology stack or legacy stack as well as IP.
That is non strategic we have quite a lot of pattern.
And technology in the background. So I think that would be one but that doesn't necessarily reduce costs, but some divestment of businesses. Obviously it takes cost away with those businesses as well so that's the other side of it.
Okay.
You noted that well alerted advance beyond your initial target market. So I was wondering if you could remind us again, what that first market was at what sort of.
Regulatory goals or actions.
<unk>.
The level or horizon.
Yes. So the initial the initial focus of well alert was plugged and abandoned wells where in certain in certain geographies theres regulatory requirements to monitor those so that was our target.
Really driven by a major oil and gas company that wants to have a solution in their operating regime.
We thought that go in parallel with that to get to sea trials faster, we would look at other.
Geographies that will probably have emerging regulatory requirements like the U K the U S and perhaps Australia, New Zealand area. So so we've done outreach there theres definitely.
Are there other lines of interest and the other piece that came there is also just C. C. U S. C O two monitoring is.
<unk> two is re injected.
Physical monitoring with seabed type systems.
We will make sense. So that's really just a changing out of the methane sniff refer a C O two sniffer on the device.
Okay, and I'll ask one last one and then turn it over to others I just wanted to ask you about slide eight I think that was probably referring to the.
Government acting as a chaperone.
In Africa that we've talked about before if I'm wrong, correct me, but I was wondering.
The 15th country introductions that you referenced.
Was that within or did it exceed your expectations any sense at this point.
Any of those introductions might continue onto next levels of discussion and finally.
Do you have any sense at this government assistance effort might extend beyond Africa at some point.
Yes, Great question. This is one of the bigger shifts in our strategy for 2021, I mean, we really just started and I mentioned it briefly on the earnings call.
Last time, we had really just started it and we are it has exceeded expectations. We have worked with the U S Department of Commerce.
There are tradeoffs shades in the embassies the U S ambassadors to these countries and we have had.
I've personally been on multiple.
Calls, where they've got U S government has introduced us to the ministries involved whether the vessel support industries the department of interior.
The Fisheries Department and we have generated follow on discussions with those ministries from those.
Yes.
<unk> engagement and introductions.
And we are working towards that we're making proposals.
Several of those countries now so.
Yeah with a view that we would hope to get a funded pilot done before the end of the year kind of on the one on $1 million to $2 million scale to basically determine.
The relevance of our solutions for their challenges, which are which are brought in brought in significant.
So we are having excellent ministry level discussions about our solution and how we can help them and how we went back that.
For them with that with Exim bank funding or other other sources of.
Funding for those for those countries for the products. So it's.
It's been pretty exciting and it really is a shift to a much larger scale more like we've done with our our data library business in Africa and other areas in the past and secondly, your other question about other areas. We are also looking at.
The U S Department of Commerce supports these initiatives also in other parts of the world. So we are thinking about South Africa, South America as well.
Some initial inroads there, but we're really focusing on converting something towards the end of the year in Africa with.
With a view that 'twenty two would be would be when solutions get rolled out at larger scale.
Okay, Great I appreciate the color.
Yes.
Thank you and our next question comes from Colin Rusch from Oppenheimer. Your line is now open.
Thanks, so much guidance.
Given these new technology efforts that Youre looking at I don't want to get a sense of kind of ongoing R&D spend and any sort of incremental increases in what that cadence might look like as we get through the balance of this year.
Yes, so thats a good question Collin thanks for joining.
So we typically if you've watched us over the last probably five six years with revenues down and up and down.
We've been about 10%.
R&D, 10% of revenue, we continue to be around that even with the covid.
Impact on substantial substantial impact on revenues over the last three or four quarters, and we did scale R&D down and certainly outside spend on technology has been curtailed we contained the head count in our R&D group, but we have felt it's been essential to stay differentiated.
And the selected areas, we're focusing on.
And most of our R&D is deployed to the business lines, whether that's imaging, whether that's data library, whether that software.
And we have a very small centralized team of subject matter experts that looked at.
Things that add onto those.
You know what we've said really at the beginning of the years is we're not going to increase R&D spend.
From the baseline.
It's been also stressed that we need to have R&D funding from customers that they need to vote with their wallets that they want these technologies given the nature of our industry.
And we're not going to repeat mistakes in the past, where we build things, but they will come it's going to be we want them to ask for things and we will we will build what they asked for and pay for it so.
So yes, so we've had an overlay now of customer funding. If we had funding for the Gemini stores that we rolled out very successfully.
At the end of last year and early this year into Q2, and we also had we have funding for some you know some very small new things that we're looking at and we'd anticipate before you scale up.
Well then we would also have customer funding for that.
Okay. That's super helpful. And then just just on the revolver.
Sorry for the detail here, but just want to understand how much incremental capacity you still have lost on that as you exited the quarter from a cash perspective.
Yeah, Mike why don't you jumping on that one.
Thanks Colin.
The borrowing base calculated so the capacity is dependent upon.
Receivables inventory and our.
Data library is a significant piece of that what I would say with the low first half revenues even into Q2 receivables are not a big piece of that so.
When things in Peru, and receivables are bigger it will naturally increase that underlying level of capacity, what I would say a Q2 and today with where were at essentially we borrowed too.
The about to the amount that.
We can so it's really looking to improvement feeding the collateral increase and the collateral would give us more availability.
Perfect. That's super helpful guys. Thanks, so much okay. Thank you.
Yeah.
Thank you and our next question comes from Amit Dayal from H C. Wainwright. Your line is now open.
Thank you and good morning, everyone.
Alright.
Chris in terms of the seismic challenges.
The highlighted.
In the seismic market challenges in the seismic market.
Are these more longer term given all of these regulatory pressures in.
In the legacy energy markets like how do you see sort of.
Coming to.
Or overcoming some of these challenges any color on that would be helpful. Thank you.
Amit. Thank you so much great question, obviously, the largest percentage of our revenues.
Come from.
Seismic data market in the oil and gas sector and it's been a challenging you know the rest of oil and gas has become frothy with the commodity price coming back in the first half of the year Plasmic has not participated particularly in that yet usually it would start would have started by now and you know what the correlation with the energy price for the oil and gas price. So we.
Do anticipate that we will come back.
I will say, obviously that we did have a sequential improvement which relates to our customers.
Customers underwriting our new program in the North Sea I think it's about having those assets as we said in the script.
In the right places to serve the new the new needs of our customers during the energy transition and I think we're well placed for that in Brazil, and the U K.
And so we did see that sequential improvement perhaps not not.
<unk> shown by some of our other peers, so but I do think they all expect to see kind of a linear.
Increased through the end of the year and I think we have line of sight on things improving in that regard not leaps and bounds, but improving nonetheless, and some of that is the iOS sees that you know.
I have been really working under a changed remit.
The energy transition from there.
We are starting to realign and get engaged and we're having discussions in the in select areas where again.
The purchase of data fits their overarching goals.
And we do have a major supporting arm in the North Sea high program as well as independents. The other sector is emerging independent too.
As iOS these divest some of their their traditional asset.
As they progress their energy transition strategy other people pick those up and develop them and need data in independents are moving into the Fray and we're having independent stuff support processing of seismic.
The library spend with us.
Again on mid North Sea high and others and then the third is the NSF fees. I know these are progressing ahead. They they have a slow pace generally they're not the rapid responders to data needs, perhaps that we've seen in the past with iOS ease, but they are expanding out around the world of their home countries. There are investing in data.
In a in a thoughtful manner.
As they support.
Asset sales and license rounds et cetera, and.
So we see coming in the pipe are predominantly driven by <unk> and the areas, where we have a large large datasets such as Brazil, which is all a reprocessing and Remastering program. So so that's that's kind of the flavor, we see now and I think all of that together supports.
A modest but a sequential increase in data library sales for US you can see what we see in our pipeline, but I think it probably also appears we'll see some of that as well.
Okay. Thank you for that guidance.
Hum.
The background.
Maybe potentially expected during the course of the year is that coming from Judy or treaty contracts, you think yes.
Almost all the backlog is coming from both on the place we have backlog that is basically from our underwritten new seismic three D programs and Thats, where our backlog will turn.
Turned back up we have some things coming up soon we belief and then the rest is.
Really three D processing also are both on the multi client side gets a late underwriting as we get close to finalizing those products in Brazil for example, and then.
And then we get backlog based on the <unk>.
Services the umbrella contract I mentioned for example, so you know all of our.
Primary imaging is is three D and lastly, the Gemini deployment is when we book services contracts are about as we did in the first half, which with shell and jointly with PGS.
That was also.
<unk>.
Okay. Thank you.
Early in the year, you had highlighted securing a proof of concept from our board.
Platform logistics application within E&P major how does that move forward in any way.
Yes. It has I mentioned that last time. So we do have the proof of concept has led to a tendering and we're in the final discussions there are a couple of other participants in that tender.
It has been reshaped, but it's a it's due in the next couple of weeks, we're gonna here, one way or the other.
On that one on the large scale supply vessel management.
Okay.
And that's all I have guidance for now thank you. So much. Thank you so much.
And thank you.
Okay.
And I am showing no further questions I would now like to turn.
I'd like to turn the call back to Chris Thatcher for closing remarks.
Yes. Thank you so much I appreciate it yes.
Yes, I just would cloud pardon pardon me Mr. <unk>, we have one person will Crowley from gates capital.
Got it okay well.
Okay.
Hey, Chris This is Jeff so.
Why are the magic number 15 to 20 on cost.
Cutting one why is it not more than that and the question is.
It was 15 to 20 and not to get you to to cash flow breakeven for the balance of the year or are you content.
So to continue burning cash.
No, we're not content and that content to continue burning cash for sure it's been painful.
For all of US are all stakeholders to watch that.
With the unprecedented drop in revenue. Despite the cuts we had already made so 15 to 20.
It seems to be when might we look at the things we can control.
And move on and the current market.
The next steps.
And looking at you know, obviously, where we think revenues are going to go and in our most conservative revenue models and.
What costs, we can take out across the spectrum of real estate asset divestments and the cost to go with them and then and then you know vendor control.
Conor.
Contractor.
And employee costs and all those things that's what we think we can get two whilst also retaining the agility and responsiveness of our of our kind of basically organization to respond to the.
Very modest recovery in market share grab.
Grab that we have underway and are in the <unk> space. So we believe it's enough and if we need to do more we would and.
It becomes harder and harder to do that given the cost we've taken out already.
It's a great question I'm not surprised you asked it.
Someone did.
Mike do you want to add anything else to that.
Okay.
Chris I think you added the appropriate level of color and I answered it so.
Yeah, and then the other side of that Jeff is not just reduce the cost we do need I mean, we basically need to take out the structural cost that will handle the uncertainty of the times we're in.
We need to be.
Cash cash flow breakeven or better in the first half of next year.
And in a sustainable way and we believe 2022.
A better year than 2021 has played out to be.
Even in the seismic space in the other areas, where we believe we're going to get some scale and so.
And on the other side of that is cash.
Cash beyond just cash freed up from from cost cutting it is we have a real commitment to looking at the assets. We have that are not core to our strategy. We publicly of course talked about the another thing which has been frustratingly long to materialize, hence our reopening of that process.
Which is encouraging and secondly, other things.
No we can't say what they are at this point, but I think theres interest in another other things iron has built up as a technology company over the years in business lines that probably may not be as core to the strategy. We have going forward. So again fewer things better and generate some cash from that as part of that bridge too.
A sustainable.
Marketplace to participate in with a sustainable platform.
And can you.
Secondly, can you talk about the level of multi client investment has been greater than the new venture revenue for several quarters now and I'm wondering.
The net investment in the library seems to be.
Going up and I'm, just kind of wondering what the.
Is there less underwriting or are you doing more with less underwriting or.
And then also can you talk about.
The late sale.
Environment and the prospects for do you expect to catch up in late sales in the second half of the year or do you expect those budgets just not to be used by the by the oil companies.
Yes, so good question and I'm going to let Mike jump on it a little bit too Bob I'll start and so the yeah. So yeah. So if you look at it.
Done about 12 million to $12 million of multi client spend in the first half, which some of that stuff really catching up from things that were done.
They are in our accounts accounts payable that were done several years ago. So it's not new investment and we are working that out of the system.
So the real investment in the first half is about $8 million.
And that does flip as you note the the pre funded revenues that.
We've noted in the numbers.
So we are seeing.
So it's not 100% pre funded but the level that we.
It's probably about the level, we've seen for a while I don't.
I think going forward the thing where it's been a see through the rest of the year, which may not take us to the high end of that that.
That range, we discussed but the range as such because we're doing fewer projects, but they're three D. I think any new when you see will be pretty much 100% pre funded on the <unk> the new acquisition side.
For the cash issues and and working capital side of things obviously.
So that's why you would see there and I'm. The only other area that is not necessarily pre funded upfront as the three D repricing, where we're in areas, where we are treating onto Arthur Kania Ah <unk> program that is deliberate four to six times returns on the very low investments due to getting public public tapes from governments and re imaging with our fixed cost.
Infrastructure.
So those tend to be late underwriting, but as you get closer to the lease sales and others that are basically the clients come in you will see in the second half that isn't that.
That $8 million number that outstrips, the five or so that we have.
Blended so far you will see that the sales that will come from.
That commitment from ion on those reprocessing projects will outstrip the are the.
The cost in.
In the second half.
In a material way.
Okay, you got anything else to add on that.
Yes.
The color I would add and you gave the numbers, but in the kitchen.
10-Q, we filed this morning, you'll see that spin we disclosed about $5 million of that was related to past work in previous years that we're catching up to it's Jeff you add to your question of numbers, it's about $8 million of first half has been on a pretty low $5 million revenue number most of that had been the internal work that Chris had mentioned.
On the <unk> reprocessing that is more typical to a when it's closer to being finished as when that.
Late underwriting comes in and that's what we're <unk>.
Seen and is looking to transpire.
In the back half of this year like we've seen in past years other than.
Kind of excluding last year's activity.
Okay.
Okay. Thank you that's helpful.
Thanks, Jeff.
Thank you.
There are no further questions in queue I'd like to hand, the call back to Chris <unk> for closing remarks.
Yeah, So actually Jeff's very timely question kind of covered the kind of the summary topics I was going to make around the structural cost in the a and.
And the way, we see things improving.
Through the rest of the year in terms of the library, new acquisition and repurchasing.
Project.
So that's fine I guess, all I'd, rather I'd, just say, it's like watching the trend in the in our market seismic in general is we're suffering from the same things as the others.
Perhaps with the exception of PGS and <unk>.
We need to figure out the best way to navigate out of there and I think being smaller and nimble.
Working very hard to do that and have the right structural level to do that and take some market share out of a modest market I think the other thing I would say around that is that the western Chico.
Organization used to be one of the largest players out there and definitely with Schlumberger is overall refocus which is good for them I think the western Chico's side has perhaps.
Change focus and we noticed noted their low level of multi client investment in Q2 and I think.
It gives them it gives market share potential for all of us.
To address so plenty of.
That's kind of a macro for seismic and they are in the multi client space.
With regards to our strategy.
So yes, so basically very focused on our strategy execution in a tough space and definitely.
Addressing structural issues to to address the cash flow side of things.
So I'll leave you with that and thank you so much for everyone, joining and asking some really relevant.
Thank you ladies and gentlemen. This concludes today's teleconference. Thank you for participating you may disconnect. Your lines at this time and have a wonderful day.
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