"This is a visible transition period for the domestic seismic survey
Mr. Z. P. Marshall, Chairman, Alphageo (India) Limited
The year 2012-13 was one of the toughest in living memory as the business pipeline in
India ran dry. During the year under review, the Company could only complete the NTPC
project and received one contract from Oil India Limited in January, 2013, which was
delayed due to licensing issues. Besides, our Manipur project remained stalled due to
issues beyond our control. The result was that our topline of Rs.797 Lakh (standalone) was
our lowest in a decade.
However, the silver lining in this grim scenario was the performance of our
international business. We received two projects from Myanmar for a cumulative project
value of about US$12 million, an important achievement for the following reasons:
We emerged as the only Indian company to establish a strong foothold in the
Myanmar E&P sector
We successfully out-bid entrenched Chinese players
We de-risked our business from an excessive dependence on a single geography
The other heartening development was that we received an assignment from Oil India to
be executed in 2013-14. The mix of these developments indicates credible revenue
visibility for Alphageo 2013-14 onwards.
The Indian scenario
This is clearly a transition period for Indias seismic survey sector. Not too
long ago, India would periodically report about nine-to-ten seismic survey opportunities a
year; today, this has declined to about two-to-three a year.
The apparent contradiction between such an industry scenario and crude oil movement
needs to be explained.
Allottees under the final NELP rounds were largely industrial groups making a
first-time entry into the business of oil exploration. Given their relative inexperience,
they do not appear too keen to make large exploration investments. Moreover, the
Government is yet to finalise and implement the Open Acreage Licensing Policy (OALP),
which is accepted as the next progressive and logical step forward for Indias
The current trend is expected to reverse over the medium-term. Business prospects will
improve as governmental regulations imposed heavy penalties and block confiscation
following survey inaction beyond a certain period from the date of allotment. Besides, the
government plans to implement the OALP in the near future.
A new Speculative Seismic Survey Policy is also being worked upon in the regulatory
corridors. This initiative will divide India into blocks on which private operators can
undertake seismic surveys and market the acquired data to interested corporates to apply
to the government for a license for E&P activities. This policy indicates attractive
opportunities for the seismic services business.
The international business
The international market for seismic services remains robust as nations work towards
building their energy security. In addition, surging shale gas production in the US and
the possibility of replicating this success worldwide can potentially revolutionise global
energy markets. Every nation is seeking to explore this new energy source, which can
provide sizeable global seismic survey opportunities.
At Alphageo, we follow a policy of cautious aggression when it comes to our
international business. We are not driven by the motivation of expanding our presence
across multiple nations, but are focused on establishing a strong footprint in select
countries, building credibility, brand equity and leveraging it for onward geographic
Business prospects will improve as governmental regulations imposed heavy penalties and
block confiscation following survey inaction beyond a certain period from the date of
As a first step towards this, we selected to establish our footprint in Myanmar, a
country with hitherto negligible exploration activity. It was only recently that the
Government opened the space and in fiscal 2012-13 witnessed the first round of licenses
for oil blocks. The second round is expected to commence in the coming months, offering
licenses for 18 blocks. As we continue working on our first assignment, we can safely say
that we have established our credentials in this space.
Additionally, we are scouting for similar opportunities in the Middle East and Africa
to strengthen our global presence and expect that it would take anywhere between 18-24
months for these to yield significant results.
Message to shareholders
While the going has been tough in the recent past, our present order book and enhanced
capabilities provide us with the confidence of robust business growth and return to
profitability, translating into shareholder value creation.
Z P Marshall,