Quench the World’s Thirst for Oil: Geospace Technologies Corp (GEOS)

One of Norway’s oil majors, Statoil has been awarded interest in fourteen production licenses on the Norwegian continental shelf, of which it will operate seven. These development projects are expected to be one of the growth drivers of Statoil’s objective of increasing its daily production to 2.5 mmboe (million oil barrels of oil equivalent) per day by 2020 and, in turn, boost its profits.

For 2012, the company met its production growth target of 8 percent. For the fourth quarter of 2012 it reported an operating income of NOK 45.8 billion and net income of NOK 13.0 billion. Its strong earnings growth enabled the company to increase its 2012 dividend to NOK 6.75 per share from NOK 6.50 in 2011.

More to Expect for Geospace

Companies like Geospace service Statoil, and hence can expect more business from the Norwegian oil major as it seeks to boost its output by 25 percent by the end of this decade. This year the company has set a $19 billion capital expenditure, up from the $18 billion it spent in 2012. This spending would average an estimated $21 billion annually up to 2016 as Statoil hikes it exploration investments and puts new developments on stream.

Delivery of the Geospace systems to Statoil’s Norwegian projects will be made at various intervals and will extend into 2015, yet another indication of the solid footing of companies servicing the hunt for hydrocarbon deposits. Therefore, further solidifying a position in Geospace appears warranted for any forward-looking investor. The Statoil deal alone will deliver about 45 percent, 40 percent, and 15 percent of the contract revenues for FY 2012, 2014, and 2015, respectively. Moreover, other drivers of the company’s growth—wireless and reservoir products—are expected to continue bringing in robust results, an add-on for analysts to bump up earnings forecasts for Geospace, which will certainly benefit as it helps sate the world’s thirst for oil.

The article Quench the World’s Thirst for Oil originally appeared on Fool.com and is written by Renia Bula.

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