transit enabled the Company to save between 8 and 13 days compared to the normal transit routes between Europe and Asia-Pacific, further reducing the environmental footprint of the passage POLARCUS ALIMA was thereby placed into the highly visible and demanding region of the Southern Oceans around New Zealand where environmental, health and safety issues are at the forefront of every project. Whilst operating in this region the vessel has continued to perform to the highest standards. Polarcus believes that the Company’s focus on its Arctic credentials has subsequently been a major contributor to securing certain key Arctic projects in environmentally sensitive areas for execution in 2012.
3. Operations and markets During 2011, Polarcus doubled its operational fleet from three to six high-end 3D seismic vessels. The Company delivered significant improvements in technical performance throughout the year resulting in technical downtime of just 5.8% by year end. The vessel utilization on contract of 79% is lower than the Company’s aspirations but with two vessels being delivered from the yard in 2012 and a fleet size closer to critical mass, utilization is expected to improve going forward. Polarcus has increased its market share amongst all client segments including super-majors. Being a newcomer in a flat seismic market where clients seek a proven track record is always a challenge but the Company nevertheless succeeded in adding more than thirty customers to its client list. The Company’s outstanding quality of delivered data has been commented on by a number of clients. Whilst POLARCUS SELMA (now M/V Vyacheslav Tikhonov) was for strategic reasons placed on a 5 year bareboat charter agreement with Russian shipping company OAO Sovcomflot the rest of the Company’s 5 vessels presently in operation are active in the global contract market where they compete with five main seismic companies in the high-end market segment. Seismic operations in general are split between contract seismic, where data is acquired exclusively for an oil company, and multi-client, where seismic companies plan and undertake a survey for its own account, subsequently marketing the final fully processed project data to multiple customers on a non-exclusive license basis. Unlike the contract model, the seismic companies own the acquired data, or are granted exclusive marketing rights for it, for a period of ten or sometimes more years. In Q3 2011 Polarcus launched its inaugural 3D multi-client project in UK Quad 28, completing seismic acquisition in November 2011 and the subsequent data processing in Q1 2012. The survey, named the “Catcher project”, encompasses the recent significant Catcher oil discovery and several adjacent open blocks that are on offer in the current UK 27th Round that opened in January 2012. The project has attracted strong industry interest and saw increasing prefunding commitments through the year. The survey was undertaken through a 50/50 joint venture with Sabaro Investments Limited. Polarcus saw contract prices being stable in H1 2011, despite the disruptions seen post Macondo in the Gulf of Mexico a year earlier, that also coincided with new vessel capacity entering the market. However, in Q3 2011 implied day rates on new contracts signed were higher than day rates previously achieved. The Company believes this reflected a strengthening of certain regional markets. Following this slight strengthening in Q3 2011 the market environment for seismic became highly competitive again in Q4 2011 as an estimated 23 vessels transited from NW Europe at the end of the traditional operating season. With a limited number of new contract opportunities immediately available at that time there was consequently renewed pressure on day rates. During 2011 the Company announced projects in Asia-Pacific that broadened the global footprint of the Polarcus fleet, a key strategic objective. Further, included in the current backlog are two Arctic projects secured offshore Greenland for three vessels in 2012. These three vessels all have the high ICE 1A or 1A* class and the contracts are considered by the Company to be a strong endorsement of the investment it has made into leading-edge Arctic technologies, systems and procedures.
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