HOUSTON, April 2, 2020 /PRNewswire/ -- ION Geophysical
Corporation (NYSE: IO) today announced enhanced measures to
mitigate the impact of COVID-19 and oil price volatility while
maintaining business continuity. The Company plans to scale
down costs by $18 million during the
remaining nine months of 2020 to preserve cash and manage
liquidity, building on the >$20
million permanent cuts taken in January of this year.
ION's asset light strategy avoids significant fixed costs and
provides flexibility to easily scale the business to meet
demand.
ION's priority remains the health and wellbeing of all our
employees and the communities in which we operate and, earlier this
week, we described the steps we had taken to rapidly shift 95% of
our workforce to remote working and enhance protocols in accordance
with CDC recommendations for the remaining 5% of exempted essential
employees onsite.
We have now also assessed the related impact of E&P budget
reductions to our business and, while the duration and extent of
coronavirus is difficult to predict, we are taking decisive action
to proactively manage our business. We are implementing the
following initiatives to reduce costs by $18
million during the remaining nine months of 2020 as outlined
below:
- We are reducing personnel expenses ~$13 million through a variety of furlough
programs and reduced compensation arrangements. ION executives are
taking a 20% base salary reduction and a tiered reduction scheme is
being cascaded to the rest of the worldwide workforce. These
temporary reductions go into effect no later than April 10th and will last until market
conditions improve. The Board of Directors will also be taking a
cut to compensation in alignment with all stakeholders. In
addition, we will eliminate the modest 2019 bonus payout that had
been approved prior. We believe we were right-sized for our vision
and business plans as we entered 2020, and that this response
significantly reduces costs while retaining our talented workforce
and preserves their access to benefits through this challenging
time.
- We are further decreasing SG&A costs by
~$5 million. We will continue
curtailing the use of external contractors and narrow our supply
chain, while implementing new systems and processes that more
efficiently support our business. We slashed spending on physical
trade shows and quickly pivoted to new digital go-to-market
strategies. T&E has been cut by over 80% through the end of the
year.
In addition to the aforementioned cost reductions, we are also
scaling back capital expenditure estimates for the year to
$20-$35
million, down from our initial estimate of $35-$50 million
to reflect both reduced seismic demand and travel/border
restrictions impacting new data acquisition offshore. The
majority of our capital expenditures relate to investments in our
multi-client data library. Our sanctioning approach continues
to require that a majority of new multi-client program costs are
underwritten by customers or other financial partners. Our
conservative approach to data library investment, successfully
implemented in prior downturns, is a prudent way to respond to
sudden reductions in demand for new data. This provides
flexibility to aggressively reduce cash outflows while shifting to
much lower cost reimaging programs. Non-program related capex
associated with computing infrastructure and corporate IT has also
been removed from our revised 2020 budget.
"The combination of our business continuity plans and cost
reduction initiatives enable ION to remain agile and support
clients while navigating these uncertain times," said Chris Usher, ION's President and Chief Executive
Officer. "I believe we are better positioned given our first
quarter results, and with decent levels of backlog and recurring
revenue in some parts of the business, we can mitigate some of the
immediate impacts of the market decline. These new expense
reductions, on top of the over $20
million of cost cuts that we announced in January, create a
significantly improved buffer for maneuvering through unprecedented
times in our world, and our industry. We are actively
evaluating innovative ways to retain our talented team, including
the applicability of government relief efforts around the
globe."
About ION
Leveraging innovative technologies, ION delivers powerful
data-driven decision-making to offshore energy, ports and defense
industries, enabling our clients to optimize operations and deliver
superior returns. Learn more at iongeo.com.
Contacts
ION (Investor relations)
Executive Vice President and Chief Financial Officer
Mike Morrison, +1 281.552.3011
mike.morrison@iongeo.com
ION (Media relations)
Vice President, Communications
Rachel White, +1 281.781.1168
rachel.white@iongeo.com
The information herein contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements may include information and other
statements that are not of historical fact. Actual results may vary
materially from those described in these forward-looking
statements. All forward-looking statements reflect numerous
assumptions and involve a number of risks and uncertainties. These
risks and uncertainties include the risks associated with the
timing and development of ION Geophysical Corporation's products
and services; pricing pressure; decreased demand; changes in oil
prices; political, execution, regulatory, and currency risks; the
COVID-19 pandemic; and the Saudi-Russian oil price war. These risks
and uncertainties also include risks associated with the
WesternGeco litigation and other related proceedings. We cannot
predict the outcome of this litigation or the related
proceedings. For additional information regarding these
various risks and uncertainties, including the WesternGeco
litigation, see our Form 10-K for the year ended December 31, 2019, filed on February 6, 2020. Additional risk factors, which
could affect actual results, are disclosed by the Company in its
filings with the Securities and Exchange Commission ("SEC"),
including its Form 10-K, Form 10-Qs and Form 8-Ks filed during the
year. The Company expressly disclaims any obligation to revise or
update any forward-looking statements.
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SOURCE ION Geophysical Corporation