Keith Findlay, 3rd March 2010
Troubled Aberdeen company Offshore Hydrocarbon Mapping (OHM) saw its share price slump yesterday after a gloomy trading update warned investors of further substantial losses.
OHM, which specialises in controlled-source electromagnetic imaging surveys (CSEM) to find oil and gas, said it was also likely to report a year-on-year plunge in revenue for the six months to February 28.
It confirmed previous warnings that income from CSEM surveys during the period had been disappointing, largely as a result of “geopolitically induced delays” to some anticipated contracts.
In addition, the Bridge of Don-based firm revealed it was looking at options for attracting new funding to provide the capital needed to meet ongoing cash-flow requirements and drive future expansion.
OHM also said it expected a much stronger second half than in the previous financial year, when revenue slumped to £3million after a figure of £6.2million for the six months to February 28, 2009. The firm added that overheads had been reduced to an average of £410,000 a month, compared with £630,000 a year earlier.
It also highlighted an upward trend for inquiries and a growing backlog of survey work but investors were spooked by the update, sending OHM’s shares down 25% on Monday’s close to 5.62p.
OHM, which listed on the Alternative Investment Market in 2004, announced a new credit line of up to £1.25million just a few months ago.
The firm had said previously further funding might be needed in the event that increasing levels of inquiries and tender activity failed to result in a flow of profitable orders.
Yesterday, OHM revealed the credit facility – agreed with affiliates of its two largest shareholders, East Hill Hedge Fund and Euro Trans Skips – had been fully used.
It added that it expected first-half pre-tax losses in the range of £4.1million-£4.4million, before impairment provisions and one-off charges, compared with losses of £5.6million a year ago.
Revenue of about £3.2million is anticipated for the latest period, nearly half the total achieved during the first half of 2008-09.
OHM said its wholly owned Rock Solid Images subsidiary had been making a positive contribution, reducing the group’s dependence on CSEM income in difficult market conditions.
It added: “As the market recovers, our focus will inevitably change from cost-cutting to planning and building for future growth.”
Chief executive Richard Cooper said seismic and CSEM methods were playing an increasingly important role in reservoir appraisal, in addition to their traditional place as exploration tools.
He added: “OHM is uniquely positioned to benefit from this trend as this market matures over the coming years.”