October Idea of the Month: Feel the Earth, Move, Under Your Feet

Looking into a recent personal buy for our Idea of the Month

By Travis Johnson, Stock Gumshoe, October 21, 2013

This month, as I indicated I would do when I surprisingly bought some shares of a seismic company a little while ago, I want to take a look at two of the available “seismic data” stocks — there are many others, including companies that specialize in software or processing or building or running the equipment to do seismic surveys, but the two I want to focus on are firms that are asset-light (ie, they don’t own the big seismic data collection ships or trucks) and are focused on acquiring, processing, and selling growing libraries of seismic data.

There are also other stocks in this group, but the two I want to focus on are a large Texan/Norwegian firm and a small Canadian one — TGS Nopec (TGS in Oslo, TGSNF or TGSGY on the pink sheets — I prefer TGSGY because it’s the sponsored ADR that the company launched in June of this year, so data and future liquidity should be better for that one) and Pulse Seismic (PSD in Toronto, PLSDF on the pink sheets). I’ll also look briefly at some of the less “pure play” library names that are easier to trade, since both of these are somewhat illiquid on the pink sheets.

First — what is seismic? And what do I mean by a “library?”

Seismic data is used by oil and gas exploration companies in discovering and defining underground reservoirs, and in choosing specific drilling locations to try to hit those reservoirs. Marine seismic data is acquired by ships towing long arrays of sensors that pick up reflected sonar signals, and land seismic is acquired by land sensors that are spaced physically to “listen” to the reverberations caused either by a truck with a heavy vibrating plate or by controlled explosions. In either case, the data acquired by these sensors either 2D or 3D seismic data, depending on how many sensors they employ, is crunched by increasingly powerful computers to give petroleum geologists and engineers a picture of the density and shape of the different layers of rock and earth underfoot (or under water), which can show potential reservoirs or traps that indicate the possible presence of oil and gas. You still don’t know for sure what’s under there without drilling, but seismic data shows you where to drill.

And seismic data can remain valuable for a long time after it’s collected ...

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