Getech Grp Share News (GTC)

In normal times, a sharp rally in the oil price would bode well for companies that provide services to big oil firms, but unfortunately for Getech these are not normal times.Getech, which provides oil and gas companies with geophysical data to help them track down the black gold, fell into losses in the year to July 31 as the oil price slumped.The company, whose clients include the likes of BP and ExxonMobil, posted a pre-tax loss of £630,000 compared with a profit of £900,000 the previous year as revenues slid to £3.31m from £4.12m. Getech was forced to suspend its final dividend, having paid out 0.6p a share at the interim stage.The fall in revenues was due to the collapse in the oil price, which fell from a peak of $147 a barrel in July 2008 to the mid $30s in December, and to the global economic downturn with which that collapse was closely connected. If oil companies are to splash out on expensive services that help them drill for the fuel, they need the certainty of high prices and a healthy global economy to sustain such prices.Oil prices have since recovered to levels above $80 a barrel, which is good news for Getech, but the dust has yet to settle following the economic storm that began towards the end of last year and the outlook for Getech remains uncertain.While Getech has suspended its dividend, big oil prices will be loath to do this, meaning that they will have less cash to spend on services such as Getech's. The broker Nomura notes that in Shell's 2010 budgeting plans, capital expenditure has been cut by 8% and thinks that other companies, which don't share the firm's balance sheet strength, may have to go further. Nomura also noted that cuts are likely to be directed towards the natural gas side of oil and gas firms' business. Following its acquisition in December 2008 of the US firm Lisle Gravity, whose assets include the largest commercially available library of onshore gravity data, the firm has strong exposure to the US gas market, so this could be an area of concern.Getech notes that the US gas market has been slow to recover but said there are signs that activity in the US is beginning to build up again, although this is expected to be slow.In keeping with the uncertain outlook, Getech's chief executive Raymond Wolfson said that the firm had been shifting towards its 'must-have' services such as geophysical data processing from its 'nice-to-have' data and studies activities. However, he was keen to emphasise that while engaging in less lucrative activities the company always has an eye on establishing relationships which could lead to companies spending more when the outlook brightens.Despite all the worries over the economic recovery and oil price volatility, normality will eventually return to the world economy and Getech has already shown that it can be a profitable company in normal conditions. WH Ireland, the house broker, is predicting that the firm will return to profitability in 2011.It notes that there has been little evidence of spending taps being opened by the big oil companies. With December traditionally a buoyant month for oil services groups as big firms look to use up their annual budgets, the broker expects more clarity to emerge by the end of the year.