Goldman Sachs: Upstream Oil & Gas Exploration Restarts; Seismic Services Enter Multi-Year Upswing

Overview

By interpreting feedback from the EAGE 2026 conference and conversations with the CFO of Viridien (formerly CGG), combined with Goldman Sachs' proprietary macro and industry analysis, this report argues that global upstream oil and gas exploration is recovering, marking the beginning of a new, disciplined capex upcycle. The report notes that while 2026 revenues may not fully reflect this trend (as budgets are already locked in), institutions broadly expect a clear inflection point with significant budget increases in 2027. In the seismic services sub-sector, after years of supply-side rationalization and consolidation, industry concentration is extremely high. This will grant remaining service providers stronger pricing power and cash flow generation capabilities as demand recovers.

Core views

First, on the demand side, the industry is undergoing a style switch from "capital discipline" to "growth investment." Over the past decade, due to an excessive focus on short-term cost cutting and brownfield projects, the Reserve Life of top global projects has dropped sharply from approximately 55 years in 2012 to about 20 years in 2026. This erosion of reserve life,叠加 with OPEC spare capacity at multi-year lows and U.S. shale production plateauing, forces major oil companies to prioritize reserve replacement. The attendance of over 6,000 people and increased executive engagement at the EAGE 2026 conference represent the strongest recovery signal in years. Notably, the return of "Frontier Exploration" has become the dominant theme; historical data shows that approximately 80% of activity was concentrated in near-fields, but this is no longer sufficient to offset reserve declines. Recently, client interest in new blocks has heated up noticeably in regions such as Uruguay, Brazil's Equatorial Margin, Angola, Egypt, and Liberia. Second, the demand structure for seismic services is undergoing profound changes. In the short term, "Reprocessing" is the primary driver. As success rates for new drilling remain relatively low (approx. 20-25%), clients increasingly prefer to reprocess data in frontier basins before drilling to lock in data quality early. Meanwhile, behavioral patterns are shifting: the proportion of Prefunding is rising, and National Oil Companies (NOCs) like ADNOC are increasingly outsourcing the entire workflow—from imaging to target selection—to seismic service providers rather than building in-house teams. This directly benefits asset-light technology platforms with proprietary AI algorithms and internal High-Performance Computing (HPC) capabilities, such as Viridien. Finally, regarding the competitive landscape, the marine seismic industry has experienced severe supply-side rationalization. Since 2014, global 3D seismic vessel capacity has declined by approximately 70%-90%, shrinking from a peak of about 60 vessels to just 16-17 active vessels today. A duopoly has formed: TGS and Shearwater control the vast majority of Western Streamer and Ocean Bottom Node (OBN) capacity, while Viridien and SLB focus on data and digital solutions. This high concentration significantly raises barriers to entry. Goldman Sachs believes the current recovery will not be an irrational spending spree like 2010-2015, but rather a sustainable, disciplined multi-year cycle driven by shareholder return pressures and selective investment.

Analysis framework

This report employs a cross-validation methodology combining "top-down macro cycle assessment" with "bottom-up micro verification across the industrial chain." The first layer is macro and financial framework analysis. Goldman Sachs starts with industry-wide capital allocation logic, utilizing FAS69 data and LSEG statistics to compare the correlation between oil companies' capex intensity (Capex/CFO) and stock price performance across different periods. They found that market sentiment has shifted from rewarding dividends to rewarding capital reinvestment. Simultaneously, by tracking the long-term downward trend in the "Reserve Life" metric, they established the fundamental logic necessitating increased upstream exploration spending. The second layer is industry sentiment tracking. Analysts did not stop at macro inference; instead, by attending the premier EAGE industry conference and conducting in-depth Fireside Chats, they obtained first-hand executive sentiment indicators (e.g., quarterly rolling averages of mentions of the keyword "exploration" during management Q&A sessions). This method of translating qualitative exchanges into quantitative trends effectively captured the inflection point in industry prosperity. The third layer is supply-demand dynamics analysis. After confirming the demand recovery, the report focused on analyzing supply-side elasticity. By reviewing the M&A and restructuring history over the past decade and quantifying the extent of fleet capacity contraction, they derived the conclusion that surviving service providers will reap excess profits under the current supply-demand mismatch.

Methodology notes

• Cycle & Prosperity FrameworkCapacity/Equipment Cycle (Juglar)

  Determining the industry cycle position by observing capital expenditure (Capex) and fixed asset renewal/replacement.

  The report notes that the marine seismic fleet has seen almost no new vessel deliveries for over a decade, leading to severe capacity depletion. This long-cycle equipment depreciation and exit mechanism implies that once demand rebounds, supply cannot respond quickly, thereby supporting upward pricing and margins.

• Event Arbitrage & Behavioral FinanceExpectation Gap / Expectations Management

  Analyzing deviations between market consensus and actual conditions, particularly shifts in capital allocation preferences.

  The report emphasizes that in recent years, the market's insistence on "capital discipline" and high dividends led to exploration being neglected. Now, the market is beginning to reward companies daring to increase capex (high Capex/CFO group outperforming low group by 14pp); this reconstruction of valuation logic constitutes a significant expectation gap.

• Competition & Strategy FrameworkMoat / competitive advantage

  Identifying core barriers within the industry that are difficult for competitors to replicate.

  Regarding AI application, the report points out that while AI can accelerate data processing, it cannot solve underlying physical wave equations. Therefore, companies possessing massive historical multi-client databases and robust HPC computing power (such as Viridien) have built a true moat, preventing disintermediation risks at the technological level.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Equinor (EQNR)

  As a representative upstream oil company, its CMD guidance increasing capex by 9% is viewed as a directional positive signal for industry budget hikes.

  Strengths

  Located in high-interest areas such as Norway, GoM, and Brazil; benefits from the return of frontier exploration.

  Comparison

  Compared to other international majors, its increased capex intensity reflects the overall strategic pivot of the industry.

  Risks

  Risk of supply chain disruptions caused by geopolitical conflicts.

• Viridien (ex-CGG)

  As a leader in seismic data processing, it directly benefits from surging reprocessing demand and client outsourcing trends.

  Strengths

  Possesses proprietary AI algorithms and internal HPC computing power; highly competitive database positioning in Norway, GoM, and Brazil.

  Comparison

  Compared to heavy-asset vessel owners, its asset-light model is better adapted to the current industry environment focused on shareholder returns.

  Risks

  If downstream drilling activity falls short of expectations, reprocessing orders could be delayed.

• TGS / Shearwater

  Controls the vast majority of the world's active streamer and OBN seismic acquisition fleets.

  Strengths

  Extremely high industry concentration grants them strong bargaining power when capacity is tight.

  Comparison

  Represents the oligopolistic landscape following supply-side rationalization.

  Risks

  Although idle capacity can be restarted, if demand surges too rapidly, short-term capacity bottlenecks may still exist.

Key data

• Top Projects Reserve LifeApprox. 20 yearsDown approx. 60% from roughly 55 years in 2012
• Marine Seismic Fleet Capacity ChangeContracted by approx. 85%-90%Decreased from approx. 60 vessels in 2013 to currently approx. 16-17 vessels
• Exploration CapexApprox. $1.8/bbl2024 data, down 59% from peak
• High-Capex Oil Co. Relative Return+14 percentage pointsCompanies with high Capex/CFO ratios outperformed low-ratio peers over the past 6 months
• OBN vs. Streamer Price Comparison4-5xAbsolute prices for Ocean Bottom Node (OBN) technology remain far higher than traditional streamer technology
• IEA 2030 Oil Demand Forecast Upward Revision+5 mb/dEquivalent to China's oil demand growth scale between 2000-2010

Impact & implications

For investors, this suggests that the upstream oil and gas exploration sector may present investment opportunities similar to those in the early 2000s. Specifically within the industrial chain, seismic service providers (especially leading consolidators) will be the most direct beneficiaries, as they face not only a definitive recovery in demand but also enjoy pricing power resulting from extreme supply-side tightness. Furthermore, companies with heavy-asset operational capabilities and proprietary data assets will secure superior cash flow returns in this new cycle.

Risks

• Escalation of geopolitical tensions in the Middle East leading to a prolonged blockade of the Strait of Hormuz, thereby disrupting global crude supply stability.
• OPEC+ adjusting quota strategies post its annual capacity audit in November 2026 in a manner inconsistent with market expectations.
• Breakthroughs in AI technology for image processing occurring faster than anticipated, weakening the barriers of existing HPC computing platforms.

What to watch

• Capital budget formulation by major oil companies for 2027, specifically whether substantial upward revisions materialize.
• Progress on new MoU signings and actual drilling counts in frontier basins (e.g., Brazil's Equatorial Margin, Angola).
• Utilization metrics and day rate trends for seismic service providers.
• Specific timelines from OPEC+ regarding the release of spare capacity.