Geokinetics Inc. (NYSE Alternext: GOK) announced that its Board of Directors has approved a capital expenditure budget for 2009 of $37.3m, which is a reduction of over 50% from capital expenditures in 2008. The company expects investments in 2009 to be targeted toward maintenance and selective additions of vessels and other equipment to improve the efficiency of the company's shallow water operations, support equipment for long-term projects in South America and West Africa and the continued implementation of new information technology systems.
In addition, the company's Board of Directors approved a $12.7m investment in an interest in data that the company will retain in conjunction with a data acquisition survey that will be completed by the company. The data will be acquired in the United States and co-owned by the company and its customer. The company expects that license revenues already committed will be sufficient to cover the company's share of cash costs for data acquisition.
The company also amended its existing $70m revolving credit facility with PNC Bank on February 11, 2009. Among other things, the amended agreement increases the company's borrowing base that can come from eligible fixed assets to $55m, up from the original $45m and deferred any reductions to this new amount until June 30, 2009, at which time, the amount of the borrowing base that can come from eligible fixed assets will be reduced by $0.9m per month until maturity. Once started, the reduction will affect only the amount of the borrowing base that can come from eligible fixed assets and will not reduce the overall amount of the revolver. Based on the current borrowing base calculation, the company has immediate access to the maximum availability of $70m. As of December 31, 2008, outstanding borrowings on the revolver were $44m of principal and $2.3m in letters of credit. The revolving credit facility matures in May 2012.
Richard Miles, President and Chief Executive Officer, said, "In today's challenging financial environment, it is more important than ever that companies align their spending patterns with client demand. In light of reduced spending by many exploration and production companies combined with lower commodity prices, we have decided to reduce our investments in capital expenditures in 2009. The reduced capital budget reaffirms our commitment to financial discipline and strategic growth. It strengthens our ability to remain well-capitalized and positions us for increased opportunities as consumer demand increases. Our worldwide backlog is very strong and we remain committed to maintaining and strengthening our leadership position in shallow water data acquisition and will continue to make prudent investments in upgrades to our international crews where it improves productivity or enhances our competitive advantage. In addition, we are excited by our joint-investment in data that we will acquire and we are encouraged to partner with our client for future data sales. We expect this endeavor to utilize two crews in the United States for the majority of this year."
Scott McCurdy, Vice President and Chief Financial Officer, said, "Amending our credit facility with PNC increases our financial flexibility and strengthens our financial position during these uncertain times. We appreciate the support of PNC and the confidence of our bank group in our business plan and strategy going forward."