2016 Annual Report/Notice of 2017 Annual Meeting and Proxy Statement

218 Pages·2017·2.05 MB·English

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2016
Charged to innovate. Driven to solve.™
ION Geophysical Corporation
2105 CityWest Blvd., Suite 100
Houston, TX 77042 USA
[phone]
iongeo.com
Charged to innovate. Driven to solve.™
CONTENTS CORPORATE INFORMATION
Around the globe, ION pushes the limits of
geoscience to help oil and gas companies
EXECUTIVE OFFICERS INVESTOR RELATIONS “potential,” or “continue” or the negative of such terms
locate and produce hydrocarbons safely R. Brian Hanson Stockholders, securities analysts, portfolio managers, or other comparable terminology. Examples of other
About ION
President and Chief Executive Offi cer or brokers seeking information about the Company are forward-looking statements contained or incorporated
and effi ciently. Harnessing the expertise welcome to call Investor Relations at [phone]. If by reference in this Annual Report to Stockholders
Steven A. Bate you prefer, you may send your requests to the Investor include statements regarding: the expected outcome
Executive Vice President Relations e-mail address: [email protected]. Recent news of the WesternGeco litigation and future potential
CEO Letter to Shareholders and drive of some of the brightest minds and Chief Financial Offi cer releases, fi nancial information, and SEC fi lings can be adverse eff ects on our liquidity in the event that we must
downloaded from the Company’s website at iongeo.com. collateralize our appeal bond for the full amount of the
Jamey S. Seely
in the industry, we solve imaging and bond or are unsuccessful in our appeal of the judgment;
Executive Vice President, General Counsel
ANNUAL REPORT ON FORM 10-K future levels of capital expenditures of our customers for
Financial Highlights and Corporate Secretary
ION Geophysical Corporation’s Annual Report on Form seismic activities; future oil and gas commodity prices;
operational challenges throughout the
Colin T. Hulme 10-K for the fi scal year ended December 31, 2016, the eff ects of current and future worldwide economic
Executive Vice President, which is furnished as part of this Annual Report to conditions (particularly in developing countries) and
E&P lifecycle. The more challenging Ocean Bottom Services Shareholders, is also available upon request without demand for oil and natural gas and seismic equipment
Notice of 2017 Annual Meeting
charge from: ION Geophysical Corporation, Attn: and services; future cash needs and future availability
Christopher T. Usher
Investor Relations, 2105 CityWest Blvd., Suite 100, to fund our operations and pay our obligations; the
the environment, the more complex Executive Vice President and Chief Operating
Houston, Texas 77042-2855. eff ects of current and future unrest in the Middle East,
Offi cer, E&P Operations Optimization
North Africa and other regions; the timing of anticipated
Proxy Statement the geology, the more we excel. Kenneth G. Williamson ANNUAL MEETING revenues and the recognition of those revenues for
Executive Vice President and Chief Operating The Annual Meeting of Stockholders of ION fi nancial accounting purposes; the eff ects of ongoing
Offi cer, E&P Technology & Services Geophysical Corporation will be held at the offi ces and future industry consolidation, including, in particular,
of the Company located at 2105 CityWest Blvd., the eff ects of consolidation and vertical integration in the
Form 10-K Report Learn more at iongeo.com Lawrence T. Burke Suite 100, Houston, Texas, on May 17, 2017, towed marine seismic streamer market; the timing of
Executive Vice President, at 10:30 AM CST. future revenue realization of anticipated orders for multi-
Global Human Resources client survey projects and data processing work in our
STOCK TRANSFER AGENT E&P Technology & Services segment; future levels of
Jacques P. Leveille Computershare Investor Services our capital expenditures; future government regulations,
Executive Vice President, Technology 211 Quality Circle, Suite 210 pertaining to the oil and gas industry; expected net
College Station, TX 77845 revenues, income from operations and net income;
expected gross margins for our services and products;
BOARD OF DIRECTORS INDEPENDENT AUDITORS future benefi ts to be derived from our OceanGeo
James M. (Jay) Lapeyre, Jr. Grant Thornton LLP subsidiary; future seismic industry fundamentals,
Chairman of the Board 700 Milam St., Suite 300 including future demand for seismic services and
President, Laitram, L.L.C. Houston, TX 77002 equipment; future benefi ts to our customers to be
VISION CORE VALUES 832 476 3600 derived from new services and products; future benefi ts
David H. Barr
to be derived from our investments in technologies,
Former President and Chief Executive Offi cer,
CEO AND CFO CERTIFICATES joint ventures and acquired companies; future growth
Logan International Inc.
Underlying everything we do The Company has included as Exhibit 31 to its rates for our services and products; the degree and
Our vision is to be the leading R. Brian Hanson Annual Report on Form 10-K for the fi scal year rate of future market acceptance of our new services
President and Chief Executive Offi cer, ended December 31, 2016, fi led with the Securities and products; expectations regarding E&P companies
innovator in geoscience and PEOPLE Our people fuel our innovation. We strive to ION Geophysical Corporation and Exchange Commission, certifi cates of the Chief and seismic contractor end-users purchasing our
attract and develop the best talent in the business and to Executive Offi cer and Chief Financial Offi cer of the more technologically-advanced services and products;
engineering, creating value for Hao Huimin Company certifying the quality of the Company’s anticipated timing and success of commercialization and
support and inspire them to achieve their personal best.
Chief Geophysicist, BGP Inc., public disclosure and the Company has submitted capabilities of services and products under development
our customers, shareholders and
China National Petroleum Corporation to the New York Stock Exchange a certifi cate of the and start-up costs associated with their development;
employees. COLLABORATION Delivering leading technologies Chief Executive Offi cer of the Company certifying that future opportunities for new products and projected
Michael C. Jennings he is not aware of any violation by the Company of research and development expenses; expected
requires collaboration and honest, open communication Chairman of the Board the New York Stock Exchange corporate governance continued compliance with our debt fi nancial covenants;
among employees, customers and partners. HollyFrontier Corporation listing standards. expectations regarding realization of deferred tax assets;
STRATEGY and anticipated results with respect to certain estimates
Franklin Myers
FORWARD-LOOKING STATEMENTS we make for fi nancial accounting purposes. These
QHSE Quality, health, safety and environmental Senior Advisor
This Annual Report to Stockholders contains or forward-looking statements refl ect our best judgment
stewardship are at the forefront of everything we do. Quantum Energy Partners incorporates by reference statements concerning our about future events and trends based on the information
Our strategy is to develop and S. James Nelson, Jr. future results and performance and other matters that currently available to us. Our results of operations can
Former Vice Chairman, are “forward-looking” statements within the meaning of be aff ected by inaccurate assumptions we make or
leverage innovative technologies INNOVATION We continuously push the boundaries Cal Dive International, Inc. Section 27A of the Securities Act of 1933, as amended, by risks and uncertainties known or unknown to us.
of geoscience and engineering to solve the toughest (now Helix Energy Solutions Group, Inc.) and Section 21E of the Securities Exchange Act of Therefore, we cannot guarantee the accuracy of the
to deliver solutions that address
1934, as amended. These statements involve known forward-looking statements. Actual events and results
E&P challenges.
John N. Seitz and unknown risks, uncertainties and other factors of operations may vary materially from our current
oil and gas companies’ most
Chairman and Chief Executive Offi cer, that may cause our or our industry’s results, levels of expectations and assumptions. Information regarding
challenging problems, throughout RESULTS We strive to deliver true value to our GulfSlope Energy, Inc. activity, performance, or achievements to be materially factors that may cause actual results to vary from our
diff erent from any future results, levels of activity, expectations, referred to as “risk factors,” appears in our
stakeholders, including our shareholders, customers,
the E&P lifecycle. performance, or achievements expressed or implied by Annual Report on Form 10-K for the fi scal year ended
employees, partners and communities. such forward-looking statements. In some cases, you December 31, 2016 in Part I, Item 1A. “Risk Factors” and
can identify forward-looking statements by terminology in other documents that we fi le from time to time with
such as “may,” “will,” “would,” “should,” “intend,” “expect,” the Securities and Exchange Commission.
“plan,” “anticipate,” “believe,” “estimate,” “predict,”
About ION
ION is a leading provider of technology-driven solutions to the global oil and gas industry. Our offerings are designed to help
companies reduce risk and optimize assets throughout the E&P lifecycle. Our business is comprised of three reporting segments:
E&P Technology & Services, E&P Operations Optimization, and Ocean Bottom Seismic Services.
E&P TECHNOLOGY & SERVICES
Our E&P Technology & Services business provides three service activities that o(cid:3)en work together: Ventures program
development, E&P Advisors and Imaging Services.
ION develops and manages full-scope 2D and 3D multi-client and proprietary geoscience programs, including survey design
and planning, data acquisition, project management, advanced processing, reservoir characterization, and interpretation
services.
Our global BasinSPAN™ data library consists of over 500,000 km of depth-imaged 2D seismic data covering virtually all major
offshore petroleum provinces. Oil and gas companies use this data to evaluate the potential of new frontiers and to identify
new play concepts. In 2014 we expanded our data library to include 3D multi-client data sets and now have over 90,000 sq km
of data available, which can be used for prospecting and drilling.
Our E&P Advisors have extensive global experience to deliver full-value-chain commercial and technical solutions to the oil and
gas industry worldwide, including basin-scale regional geological analyses, prospectivity evaluation, portfolio management,
reservoir characterization and government and license round support and management.
We have one of the most technologically advanced seismic imaging teams in the industry. We routinely tackle some of the
most complex imaging projects, applying advanced techniques such as full waveform inversion (FWI), high frequency reverse
time migration (RTM), Least Squares RTM, Kirchoff, Beam and Q migration, and more.
E&P OPERATIONS OPTIMIZATION
ION develops seismic data acquisition systems and so(cid:3)ware for both towed streamer and ocean bottom seismic surveys.
Our equipment offering includes marine towed streamer positioning and data acquisition systems.
ION is a leading provider of navigation systems for offshore seismic acquisition through Orca® and Gator® as well as
survey design so(cid:3)ware through MESA®. We also offer seismic survey planning and optimization services for 2D, 3D and
4D surveys for both towed streamer and ocean bottom environments. Our newest so(cid:3)ware offering, Marlin™, provides
situational awareness for simultaneous operations management.
OCEAN BOTTOM SEISMIC SERVICES
ION provides a full suite of ocean bottom seismic (OBS) services, providing superior data to help oil and gas companies
gain insights for reservoir development decisions. The integrated OBS solution includes expert survey design, planning
and optimization, superior data captured using multicomponent acquisition systems available exclusively to
OceanGeo; data acquisition by the experienced team at OceanGeo; and data processing, interpretation and reservoir
services, by our Imaging Services experts. In addition, ION is engaged in the manufacture of redeployable ocean bottom
cable seismic data acquisition systems.
11
Letter to Shareholders
R. Brian Hanson
President and Chief Executive Officer
Dear Fellow Shareholders,
As anticipated, 2016 was another challenging year for us and break-even for the year demonstrates that we have right-sized our
our industry. Oil prices remained low, affecting free cash flows business to reflect 2016 market conditions. Our cash balance at
and prompting additional cost cutting, especially on exploration. December 31, excluding borrowings under our credit facility, was
Oil and gas service companies were particularly hard hit. It’s $43 million.
estimated that E&P spending declined an additional 22% from
2015 levels. In addition to improving our cash position, we also took measures
to protect our listing on the New York Stock Exchange, effecting
Despite challenging market conditions, we had several financial a 1-for-15 reverse split of ION stock on February 5, 2016. In
and operational successes. We have been proactive, disciplined November 2015, in advance of the reverse split, we announced
and creative regarding our balance sheet management. We a stock repurchase program whereby our Board of Directors
believe we have right-sized our business and that our current authorized ION to repurchase, between November 10, 2015 and
liquidity, coupled with our operational and financial restructurings, November 10, 2017, up to $25 million in shares of our outstanding
will enable us to weather this severe industry downturn. common stock. Our intention was to use this to guard against the
risks of auto-delisting from the New York Stock Exchange prior
For the full year, ION reported revenues of $173 million, down 22% to the reverse split. Between November 2015 and February 2016,
from 2015. Our net loss was $65 million, or $(5.71) per share, we purchased just over 450,000 shares, adjusted for our reverse
compared to an adjusted net loss* of $119 million, or $(10.83) per split, at a total net cost of about $3 million, reducing our float by
share in 2015. about 4%.
Over the last two years, we implemented several cost reduction While protecting our stock listing, we were also addressing the
initiatives and are now fully benefitting from $95 million in nearing maturity of our debt instrument. In February 2016, we
annualized cost savings. For the full year, we consumed $32 launched an exchange offer to reduce the outstanding amount
million of cash, which included the $21 million litigation payment, of our Senior Notes and extend their maturity. The bond
a $22 million payment we made during the second quarter related exchange was successful. We reduced our debt by approximately
to our bond exchange, and $10 million of net borrowings under 20%, down from $183 million to $149 million at the end of the
our revolving credit facility. Excluding these items, we were cash year, excluding our revolver. We were also able to extend the
flow break-even for the full year, compared to a consumption of maturity on $121 million of our bonds by three and half years, to
cash of $89 million for the full year of 2015. Our ability to cash flow December 15, 2021.
2
With respect to our ongoing lawsuit with WesternGeco, the Court In December, we initiated an “At-the-Market” equity program,
of Appeals ruled in ION’s favor, declining WesternGeco’s request under which we may issue and sell, from time to time, shares
for a rehearing at the Court of Appeals level and affirming the of our common stock based on certain conservative criteria.
reduction in the judgement to $22 million, which we paid in the The ATM program could gross up to $20 million over time and
fourth quarter. was initiated to allow us to be better positioned to capitalize on

opportunities such as acquiring complementary distressed assets,
The decline in exploration spending affected all parts of our further deleveraging through buying back bonds at discounted
business. However, in our E&P Technology & Services segment, a rates or other value-added transactions. As of today, we have not
bright spot has been our 3D multi-client Campeche reimaging sold any of our common stock under the program. If we do sell
program in partnership with WesternGeco. We continue to stock under this program, it will be done in a manner designed to
receive very positive customer feedback on the unprecedented minimize significant dilution or downward pricing pressure.
turnaround time and significant imaging improvement we’ve
made in both subsalt and above-salt imaging. Our Imaging There is no doubt 2016 was another very tough year for E&P
Services group remains close to being fully utilized, with a large companies and the contractors that serve them. However, we
portion of our capacity dedicated to these higher potential went into the year with a set of deliberate objectives, and they
projects. Largely due to the Campeche reimaging project, our were more than to simply weather the storm. We were
multi-client new venture programs and data processing backlog determined to right-size the company, while maintaining our core
increased $15 million to $34 million at year-end, up from capabilities and continuing to strategically invest in R&D and
$19 million at year-end 2015. commercial opportunities, so that when the market comes back,
we are ready to take full advantage. We believe we have
Our E&P Operations Optimization segment continues to be accomplished that.
hampered by extremely low utilization levels and day rates among
our contractor customers. During this period of reduced activity, Thank you for your continued confidence in ION.
we have now successfully completed 22 deployments of our
simultaneous offshore operations management so(cid:3)ware, Marlin, Regards,
and we continue to receive very positive client feedback about it.
In our Ocean Bottom Seismic Services segment, we continue
to actively pursue multiple tenders for longer-term work while Brian Hanson
the crew and vessels remain stacked to minimize costs. We President & Chief Executive Officer
anticipate significant improvement in the OBS market in 2017, and
believe we are well positioned for our crew to go back to work
this year. The Nigerian OBS project last year demonstrated our
ability to quickly ramp up the crew, flawlessly execute the program,
and generate significant amounts of cash.
* A reconciliation of our adjusted net loss to our net loss as reported in accordance with GAAP for 2015 can be found in the tables of our
3
2016 Year-end Results press release issued February 7, 2017.
Financial Highlights
years ended December 31
2016 2015 2014
(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA
Net revenues $ 172,808 $ 221,513 $ 509,558
Gross profit 36,032 8,003 62,223
Loss from operations (43,171) (100,632) (117,929)
Net loss per basic and diluted share (65,148) (25,122) (128,252)
Net loss per diluted share $ (5.71) $ (2.29) $ (11.72)
Weighted average number of common and diluted shares outstanding 11,400 10,957 10,939
Balance Sheet Data (end of year)
Working capital $ 16,555 $ 93,160 $ 222,099
Total assets 313,216 435,088 617,257
Long-term debt 158,790 182,992 190,594
Total equity 53,398 112,040 135,712
Other Data
Investment in multi-client library $ 14,884 $ 45,558 $ 67,785
Capital expenditures 1,488 19,241 8,264
Depreciation and amortization (other than multi-client library) 21,975 26,527 27,656
Amortization of multi-client library 33,335 35,784 64,374
The selected consolidated financial data set forth above with respect to our consolidated statements of operations for 2016, 2015 and 2014 and with respect to our consolidated
balance sheets at December 31, 2016, 2015 and 2014 have been derived from our audited consolidated financial statements. Our results of operations and financial condition have
been affected by restructuring activities, legal contingencies and settlements, debt, refinancing, and impairments and write-downs of assets during the periods presented, which
affect the comparability of the financial information shown. For a detailed discussion of these items impacting the comparability of the financial information, please see Item 6,
“Selected Financial Data,” in our Annual Report on Form 10-K for the year ended December 31, 2016. Also, this information should not be considered as being indicative of future
operations, and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial
statements and the notes thereto included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2016.
4
ANNUAL REVENUES
Consolidated
Revenues
2012 526.3 E&P Technology & Services
2013 549.2 E&P Operations Optimization
2014 509.6 Ocean Bottom Seismic Services
2015 221.5
2016 172.8
0 50 100 150 200 250 300 350 400 450 500 550 600
$ Millions
SHAREHOLDER RETURNS
ION Geophysical Corporation Dow Jones U.S. Oil Equipment & Services This graph compares our cumulative total stockholder
S&P 500
return on our common stock for the five years ending
$450
December 31, 2016, assuming reinvestment of
$400
dividends, with (i) the S&P 500 Index and (ii) the Dow
$350
Jones U.S. Oil Equipment and Services Index, an index
$300
of companies that we believe are comparable in terms
$250
of industry and their lines of business.
$200
$150
The graph assumes that $100 was invested in our
$100
common stock and the above indices on January 1,
$50
2011. We have not paid any dividends on our common
$0
2011 2012 2013 2014 2015 2016 stock during the applicable period. Historic stock price
performance is not necessarily indicative of future
100.00 106.20 53.83 44.86 8.21 6.53
100.00 116.00 153.58 174.60 177.01 198.18 stock price performance.
100.00 100.33 128.83 106.64 82.67 105.26
5
29APR201300073885
ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 100
Houston, Texas 77042-2855
[phone]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 17, 2017
To ION’s Shareholders:
The 2017 Annual Meeting of Shareholders of ION Geophysical Corporation will be held in the
offices of the Company located at 2105 CityWest Boulevard, Houston, Texas, on Wednesday, May 17,
2017, at 10:30 a.m., local time, for the following purposes:
1. Elect the two directors named in the attached Proxy Statement to our Board, each to serve
for a three-year term;
2. Advisory (non-binding) vote to approve the compensation of our named executive officers;
3. Advisory (non-binding) vote on the frequency of shareholder votes on executive compensation;
4. Ratify the appointment of Grant Thornton LLP as our independent registered public
accounting firm (independent auditors) for 2017; and
5. Consider any other business that may properly come before the annual meeting, or any
postponement or adjournment of the meeting.
ION’s Board of Directors has set March 31, 2017, as the record date for the meeting. This means
that owners of ION Common Stock at the close of business on that date are entitled to receive this
notice of meeting and vote at the meeting and any adjournments or postponements of the meeting.
Your vote is very important, and your prompt cooperation in voting your proxy is greatly
appreciated. Whether or not you plan to attend the meeting, please sign, date and return your enclosed
proxy card as soon as possible so that your shares can be voted at the meeting.
By Authorization of the Board of Directors
4APR201709180421
Jamey S. Seely
Executive Vice President,
General Counsel and
Corporate Secretary
April 13, 2017
Houston, Texas
Important Notice Regarding the Availability of Proxy Materials
For the Annual Shareholders’ Meeting to be held on May 17, 2017
The Proxy Statement and our 2016 annual report to shareholders
are available at www.iongeo.com under ‘‘Investor Relations—Investor Materials—
Annual Report & Proxy Statement.’’
The Annual Meeting of Shareholders of ION Geophysical Corporation will be held on May 17,
2017, at the offices of the Company located at 2105 CityWest Boulevard, Houston, Texas, beginning at
10:30 a.m., local time.
The matters intended to be acted upon are:
1. Elect the two directors named in the attached Proxy Statement to our Board, each to serve
for a three-year term;
2. Advisory (non-binding) vote to approve the compensation of our named executive officers;
3. Advisory (non-binding) vote on the frequency of shareholder advisory votes on executive
compensation;
4. Ratify the appointment of Grant Thornton LLP as our independent registered public
accounting firm (independent auditors) for 2017; and
5. Consider any other business that may properly come before the annual meeting, or any
postponement or adjournment of the meeting.
The Board of Directors recommends voting in favor of the nominees listed in the Proxy Statement,
the approval of the compensation of our named executive officers, the approval of an executive
compensation vote to be held every year and the ratification of the appointment of Grant
Thornton LLP.
The Proxy Statement for the 2017 Annual Meeting of Shareholders and the 2016 annual report to
shareholders are being made available at the website location specified above.
Directions to the annual meeting are also provided in the accompanying Proxy Statement under
‘‘About the Meeting—Where will the Annual Meeting be held?’’
29APR201300073885
ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 100
Houston, Texas 77042-2855
[phone]
April 13, 2017
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 17, 2017
Our Board of Directors (the ‘‘Board’’) is furnishing you this proxy statement (this ‘‘Proxy
Statement’’) to solicit proxies on its behalf to be voted at the 2017 Annual Meeting of Shareholders
(‘‘Annual Meeting’’) of ION Geophysical Corporation (‘‘ION’’). The Annual Meeting will be held at
2105 CityWest Boulevard, Houston, Texas, on May 17, 2017, at 10:30 a.m., local time. The proxies also
may be voted at any adjournments or postponements of the Annual Meeting.
The mailing address of our principal executive offices is 2105 CityWest Boulevard, Suite 100,
Houston, Texas 77042-2855. We are mailing the proxy materials to our shareholders beginning on or
about April 13, 2017. All properly completed and returned proxies for the annual meeting will be voted
at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked
before the Annual Meeting.
Only owners of record of our outstanding shares of our Common Stock, par value $0.01
(‘‘Common Stock’’) on March 31, 2017 are entitled to vote at the Annual Meeting, or at adjournments
or postponements of the Annual Meeting. Each owner of Common Stock on the record date is entitled
to one vote for each share of Common Stock held. On March 31, 2017, there were 12,072,605 shares of
Common Stock issued and outstanding.
When used in this Proxy Statement, ‘‘ION Geophysical,’’ ‘‘ION,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘our,’’ ‘‘ours’’
and ‘‘us’’ refer to ION Geophysical Corporation and its consolidated subsidiaries, except where the
context otherwise requires or as otherwise indicated.