The short answer: – as much as someone is willing to pay for it.
So then, where does an individual start in determining value, and how do they find the right price? And why would would a person bother to evaluate their seismic data?
In many industries, getting assets appraised from a third party is a standard practice. A house appraisal is an example of this and offers many parallels to the seismic industry.
Professional valuations are formal processes, conducted by experts in their field. In the example of real estate, banks and other financial institutions, one requires the services of a professional appraiser.
A valuation determines the fair market value of a property. The City of Calgary recently did appraisals to determine the tax-assessed value of a property and, as a result, how much individuals needed to pay in taxes. Property assessment is a standardized and accepted practice.
The asking price is generally not sufficient enough to provide assurance to the lender as to its true market value, so an independent, third-party evaluation is needed.
The same applies for seismic data.
In the seismic industry, in simple terms, the sale price can be 20-40% of the original AFE cost. Often more factors affect determining the price including quality, vintage, fold, location, etc. In real estate, a comparison is made between similar homes in a general area to what prices have been and a value is chosen based on this information; the same is true with seismic.
With real estate, additional factors like square footage and renovations help to determine the price. However, regardless of what the realtor and the seller determine the price to be, the bank requires a professional appraisal to be done on the home. This professional appraisal provides the bank/ lender with the assurance that the price is correct and appropriate.
Businesses annually trust third-party advisors (accountants) like PWC or KPMG to evaluate and act as a quality control for their financials. A significant amount of financial rigor goes into these processes to help strengthen the confidence in keeping both book and company value. In the seismic industry the value of data is very significant, yet often is passed over. Companies should consider third-party valuations of their databases as part of their annual audits – as this will help boost company value… sometimes more than one might imagine.
A third-party review engagement is something corporations ‘should be’ considering for this year (and on an annual basis) using a procedure that is recognized as the standard methodology.
The monetary value of seismic data is a combination of revenue that could be generated by licensing copies of the seismic to third parties, as well as the value inherent in the seismic because of its utility as an exploration tool.
Having a third-party valuation of your seismic data ensures that it is properly recognized and valued as a company asset. Therefore, an important step in preparation is to proactively license your seismic, thus generate revenue for your company.
It is also essential in preparation for potential asset divestitures. Today’s marketplace is tumultuous to say the least. Board of directors and management teams are faced with the difficult task of keeping shareholder confidence and maintaining company value in a low commodity market; as a geoscientist, you can help.
Often times, seismic is overlooked and no book value has been placed on it. You can change that.
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