I think TGS-NOPEC Geophysical (OSL:TGS, Financial) fits that description very well. The company is headquartered in Norway and is the world`s largest provider of seismic data to oil and gas developers on a multiclient basis. Its stock fell 51% in the first half of 2020, performing slightly better than the energy equipment & services industry within the Russell 2000, which declined 53.4% for the same period. Investors tend to see TGS as a capital-intensive, high fixed cost, commodity oilfield services company when in reality its business model is that of a data services provider. It`s an asset light business that doesn`t own the boats which are used to collect seismic data. In addition, we like its high contribution margin-TGS repackages the same data and sells it to multiple clients-and high variable costs, such as vessel rental rates, which are in decline. TGS has also been cutting costs, including reducing executive compensation, to better deal with the recent challenges to its industry.
TGS-NOPEC Geophysical (Nasdaq: TGS-NO) 2020
The company is built to weather downturns as it has been consistently free cash flow positive, including during each year of the energy "depression" from 2014-2016. Although spending on seismic is among the first expenses cut by exploration & production ("E&P") companies during industry downturns, reserves remain the lifeblood of these companies. Their importance makes TGS`s seismic studies vital to reducing costs and allowing E&P companies to maintain value and meet demand when supply rebalances.
From Royce Investment Partners' commentary on Small-Cap Premier quality holdings.