Letter to Shareholders - 2011
In 2011, E&P spending increased as the oil and gas industry invested to meet growing energy demand in an ever more challenging geologic and operational setting. Demand for our high-end seismic products and services increased in most regions worldwide despite the continued unrest in North Africa and the Middle East and the measured recovery in the Gulf of Mexico.
Group Revenue for the year grew 10% to $3.2 billion.
Sercel delivered an impressive $1.14 billion in revenue and a 31% operating margin, showing our clear leadership in the seismic equipment market, on robust regional activity and strong demand for higher resolution surveys and equipment upgrades.
Services revenue grew 10% year-on-year while operating income was breakeven mainly as marine overcapacity lingered in the market. Land remained stable with unrest in North Africa and the Middle East. Processing, Imaging & Reservoir continued to grow along with data volumes and demand for our unique and preferred advanced imaging algorithms. Multi-client sales moderated as reduced Capex levels offset high after-sales.
Net Free Cash Flow for the year was strong at $94 million. In late 2010, we initiated a two-year performance plan focused on operational excellence, cost reduction, and commercial and technical differentiation. It was satisfying to see the early effect of this plan in the second half of 2011. Our fleet upgrade is on schedule and we made signifycant progress on strengthening our differentiation through commercial joint ventures and the advance of technology, particularly with our unique BroadSeis broadband marine solution. Since its introduction we have completed 30 BroadSeis projects. In 2011, we therefore made good progress on our performance plan and at the end of the year were on track to achieve the two-year objectives.
Looking forward, the seismic outlook remains strong. Energy demand is at record levels, while reservoirs continue to decline and exploration and production becomes increasingly more challenging. E&P spending is expected to grow 10 to 15% along with demand for high-end seismic technologies and services in 2012. This strengthening of the market should lead to increased geophysical activity, the progressive absorption of marine overcapacity, and more favorable pricing. In the context of continued strong demand together with the second year of our performance plan, CGGVeritas is well positioned to start a new journey of growth and strengthening performance across all activities.
Chief Executive Officer