CGG Announces Third Quarter 2009 Results

  • Free Cash Flow at $148m

  • Group EBITDAs margin at 32%

  • Backlog at $1.65B

PARIS, France – November 10th 2009

CGGVeritas (ISIN: 0000120164 – NYSE: CGV) announced today its non-audited third quarter 2009 consolidated results. All comparisons are made on a year-on-year basis unless stated otherwise. All results are reported after restructuring charges unless stated otherwise.

Results in line with expectations

  • Group revenue was $731m down 31% from a record quarter last year and reflecting current market conditions
  • Group operating margin was 8% and EBITDAs margin was 32% with a resilient Sercel EBIT margin, good vessel performance in oversupplied market and sequentially stable multi-client sales with a higher amortization rate
  • Net income was $12m
  • Free cash flow at $148m this quarter following a significant reduction of working capital
  • Net debt to equity reduced to 32%
  • Long term marine contract awarded by Pemex. Backlog as of November 1st increased sequentially to $1.65 billion

Cost reduction and marine adjustment plans on track

  • Disciplined capital spending with a 25% reduction year to date
  • Fleet reduction from 27 to 20 vessels progressing with three 3D vessels decommissioned to date. All related restructuring charges were accrued in Q2

Third Quarter 2009 key figures

In million $

Q3 2009

variance

Q3 2008

Group Revenue 731 -31% 1 062
Sercel 203 -35% 314
Services 571 -25% 762
Group Operating Income before restructuring 58 -78% 265
margin 8% 25%
Sercel 37 -64% 103
margin 18% 33%
Services 33 -81% 173
margin 6% 23%
Net Income 12 -93% 162
margin 2% 15%
Cash Flow from Operations 303   298
Net Debt 1 371
(30 Sept 09)
-4% 1 432
(31 Dec 08)
Net Debt to Equity ratio 32% 35%

CGGVeritas Chairman & CEO, Robert Brunck commented:

“As expected, the positive contribution of higher margin 2008 backlog coming to an end, led to a more difficult quarter. Nevertheless, we delivered solid free cash flow thanks to strong and disciplined actions across the company.

In the current economic environment Sercel, with its leading technology and manufacturing excellence, exhibited a resilient margin. Services reinforced their high-end positioning with increased prefunding of new multi-client projects, continued interest for its advanced depth imaging and through its high-resolution land seismic surveys. In marine, the industry began capacity adjustments but oversupply still prevails, translating into lower pricing and increased vessel transits for some of the new contracts.

Looking forward in the context of relatively high and stable oil prices, we expect oil and gas fundamentals to strengthen and demand for high-end seismic technology, especially around reservoir optimization, to continue to increase. CGGVeritas is well positioned to take full advantage of its technological strength and its well balanced portfolio.”

Third Quarter 2009 Financial Results

Group Revenue

Group Revenue was down 31% in $ and 26% in € from a record quarter last year, reflecting weak market conditions.

In million

Q3 09 ($)

variance

Q3 08 ($)

 

Q3 09 (€)

variance

Q3 08 (€)

Group Revenue 731 -31% 1 062 512 -26% 692
Sercel Revenue 203 -35% 314 143 -30% 204
Services Revenue 571 -25% 762 400 -19% 496
Eliminations -43 -13 -31 - 9
Marine contract 271 -15% 320 189 - 9% 208
Land contract 85 -35% 131 59 -30% 85
Processing 101 + 1% 99 71 + 9% 65
Multi-client 114 -46% 212 81 -41% 138
MC marine 77 -54% 169 54 -51% 110
MC land 37 -16% 44 27 - 4% 28

Sercel

Revenue was down 35% in $ and 30% in € from a record third quarter last year with an increased contribution from marine with sales of two SeaRay OBC systems and one Nautilus for acoustic positioning and streamer control. Internal sales represented 21% of revenue.

Services

Revenue was down 25% in $ and 19% in € with good vessel utilization despite increasing standby between contracts. Revenue was also supported by strong processing performance, while marine multi-client revenue decreased year on year following the reduction of our multi-client investments. Amortization rates of our multi-client library were higher this quarter at 75% mainly due to a different sales mix with lower fully depreciated data and higher onshore contribution. We anticipate the full year 2009 amortization rate to be around 65%.

Marine capacity adjustments: The Fohn and the Orion 3D vessels were decommissioned this quarter. Following contract completion, another 2D vessel will be de-rigged in the fourth quarter 2009. Three additional 2D vessels are scheduled for decommissioning in 2010.

  • Marine contract revenue was down 15% in $ and 9% in €. The vessel availability rate1 was 90%, including a 7% impact related to standby between contracts and the production rate2 was 93%. 86% of the 3D fleet operated on contract. With the end of 2008 higher margin backlog, we saw the impact of lower pricing. The industry first Arctic Beaufort Sea acquisition project was completed with excellent results and one vessel was equipped with Nautilus for integrated acoustic positioning and streamer control.
      
  • Land contract revenue was down 35% in $ and 30% in €, mainly in North American land as activity remained slow with gas prices continuing to stagnate. We operated 12 crews worldwide, including Argas crews in Saudi Arabia and our large high-density contracts in Qatar and Oman where we continue to operate near record levels with promising results. In Canada, we successfully completed a 4D SeisMovie reservoir monitoring acquisition.
       
  • Processing & Imaging revenue was up 1% in $ and 9% in € as the performance and demand for our high-end innovative imaging products, especially in the Gulf of Mexico remained robust. The latest releases include AGORA our ground roll attenuation and TTI RTM, our leading edge depth migration technology. During the quarter, we were awarded a new dedicated center in Brazil and two dedicated center contracts were renewed, one in the Netherlands, the other in France.
       
  • Multi-client revenue was down 46% in $ and 41% in € following our decreasing Capex spending. The amortization rate averaged 75%, with 78% in land and 74% in marine, a high amortization rate due to a sales mix of less fully depreciated data and an increasing contribution from land. Net Book Value of the library at the end of September was stable at $828 million.

Multi-client marine revenue was down 54% in $ and 51% in € as Capex was reduced 59% year on year in $ to $48 million (€33 million). Prefunding was $54 million (€38 million), up sequentially with a rate of 112%. In Brazil the extension of our Santos cluster survey around the Tupi discovery continued to progress well and we completed our programs offshore Australia and in the North Sea. After-sales worldwide were down 47% in $ and 45% in € at $23 million (€16 million).

Multi-client land revenue was down 16% in $ and 4% in €. Capex was reduced 26% year on year at $20 million (€14 million). Prefunding was high during the quarter, at $25 million (€18 million). Prefunding rate increased year on year and sequentially to 121% reflecting the strong interest for our Haynesville program where we operated two crews this quarter on the 3D multi-client Tri-Parish Line survey in northern Louisiana. After-sales were at $13 million (€9 million).

1 - The vessel availability rate, a metric measuring the structural availability of our vessels to meet demand; this metric is related to the entire fleet, and corresponds to the total vessel time reduced by the sum of the standby time between contracts, of the shipyard time and the steaming time (the “available time”), all divided by total vessel time;

2 - The vessel production rate, a metric measuring the effective utilization of the vessels once available; this metric is related to the entire fleet, and corresponds to the available time reduced by the operational downtime, all then divided by available time.

Group EBITDAs was $231 million (€163 million), a margin of 32%.

In million

Q3 09 ($)

variance

Q3 08 ($)

 

Q3 09 (€)

variance

Q3 08 (€)

Group EBITDAs 231 -50% 467 163 -47% 304
margin 32% 44% 32% 44%
Sercel EBITDAs 47 -58% 112 32 -55% 73
margin 23% 36% 23% 36%
Services EBITDAs 203 -45% 367 143 -40% 239
margin 36% 48% 36% 48%

Group Operating Income was $58 million, with a margin of 8% based on resilient performance of Sercel while weaker marine prices impacted Services.
  

In million

Q3 09 ($)

variance

Q3 08 ($)

 

Q3 09 (€)

variance

Q3 08 (€)

Group Operating Income 58 -78% 265 41 -76% 173
margin 8% 25% 8% 25%
Sercel Op. Income 37 -64% 103 25 -62% 67
margin 18% 33% 18% 33%
Services Op. Income 33 -81% 173 24 -79% 113
margin 6% 23% 6% 23%

Group Net Income was $12 million (€8 million), a 2% margin, compared to $162 million (€105 million) last year, resulting in an EPS of €0.05 per ordinary share and $0.07 per ADS.

Taxes

The effective tax rate was 42%.

Financial Charges

Financial charges were $38 million (€27 million).

Cash Flow

Cash Flow from Operations

Cash flow from operations was $303 million (€217 million) stable year-on-year.

Capex

Global Capex was $148 million (€104 million) this quarter, a reduction of 25% year-on-year.

  • Industrial Capex was $79 million (€56 million), up 54% in $, including a SeaRay and Nautilus system.
  • Multi-client Capex was $68 million (€47 million) down 53% in $ with a prefunding rate of 115% compared to 102% last year.

In million

Q3 09 ($)

variance

Q3 08 ($)

Capex 148 -25% 197
Industrial 79 54% 52
Multi-client 68 -53% 146

Free Cash Flow

After interest expenses paid during the quarter, free cash flow was strong at $148 million up year on year and sequentially due to strict management of working capital.

Third Quarter 2009 Comparisons with Third Quarter 2008

Consolidated Statement of Income

Third Quarter
(in million dollars)

Third Quarter
(in million euros)

2009

2008

2009

2008

Exchange rate euro/dollar 1.418 1.537 1.418 1.537
Operating Revenue 731.4 1 062.2 512.2 691.6
Sercel 203.3 313.5 142.8 204.1
Services 570.9 761.7 400.0 496.0
Elimination -42.8 -13.1 -30.6 -8.5
Gross Profit* 151.0 379.0 104.5 246.9
Operating Income* 57.7 265.1 40.7 172.8
Sercel 36.5 102.5 25.2 66.7
Services 33.3 172.9 23.8 112.7
Corporate and Elimination -12.1 -10.1 -8.3 -6.5
Income from Equity Investments 4.0 -0.9 2.9 -0.6
Net Income* 12.2 161.7 8.4 105.4
Earnings per share (€) / per ADR ($) 0.07 1.14 0.05 0.74
EBITDAs* 231.3 467.2 162.8 304.3
Sercel 46.8 111.8 32.4 72.8
Services 203.2 367.3 143.4 239.2
Industrial Capex 79.2 51.5 56.2 33.4
Multi-client Capex 68.4 145.8 47.3 94.9

Year to Date 2009 Financial Results

Group Revenue

Group Revenue was down 16% in $ and 6% in €, with lower Sercel sales in line with weaker market conditions while Services benefited from the addition of Wavefield.

In million

YTD 09 ($)

variance

YTD 08 ($)

 

YTD 09 (€)

variance

YTD 08 (€)

Group Revenue 2 361 -16% 2 809 1 733 - 6% 1 836
Sercel Revenue 643 -27% 876 472 -18% 573
Services Revenue 1 817 -10% 2 021 1 334 + 1% 1 321
Eliminations -98 -10% -89 -72 -24% -58
Marine contract 905 +17% 771 664 +32% 504
Land contract 301 -24% 395 221 -15% 258
Processing 299 + 2% 293 219 +15% 192
Multi-client 312 -44% 562 229 -38% 367
MC marine 250 -43% 435   183 -36% 285
MC land 62 -51% 126   46 -46% 83

Sercel

Sercel sales were down 27%, in $ and 18% in €. Land equipment sales were down from record sales in 2009 while marine sales were down as industry future fleet plans were adjusted.

Services

Revenue was down 10% in $ and slightly up in € supported by the addition of Wavefield in marine and strong processing performance. For the first nine months, fleet availability rate was 90% and the production rate was 91%. Multi-client revenue was down 44% in $ and 38% in € as Capex eased as planned and was down 40% in $ to $261 million (€192 million). The amortization rate averaged 65%, a level we expect to continue throughout 2009.

Group EBITDAs before restructuring was $746 million (€548 million), a margin of 32% mainly based on the impact of lower pricing and particularly the lower contribution from multi-client sales.

Group EBITDAs was $689 million (€506 million).

In million
before restructuring

YTD 09 ($)

variance

YTD 08 ($)

 

YTD 09 (€)

variance

YTD 08 (€)

Group EBITDAs 746 -35% 1 150 548 -27% 751
margin 32% 41% 32% 41%
Sercel EBITDAs 178 -42% 305 130 -35% 199
margin 28% 35% 28% 35%
Services EBITDAs 634 -31% 921 466 -23% 602
margin 35% 46% 35% 46%

Group Operating Income before restructuring was $256 million (€189 million), an 11% margin driven by the industry leading and resilient performance of Sercel while good vessel operational performance was hampered by a decrease in marine prices and lower multi-client contributions.

Group Operating Income was $170 million (€125 million).

In million
before restructuring

YTD 09 ($)

variance

YTD 08 ($)

 

YTD 09 (€)

variance

YTD 08 (€)

Group Operating Income 256 -57% 600 189 -52% 392
margin 11% 21% 11% 21%
Sercel Op. Income 148 -47% 277 108 -40% 181
margin 23% 32% 23% 32%
Services Op. Income 161 -59% 389 119 -53% 254
margin 9% 19% 9% 19%

Taxes

The effective tax rate was 32% and financial charges were $109 million (€80 million).

Group Net Income before restructuring was $106 million (€79 million), down 69% in $ and 64% in €, resulting in an EPS of €0.49 per ordinary share and $0.66 per ADS.

Group Net Income was $50 million (€37 million), resulting in an EPS of €0.22 per ordinary share and $0.29 per ADS.

Cash Flow

Cash Flow from Operations

Cash flow from operations was $643 million (€472 million) a reduction of 20% year-on-year.

Capex

Global Capex was $470 million (€345 million) end of September, down 25% in $ year-on-year.

  • Industrial Capex was $208 million (€153 million),
  • Multi-client Capex was $261 million (€192 million), reduced by 40% in $ year-on-year.

In million $

YTD 09

variance

YTD 08

Capex 470 -25% 622
Industrial 208 10% 189
Multi-client 261 -40% 434

Free Cash Flow

After interest expenses paid during the first 9 months, free cash flow was $130 million stable year on year.

Balance Sheet

Net Debt to Equity Ratio

The Group’s gross debt was reduced to $2.190 billion (€1.496 billion) at the end of September 2009.

With $819 million (€560 million) in available cash, Group net debt was $1.371 billion (€936 million) and the net debt to equity ratio was reduced to 32%.

Year to Date 2009 Comparison with 2008

Consolidated Statement of Income
before restructuring*

Year to Date
(in million dollars)

Year to Date
(in million euros)

2009

2008

2009

2008

Exchange rate euro/dollar 1.362 1.530 1.362 1.530
Operating Revenue 2 361.4 2 809.1 1 733.3 1 835.6
Sercel 643.1 876.4 471.8 572.7
Services 1 816.7 2 021.5 1 333.6 1 320.9
Elimination -98.3 -88.8 -72.1 -58.0
Gross Profit* 571.4 922.9 419.4 603.0
Operating Income* 256.3 600.2 189.4 392.2
Sercel 147.5 276.6 108.2 180.7
Services 160.6 389.3 119.1 254.4
Corporate and Elimination -51.7 -65.7 -38.0 -42.9
Income from Equity Investments 7.3 3.7 5.3 2.4
Net Income* 106.2 338.5 78.7 221.2
Earnings per share (€) / per ADR ($) 0.29 2.38 0.22 1.55
EBITDAs 745.6 1 149.5 548.1 751.1
Sercel 177.5 304.5 130.2 199.0
Services 633.9 920.7 466.2 601.7
Industrial Capex 208.4 188.6 152.9 123.2
Multi-client Capex 261.2 433.7 191.8 283.4

Key Figures

In million

YTD 09 ($)

variance

YTD 08 ($)

 

YTD 09 (€)

variance

YTD 08 (€)

Group EBITDAs
Before restructuring costs 746 -35% 1 150 548 -27% 751
margin 32% 41% 32% 41%
After restructuring costs 689 -40% 1 150 506 -33% 751
margin 29% 41% 29% 41%
Group Operating Income
Before restructuring costs 256 -57% 600 189 -52% 392
margin 11% 21% 11% 21%
After restructuring costs 170 -72% 600 125 -68% 392
margin 7% 21% 7% 21%
Group Net Income
Before restructuring costs 106 -69% 339 79 -64% 221
margin 4% 12% 4% 12%
After restructuring costs 50 -85% 339 37 -83% 221
margin 2% 12% 2% 12%
Earnings per share (€) / per ADR ($)
Before restructuring costs 0.66 -72% 2.38 0.49 -68% 1.55
After restructuring costs 0.29 -88% 2.38 0.22 -86% 1.55

Consolidated Financial Statements

 Q3 09 Consolidated Financials - Balance Sheets, Statements of Operations, Statements of Cash Flows, Analysis by Operating Segment (PDF, 522KB)

Other Information

Detailed financial results (6K) are available on our website: www.cggveritas.com.

A French language conference call is scheduled today November 10th, at 9:30am (Paris), 8:30am (London). To take part in the French language conference, simply dial in five to ten minutes prior to the scheduled start time.

French call-in +33 1 72 00 13 65
International call-in +44 808 238 1769
Replay +33 1 72 00 14 59 & +44 207 107 0686 - code 256924#

An English language conference call is scheduled today November 10th, at 3:00pm (Paris), 2:00pm (London), 8:00am (US CT), 9:00am (US ET). To take part in the English language conference, simply dial in five to ten minutes prior to the scheduled start time.

US call-in 1 (888) 241-0558
International call-in 1 (647) 427-3417
Replay 1 (402) 220-4375 & 1 (888) 567-0351 - code 82646791

You will be asked for the name of the conference: “CGGVeritas Q3 2009 Results”.

A presentation is posted on our website and can be downloaded.

The conference calls will be broadcast live on our website www.cggveritas.com and a replay will be available for two weeks thereafter.

About CGGVeritas

CGGVeritas (www.cggveritas.com) is a leading international pure-play geophysical company delivering a wide range of technologies, services and equipment through Sercel, to its broad base of customers mainly throughout the global oil and gas industry.

CGGVeritas is listed on the Euronext Paris SA (ISIN: 0000120164) and the New York Stock Exchange (in the form of American Depositary Shares, NYSE: CGV).

 Investor Relations - Paris
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The information included herein contains certain forward-looking statements within the meaning of Section 27A of the securities act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties as disclosed by the Company from time to time in its filings with the Securities and Exchange Commission. Actual results may vary materially.