CGG: CGG Announces its 2020 Third Quarter Results

CGG Announces its 2020 Third Quarter ResultsSolid Q3 Adjusted EBITDAs performanceBusiness activity gradually resumingPARIS, France – November 5, 2020 – CGG (ISIN: FR0013181864), a world leader in Geoscience, announced today its 2020 third quarter unaudited results.Commenting on these results, Sophie Zurquiyah, CGG CEO, said:“CGG markets stabilized in Q3 as large Independents and NOCs started to resume activity, mainly in their core areas.  We are on track with the implementation of the cost reduction plan resulting in increased Adjusted EBITDAs. Our high-end technology significantly improves our client’s understanding of the subsurface and provides important insights to the prioritization of their energy investments.  This, combined with our focus on mature basins and the technology vital for step-out exploration, development and production, provides CGG with a unique value proposition for our clients.  We have been able to maintain market share in our core businesses throughout the year, and I have been pleased with our progress towards developing offerings in adjacent fields, including structural health monitoring, CCUS, geothermal and environmental geosciences. “





Third Quarter 2020 Segment Financial ResultsGeology, Geophysics & Reservoir (GGR)GGR segment revenue was $150 million, up 4% quarter-on-quarter.Geoscience revenue was $77 million, down (7)% quarter-on-quarter.Despite the general slowdown of the economy and its effect on clients’ E&P spending, Geoscience activity remained resilient, down sequentially (7)% driven by sustained activity in the main large imaging centers, GeoSoftware and our dedicated processing centers.Geoscience is adapting to lower demand as Q3 total production was down only (2)% sequentially.
Preservation of business continuity and profitability remains the focus. CGG’s Geoscience leading technology continues to be recognized by major clients. GeoSoftware continued to delivered innovation this quarter with new reservoir characterization cloud technology, and Smart Data Solutions business won significant data management contracts.Multi-Client revenue was $73 million this quarter, up 18% quarter-on-quarter.Prefunding revenue of our multi-client projects was $39 million, down (15)% quarter-on-quarter as multi-client cash capex was (20)% lower at $(58)m in Q3. Prefunding rate was 68%.

We had four multi-client programs this quarter: three marine streamer surveys – Nebula in Brazil, Gippsland – in Australia and North Viking Graben in Norway, and one ocean bottom nodes survey in the UK North Sea.

Multi-client after-sales were at $34 million this quarter driven by Brazil and US Gulf of Mexico, up 120% quarter-on-quarter.The segment library Net Book Value was $345 million ($499 million after IFRS 15 adjustments) at the end of September 2020, split 86% offshore and 14% onshore.GGR segment EBITDAs was $56 million, with 38% margin.GGR Adjusted segment EBITDAs $85 million with 57% margin before $(28) million of COVID-19 plan costs.GGR segment operating income was $(25) million.GGR Adjusted segment operating income was $10 million with 6% margin before $(35) million of non-recurring charges.GGR capital employed was stable at $1.7 billion at the end of September 2020.EquipmentEquipment segment revenue was $50 million, down 14% quarter-on-quarter. External sales were $50 million.Land equipment sales represented 62% of total sales, as we delivered in Q3 over 50 thousand 508XT channels mainly in Russia and India. Sercel also delivered its first land node WiNG system in North America.Marine equipment sales represented 29% of total sales driven by spares sections sales of Sentinel streamers’ installed base.Downhole equipment sales were $2 million and sales from non Oil & Gas equipment were $3 millionEquipment segment EBITDAs was $(1) million.Equipment Adjusted segment EBITDAs was $0m before $(1) million of COVID-19 plan costs.Equipment segment operating income was $(9) million.Equipment Adjusted segment operating income $(9) million before $(0.5) million of non-recurring charges.Equipment capital employed was up at $0.6 billion at the end of September 2020.Third Quarter 2020 Financial ResultsSegment revenue was $199 million, stable quarter-on-quarter. The respective contributions from the Group’s businesses were 38% from Geoscience, 37% from Multi-Client (75% for the GGR segment) and 25% from Equipment.Segment EBITDAs was $52 million and Adjusted^*segment EBITDAs was $80 million before $(28) million of Covid-19 plan costs, up 6% sequentially, a 40% margin.Segment operating income was $(38) million and Adjusted^*segment operating income was $(4) million before $(34) million of non-recurring charges.IFRS 15 adjustment at operating income level was $(5) million and IFRS operating income, after IFRS 15 adjustment, was $(43) million.Cost of financial debt was $(34) million. The total amount of interest paid during the quarter was $(7) million.Other Financial Items were $(12) million including $(8) million of non-recurring charges related to remeasurement of fair value of other financial assets and liabilities.Taxes were at $1 million.Net loss from continuing operations was $(88) million.Group net loss was $(93) million.After minority interests, Group net loss attributable to CGG shareholders was $(93) million/ €(79) million.Adjusted Net loss from continuing operations, excluding $(41) million of non-recurring charges, was $(47) million.Global economic crisis, triggered by Covid-19 pandemic and unprecedented drop in oil price and E&P spending lead CGG to launch cost reduction actions («Covid-19 plan») and recognize other non-recurring charges. $(41) million of non-recurring charges were booked during the third quarter of 2020:$(28) million of severance costs$(6) million of non-cash fair value remeasurement of assets available for sale$(8) million of non-cash remeasurement of other financial assets and liabilities mainly related to Marine Acquisition exit transactionThird Quarter 2020 Cash FlowTotal capex was $(71) million, down (20)% quarter-on-quarter:Industrial capex was $(5) million,Research & Development capex was $(8) million,Multi-client cash capex was $(58) million, down (20)% quarter-on-quarterSegment Free Cash Flow, including $(37) million change in working capital and $(7)m of non-recurring severance cash costs, was $(59) million.After $(15) million lease repayments, $(7) million paid cost of debt, $(19) million 2021 plan cash costs and $7 million free cash flow from discontinued operations, Net Cash Flow was $(92) million.First 9 months 2020 Financial ResultsSegment revenue was $672 million, down (33)% compared to last year. The respective contributions from the Group’s businesses were 38% from Geoscience, 35% from Multi-Client (73% for the GGR segment) and 27% from Equipment.GGR segment revenue was $492 million, down (28)% year-on-yearGeoscience revenue was $253 million, down (9)% year-on-year and more resilient mainly due to backlog.Multi-Client sales were $239 million, down (41)% year-on-year.Prefunding revenue was $143 million, down (9)% year-on-year. Multi-Client cash capex was $(198) million, up 29% year-on-year and cash prefunding rate was 72%.After-sales were $96 million, down (62)% year-on-year, including large one-off transfer fees in Q3 2019.Equipment revenue was $183 million, down (44)% year-on-year with a drop in equipment market triggered by the Covid-19 crisis.Segment EBITDAs was $243 million and Adjusted segment EBITDAs was $281 million, before $(38) million of Covid-19 plan costs, down 46% year-on-year, a 42% margin.GGR adjusted EBITDA margin was at 59% and Equipment adjusted EBITDA margin at 4%.Segment operating income was $(122) million and Adjusted segment operating income, was $32 million, before $(154) million of non-recurring charges.IFRS 15 adjustment at operating income level was $7 million and IFRS operating income, after IFRS 15 adjustment, was $(115) million.Cost of financial debt was $(100) million. The total amount of interest paid during the first 9 months 2020 was $(47) million.Other Financial Items were $(42) million, including $(45) million of non-recurring charges related to remeasurement of fair value of other financial assets and liabilities.Taxes were at $(28) million.Net loss from continuing operations was $(293) million.Group net loss was $(338) million.After minority interests, Group loss attributable to CGG shareholders was $(340) million/ €(302) million.Adjusted Net Loss from continuing operations, excluding $(207) million non-recurring charges, was $(86) million.Global economic crisis, triggered by Covid-19 pandemic and unprecedented drop in oil price and E&P spending lead CGG to launch cost reduction actions and recognize other non-recurring charges. $(207) million of non-recurring charges were booked during the first 9 months of 2020:$(38) million severance cash costs related to Covid-19 plan$(69) million non-cash impairment of the multi-client library$(23) million non-cash fair value remeasurement of GeoSoftware business available for sale$(24) million non-cash goodwill impairment related to GeoConsulting business mainly focused on exploration and appraisal$(45) million non-cash remeasurement of other financial assets and liabilities mainly related to Marine Acquisition exit transaction$(9) million non-cash impairment of Deferred Tax AssetsFirst 9 months 2020 Cash FlowSegment Operating Cash Flow was $238 million compared to $572 million for the first nine months of 2019, a (58)% decrease year-on-year.Capex was $(248) million, up 21% year-on-year:Industrial capex was $(18) million, down (36)% year-on-year,Research & Development capex was $(32) million, up 31% year-on-year,Multi-client cash capex was $(198) million, up 29% year-on-year.Including negative change in working capital of $(1) million and $(11) million of COVID-19 plan severance cash costs, Segment Free Cash Flow before lease repayments was at $(9) million.After lease repayments of $(44) million, payment of interest expenses of $(47) million, CGG 2021 Plan cash costs of $(69) million and positive free cash flow from discontinued operations of $17 million, Group Net Cash Flow was $(152) million.
 Balance Sheet Group gross debt before IFRS 16 was $1,213 million at the end of September 2020 and net debt was $749 million.Group gross debt after IFRS 16 was $1,375 million at the end of September 2020 and net debt was $910 million.Group’s liquidity amounted to $465 million at the end of September 2020. 
Q3 2020 Conference callAn English language analysts’ conference call is scheduled today at 8:15 am (Paris time) – 7:15 am (London time)To follow this conference, please access the live webcast:A replay of the conference will be available via webcast on the CGG website at: www.cgg.com.For analysts, please dial the following numbers 5 to 10 minutes prior to the scheduled start time:About CGGCGG (www.cgg.com) is a global geoscience technology leader. Employing around 4,000 people worldwide, CGG provides a comprehensive range of data, products, services and equipment that supports the discovery and responsible management of the Earth’s natural resources. CGG is listed on the Euronext Paris SA (ISIN: 0013181864).ContactsCONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2020 Unaudited Interim Consolidated statements of operationsUnaudited Consolidated statements of financial positionUnaudited Consolidated statements of cash flows
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