CGG Announces its 2018 Second Quarter Results
| Q2 2018: solid segment EBITDAs in line with expectations IFRS figures1: revenue at $314m, OPINC at $26m, net income at $49m Segment revenue2 at $338m, down 3% year-on-year GGR: robust Subsurface Imaging & Reservoir (SIR) activity and Multi-Client driven by high after-sales partly offsetting lower prefunding Equipment: strong volume increase leading to breakeven Contractual Data Acquisition: continuing competitive market environment Segment EBITDAs2 at $110m, down 9% year-on-year, a 33% margin Segment operating income2 at $40m, versus $(3)m last year, supported by favorable Multi-Client sales mix and increase in Equipment sales |
| Q2 operational highlights Multi-Client recorded large sales in North Sea and US onshore; activity in Brazil, Mozambique and Permian basin SIR activity driven by client reservoir/ production imaging and services, including nodes processing Equipment main sales notably in North Africa and Asia Contractual Data Acquisition fleet operating in West Africa |
| H1 2018: activity gradually improving IFRS figures1: revenue at $560m, OPINC at $(41)m, net income at $696m Segment revenue2 at $633m, up 6% year-on-year Segment EBITDAs2 at $163m, up 9% year-on-year, a 26% margin Segment operating income2 at $17m, versus $(71)m last year |
| Sound financial situation First Lien refinancing completed in April 2018 Limited cash consumption, segment FCF at $(9)m Net debt of $716m at end of June, liquidity of $447m and leverage ratio at 1.9x |
| Reiterated 2018 outlook Capital Market Day planned on November 7th |
| 1 Based on transitory IFRS 15 application 2 Segment figures presented before IFRS 15 and Non-Recurring Charges (NRC) |
PARIS, France – August 2nd 2018 – CGG (ISIN: FR0013181864 – NYSE: CGG), world leader in Geoscience, announced today its 2018 second quarter unaudited results.
Commenting on these results, Sophie Zurquiyah, CGG CEO, said:
“The second quarter results were in line with our expectations with a stable EBITDAs margin year-over-year. SIR performed well and Multi-Client after-sales were particularly high with significant contribution from the North Sea. Prefunding was low, primarily as a result of regulatory delays. Equipment saw strong volume increase and returned to breakeven. Contractual Data Acquisition activities were still under pressure with continued low prices.
Priority is to focus on cash generation, and specifically this quarter cash consumption was limited due to rigorous management of working capital.
In the context of a gradual market improvement, while clients maintain a cautious approach to spending, we remain on track to meet our targets for 2018.”
Post-closing events
- Geowave Voyager
SeaBird Exploration Plc announced on July 11, 2018 that it was in an exclusive process to acquire our seismic vessel Geowave Voyager and certain seismic equipment for cash consideration of US$17 million. The transfer of ownership of the Vessel and closing of the transaction is expected to be finalized by October 2018. As of June 30, 2018, the classification of the Geowave Voyager as an asset held for sale is unchanged.
- Convertible bondholder’s appeal
On July 17, 2018, certain holders of CGG’s convertible bonds filed a recourse before the French Supreme Court (Cour de cassation) against the ruling rendered on May 17, 2018 by the Appeals Court of Paris rejecting a claim by a group of Convertible Bondholders against the ruling of the Commercial Court of Paris sanctioning the safeguard plan on December 1, 2017.
Transitory application of IFRS 15
Discussions between CGG, its auditors and the regulators are still on going. CGG continues advocating for the IFRS 15 compliance of revenue recognition policy based on the two distinct performance obligations contained in these contracts.
In the absence of a finalized IFRS 15 accounting policy, prior to the Group’s second quarter 2018 results, CGG decided to continue presenting a dual approach:
- Â Â Â one set of figures (the “IFRS” figures) in line with the accounting practice adopted by some other seismic players, with pre-commitment revenue recognized in full only upon delivery of the final data, and
- Â Â a second set of figures (the “Segment Figures”) corresponding to the figures used for internal management reporting purposes and produced in accordance with the Group’s historical method (percentage of completion for multi-clients pre-commitments).
The Company aims to fix a definitive approach with its auditors and the regulators ideally prior to the release of Q3Â 2018 financial statements and at the latest for the 2018 annual report.
Please find below tables for key IFRS figures, segment figures and bridges; please refer to our 6-K document for full IFRS financial statements.
Key IFRS Figures – Second Quarter 2018
| In million $ | Second Quarter 2017* |
First Quarter 2018 |
Second Quarter 2018 |
| Group revenue | 349.8 | 245.6 | 314.3 |
| Operating income | (98.2) | (67.1) | 26.3 |
| Equity from investments | (2.5) | 1.3 | 1.1 |
| Net cost of financial debt | (48.7) | (33.2) | (33.3) |
| Other financial income (loss) | 0.5 | 762.8 | 65.2 |
| Income taxes | (20.8) | (17.2) | (10.2) |
| Net income | (169.7) | 646.6 | 49.1 |
| Net debt | 2,497.0 | 659.3 | 715.9 |
| Capital employed | 3,273.5 | 3,149.4 | 3,158.1 |
            *Previous periods are not restated as per IFRS 15 guidelines
Key Segment Figures – Second Quarter 2018
| In million $ | Second Quarter 2017 |
First Quarter 2018 |
Second Quarter 2018 |
| Segment revenue | 349.8 | 294.7 | 337.9 |
| Segment EBITDAs | 120.0 | 53.0 | 109.7 |
| Group EBITDAs margin | Â 34.3% | 18.0% | 32.5% |
| Segment operating income | (3.5) | (22.3) | 39.7 |
| Â Opinc margin | Â (1.0)% | (7.6)% | 11.7% |
| Non-recurring charges (NRC) | (94.7) | (33.9) | (3.4) |
| IFRS 15 adjustment | na | (10.9) | (10.0) |
| IFRS operating income | (98.2) | (67.1) | 26.3 |
| Equity from investments | (2.5) | 1.3 | 1.1 |
| Net cost of financial debt | (48.7) | (33.2) | (33.3) |
| Other financial income (loss) | 0.5 | 762.8 | 65.2 |
| Income taxes | (20.8) | (17.2) | (10.2) |
| Net income | (169.7) | 646.6 | 49.1 |
| Segment Operating Cash Flow | 52.2 | 62.8 | 95.1 |
| IFRS Operating Cash Flow | (2.1) | 7.1 | 84.9 |
| Segment Free Cash Flow | (23.9) | (39.9) | (9.3) |
| IFRS Free Cash Flow | (78.2) | (95.6) | (19.5) |
| Net debt | 2,497.0 | 659.3 | 715.9 |
| Capital employed | 3,273.5 | 3,179.7 | 3,199.0 |
Key IFRS Figures – First Half 2018
| In million $ | First Half 2017* |
First Half 2018 |
| Group revenue | 599.2 | 559.9 |
| Operating income | (195.1) | (40.8) |
| Equity from investments | 0 | 2.4 |
| Net cost of financial debt | (95.5) | (66.5) |
| Other financial income (loss) | (1.1) | 828.0 |
| Income taxes | (23.1) | (27.4) |
| Net income | (314.8) | 695.7 |
| Net debt | 2,497.0 | 715.9 |
| Capital employed | 3,273.5 | 3,158.1 |
            *Previous periods are not restated as per IFRS 15 guidelines
Key Segment Figures – First Half 2018
| In million $ | First Half 2017 |
First Half 2018 |
| Segment revenue | 599.2 | 632.6 |
| Segment EBITDAs | 148.7 | 162.7 |
| Group EBITDAs margin | 24.8% | 25.7% |
| Segment operating income | (70.7) | 17.4 |
| Â Opinc margin | (11.8)% | 2.8% |
| Non-recurring charges (NRC) | (124.4) | (37.3) |
| IFRS 15 adjustment | na | (20.9) |
| IFRS operating income | (195.1) | (40.8) |
| Equity from investments | 0 | 2.4 |
| Net cost of financial debt | (95.5) | (66.5) |
| Other financial income (loss) | (1.1) | 828.0 |
| Income taxes | (23.1) | (27.4) |
| Net income | (314.8) | 695.7 |
| Segment Operating Cash Flow | 86.6 | 157.9 |
| IFRS Operating Cash Flow | (12.9) | 92.0 |
| Segment Free Cash Flow | (98.2) | (49.2) |
| IFRS Free Cash Flow | (197.7) | (115.1) |
| Net debt | 2,497.0 | 715.9 |
| Capital employed | 3,273.5 | 3,199.0 |
Key figures bridge: Segment to IFRS – Second Quarter 2018
| Q2 2018 P&L items
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| Total revenue | 337.9 | (23.6) | 0 | 314.3 |
| OPINC | 39.7 | (10.0) | (3.4) | 26.3 |
| Q2 2018 Cash Flow Statement items
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| EBITDAs | 109.7 | (23.6) | (3.4) | 82.7 |
| Change in Working Capital & Provisions | (22.9) | 23.6 | 6.2 | 6.9 |
| Cash Flow from Operations | 95.1 | 0 | (10.2) | 84.9 |
| Opening Balance Sheet – April 1st 2018
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| MC Data Library NBV | 853.9 | 157.6 | 0 | 1,011.5 |
| Other current liabilities | 104.9 | 153.1 | 0 | 258.0 |
| Closing Balance Sheet – June 30th 2018 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| MC Data Library NBV | 869.8 | 170.8 | 0 | 1,040.6 |
| Other current liabilities | 94.6 | 157.5 | 0 | 252.1 |
*Non-recurring charges linked to Transformation Plan and Financial Restructuring
Key figures bridge: Segment to IFRS – First Half 2018
| H1 2018 P&L items
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| Total revenue | 632.6 | (72.7) | 0 | 559.9 |
| OPINC | 17.4 | (20.9) | (37.3) | (40.8) |
| H1 2018 Cash Flow Statement items
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| EBITDAs | 162.7 | (72.7) | (37.3) | 52.7 |
| Change in Working Capital & Provisions | 8.1 | 72.7 | (15.6) | 65.2 |
| Cash Flow from Operations | 157.9 | 0 | (65.9) | 92.0 |
| Opening Balance Sheet – January 1st 2018
 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| MC Data Library NBV | 831.2 | 119.0 | 0 | 950.2 |
| Other current liabilities | 123.1 | 130.6 | 0 | 253.7 |
| Closing Balance Sheet – June 30th 2018 In million $ |
Segment figures | IFRS 15 adjustments | NRC* adjustments | IFRS figures |
| MC Data Library NBV | 869.8 | 170.8 | 0 | 1,040.6 |
| Other current liabilities | 94.6 | 157.5 | 0 | 252.1 |
*Non-recurring charges linked to Transformation Plan and Financial Restructuring
Second Quarter 2018 Financial Results by Operating Segment and before non-recurring charges
Geology, Geophysics & Reservoir (GGR)
| GGR
  In million $ |
Second Quarter 2017 |
First Quarter 2018 |
Second Quarter 2018 |
Variation Year-on-year |
Variation Quarter-to-quarter |
| Segment  revenue | 220.7 | 185.1 | 203.3 | (8)% | 10% |
| Multi-Client | 132.7 | 84.4 | 110.5 | (17)% | 31% |
| Â Prefunding | 73.3 | 49.2 | 23.7 | (68)% | (52)% |
| Â After-Sales | 59.4 | 35.2 | 86.8 | 46% | 147% |
| Subsurface Imaging & Reservoir (SIR) | 88.0 | 100.7 | 92.8 | 5% | (8)% |
| Segment EBITDAs | 139.3 | 96.9 | 116.8 | (16)% | 21% |
| Margin | 63.1% | 52.4% | 57.5% | (560) bps | 510 bps |
| Segment operating income | 37.3 | 38.4 | 64.1 | 72% | 67% |
| Margin | 16.9% | 20.7% | 31.5% | na | na |
| Equity from investments | 0 | (0.5) | (0.3) | na | 40% |
| Capital employed (in billion $) | 2.3 | 2.2 | 2.2 | na | na |
| Other key metrics | |||||
| Fleet allocated to Multi-Client surveys (%) | 48% | 44% | 39% | na | na |
| Multi-Client cash capex ($m) | 60.0 | 62.0 | 54.2 | (10)% | (13)% |
| Multi-Client cash prefunding rate (%) | 122% | 79% | 44% | na | na |
GGR segment revenue was $203 million, down 8% year-on-year.
- Multi-Client revenue was $111 million, down 17% year-on-year. Prefunding sales were down 68% year-on-year at $24 million, impacted by regulatory delays. Fleet was active for offshore multi-client surveys in Mozambique and Brazil. A new acquisition started in the Wolfcamp Shale play, targeting US onshore unconventionals. After-sales were strong in most basins, amounting to $87 million up 46% year-on-year, including North Sea, Brazil and US onshore.
- Subsurface Imaging & Reservoir revenue was $93 million, up 5% year-on-yea