CGGVeritas’ Transformation Plan
Tuesday, August 5, 2014
Release
2014-2016 Transformation Plan
Intensified, accelerated and implemented in 2014
Resilient second quarter operating income in weak market conditions
PARIS, France – August 1st 2014 – CGG (ISIN: 0000120164 – NYSE: CGG), world leader in Geoscience announced today its non-audited 2014 second quarter results.
- 2014-2016 Transformation Plan intensified and accelerated. Restructuring measures implemented in 2014:
- Marine fleet reduced to 13 seismic vessels by end 2014. 1 vessel already decommissioned, 1 vessel retired from the seismic market, 2 vessels de-rigged and 1 permanently converted to source vessel
- North American land contract business disposed to Geokinetics
- New Argas set up finalized in the Middle-East
- More than 10% headcount reduction
- Strong cost reduction, reinforced cash management, 2014 industrial capex reduced by 10%
- Operational sites closed down in Bergen (Norway), Nigeria and Venezuela
- Resilient second quarter operating income in difficult current market environment:
- Revenue at $689m
- Operating income at $45m with solid operational marine performance
- EBIT at $31m, including a $(13)m negative contribution of equity from investees, mainly related to the Seabed Geosolutions JV
- $230m of non-recurring charges:
- $120m (including $96m cash costs) restructuring costs related to the Transformation Plan
- $74m write-off related to Seabed activities
- $37m write-off related to 2007-2008 multi-client library in Brazil
- Successful refinancing operations to extend debt maturity:
- Issue of a €400m High Yield Bond due 2020 at 5.875%
- Issue of a US $500m High Yield Bond due 2022 at 6.875%
- $57m financial one-off costs related to the April debt refinancing
- Backlog was $1.1bn as of 1st July 2014:
- Marine fleet coverage at 97% in Q3 and 40% in Q4
- Strategic agreement with Sovcomflot to create a marine JV
CGG CEO, Jean-Georges Malcor, commented:
« Given the current weak market conditions characterized notably by the unpredictable capex spending of our clients, delays in awarding projects and pressure on prices, we anticipate 2014 to remain difficult. In this context, CGG has decided to accelerate and intensify its restructuring measures into 2014, downsizing the fleet from 18 to 13 vessels by the end of the year and disposing of its North America land acquisition business to Geokinetics. Thanks to the full commitment of our employees we managed to deliver resilient profitability this quarter.
We anticipate, with this new perimeter, a sequential improvement in our results during the second half of the year sustained by a typically strong fourth quarter. The set of measures put in place during 2014 allow us to confirm our objective of 400 bps Ebit margin improvement in 2016.»
Post-closing event:
- On the 21st of July, CGG negotiated a one-year extension of the French Revolving Credit Facility to maintain the 3 year maturity
- On the 1st of August, CGG announced the disposal of the North American land contract business to Geokinetics
Implementation of the 2014-2016 Transformation Plan:
Rebalanced business portfolio
- Reformatting and rebalancing of businesses:
- Right-sizing of the fleet from 18 to 13 vessels by end of 2014
- North American land contract business disposed to Geokinetics
- New Argas land set up finalized in the Middle East. The new Argas owned respectively 51% by Taqa and 49% by CGG has enlarged its operational footprint across the Gulf Countries
- Agreement with Sovcomflot to form a marine JV
- Technology and innovation:
- 1st deliveries of Sercel 508XT land acquisition system
- Paradigm shift in Gulf of Mexico with the first high quality StagSeis fast track images available and strong interest from our customers
Cash and debt management
- Scaling up across the board with 2.5% reduction of employees since January 2014 and more than 10% reduction by end 2014 (more than 1000 employees)
- Strong cost reduction, cash management and capex discipline
- Three operational sites closed down in Norway, Nigeria and Venezuela
- Availability and production rates above 90% in H1 2014
- Excellent customer feedback in the Welling Report on CGG data acquisition activities
- Refinancing operations launched in April to push back the mandatory instalments beyond 2019
- One year extension of the French Revolver Credit Facility
- 10% 2014 industrial capex reduction
- End of multi-client IBALT program in the Gulf of Mexico in Q3
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