CGG Reports 3Q04 Results

Compagnie Generale de Geophysique (ISIN: FR0000120164 ; NYSE : GGY) ) published its consolidated results for the third quarter of 2004.

Q3 2004 Highlights:

Revenues for the third quarter of 2004 were Euros 166.8 million, up 23% in Euros and 33% in USD compared to the third quarter of 2003.

Group operating profit of Euros 10.7 million compared to a Euros 0.2 million operating profit before NRI in Q3 2003.

Geophysical Services operating profit of Euros 1.6 million compared to a Euros 12.6 million operating loss before NRI in Q3 2003.

Sercel operating margin of 17%.

Exceptional currency exchange loss of Euros 3.8 million resulting from the liquidation of Kantwell, the subsidiary which previously owned the CGG Mistral vessel.

Q3 2004 net loss of Euros 3.2 million compared to a Euros 6.5 million net loss before NRI in Q3 2003.

Record high Group backlog of US$ 435 million.

Chairman and CEO Robert Brunck stated:

"This third quarter constitutes a turning point in our market. For the first time after five consecutive quarters, Geophysical Services show a positive operating result. The increase in marine acquisition prices, a good productivity of the vessels and a high level of after-sales from our multi-client library contributed to this performance. This positive trend should further firm up during the coming quarters. The recent awards and firm leads in land acquisition allow us to enter into the first half of 2005 with greater confidence on this specific segment. With Sercel maintaining its very strong profitability and Geophysical Services benefiting from an increase in exploration investment, CGG is well poised to further develop its financial performance in 2005."

Revenue and earnings with the comparative amounts for the corresponding periods of fiscal year 2003 are as follows:

                    Consolidated Statement of Earnings
    Million Euros                Year to Date               Third Quarter
                                 2004     2003               2004    2003
    Operating revenues          488.2     454.6             166.8   135.7
    Operating profit
    (loss) (1)                   23.7      (5.3)             10.7   (17.2)
    Income from equity
    investments                   7.7       5.8               2.9     0.9
    Goodwill depreciation        (6.4)     (6.2)             (2.2)   (3.2)
    Net interest expense        (16.7)    (15.8)             (5.0)   (3.6)
    Exchange gains (losses)       0.9       5.4              (3.2)   (0.7)
    Income taxes                (15.6)     (8.4)             (6.0)   (1.7)
    Minority interest            (0.9)      0.0              (0.4)    0.0
    Net income (loss)            (7.3)    (24.5)             (3.2)  (25.5)
    Diluted earnings
   per share (Euros)             (0.62)    (2.07)            (0.27)  (2.15)


 (1) The third quarter 2003 includes non recurring expenses of EUR17.4 million 


Revenues:

At Euros 166.8 million, CGG total revenues for the third quarter of 2004 were up 23% compared to the third quarter of 2003 and up 33% in USD.

Total revenues for Geophysical Services for the third quarter 2004 were Euros 101.5 million, up 34% in Euros, (+45% in USD), compared to the third quarter 2003.

Land acquisition total revenues for the third quarter 2004 fell 8% to Euros 18.8 million (stable in USD), compared to the third quarter 2003. At the end of September 2004, seven crews were in operation.

Offshore revenues for third quarter 2004 were Euros 55.2 million, up 110% in Euros and 127% in USD compared to the third quarter 2003. The Offshore SBU achieved a record level of revenues in USD. Multi-client after sales were high at Euros 14.1 million compared to the same period last year. The net book value of the offshore seismic data library at the end of September stood at Euros 143 million.

Processing-Reservoir revenues, at Euros 27.5 million for third quarter 2004, fell 5% in Euros and increased 2% in USD, compared to the third quarter 2003.

For the third quarter 2004, Sercel total sales were Euros 69.2 million, up 8 % in Euros and up 17% in USD, compared to the third quarter 2003. External sales for the third quarter 2004 were Euros 65.3 million, up 9% in Euros and up 19% in USD.

At the end of September 2004, CGG total revenues stood at Euros 488.2 million, a 7% increase in Euros and 19% in USD compared to the first nine months of 2003.

Total revenues for Geophysical Services were Euros 271.9 million, down 14% in Euros and 5% in USD compared to the same period last year.

Sercel total revenues were Euros 228.9 million, up 51% in Euros and up 66% in USD compared to the same period last year. At the end of September 2004, Sercel external sales were Euros 216.3 million, up 57% in Euros and 73% in USD compared to the same period last year.

Operating Result :

For the third quarter 2004, the Group operating result is a profit of Euros 10.7 million compared to an operating loss of Euros 0.2 million before NRI for the third quarter 2003.

The third quarter 2004 operating result would have increased by an additional Euros 6 million with a stable EUR/$ exchange rate.

For the third quarter 2004, the operating result from Geophysical Services shows a profit of Euros 1.6 million compared to an operating loss of Euros 12.6 million before NRI for the third quarter 2003. Strong vessels productivity and the high level of after-sales in multi-client significantly contributed to the return of Geophysical Services to a profitable situation, despite the still low level of activity in land acquisition. Including Argas, Services improved their EBIT margin to a EUR 4.5 million profit.

For the third quarter 2004, the operating result of Sercel shows a profit of Euros 11.7 million, representing 17% of revenues, compared to an operating result of Euros 13.8 million for the third quarter 2003. The sustained international demand in Land and Marine acquisition products supported this good operational performance.

For the first nine months of 2004, the Group operating result is a profit of Euros 23.7 million, a significant increase compared to the Euros 12.1 million profit before NRI at the end of September 2003. This operating profit does not include a positive contribution of Euros 7.7 million by subsidiaries, principally Argas, consolidated under the equity method compared to a positive contribution of Euros 5.8 million at the end of September 2003.

    Segment information
    Million Euros                  Year to Date       Third Quarter
                                    2004    2003       2004    2003
    Operating revenues
    Services                         273.5  317.7       101.7    76.5
    Products                         228.9  152.0        69.2    63.8
    Elimination                     (14.2) (15.1)       (4.1)   (4.6)
    Total                            488.2  454.6       166.8   135.7

    Operating profit (loss)
    Services (1)                    (16.4) (31.1)         1.6  (30.0)
    Products                          45.5   30.4        11.7    13.8
    Corporate                       (10.1)  (8.0)       (4.2)   (2.7)
    Elimination                        4.7    3.4         1.6     1.7
    Total after NRI                   23.7  (5.3)        10.7  (17.2)


 (1) The third quarter 2003 includes non recurring expenses of EUR17.4 million Operating Result Before Depreciation and Amortization (ORBDA): 


The Operating Result Before Depreciation and Amortization, "ORBDA", previously denominated "Adjusted EBITDA" in our previous financial reports, is defined as operating income (loss) excluding non-recurring revenues (expenses) plus depreciation, amortization and additions (deductions) to valuation allowances of assets and add-back of dividends received from equity companies.

The ORBDA for the third quarter 2004 stood at Euros 40.5 million, 24.3% of revenues. The ORBDA at the end of September stood at Euros 111.3 million, 22.8% of revenues.

        Million Euros                  Year to Date          Third Quarter
                                      2004    2003           2004       2003
    ORBDA                            111.3         122.7     40.5       22.3

    Summary of cash-flows:

                                           Year to Date    Third Quarter
    Million Euros                          2004    2003     2004    2003
    Cash-flow from operations              99.0    84.9     36.0     9.6
    Cash-flow after change in
    working capital                        64.8   135.8      4.3    17.1
    Capital expenditures                  (37.2)  (26.1)   (11.9)   (7.5)
    Investment in multi-client library    (39.8)  (92.0)   (12.4)  (25.3)



Net Result:

The net group consolidated result for the third quarter 2004 includes an exceptional currency exchange loss of Euros 3.8 million for the liquidation of Kantwell, the subsidiary owner of the Mistral vessel.

The net group consolidated result for the third quarter 2004 shows a Euros 3.2 million loss, compared to the Euros 6.5 million net loss before NRI for the third quarter 2003.

At the end of September, the net group consolidated result shows a loss of Euros 7.3 million compared to a net loss of Euros 5.5 million before NRI at the end of September 2003.

Equity and net debt:

    Million Euros                   YTD 2004  End of 2003
    Shareholders' equity                396.2       396.6
    Net Debt                            185.8       139.2
    Gearing ratio                       46.9%       35.1%



Backlog:

The backlog as of November 1st 2004 stands at US$ 435 million, a record high level for the Group and a 43% increase compared to last year.
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