CGGVeritas Meets Financial Objectives, Grows Company
CGGVeritas announced that its Board of Directors approved the fourth quarter and full year 2008 consolidated accounts. All comparisons are made on a year-on-year basis unless otherwise stated.
Q4 2008 Financial Performance
Group revenue was up 19% to $1.041 billion. Group operating income reached $199 million, up 6%, a 19% operating margin.
- Sercel revenue grew by 30% to a record $333 million as demand for 428XL land technology continued to strengthen. Operating margin was 33%.
- Services revenue rose 9% to $696 million, driven by high marine utilization rates and strong multi-client prefunding. Operating margin was 20%.
Net income was $164 million, up 69%. Earnings per ADS was $1.19. Expressed in Euros, net income was up 77% to €119 million. Earnings per share (EPS) was €0.86.
Net free cash flow was $293 million.
Operating income includes a nonrecurring charge of $34 million related to unrealized losses on investment in OHM.
Wavefield was consolidated into the accounts as of December 31st following the successful completion of our exchange offer on December 19th.
Year 2008 Financial Performance
Group revenue was up 18% to $3.850 billion. Group operating income rose 19% to $800 million. Operating margin reached 21% of revenue.
- Sercel operating margin was 32%, above our 30% target.
- Services operating margin was 20%, in-line with target.
Net income increased by 47% to $503 million. Per ADS, net earnings reached $3.57. Net income in Euros was €340 million, up 36%, reaching 13% of consolidated revenue. Earnings per share (EPS) was €2.41.
Operating cash flow for the year was $1.310 billion, up 48%. Free cash flow after capital spending, financial charges and before acquisitions was $452 million.
- Net debt/equity ratio was reduced to 35% at year-end (after Wavefield acquisition), in-line with target.
- Backlog as of February 1, 2009 was solid at $1.98 billion with $1.6 billion allocated to 2009 activities.
CGGVeritas Chairman & CEO, Robert Brunck commented, "I am very pleased to report that in 2008, despite a more challenging market during the last part of the year, we were able to achieve record performance, meet all our financial objectives, further grow the company mainly through the acquisition of Wavefield and strengthen our position.
"The technological and commercial leadership of Sercel is more and more established. Customers around the world are increasingly selecting our Services highly-advanced technologies, such as: HPVATM and V1TM in Land, our high-end marine acquisition, unique wide-azimuth data library in the Gulf of Mexico and our RTM and CBM software technology for depth processing and imaging.
"We currently expect that E&P spending will be reduced by around 10 to 15% in 2009. Outlook for seismic can be characterized by a softer market with low visibility especially in the second half. We are well prepared to manage these constraints by reducing our cost structure and adjusting our marine capacity.
"Current global economic conditions should not lead us to underestimate underlying oil and gas fundamentals, which support the worldwide longer term need to increase reserve replacement rates and the efficiency of reservoir management. In 2009, while addressing carefully the short term uncertainties, we will preserve the ability to develop long term opportunities through technology leadership, the quality of our products and services and the value of the expertise of our personnel.
Our top priorities are the following:
A rigorous discipline in managing cost, operational capacity and capital spending:
- We are implementing cost reduction programs across all activities of the company and have streamlined the organization in Services,
- In Sercel, manufacturing costs are being adjusted,
- In Services, we will focus our Land activity on long term contracts and select markets. In Marine, should the market weaken, the policy of the company would be to decommission older vessels as soon as they complete their programs,
- Our most recent and advanced data library with leading positions, particularly our wide-azimuth in the Gulf of Mexico, will provide resilient revenue generation and
- In general, the reduction of capital spending will support continued strong Net Free Cash Flow.
Strengthen technology leadership:
- Increase focus on technology with a sustained level of Research and Development.
- Further technology leadership in Sercel with continued innovations such as Nautilus, for streamer control and acoustic positioning and Optoplan, for reservoir monitoring.
- Leverage the growing technology differentiation in Services with our Marine high-end position further strengthened by Wavefield and our expertise in wide-azimuth, ultra high resolution capabilities in Land and advanced depth imaging.
"We enter the year with a solid balance sheet, low financial leverage, long term debt maturity and a flexible and well balanced portfolio of high-end seismic capabilities."
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