CGGVeritas Reports $656MM for 3Q10

CGGVeritas posted its non-audited third quarter 2010 consolidated results. All 2009 results are reported before restructuring.

  • Group revenue was $656m, down 10% year-on-year and up 1% sequentially on recovering multi-client sales, including Gulf of Mexico, and continued robust Sercel activity
  • Group operating margin at 4% with contrasting performance:
    • Sercel: margin up to 30%, primarily driven by higher land sales
    • Services: negative margin due to challenging contract market conditions in marine and North America onshore, offsetting promising trends in multi-client and high-end imaging. In this continued oversupplied marine environment, vessel upgrades and planned repairs were accelerated. Together with increased transits, this drove vessel utilization rates lower in Q3
  • Net income was a loss of $33 million including $13 million taxes this quarter
  • Operating cash flow was $82 million including the impact of increased working capital which was mainly related to Sercel activity. After capital expenditure, including the Oceanic Vega, and after financial costs, our free cash flow decreased by $93 million
  • Net debt to equity ratio at 41%
  • Backlog as of October 1st was sequentially up 9% to $1.6 billion with significant long term contract awards
  • Our 4th quarter is expected to benefit from increased Sercel sales and the promising multi-client trend. Operational cash flow should strengthen in the 4th quarter but not enough to compensate for the decrease in cash flow from the first nine months of the year

CGGVeritas CEO, Jean-Georges Malcor commented, "CGGVeritas results this quarter reflect the challenging conditions that prevail during the low phase of the cycle we are going through. In this context, although our revenue was sequentially stable, our profitability was impacted by lower vessel utilization rates and difficult marine and North American land contract market conditions.

"However, in recent months, we have seen promising signs of increased demand for our high-end solutions and innovative technologies. As an example, our new breakthrough broadband solution BroadSeis, which provides a remarkable step forward in the quality of marine imaging, has received a very strong and positive client response. Land and Marine multi-client sales have strengthened, Sercel again posted a very strong quarter and backlog has increased.

"Our goal is to benefit from the increasing interest worldwide for our technology and expertise, while leveraging our high-end position in the progressively recovering seismic market.

"Looking towards the future, we remain focused on our three strategic priorities: costs savings, operational performance and technology differentiation. We look forward to communicating our plan and progress towards these priorities during an upcoming market day which will be held in Paris on December 16th 2010."

Third Quarter 2010 Financial Results

Group Revenue

Group revenue was down 10% in $ and up 1% in € year-on-year mainly due to fleet capacity adjustments and low vessel utilization rates while Sercel sales significantly increased. Sequentially, Group revenue was up 1% in $.


Year-on-year, revenue was up 21% in $ and 36% in €. Sequentially, revenue was stable in $ and operating margin increased 3 points to 30% confirming the indisputable position of Sercel as the industry leader.

Strong demand for increasing channel counts for high density surveys and regional activity drove sequential growth in land equipment this quarter. Sentinel® solid steamer sales along with increased technology take-up of SeaRay® OBC systems kept marine sales at a good level. Internal sales represented 21% of revenue, including the delivery of the Sentinel streamers and Nautilus® for the Oceanic Vega.


Year-on-year, revenue was down 19% in $ and 9% in €. Sequentially revenue was stable in $ and operating margin was negative this quarter as a consequence of lower vessel utilization rates and challenging contract market conditions in marine and onshore North America.

  • Marine contract revenue was down 36% year-on-year in $ and 28% in € due to our vessel reduction plan and lower vessel utilization rates. Sequentially, revenue was down 11% with vessel availability1 and production2 rates, both at 87% in a continued low priced market. 90% of the 3D fleet operated on contract, 10% on multi-client. During the quarter, the Oceanic Vega was delivered and successfully completed its first survey in the Barents Sea, before mobilizing to Mexico to acquire a large wide-azimuth dual vessel survey with the Vanquish which was upgraded to 12 Sentinel streamers. Our new superior broadband marine solution, BroadSeisTM continued to generate strong and increasing client interest with eight successful pilot projects since its introduction earlier this year.
    • The vessel availability rate, a metric measuring the structural availability of our vessels to meet demand; this metric is related to the entire fleet, and corresponds to the total vessel time reduced by the sum of the standby time, the shipyard time and the steaming time (the “available time”), all divided by total vessel time;
    • The vessel production rate, a metric measuring the effective utilization of the vessels once available; this metric is related to the entire fleet, and corresponds to the available time reduced by the operational downtime, all then divided by available time.
  • Land contract revenue was down 4% year-on-year in $ and up 10% in €. Sequentially revenue was relatively stable in $ while margins were impacted by challenging land contract conditions in North America. Activity remained high in the Middle East. In Oman, our high channel count contract was extended until the end of 2011. OBC activity continued to grow with the startup of the first of our two new crews in Saudi Arabia. EmphaSeisTM our new broadband land solution was successfully launched with implementation on four vibroseis crews.
  • Processing & Imaging revenue was down 7% year-on-year in $ and up 4% in €. Sequentially revenue was stable in $ and profitability remained strong driven by increased demand for our advanced capabilities, such as our leading RTM 3D gather depth processing technology and our reservoir solutions, particularly for shale gas. We now operate 12 dedicated centers and continued to develop our leadership this quarter with a three year extension for one center in Aberdeen, and the opening of another in Copenhagen.
  • Multi-client revenue was down 1% year-on-year in $ and 9% in €. Sequentially, we saw promising signs with revenue up 23% in $ mainly fueled by higher marine after-sales, which were up 138%. Capex for the third quarter was reduced to $62 million (€49 million) with prefunding rates increasing to 93%. The amortization rate averaged 52%, with 75% in land and 41% in marine. The Net Book Value of the library at the end of September was $745 million.
    • Multi-client marine revenue was sequentially up 29% in $. Capex was $35 million (€29 million). Prefunding was $36 million (€29 million) corresponding to a very high prefunding rate of 102%. After-sales worldwide were strong at $42 million (€33 million), increasing sequentially both in the Gulf-of-Mexico and in Brazil, highlighting the confidence of our clients in the long term value of deep offshore sub-salt plays. The final processing of our recently acquired Three Corner wide-azimuth survey in the Gulf of Mexico is on track for delivery in June 2011. Initial results show a tremendous improvement in the sub-salt section.
    • Multi-client land revenue was sequentially up 10% in $ with total sales in US Land breaking a quarterly record. Capex was high this quarter at $27 million (€21 million) as we continue to extend our footprint of prime seismic coverage in the shale gas resource plays. In addition to the ongoing survey in the Haynesville basin, in September we began acquisition of a multi-phase program in the Marcellus basin. Prefunding was $22 million (€17 million), a rate of 81%. After-sales were $14 million (€11 million).

Group Operating Income was $27 million (€21 million), a margin of 4%. The strengthening performance of Sercel and increased multi-client sales were offset by the continued low priced marine market, low vessel utilization rates and challenging contract market conditions onshore North America.

  • Financial Charges
    • Financial charges were $36 million (€29 million).
    • Other financial charges were $9 million (€7 million) following changes in the currency exchange rate this quarter, especially the strengthening of the euro.
  • Taxes
    • Taxes were $13 million (€10 million) mainly due to foreign deemed and US taxation
    • Net Income was a loss of $33 million (€25 million). After the positive impact of minority interests of $3 million (€2 million), EPS was €-0.18 per ordinary share and $-0.23 per ADS.
  • Cash Flow
    • Cash Flow from Operations
    • Cash flow from operations was $82 million (€66 million).
  • Capex
    • Global Capex was $169 million (€140 million) this quarter, an increase of 14% year-on-year.
      • Industrial Capex was $107 million (€91 million)
      • Multi-client Capex was $62 million (€49 million) a reduction of 9% in $ year on year with a 93% prefunding rate