CGGVeritas Reports Third Quarter 2009 Consolidated Results
CGGVeritas has announced its non-audited third quarter 2009 consolidated results. All comparisons are made on a year-on-year basis unless stated otherwise. All results are reported after restructuring charges unless stated otherwise.
Results in line with expectations
- Group revenue was $731m down 31% from a record quarter last year and reflecting current market conditions
- Group operating margin was 8% and EBITDAs margin was 32% with a resilient Sercel EBIT margin, good vessel performance in oversupplied market and sequentially stable multi-client sales with a higher amortization rate
- Net income was $12m
- Free cash flow at $148m this quarter following a significant reduction of working capital
- Net debt to equity reduced to 32%
- Long term marine contract awarded by Pemex. Backlog as of November 1st increased sequentially to $1.65 billion
Cost reduction and marine adjustment plans on track
- Disciplined capital spending with a 25% reduction year to date
- Fleet reduction from 27 to 20 vessels progressing with three 3D vessels decommissioned to date. All related restructuring charges were accrued in Q2
CGGVeritas Chairman & CEO, Robert Brunck commented, "As expected, the positive contribution of higher margin 2008 backlog coming to an end, led to a more difficult quarter. Nevertheless, we delivered solid free cash flow thanks to strong and disciplined actions across the company.
"In the current economic environment Sercel, with its leading technology and manufacturing excellence, exhibited a resilient margin. Services reinforced their high-end positioning with increased prefunding of new multi-client projects, continued interest for its advanced depth imaging and through its high-resolution land seismic surveys. In marine, the industry began capacity adjustments but oversupply still prevails, translating into lower pricing and increased vessel transits for some of the new contracts.
"Looking forward in the context of relatively high and stable oil prices, we expect oil and gas fundamentals to strengthen and demand for high-end seismic technology, especially around reservoir optimization, to continue to increase. CGGVeritas is well positioned to take full advantage of its technological strength and its well balanced portfolio."
Third Quarter 2009 Financial ResultsGroup RevenueGroup Revenue was down 31% in $ and 26% in € from a record quarter last year, reflecting weak market conditions.
Revenue was down 35% in $ and 30% in € from a record third quarter last year with an increased contribution from marine with sales of two SeaRay OBC systems and one Nautilus for acoustic positioning and streamer control. Internal sales represented 21% of revenue.
Revenue was down 25% in $ and 19% in € with good vessel utilization despite increasing standby between contracts. Revenue was also supported by strong processing performance, while marine multi-client revenue decreased year on year following the reduction of our multi-client investments. Amortization rates of our multi-client library were higher this quarter at 75% mainly due to a different sales mix with lower fully depreciated data and higher onshore contribution. We anticipate the full year 2009 amortization rate to be around 65%.
Marine capacity adjustments: The Fohn and the Orion 3D vessels were decommissioned this quarter. Following contract completion, another 2D vessel will be de-rigged in the fourth quarter 2009. Three additional 2D vessels are scheduled for decommissioning in 2010.
- Marine contract revenue was down 15% in $ and 9% in €. The vessel availability rate1 was 90%, including a 7% impact related to standby between contracts and the production rate2 was 93%. 86% of the 3D fleet operated on contract. With the end of 2008 higher margin backlog, we saw the impact of lower pricing. The industry first Arctic Beaufort Sea acquisition project was completed with excellent results and one vessel was equipped with Nautilus for integrated acoustic positioning and streamer control.
- Land contract revenue was down 35% in $ and 30% in €, mainly in North American land as activity remained slow with gas prices continuing to stagnate. We operated 12 crews worldwide, including Argas crews in Saudi Arabia and our large high-density contracts in Qatar and Oman where we continue to operate near record levels with promising results. In Canada, we successfully completed a 4D SeisMovie reservoir monitoring acquisition.
- Processing & Imaging revenue was up 1% in $ and 9% in € as the performance and demand for our high-end innovative imaging products, especially in the Gulf of Mexico remained robust. The latest releases include AGORA our ground roll attenuation and TTI RTM, our leading edge depth migration technology. During the quarter, we were awarded a new dedicated center in Brazil and two dedicated center contracts were renewed, one in the Netherlands, the other in France.
- Multi-client revenue was down 46% in $ and 41% in € following our decreasing Capex spending. The amortization rate averaged 75%, with 78% in land and 74% in marine, a high amortization rate due to a sales mix of less fully depreciated data and an increasing contribution from land. Net Book Value of the library at the end of September was stable at $828 million.
Multi-client marine revenue was down 54% in $ and 51% in € as Capex was reduced 59% year on year in $ to $48 million (€33 million). Prefunding was $54 million (€38 million), up sequentially with a rate of 112%. In Brazil the extension of our Santos cluster survey around the Tupi discovery continued to progress well and we completed our programs offshore Australia and in the North Sea. After-sales worldwide were down 47% in $ and 45% in € at $23 million (€16 million).
Multi-client land revenue was down 16% in $ and 4% in €. Capex was reduced 26% year on year at $20 million (€14 million). Prefunding was high during the quarter, at $25 million (€18 million). Prefunding rate increased year on year and sequentially to 121% reflecting the strong interest for our Haynesville program where we operated two crews this quarter on the 3D multi-client Tri-Parish Line survey in northern Louisiana. After-sales were at $13 million (€9 million).
1 - 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 between contracts, of the shipyard time and the steaming time (the "available time"), all divided by total vessel time;
2 - 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.
Group Operating Income was $58 million, with a margin of 8% based on resilient performance of Sercel while weaker marine prices impacted Services.
Group Net Income was $12 million (€8 million), a 2% margin, compared to $162 million (€105 million) last year, resulting in an EPS of €0.05 per ordinary share and $0.07 per ADS.
Cash Flow from Operations
Cash flow from operations was $303 million (€217 million) stable year-on-year.
Global Capex was $148 million (€104 million) this quarter, a reduction of 25% year-on-year.
- Industrial Capex was $79 million (€56 million), up 54% in $, including a SeaRay and Nautilus system.
- Multi-client Capex was $68 million (€47 million) down 53% in $ with a prefunding rate of 115% compared to 102% last year.
Free Cash Flow
After interest expenses paid during the quarter, free cash flow was strong at $148 million up year on year and sequentially due to strict management of working capital.