CGG to Downsize Its Fleet

CGG has announced its non-audited 2014 second quarter results. Reported revenue was at $689 million, compared to $1.032 million same time last year.

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.”