CGG: Announces its Q4 and Full Year 2020 Results

 CGG Announces its Q4 and Full Year 2020 Results

Q4 Solid Operational Performance

2021 Positive Net Cash Flow sustained by gradual recovery

PARIS, France – March 5, 2021 – CGG (ISIN: FR0013181864), a world leader in Geoscience, announced today its fourth quarter and full year 2020 audited results.

Commenting on these results, Sophie Zurquiyah, CGG CEO, said:

“In the particularly challenging year of 2020, which saw the collapse of the oil & gas market across the second and third quarters, we finished the year with solid fourth quarter operational performance. During 2020, we successfully completed our exit from the Acquisition business while continuing to advance our high-end Geoscience technologies for reservoir development and production. We also delivered our Multi-client surveys in the industry’s core mature sedimentary basins and released new products while reinforcing our market leadership in Equipment. Our initiatives towards energy transition are accelerating with the development and commercialization of new business offerings, along with our announced target to achieve carbon neutrality by 2050. Looking forward, as global economies continue to progressively recover and with oil price stabilizing above $50/bbl, we expect CGG’s performance to benefit from the proactive cost reduction actions and gradually strengthen in the second half of the year, delivering positive net cash flow in 2021.“

Q4 2020: Solid Operational Performance IFRS figures: revenue at $217m, EBITDAs at $52m, OPINC at $(58)m Segment revenue at $283m, up 42% quarter-on-quarter and down (29)% year-on-year Geoscience: Increased software sales and sustained activity of large and dedicated imaging centers Multi-client: Solid prefunding rate of 171% in Q4   Equipment: Solid quarter driven by land equipment deliveries Segment EBITDAs at $118m and Adjusted* Segment EBITDAs at $122m before $(4)m of non-recurring severance costs, a 43% margin Segment Operating Income at $(42)m and Adjusted* Segment Operating Income at $17m before $(59)m of non-recurring charges Group Net loss at $(100)m including $(61)m non-recurring charges on continuing activities and $(23)m non-recurring charges on discontinued activities Group segment backlog at January 1st 2021 stands at $421m *Adjusted indicators represent supplementary information adjusted for non-recurring charges triggered by economic downturn.   Full Year 2020: Financial performance hampered by Covid-19 pandemic impact IFRS figures: revenue at $886m, EBITDAs at $292m, OPINC at $(173)m Segment revenue at $955m, down (32)% year-on-year Segment EBITDAs at $361m and Adjusted* Segment EBITDAs at $402m before $(42)m of non-recurring severance costs, a 42% margin Segment Operating Income at $(164)m and Adjusted* Segment Operating Income at $48m before $(213)m of non-recurring charges Group Net loss at $(438)m including $(269)m non-recurring charges on continuing activities and $(67)m non-recurring charges on discontinued activities   Liquidity of $385m and Net Debt (before IFRS 16) at $849m at year-end 2020 Q4 2020 Net Cash Flow at $(95)m including negative change in working capital of $(88)m supporting increased December sales FY 2020 Net Cash Flow of $(247)m including $(89)m negative change in working capital and $(101)m non-recurring cash costs Liquidity of $385m and Net debt before IFRS 16 at $849m as of December 31, 2020 CGG is in a leading position to benefit from progressive market recovery   With continuing acceleration of Covid-19 vaccinations world economies should continue to progressively recover from pandemic in 2021. Recent OPEC+ agreements support the rebalancing of supply and demand and Brent oil price has gradually recovered and stabilized above the $50/bbl threshold. CGG will continue to invest in geoscience technologies that support clients’ prioritization towards reservoir development and production optimization. After a low Q1, our Geoscience activity will start recovering during the second half of the year on the back of solid demand for best-in-class subsurface imaging technologies and sustained activity with large NOCs. Our Multi-client business will reduce capex keeping its focus on expanding our unique footprint offshore Brazil and in the North Sea while reprocessing existing data libraries with our latest imaging technologies. Our Equipment business should benefit from solid deliveries for land mega crews in Saudi Arabia in H1 and improved demand for its large portfolio of WING nodes onshore and GPR nodes offshore. CGG continues to progressively develop its existing energy transition businesses, leveraging its core capabilities into other domains (Geothermal, Mining and SHM), expanding into areas where clients are growing (Carbon capture, utilization and storage) and hiring new talents.   Financial objectives: positive net cash flow in 2021 Given the context outlined above and assuming there will be no deterioration in Covid-19 pandemic and market conditions, CGG segment revenue is expected to increase by low single digits year-on-year with growth in Equipment, gradual recovery in Geoscience from H2 2021 and reduced Multi-Client prefunding revenue. Segment EBITDAs is expected to remain stable with a less favorable business mix. Net cash flow is anticipated to be positive. The Group will continue to focus on capital discipline and cash generation. Multi-client cash capex is expected to be reduced to around $165 million with prefunding above 75% and industrial capex is expected to be stable at around $70 million. Non-recurring cash costs are expected to come down to around $(60) million.

Key Figures - Fourth Quarter 2020

Key Figures IFRS - Quarter In million $	2019 Q4	2020 Q4	Variances %
Operating revenues	426	217	(49)%
Operating Income	74	(58)	-
Equity from Investment	-	-	-
Net cost of financial debt	(33)	(34)	3%
Other financial income (loss)	2	2	12%
Income taxes	20	7	(64)%
Net Income / Loss from continuing operations	63	(83)	-
Net Income / Loss from discontinued operations	(37)	(18)	53%
Group net income / (loss)	26	(100)	-
Operating Cash Flow	179	26	(85)%
Net Cash Flow	7	(95)	-
Net debt	716	1,004	40%
Net debt before lease liabilities	540	849	57%
Capital employed	2,323	2,168	(7)%

Key Segment Figures - Fourth Quarter 2020

Key Segment Figures - Quarter In million $	2019 Q4	2020 Q4	Variances %
Segment revenue	396	283	(29)%
Segment EBITDAs	206	118	(43)%
Group EBITDAs margin	52%	42%	(103) bps
Segment operating income	72	(42)	-
Opinc margin	18%	(15)%	-
IFRS 15 adjustment	2	(16)	-
IFRS operating income	74	(58)	-
Operating Cash Flow	179	26	(85)%
Net Segment Cash Flow	7	(95)	-
Supplementary information
Adjusted segment EBITDAs before NRC	206	122	(41)%
EBITDAs margin	52%	43%	(90) bps
Adjusted segment operating income before NRC	72	17	(77)%
Opinc margin	18%	6%	(123) bps

Key Figures – Full Year 2020

Key Figures IFRS - YTD In million $	2019	2020	Variances %
Operating revenues	1,356	886	(35)%
Operating Income	244	(173)	-
Equity from Investment	-	-	-
Net cost of financial debt	(132)	(134)	2%
Other financial income (loss)	6	(39)	-
Income taxes	9	(30)	-
Net Income / Loss from continuing operations	126	(376)	-
Net Income / Loss from discontinued operations	(188)	(63)	67%
Group net income / (loss)	(61)	(438)	-
Operating Cash Flow	751	264	(65)%
Net Cash Flow	186	(247)	-
Net debt	716	1,004	40%
Net debt before lease liabilities	540	849	57%
Capital employed	2,323	2,168	(7)%

Key Segment Figures – Full Year 2020

Key Segment Figures - YTD In million $	2019	2020	Variances %
Segment revenue	1,400	955	(32)%
Segment EBITDAs	721	361	(50)%
Group EBITDAs margin	51%	38%	(137) bps
Segment operating income	247	(164)	-
Opinc margin	18%	-17%	(349) bps
IFRS 15 adjustment	(4)	(8)	-
IFRS operating income	244	(173)	-
Operating Cash Flow	751	264	(65)%
Net Segment Cash Flow	186	(247)	-
Supplementary information
Adjusted segment EBITDAs before NRC	721	402	(44)%
Group EBITDAs margin	51%	42%	(94) bps
Adjusted segment operating income before NRC	247	48	(80)%
Opinc margin	18%	5%	(130) bps

Key figures bridge: Segment to IFRS - Fourth Quarter 2020

P&L items - Q4 In million $	Segment figures	IFRS 15 adjustment	IFRS figures
Total Revenue	283	(66)	217
OPINC	(42)	(16)	(58)
Cash Flow Statement items - Q4 In million $	Segment figures	IFRS 15 adjustment	IFRS figures
EBITDAs	118	(66)	52
Change in Working Capital & Provisions	(88)	66	(22)
Cash Provided by Operations	26	-	26
Multi-Client Data Library NBV In million $	Segment figures	IFRS 15 adjustment	IFRS figures
Opening Balance Sheet, Sept 20	345	154	499
Closing Balance Sheet, Dec 20	285	207	492

Key figures bridge: Segment to IFRS – Full Year 2020

P&L items - YTD In million $	Segment figures	IFRS 15 adjustment	IFRS figures
Total Revenue	955	(69)	886
OPINC	(164)	(8)	(173)
Cash Flow Statement items - YTD In million $	Segment figures	IFRS 15 adjustment	IFRS figures
EBITDAs	361	(69)	292
Change in Working Capital & Provisions	(89)	69	(20)
Cash Provided by Operations	264	-	264
Multi-Client Data Library NBV In million $	Segment figures	IFRS 15 adjustment	IFRS figures
Opening Balance Sheet, Dec 19	376	155	531
Closing Balance Sheet, Dec 20	285	207	492

Fourth Quarter 2020 Segment Financial Results

Geology, Geophysics & Reservoir (GGR)

Geology, Geophysics & Reservoir (GGR) In million $	2019 Q4	2020 Q4	Variances, %
Segment revenue	275	176	(36)%
Geoscience	106	75	(29)%
Multi-Client	169	101	(40)%
Prefunding	62	70	13%
After-Sales	106	31	(71)%
Segment EBITDAs	189	108	(43)%
EBITDAs Margin	69%	61%	(78) bps
Segment operating income	64	(44)	-
OPINC Margin	23%	(25)%	(479) bps
Equity from investments	-	-	-
Capital employed (in billion $)	1.9	1.6	(10)%
Supplementary information
Adjusted segment EBITDAs before NRC	189	111	(41)%
EBITDAs Margin	69%	63%	(58) bps
Adjusted segment OPINC before NRC	64	15	(79)%
OPINC Margin	23%	8%	(168) bps
Other Key Metrics
Multi-Client cash capex ($m)	(32)	(41)	(26)%
Multi-Client cash prefunding rate (%)	191%	171%	(204) bps

GGR segment revenue was $176 million, up 18% quarter-on-quarter and down (36)% year-on-year.

• Geoscience revenue was $75 million, down (2)% quarter-on-quarter and down (29)% year-on-year.

Despite the general slowdown of the global economy and its negative effect on oil price and clients’ E&P spending, Geoscience production was more resilient, driven by stable activity for Naitional Oil Companies and sequential increase in GeoSoftware and Geovation sales.

CGG Geoscience technology leadership continues to be recognized by major clients.

• Multi-Client revenue was $101 million, up 38% quarter-on-quarter and down (40)% year-on-year.

Prefunding revenue of our multi-client projects was $70 million, up 78% quarter-on-quarter and up 13% year-on-year.

We had one marine streamer multi-client program offshore Brazil and several reprocessing and reimaging multi-clients surveys this quarter.Multi-client cash capex was $(41)m and prefunding rate was high at 171%.

Multi-client after-sales were at $31 million this quarter primarily driven by Brazil, down (8)% quarter-on-quarter and down (71)% year-on-year.

The segment library Net Book Value was $285 million ($492 million after IFRS 15 adjustments) at the end of 2020, split 84% offshore and 16% onshore.

GGR segment EBITDAs was $108 million, a 61% margin.

GGR Adjusted segment EBITDAs was $111 million, a 63% margin before $(4) million of severance costs.

GGR segment operating income was $(44) million.

GGR Adjusted segment operating income was $15 million, a 8% margin before $(59) million of non-recurring charges including mainly $(29)m Multi-client library impairments mainly in Africa and Ireland.

GGR capital employed was stable at $1.6 billion at the end of 2020.

Equipment

Equipment In million $	2019 Q4	2020 Q4	Variances, %
Segment revenue	123	108	(13)%
Land	87	87	(0)%
Marine	23	13	(43)%
Downhole gauges	9	3	(68)%
Non Oil & Gas	4	5	19%
Segment EBITDAs	23	14	(41)%
EBITDAs margin	19%	13%	(60) bps
Segment operating income	16	6	(63)%
OPINC Margin	13%	5%	(75) bps
Capital employed (in billion $)	0.5	0.6	22%
Supplementary information
Adjusted segment EBITDAs before NRC	23	14	(40)%
EBITDAs margin	19%	13%	(58) bps
Adjusted segment OPINC before NRC	16	6	(62)%
OPINC Margin	13%	6%	(73) bps

Equipment segment revenue was $108 million, up 114% quarter-on-quarter and down (13)% year-on-year. External sales were $108 million.

• Land equipment sales represented 81% of total sales, as we delivered in Q4 over 100,000 channels worldwide. Sercel also delivered WiNG land node systems in Latin America.
• Marine equipment sales represented 12% of total sales driven by spares sections sales of Sentinel streamers to its installed customers base.
• Downhole equipment sales were $3 million and sales from non Oil & Gas equipment were $5 million

Equipment segment EBITDAs was $14 million.

Equipment segment operating income was $6 million.

Equipment capital employed was up at $0.6 billion at the end of 2020.

Fourth Quarter 2020 Financial Results

Consolidated Income Statements In million $	2019 Q4	2020 Q4	Variances %
Exchange rate euro/dollar	1.10	1.18	7%
Segment revenue	396	283	(29)%
GGR	275	176	(36)%
Equipment	123	108	(12)%
Elim & Other	(2)	(1)	36%
Segment Gross Margin	109	46	(58)%
Segment EBITDAs	206	118	(43)%
GGR	189	111	(41)%
Equipment	23	14	(40)%
Corporate	(6)	(4)	38%
Elim & Other	-	-	-
Severance costs	-	(4)	-
Segment operating income	72	(42)	-
GGR	64	15	(77)%
Equipment	16	6	(62)%
Corporate	(7)	(4)	37%
Elim & Other	-	-	-
Non recurring charges	-	(59)	-
IFRS 15 adjustment	2	(16)	-
IFRS operating income	74	(58)	-
Equity from investments	-	-	-
Net cost of financial debt	(33)	(34)	(3)%
Other financial income (loss)	2	5	-
Income taxes	20	7	(64)%
NRC (Tax & OFI)	-	(3)	-
Net income / (loss) from continuing operations	63	(83)	-
Net income / (loss) from discontinued operations	(37)	(18)	53%
IFRS net income / (loss)	26	(100)	-
Shareholder's net income / (loss)	25	(102)	-
Basic Earnings per share in $	0.04	(0.14)	-
Basic Earnings per share in €	0.03	(0.12)	-

Segment revenue was $283 million, up 42% quarter-on-quarter and down (29)% year-on-year. The respective contributions from the Group’s businesses were 27% from Geoscience, 35% from Multi-Client (62% for the GGR segment) and 38% from Equipment.

Segment EBITDAs was $118 million and Adjusted^* segment EBITDAs was $122 million before $(4) million of severance costs, up 51% sequentially and down (41)% year-on-year, a 43% margin.

Segment operating income was $(42) million and Adjusted* segment operating income was $17 million before $(59) million of non-recurring charges, which included $(29)m of Multi-client library impairments.

Global economic crisis, triggered by Covid-19 pandemic, and unprecedented drop in oil price and E&P spending lead CGG to launch cost reduction actions, which resulted in new severance costs and recognize other non-recurring charges.

$(61) million of non-recurring charges were booked during the fourth quarter of 2020:

$(59) million at the operating level:

• $(4) million of severance costs
• $(29) million of non-cash Multi-client library impairments mainly in Africa and Ireland
• $(10) million of asset impairment
• $(15) million of non-cash fair value remeasurement of assets available for sale

$(3) million of non-cash remeasurement of other financial assets and liabilities

Non-recurring charges (in m$)	Q4 2020
Operational costs provisions	(4)
Multi-client library Impairment	(29)
Asset impairment	(10)
Fair value remeasurement of assets available for sale	(15)
Other financial items (OFI) adjustements	(3)
Total	(61)

IFRS 15 adjustment at operating income level was $(16) million and IFRS operating income, after IFRS 15 adjustment, was $(58) million.

Cost of financial debt was $(34) million. The total amount of interest paid during the quarter was $(34) million.

Other Financial Items were $2 million including $(3) million of non-recurring charges. Taxes were at $7 million.

Net loss from continuing operations was $(83) million including $(61) million of non-recurring charges.

Discontinued operations : Correspond to the former Contractual Data Acquisition and Non-Operated Resources segments. Main aggregates are as follows: - Q4 revenue from discontinued operations was $17 million. - Net loss from discontinued operations was $(18) million this quarter, including $(23)m non recurring charges related to the 2021 Plan - Net Cash flow from discontinued operations was $(2) million before CGG 2021 Plan

Group net loss was $(100) million including $(84) million of non-recurring charges; $(61) million of non-recurring charges on continuing operations and $(23)m of non-recurring charges on discontinued operations.

After minority interests, Group net loss attributable to CGG shareholders was $(102) million/ €(86) million.

Fourth Quarter 2020 Cash Flow

Cash Flow items In million $	2019 Q4	2020 Q4	Variances %
Segment Operating Cash Flow	179	26	(85)%
CAPEX	(55)	(55)	-
Industrial	(15)	(5)	64%
R&D	(8)	(9)	(10)%
Multi-Client (Cash)	(32)	(41)	(26)%
Marine MC	(21)	(40)	(88)%
Land MC	(11)	(1)	94%
Proceeds from disposals of assets	-	-	-
Segment Free Cash Flow	124	(29)	-
Lease repayments	(16)	(12)	24%
Paid Cost of debt	(33)	(34)	(2)%
CGG 2021 Plan	(71)	(18)	75%
Free cash flow from discontinued operations	3	(2)	-
Net Cash flow	7	(95)	-
Financing cash flow	(1)	0	100%
Forex and other	9	16	75%
Net increase/(decrease) in cash	15	(79)	-
Supplementary information
Change in working capital and provisions, included in Segment Operating Cash Flow	(20)	(88)	-
From severance cash costs	-	(3)	-
Segment Free Cash Flow before severance cash costs	124	(26)	(121)%

Total capex was $(55) million:

• Industrial capex was $(5) million,
• Research & Development capex was $(9) million,
• Multi-client cash capex was $(41) million

Segment Free Cash Flow was $(29) million, including $(88) million negative change in working capital and $(3)m of non-recurring severance cash costs.

After $(12) million lease repayments, $(34) million paid cost of debt, $(18) million 2021 plan cash costs and $(2) million free cash flow from discontinued operations, Net Cash Flow was $(95) million.

Full Year 2020 Financial Results

Consolidated Income Statements In million $	2019	2020	Variances %
Exchange rate euro/dollar	1.12	1.14	1%
Segment revenue	1,400	955	(32)%
GGR	960	668	(30)%
Equipment	452	291	(36)%
Elim & Other	(11)	(4)	69%
Segment Gross Margin	393	169	(57)%
Segment EBITDAs	721	361	(50)%
GGR	652	401	(39)%
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