Regulatory News:

CGGVeritas (Paris:GA) (NYSE:CGV) announced today its non-audited first quarter 2012 consolidated results. All comparisons are made on a year-on-year basis unless stated otherwise.

Effective January 1, 2012, CGGVeritas changed the presentation currency of its consolidated financial statements from the euro to the U.S. dollar to better reflect the profile of an industry with revenues, costs and cash-flows primarily generated in U.S. dollars.

The 2011 first quarter figures shown in this press release were restated as if the change in the Group presentation currency was effective since the January 1, 2004 (IFRS transition). The 4th quarter 2011 figures are presented for information purposes only. They correspond to the conversion into USD of the 2011 accounts provided in Euros as released last February. In the context of our new presentation of cash indicators, 2011 first and fourth quarter EBITDAs and multi-client Capex figures were restated.

First Quarter 2012 Key Figures

   
First Quarter First Quarter
In million $   2012   2011*
Revenue   787   729
EBITDAs   212   156
Operating Income   54   23
Net Income   -3   -37
Cash Flow from Operations   193   198
Free Cash Flow   -7   65
Backlog   1 565   1 218
 

*Restated figures

CGGVeritas CEO, Jean-Georges Malcor commented:

"In the first quarter 2012, Group revenue increased year-on-year as Sercel delivered record sales and Services remained stable. Group results improved despite operating marine contracts this quarter which were awarded during the second half of 2011 at historic low prices. Our performance plan is progressing well and bearing fruit as the marine modernization plan reached completion in early April with the Oceanic Champion returning to operations and our vessel production rate was high at 92% this quarter.

Our backlog is significantly increasing, confirming the recovery in demand for the high end seismic equipment and services market, with marine prices strengthening year on year and good visibility for our land crews across the year.

With our strengthening operational performance and reinforced technical differentiation, CGGVeritas should continue its journey of growth in 2012 while benefiting from both the excellent financial performance of Sercel and an expected significant improvement of Services, especially in the second half of the year."

First Quarter 2012 Results

  • Group revenue was $787 million, up 8% year-on-year mainly driven by record high Sercel sales.
  • Group operating income was $54 million. Group margin was 7%:
    • Sercel margin was high at 33% driven by demand for land and marine high resolution surveys.
    • Services margin was negative at 1% mainly due to the continued very low prices in the marine contracts executed this quarter.
  • Net income was a loss of $3 million.
  • Operational cash flow was $193 million, stable year-on-year.
  • After financial costs paid and capital expenditure, including $65 million for the performance upgrade of the Oceanic Champion, free cash flow was negative at $7 million.
  • The acquisition of Global Research Company (GRC) on the 18th of January strengthened Sercel's diversification into high resolution downhole gauges and sensors.
  • Backlog strengthened to $1.565 billion at the end of March 2012, up 28% year-on-year

First Quarter 2012 Financial Results

First Quarter 2012 key figures

   
In million $ Fourth Quarter

2011*

First Quarter
    2012   2011*
Group Revenue   906   787   729
Sercel   326   348   275
Services   632   531   533
Group Operating Income   71   54   23
Margin   8%   7%   3%
Sercel   98   116   95
Margin   30%   33%   34%
Services   11   -8   -26
Margin   2%   -1%   -5%
Net Income   21   -3   -37
Margin   2%   0%   -5%
Net Debt   1 411   1 512   1 444
Net Debt to Equity Ratio   37%   39%   38%
 

*Restated figures

Revenue

Group revenue was up 8% year-on-year and down 13% sequentially compared to the fourth quarter which was particularly strong. Services revenue was stable year-on-year, while Sercel reached a quarterly record.

In millions $   Fourth Quarter   First Quarter
  2011*   2012   2011*
Group Revenue   906   787   729
Sercel Revenue   326   348   275
Services Revenue   632   531   533
Eliminations   -52   -92   -79
Marine contract   245   189   199
Land contract   64   123   160
Processing   124   106   99
Multi-client   199   114   75
MC marine   160   87   45
MC land   40   27   30
 

*Restated figures

Sercel

First quarter revenue was up 26% year-on-year and up 7% sequentially. This particularly high level of sales was mainly related to the first land equipment deliveries for high channel count surveys in the Middle East and also to sustained marine streamer sales. Internal sales, which are generally strong in the first quarter, represented 27% of Sercel total revenue as Sentinel and Nautilus were delivered to the Oceanic Champion.

Services

Revenue was stable year-on-year and down 16% sequentially due to the traditional seasonality of multi-client sales in the fourth quarter.

  • Marine contract revenue was down 5% year-on-year and sequentially down 23% mainly related to the higher rate of 23% of our fleet dedicated to multi-client programs. The vessel availability rate1 grew to 84% and the production rate2 to 92% as a result of our strengthening operational performance. The Oceanic Champion, the last of our vessel planned for performance upgrade, left the shipyard on the 31st of March. She is now operating in the North Sea. Our marine performance plan has reached completion with the Vanquish, Oceanic Endeavour, Oceanic Phoenix and Oceanic Champion vessels all returning to operations over the last 18 months with an enhanced configuration of 12 Sentinel solid streamers and Nautilus navigation systems. The Amadeus vessel was effectively transferred to our Vietnamese Joint-Venture on the 27th of March.
  • Land contract revenue was down 23% compared to an exceptionally strong first quarter 2011. Sequentially, it is up 91%. Our winter campaign in North America, where we operated 12 crews, was successful, our operations in Saudi Arabia were sustained and our crews are beginning to remobilize in North Africa in a still uncertain geopolitical context. Worldwide demand for shallow water and OBC operations continue to be strong.
  • Processing, Imaging & Reservoir revenue was up 6% year-on-year and down 15% sequentially compared to the very strong fourth quarter in 2011. Demand for high-end processing remains at high levels especially in our major centers.
  • Multi-client revenue was up 52% year-on-year mainly related to strong after-sales in the Gulf of Mexico and the North Sea. Capex was $76 million. The depreciation rate averaged 71%, with 92% in land and 65% in marine, a high rate due to geographical sales mix this quarter. Net Book Value at the end of March 2012 was $536 million compared to $527 million at the end of December 2011.
    • Multi-client marine revenue was up 95% year-on-year. Capex was $52 million and was focused on offshore Brazil. Prefunding revenue was low at $22 million, a rate of 42%, as some prefunding was postponed to the second quarter. After-sales were particularly strong for a first quarter and reached $65 million with high levels of client interest for our North Sea and Gulf of Mexico data, ahead of lease sales.
    • Multi-client land revenue was down 9% year-on-year. Capex was $24 million dedicated to the pursuit of our Marcellus and Alaska programs. Prefunding revenue was $21 million, a rate of 87%. After-sales were $6 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, 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 EBITDAs was $212 million, a margin of 27%.

  Fourth Quarter   First Quarter
In millions $   2011*   2012   2011*
Group EBITDAs   273   212   156
Margin   30%   27%   21%
Sercel EBITDAs   110   127   108
Margin   34%   36%   39%
Services EBITDAs   198   136   91
Margin   31%   26%   17%
 

*Restated figures

Group Operating Income was $54 million. Operating margin was 7%.

  Fourth Quarter   First Quarter
In millions   2011*   2012   2011*
Group Operating Income   71   54   23
Margin   8%   7%   3%
Sercel Operating Income   98   116   95
Margin   30%   33%   34%
Services Operating Income   11   -8   -26
Margin   2%   -1%   -5%
 

*Restated figures

Financial Charges

Financial charges were $42 million:

  • Cost of debt was $39 million, including $7 million paid during the quarter
  • Other financial items were $3 million including the unfavorable impact of currency translation

Taxes were $19 million including the favorable impact of $3 million of currency translation.

Group Net Income was a loss of $3 million compared to a loss of $37 million in the first quarter 2011.

Net Income attributable to the owners of CGGVeritas was a loss of $9 million/?7 million after the impact of non-controlling interests of $5 million/?4 million. EPS was negative at ?0.04 per ordinary share and negative at $0.06 per ADS.

Cash Flow

Cash Flow from Operations

Cash flow from operations was at $193 million, stable compared to $198 million last year.

Capex

Global Capex was $202 million this quarter, up of 68% year-on-year.

  • Industrial Capex was $126 million, up 59% year-on-year
  • Multi-client Capex was $76 million up 85% year-on-year with a 56% prefunding rate
In million $   First Quarter
  2012   2011*
Capex   202   120
Industrial   126   79
Cash Multi-client 76   41
MC marine 52 17
MC land   24   24
 

*Restated figures

Free Cash Flow

After financial interests paid during the quarter and Capex, free cash flow was negative at $7 million compared to $65 million in the first quarter of 2011.

Balance Sheet

Group gross debt was $1.975 billion, at the end of March 2012.

Available cash was $462 million after the $50 million cash out related to the acquisition of GRC. Group net debt was $1.512 billion, up 7% from $1.411 billion at the end of 2011.

Net debt to equity ratio, at the end of March 2012, was 39% compared to 37% at the end of December 2011.

First Quarter 2012 Comparisons with First Quarter 2011

Consolidated Income Statement   Fourth Quarter   First Quarter
In millions   2011*   2012   2011*
Exchange rate euro/dollar   1.364   1.318   1.363
Operating Revenue   905.7   786.6   728.6
Sercel   325.5   347.8   275.0
Services   632.1   531.1   532.9
Elimination   -51.9   -92.3   -79.3
Gross Profit   177.3   138.6   96.6
Operating Income   71.0   53.8   23.1
Sercel   97.5   115.5   94.7
Services   10.8   -7.7   -26.0
Corporate and Elimination   -37.3   -54.0   -45.6
Net Financial Costs   -27.6   -41.9   -59.1
Income Tax   -26.1   -21.8   -8.1
Deferred Tax on Currency Translation   -3.2   2.8   5.2
Income from Equity Investments   6.9   3.6   2.0
Net Income   21.0   -3.5   -36.9
Earnings per share (?)   0.08   -0.04   -0.20
Earnings per ADS ($)   0.11   -0.06   -0.27
EBITDAs   272.6   211.9   155.9
Sercel   109.9   126.9   108.2
Services   197.6   136.3   91.3
Industrial Capex   113.6   126.2   79.4
Multi-client Capex   52.2   75.5   40.8

 

 

*Restated figures

Other Information

  • Jean-Georges MALCOR, CEO, will comment on the first quarter results today May 10, during the shareholders meeting at 9:30 AM - at the Auditorium Etoile Saint Honoré - 21, 25 rue Balzac - Paris 8ème.
  • An English language conference call is scheduled today at 3:00 PM (Paris time) - 2:00 PM (London time) - 8:00 AM (US CT) - 9:00 AM (US ET).

To take part in the English language conference, please simply dial five to ten minutes prior to the scheduled start time.

- US Toll-Free         1-877-317-6789
- International call-in 1-412-317-6789
- Replay 1-877-344-7529 & 1-412-317-0088 -
Conference # 10009283
 

You will be connected to the conference: "CGGVeritas Q1 2012 results".

  • Copies of the presentation are posted on the Company website www.cggveritas.com and can be downloaded.
  • The conference call will be broadcast live on the CGGVeritas website www.cggveritas.com and a replay will be available for two weeks thereafter.

About CGGVeritas

CGGVeritas (www.cggveritas.com) is a leading international pure-play geophysical company delivering a wide range of technologies, services and equipment through Sercel, to its broad base of customers mainly throughout the global oil and gas industry. CGGVeritas is listed on the Euronext Paris SA (ISIN: 0000120164) and the New York Stock Exchange (in the form of American Depositary Shares, NYSE: CGV).

The information included herein contains certain forward-looking statements within the meaning of Section 27A of the securities act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect numerous assumptions and involve a number of risks and uncertainties as disclosed by the Company from time to time in its filings with the Securities and Exchange Commission. Actual results may vary materially.

CGGVeritas

First Quarter 2012

CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS

   
Three months ended March 31,
2012

 

2011 (restated)

Amounts in millions of U.S.$, except per share data or unless indicated

 

 
Operating revenues 786.6 728.6
Other income from ordinary activities 1.2 0.9
Total income from ordinary activities 787.8 729.5
Cost of operations (649.2) (632.9)
Gross profit 138.6 96.6
Research and development expenses, net (21.8) (20.1)
Marketing and selling expenses (22.0) (18.5)
General and administrative expenses (47.1) (47.0)
Other revenues (expenses), net 6.1 12.1
Operating income 53.8 23.1
Expenses related to financial debt (39.5) (44.9)
Income provided by cash and cash equivalents 0.9 0.5
Cost of financial debt, net (38.6) (44.4)
Other financial income (loss) (3.3) (14.7)
Income (loss) of consolidated companies before income taxes 11.9 (36.0)
Deferred taxes on currency translation 2.8 5.2
Other income taxes (21.8) (8.1)
Total income taxes (19.0) (2.9)
Net income (loss) from consolidated companies (7.1) (38.9)
Share of income (loss) in companies accounted for under equity method 3.6 2.0
Net income (loss) (3.5) (36.9)
Attributable to :
Owners of CGGVeritas $ (8.7) (40.5)
Owners of CGGVeritas (1) ? (6.6) (29.7)
Non-controlling interests $ 5.2 3.6
 
Weighted average number of shares outstanding 151,864,165 151,561,798
Dilutive potential shares from stock-options (2)

-

-

Dilutive potential shares from performance share plan (2)

-

-

Dilutive potential shares from convertible bonds (2)

-

-

Dilutive weighted average number of shares outstanding adjusted when dilutive 151,864,165 151,561,798
Net income (loss) per share

Basic

$ (0.06) (0.27)
Basic (1) ? (0.04) (0.20)
Diluted (2) $ (0.06) (0.27)
Diluted (1)(2) ? (0.04) (0.20)
 

(1) Converted at the average exchange rate of U.S.$1.318 and U.S.$1.363 per ? for the periods end March 31, 2012 and 2011, respectively

(2) As our net result is a loss, stock-options, performance shares plans and convertible bonds have an accretive effect (increase of our earning per share); as a consequence, potential shares linked to those instruments are not taken into account in the dilutive weighted average number of shares, or in the calculation of diluted loss per share.

ANALYSIS BY OPERATING SEGMENTS

 

  Three months ended March 31, 2012
    Eliminations   Consolidated
(in millions of US$) Services Equipment and Total
        Adjustments    
Revenues from unaffiliated customers 531.1 255.5 - 786.6
Inter-segment revenues - 92.3 (92.3) -
Operating revenues 531.1 347.8 (92.3) 786.6
Other income from ordinary activities - - - -
Total income from ordinary activities 531.1 347.8 (92.3) 786.6
Operating income (loss) (7.7) 115.5 (54.0) 53.8
 

UNAUDITED INTERIM CONSOLIDATED BALANCE SHEET

       
March 31, 2012  

December 31, 2011

(unaudited)  

(restated)

Amounts in millions of U.S.$, unless indicated

 

ASSETS

Cash and cash equivalents 462.3 531.4
Trade accounts and notes receivable, net 848.1 876.0
Inventories and work-in-progress, net 386.5 361.5
Income tax assets 115.2 119.4
Other current assets, net 198.8 157.0
Assets held for sale, net 23.4 64.5

Total current assets

2,034.3

2,109.8

Deferred tax assets 186.8 188.8
Investments and other financial assets, net 52.0 24.7
Investments in companies under equity method 158.8 131.7
Property, plant and equipment, net 1,217.3 1,183.2
Intangible assets, net 914,6 865,1
Goodwill, net 2,716.1 2,688.2

Total non-current assets

5,245.6

5,081.7

TOTAL ASSETS

7,279.9

7,191.5

 

LIABILITIES AND EQUITY

Bank overdrafts 6.0 6.0
Current portion of financial debt 81.5 64.5
Trade accounts and notes payable 475.5 386.4
Accrued payroll costs 163.7 185.7
Income taxes liability payable 103.0 159.7
Advance billings to customers 45.2 51.0
Provisions - current portion 36.8 34.6
Other current liabilities 288.5 272.3

Total current liabilities

1,200.2

1,160.2

Deferred tax liabilities 104.3 110.8
Provisions - non-current portion 106.0 106.7
Financial debt 1,887.1 1,871.6
Other non-current liabilities 51.9 49.8

Total non-current liabilities

2,149.3

2,138.9

Common stock 252,090,578 shares authorized and 151,871,998 shares with a ?0.40 nominal value issued and outstanding at March 31, 2012 and 151,861,932 at December 31, 2011

79.8 79.8
Additional paid-in capital 2,669.5 2,669.3
Retained earnings 1,139.1 1,161.1
Other reserves (21.6) (17.0)
Treasury shares (20.6) (20.6)
Net income (loss) for the period attributable to the owners of CGGVeritas (8.7) (28.2)
Cumulative income and expense recognized directly in equity (6.5) (11.5)
Cumulative translation adjustment 7.1 (27.6)

Equity attributable to owners of CGGVeritas SA (1)

3,838.1

3,805.3

Non-controlling interests 92.3 87.1

Total equity

3,930.4

3,892.4

TOTAL LIABILITIES AND EQUITY

7,279.9

7,191.5

 

(1)

 

Effective January 1, 2012, we changed the presentation currency of our consolidated financial statements from the euro to the U.S. dollar to better reflect the profile of our revenues, costs and cash-flows, which are primarily generated in U.S. dollars, and hence, to better present the financial performance of the Group. As a change in presentation currency is a change of accounting policy, all comparative financial information has been restated into U.S. dollars.

The currency translation adjustment was set to nil as of January 1, 2004 on transition to IFRS and has been re-presented on the basis that the Group has reported in U.S dollars since that date.
The functional currency of the parent company remains the euro. The currency translation adjustment resulting from the parent company is presented in other reserves.
 

Main restatements related to the change in the presentation currency from euro to U.S. dollar are as follows (in millions):

  Historical consolidated financial statements as of Dec.31, 2011 in euros   Historical consolidated financial statements of Dec.31, 2011 converted into dollar U.S (a)   Restatements (b)   Restated consolidated financial statements as of Dec.31, 2011 to U.S dollar
Common stock, additional paid-in capital, retained earnings and other

2,883.1

 

3,730.5

 

+102.4

 

3,832.9

Cumulative translation adjustment 55.8   72.2   (99.8)   (27.6)
Equity attributable to owners of CGGVeritas

2,938.9

  

3,802.7

  

+2.6

  

3,805.3

 

a) Converted at the closing exchange rate of 1.2939 U.S.$ per euro

b) Differences between historical currency exchange rates and the closing rate of 1.2939 U.S.$ per 1 euro, including U.S.$(17) millions translation adjustments from the mother company presented in other reserves.

Investor Relations Contact
CGGVeritas
Christophe Barnini, +33 1 64 47 38 11
invrelparis@cggveritas.com