CGG SA

Good afternoon or good evening, ladies and gentlemen. Good morning as well. Welcome to this presentation of CDG fourth quarter and full year 2021 financial results. The call today is hosted from Paris, where Mrs. Sophie Zierkia, our chief executive officer, and Mr. Yuri Zaytsev, our chief financial officer, will provide an overview of the fourth quarter results, as well as provide comments on our outlook. So let me remind you that some of the information contains forward-looking statements subject to risk and uncertainty that may change at any time, and therefore the actual results may differ materially from those that were expected. Following the overview of the fourth quarter and full year, and of the 2022 market trends and financial guidance, we will be pleased to take your questions. And now I turn the call over to Sophie.

Thank you, Christophe, and good morning, good afternoon, good evening, ladies and gentlemen. Thank you for participating in this Q4 and for your 2021 conference call. Starting with slide five. First, I want to say I'm deeply concerned about the crisis unfolding in Ukraine and the consequences of it on people and their family and what they will suffer from. CDD has no employee, no business with Ukraine. and we have around 70 Russian employees in Russia, which we are doing our best to support. We have a small processing center that works locally and a sales office for our equipment business. CDD will comply with the regulations, and we're monitoring the evolution of the sanctions against Russia and their implications. So let me start now with some general comments on our market environment. We operate today in a favorable macro environment, as Brent oil price is now well above the 90 mark. We're entering a favorable cycle that was created by sustained underinvestment in exploration and production, combined with a solid rebound in demand. Overall, as expected during the fourth quarter, our markets continue to recover, and that was signaled by more client engagement and clearer perspectives. While national oil companies and independents drive our activities, we're starting to see regained interest in imaging and multi-client data from the international oil companies. Our strong Q4 performance, and particularly in multi-client, gives us confidence that our clients are planning to increase their activities and are contemplating a longer timeframe for bringing new oil and gas on stream to compensate for depletion. In 2021, We extended our leadership and technology differentiation and increased our market share. For all our clients' activities that are focused on optimizing production from their current reservoirs to meet the growing demand for hydrocarbons, CGD's high-end technology is the clear choice and an important element of the value chain. Moving on to slide six. Our Q4 revenue of 301 million was up 7% year-on-year and up 12% sequentially. Segment EBITDA was 154 million, a high 51% margin that was driven by the business mix and increased revenue on the strengthening market. Segment free cash flow was 81 million. mainly due to the positive impact of $95 million in proceeds from the sale of our GeoSoftware and physical data storage businesses. For the full year, net cash flow was positive at $19 million before $14 million refinancing cash costs. We did strengthen our balance sheet in a difficult environment. Slide seven. We have summarized here some of the key ESG achievements for 2021. There are a lot more details in the URD that will be coming out shortly. On the environmental dimension, beyond the absolute scope one and two numbers, we're looking at the carbon intensity of our operation through two numbers. The scope one and two of our GDR operations per petaflop, and the scope one and two of equipment per million dollars of revenue. Both have reduced since we started to track those numbers in 2019. On the social responsibility dimension, we track our health and safety performance. Our LTI, lost time injury, is well below the benchmark for each of our three businesses. And the percentage of women in our most senior position has increased to 24%. And finally, on the third dimension, regarding the corporate governance, we can be very proud for having a very engaged, diverse, and independent board. Moving on to slide nine. GGR segment revenue was very strong this quarter at 207 million, up 17% year-on-year, thanks to a solid Q4 in geoscience and good multi-client sales in Q4. As a result, adjusted segment EBITDA margin improved to 69%. Looking at the full year, the overall adjusted EBITDA margin of GGR was down year-on-year because of the mix between geoscience and multi-client, offset by significant savings from our cost reduction plans launched in 2020. However, adjusted OPIC margin significantly improved. On slide 10 now. Geoscience external revenue was 93 million in Q4, up 24% year-on-year, sustained by increased demand for sophisticated seismic imaging, as well as the sale from a large multi-year geovation imaging software and support contract. Proforma segment revenue excluding GeoSoftware and the physical data storage business of Smart Data Solutions was 88 million, up 19% year-on-year. Year-on-year backlog is stable despite stronger market outlook perspectives. And this is due to the size of the contracts becoming smaller while the volume is increasing and therefore providing slightly reduced long-term forward coverage. we're quite confident that demand for our imaging business is in fact increasing. The total production per head KPI has significantly improved year on year, thanks to the full impact of the cost-saving plan. Our high-performance computing capacity is now around 300 petaflops. This large and cost-effective HPC capacity is today a key technology enabler for our geoscience business, that requires more compute power to run the advanced algorithms needed to provide ever clearer images of the subsurface. This expertise in HPC, which has been developed for our internal users and is well in advance of competitive metrics, is now being offered to our clients both in and outside the oil and gas business that are considering outsourcing their specialized HPC requirements. Slide 11. Strong Q4 revenues were driven by global increase in demand for best resolution imaging of the subsurface, especially in geologically complex basins such as the Gulf of Mexico, North Sea, and Brazil, where application of our time-like full waveform inversion and elastic time-like full waveform inversion technology provides step improvements in the resolution of layers and boundaries. Until recently, it was not possible to commercially run an elastic full waveform inversion algorithm because it demanded too much compute power and would have taken too much time as well as cost too much. We're the first company to be able to offer this solution commercially thanks to our unique and specialized HPC capabilities. Geoscience market remains solid worldwide, driven by our differentiated technology and our excellent service. As marine nodes take a larger share of the total data acquired, this benefits us, as this data density requires the most advanced technology to ensure value from the investment. I mentioned earlier a large geovation contract that further enhanced geosciences performance. We see a favorable trend of clients wanting to procure our imaging software as a complement to their internal solutions, which should continue through 2022. Beyond the core, geoscience has been busy in the energy transition space with the release of our NOTE-C CCUS screening tool and the launch of tailings pulse for mine sites tailing facilities monitoring and risk management. With the increasing interest in renewables, we're also involved with several global assessments for geothermal and geothermal lithium. In environmental science, we successfully completed a project to characterize micropollutants and microplastics captured by domestic and industrial filters. On a side note, CDD was invited to participate in a recent episode of the BBC Countryfile based on a microplastic study that we completed on Mount Snowdon in the UK. Moving on to slide 12. Multi-client revenue was 114 million, up 13% year-on-year. Multi-client cash capex of 37 million this quarter was dedicated to the Nebula Area B and C marine multi-client project offshore Brazil, along with five reprocessing projects. A pre-funding revenue of 59 million for our new projects allowed us to end the year with an 89% pre-funding, in line with our expectations. Multi-client after-sales were much stronger this quarter at 55 million, up 77% year-on-year. Our client mix in 2021 included more national oil companies and small independents than we saw historically, and towards the end of the year, we started to see IOCs modestly regain interest in data. The cash-on-cash ratio, which is sales over capex, was 1.6 times at the end of 2021, a significant improvement compared to the 1.4 the prior year. Slide 13 now. In Brazil, we completed our very successful Nebula program and started our new survey Antares. Antares is designed to extend and enhance our data library in the south center spacing of Brazil. and will improve existing imaging over challenging geology by providing a second azimuth with longer offsets. This area is highly prospective but underexplored, and there is substantial interest in the pre-salt blocks that should be offered in the next bid round later this year. U.S. land activity this quarter was supported by clients' growing interest in U.S. onshore gas assets and by M&As. We also made some sales for CCUS applications. In the Gulf of Mexico, our re-imaging projects continue to draw interest, given the uplift to the data and the drive for near-field exploration. And finally, we're making significant progress with our data platforms. Verso was launched to provide clients with a single point of access to seismic data across vendors. And our GeoVerse geology and well data library is now accessible as a service. Moving on to equipment on slide 15. Equipment segment revenue was 94 million in Q4, down 12% year-on-year, but still very solid, giving us an overall 23% growth in 2021 year-on-year. This growth is mainly coming from marine node sales, which we see remaining very active throughout 2022 and beyond. At this level of activity, the equipment business delivered a 16% adjusted EBITDA margin in Q4. Now in slide 16. This quarter, we delivered land equipment to Russia and North Africa. Within the sales mix, we see a strong take-up of our land wireless node wings. Marine equipment sales were supported by the remaining deliveries of the GPR-300 nodes to the UAE. Marine nodes are in high demand as E&P companies focus on their reservoirs and want to have precise baselines to engineer field development and optimize recovery. Beyond our core businesses, in infrastructure monitoring, we are making progress in piloting our solutions to address the very large North American structural health monitoring market. I will now give the floor to Yuri for more financial highlights.

Thank you, Sophie. Good morning, good afternoon, and good evening, ladies and gentlemen. I will comment the Q4 and full year 2021 financial results. Slide 18, Q4 and full year 2021 income statement. Let me first comment on the overall 2021 activity. 2021 was a year of contrasts. The first half of the year revenue was lower at 370 million, while H2 revenue was strong at 571 million, up 54% sequentially. EBITDA increased by more than three times between H2 and H1, and adjusted operating income margin was at 19% in the second half of the year. We have also successfully strengthened our balance sheet by refinancing our debt, normalizing capital structure, and securing 100 million RCF in March last year, capitalizing on a favorable market window. Looking at the consolidated P&L for Q4 2021, CEG segment revenue was 301 million, up 7% year-on-year. It was a very solid quarter and the best quarter of the year for CEG as the gradual market recovery started to manifest itself during the second half of the year. In Q4, geoscience performed very well, Multi-client sales were strong, driven by high pre-funding and increased level of after sales, and equipment sales were solid. GGR segment revenue was $207 million, up 17% year-on-year. Geoscience segment revenue was $93 million, up 24% year-on-year. Multi-client segment revenue was $114 million, up 13% year-on-year. Pre-funding revenue for our multi-client projects was $59 million, down 16% year-on-year, primarily on lower capex at $37 million, which was well pre-funded, and client after sales were at $55 million this quarter, up 78% year-on-year. Equipment segment revenue was $94 million, down 12% year-on-year. The respective contributions from the group businesses were 31% from geoscience, 38% from multi-client, 69% for the GGR segment, and 31% for equipment. Segment EBITDA was $154 million this quarter, up 33% year-on-year, a high 51% margin. Adjusted segment EBITDA was $150 million at 50% margin. Segment operating loss was 57 million. It included 23 million fair value adjustment of one multi-client survey in the UK North Sea, where market conditions for exploration have changed in 2021, as well as 102 million impairment of the multi-client goodwill, where we revised downwards the near-term cash flow forecast after two years of lower than expected multi-client after sales in 2020 and 2021, and therefore, with the ongoing recovery starting from a lower base. Adjusted segment operating income was at 78 million, up 62 million year on year with 26% margin. After cost of debt of 26 million, tax credit of 22 million and net loss from discontinuing operations of 1 million, growth net loss was 28 million this quarter. Looking at the full year 2021, Our segment revenue amounted to $941 million, down 1% year-on-year, with a 62% contribution from GGR and 38% from equipment. 2021 segment EBITDA was $344 million, a 37% margin, and adjusted segment EBITDA was $337 million, a 36% margin. 2021 segment operating loss was $49 million and adjusted segment operating income was at $78 million, up 56% year-on-year with 8% margin. Group net loss was $180 million, a reduction of 2.4 times compared to 2020. Moving to slide 19, simplified cash flow. Q4 segment free cash flow was $142 million after $46 million negative change in working capital on strong Q4 revenues, $55 million capex, and $95 million of receipts from the sale of geosoftware and physical data storage businesses. Q4 capex was flat year-on-year and included industrial capex of $12 million, research and development capex of $6 million, and multi-client cash capex of $37 million. U4 net cash flow was $81 million after $13 million lease repayments, $53 million paid cost of debt, $8 million CEG 2021 blend cash flows, and $13 million positive free cash flow from discontinued operations. For the full year 2021, segment free cash flow was $201 million after $2 million negative change in working capital, $227 million CAPEX and $91 million net proceeds from disposals. 2021 CAPEX was down 25% year-on-year and included industrial CAPEX of $29 million, research and development CAPEX of $30 million, and multi-client cash CAPEX of $168 million. Net cash flow for 2021 was positive at $19 million before $40 million refinancing cash costs and included 57 million lease repayments, 90 million paid cost of debt, 33 million CEG 2021 plan cash costs, and 2 million negative free cash flow from discontinued operations. This was a very significant improvement compared with 247 million negative net cash flow in 2020. Moving on to slide 20, group balance sheet and capital structure. At the end of December 2021, group liquidity amounted to 419 million, including 319 million cash liquidity and 100 million on drone RCF. Group gross debt before FRS-16 was 1.18 billion and net debt was 866 million. Group gross debt after FRS-16 was 1.3 billion and net debt was 989 million. Our gross debt included 1.16 billion senior secured notes during 2027, 22 million other items mainly accrued interest, and 123 million lease liabilities. Capital employed was at 2 billion, down 172 million from the end of December 2020. Networking capital, after FRS 15, was at 229 million, slightly up from $212 million at the end of December 2020, primarily driven by a reduction in net accounts receivable, inventories, and current provisions, partially offset by significantly lower deferred revenue liability from FRS-15. Goodwill was down at $1.1 billion, corresponding to 54% of total capital employed. Multi-client library netbook value after FRS-15 was down at $393 million, including $357 million of marine and $36 million of land net book value. Non-current assets were at $386 million, with $212 million of property, plant, and equipment, down $56 million from year-end 2020, and included $119 million of IFRS 16 right-of-use assets. as well as $90 million of other intangible assets, down $26 million from year-end 2020. Non-current liabilities were at $100 million, down $49 million from year-end 2020, and shareholder equity was at $1 billion, including $44 million of minority interests, mainly related to InfantGV. Now I hand the floor back to Sophie for an outlook for 2022 market environment. and presentation of CEG new beyond the core businesses, business perspectives, and 2022 financial guidance.