CGG SA

Thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to this presentation of CDG's first quarter 2023 reserves. The call today is hosted from Paris, where Mrs. Sophie Zierkia, our Chief Executive Officer, and Mr. Jerome Cerf, our Group CFO, will provide an overview of the quarter reserves, as well provide comments on our outlook. Let me remind you that some of the information contains forward-looking statements, subject to risk and uncertainties that may change at any time, and therefore, the actual results may differ materially from those that were expected. Following the overview of the quarter, we will be pleased to take your questions, and now I will turn the call over to Sophie.

Thank you, Christophe. Good morning and good afternoon, ladies and gentlemen, and thank you for participating in this Q1 2023 conference call. We move now to slide five. Let me start with some general comments on the evolution of our businesses and market environment during the quarter. Overall, commercial activity was strong across all our businesses and geographic locations this quarter. Exploration activities are picking up as clients are increasingly looking for new advantage reserves with lower breaches in prices and lower emissions, including IOCs, which we hadn't seen much of in 2022. To respond to projected supply-demand balance, our clients are also continuing to accelerate their field development programs. Many of our clients today are starting to face lack of resource challenges after downsizing their organizations and losing geoscientists to low-carbon divisions. We have seen the strongest increase of activity in the Gulf of Mexico, Norway, and the Middle East, which all have been very active, and we all started to see increases in other parts of the world including Asia-Pacific. Offshore, particularly offshore deporter, is attracting a larger share of E&P investments, and as such, high-end geoscience is increasingly required to de-risk subsurface and operational risks. We are well-positioned to support our clients with our high-end technology and integrated capabilities. I am pleased to report that our core business and technology development efforts, as well as our investments in our beyond the core business initiatives, have paid off. We saw the recent award of three very large integrated imaging projects for NOCs, and also achieved our first signature for a commercial HPC and cloud solution services contract outside of the energy industry and academic world, which is a real milestone in the establishment of this new business. We also delivered our first Gulf Coast U.S. CCUS screening study during the quarter. Overall, Q1 was a solid start to the year, with improving performance across three business lines. Geoscience revenue was $79 million, up 5% year-on-year on external revenue. The level of order intake at the end of the quarter was up 31% year-on-year, and this doesn't include the large integrated projects that we were awarded in April. Earthdata had a good quarter thanks to stable aftersales at $13 million and high pre-funding at $35 million. On a pro forma basis, adjusting for the sale of our U.S. land library, aftersales were up 36%. Sensing and monitoring had a better quarter thanks to the early delivery of a set of streamers in a market environment that tends to be lumpy and still driven by significant runoff orders. Large tenders in the Middle East and North Africa for land and OBN equipment are positive signals for active Q2 and Q3 quarters. Overall, our Q1 revenue reached $210 million, up 37% year-on-year. Segment EBITDA was $66 million, a 31% margin, and up 71% year-on-year. Net cash flow was $1 million. Now on slide seven. DDE segment revenue was solid this quarter at 144 million, up 21% year-on-year, with growth in both geoscience and earth data. Profitability was impacted by our compensation for underutilization of vessels. Moving on to geoscience on slide 8. Geoscience external revenue was $79 million in Tier 1, up 5% with growth coming from all regions. The market is strengthening with a higher level of bid submissions worldwide. Backlog is up 22% year-on-year, thanks to order intake value being up 31% from Q1 last year, tracking back to 2019 levels. As mentioned, this increase in backlog doesn't include the three large multi-year integrated projects that were recently awarded to CGG by three different national oil companies. Overall, we see the size and content of projects significantly increasing, with more demand for advanced imaging technologies together with integrated geoscience services. Historically, NOCs have asked for higher levels of integrated services in their projects, but we are starting to see a similar trend with independents and IOCs who are short of resources and trust our highly data-driven products. The total production per head KPI continues to strengthen, and is now above 2019 levels. While we also are looking to increase our headcount to respond to higher demand for our services, we have gained in efficiencies and are increasingly using advanced AI-driven algorithms to perform some of the previously people-intensive tasks. Moving on to slide nine. In geoscience, CGD has always pioneered new and disruptive technologies, like today with our unique Elastic 4-Wave Forming version. It is interesting to realize that today, the management of these technologies is utilized more broadly by all customer profiles and across all locations, such as offshore. Advanced technologies have been most required, but also now more and more in shallow water and even on land where precision matters. These advanced algorithms enable our clients to significantly improve their understanding of the subsurface, reduce risk, and increase their drilling success. The image you see here from southern Mexico is a clear example of improvements that technology can bring. The image offers a seamless view of the subsurface, from shallow water to transition zone and land, with many critical details. The project includes both onshore and offshore areas, covered by multiple ocean bottom cable and land serves. Land and transition zone four-way forming version is very challenging due to the limitation of input data. This is where TGD excels with our advanced technology and expertise. The financed image provides significant uplift over the 2021 legacy dataset. In Beyond the Core, CCUS screening and monitoring design are two areas with increasing demand. and we just completed a study in the Gulf of Mexico, which again, as mentioned earlier, saw first delivery in Q1. I am particularly pleased with the signature of our contracts with Biosimilintics. Bios technology is one of our target verticals for offering our specialized HPC and cloud services solutions. I will comment more on a later slide. Now going on to slide 10. In UAE during the quarter, We completed nearly all the processing of the largest ever OBN acquisition program. This OBN acquisition project covered a total area of more than 26,000 square kilometers. More than 2 million sensors were deployed, resulting in approximately 700 billion recorded seismic traces. This was a technological challenge that we stepped up to. and addressed thanks to our outstanding people and technology, supported by the largest HPC capacity in the industry. The project led to CDG winning another challenging imaging project, which entails the processing of the densest multi-component survey acquired in the world. On slide 11. Back to our new contract with biosimiletics. CDD will be the exclusive HPC cloud partner of Biosimiletics, a pharma software company that uses artificial intelligence to accelerate drug development. CDD will be providing Biosimiletics with a fully customized cloud HPC solution. Thanks to our experience of designing, developing, hosting, and optimizing scientific workflows on specialized HPCs at an industrial scale, we are very well positioned and have the unique expertise to optimize the required IT infrastructure and software to run more efficiently, allowing biosecurity analytics to scale up faster as well as increase their focus on their expertise while not being distracted by HPC optimization. We have other similar opportunities in our pipeline in biotechnology, generative AI, and with industrial companies faced with new or increasing HPC requirements. Moving on to slide 12 now with Earthdata. Earthdata cash capex was 28 million this quarter, down 15% year-over-year. In Brazil, we partnered with TGS in the Foz do Amazonas Basin. In the U.S. GOM, our re-imaging project continued to draw increased interest and pre-funding, and we continued the reprocessing of our stack size program. Pre-funding revenue was solid at 35 million, and came mainly from our Norway and Brazil projects. Aftersales were at 30 million this quarter, stable year on year, even with the divestiture of our US land library in Q4 2022, and were mainly driven by the US Gulf of Mexico. The Gulf of Mexico is clearly attracting interest from an increasing number of clients, including the deeper and more complex areas that have been quite slow in the last few years. The basin does offer a secure and reasonably stable environment with a relatively lower emission profile and a clear go-to market, and hence why it remains a priority for many of our clients. Going on to slide 13 now. The EarthBaser team had a very active quarter with a few high-profile business initiatives, including a 2D Guyana reprocessing project, which is fully pre-funded by clients, the Suriname project, which we completed this quarter and is filling a data gap in the compellingly quarter area, and preparing for the start of our North Viking gravel east-west acquisition project, a continuation of this successful program. We also started preparation for the highly funded Haimdel Terrace OBN project. On slide 14. In the context of extending our Earth data library, our teams are building a unique comprehensive database of wells covering offshore Guyana, Suriname, and Equatorial Margin. 30 wells offshore Brazil, 7 wells offshore French Guyana, 17 wells offshore Guyana are included in this program, assuming this map. Thanks to our expertise and business best practices, data rights have been agreed with the local road users from each country and then cleaned, processed, interpreted, and integrated. This type of product has been welcomed by our clients, as they do not have the resources to secure the data, clean it comprehensively, and then analyze it with advanced ML and geoscience technologies. But this is key for their interpreters to gain the most accurate understanding of the new data. A Guyana-Suriname GeoWells database is part of a global program to gather relevant well data from around the globe to complement our geology and geophysical products, and continue to build expertise for our integrated projects. We'll move to sensing and monitoring with slide 15. A sensing and monitoring segment revenue was stronger this quarter at $66 million, up 95% year-on-year. This was mainly supported by marine sales at $34 million, which were higher than previous quarters as we delivered a set of streams to research vessels in Asia Pacific. Sales from beyond the core, which includes Geocom and the active defense sector, were also up at 12 million, mainly driven by our structural health monitoring business. At this level of sales, EBITDA of the sensing and monitoring business was breakeven. Slide 16. During the quarter inland, we delivered seismic equipment in North Africa, West Africa, and Asia. We see significant potential for our GPR 300 node, especially in the Middle East, where demand for marine node systems and high-end processing continues to accelerate. During the quarter, we also acquired a small French startup, Mofosense, which complements the structural health monitoring product portfolio of Assemble with a cable system and a digital twin offering. Let me now give the floor to Jérôme for financial comments.

Thank you, Sophie. Good morning and good afternoon, ladies and gentlemen. I will now comment our Q1 2023 central results. Let me start with the overall Q1 activities. As mentioned by Sophie, our segment revenue was up 37% year-on-year at $210 million, driven by higher SMO sales. You may remember that SMO sales were the record low last year in Q1, as well as higher EDS sales coming from solid pre-funding revenues from Norway and Brazil. Overall, the respective cell contributions from the group's businesses were 38% from geoscience, 31% from EDA, totaling 69% for all EDA segments, and 31% from the SMO segment. SMO representing last year only 22% of all human revenues. Segment EDA was 66 million of 31% margin, This is up to 71% year-on-year. However, note that as expected, the fall through from increased revenues to EBITDA was negatively impacted by the revenue mix. Higher SMO sales bring in lower EBITDA margins than EDD. EBITDA was also negatively impacted by a higher compensation for underutilization of escorts versus last year in EDD. Regarding segment operating income, Q1 was $30 million dollars. or 6% margin. After ESRS 15 adjustment, Q1 operating income was 7 billion. Finally, net income was negative at 16 billion this quarter. Moving on to our cash flow. Q1 23 segment free cash flow was 2 million, so this is after a negative change in working capital of 4 million and capex of 52 million. Versus last year, working capital was impacted by lower collections of Q4 revenues, as well as higher end-of-the-course sales to be collected in Q2. CapEx was 52 million, plus 10 million versus last year, or 23% year-on-year, mainly from higher industrial CapEx related to the construction of the new HPC data center in the UK for 18 million. Research and development capitalized costs were 6 million and multi-client cash capex was 28 million, with a pre-funding ratio of 126%. Below the segment pre-cash flow, main cash items included plus 14 million of asset financing from the EU-UK data center, minus 12 million of lease repayment, and minus 6 million of cash costs linked to the share water idler vessel compensation. So Q1 2023, segment 3 cash flow was 2 million after a negative change in working capital of 4 million and capex of 52 million. But since last year, the working capital was impacted by lower collection of Q4 revenues, as well as higher end-of-the-quarter sales to be collected in Q2. Capex was 52 million, up 10 million, or 23% year-on-year. This is mainly coming from higher industrial capex related to the construction of the new HPC data center in the UK for 18 million. Research and development costs which are capitalized were 6 million for this table versus last year. And multi-client cash capex was 28 million with a pre-funding ratio of 126%. Below the segment free cash flow, the three main cash items were 14 million of asset financing or the new UK data center, minus 12 million of lead repayments and minus 6 million of cash costs linked to the Shearwater Eidol Vestal Compensation. Overall, we ended up Q1 with a net cash flow at plus 1 million. Moving on to the group balance sheets, the group liquidity amounted to 301 million at end of March, excluding 95 million of undrawn RTFs. Before IFRS 16, growth debt was $1.2 billion, and net debt was $905 million. After IFRS 16, net debt was $994 million. At the end of March 2023, the segment leverage ratio of net debt to EVDA was 2.4 times. I will now hand the floor back to Sophie for an outlook of 2023.