Viridien

Ladies and gentlemen, thank you for standing by and welcome to the CGG third quarter 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. And to ask a question during the Q&A session, you will need to press star and one in your telephone. I must advise you that this conference is being recorded today, Thursday, 5th of November, 2020. I'd now like to hand the conference over to the first speaker today. CGG, thank you. Have a great day.

Thank you. Thank you. Good morning, ladies and gentlemen. Welcome to this presentation of CGG's third quarter 2020 results. The call today is hosted from Paris, where Sophie Zierkia, our chief executive officer, and Mr. Yuri Baidukov, The group's chief financial officer will provide an overview of the third quarter 2020 results, as well as provide comments on our outlook. As a reminder, some of the information contains forward-looking statements, including without limitation statements about CDG plan strategies and prospects. These forward-looking statements are 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, and good morning, ladies and gentlemen, and thank you for participating in this Q3 2020 conference call. Our presentation will cover our third quarter 2020 operational and financial results, And I would like to start with a quick update on COVID-19. Our focus has been on maintaining business continuity, and we are fortunate that through our IT expertise, combined with the CDGHVC cloud that supports our geoscience business, most of our employees have been able to work effectively from home. Over the last few months, we have progressively brought back staff into the office. And overall, we've had a very limited number of confirmed COVID-19 cases. we've had no fatality, and in addition, there has been no cross-contamination at our sites, thanks to strict social distancing, wearing of masks, and the overall protocols that we put in place. With this, along with the strong business continuity of our geoscience and multi-client business, our manufacturing sites have in general been able to maintain production and meet client demand. Moving on to slide four. Looking at the market, In Q3, crude oil prices stabilized, but the COVID-19 pandemic is still dramatically affecting global economies and severely suppressing our business environment. In 2020, we have seen some major strategic shifts from the integrated oil companies, especially in Europe, making firm commitments to decarbonize portfolios, increase renewable power generation, de-gear balance sheets, and support dividend commitments. Yet, most analysts report projects oil and gas as a fundamental source of energy through the energy transition and for a long time to come. As the required investments to maintain productions are delayed, this will eventually create an unbalance that will need to be addressed. During Q3 2020, CDG markets stabilized. However, visibility remains low with the second wave of lockdowns in Europe and the evolving geopolitical landscape in the U.S. We will monitor the situation closely and assess the implications, but at this stage, I do not see clients making additional capex cuts. Geoscience and multi-client markets are mainly driven by the large independents and NOCs, which have remained focused on their core business of producing oil and gas. IOCs are largely still reorganizing, cutting headcount, and right now in their 2021 budgeting process. I expect commercial activity with them will remain low through November. However, there should still be some year-end budgets available for data and software purchases. In general, as I expected, as expressed clearly by our clients, they are retrenching in their core areas, and they're prioritizing CapEx to the lower risk highest return project. In this environment, our geoscience imaging technology plays a key role as it enables our clients to make surgical choices to assign their capex. Reprocessing in particular is a cost-effective alternative to new data acquisition, and we have seen the balance between processing and reprocessing shift towards reprocessing. Our equipment business is also benefiting from NOCs, sustained activity in land in North Africa, Middle East, Russia, and India. And more recently in October, two of the three land 3D mega crews in Saudi and one land 2D crew have been awarded to geophysical contractors. TDD's strategic rationale remains strong. Our three differentiated businesses are well positioned with the best technology and increasingly working together to best serve our clients and to develop unique solutions. In parallel, CDD is reducing costs and quickly adapting to our clients' new activity levels while preserving our differentiated capabilities as activity is resuming. In addition, we continue to advance our new initiatives focused on leveraging our core capabilities in near step-up markets and following our clients in support of the energy transition. Moving on to slide six. Overall, Q3 was similar to Q2. Our Q3 revenue of $199 million was sequentially stable with GDR $150 million driven by increased multi-client revenues and equipment at $50 million. Group adjusted segment EBITDA before $28 million non-recurring severance cost was $80 million, up 6% sequentially and with a 40% margin. Group adjusted segment operating income before $30 million non-recurring charges was negative $4 million, not far from break even, and slightly better than our Q2 adjusted segment operating income. Ahead of increasing Q4 sales, especially in equipment, our change in working capital was especially high at minus $37 million as we started to ramp up inventory of land products. CDG also consumed this quarter $26 million of exceptional cash costs related to our saving plan, essentially severances. After the 37 million of negative change in working cap and 26 million of non-recurring charges, the net cash flow this quarter was negative 92 million. This puts our liquidity at 465 million at the end of September, which allows us to operate comfortably. I will now cover our Q3 2020 operations by reporting segment. On slide seven. Overall GDR top line increased sequentially 4% to $150 million, with an adjusted EBITDA margin of 57%. For the first nine months of the year, our year-on-year revenue drop of 28% is consistent with our clients' overall E&P capex reductions. While CDD has an important role to play in exploration, the majority of our work comes from development and production activities. OPINC before non-recurring charges was positive at 10 million, up 7% sequentially. Moving on to geoscience with the slide eight. Geoscience total production was 111 million in Q3, sequentially stable with higher internal production for our multi-client projects. Business remained solid in Europe, Africa, and Middle East, and Latin America. Commercial activity rebounded in Q3, after a very low Q2, and backlog only decreased by 10 million this quarter to 204 million at the end of September. We have been awarded several significant contracts in October, resulting in an increasing geoscience backlog. We are introducing a new quarterly KPI dedicated to our geoscience personnel, which we believe is relevant. Compute Power, which we reported earlier, is an enabler, but the unique profile of people at CDG makes the difference. The geoscience division at the end of September was around 1,900 employees. 15% are dedicated to R&D and 55% to production, which is essentially the data processing people. 27% of our production and R&D employees have a PhD. Now onto the operational highlights with slide nine. Geoscience activity remained resilient in Q3, driven by sustained activity in both our large imaging centers and dedicated centers, which offset reduced activity in our smaller processing centers regionally. Our Geosoftware business was successful in retaining maintenance revenue, which also supported our performance. Q3 total production was down 13% year-on-year and 2% sequentially. The business continuity of our geoscience division has been excellent. All projects throughout the pandemic were delivered on time with excellent quality. Cash preservation and profitability has been and continues to be the key focus. Geoscience has been able to quickly adapt to lower demand and we continue to reduce costs as required. CDG's geoscience leading technology continues to be recognized by our key clients and we are consistently rated number one in their supplier evaluations. We continue to see demand for high-end services that solve complex problems in difficult subsurface environments. On slide 10, as of recently, and in order to provide more visibility and clarity into our geoscience business, we have been increasingly sharing publicly via press releases our technology innovations and commercial achievements. Our technology advances are impressive and clients rely on us to resolve some of their complex challenges. Recent commercial awards range from a geothermal resources study for a major client and several high-end reprocessing projects to cloud computing software and data management. But we'll continue to update you in the future. Let's move on to multi-client with the slide 11. In the last two years, multi-client made a conscious effort to increase focus in development and production areas and use much more caution in frontier basins as they were believed to be less robust. This was a very successful and timely decision. A multi-client library today is very well positioned in proven, developing, and mature sedimentary basins. These unique positions in key basins globally provide us with visibility and opportunity in Brazil and Norway for 2021. We have opportunities to extend our footprint and reprocess our data by leveraging advances in technology. In Q3, multi-client revenue increased 20% sequentially, driven by solid pre-funding and increased after-sales. Pre-funding revenue was $39 million in Q3, a 68% pre-funding rate. after sales increased sequentially to 34 million, driven by Brazil and Gulf of Mexico. On slide 12. In multi-client, we also saw excellent continuity. Despite COVID-19, all of our operations in several countries progressed uninterrupted. We had five multi-client projects in acquisition during the quarter, including the Central Basin Platform, a land survey that was completed this quarter. Along with this, we also had four well-prefunded multi-client programs offshore. Nebula in Brazil, a 17,700 square kilometers program in the Santos Basin, which is attracting a high level of interest from clients. We announced last week Phase 2. Phase 2 will cover approximately 10,000 square kilometers on the northern side of the survey area. CDG's industry-leading subsurface imaging center in Rio de Janeiro will employ state-of-the-art processing technology to eliminate the pre-salt events. This quarter, we also completed the 8,700 square kilometer Gippsland program in a mature producing base in offshore Australia. The third program is an ocean bottom node survey in the cornerstone area of the UK North Sea that we are acquiring in partnership with MaxEyes. And finally, we extended our North Viking RABN data library in Norway and validated the value of a second azimuth in that area. Looking at the rest of the year, we expect 2020 multi-client cash capex of around 225 million, with a solid pre-funding rate of more than 75%. On to slide 13. In addition, we also commenced this quarter multiple reprocessing projects. The first is the reprocessing of our multi-client stack size marine survey in the GOM. The first phase of this re-imaging project is bringing new light to the data and major improvements in key areas. Clients are very interested in this as it has the potential to substantially de-risk this prolific area. We also launched our Walker Reach reprocessing program in the central GOM, covering 300 OCS blocks, which is around 7,000 square kilometers. And that's what's shown on this slide. And it's leveraging all of our existing data sets and the latest technologies. Several clients already joined the project, given the attractiveness of the area. And in general, for reprocessing projects, we look for opportunities where we can create significant uplift by new technology and bring to the market more cost-effective and quicker alternatives than new acquisitions. With our unique processing technology, we can extend the life of multi-client data sets by rejuvenating legacy fully depreciated data. On that picture, you can clearly see the improved definition of the structures below the salt on the images, as well as the continuity of the layers that were impossible to see before. Moving on to equipment now with the slide 14. Our business in equipment continues to be supported by the large installed base that we have in land and marine, and in particular by NOCs that have continued with their land exploration and development projects. This quarter equipment segment revenue was down 14% quarter to quarter at 50 million due to the continued reduced demand for land equipment and the general lumpiness of sales in equipment, the very weak marine market, and delays in some deliveries due to the pandemic situation in different countries. Marine equipment sales remain at the lowest levels as the total market fleet has been reduced to 14 3D vessels, and geophysical contractors continue to try and extend the use of their existing streamers past the typical lifespan. At this time, half of the active 3D fleet is equipped with Sercel equipment. Equipment segment EBITDA was at break-even, which shows our ability to adapt our structure to the market cycles. Moving on to slide 15. During the quarter, equipment delivered over 50,000 508 cross-tech channels, mainly to India and Russia. CERCEL also delivered its first node land wing system in North America, which is very positive news, demonstrating that we have a competitive land node product. After the award of the SICEMIC cruise in Saudi Arabia, we are in advanced discussions with the geophysical companies and are encouraged by the potential outcomes. Demand for marine equipment, both streamers and nodes, is expected to remain low throughout 2020 and into 2021, as geophysical contractors stack more vessels and try to reuse old streamers and extend their life as long as physically possible. In this context, due to the downturn in the oil and gas industry triggered by the COVID-19 pandemic, CDD and Shearwater have jointly agreed to suspend negotiations around creating a marine streamer equipment JV until visibility in the streamer replacement cycle improves. We are committed to continuing our mutually beneficial cooperation. In our non-oiling gas segment, we had a successful joint test with our partner for CELSA's new structural health monitoring node prototype designed for the growing high-end infrastructure monitoring market and we're now preparing for the commercial launch. I will now give the floor to Yuri for more financial highlights.

Thank you, Sophia. Good morning, ladies and gentlemen. Looking at consolidated P&L for the third quarter of 2020 on slide 17, our segment revenue from new profile amounted to 199 million stable quarter-on-quarter. GGR contribution was $150 million, a 4% increase quarter-on-quarter with 75% weight. Geoscience revenue was $77 million, a 7% increase quarter-on-quarter. And multi-client sales were at $73 million, increasing 18% sequentially on higher after-sales. Equipment revenue contribution was $50 million, down 14% quarter-on-quarter with 25% weight. Segment EBITDA was $52 million down from $68 million in the second quarter of 2020. Adjusted segment EBITDA was $80 million before $28 million of severance cash costs with 40% margin and up 6% sequentially. Segment operating income was negative $38 million up from negative $53 million last quarter. Adjusted segment operating income was negative $4 million before $34 million of non-recurring charges up from negative 5 million in the second quarter. IFRS 15 adjustment at operating income level was negative 5 million, and IFRS operating income up to this IFRS 15 adjustment was negative 43 million. Cost of financial debt was 34 million, including a non-cash peak component of 12 million. Net loss from continuing operations was 88 million, and adjusted net loss from continuing operations was 47 million before 41 million of non-recurring charges. Net loss from discontinued operations was 5 million, and group net loss was 93 million. Moving to slide 18, NQ3 2020, segment operating cash flow was negative 12 million, including a significant negative change in working capital of 37 million on increased equipment inventories for upcoming higher sales in Q4 and higher multi-client sales in September. Segment operating cash flow also includes $7 million of paid severance costs. Our multi-client cash capex of $58 million was down 20% quarter-on-quarter and was pre-funded at 68% on the back of solid portfolio of ongoing well-prefunded projects. Industrial cash capex and R&D costs in our geoscience and equipment businesses were stable at $13 million. Q3 segment free cash flow, including $37 million significant negative change in working capital and non-recurring servants costs, was negative at $59 million this quarter. Q3 cash cost of debt was $7 million, and Q3 net cash flow from discontinued operations was positive $8 million this quarter. U3 cash costs related to the implementation of CEG 2021 plan were at $19 million, and cash costs related to new severance were at $7 million. Overall, net cash flow this quarter was negative at $92 million. Looking at our group balance sheet and capital structure on slide 19, our liquidity decreased to $465 million at the end of September 2020 and remains solid. Following the exit from acquisition business, CGG, with its new asset-light profile, has lower capital intensity. With no debt maturities before 2023 and $150 million required to run the business, our current liquidity levels allow us to securely navigate through the current market environment. At the end of September 2020, our growth debt was at $1.374 billion, or 1,213,000,000 before FRS-16 with the following breakdown. 628,000,000 firstly in USD and Euro bonds due in 2023, 559,000,000 secondly in USD and Euro bonds due in 2024, 26,000,000 other items mainly accrued interest, and 161,000,000 lease liabilities including 41 million of Galileo financial lease and 120 million of operating leases under FRS 16. Looking at our financial leverage ratios at the end of September 2020, net debt to shareholder equity was at 75% and segment leverage before FRS 16 was at 1.9 times net debt to last 12 months EBITDA. At the end of September 2020, Our capital employed was at 2.17 billion, down from 2.3 billion at the end of 2019. Networking capital, after RFRS 15, was up at 168 million. Goodwill was down at 1.18 billion, responding to 54% of total capital employed. Multi-client library netbook value, after RFRS 15, was at 499 million, including $416 million of marine and $84 million of land netbook value. Other assets were $472 million, including $279 million of property, plant, and equipment, down from $300 million at year-end, and $167 million of IFRS 16 right-of-use assets, of which $41 million related to Guerrero Financial Lease, 156 million of other intangible assets, stable year on year, and 37 million of other non-current assets, up seven million from 2019 year end, mostly from Sharewater vendor note of 19 million. Other non-current liabilities were the 144 million, including 93 million of non-current portion of liabilities related to capacity agreement with Sharewater, split between 45 million related to off-market components and 48 million to idle vessel compensation. Shareholders' equity was at 1.26 billion, including 41 million of minority interest, mainly related to Yongsheng JV. Moving to slide 20. We continue to operate in uncertain times and turbulent environment. This is why we stay focused on what we can control by significantly reducing our cash costs and capex, continuing to generate cash from operations and preserving our liquidity. Our capex guidance remains unchanged, as was communicated back in May. We're also well on track with our cash cost reductions, mainly coming from adjustments to our headcounts across the world, with over half of them implemented by the end of Q3. Now I hand the floor back to Sophie for her concluding remarks.

Thank you, Yuri. I'd like to reiterate that in Q3, we saw the CDD market stabilize. Barring any new volatility from the US political backdrop and lockdowns in Europe, CDD's revenue appears to have reached the bottom. At current, we also anticipate a typical seasonality pattern in Q4 with higher multi-client sales and increasing equipment deliveries. During the first nine months of 2020, We have been able to maintain or increase our market share in our core businesses thanks to our unique technology, which remains key to our clients for improving their understanding of the subsurface and supporting the prioritization of their energy investments. Our technology, which is essential for step-out exploration, development, and production, combined with our focus on mature basins, provides CDG with a unique value proposition to our clients. We are progressing well in the development of new offerings in adjacent fields, including structural health monitoring, carbon capture, secretion and storage, geothermal and environmental geoscience. I'd like to conclude by confirming that while we are preserving our ability to capture the market recovery and achieve stronger financial performance in 2021, we are well on track with the implementation of the cost reductions that are required to align CDG with a rebased level of activity in the industry, and to protect our cash going forward. Thank you very much for your interest, and we're now ready for your questions.

All right, thank you, ladies and gentlemen. To those who wish to ask a question over the telephone lines, you may please press R and 1 on your telephone keypad. Once again, if you wish to ask a question over the telephone keypad, Please press star and one. Your first question comes from the line of Nick Constantakis from Exxon. Please ask your question.

Good morning, guys, and thank you for taking my questions. One for Yuri to start with. I mean, you have a decent amount of cash on the balance sheet. Are there any options you have around your debt to retire any part of it? And are you considering any other uses for this cash? And then I guess related to that, what are your current thinking around refinancing? What are the conditions you're seeing in the market right now? I appreciate we're coming out of a very difficult period, so any color will be appreciated. And then one for Sophie, you follow your clients' results quite closely. You speak to them every day. It seems to be the refocus towards more mature basins and less in frontier plays well with the repositioning you guys have done. I appreciate it's quite early to ask this, but when you think about a few years out, what do you think would be a good run rate, multi-client sales when you think about the mix of the business going forward? Thank you.

Okay, thank you. Uriel, let's start.

Good morning, Nick, and thank you for your questions. You're absolutely right about our level of liquidity. Unfortunately, with the current covenants package that we have around the first and the second lien bonds, and to remind you, the current capital structure, of course, was the result of CGG exiting from bankruptcy and restructuring in February 2018. So this covenants prevent us from extinguishing the, or at least trying to reduce the second lien bond, which is the most expensive with its peak component of 8.5%. This is yet another reason and another driver for us to refinance both the first and the second lien bonds in the near future. Now, there is one element in relation to the second lien bonds, and this is the call premium of 12.5% which drops to zero in February of next year. So that results in significant reduction in cash that we will need to pay upfront. And with that, our objective remains the same. It remains unchanged. So we are working on preparing for potential refinancing of both the first and the second lien bonds as early as March next year. And that work includes ensuring that we'll be in a position to not only publish our annual results, but also publish our URG, or annual report, at the same time. And in this refinancing exercise, another objective, of course, will be to move to the normal covenants package and no longer have restrictions similar to what we have currently, unfortunately. Now, that being said, of course, this will depend on the market environment early next year. Now, if we look at our first lien bonds as they're trading today, they have been stable at slightly above par. which is a good indicator that in the current environment, we should be, even in the current environment, we should be able to tap into the markets, but again, we'll wait until March because of this 67 to 68 million off-call premium associated with the second lien bonds, which will become zero in February of next year. And I will pass it now to Sophie to answer your second question.

Thank you. Hi, Mike. So multi-client revenue is a mix. I mean, you have to understand where the revenue comes from to be able to respond to your questions. So there are two revenue streams. One is the pre-funding, which is highly correlated to the CapEx. And then the other one is the after-sales, which is selling the data that we have on the shelf. So obviously that revenue stream, if you look at CDG past revenue, was almost equivalent between the pre-funding and the after sales. And again, that pre-funding was linked to the investment that we were making. So I think the future, so that's one point. So the revenue that we'll make will depend on our ability to invest or our willingness to invest and our ability to find good projects. And then the other element that you have to consider is the appetite from the other players in the market and the relative market shares that CDG will have in the future. If you look at what's happened more recently, we've increased our market share a bit naturally with the fact that we've invested less in those frontier areas. The total market for multi-client was around 2 to 2.5 billion pre-COVID-19. And that market is reduced by around, let's say, 30%. So somewhat in line with the exploration and production capex. I would think that typically as things improve, we see a recovery first in the after sales. And if you look longer term, My ambition would certainly be to bring back the multi-client revenue closer to where we were, which is around that 500 million mark, with all the caveats that I explained, that it depends on the capex, it depends as well on what other players will do. Does that answer your question?

Yeah, yeah, exactly. I was going for the late sales. Thank you.

Okay, thank you. And your next question comes from the line of Kevin Roger from Kepler. Please ask your question.

Yes, good morning. Thanks for taking my questions. I hope that you are doing well. The first question would be related to the movement in the working cap that you face this quarter. So you mentioned that this is basically related to future equipment sales. I was wondering if you can precise a Let's say a bit the environments around those cells and let's say that is it related to the Saudi Aramco mega cruise that you were expecting? Does it mean that you will have deliveries in Q4 and that based on that what will be the impact on your Q4 sales please? So if you can precise us the environment around this movement in the working cap. And the second question is more broadly, Sophie, it seems that based on the comment that you did during the presentation, it seems that maybe Q3 was, let's say, the low point in terms of revenues and margin because you seem to expect if I well understand the kind of improvement in the coming quarter. Can you maybe give us a bit more information in terms of dynamic that you expect in terms of top line and margin, let's say, for the next maybe two to three quarters in terms of dynamics, please.

Thank you, Kevin. Bonjour. First on the equipment sales in Q4, typically in equipment we build based on a manufacturing plan because the clients come in and expect deliveries within three months typically, three to four months. where the manufacturing cycle is longer than that. It is somewhere around nine months. So we cannot wait to get the order to start the manufacturing. So this is like the way equipment works. And we've been building equipment in anticipation of stronger deliveries in Q4. And that has definitely had an impact on our inventory. But I want to say as well that this inventory that we're building is standard equipment. So this is what we sell to India, to Russia, to Middle East. And yes, we are expecting that we're building based on our expectation to be selling equipment to Middle East in Q4 and Q1. But we're still in negotiation and it is a bit early to share more precise news at this point in time. Although I did mention that we're having encouraging conversations. So that's the one on the equipment. Now I did mention that we're at the low point. You've seen the clients have said that they're reducing their capex of 30%. And basically what I'm saying is that that's where we are and then I do expect that we'll be staying in that environment probably first half, if not the whole year, in 2021, which means that going into Q1, we'll see a Q1 rebase to that new environment compared to the Q1 last year. So we're sort of rebased at that low point, and I do expect we'll see a similar environment in the next few quarters. Keep in mind, when you look at the margins, that it is... highly dependent on the mix between the three businesses. We've got three businesses that have very different EBITDA margins, you know, between the multi-client, very high EBITDA margin, the geoscience somewhere in the middle, and then equipment with lower EBITDA margins. So that aggregate EBITDA will highly depend on the mix. I hope that answers your question, but I do definitely see that, you know, we're at that 200, million level for the quarter, I do not expect moving forward that we'll get significantly lower from that number and that we should be seeing improvements. But again, the margin will depend on the mix.

Okay, I understand. Thanks for that.

Okay, thank you. Once again, as a reminder to those who wish to ask questions, you may please press star and 1. Your next question comes from the line of Christopher from Remigy. Please ask your question.

Yes, good morning. This is Christopher Muller-Locken from Carnegie. Regarding the equipment you are building on the balance sheet, are you saying that you're building this on speculation or are you confident that you will be able to sell this? And if so, what do you expect the working capital development to be in fourth quarter and first quarter next year?

Yes. So, you know, like I said, it's not like something new that we're doing now. It has always been the model of that equipment business. There is a close conversation or discussion between the salespeople and the manufacturing that drives our manufacturing plants So if we are building this equipment or increasing our inventories, that we have high hopes that we'll be able to save that equipment. And again, it is standard equipment. So it's not like we're building custom-built equipment for a particular client or project. It is standard equipment. So yes, I mean, the answer is that we have high hope of doing those sales. Otherwise, we wouldn't be building and spending working cap for that. Any...

Regarding the outlook, yes, I'm good morning, Christopher. Regarding the outlook or the dynamics of change in working capital. So this quarter, one element was inventory inter-sale, but the other element was also increasing revenue in multi-client as well. So that was kind of two main contributing factors to the negative change in working capital. Looking at the fourth quarter, what we expect. Because the delivery of the equipment most likely will start towards the end of the quarter, that will translate in the increase in accounts receivable. But then of course subsequently these receivables, and by the way this will continue, sales will continue into one as well, but of course these receivables will be collected in the first half of next year. And secondly, As Sophia mentioned, we still do hope that there will be so-called Christmas after sales on the multi-client side. Of course, the magnitude of them will not be the same as last year, but we do have some early indications from some of the customers that they didn't spend even the reduced budgets so far. So, and they will need data to feed into their geoscience schemes. So with that, there will be the same phenomena on the multi-client side as well, where basically multi-client receivables will go up as well. So hence, there will be also negative change in working capital, but of course, again, this will be collected in the first quarter of 2021. I hope we answered your question.

Yes, thank you. With regards to the non-recurring charges in Q3, could you say how much of that was cash costs? And then the second question would be, could you also provide some guidance for charges going forward, both for Q4 and for 2021, and how much of that will be cash?

Sure. So when it comes to cash costs in the third quarter, In relation to costs related to exit from acquisition business, what we call CEG 2021 plan, we have $19 million of cash costs this quarter, and in Q4 it will be around $12 million. So with that, the total cash costs for the year will stay around $80 million as we kind of guided previously. Now, there is also this new severance cost that we're incurring on the back of reducing our headcounts and reducing our cash costs, and that amounted to $7 million of cash severance payments in the third quarter, and we anticipate in the range of about $5 million in Q4. So with that, the cash sequence for new severance will be around... 15 million overall in 2020, and the remaining 35 million will be paid mainly in the first half of next year because we're continuing basically with our headcount reductions. So that is the sequence, Christopher.

Thank you.

Yes, but of course, again, this severance cost, new severance cost will generate significant cash cost savings. Again, as we discussed during our second quarter call and we reiterated it in our adaptation plan, we'll be reducing our fixed cash costs by $90 million annually.

Thank you.

Okay, thank you. Your next question comes from the line of Phillip Buckner from Aurelius, please ask your question.

Hi, good morning. I just have two questions. The first one is on the cash flow statement. It shows a 5.2 repayment of long-term debt. I was wondering which debt you repaid during the quarter. And then in the press release, you mentioned, you know, you're making progress towards adjacent fields. Could you talk a bit about how large the revenue potential for these adjacent fields is in the future?

Good morning, Philip. Can you please kind of clarify your first question?

5.2 of repayment of debt. That's just the interest, isn't it?

No, actually, yes, the interest. cash debt costs were seven million.

We did not pay back any debt. That's the remaining part of the debt which is due to the financial transition.

Philip, there's this five million or five point something million was related to us paying off the remaining creditors that we had following the exit from bankruptcy and restructuring. And that was done together with our application to the Commercial Court of Paris. for the exit from the, what's called in French, plunders of guards. So basically, we paid down the remaining creditors who could not convert into equity.

So, yes, thank you. Hi, Philippe, and your question on adjacent fields. I've listed a number, and we're in the process of updating our strategy for the next three-year cycle. So we did 18 to 21. 18 to 21 is about making the company, repositioning the company to be resilient through the cycle, which was timely. And now 21 to 24 will be about growth and looking for those adjacent fields. Now, of course, my ambition is that those adjacent fields represent a significant portion of our revenue, otherwise it is a bit meaningless. It does depend on the client pickup or the market growth itself. We are in the process of analyzing and understanding where our core capabilities fit. The sweet spot is where we can rely on where we're good at, and a lot of it is around subsurface and equipment. and where our clients are going. And our clients are talking about geothermal, carbon sequestration. And so we believe there's a sweet spot where we could do well. And what my aim would be at a certain horizon that this represents somewhere around 20% of the revenue stream of CDG. If you'd ask me, you know, how do I achieve that? I don't know yet. That's what we're working on as part of our strategy exercise. However, this is the kind of ambition that we'll give to the team.

That's helpful. Thank you.

Okay. Thank you. And the next question comes from the line of Sahar Islam from Goldman Sachs. Please ask your question.

Good morning. Thank you for taking my questions. The first one I had was on the land equipment tendering pipeline. and as much visibility as you can give, please, into 2021, whether there are any more mega crew awards coming up. And then secondly, on the refinancing, Yuri, do you mind reminding us when you can refinance next year and what you'd need to see for market conditions in terms of COVID or just general market volatility for you to be able to execute that refi, please?

Yes. Hi, Sahar. Good morning. So on the land equipment, it's a bit early across the board to give you 2021 visibility because we're just starting our budgeting process. But what I can say is I do think that on that land side, we've reached the low point. This is typically equipment is the capex of geophysical contractors that react immediately to the difficult market condition. And so I think that's what we've seen in 2021. In 2020, sorry. So generally speaking, I would expect that we see some improvement on the land side of the equipment. The marine, I think, will be very similar at a low level. Now, in terms of visibility, it's Saudi. I mentioned two 3D crews have been awarded. There will be one more awarded that's pending. There's Algeria as well has one large 3D crew. Actually, interestingly, Algeria has been quite busy as of recently, a bit counter-cyclically. And then Russia, India are still active. So I'd say low point on land equipment in 2020. Improvement, I don't know how much, but there is activity coming from NOCs.

Good morning, Sacha. Regarding your second question, And I already mentioned that, yes, we are working on preparing ourselves for potential refinancing as early as March next year. But that being said, of course, fortunately, we're in a position where we don't have to jump into bad markets because the first maturity of our first lien bonds is in April of 2023. That being said, of course, the second lien bonds, which again, are the legacy of exiting from bankruptcy and restructuring, are expensive with 8.5% peak component, and naturally, again, in this refinancing exercise, we'll be looking at the wholesale refinancing of both the first and the second lien bonds. ensuring that we're ready from the kind of technical perspective that everything is on the shelf and that would open the first technical window in March of next year. But of course, as you rightfully pointed out, it will depend on the market conditions. And if market conditions will be favorable, we'll kind of jump into this window. But equally, if they're not there, We can wait, and we will. So basically, that is our strategy. I hope I answered your question, Zakhar.

Very clear. Thank you.

Thank you. The next question comes from the line of Christopher Muller-Glocken. Please ask your question.

Yes, thank you. Just a follow-up regarding 2021 multi-client investments. Would you care to give any indications for that level for next year?

Hi, Christopher, again. I could give you sort of directional views, certainly not numbers yet. But if you look at how our multi-client CapEx is composed of, there is always that land side of multi-client CapEx. Then there is the marine side, or the streamer side, and then the nodes, you know, as we started to invest. And, of course, the reprocessing, but those are smaller amounts. So I'd say, generally speaking, the land, as it is today, we're not seeing very interesting projects, or we have a pipeline, as always, for all the projects. But I would expect that certainly reduced investment on the land side. and probably somewhat similar on the marine side. The node is a question. It really depends on the projects that are presented during the budgeting cycle that is coming up. Those are typically more difficult to approve because the capex is more expensive, so the economics aren't always as interesting as the streamer surveys. So that's generally speaking... I'd say less in the land U.S. side because it's just not such an active market right now.

And I can add to what Sophie said that of course this year, as you might recall, we did enter into the year with a strong portfolio of ongoing well-prefunded projects and that's why although we reduced our CAPEX versus the original guidance significantly, in fact, from overall $300 million to about $225 million. So next year we definitely have much more flexibility. We'll continue with our project in Brazil. We're also looking at continuing our North Viking Rebens project next summer in Norway. And with all that, again, directionally, as you said, our capex will be lower definitely than this year.

Thank you.

Thank you. There are no further questions at this time. Please continue.

Okay, Maria, thank you. Now I hand the floor to Sophie for the conclusion. Thank you.

Yes, thank you, everyone, for attending this call. I know you all want to know about 2021, but I think we'll have an opportunity to give you more information after we get through our budgeting cycle. Thank you again for attending, your great questions, and we'll be in touch.

Thank you. Bye-bye.

Bye. Thank you, everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect.