Viridien

Good afternoon and good morning, ladies and gentlemen. Welcome to this presentation of CGG's second quarter 2022 results. The call today is hosted from Paris, where Mrs. Sophie Durkia Chief Executive Officer and Mr. Yuri Baidukov, Group CFO. We provide an overview of the quarter results as well as 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, and good morning, good afternoon, ladies and gentlemen. Thank you for participating in this T2 2022 conference call. We move on to slide five, and I'll start with a few comments on the macro environment. The oil and gas market is tight after years of underinvestment, combined with post-COVID strengthened demand and increased geopolitical uncertainty with the war in Ukraine highlighting the importance of energy security. Energy transition continues to progress, but it will be a long process during which all sources of energy will be required. Short-cycle projects and unconventionals will not be sufficient to meet demand, and new resources will progressively need to be discovered. It will take time to bring meaningful new oil and gas supply to the market, which means that we anticipate entering a longer period of sustained high oil and gas prices. While NOCs, private equity-backed companies, and to a certain extent, independents, are reacting more swiftly with increased capex, IOCs are still constrained by public pressure towards oil and gas investments, along with their capital discipline, deleveraging, and shareholder return commitments. Given the significant cash flows generated by the sector, E&P companies are still in a strong position to both respond to the demand for hydrocarbons and invest into the decarbonization of our industry and energy transition. I expect significant increases in E&P capex in 2023 and beyond, and we're already seeing the first signs of return to more frontier exploration with longer cycles, particularly offshore deepwater. Overall, in Q2, we saw more active commercial discussions and engagements across our business lines, signaling further upcoming market improvements. In Q2, CDG delivered strong financial performance, with segment revenue at $214 million, up 66% pro forma year-on-year, EBITDA at $126 million, multiplied by three year-on-year, and positive net income at $16 million. Revenue was driven by the strong activity of our DDE segment as clients started to catch up on geoscience work and data purchases. Net cash flow was negative 56 million for the quarter, including a 42 million negative change in working capital and 47 million cash cost of debt. However, we remained net cash flow positive at 13 million for the first half of the year. I'll go on to slide 7 now. Our core markets continue to recover, and Q2 DBE segment revenue was high this quarter at 194 million, up 100% pro forma year-on-year, with growth in both geoscience and Earth data. Profitability significantly increased, with a high 70% EBITDA margin and a 43% operating income margin, driven by the revenue mix, the full effect of cost savings, and some pricing improvements. On slide eight for geoscience. Geoscience external revenue was 17 million in Q2, up 16% pro forma compared to last year. Sequentially, geoscience revenue was softer this quarter due to the timing of project completion. We continue to anticipate a high single digit growth for the fall year. Total geoscience order intake value was up 61% year-on-year during the period of January to June 2022. The total production per head KPI continues to improve as we're achieving the full effect of cost reduction combined with efficiency gains and the strengthening commercial environment. We anticipate our HPC capacity to be above 300 petaflops at the end of 2022. which is required to support our near-term growth perspective. The construction of our new European HPC hub in Southeast England, that will become the second half of 2023, is progressing as planned. Moving on to slide nine. Imaging activity is the strongest in North America, where customers require advanced technology for infrastructure-led exploration in the Gulf of Mexico. Technology differentiation continues to be key, especially in complex geology, where we win the majority of opportunities. Our unique technology significantly contributes to reducing drilling lists, increasing success rates, and optimizing production. And on this slide, we show a beautiful image of the complex geology of the Nordkapp Basin in the Barents Sea at 500 meter depth. The acquisition was designed to improve the resolution of the shallower depth and finally image the interface between salt and overburden. Thanks to our recent advanced 200 Hz four-way form inversion imaging algorithm, we were able to reveal abundant geological details which will be critical for exploration. Similar technology will prove important for the analysis and monitoring of carbon sequestration and storage reservoirs. In Beyond the Core, we were awarded a large contract over two years by BP to support their digitalization journey. And more specifically, we will work with the asset team to help extract the full value from their data and enable more efficient and higher quality data-driven decisions. Our subsurface experts and data scientists will apply our advanced and bespoke machine learning models and data pipelines to transform and curate data to help solve complex asset specific challenges. On slide 10, we developed one of the largest and from our analysis, the most efficient high performance computing capability amongst all industries globally, because over the decades, our imaging algorithms combined with the volumes of data that we utilize have continuously demanded compute power and storage capabilities that are beyond general industry offering to effectively respond to our clients' needs. With the emergence of the cloud, our clients are increasingly looking to procure compute power as a service, and we think it is a market that we can serve effectively based on our highly customized technology, middleware, and software that is specifically optimized for the unique challenges faced by our industry. Beyond our industry, there are huge quantities of data acquired with the Internet of Things. AI and machine learning requires large compute power capacity to train the models. And many industries, including biomedical, automobile, and aeronautics, need access to large and efficient compute power for the modeling of their products. And to be clear, this is not just about the raw compute power, but it's the design of the IT stack to address specific requirements along with all the layers of software and services that make the best use of it. Our experience in optimizing high-performance computing centers spans over seven decades, resulting in a highly differentiated HPC solution, much of which can be packaged and offered externally. Agnès Boudot recently joined CGG to lead the continued expansion of the HPC and cloud solutions business. Previously, Agnès led HBC, AI and quantum global business line at Atos, where she successfully grew the activity over the last five years and captured many references in the academic world and diverse industry around the globe. Moving on to slide 11. In Q2, we had two vessels working on our Earth data programs in the Norwegian North Sea and one vessel offshore Brazil. Earthdata cash capex was 75 million this quarter, up 72% EUR. Pre-funding revenue was 36 million with a pre-funding rate of 48%. Earthdata aftersales was 88 million this quarter, significantly up EUR, sustained by sales in Latin America, Gulf of Mexico and Norway, and significant transfer fees. Moving on to slide 12. We continue to invest in our core basins with the 12,000 square kilometer Antares project offshore Brazil in the South Santos Basin and with our Norwegian NVG East-West program. These two programs are continuing from earlier in the year and we expect to attract more pre-funding in the upcoming quarters. In addition to the stack size reprocessing project in Lugon, we started another reprocessing project in the Brazil Poste Amazona. Both projects are driven by the need to find new exploration targets in the most established and prolific basins in the world. The image on the slide is a nice example of the value of OBN taken from our UK North Sea Survey. It is an image with velocity overlaid on the seismic image. With OBN data and our unique advanced technology, we can significantly improve the velocity model and increase illumination. As a result, we enable our clients to see geological features more clearly and see some structures that have never been seen before, especially under the salt. And finally, we continue to expand our offering of data to address energy transition, especially CCUS and mining. Moving on to slide 13. A paleocellular study is a good example of what we can deliver to the mineral and mining industry. by combining our broad expertise in geology and geophysics, along with our geology data and satellite imagery. The lithium triangle is an area between Chile, Bolivia, and Argentina. This study uses maps of lithology, rock age, surface structures, erosion, and topography in the near surface to produce lithium concentration estimates in the different basins. The output map with the different grades of lithium is used by the exploration departments of mining companies to identify potential new commercial deposits. We move into SMO now with slide 14. Our sensing and monitoring segment revenue was soft this quarter at 46 million, down 4% year-on-year in the absence of large mega crude deals and few contracts slipping into Q3 of this year. At this level of sales, the EBITDA of the sending and monitoring business was negative at minus 7 million. We anticipate strong acceleration in the second half of the year with orders either in backlog or currently in negotiation. However, the timing of the Saudi mega cruise is slipping into 2023 as the acquisition tenders are yet to come out. Typically, there is a six-month mobilization period between the award and the start of acquisition. During the quarter, land equipment sales represented 28% of total sales due to a shift of some deliveries to Q3 2022. Several land nodal wing systems were delivered to Europe and Asia. Marine equipment sales represented 49% of total sales driven by significant deliveries of GTR 300 OBN noise. Tercel was awarded a major contract for the supply of a complete Sentinel streamer set, the first order of a complete streamer set since 2014. And sales from beyond the core business were 6 million, sustained mainly by increasing demand from the defense sector. And in summary, following the slow first half of the year, we anticipate a significant strengthening of the sensing and monitoring business in H2 2022, and even more so in 2023. driven notably by the upcoming tenders for large land-sized big mega-crews and OBN mega-crews in the Middle East and North Africa, with equipment deliveries expected at the end of 2022 or in H1 2023. Slide 16. During the quarter, Tercel completed the acquisition of Geocompt, which is specialized in high-value services and products for geotechnical risk management and infrastructure monitoring. Headquartered in Acton, Massachusetts, and present in key U.S. states, Geocomp employs 120 engineers, technicians, and support staff. Its 2021 revenue was $20 million. This acquisition is a major step in our strategy to become a significant global player in the fast-growing infrastructure monitoring industry. We strongly believe that the complementary technologies and skills of GeoComp and CERCEL will provide cutting edge solutions to address the numerous infrastructure challenges in the US and into international markets. Although this quarter, CERCEL was selected as a successful bidder for the acquisition of ION Geophysical Corporation software business. ION's software business is the leader in navigation software, both for vessels and ocean bottlenose. The integrated navigation systems of ION is at the heart of SACSMIC operations and it has been adapted to serve outside the industry for general marine fleet management. This acquisition is also a great opportunity for SIRSEL to further diversify and to develop a layer of value-added solutions on top of the equipment. Now handing the floor to Yuri to cover the financial details.

uh thank you sophie good morning and good good afternoon ladies and gentlemen i will comment on the q2 financial results uh looking at our industry statement on slide 18 uh segment revenue was 240 million up 66 percent performer year on year the respective contributions from the group's businesses were 29 percent from geoscience 52% from our data, 81% from the DDA segments, and 19% from sensing and monitoring. Segment EBITDA was high at $126 million, a three-times increase year-on-year with a 52% margin due to the favorable business mix and the full benefit of cost reduction measures. Adjusted segment EBITDA was $122 million. Segment operating income was 66 million at 28% margin and adjusted segment operating income was 62 million. IFRS 15 adjustment at operating income level was negative 7 million and IFRS operating income after IFRS 15 adjustment was 59 million. Cost of financial debt was 25 million. The total amount of interest paid during the quarter was 47 million. Other financial items were at negative 4 million. Taxes were up this quarter at 14 million, primarily due to 5 million negative impact of currency exchange rates on deferred tax assets. CEG returned back to black with net income positive at 16 million. Moving to slide 19 and looking at our simplified cash flow. Segment-free cash flow was $9 million, including $34 million net proceeds from the Galileo headquarters building, sale and leaseback, $16 million payment for the acquisition of Geocom, and $42 million negative change in working capital and provisions. Total capex was $85 million, of which industrial capex was $4 million, research and development capex was $5 million, and our data cash capex was $75 million. After 12 million lease repayments, 5 million CEG 2021 plan cash costs, 1 million negative free cash flow from discontinued operations, and 47 million paid cost of debt, the net cash flow was negative 56 million. However, net cash flow for the first half of the year was positive at plus 13 million. Looking at our balance sheet on slide 20, Group liquidity amounted to $417 million at the end of June 30, 2022, and included cash liquidity of $317 million and $100 million on drone RCF. Group gross debt before FRS-16 was $1.13 billion and net debt was $812 million. at the end of June 2022. Group gross debt after FRS 16 was 1.23 million, sorry, 1.23 billion, and net debt was 909 million as of June 30th, 2022. Segment leverage ratio of net debt to adjusted segmented debt was 2.1 times at the end of June this year. Capital employed was $1.93 billion, down $63 million from the end of December 2021. Networking capital after AFRS 15 was at $163 million, down from $229 million at the end of December last year, primarily driven by significant reduction in net accounts receivable. lower deferred revenue liability from IFRS 15, and reduction in personnel liabilities partially offset by growing inventories in sensing and monitoring. Goodwill was stable at $1.1 billion, corresponding to 56% of total capital employed. Multi-client library net book value after IFRS 15 was up at $443 million, including $412 million of marine and $31 million of land and BV. Non-current assets were at $328 million, with $155 million of property, plant, and equipment, including $70 million of IFRS 16 right-of-use assets, down 50 million from year-end 2021, primarily due to Galileo's sale at Lisbeck. And 89 million of other intangible assets were stable from year-end 2021. Non-current liabilities were at 81 million, down 19 million from year-end 2021, and shareholders' equity was up at 1.024 billion, including 40 million of minority interests mainly related to UNFAM-GE. Now I hand the floor back to Sophie for conclusion.

Thank you, Yuri, and we're on slide 22. Before concluding this Q2 review and opening the floor to questions, I'd like to highlight CEG's contributions to the sustainability of the energy sector's value chain. Through our advanced technologies and data, we provide a much more accurate understanding of the earth and subsurface, which can be turned into decisions that help our clients be more efficient and sustainable, including reducing the carbon footprint. Key risks, such as shallow faults or gas clouds, can be avoided, and fewer and more productive wells can be drilled. Beyond the core, we support our clients with the information needed to enhance the exploration and production of minerals, that are required for the energy transition, and with the information that is needed to effectively evaluate the potential of carbon storage reservoirs, as well as efficiently monitor their operations. A company's high-end technology business profile, along with our carbon intensity reduction efforts and profile that has been consistently dropping since 2019, is recognized by ESG rating agencies. Only two oilfield services companies, including CGG, have achieved an AA rating with MSCI. And with an index of 17.9, CGG is ranked number two by Sustainal Analytics among 113 energy service companies. So now I'll conclude on slide 23. Our industry is entering a favorable multi-year up cycle. as it will require time and capital investment to bring new oil and gas on stream in a sustainable and low-carbon intensive way, while also developing the renewable sources of energy that are required to effectively manage through the energy transition. Step-out exploration and unconventionals while active will not be sufficient to compensate for the natural depletion of reservoirs, and traditional exploration will have to progressively resume. Our unique and advanced subsurface technology will be key to face the energy challenges. I am convinced that carbon sequestration at scale will be required to meet the world's emission reduction targets, and this will require a comparable level of technology to characterize and monitor the reservoirs for carbon storage. We're heading into this upcycle from a leading market position across our businesses and with unique capabilities that allow us to participate in many markets beyond our core markets. Our ability to deliver exceptional technology, data, earth information, subsurface images, data science, monitoring solutions, and high-performance computing, all with outstanding results and excellent services, will be even more important than it is today for our current clients and the clients that we're building beyond the core. As we move into this new world, our clients will increasingly need to rely on the best-in-class partners that have scale and expertise, and I am convinced that we will develop more of these partnerships moving forward. The CGG organization has been very resilient through the recent difficult times and is successfully able to navigate through the post-COVID challenges, including supply chain disruptions. I would like to thank the women and men of CGG for their outstanding commitment and work. As a conclusion, I expect that we will continue to see improvements across all our businesses, core and beyond the core, as the year progresses, and we'll see further accelerated growth in 2023 and beyond. Thank you for your interest, and we're now ready to take questions.

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Once again, it's Star 1-1 to ask a question. We'll now take our first question. Please stand by. Your first question is from the line of Jean-Luc Romain from CIC Market Solutions. Please go ahead.

Good afternoon. Congratulations on your results, prospects. I have two questions, actually. One is on equipment. And I was wondering, you mentioned for the first time prospect for marine equipment. Is this only for OBN or do you have prospects for streamer sales? That is the first question. Second question is about your after phase. Do you expect that after phase to remain strong in the second half after this good second quarter performance? And how much was the new link to transfer fees from one operator to another?

Okay. Well, thank you. So I'll start with the first question on SMO. The driver is both actually If you look into 2023, it will be both OBN, Ocean Bottom Nodes, and streamers. For this year, the marine is very much driven by the OBN already. As you know, the OBN is exposed to the production side and it's experiencing significant growth. And we delivered OBN last year, we're delivering more this year, and even more next year. But next year, as we had anticipated, streamer replacement cycle is finally kicking in. Actually, we have one complete set of streamer on order for Coraline Company, but that's not for the seismic sector. It's a different application, but we are anticipating to start seeing that streamer replacement kick in next year as well. So it'll be both. And for the after sales, we are seeing signals of strong Q4 sales. I can't yet talk about Q3, but I think we'll have a good year, generally speaking, on after sales and much improved from last year. And we're getting ready for strong Q4 sales. In terms of transfer fees, this is something that we have recurrently, I would say, every year we do have transfers. I would say for the four-year, the amount of transfer fee is anywhere between $13 million and $15 million on a recurring basis, and this year will be the same.

Thank you very much.

Thank you. Thank you. We'll now take our next question. Please stand by. The question is from the line of Kevin Roger from Kepler-Shuffra. Please go ahead.

Yes, good evening. Thanks for taking the question. Sorry if you mentioned that during the early comments, but if I look at the imaging business SIR, you have a top line that is lower in Q2 than in Q1 while basically the backlog is full, etc. So I was wondering if you can explain us why Q2 is lower than Q1 on the imaging business. Please, Sophie. The second one is related to the cash and the working cap. So you had the negative movement on the working cap in Q2, a strong one in Q1. What should we expect in terms of working cap and net cash flow for the H2? Is there any big movement to be based on that side? And the third one is more globally. One of your competitors in the seismic business, Schlumberger, just had a conference call last week, and they had quite very bullish messages on the seismic business, saying that there were a lot of discussions currently happening, that things were accelerating, not to be for semi-frontier areas, that a lot of new surveys were coming on, etc., Is it something that you see also on your site? Sophie, do you share the statement that was made by Schoenberger last week during the conference call? Do you share everything with them?

Okay. So what I'll do, I'll – bonsoir, first of all, Kevin. It's good to thank you for your question. I'll answer your first and third question, and then I'll pass it on to you, Ruth, for the cash and working cap. But on geoscience, the quarter is not necessarily the right metric, especially the variation from quarter to quarter. So I think you heard correctly my comments that generally speaking, this business has been strengthening. We're getting more order intake. Now, what happened on Q1 and Q2, and you expected to have the question, is it's just the... how the projects get sequenced. And we had a little bit of an up from the project by releasing some provisions. So this is just due to the how project completing, new project starting. There is really nothing to be inferred from the spatially lower Q2. So we're still on our trend. And that's why I pointed out that on year-on-year trend, first of all, you saw that H1 to H1 was still a double-digit increase. And then for the four-year, we're still expecting to be in the high single-digit for geoscience. So really nothing special to be seen from that slight decrease from Q2 to Q1. The fundamentals are strong.

Sorry, Sophie, if I can jump in. Considering that you say business is laundering, backlog, they're well-loaded, et cetera, what would be the kind of top-end, top-line that you can generate with GeoSource? What would be the top-line that you can generate with everyone fully loaded, et cetera?

So that's the high single-digit growth from last year. Four years. Four years on four years is what we're planning pro forma. is what we indicated in the notes um and then we'll continue to see i mean from the beginning when we went down we went down by high single digits or you know 10 15 but then the the way up is somewhat similar and we are a little bit constrained by by the people signed okay okay i understand That's one. And then on the comments from Schlumberger, I did read that and I was quite happy to see that they're bullish on exploration. I think they're exposed to more parts of exploration than we are, in particular to the well construction and the drilling. And they're seeing that part too. I would say if I just look at purely the part that we play in, Again, I'm optimistic, I'm sending positive signals that we're entering an upcycle, but as of H1, I wouldn't say it is, I wouldn't be maybe as bullish as they are based on just H1. But I'm confident about Q4. Again, we're seeing clients coming back to the conversation. I'm convinced that there's no choice other than resuming proper exploration or traditional exploration. meaning the ILX, the infrastructure-led exploration, is not going to be enough to meet the demand. So in that sense, I'm very optimistic about 2023 and forward, but I think the H1, at least for us, is good, but not bullish maybe as much as their comments. And I'll pass it to you, Yuri, now.

Yes, thank you, Sophie. And good evening, Kevin. Yeah, coming back to your second question about kind of how is cash and working capital shaping up in H2. So in equipment business, in SMO business, we do see, as Sophie was already commenting, the year being quite back-loaded. And therefore, the negative change in working capital in that particular business will be there. So it will depend also on where we end up at year end in terms of receivables. And the second known-unknown is, of course, multi-client or earth data business. And there, like always, it will depend where we finish the year, or December even, in terms of after sales. So basically, again, we see that overall directionally, earth data business will be also back-loaded. In other words, Q4 higher than Q3, but ultimately until midnight December 31st, we will not know exactly where we left in terms of receivables at year end. All in all, on the four year basis, of course, our objective remains the same to be cash flow positive before change in working capital. In other words, again, depending on where we land with working capital, we'll see.

Okay. Okay. Thanks for the answer. Have a nice evening. Thanks.

Thank you. Thank you. Thank you. We'll now take our next question. Please stand by. This is from the line of Daniel Thompson from BNP Paribas Exxon. Please go ahead.

Good evening, Sophie and Yuri. Just one clarification, if I may. Last quarter, I think you said your guidance was factoring in SMO, one land mega crew and one OBN award in 2022. And there was also some potential upside from tenders in Algeria, Libya and the UAE. Is this still your latest outlook, given your comments on Saudi Arabia? And has there been any progress on those potential tender announcements related to North Africa and the UAE?

Yeah, thank you, Daniel, and good evening for that question. Yeah, I mean, I indicated in my comments that some of the upsides that we were seeing for this year, including those mega crew in Saudi Arabia, have shifted into next year. So technically speaking, the tenders, I'm fairly convinced they will come out this year, but as we're already July, you need the time for the tenders to come out, for the responses to be given, and then there's a six-month mobilization. So very likely, you're talking about mobilization sometime in Q1 or Q2, which means the equipment will be sold and required, I think, most likely in 2023. And that is for the Saudi mega crew. Now there's other deals that we have in the pipeline in North Africa and an OBM that we'll be selling. So if I look at the set that we need to do for the second half of the year for SMO, obviously the first half is kind of soft. We have a big chunk of it already in the backlog and then another chunk which is already in discussion. So we're missing a little bit of it, but we have a general confidence that we'll be able to see that acceleration in the second half of the year. Now, compared to my comments in Q1, we'll end up softer to where I thought three months ago. But it doesn't change our guidance, basically, for an EBITDA and OPEC, because I always had the intention to sort of compensate for it and find other ways. to meet our objectives. But if I just look at that business line, and we knew coming into the year, it would be a sort of a transition year, and it ends up being the case. Okay. As Yuri points out, we're missing Russia, and that is the case, and we had talked about a $36 million impact, and that's for sure we're missing it.

Thanks for the call, Sophie. Have a good evening.

Thank you. As a reminder, if you would like to ask a question, you can press star 1 1 on your keypad. I'll now take our next question. Please stand by. This is from the line of John Olesen from ABG. Please go ahead.

Good evening, Paris. I have a question regarding fresh news out today that there's been a deal struck between the Senators Schumer and Mashin in the U.S. and that this deal will mean opening up the Gulf of Mexico for lease rounds again. Is that something you're updated on?

Thank you. Good evening, John. Actually, I haven't seen the news and it would be good news. because the Gulf of Mexico definitely needs a little bit of a boost. It's been stalled, as you know, and we're busy in the Gulf of Mexico, but on the back of production-related activity or infrastructure-led around existing infrastructure. So we look forward to seeing the more active activity in the Gulf of Mexico, but it does need that five-year plan to be re-established. So basically, we're missing that five-year plan to be able to resume these activities in the Gulf of Mexico.

Go ahead. There seems to be rumors out that this potentially could be launched even already now in August. I just wonder if that happened. Of course, you have a big library in the Gulf of Mexico. Is it possible to give some indication of what would you expect if that happens? Would you expect strong late sales already from Q4 and also on the multi-client investment side? You haven't done any big new conventional toad streamer multi-client service in Mexico for a while. Of course, you've done ILX and OBN, but if Mexico opens up again, would you then plan for for new conventional 3D seismics?

Look at the Gulf of Mexico, definitely. The Gulf of Mexico is a core area for us. If you look at historically in the Gulf of Mexico, you had layers of technology. And right now, technology that's required is really that OBM technology. So I would expect that the Gulf of Mexico, the next, if we were going to invest, it might be probably either full node, or a combination of hybrid node and streamer, but it does require that node to get a much more accurate velocity model because the Gulf of Mexico is complex and requires that advance. Now, what we've been doing in the Gulf of Mexico is a lot of reprocessing because you need both to get a better image. You can advance the technology through the acquisition itself, having better data, more accurate, more dense data, but also the imaging technology advances and we're able already to provide significant uplift onto existing data set, which is wide azimuth data. And that we've been doing throughout the last years. So something we're continuing. Actually, I did say we're reprocessing the stack size. Remember, stack sizes are central-grown, ultra-deepwater data sets. And that's where you've had, for example, the North Platte is moving from Total to Shell, for example. So it's a very prolific area, and there's still interest in that area. And there are some blocks that are held, and we see the interest in the held blocks. I imagine that if there was an opening, then all of a sudden we'd see more clients interested in, for example, in the stack size. And we started a reprocessing of the stack size sort of because we saw the the interest in that in that area so we would accelerate and maybe do a larger one because we started with a subset of the of the data set so we would go either from the repository because it can give data quicker to clients and then we would uh start talking to whoever is interested to for that next layer of technology that will be required

My second question is regarding streamer capacity in the offshore, well, streamers are offshore, but streamer capacity in the industry for those who have vessels. There's talk now that the vessel owners are planning to bring out more vessels due to higher demand, but I guess with the structural changes we've seen over the last few years with shareholder making their own streamers, and it's the same with PGS, would Serschell be in a position that it could sell more offshore streamers, and who could potentially be the clients, please?

And I think definitely we're in a good position to sell our streamers. And so one of the indicators that we follow is we look at how many vessels are in operation at any point in time. And we look at sort of our market share, if you wish, how many of those vessels are equipped with CERCEL equipment. And right now it is 10 out of 16. So we still have a fairly significant market share of vessels that are in operation, which tells me that, yes, when and if, because you're saying, yes, GeoWater and PGS have their own streamers, but they're not manufacturing either. I think everybody's kicking the can and trying to delay making any spend in capex. So I do think that we have a significant market share of vessels in operation. And again, our stream is also used beyond the core. So they use for oceanography, like the case that we sold to Korea. And then there are vessels perhaps that are country-specific vessels that maybe don't get counted in that sort of international vessel count. You know, like Turkey has a vessel. And so we do sell streamers those countries as well. But the issue we've been facing is that there hasn't been any capex spent in streamer replacement. That's full stop the story.

And you haven't seen any upticks or any orders or indications or clients asking for price quotes lately?

conversation is continued throughout right because the need is there the money is just the investment capacity isn't there the market hasn't allowed this to happen and what the market needs it needs those marine prices to go up and they are going up but arguably they're still not very high so the the service companies need to start generating cash and being comfortable about the outlook as well because it's not about generating cash a quarter it's do they have a confident outlook in 2023 and 24 so they could start you know making this 13 million capex investment that's required to change it for stream set but another data point i might give you is that we're starting to see an increase of technical downtime and not just from our side because we are clients of vessels but it is pretty much across the service providers, which kind of tells me that there is investment required.

So technical downtown time on the vessels.

Yes, right.

And we're, like, real time. We see it. Is that due to streamer issues or engine issues?

Streamers, equipment, general equipment state. And it's not just us. It's an issue across the industry. I mean, there's no secret that humans are more than 10 years old. So it never gets old. And there's a point in time where it's not going to continue working.

It'll be interesting when we reach that point. That should benefit the shell big time. My final question, is it possible to quantify the increase that you see in the day rates?

I mean, we're not, I mean, the market is, there isn't a lot of data points, actually. But I would say, I mean, the vessel companies would be better off actually talking about it because we had our, you know, with Shearwater, we have our agreed market rate that we have with our agreement. But eventually, after mid this year, we're going to go to market rates, but we'll see I mean, it will be a moderate increase, and that's why I'm saying that the market rates aren't very high yet. It does need a... And then the rates as well. When I look at the rate myself, I include the project cost. And if you look at the project cost, we're paying the fuel, and the fuel has gone up as well. So there's other sources of inflation than just the vessel providers. But we're far from what I would call a solid market rate to allow investment. It needs a bit more.

Okay, thanks for taking my questions. Have a nice evening. Thank you.

Thank you. We'll now take our next question. Please stand by. This is from the line of Naila Velimukhamatova from BlackRock.

Please go ahead. Yes, good evening. Hi. Thank you very much for taking my question. I've only got one. I noticed you removed the quantitative guidance, unless I'm mistaken, from your outlook. Just wanted to check if my understanding is correct or if I've missed it, perhaps, and you removed it earlier. But yeah, I just want to check if that's correct and also if you could give some sort of indication. Obviously, the tone of the discussion is quite positive, but I just wanted to check if there was something quantitative you could give us in terms of revenue development or anything like that. Thank you.

Actually, we didn't remove it. There wasn't anything changed, so we just didn't feel like we needed to repeat it, but it's just unchanged, basically. You're right.

Yes, that's exactly the case. So basically, we felt that we don't need to reconfirm our guidance every quarter if there's no change, right? So basically, it's effectively reconfirming it by default. And in this context, we reconfirmed it in Q1 because Q1 was obviously low, but now Q2 is good and basically, yes. we see as she was explaining kind of the up cycle in front of us so we felt that there's no no need i would say to uh to reconfirm games fantastic okay many thanks panic over thank you thank you thank you thank you we'll now take our next question please stand by and the question is from the line of baptist labak from outdoor please go ahead

Yes, good afternoon. Thanks for taking my question. A very easy question, I guess, for you regarding lithium business. A couple of years ago, it was in 2025, you decided to exit non-seismic data acquisition. And what is exactly your policy regarding lithium business? Is it just data interpretation? Or can we see you coming back with a data cruise in order to make also the collecting of the data?

Hi, good evening. So I will state it again. There is absolutely no way that we would ever get back in anything that has acquisition in its name. So no, it is what we provide. We provide an understanding of the subsurface. We provide data processing. We provide data and, for example, this is one of the new studies that we released. This is like this analysis of lithium. So we're using our geology database to be able to provide information to the mining companies for them to do exploration. Now, let's say there is data required to do a lithium exploration project. It might require one of these plates that we sold. you know, we will contract it as we do for the vessels. Or we'll contract it and we'll process the information. So it would be exactly the same business model as we do in the cycling world. So we'll continue focusing on our excellence and our capabilities. We're not going to step out back into anything that has that position in it.

Very clear. Thank you.

Yeah, I think it's just a commodity, right? And so I haven't changed my mind on that. And actually, when I look at what's going on right now, I'm actually even more comforted that we made the right decision.

Thank you. At this time, there were no further questions, so I'll hand back to the speakers.

Great. Well, thank you. Thank you very much for all the great questions and for attending in the day that I know has been busy with a lot of calls today. And, of course, we're available for any follow-up questions. Thank you very much and have a great evening.

Thank you all. Goodbye.