Viridien S/Adr

Ladies and gentlemen, thank you for standing by, and welcome to the C2G Full Year 2020 and Q4 2020 Results Conference Call. At this time, all participants are in a listen-only mode. After this 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 1 on your telephone. I must advise you that this conference is being recorded today, Friday, 5th of March, 2021. I'd now like to hand the conference over to CGG. Thank you, and please go ahead.

Good morning. Good morning, ladies and gentlemen. Welcome to this presentation of CGG's fourth quarter and full year 2020 results. The call today is hosted from Paris, where Mrs. Sophie Giacchia, our CEO, and Mr. Yuri Baidukov, our group CFO, We provide an overview of the fourth quarter and full year results, as well as provide comments on our outlooks. As a reminder, 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 and of the full year results, we will be pleased to take your questions. And now I will turn the call over to Sophie.

Yes, thank you, Christophe, and good morning, ladies and gentlemen. Thank you for participating in this Q4 2020 conference call. Our presentation will cover our fourth quarter and four-year 2020 operational and financial results. So I'm on slide five now. And I'll start with a few remarks on 2020. During the year, we faced one of the worst crises based on its brutality, speed and magnitude that the industry has ever seen. Our clients reacted very rapidly to the COVID pandemic and by the end of Q1 had started to cut capex dramatically. This led to around 30% reductions for the full year which is in fact closer to 50% if we just look at Q2, Q3, Q4 combined. Throughout 2020, most of our large international oil and gas company clients focused on reorganizing and reassessing their oil and gas portfolio for cost reductions and postponements. New activity was paused and only critical projects moved forward. In Europe, we also saw many reposition themselves as energy providers, strengthening the development of their renewable energy roadmap. Our business continuity at CDG across the challenging year was exceptional. Our processing centers and manufacturing plants continued to operate without interruptions, and we executed all of our multi-client programs offshore and onshore thanks to continued client interest, our business continuity plans, and our strong acquisition partners. 2020 was a true test of the resilience of the newly repositioned CDG out of acquisition and onto its leading and differentiated businesses, which I would call quite successful. Moving on to slide six. Looking at how CDG responded, along with our excellent efforts to maintain business continuity. First, I'm very pleased for our timely completion of the exit from the acquisition business in the first quarter of 2020. and our focus on our core business lines. In 2020, in a shrinking market, we reinforced our market share in all core businesses. In geoscience, as demand for reservoir development and production optimization was accelerating, our unique best-in-class technology geared towards high-density data sets was well-positioned. In multi-client, all our 2020 surveys were focused on mature producing sedimentary basins and had good client support. And in equipment, we delivered over 360,000 LAN channels and enlarged our install base. In 2020, we also quickly adjusted our costs, adapted to our clients' rapidly changing activity levels while preserving our differentiated capabilities. Our segment-free cash flow was positive at $50 million before change in working capital. Overall, the past year validates our strategic roadmap And now, as markets gradually strengthen, we can look forward to building the future. I believe that CDG's new strategic rationale and value in our industry were confirmed in 2020 and remain strong looking forward. Slide 8. After a low Q2 and Q3, the last quarter saw a seasonal uptick of 41% compared to the average of Q2-Q3. This came from strong multi-client and equipment sales. Four-year segment revenue was $955 million, down 32% compared to last year, and in line with our clients' reductions of E&P CapEx. I know one of the concerns of our investors is our exposure to exploration, which has now reduced to less than 25% of our revenue. Most of our activity is driven by development and production, and our revenue dynamics are a proof of that. Adjusted segment EBITDA margin was 43% for the quarter and 42% for the four-year, which again demonstrates our resilience. With a very high level of revenue in December and an increase in inventory of land equipment for the two large megacrews awarded to our equipment division, change in working capital was highly negative at minus $88 million in Q4. For the four-year, segment free cash flow was positive at $15 million before highly negative $89 million negative million change in working capital. This puts our liquidity 385 million at the end of December, which allows us to operate comfortably. I'll now cover our Q4 2020 operations by reporting segment. Starting with GDR on slide nine. In Q4 2020, GDR revenue was 176 million, up 18% sequentially, but down 36% from the previous year. Despite a significant decrease in revenue, GGR delivered a solid 63% adjusted EBITDA margin. Now slide 10 in geoscience. In Q4, geoscience revenue was $75 million, down 2% quarter-on-quarter. As expected, geoscience production was more resilient than our other businesses because of its backlog coming into the crisis. The business was supported by more stable activity for large independents and national oil companies, along with a sequential increase in geosoftware sales. We also continue to experience sustained demand for our products and services for our clients' reservoir development and optimization activities. While we are prioritized, most offshore development projects are continuing and require advanced imaging to optimally position production wells. Our geosoftware business was successful in retaining maintenance revenue, which also supported our performance. The business continuity of our geoscience division has been excellent. All projects throughout the pandemic were delivered on time with excellent quality, and the total production per head was fairly stable at 238K. Slide 11. on Purdue Science operational highlights. Advances in acquisition technology, particularly ocean bottom nodes, can provide the added data that is required for advanced processing to image complex subsurface structures, and this can make a big difference in the ultimate economics of a development project. CDG's significant lead in imaging technology provides value to our clients, and it's why they tend to privilege CDG solutions when the stakes are high or in complex subsurface environments. Our market share increased in 2020 to 41% thanks to our geoscience-leading technology that continues to be recognized by our key clients and is also consistently rated number one in their supplier evaluations. As our clients reconsider reduction in their geoscience teams and reconsider the boundaries between internal and external imaging work, we see more interest in dedicated center models in which they can secure a dedicated pool of people and access CGG's latest innovations. We currently have seven such long-term contracts that allow a stronger partnership with our clients and provide visibility into future revenue streams. The most recent win was a three-year extension of our OMA and PDO center until 2024. And we have been providing value in this center in that country since 1994. Flight 12. Looking at our technology this quarter, I'd like to highlight satellite mapping, where through our unique capabilities, we harness the data from Earth observation satellites to address a diverse range of challenges faced by the energy, mining, engineering, environment, and defense sectors. In that case here, clouds can fully or partially mask the ground in satellite imagery, For most applications, need to be identified and excluded from processing, which is a very time-intensive process. Applying a deep learning approach, we achieve results that outperform the existing benchmark, allowing us to provide more accurate results from algorithms run on this type of data. Now to slide 13, still with geoscience technology. And that second example of technology is about the application of our latest imaging algorithms to resolve the subsurface under gas clouds. Jack Havit is a large field in the Barents Sea, surrounded by complex gas clouds, which create significant challenges for imaging at reservoir level. This example is taken from a multi-client top-size survey. Our superior top-size acquisition configuration enables the recording of extra data when compared to a traditional streamer acquisition, and this in turn provides better data for our advanced time lag FWI algorithms. In this example, we're using our time lag FWI to build an incredibly detailed velocity model of a very challenging and complex gas cloud area. We're able to resolve the continuity of layers, faults, and generally the subsurface structures, which allows our clients to be much more effective in their interpretation work, and down the road better identify prospects, develop the field, or optimize production. Moving on to multi-client with the slide 14. Q4 multi-client revenue was 101 million, up 38% quarter-and-quarter, and down 40% year-on-year. In the quarter, we completed our nodes acquisition in the node C, as well as a small complementary survey in a Norwegian nodes bike and grab area, and by the end of the quarter had essentially one vessel working in Brazil. With lower capex levels than previous quarters at 41 million, pre-funding was much higher at 171%, putting us at 89% for the year. Our most active basins are Brazil and Norway, where we have footprint that is particularly attractive to our clients. This leads me to talk about our exposure to federal land in the U.S., I did get questions after the moratorium was announced. At this stage, the most accepted belief is that activity on held acreage should not be affected in the future, even if drilling permits might get more difficult to obtain. The GOM, the Gulf of Mexico, is federal land, but keep in mind that the GOM has been slow for multi-clients for a while already, and we've not made significant investment for many years. Our GOM net book value exposure represents only 5% of our net book value, and in 2020, revenue from the GOM represented 6% of our total multi-client revenue. The GOM is very important to our imaging business, but this business is focused on data that has already been acquired on leased acreage and is also development production driven. The recent announcement have thus far not affected our activity, and while we don't expect any impact at current going forward, It is an area that we will continue to watch closely. Our U.S. land footprint is not on federal land, and I do not expect any implications on this basin for us. On the contrary, we're actually already seeing signs of activity picking up as of Q4 on the back of strengthening WTIO price. Looking at 2020, we started the year with several large committed projects, and it made sense to complete those projects as they had good pre-funding and client-maintained interest. This led us to increased capex in a year of much lower revenue. All of our projects were either in the core developing basins of the world, like Brazil, or in mature producing basins with strong economics, such as the UK North Sea, Norway, or in US land. This combined with a maintained level of client interest throughout the challenging year and strong pre-funding increased my confidence that this capex was well spent and that we'll see good returns for this investment. Now on slide 16. If you look at our complete multi-client footprint, in the last few years, we've made a conscious effort to shift our multi-client business away from new frontier exploration towards mature fields with a focus on field development, production optimization, and near-field step-out exploration. With this, we have avoided frontier exploration areas that we believed were less robust. Our multi-client additions during the last three years, as highlighted on this slide, were all focused on the expansion and upgrade of our footprint in key mature and prolific basins. Our presence in the U.S. land was expanded by 15%. Offshore Brazil centers and compasses were expanded by 23%, and our presence offshore North Sea, both UK and Norway, were extended by 34%. We believe that our exposure to reservoir development, production, and near-field exploration provides solid resilience through the cycles, particularly with current short- and longer-term outlooks. We expect that our clients will retrench into their core areas and prioritize capital expenditures on projects with lower risk or higher returns, both to manage through the existing challenging markets but also to best support their longer-term energy transition goals. Now on the next slide, multi-client solutions. In addition, we developed digital solutions to enrich our multi-client offering. We added to our portfolio of seismic data a library of well data synchronized with our existing footprint. We digitalized our geology library and developed a unique taxonomy that enables the meaningful classification of subsurface information and extraction of insights for all available data sets. The process that we utilize to classify information with our taxonomy is unique in the industry and has attracted client interest. We've also been working on our client portal that enables them to access information about all of our available data and their entitlements. So moving on to slide 17 for the equipment key financial indicators. It was a great quarter with 108 million revenue, more than double Q3. We delivered over 100,000 channels, including a large number for mega crews in Saudi Arabia. Equipment also delivered winged land node systems in Latin America. Marine equipment sales remain quite low, driven by spare section sales of sentinel streamers to install bays. 2020 equipment sales were 291 million, down 35% year-on-year, and have been more resilient than expected thanks to North Africa and Middle East land activity. OPIC for Q4 was positive as we were above our break-even threshold. Moving on to slide 18. CERCEL equipment has been selected for two 3D mega-crews recently awarded in Saudi Arabia, as well as for a smaller 2D survey project. These awards confirm the technical superiority of our equipment and the confidence that major clients and local contractors have in its capabilities. For each crew, we are talking about more than 60,000 channels of our 508 cross-tech acquisition system, and 40,000 SG10 geophones and over 30 Nomad 65 neo-vibrators controlled by VE's 464 electronics. The fact that we've had CECEL systems running for years on other crews in Saudi Arabia and in the wider region, combined with their consistent excellent performance in terms of both data quality and productivity, most likely played a part in those awards. We should also highlight our very flexible manufacturing organization, which has been enabled to manufacture at full speed this equipment and organize the logistics to deliver it in a very short timeframe, even during the challenging year. In terms of data quality, we see the clear potential for continued innovation in seismic sensors, like our third generation of MEMS sensors, QuietSys, which is unique in terms of broadband capability and fidelity of the signal required. So far, these cutting-edge sensors equip our 508 cross-tech systems and two new nodal equipment we recently released, the real-time QC-capable wing system for onshore and the GPR system for ocean bottom surveys. Marine activity has been slow, limited to spare parts. I do expect that the streamer replacement cycle is getting closer as the streamers that are in use are getting older and older and there are no more used parts available in the market. With this, I will now give the floor to Yuri for more financial highlights.