Viridien S/Adr

Good day and thank you for standing by. Welcome to the CGG Q2 2023 financial results conference call. I will now hand over to CGG. Please go ahead.

Thank you. Thank you and good afternoon and good morning ladies and gentlemen. Welcome to this presentation of CGG's second quarter 2023 results. The call today is hosted from Paris where Mrs. Sophie Giacchino, Chief Executive Officer and Mr. Jérôme Serre will 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 that may change at any time. And following the overview of the quarter, we will be pleased to take your questions and now turn the call over to Sophie. Thank you.

Thank you, Christophe. Good morning and good afternoon, ladies and gentlemen, and thank you for participating in this Q2 2023 conference call. Starting with the slide five, let me start with some general comments on the evolution of our businesses and market environment during the quarter. Overall, commercial activity was solid across all our businesses and geographic location this quarter, with a strong rebound of our SMO sensing and monitoring business, driven by increased land and OBN seismic projects, especially from the national oil companies. Fundamentals for exploration and development remain strong, with exploration continuing to gradually increase. The priority of our clients is to bring short cycle oil and gas to market, while increasingly looking for new potential lower cost and lower carbon reserves, especially offshore. This trend translates into continued focus on mature producing basins, and is driving demand for high-end imaging and increased OBN data acquisition surveys, a backdrop that is favorable to CGG. We are particularly well positioned to support our clients with our three differentiated core businesses. Q2 commercial activity was high. Our geoscience business was awarded very large multi-year contracts, while sensing and monitoring had record quarterly order intake. At the end of June, our group backlog stands at $510 million, up 54% year-on-year, the highest backlog since 2020. Looking at our Q2 financial performance, we had a good quarter despite volatility in our Earth data business, with around 20 million of late sales slipping from end of June to early July. Geoscience revenue at $80 million was up 14% year-on-year, driven by increased activity worldwide and our technology differentiation. Earth data sales at $62 million were down 5% year-on-year when adjusted for transfer fees and US land library sales. Sensing and monitoring was very high at $146 million, significantly up 222% year-on-year mainly driven by OBN equipment deliveries. Overall, our Q2 revenue reached $289 million, up 20% year-on-year. Segment EBITDA was $104 million, a 36% margin related to business mix. Q2 net cash flow was a negative $79 million, including $45 million negative change in working capital, mainly related to SMO. Moving on to slide seven. DDE segment revenue was $142 million in Q2, flat compared to Q1, and down 27% year-on-year, with double-digit growth in geoscience and lower Earth data sales compared to the exceptionally high second quarter in 2022. Profitability was impacted by a low level of aftersales this quarter. Now going into the business lines with slide eight in geoscience. Geoscience external revenue was 80 million in Q2, up 14% with growth coming from all regions. The geoscience business is back to pre-COVID 2019 levels, thanks to strong demand, but also because of our technology differentiation and increasing market share. The market is active with a higher level of bid submissions worldwide and more high-end data being acquired, such as with ocean bottom nodes, to image producing reservoirs. Backlog is up 19% year-on-year. The total production per head KPI continues to strengthen and is now up 10% year-on-year and back to 2019 levels. In parallel, we continue to actively add computing power to be able to run more and more advanced algorithms. As of the end of June, we reached 371 petaflops. On slide nine. In geoscience, demand for a unique elastic four-way form inversion is very high, driven by North America and growing worldwide in line with increasing OBN acquisition activity. Our differentiated images deliver highly impactful, precise images of the subsurface. On this example from the Santos Basin in Brazil, you can see the stunning images of the subsurface provided by our Prisic full waveform imaging model to the left and the 25 Hz elastic full waveform imaging model to the right. The carbonate reservoir in darker red just below the salt in yellow is remarkably clear as is the green shale source rock below the reservoir. This level of structural precision and geologic detail directly from the data-driven seismic imaging significantly reduces the risk of exploration, improves reservoir development, and is critical for optimizing well placement. Looking at our beyond the core initiatives, we see strong momentum for our data hub offering with new pilot tests in progress for various clients. Many players are positioning within the CCUS market, including our traditional Olingas clients. CCUS will further accelerate, especially as frameworks and fiscal regimes in the various countries continue to become clearer. Geographically, we see stronger demand in North America, North Sea, and Australia. Most of the demand for our services in CCUS are around the screening for potential reservoirs, which includes both processing and geological integrated studies, as well as long-term monitoring design. We have been recently awarded CCUS imaging and monitoring design projects, the first for CGG, and an area we expect will continue to grow. Our HPC initiatives are progressing well, with the new UK HPC hub expected to be operational in Q3 2023, and the biosimiletics contract which was signed in May and starting delivery of HPC services in June. Also, in the context of reducing our overall carbon intensity, our Houston HPC hub recently switched to green electricity, making a significant impact on our Scope 2 emissions. Now moving on slide 10. Since the successful introduction of our full waveform inversion algorithms, our market share has significantly increased as we have generated demand for the reprocessing of existing data sets, and particularly in the Gulf of Mexico. New OBN data also greatly benefited from our CDG proprietary techniques and these advanced algorithms, as can be seen on this example of Mad Dog fields. These more precise images help our clients understand the reservoirs and better position their development wealth, saving them millions of dollars. They also help identify potential new reserves that were not previously visible. Now going into Earth data, slide 11. Q2 Earth data pre-funding revenue was solid at $42 million, bringing the pre-funding rate for the first half of the year to 84%. Earth data cash capex was $64 million this quarter, down 15% year-on-year. Aftersales were $20 million this quarter, with around an additional $20 million slipping to close in early July instead of June. Clients continue to underinvest in the data required for exploration. While offshore exploration budgets have increased around 15-20% year-on-year, spend remains prioritized around drilling. I expect we will continue to see gradually increasing data purchases as clients need to acquire new reserves to meet demand. We see this reflected in our year-to-date order intake, especially as the IUC's proportion of spend continues to grow. Slide 12. The Earthdata team in charge of operations had a very busy second quarter. In Brazil, we completed in partnership with TGS, Fosdo Amazonas, phase two. In the North Sea, we completed the NVG East-West 2023 survey and launched two OBN surveys also in partnership with TGF. During the quarter, we also performed multiple reprocessing projects, including our stack size survey in the Green Garden area of the Gulf of Mexico and launched our Uruguay reprocessing project covering an area of 25,000 square kilometers, which is well-prefunded by clients. Our objective is to continue expanding the strong positions that we have in our core basins while developing positions in new basins with the most potential. Slide 13. In Earth data, our Beyond the Core focus is on CCUS and minerals and mining. We kicked off the Arizona Multiphysics Airborne Acquisition Project aimed at supporting the minerals and mining industry explore for new areas and mainly for copper production. This project totals 27,000 line kilometers and is attracting high industry interest with that current six potential clients and we have already secured a pre-funder. In the Gulf of Mexico, we are capitalizing on the success of our CCUS phase one project and are expanding west in phase two with the goal of providing multidisciplinary data to our clients for potential storage reservoirs. Now into going into sensing and monitoring, slide 14. Our Q2 sensing and monitoring segment revenue was very high at $146 million, up 222% year-on-year. It came mainly from marine sales at $84 million, driven by deliveries of OBN products. Sales from beyond the core, which now include Geocomp that we purchased last year, but also up at $11 million, mainly for structural health monitoring projects. The profitability of SMO reached a high 23% adjusted EBITDA margin, thanks to the high level of sales, a favorable sales mix, and the absorption of fixed manufacturing costs. This represents a 42% fall through compared to a year ago. Slide 15. Q2 was a very busy quarter for our SMO business, both commercially and operationally. SMO saw record quarterly order intake at 238 million, and our manufacturing plants were busy producing large quantities of vibrators and OVN-GPR nodes. Looking at our BDC businesses, SMO made significant progress during the quarter, with first commercial successes in the U.S. for the earthworks and wind farm structural health monitoring technologies. And now let me give the floor to Jérôme for more financial details.