2016 Q4 & Full-Year Results

3/3/2017 |

Weak volumes in difficult market conditions
Financial restructuring process engaged

CGG (ISIN: FR0013181864 – NYSE: CGG), world leader in Geoscience, announced today its 2016 fourth quarter and full-year unaudited results.

Commenting on these results, Jean-Georges Malcor, CGG CEO, said:

“Our 2016 results reflect a particularly challenging market environment. In this context, we have fully delivered on our Transformation Plan, which we funded through the February 2016 rights issue. We have significantly reduced our cost base and headcount while preserving our commercial positioning and operational excellence. Through strict cash management, the Group’s net debt came in at $2.312bn, in line with our objective.

In light of our Q4 results and given the challenging market conditions which persist, we expect 2017 operating results to be in line with 2016; however we expect downward pressure on cash flow generation in 2017 compared to 2016. In this environment and given delays in market recovery, we do not expect our performance to generate sufficient cash flow to service our current level of debt over the years to come. With the approval of the Board of Directors, CGG is therefore entering into a financial restructuring process with the aim of significantly reducing debt levels and related cash interest costs to align them with our cash-flows. The proposed debt reduction would involve the conversion of unsecured debt into equity and the extension of the secured debt maturities. For that purpose, a mandataire ad hoc (a French facilitator for creditor negotiations) has been appointed by the President of the Commercial Court of Paris (Tribunal de Commerce de Paris) on 27 February 2017 to help the Group conduct further discussions in a manner intended to respect the best interests of all the Group’s stakeholders.

In parallel with the financial restructuring process, the Group and all its employees remain fully focused on delivering innovative geoscience solutions to meet our clients’ needs.”

Weak volumes in difficult market conditions

Revenue at $1,196m

• • GGR: resilient multi-client volumes, driven by a strong cash prefunding rate of 92% and with subdued after-sales, SIR leadership position preserved
  • Equipment: low external volumes
  • Contractual Data Acquisition: low pricing conditions, 50% of fleet dedicated to Multi-Client
• EBITDAs1 at $328m
• Group Operating Income1 at $(213)m
• Net income at $(577)m after $184m non-cash one-off costs and impairments
• Capex at $395m and Free Cash Flow1 at $(7)m given notably a significant positive change in working capital
• Net debt at $2,312m in line with guidance and maintenance covenants disapplied at year-end

1Figures before Non-Recurring Charges related to the Transformation Plan and data library impairment

2014-2016 Industrial Transformation Plan executed

• GGR now above 60% of Group total revenue
• Marine fleet reduced to 5 vessels and improved operational performance with 94% production rate and 92% availability rate in 2016
• Proactive management of marine liabilities
• Equipment breakeven point further reduced
• G&A cost reduced by 61%
• c. 5,800 employees as of end-2016 vs. c. 11,000 as of end-2013

Necessary financial restructuring: Process engaged

• Recovery pushed back in longer and more difficult market conditions; 2017 operating results expected to be in line with 2016
• 2017 multi-client cash capex expected to be at $250-300m, with cash prefunding rate above 70% and industrial capex at $75-100m
• Cash generation in 2017 expected to be hampered by the lack of a positive change in working capital versus 2016
• Proposed financial restructuring to lead to a significantly reduced debt level and cash interest burden adequate to the new CGG profile based on the conversion of unsecured debt into equity and the extension of the secured debt maturities
• Implementation timetable to be aligned with business and financial constraints
• Nomination of a Mandataire Ad Hoc, on 27 February 2017, to better organize and facilitate discussions with and between all stakeholders

1Figures before Non-Recurring Charges related to the Transformation Plan and data library impairment

Fourth quarter 2016 results:

• Revenue at $328m, up 24% sequentially
• EBITDAs at $100m, and positive Free Cash Flow before NRC at $2m
• Operating income, before Non-Recurring Charges (NRC), at $(70)m
• Non-Recurring Charges and impairment of $(173)m booked in Q4:
  • $(97)m of multi-client data library impairment, mainly related to US offshore
  • $(45)m of Group Transformation Plan charges, including $(28)m due to maritime liabilities
  • $(31)m of marine assets net book value adjustment
• Net Income at $(280)m after NRC

Post-Closing Events

• On January 20, CGG entered into agreements to substantially reduce the cash burden of the charter agreements in respect of three cold-stacked seismic vessels. As part of the agreements to settle those amounts on a non-cash basis, CGG issued $58.6 million of its 2021 Notes to the relevant charter counterparties.
• On February 6, CGG solicited consents from the holders of each series of Senior Notes and the creditors under the Term Loan B to permit the appointment of a ‘mandataire ad hoc’ without such action constituting an Event of Default
• On February 20, CGG announced receipt of requisite majority consent from holders of its Term loan B, 2020 Notes, 2021 Notes and 2022 Notes and extension of consent solicitation in respect of its 2017 Notes.
• On February 21, CGG announced it has been awarded a contract by Brunei Shell Petroleum to operate a dedicated processing center (DPC) in Brunei Darussalam. The contract will run for a period of six years, from January 2017 to December 2022.
• On February 23, CGG announced execution of supplemental indentures in respect of its 2020 Notes, 2021 Notes and 2022 Notes to allow for appointment of a ‘mandataire ad hoc’ and its intention to discharge and satisfy the indenture in respect of its 2017 Notes. The payment to the indenture trustee, in trust for the bondholders, of the aggregate outstanding principal ($8.3m) and interest on the 2017 Notes was done on Friday, February 24, 2017.
• Following this operation, the amount of unsecured debt (Senior Notes and Convertibles) reached $1.884bn.
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*For full financial records, please reference the Investors section of this website.*