France’s geotechnical giant CGG has signalled its intention to accelerate its cost-cutting transformation plan, which will see the reduction of its marine seismic fleet by a third from 18 to 13 vessels by the end of this year.
One vessel has already been decommissioned, another retired from the seismic market, one has been de-rigged, and another has been permanently converted into a seismic source vessel, the group disclosed.
After disposing of its North American land contract seismic business to Geokinetics, the company has also established a new joint venture with Taqa in the Middle East called Argas – 51% owned by Taqa and 49% by CGG – which is aimed at increasing CGG’s presence there.
At the same time the company has agreed with Russia’s Sovcomflot to form a new marine seismic joint venture first announced in June. This new entity, Arctic Geophysical Exploration (AGE), will be aimed at providing high-end marine 3-D seismic operations. Sovcomflot will own 51% and CGG 49%.
Meanwhile CGG has had to cut back on personnel. Since January it has reduced its staff by 2.5%, and up to 10% of staff – around 1,000 employees – will leave the company by the end of the year. Three operational centres in Norway, Nigeria and Venezuela have also been closed.
Measures to control cash management have been introduced with a refinancing operation which was launched in April to defer mandatory interest instalments beyond 2019 while a one-year French Revolver Credit Facility has been extended by a year. Furthermore a 10% cutback in capital expenditure has been imposed by CGG for 2014, and a multi-client program in the Gulf of Mexico ends in the third quarter.
“Given the current weak market conditions characterized notably by the unpredictable capex spending of our clients, delays in awarding projects and pressure on prices, we anticipate 2014 to remain difficult,” noted CGG’s chief executive Jean-Georges Malcor in the company’s second quarter results statement. He went on “In this context, CGG has decided to accelerate and intensify its restructuring measures into 2014.”
During the last quarter CGG reported a 21% year-on-year fall in revenue in its seismic acquisition division, to US $481 million. Marine seismic acquisition revenue during the second quarter was down 20% to $407 million year-on-year and 10% down on the previous quarter.
Multi-client revenue for the second quarter was down 36% year on year to $128 million, however CGG said this revenue stream was stable sequentially “...in the context of overall lower exploration spending and delays in operations and permitting issues in Brazil”.
Tellingly, CGG said after-sales revenue in the second quarter was $35 million, down 68% year-on-year.
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