CGG enters a new era of growth

Transcription

1 2012 Annual Report

2 CONTENTS Message from the Chairman 02 Interview with the CEO 03 Key figures highlights 06 CGG worldwide 08 Activities 10 Powered by people a new era for the Group 28 Shareholder information 33

3 PROFILE CGG is a leader in cutting-edge geoscience. We have built our leadership on a commitment to innovation and a sustained effort to develop our markets both locally and globally. We bring our clients a unique range of technologies, services and equipment designed to acquire extremely precise data and images of the earth s subsurface as well as state-of-theart interpretive software and services required to develop a deeper understanding of the subsurface for exploration, production and optimization of natural resources including potential and existing oil and gas reservoirs. As of 2013 CGG employs over 9,800 people around the world; they share a Passion for Geoscience and work together safely and with integrity to deliver the best sustainable solutions to our clients energy challenges. CGG is listed on the Euronext Paris Stock Exchange and the New York Stock Exchange. 01

4 MESSAGE FROM THE CHAIRMAN A message from Robert Brunck Our announced acquisition of Fugro s Geoscience division in 2012 will mark CGG s history as profoundly as did our 2007 merger with Veritas. We are now a global leader in geoscience. This is a giant step forward for the Group, our clients, shareholders and employees and fully consistent with CGG s long-term strategy as defined by the Board of Directors and corporate management. CGG enters a new era of growth The acquisition of Fugro Geoscience gives CGG the capacity to offer our clients a differentiated, more global and complex range of products and services that meet the most demanding HSE, corporate social responsibility and sustainable development standards. In the long term, it will open new horizons for innovation and collaborative agreements and strengthen our ability to help our clients meet the energy and environmental challenges of the future. Last but not least, this acquisition will ensure CGG s future by making our business less cyclical and giving us a financial structure that generates greater cash flow. To mark this step-change acquisition, we have decided to streamline our brand name to CGG, capitalizing on our roots while setting a clear course for the future. The Board of Directors will submit the name change to the upcoming Annual Shareholders Meeting on May 3, We have continued to broaden our global presence. Today, CGG can count on the know-how and passion of the over 9,800 talented women and men worldwide working to meet our clients needs. It is thanks to their expertise, commitment to innovation and capacity to adapt to change that we will continue to meet future challenges, seize tomorrow s opportunities for growth and profitability and offer our clients ever better and more competitive solutions. Robert BRUNCK, Chairman of the Board of Directors Today, more than ever, all of us at CGG are committed to building a future founded on our vision and values. From the creation of our Group in 1931 to today, CGG owes its success to powerful and inalienable core values: our dedication to innovation, our global and local positioning and our firm conviction that it is our people, working safely and with unflagging integrity, that make us successful. CGG is entering a new era of growth and value creation for our shareholders thanks to our unique range of technologies, products and services and an ambitious long-term development strategy. 02

5 INTERVIEW WITH THE CEO Interview with Jean-Georges Malcor What are your views on 2012? 2012 was a year of growth and development for CGG. Annual revenue increased by 7% and now exceeds 3.4 billion dollars. Operating performance improved significantly thanks to a healthy seismic market and the positive impact of our Performance Plan launched in Our operating income was up 73%, in line with growth and profitability targets. Organically, and through our innovation initiatives, we expanded our technology offering, notably with the launch of Sercel s Sentinel RD and the new UNITE cableless acquisition solution and developed cutting-edge seismic acquisition technologies such as BroadSeis TM, BroadSource TM and StagSeis TM for marine acquisition and UltraSeis TM for land acquisition. We also signed strategic agreements with high-profile partners, such as Baker Hughes for unconventional reservoir optimization and Saudi Aramco for collaborative high-potential R&D projects. Innovation and collaboration set us apart; they are significant drivers for our future development. Clearly, the single most defining event of 2012 was our announced acquisition of Fugro s Geoscience Division, making us a global leader in geoscience. Why a fully integrated geoscience group? To better meet clients needs, our strategy has been to develop a comprehensive range of integrated, high-value solutions from equipment, acquisition services and processing & imaging to data library, reservoir characterization and high-end geological services. We achieved our objective with the acquisition of Fugro s geoscience activities. In line with our strategy and businesses, we have reorganized the Group around three divisions: Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR). The Equipment division includes Sercel, Optoplan, Metrolog, GRC and De Regt. Acquisition brings together Marine Acquisition, Land Acquisition, and Airborne Acquisition (once it has joined the Group) as well as General Geophysics, Electromagnetic and Gravity & Magnetic Services. GGR includes Subsurface Imaging, Seismic Reservoir Characterization with Hampson-Russell and Jason, Multi-Client & New Ventures, the Robertson brand of high-end geologic products and services and Data Management Services. Additionally, with the Seabed Geosolutions joint venture, CGG and Fugro have created a world leader in ocean bottom acquisition. Our greatest asset, however, is our people. In 2013, with the integration of our new colleagues from Fugro Geoscience, CGG now has over 9,800 employees across the globe, with the same energy, expertise and capacity for innovation, working together with our shared values to bring our clients the best and safest solutions available today. What are your priorities for 2013? Our top priorities for the coming year are integrating our teams and activities, developing comprehensive geoscience solutions and implementing our new brand strategy while generating increased free cash flow, delivering operational excellence, improving profitability and optimizing capital employed. Our new Group is now set for strong growth in 2013, in an expanding market for geoscience, where high-end technologies are in ever greater demand. This is an exciting time for CGG with untold possibilities for development, innovation and differentiation. With our strengths, expertise and values, CGG is uniquely positioned to create value for our shareholders, clients, employees and partners. I am very confident in our future. Jean-Georges MALCOR, CEO 03

6 KEY FIGURES SHAREHOLDER STRUCTURE REVENUE BY REGION REVENUE BY ACTIVITY 4% IFP 7% FSI 89 % Floating USA/Europe 15% Latin America 21% North America 27% Asia Pacific 37% Europe, Africa & Middle East 14 % Multi-Client 14 % Processing, Imaging & Reservoir 15 % Land 27 % Equipment 30 % Marine NUMBER OF EMPLOYEES CONSOLIDATED OPERATING REVENUE (million dollars) CASH FLOW FROM OPERATIONS $921m 7,198 7,560 3,181 3,

7 NET INCOME (million dollars) EBITDAS (million dollars) OPERATING INCOME (million dollars) , CAPITAL EXPENDITURE (million dollars) NET DEBT TO EQUITY RATIO: 17%* IN 2012 Net debt (million dollars) Equity (million dollars) 1,411 4, , * Before payment of $1.32 billion for the Fugro Geoscience acquisition

8 2012 HIGHLIGHTS January 18 February 14 March 13 Sercel builds on its diversification into the well environment by acquiring the assets of Geophysical Research Company, LLC (GRC), a leading provider of downhole sensors and gauges for the oil and gas industry. GRC has its headquarters in Tulsa, Oklahoma. Our high-channel-count (HCC) land crew operated in Oman by Ardiseis, our Middle East joint venture with TAQA, passes a new HSE milestone by achieving 20 million person-hours of continuous operations without a single Lost-Time Incident (LTI) while acquiring a very large high-density 3D seismic program. Hampson-Russell Software & Services launches HRS-9, a complete redesign of its suite of reservoir characterization applications. Its new integrated approach facilitates a more in-depth analysis of the reservoir, reducing exploration and production risk. March 22 May 7 June 5 CGG widens deployment of energy-efficient, fluid submersion cooling systems for high-performance computing (HPC) servers, providing its large-scale data processing installations with new levels of energy savings, efficiency and performance. CGG crews achieve high production rates on the 2012 portion of the vast multi-client program over the Marcellus Shale Fairway in Pennsylvania by exploiting the Sercel UNITE cableless acquisition system s full range of capabilities and deploying multiple helicopters to harvest the data. Sercel launches the Sentinel RD, the latest generation of its Sentinel solid streamer. With a reduced diameter and weight, it can be deployed for a wider range of layout options including denser or longer configurations to meet growing demand for high-end marine seismic techniques. 06

9 June 6 July 17 September 24 To reinforce the benefits of BroadSeis and provide even better resolution and clearer images of the subsurface, CGG launches BroadSource, its broadband marine seismic source. BroadSource was deployed with impressive results on a BroadSeis survey in the Norwegian sector of the North Sea. CGG begins first StagSeis dual-vessel, long-offset, full-azimuth (FAZ) survey of Keathley Canyon area of the US Gulf of Mexico. The IBALT1 survey is the first phase in a multi-year multi-client program in the region. CGG signs an agreement to acquire Fugro s Geoscience Division. This game-changing acquisition makes CGG a fully integrated geoscience company and a leader in the fast growing, high-end integrated geology, geophysics and reservoir market. November 5 November 6 December 1 CGG takes a step further in its long-term geoscience strategy, announcing a collaborative relationship with Baker Hughes Incorporated aimed at integrating their respective seismic and drilling services to help shale operators drill more productive wells. Five months after signing a Memorandum of Understanding (MOU) for collaborative research and the development of geophysical acquisition, processing, analysis and interpretation technologies, CGG and Saudi Aramco announce at the SEG their first major joint R&D project, SpiceRack, whose goal is to develop an innovative solution for seabed seismic acquisition. Two OBC crews operated by ARGAS, CGG s joint venture with TAQA, in a challenging environment in the Arabian Gulf consistently exceed productivity targets and achieve excellent HSE records while recording four-component data with the Sercel SeaRay seabed acquisition system. 07

10 CGG WORLDWIDE Close to our clients across the globe With over 70 locations worldwide, CGG works closely with its clients, wherever their location, to bring them the best solutions to meet their business needs. Our Equipment division, Sercel, operated in 2012 via an independent network of production facilities and offices. The industry-recognized expertise of our Processing, Imaging & Reservoir activity was made available to clients through 30 open and 12 client-dedicated centers. These centers offer a unique platform for research, cooperation and interaction with our clients. They are also our way of investing locally in knowledge-sharing and people development. As one of the world s leading land seismic acquisition contractors, CGG is present in North America and the Middle East, and in areas requiring specific technologies, HSE excellence and operational expertise, such as the Arctic or other environmentally sensitive regions. With a fleet of 16 vessels at the end of 2012, CGG delivered a complete range of marine seismic services, principally in the Gulf of Mexico, the North Sea, offshore West Africa and Brazil, as well as in the Asia-Pacific region. CGG also conducted marine seismic data acquisition in frontier areas such as the Arctic basin, offshore Eastern Africa and in the Black Sea. CGG provides world-class geophysical training and encourages performance and innovation via its CGG University centers in Paris, London, Houston, Singapore and Villahermosa. This worldwide footprint gives us the flexibility and scope to ensure we bring targeted, local solutions that are backed by global resources. Headquarters Regional office Equipment Processing, Imaging & Reservoir CGG University 08

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12 ACTIVITIES Equipment 12 Services 14 Meeting today s Exploration & 20 Production challenges 10 10

13 ACTIVITIES On land or at sea, in remote regions and extreme climates or in urban areas, CGG serves its clients even in their most complex and ambitious projects. By providing them with the industry s most innovative technologies and the highest level of expertise available, we help our clients meet the energy and environmental challenges of today and tomorrow. CGG s geoscience solutions enable our clients to push back the limits of exploration to new frontiers and increase the production of existing fields while meeting the most demanding safety and environmental standards. In 2012 we delivered our unique expertise in geoscience technology and project management to our clients through our two complementary business segments, Equipment and Services. 11

14 EQUIPMENT Client demand for Sercel s UNITE cableless acquisition system rose significantly in 2012 SERCEL Innovative equipment for every seismic application Our equipment division, Sercel, designs, manufactures and markets a comprehensive range of innovative and reliable seismic equipment. Oilfield service companies and geophysical contractors from across the globe use our equipment for seismic exploration and reservoir monitoring in land, marine, ocean bottom, transition zone and downhole environments. In 2012, Sercel continued to build on its position as market leader as the global seismic equipment market grew by 8%. Strong sales of land equipment The year was marked by strong industry demand for land seismic equipment for HCC super-crews operating in the Middle East. Sercel won key contracts to equip two 60,000-channel super-crews in Saudi Arabia and another for a high-productivity super-crew in Oman. This led to a record year of sales for Sercel s highly flexible 428XL cable acquisition system, specially designed to handle the high data volume recorded during HCC surveys. Sercel s Giga Transverse technology launched last year was also successfully deployed on the Saudi crews as an add-on to the 428XL, further upgrading channelhandling capacity. Client demand for land surveys deploying cableless acquisition systems increased significantly, particularly in the Americas but also in Russia, China and Poland. Sercel s UNITE cableless acquisition system is ideal for this type of survey. Growth in sales in 2012 resulted in a doubling of the total number of channels sold to date. More than 27 clients worldwide are currently using UNITE, giving it a higher client base than all competitor systems combined. CGG also increased the number of UNITE cableless channels deployed on a 3D survey over rugged terrain in Pennsylvania to 20,000 to benefit from the system s unique high-speed, long-range wireless capability which improves quality control by providing wireless harvesting and real-time data transfer. 12

15 Skilled worker at Sentinel streamer manufacturing site in Houston, Texas Sercel s Giga Transverse upgrades channel-handling capacity on HCC surveys High-end marine capabilities Sales of marine seismic equipment remained steady. To meet growing industry demand for high-end marine seismic techniques such as broadband, high-density and long-offset acquisition, Sercel launched Sentinel RD, the latest-generation Sentinel solid streamer. While Sentinel is already the system of choice due to its unmatched reliability and outstanding data quality, Sentinel RD has a reduced diameter and 15% weight reduction and can be deployed for a wider range of layout options including denser or longer configurations. Sercel s full range of marine equipment, encompassing the Seal 428 seismic recorder, G. GUN II airgun, Sentinel RD solid streamer, Nautilus all-in-one streamer positioning and control system and SeaPro Nav integrated navigation system, was selected as part of an upgrade to the high-end CGG Oceanic Champion vessel. The vessel now deploys the most reliable and high-performance acquisition technology available, ensuring optimum operational efficiency and delivering the most exceptional data quality for large, high-resolution survey projects in difficult and challenging environments. A further move into well monitoring technology In 2012, pursuing its strategy to offer the best equipment solution for every seismic application and reinforce its position in the high-potential artificial lift market, Sercel acquired the assets of Geophysical Research Company, LLC (GRC), a leading provider of downhole sensors and gauges for the oil and gas industry. Growing popularity of cableless systems Anticipating the increasing popularity of cableless technology and lightweight solutions, Sercel launched a more compact solution, consisting of RAU ex and a new geophone, the SG-5. The two systems have a combined weight of less than two kilograms. With a largercapacity internal battery the UNITE has up to two weeks of operating autonomy. New data management software increases the system s wireless data harvesting rate by 50%. The SG-5 offers the advantage of a low natural frequency response at 5 Hz, well below the 10 Hz industry standard, together with high sensitivity, making it the perfect sensor for microseismic surveys, which are increasingly conducted for shale gas development and reservoir monitoring. 13

16 SERVICES With long-standing experience on the North Slope, CGG understands its unique environmental and imaging challenges A full spectrum of geophysical services Our high-end geophysical services are made available to our clients via four divisions spanning land acquisition, marine acquisition, processing, imaging & reservoir and multi-client & new ventures. We maintain a consistently high level of technical and operational excellence in all our services and throughout our data library to ensure we deliver the best subsurface information to the E&P industry. LAND ACQUISITION Increased market share in strategic segments Although the worldwide land seismic market enjoyed up to 10% growth in 2012, it remained price-driven as supply continued to match demand. The only exceptions were the high-end acquisition markets, such as HCC crews, shallow water and ocean bottom surveys (SWOBS) and integrated solutions, where the need for high technology content limits competition. Key drivers in 2012 were the SWOBS segment, where there was a strong increase in Ocean Bottom Cable (OBC) and Ocean Bottom Node (OBN) projects, a continuing robust shallow water market and persistent strong activity in North America with a solid winter season in Canada and Alaska and a very dynamic Lower 48 market driven by shale plays, both for multi-client and proprietary surveys. Our contract revenue grew by 35% year-on-year as we increased our presence and market share in strategic market segments. Our SWOBS business enjoyed strong growth in all key regions with up to eight crews active this year. Two OBC crews operated by our Argas joint venture were active in Saudi Arabia and the Partitioned Neutral Zone; in Asia-Pacific we operated a new OBC crew in Indonesia and Malaysia. We conducted two shallow water surveys in Indonesia, while in North America we successfully completed one such survey in a very environmentally 14

17 Crew member on HCC crew in Oman OBC operations in the Arabian Gulf sensitive area of Alaska and another in the Gulf of Mexico. We also launched a new OBN crew in the North Sea. We strengthened our presence in the Middle East and North Africa with a four-year HCC crew extension in Oman, the return of a crew to Algeria and the award of a long-term contract in Tunisia. Although we suffered delays on key projects in countries affected by the 2011 Arab Spring, as well as in Kuwait and the UAE, this region remains a strong focus for growth with key contracts expected to materialize in Our increase in activity onshore North America was driven mainly by the Lower 48 proprietary market. Major commercial successes with a number of key clients marked a clear shift towards the high-end market where our cableless acquisition solutions proved extremely successful. Finally, our active monitoring solutions, based on SeisMovie, enjoyed increased market recognition particularly for the heavy oil market, with a clear technical success in the Netherlands and promising pilot projects in Saudi Arabia and Alaska. We also completed our first commercial microseismic operations in North America and Poland. High productivity on longest OBC projects in history Two OBC crews operating with ten vessels each in Saudi Arabia over the last two years have consistently exceeded productivity targets. Operating in conditions ranging from open water to congested producing fields, both crews achieved excellent HSE records and very low equipment downtime due to the outstanding performance of the Sercel SeaRay equipment deployed and the implementation of a local state-of-the-art professional maintenance workshop. 15

18 SERVICES Multi-vessel survey operations in the Gulf of Mexico MARINE ACQUISITION Leader in marine acquisition technology The marine seismic market gradually improved during the second half of 2012 as the North Sea season was particularly active and the US Gulf of Mexico showed encouraging signs of recovery. Vessel overcapacity subsided, allowing demand to catch up with supply and leading to improved pricing and growth in high-end acquisition services. We strengthened our position as leader with the latest technologies for these services, such as high-definition wideazimuth (WAZ), our BroadSeis broadband solution and StagSeis, our next-generation solution for subsalt imaging deployed for our IBALT1 multi-client survey in the US waters of the Gulf of Mexico. In Mexican waters we completed the largest proprietary WAZ survey ever recorded for PEMEX (25,000 km 2 ) and acquired the first-ever high-definition BroadSeis WAZ survey (2,800 km 2 ). We also developed new markets in South America with proprietary surveys offshore Peru and French Guyana. We had seven vessels operating during the season in the North Sea, where there was a significant uplift in activity. West Africa remained important with CGG vessels operating in the Congo, Angola, Ivory Coast and the Gulf of Guinea. First BroadSeis surveys offshore China Since its launch in 2010, BroadSeis has revolutionized the world of seismic and become the industry s benchmark for marine broadband. In 2012 we conducted China s first 3D BroadSeis surveys in two zones in the east of the South China Sea. The surveys were awarded as part of a technical collaboration between CGG and COSL (China Oilfield Services Limited). Its parent company, the Chinese national oil company, CNOOC, had specifically identified BroadSeis for the project to overcome the challenge of complex imaging of both shallow and deep targets in the area. 16

19 Checking data quality onboard the survey vessel The largest high-end fleet in the industry Strategic regional positioning Seismic activity offshore India was strong this year and we won two major surveys on the Eastern coast starting in the fourth quarter of We were well-positioned in Vietnam thanks to our joint venture with PetroVietnam Technical Services Corporation. To capitalize on the growing seismic market in Russia and the CIS, we signed a strategic alliance with the leading local marine geophysical company, Sevmorneftegeofizika (SMNG). In the new frontier of the Black Sea we won a high-resolution 8,000 km 2 seismic program in Romanian waters. As the largest program to be conducted in the Black Sea to date, it includes a 500 km 2 BroadSeis survey, a first in this highly prospective region. The year of broadband BroadSeis benefited from the acceleration in demand for 2D and 3D broadband marine seismic, with over 20 proprietary and multi-client BroadSeis surveys conducted in To reinforce its benefits, we launched BroadSource, our broadband marine seismic source, which will be deployed gradually on the BroadSeis fleet on demand. MULTI-CLIENT SURVEYS New strategy for high-end surveys In the North Sea, regular bid rounds in the UK and Norway (including the Barents Sea) led to sustained activity. Africa (Angola) and South America (Uruguay and Guyana) also saw high levels of activity in In Brazil, where there were no bid rounds for the fourth consecutive year, the business environment was slow, leading to a disappointing level in after-sales during the fourth quarter. The post-macondo Gulf of Mexico market is gradually returning to normal with a new five-year plan of two bid rounds per year now in place. Industry demand increased for new-generation acquisition techniques using extra-long offsets, wider azimuth distribution and broadband solutions to further enhance resolution and imaging under the complex salt structures. To meet these challenges, we started in July a new survey in the Gulf of Mexico with our next-generation, full-azimuth and long-offset acquisition solution, StagSeis. Onshore, the lion s share of activity continued to shift towards liquid-rich shale plays in the US and Canada. 17

20 SERVICES We solve the most complex geoscience challenges Good response to new products In line with these industry trends, our multi-client division invested $420m in new projects ($300m offshore, $120m onshore) in key basins (Gulf of Mexico, Brazil, Angola and shale plays in the US including Alaska) with an average prefunding ratio of 72%, indicating a good industry response to our new products. Our investment focused on large contiguous high-end 3D surveys capable of delivering high after-sales over time. Offshore we acquired 14,000 km 2 of high-resolution BroadSeis data over open acreage in the Santos Basin (Brazil) and 5,000 km 2 of BroadSeis data in deep offshore Angola. In the Keathley Canyon area of the Gulf of Mexico, we acquired 5,000 km 2 of data for our dual-vessel, long-offset, full-azimuth IBALT1 survey, which is the first phase in a multi-client program that we will conduct in the area over the next few years. The survey will benefit from the improved illumination and penetration capabilities of StagSeis, a newgeneration acquisition and imaging solution specially designed to deliver the very best seismic images of complex structures such as subsalt and sub-basalt. On the marine 2D multi-client front, we continued developing our partnership with Spectrum ASA by acquiring joint programs in Indonesia (BroadSeis) and Namibia. Onshore we acquired a multi-client survey on Alaska s North Slope targeting a new shale oil province. We also continued our vast multi-year shale program in the Marcellus Fairway with three high-productivity crews operating with the Sercel UNITE cableless system. A new milestone in Arctic frontier exploration In 2012 we capitalized on over a decade of high-quality proprietary data acquisition and environmental leadership on Alaska s North Slope by conducting our first ever multi-client 3D survey near the Kuparuk and Alpine oil fields. Our high-caliber Alaska crew deployed our latest high-end acquisition technologies for the first time in the difficult Arctic environment to record over 340 km 2 of highdensity broadband data to image the complex reservoirs in this area and characterize the rock properties of this emerging shale oil resource play. 18

21 PROCESSING, IMAGING & RESERVOIR Superior imaging to meet complex challenges Industry demand for data processing and reservoir characterization was strong, particularly for high-end imaging services and new technologies driven by the volume of data to be analyzed and increasingly complex exploration and production challenges. The market strengthened during the year as spare capacity in the industry was absorbed. In 2012 our Processing, Imaging & Reservoir division operated 42 processing and imaging centers worldwide, including 30 open regional centers and 12 client-dedicated centers. We registered a record performance with strong client demand for our high-end imaging and reservoir services driving revenue and margin growth. Our order intake was excellent, showing a 7% revenue increase year-on-year and a very good backlog. The market was particularly strong for sales of both our Hampson-Russell reservoir characterization software and geovation seismic processing software. Yu Zhang receives prestigious SEG Virgil Kauffman Gold Medal from SEG President Bob Hardage on 4 November Strong strategic focus Our strategy centered on people, technology and performance, the driving forces behind our track record of innovation and service excellence. This year we enhanced our capabilities in high-end imaging through the commercial deployment of new algorithms in areas such as ghost wavefield imaging and elimination, multi-layer tomography and orthorhombic reverse time migration to produce the best possible seismic images from data recorded with the very latest acquisition methods in increasingly complex geological environments. At the same time, we increased our processing capabilities in terms of compute power by deploying large-scale, liquid-cooled GPU systems in our Houston center, enabling us to run our seismic imaging algorithms with a faster turnaround yet reduced energy requirements. This enabled us to add new functionalities that further improve the quality of imaging delivered to our clients by our latest generation of seismic imaging applications. The markets were very strong in the EAME region, leading to good performances from our Crawley, Oslo and Massy centers. We won new contracts for OBN and 4D processing in key basins. In North America, our Houston and Calgary centers focused on the Gulf of Mexico and shale resource plays. Our Singapore center recorded a strong year due to growing demand in Asia- Pacific, and there was a rise in activity in Brazil. Our dedicated centers located in client offices around the world performed well again this year with strong customer proximity and consistently high activity levels. CGG researchers recognized for their innovative work In 2012, two of our researchers received prestigious international awards for their outstanding technical contributions. Yu Zhang, Deputy Global Research Manager, received the Society of Exploration Geophysicists (SEG) Virgil Kauffman Gold Medal for his recent innovative research in true amplitude wave equation migration, a key seismic imaging technique. Daniel Trad, Research Advisor at our Calgary center, was distinguished with the inaugural CSEG Technical Achievement Award Citation for his work on 5D interpolation that spearheaded a new model for seismic data processing. 19

22 MEETING TODAY S EXPLORATION & PRODUCTION CHALLENGES High-resolution seismic helps to reduce E&P risk Ultra-precise seismic: the dream comes true As hydrocarbon resources become increasingly difficult and higher-risk to access, our industry requires ever more precise and detailed information about the earth s subsurface. Seismic technologies are key to meeting these challenges and therefore pivotal to our industry. With recent major advances in high-resolution seismic, comparable to those in HD-TV, and innovative technologies for illuminating and imaging the most complex geological attributes, seismic is now capable of characterizing the structures and properties of reservoirs with a degree of precision and reliability unimaginable just a few years ago. In 2012, we confirmed our position as leader in high-resolution seismic, deploying new generations of solutions worldwide. Significant growth in marine and seabed High-resolution seismic is now used on 30% of all new marine surveys. Since 2010, we have deployed BroadSeis, our very high-resolution broadband seismic solution, on over 50 surveys, representing 60,000 km 2 of acquired data. BroadSeis has been embraced by our clients and has established itself as the industry benchmark, reducing client risks thanks to its exceptional data quality. BroadSeis provides remarkably sharp seismic imaging for the deepest and thinnest targets, revealing their subtlest details and helping to detect and monitor the fluids present in the reservoirs. In its most recent version that includes BroadSource, our ultra-high-resolution broadband source, BroadSeis is pushing back the limits of very high definition seismic, making it possible to emit, record and process over six octaves of data. 20

23 Prediction of sand reservoirs and their hydrocarbon fill with conventional seismic BroadSeis broadband seismic offers more accurate prediction as shown by well calibration We further consolidated our eight-year-long leadership in wide-azimuth technologies. Wide azimuth has proven essential for penetrating and illuminating targets in subsalt or sub-basalt geological environments. We completed the largest wide-azimuth marine survey in history for Pemex, mobilizing our advanced, versatile fleet and ultra-sophisticated processing and imaging technology capable of handling the most complex wave propagation phenomena. When illumination rhymes with resolution In response to client demand for next-generation acquisition technologies capable of achieving high-definition seismic in the most challenging and complex subsalt environments that characterize the Gulf of Mexico, we brought together an international multidisciplinary team, covering the whole chain from equipment to acquisition and imaging. The solution they developed was StagSeis, a new marine solution based on a staggered vessel configuration with multiple source and streamer vessels to achieve ultra-long offsets (up to 20 km) and full azimuth coverage (up to 10 km) to ensure comprehensive and uniform illumination of the deepest targets. StagSeis has been deployed in the Gulf of Mexico alongside BroadSeis since the summer of 2012 to achieve the best possible illumination and resolution as part of a new ambitious and innovative multi-year multi-client program known as IBALT1, covering 221 blocks (5,150 km 2 ). Program performance to date has been remarkable and, judging from preliminary data, the final results should be unparalleled. A critical breakthrough in land acquisition Recent developments in seismic technology, in particular HCC surveys and the use of highly sophisticated acquisition equipment such as our Giga Transverse system, have made it possible to acquire the data required to deploy UltraSeis, our high-density, point-source, point-receiver, high-resolution seismic solution for onshore acquisition. Signals emitted by each source and recorded by each sensor are fully exploited and analyzed at every stage of the process, guaranteeing the finest possible resolution and a dense and uniform illumination of the reservoir. Used in conjunction with broadband sweep technologies such as our EmphaSeis vibroseis technique for improved wave penetration, UltraSeis delivers the industry s highest-resolution data. CGG s high-profile project in partnership with Qatar Petroleum is already an international reference within the industry. 21

24 MEETING TODAY S EXPLORATION & PRODUCTION CHALLENGES Advanced seismic helps predict sweet spots to optimize production in a shale environment At the heart of the reservoir In response to today s energy challenges, seismic is expanding beyond exploration to production, gradually extending its scope of application to all geological contexts and types of natural resources to the very heart of the field. Seismic plays a role in more efficient production, minimizing risk and helping to build a sustainable future. Taking the pulse Over the past two decades, our Group has played a key role in developing industrial applications for Time-Lapse (4D) seismic technology. We will continue to promote and develop tomorrow s technologies with a special focus on permanent reservoir monitoring. By listening to the reservoir on an ongoing basis, we can monitor and reproduce its behavior in the form of a subsurface video. Cost-effective permanent reservoir monitoring solutions provide oil companies with high-quality data to help them make drilling and production decisions over time. Three years ago, we installed our OPTOWAVE fiber optic Permanent Reservoir Monitoring system on Norway s Ekofisk field (in production for over 40 years) for the PLO1 ConocoPhillips consortium. These Norwegian operations are fully integrated from survey acquisition to seismic imaging. We have already carried out four consecutive seismic surveys and are preparing a fifth survey for the first quarter of We deliver time-lapse results one month after the end of each survey, giving our clients a high-quality picture of how the field behaves over time and allowing them to make real-time production decisions. The Ekofisk project is a true commercial-scale laboratory and a ground-breaker on many levels. It has established long-term cooperation with our partners and opened up new opportunities for innovation such as using seismic methods to monitor micro-events that occur during the life of a reservoir. Passive 22

25 Permanent reservoir monitoring operations offshore with Sercel s OPTOWAVE system Onshore permanent reservoir monitoring with CGG s SeisMovie solution mode recording can be conducted between shooting phases to deliver useful information for controlling any geotechnical risks. Onshore, a decade of research and development has been crowned with the success of our SeisMovie permanent seismic monitoring solution at Shell s Schoonebeek heavy oil field in the Netherlands. The system is based on SeisMovie sources and sensors buried as close as possible to the reservoir being monitored. SeisMovie is a unique, patented technology with the capacity to deliver a daily image of the subsurface as it changes over time, with the advantage of a near-zero environmental footprint. SeisMovie is the ideal technology for optimizing development of onshore hydrocarbon fields, providing critical information about fluid flows caused by the successive stages of assisted recovery, or monitoring gas behavior in natural gas or CO 2 storage sites. Better-informed shale production We are continuing to acquire our multi-client integrated surveys of several shale fields in the US, including Haynesville and Marcellus. These surveys will allow our clients to optimize the location of production wells and estimate future reservoir productivity. We have also conducted our first commercial downhole, microseismic surveys for real-time monitoring of the fracturing process. The survey data will inform our clients production strategies for a more efficient and sustainable exploitation of this new resource. Safer drilling Installed and retrieved by remotely operated vehicles (ROVs), our Trilobit ocean-bottom autonomous nodes can be installed without risk on the ocean bottom, even in close proximity to production platforms. They collect seismic data that allows us, for example, to precisely locate and characterize shallow gas pockets just beneath the platforms that could be a source of risk to the operator in future drilling operations. The collaboration agreement signed with Baker Hughes in late 2012 is a decisive step towards optimizing shale reservoir production and improving well safety. Thanks to our combined seismic and drilling capabilities, operators can optimize well placement and completion design early in the asset lifecycle to optimize production and reduce risk. 23

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27 POWERED BY PEOPLE In a very high-tech, fast-moving industry with an important role to play in the sustainable development of our planet s natural resources, our people are our capital. Powered by people, CGG has built its reputation on the ingenuity and expertise of its employees. Passionate about geoscience, they enjoy working as a team to tackle challenges and come up with innovative, efficient solutions. We care about our people and provide them with an environment where they can learn and develop their talents and receive the recognition they deserve. 25

28 POWERED BY PEOPLE Our people are at the heart of our success A powerful differentiator Although our technology and global resources are essential to delivering successful projects to our clients, the strengths and qualities that set us apart are the expertise and passion of the women and men of CGG. In December 2012 we employed more than 7,560 professionals worldwide, operating in over 70 locations, on our vessels, our land and shallow water crews, and in our Processing, Imaging & Reservoir (PIR) centers. This worldwide network gives us the flexibility and coverage we need to bring our clients targeted local solutions backed by our global resources. Empowered by investment At CGG, we fuel the potential of our teams with an impressive commitment to R&D. In 2012 we invested 5% of our overall revenue in R&D with over 550 employees dedicated to R&D across our divisions. Our Chief Technology Office is at the heart of our R&D organization. This body of technical experts plays a key role in ensuring that the various divisions multi-million dollar R&D investments are coordinated, optimized and reflect the real-world needs of the industry. We also participate in numerous joint ventures and collaborative partnerships within the industry to ensure that we are innovating for our clients current and future needs. A culture of learning Within CGG, we vigorously promote a culture of innovation and knowledge-sharing that places emphasis on collaborative and creative problem-solving. We challenge our employees to use their science, energy and experience to get the most out of our technology and deliver results that best meet the specific needs 26

29 CGG maintains and values strong relations with universities and research institutes A CGG employee contributes to local development in Indonesia of each client. CGG University is a powerful global resource that provides world-class geophysical training. Its guiding principle is to offer educational opportunities that encourage performance and innovation. Working with all of our Divisions and Functions, CGG University has developed a series of educational courses and resources to ensure that all our employees participate in our exceptional technical training initiatives, be they at one of our seven university training centers worldwide, through the latest e-learning techniques, or one of our three dedicated technology training centers. In 2012, over 4,000 CGG employees took one or more class-based courses at CGG University. CGG University delivered more than 8,000 person-days of technical training (initiation and advanced lessons), 4,000 days of customer relationship management training and more than 6,000 days of leadership and managerial skills training. All employees participated in one or more of the e-modules offered by the University. Our employees also receive structured training on our company s wider commitments - Quality, Health, Safety and Environment (HSE). Care + Protect Keeping our employees and partners safe and healthy is a top priority for CGG. To further our HSE goals, sustain HSE performance and develop employee HSE awareness, we have set up an HSE Management System across our global operations. The HSE excellence program, Care + Protect, embodies the culture and conduct that helps us deliver consistent, reliable and incident-free operations, making us an industry leader in HSE. Our HSE system is supported by PRISM, a global reporting, data sharing and risk management system that assures consistency and helps us learn from incidents across all our operations. A robust HSE training program at CGG University and field level assures that our HSE system is well embedded in our activities. In 2012 we had many noteworthy successes in HSE, including the excellent performance of our crews in Saudi Arabia and Oman which set records in accident-free operations and demonstrated the benefits of proactive HSE management. These achievements encourage us to redouble our efforts to make CGG a safer, healthier place to work. Sustainable Development CGG is committed to furthering Sustainable Development. In response to corporate concerns as well as those of our employees, clients and partners, we have developed a clear and proactive set of Sustainable Development policies and actions. We are a member of the United Nations Global Compact. Our regular Communication on Progress (COP) highlights our commitment to the principles of the Universal Declaration of Human Rights, the Rio Declaration on Environment & Development and the UN Convention against Corruption. We ask that each individual CGG employee adhere to these corporate commitments and values. 27

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31 2013 A new era for the Group Our acquisition of Fugro s Geoscience Division represents a milestone in our company s history. After this transforming acquisition we are now a fully integrated geoscience group with a leading position in geophysics, geology and applied geoscience. The group has simplified its brand name from CGGVeritas to CGG and is now organized around three divisions: Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR). 29

32 2013 A NEW ERA FOR THE GROUP Worldwide launch of new CGG A fully integrated Geoscience group Acquiring Fugro s Geoscience Division gives CGG a leading position in the fast growing high-end integrated geology, geophysics & reservoir market. The agreement with Fugro also includes strategic partnerships: The creation of a joint venture, Seabed Geosolutions, a focused player in the rapidly growing seabed acquisition market (60% Fugro and 40% CGG) A marketing and sales agreement for CGG to commercialize Fugro s existing 3D multi-client data that remains with Fugro A global strategic technical and commercial mutual preferred supplier agreement. A transforming and strategic move We have strengthened our asset base, increased resources and enhanced capabilities. The addition of Fugro Geoscience s activities and technologies, including Jason and Robertson, significantly enhances our integrated geoscience capabilities. It also strengthens our core activities in equipment, imaging and acquisition, particularly in marine with the addition of four high-end 3D vessels. Moreover, we expand into new markets such as airborne geophysics, marine gravity, electromagnetics and data management services. We have created an exciting new Group of over 9,800 skilled women and men to better serve our clients. Our three new divisions cover the entire chain from exploration to production. This presents CGG with many opportunities to create value for our shareholders, customers, employees and partners and establish a stronger and more sustainable business for the future. CGG: a new brand identity for the Group Simple and powerful, our new brand name is well known in our industry. It reflects who we are, capitalizes on our roots and sets a clear course for the future. The new name will be a powerful unifier for our company as it moves forward. Our former logo had strong recognition and was appreciated by the industry and our people. The new logo keeps its colors and general look-and-feel but has been modernized to fit our new Group identity. To accompany our new brand and logo we have added a tagline, Passion for Geoscience, to capture what we do and what makes our company different and special: our people and their passion. This passion inspires each and every employee across the globe to work in partnership with our clients to meet their specific needs. 30

33 Enhanced reservoir capabilities New synergies between our different business activities A three-division organization As a global integrated geoscience group, CGG is now organized around three Divisions: Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR). EQUIPMENT ACQUISITION GEOLOGY, GEOPHYSICS & RESERVOIR A full range of products and clear market leadership onshore, offshore and downhole: Technology leadership Large installed base A cornerstone for CGG integrated solutions A full range of seismic and other geophysical methods for acquisition: Land Marine Seabed* Airborne** Multi-Client Robertson Subsurface Imaging Seismic Reservoir Characterization Data Management *Through the Seabed Geosolutions joint venture owned 60% by Fugro and 40% by CGG. **Airborne will be integrated once operating licenses and administrative authorizations have been received. 31

34 CGG s Mission, Vision & Values Along with our new brand identity, we have strengthened the Group s Mission, Vision & Values to better reflect CGG s DNA and aspirations as an international group with a single culture, a common purpose and shared ambitions. Our Mission To create value by optimizing the discovery and the development of natural resources Our Vision To be the geoscience partner of choice Our Values Powered by people, around the world, we have a passion for innovation operate safely and with integrity in order to deliver sustainable performance 32

35 SHAREHOLDER INFORMATION CGG share price As of February 1, 2013, the company is traded under a new and single ticker symbol on Euronext Paris and the New York Stock Exchange. Paris Stock Exchange (Euronext) Minimum 2012 share price: Maximum 2012 share price: Closing price, 31/12/2012: New York Stock Exchange (NYSE) Minimum 2012 share price: $20.68 Maximum 2012 share price: $34.84 Closing price, 31/12/2012: $30.52 Socially Responsible Investment (SRI) CGG is committed to Sustainable Development (SD) and Corporate Social Responsibility (CSR) through a balanced approach to economic development, social progress and responsible environmental management. In 2012, the Group was selected for the first time for inclusion in the DJSI World and Vigeo Europe 120. It has reinforced its presence in the DJSI Europe, ETHIBEL EXCELLENCE Investment Register and ASPI Eurozone indexes. These global indexes are intended to estimate the best corporate social responsibility performance. CGG is also a member of the United Nations Global Compact. Stock Exchange Listing CGG stock is listed in Compartment A (CAC Large 60) of Euronext Paris (code ISIN FR ) and on the New York Stock Exchange in the form of American Depositary Shares (ADS), where one ADS represents one ordinary share. ADS are issued by the Bank of New York Mellon and have been listed under the ticker symbol CGG since February 1, As of December 31, 2012, CGG stock was trading at and one ADS was worth US$ Share Capital As of December 31, 2012, the Group s share capital totaled 70,556,890 comprising 176,392,225 shares with a face value of Annual Shareholders Meeting The Annual Shareholders Meeting will take place on May 3, 2013 at 9:30 am at the Auditorium Eurosites George V - 28 Avenue George V, Paris, 75008, France. Dividends There are no plans to propose the payment of a dividend for the 2012 fiscal year at the Annual Shareholders Meeting. Investor Relations A copy of the 2012 annual report filed with the Autorité des Marchés Financiers (AMF) and Form 20F as filed with the Securities and Exchange Commission (SEC) and other available company documents will be sent free of charge to any investor on written application to the CGG Investor Relations Department. Group financial information is also available on our website at Statutory Auditors ERNST & YOUNG Tour First 1, place des Saisons Paris La Défense Cedex France This document has been drawn up for the general information of shareholders and its content shall in no way be seen as an offer to purchase or an incentive to acquire Company shares. Nor does it constitute a Company guarantee of the value of its shares CGG Investor Relations MAZARS 61, rue Henri Regnault Courbevoie France Tour Maine-Montparnasse - 33, avenue du Maine - BP 191, Paris Cedex 15 - France Tel.: [email protected] 33

36 Photo credits: CGG photo library, Sercel photo library, SEG, Fabien Calcavechia, Dominique Lecuivre, Jas Sansi, Gary Barchfield Photography, Scott Ramsey, Zak Melms, Cambrian Photography Ltd., all rights reserved. Design of the magazine part: avantgarde Published by: RR DONNELLEY This document is printed on Cocoon Silk paper, which contains 100% re-cycled fiber, processed chlorine free and certified FSC Recycled.