CGG 2014 July Presentation Catherine Leveau, SVP IR : catherine.leveau@cgg.com Julie Coulot, IR & SRI Officer : julie.coulot@cgg.com All results are presented before Non-Recurring Items linked to Fugro (NRFI) and before impairment & write-off, unless stated otherwise
Forward Looking Statements This presentation contains forward-looking statements, including, without limitation, statements about CGG ( the Company ) plans, strategies and prospects. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, the Company s actual results may differ materially from those that were expected. The Company based these forward-looking statements on its current assumptions, expectations and projections about future events. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our proposed results. All forward-looking statements are based upon information available to the Company as of the date of this presentation. Important factors that could cause actual results to differ materially from management's expectations are disclosed in the Company s periodic reports and registration statements filed with the SEC and the AMF. Investors are cautioned not to place undue reliance on such forward-looking statements. 2
Agenda 1. CGG at a glance : An integrated business model 2. Equipment Division 3. Acquisition Division 4. GGR Division 5. Financial Review 6. Conclusion 3
CGG at a glance: Integrated business model
CGG at a glance: An integrated business model Market leader in geoscience industry globally, providing a comprehensive range of leading geological, geophysical and reservoir capabilities Diversified business Revenues split by activity (3) Market capitalisation of c.$2.5bn (as of July 1st 2014) c.9,500 (1) staff working across the globe 3 business activities Equipment Sercel, CGG s Equipment division, is the world-leading designer and manufacturer of land and marine seismic equipment and reservoir monitoring instruments Acquisition Geophysical data acquisition services include land, marine, airborne and seabed, being operated either directly or through joint ventures Geology, Geophysics & Reservoir ( GGR ) Key activities include developing and licensing multi-client seismic surveys, processing seismic data, data and software management, reservoir consulting services Revenues split by region (2) Revenues: $3,766m (2) FY2013 Financials EBITDAS (4) : $1,160m Net Debt: $2,218m Cash: $530m EBIT (5)(6) : $423m Net Leverage:1.9x (1) As of December 31, 2013 (2) Operating revenues (3) Revenues from unaffiliated customers (4) Excluding $20m non-recurring items linked to Fugro (NRFI) (5) Earnings before interest and tax (6) Excluding $17m NRFI and $800m to Acquisition impairment and write-off 5
Our strategy: 2014-2016 Transformation Plan From cyclical and capital-intensive businesses to more profitable, less capital intensive and more cash generating businesses Strong organic growth for equipment 25% reduction in marine fleet capacity 35% 30% 35% GGR growth despite reduced MC capex 2013 revenues (1) : $3.8bn 2016 revenues (2) : > $4.0bn$ Equipment Revenues: $1,045m Ebit margin: 28.0% Capital Empl. $0.9bn 508 XT & high-channel-count / mega crews New generation of streamers Revenues (2) : : $1,2-1,3 bn Ebit margin (2) : >28.0% Acquisition Revenues: $2,226m Ebit margin: 2.5% Capital Empl. $2.4bn High-end and flexible fleet & reduced costs Land & Airborne successful turnarounds Strengthened partnerships / JV Revenues (2) : $1,6-1,8bn Ebit margin (2) : 8-10% GGR Revenues: $1,296m Ebit margin: 24.5% Capital Empl. $2.8bn Expected future Gulf of Mexico lease sales Continued leadership in Subsurface Imaging Integrated Geosciences offerings & workflows Revenues (2) : $1,5-1,6bn Ebit margin (2) : 20-25% (1) Operating revenues (2) Assuming unchanged market conditions 6
Focus on Management actions 2014-2016 Transformation Plan on track The Symphony vessel was de-rigged as planned Ongoing reduction in the marine fleet and associated support structure Restructuring of Land North America activity ongoing Two successful refinancing operations conducted in April to extend debt maturity Issue of a 400m Senior Notes due 2020 and of a US $500m Senior Notes due 2022 Full repurchase of the 2016 Convertible Bond, reimbursement of all the Senior Notes due 2016 and 2/3 of the Senior Notes due 2017 Average Debt maturity as of end-march 2014 up to 6 years from 4 years 7
8 Equipment Division
Equipment: Sercel a leading seismic equipment provider Total sales $1,045m EBIT margin 28% 2013 Key Figures Market Positioning EBIT $293m R&D / Revenues 5.6% Number of employees c.2,500 Number of sites 20 Strong footprint in land, 70% market share in cable systems Strong footprint in marine, 95% market share in streamers Maintain technological edge ahead of competitors Reliability of products, reactive customer support Main products Cable and wireless system: Unite 2013 Geographical sales breakdown Streamer: Nautilus Sentinel Digital sensor: Downhole: Vibrator: MaxiWave Nomad 9
Equipment Division growth driven by Land equipment markets Marine driven by sustainable replacement market 70% sales based on replacement or spread extension Declining new builds markets Land: more channels per conventional crew Continuous channel count growth multiplied by 5 every 10 years for conventional crews km Sentinel sold Evolution of the New Builds Market 1000 800 600 400 200 0 2010 2011 2012 2013 New builds New builds 15 10 5 0 km Sentinel sold Number of crews increasing worldwide 508XT launched Q413, powerful response to clients needs, first deliveries July 2014 Middle East: seismic for production is key 5 to 9 tenders for high channels count crews expected in 2014-2016 Sercel: strategic supplier agreement with Argas, our historical long-term partner 10 Expected tenders of high channel count crews in the Middle East SAUDI ARABIA two tenders ongoing Sa for 50 000 channel count crews KUWAITtwo tenders ongoing for 240 000 and 30 000 channels count crews UAE one tender ongoing for 150 000 channel count crew OMAN two potential tenders for 250 000 channel count crews expected in 2015-16?
Equipment profitability: Operating margin driven by volumes and product mix Sercel s business model highly sensitive to volume sold and product mix Higher electronic content leads to a higher operating margin 400 350 300 250 200 150 100 50 Revenue vs. % Operating Income by quarter 0 15% 20% 25% 30% 35% 40% 1400 1200 1000 800 600 400 200 0 Excellent Resilience to the down turn 32% 31% 32% 29% 28% 1 209 1 204 22% 1 142 1 000 1 045 420 427 858 463 3720 485 295 789 777 679 673 563 515 2008 2009 2010 2011 2012 2013 Land Marine EBIT Margin 11
12 Acquisition Division
Acquisition: Ongoing right sizing 2013 Key Figures Market Positioning Total sales $2,226m EBIT Margin (1) 2.5% EBIT (1) $56m Vessel availability / productivity rate 89% / 92% Industrial CAPEX $250m Number of employees c.3,000 Among top 3 leaders with WesternGeco, PGS High-end player in Land acquisition A leading Airborne player with 25-30% market share Asset Portfolio Marine Land Airborne 17 3D vessels 13 high-capacity 3D vessels (12+ streamers) 4 mid-capacity 3D vessels (8-12 streamers) 15 land crews including 4 High-Channel-Count crews 2 Arctic crews 20 fixed-wing aircrafts 1 helicopter (1) Excluding $17m non-recurring items linked to Fugro (NRFI) and $800m to Acquisition impairment and write-off 13
Strategic Roadmap: Reduction of the size of the fleet Oceanic Sirius 20 Tow Points Oceanic Vega 20 Tow Points Geo Coral 16 Tow Points Geo Caspian 16 Tow Points Oceanic Endeavour 16 Tow Points Geowave Voyager 12 Tow Points Viking Vanquish 12 Tow Points Vantage 10 Tow Points Viking 10 Tow Points Alizé 16 Tow Points 15 Geo Caribbean 14 Tow Points Oceanic Phoenix 14 Tow Points Oceanic Champion 14 Tow Points Viking Vision 14 Tow Points Viking II 8 Tow Points 3D vessels after having de-rigged Symphony & 1 in JV Symphony 12 Tow Points Geo Celtic 12 Tow Points Vessel in JV Oceanic Challenger 12 Tow Points Amadeus 8 Tow Points 14 Reformat the fleet down to the critical size of 13 vessels to: Address global and regional markets and optimize transit time Operate during the winter campaign with positive cash contribution Be an enabler for Equipment & GGR divisions Used as source vessel De-rigged Vessels from Fugro
Land Acquisition: Refocusing on niche & techno markets & partnerships North America: Refocused on our MC activity & land contract ongoing restructuring Middle East: Strengthen our local partnership holding 49% of the new Argas North Africa: Only direct footprint focus on technology The Land situation: Rest of the World: Opportunities for franchising / Technology consulting model An enabler for Sercel and Processing activities with the right footprint considering the risks Ramp up of the Seabed Geosolutions activity 40% JV with Fugro 15
16 GGR Division
GGR: Geology, Geophysics & Reservoir 2013 Key Figures Market Positioning Total sales $1,296m: $585m Multiclient and $711m SI & other businesses Countries with GGR implantation 36 EBIT $317m EBIT margin 24.5% Number of employees c.3,500 Multi client library in key areas (Gulf of Mexico, North Sea, Brazil) Technology and broad spectrum of technical expertise Highly-skilled people business Strong geosciences brand Footprint per activity Subsurface Imaging (SI): 46 locations in 32 countries GeoConsulting / GeoSoftware: Presence in 23 countries 4% 2% 27% Strong expertise in GGR 31% Master Bachelor High School Diploma Other/ Technical / Secondary Data Management Services: Presence in 9 countries 36% PhD 17
Multi-Client: Building librairies in key areas Delivering the right data with the best available technology at the right time For NALA: For EAME: Gulf Of Mexico StagSeis DEUX Fast Trax available TROIS (293 blocks) being acquired 20,000 km² 3 years program started in July 2012 and finishing end 2014, ahead of 2016-2018 ultra-deep water licensing rounds Norway HORDA: The Largest BroadSeis survey. Acquisition has started in Norwegian North Sea 19,000km² North Sea Innovative Technology with promising results DAZ (Dual Azimuth) on Q30 Phase 7 & 8 TomoML, GWE, Pore Pressure Prediction and Facies Finder AVO. Cornerstone 35,000km² Brazil Four new programs on going 43,000km² of new BroadSeis data 18
Subsurface Imaging: Maintaining our leadership position with our high skilled people 43 Processing centers worldwide Processing Revenue In million $ 711 403 387 442 485 PFlops 64 k CPU Cores 84 k CPU Cores 7 6 5 4 3 2 1 0 2008 2009 2010 95 k CPU cores 110 k CPU cores Graphic Processing Unit (GPU) Computer Processing Unit (CPU) 2011 2012 160 k CPU cores 453 k GPU cores / 884 cards 2013 CPU GPU 2009 2010 2011 2012 2013 People, technology, service, performance Integrate technology and operations to solve problems over 2,200 experts worldwide, specialists in solving difficult imaging problems Ranked n 1 by clients in the 2013 Welling Report 150 k CPU cores 2150 k GPU cores / 3400 cards Growth driven by unique worldwide presence and technology leaps in computing and imaging algorithms 19
Geoconsulting and Geosoftware: Developing integrated workflow Geoconsulting: offering integrated projects Acknowledged leader in geopolitical multi-client products and reports, and high-end consulting services across the E&P value chain Integrated geophysics, geology & geochemistry studies Geosoftware: from seismic to simulation Advanced reservoir characterization: integrating seismic, well and production data to better de-risk prospects and further optimize production Powered by Hampson-Russell and Jason For unconventionals: tools to help for better well planning (ProAz), predict sweet spots (Emerge) and to optimize well paths (FractureSpark) 7.0% Leveraging GGR capabilities across business lines and CGG 20
21 Financial Review
Balance Sheet as of end of March 2014 Total Capital Employed at $6,279m as of end of March Capital Employed Multi-Client Library Book Value up at $916m Increase mostly due to the IBALT program in the Gulf of Mexico Cash multi-client Capex pre-funded at 51% Amortization rate at 61% Net Debt at $2.4bn by end of March 2014 Euro-denominated component at 1.0bn Net Debt to Equity ratio at 65% 22
Accelerated Refinancing Program with Senior Debt Maturity extended by 2 years 2013 Senior Debt Maturity Profile (in $m) A 400m High Yield Bond at 5.875% due 2020: A $500m High Yield Bond at 6.875% due 2022: In April, issue of two new High Yield Bonds 400m due 2020 at 5.875% coupon $500m due 2022 at 6.875% coupon to push-back 2016-2017 mandatory instalments 360m 2016 Convertible Bond $225m 2016 Senior Notes 2013 Pro-forma Senior Debt Maturity Profile (in $m) 2/3 $400m 2017 Senior Notes Maturity as of end of March extended to 6 years from 4 years Average cash cost of Debt at 5.3% New Notes 6.3% interest-weighted on average 23
Conclusion
2014 Achievements & Outlook Equipment Sercel awarded the 1 st tender in Saudi Arabia for 50 000 channels count crews in June 2014 1 st deliveries of 508XT expected in July with the addition of a new system sold in June to PanAmerican Geophysical in North America Launch of two new tenders in Saudi Arabia for 50 000 channels count per crew Acquisition First steps of the rightsizing the fleet and the Land activity achieved and next ones well engaged First effects of these measures on our cost structure during H2 New set up with Argas operational in H2 CGG and Sovcomflot signed an agreement to create a JV for Arctic 3D seismic exploration, the legal entity will be created in January 2015 GGR Completion in September of the three year IBALT program in the GoM with the StagSeis technology ahead of the 2016-2018 licensing rounds Sustained activity in Subsurface Imaging driven by increasing volume of data linked to more complex surveys Solid activity in reservoir characterization businesses across the world 25
2014 Management priorities reaffirmed Seismic market conditions expected to remain flattish CGG management fully committed to implementing its 2014-2016 transformation plan First steps in the Acquisition division downsizing plan in Q1 2014 Positive cash generation and active debt management o 2014 Industrial Capex: $275-300m o 2014 Multi-client Cash Capex: $500-550m o Prefunding level above 70% Target 400 bps EBIT improvement in 2016 o o o Rebalanced portfolio Operational & commercial efficiency Cost reductions & tight cash management 26
Thank you
Q1 2014 Results: In line with our expectations Group Revenue at $806m, down 7% y-o-y Equipment at $206m, down 18% GGR at $290m, up 12% Acquisition at $559m, down 6% Solid operational performance, notably in Marine Fleet availability rate at 94% 871 Group Revenue (In million $) 955 806 Fleet production rate at 93% Q1 2013 Q4 2013 Q1 2014 Operating Income at $35m In line with our expectations Operating Income EBIT Group EBIT (In million $) EBIT at $18m, including a $(17)m contribution from the Equity from Investees 117 128 Mainly related to Seabed Geosolutions JV 66 73 Net Income at $(39)m CGG backlog as of April 1 st: $1.2bn 35 18 Fleet coverage: 97% in Q2, 60% in Q3 & 10% in Q4 Q1 2013 Q4 2013 Q1 2014 28
Equipment: 1Q14 Resilient despite lower revenues Total sales were $206m, down 18% Land Equipment Marine Equipment Revenue (In million $) External sales at $163m, down 14% 317 Lower land sales across all regions following strong deliveries in Q4 2013 251 41% 37% 206 Internal sales represented 21% of total sales versus 24% last year 54% 63% 51% 51% marine equipment sales and 49% land equipment sales 46% 49% EBIT margin at 20.1% Unfavorable / $ exchange rate Low volume of sales Unfavorable product mix with lower electronic components for land equipment sales Q1 2013 Q4 2013 Q1 2014 69 27.6% EBIT (In million $) 102 32.1% 41 20.1% 29 Q1 2013 Q4 2013 Q1 2014
Acquisition 1Q 14: Still difficult market conditions Acquisition revenue at $559m, down 6% Land & Airborne Marine Acquisition Revenue (In million $) External revenue at $353m, down 16% 594 559 Land & Airborne revenue at $106m, down 26% Record low winter campaign in North America 145 449 459 568 95 363 106 453 Airborne impacted by still depressed mining market Marine revenue at $453m, quite stable y-o-y and up 25% sequentially Q1 2013 Q4 2013 Q1 2014 The Symphony was de-rigged as planned Solid operational performance Acquisition Operating Income at breakeven and EBIT at $(16)m Marine profitability increased significantly sequentially due to an availability rate at 94% versus 83% in Q4 2013 Land acquisition suffered from a historically low winter season Operating Income EBIT 47 38 7.9% Q1 2013 Acquisition EBIT (In million $) Q4 2013 Q1 2014 0 (2.8)% (16) Negative contribution from Seabed Geosolutions JV (13.4)% 30 (69) (61)
GGR 1Q 14: Continuing Sustained Profitability GGR revenue at $290m, up 12% y-o-y MC Revenue SI & Reservoir GGR Revenue (In million $) Multi-Client at $127m, up 18% y-o-y, the best Q1 performance since 2008 Prefunding revenue was $80m Good level of after-sales in Canada & Brazil Amortization rate at 61% 260 152 108 371 206 166 290 163 127 Subsurface Imaging (SI) & Reservoir at $163m, up 7% y-o-y Q1 2013 Q4 2013 Q1 2014 Subsurface Imaging: strong performance EBIT margin GGR EBIT (In million $) CGG and Baker Hughes signed an exclusive agreement for RoqSCAN TM technology 81 86 GGR EBIT at $63m, a 21.8% margin Quite stable y-on-y, excluding the $20m Spectrum capital gain $20m Spectrum capital gain 31.1%* 23.2% 63 21.8% Q1 2013 Q4 2013 Q1 2014 31 *margin was 23% excluding the capital gain
Q1 2014 Cash: A typical Q1 pattern EBITDAs : $188m, a 23.4% margin Equipment at $52m, a 25% margin EBITDAs (In million $) 272 280 Acquisition at $79m, a 14% margin GGR at $159m, a 55% margin Cash Flow from Operations at $118m, up 87% y-o-y 31.3% 29.3% 188 23.4% Total Capex of $258m 32 Industrial Capex: $86m R&D Capex: $16m Multi-Client Cash Capex: $156m Marine Capex at $143m, up 20% y-o-y (GoM program & Brazil) Cash prefunding rate at 51% versus 48% in Q1 2013 Negative Free Cash Flow at $(152)m Q1 2013 Q4 2013 Q1 2014 Operating Cash Flow Industrial Multi-client cash capex R&D and other capex 63 203 Operating Cash Flow / Capex (In million $) 12 126 65 451 231 19 117 258 118 156 Q1 2013 Q4 2013 Q1 2014 95 16 86
2014-2016 Strategy: Rebalancing portfolio 2013 $3.8bn Revenue 11% Ebit margin Equipment 22% Main Drivers At unchanged market conditions Revenue before intra-group eliminations 1.5 mega-crews ordered; when by the New ARGAS: Fully booked in revenue and in cash, as acquired by a third party Intra-Group production (marine mainly): c. 10% of total sales 2016 >$4.0bn Revenue 15% Ebit margin Revenue: $1.2-1.3bn Ebit margin: >28% 30% Acquisition 43% Business line breakdown within Acquisition: Marine 80% / Land & Airborne 20% Reformatting impact: at iso-market conditions Intra-Group production: 25% of the fleet capacity corresponding to 20% of total Division revenue Revenue: $1.6-1.8bn Ebit margin: 8%-10% 35% GGR 35% 2015 and onwards, MC Cash Capex back to c. $400m, 70%+ pre-funded Depreciation rate at c. 65%, leading to a stable MC Library Net Book Value SI & reservoir businesses organic growth sustained by 5% net hiring per year Revenue: $1.5-1.6bn Ebit margin: 20%-25% 35% 33