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The impressive top-line growth at 42% yoy was overshadowed by margins as EBITDA missed the consensus by 10%. The product mix in the Sensing and Monitoring division reduced the EBITDA margin in the segment by 33%. The compensation fees to Shearwater for not using vessels as stipulated in the transaction agreement increased costs, weighing on operating margins. The silver lining was the decreasing net leverage thanks to strong operating cash flow and net cash flow at the end of the quarter.
Companies: CGG (CGG:EPA)CGG (CGG:PAR)
AlphaValue
Annual top-line revenue growth was impressive at 20%, but the segmental analysis revealed a mixed picture. The 77% drop in the after-sales business was alarming as the cash pre-funding rate was below the company’s target of 70%. Sensing and Monitoring, however, delivered an impressive performance by more than trebling revenues with strongly positive margins of c.25% and should maintain this performance in H2. At 2.6x, CGG remains highly leveraged, having a net debt double the market cap.
Unlike peers that have enjoyed the upside momentum in the upstream investment cycle, CGG’s revenue growth stalled in the Q3, negatively affecting the company’s liquidity and increasing the leverage ratio whereas companies elsewhere in the sector made impressive progress on deleveraging. While the downward guidance revision is discouraging, the FY 2023 is expected to improve as projects have been shifted into next year
Good results with gains in DDE, thanks to very strong after sales ($88m vs $20m in Q2-21) and explaining the profitability, while Sensing & Monitoring was down 4% yoy at $46m. After sales were driven by transfer fees and sales in Latin America. All in all, the release confirmed the management’s positive outlook, seeing a favourable multi-year upcycle in capex spending.
The Q1 results were below consensus with segment revenue of $153m, showing a 24% decline yoy, particularly due to low activity in Sensing and Monitoring, with revenue down 70% yoy. However, note that the 2022 outlook has been maintained. This is supported by the increasing level of commercial activity and management is expecting an acceleration in client decision-making during H2.
Positive results, confirming the trading update published in January. The recovery is a progressive one but the guidance for FY22 is above our estimates (EBITDA guided at c. $480m vs $450m in our estimates). Capital discipline remains in the sector but the group seems confident for FY22 as it is increasing its spending (Multi-Client spending at $200m vs $165m in FY21).
Positive release with EBITDA rebounding after the weak Q2. Management sees a solid Q4 in all businesses and therefore confirms the guidance for FY21. Management said that International Oil Companies are spending “well below” their allocated budgets this year. While some of this will ultimately go to the shareholders, we believe this, together with a strong oil price, supports a good Q4/H1 22.
Revenues were down 26% qoq with a pick-up in GGR sales (+10% qoq), more than offset by a decline in Equipment (-58% qoq). As International Oil Companies maintain a strong capital discipline, the outlook is revised with FY21 revenue to be flat yoy (vs low single-digit growth) and EBITDA at around $310m. This compares to an EBITDA of $78m for H1, and implies a strong ramp-up in H2.
Management hinted at a soft Q1 and this proved to be right. Segment revenues are down 21% yoy and EBITDA by 71% as equipment take a large share of the mix (53% vs 28% in Q1 20) with very low GGR revenues. At least CGG managed its working capital and spending to generate $28m of cash. Management is optimistic about H2 as it has seen commercial activity increasing since March on the back of higher oil.
EBITDA is up 48% qoq, slightly above consensus, but cash shows another working capital build. Liquidity is down 35% yoy, which might cause concern. The outlook guides for a small revenue increase, and stable EBITDA on a different sales mix. The environment remains challenging and CGG is cutting investments to focus on cash generation. No surprise, as there will not be a dramatic increase in spending this year, although a higher oil helps visibility.
A mixed bag with revenues down 48% yoy but stable qoq, while the adjusted EBITDA improve by 18% qoq. However, the segment free cash flow deteriorated ($-59m), with a working capital build ($38m). Multi-client after-sales picked up, partly offset by lower pre-funding. Meanwhile, the activity weakened in geoscience and equipment. Cost reductions help the group in coping with this crisis, but the activity will need to rebound soon, as liquidity is down $159m since Q1.
Companies: CGG (CGG:PAR)CGG (0RI9:LON)
Revenues and segment EBITDA were in line with consensus, but non-recurring charges amounted to $94m in the quarter mainly on goodwill and asset impairment, leading to a net loss of $147m. Net cash flow was at $-77m (-$60m for H1 20). The guidance remains vague, which unfortunately will not help in understanding when the activity will restart.
Companies: CGG
Most of the positive news from this release was already announced in the trading update. On the outlook, as the 25-30% cut in exploration investments will undoubtedly impact CGG’s turnover (particularly in multi-client after sales), the group focuses on delivering its backlog and reducing its own spending. Lastly, during the conference call, management said it has not received any cancellation of committed orders, which somehow validates the $256m backlog.
During the call, management discussed the possible reintroduction of the dividend in 2021. In our view, this reflects CGG’s remarkable turnover since the announcement of the strategic plan. Indeed, in 2019, the cash generation and operational performance have been improving, with good progress towards the 2021 targets. Yet, the lower oil price is weighing on the outlook. Even in an asset-light form, CGG will not be immune to lower spending from E&P companies, a likely outcome with oil at $50.
The release follows a positive trading update, which saw an increase in guidance. The quarter saw strong Multi-Client sales, even excluding exceptional one-offs and accelerated sales. Furthermore, the group is making good progress in its strategic partnership with Shearwater and is in advanced discussions for the sale of the multi-physics business.
Research Tree provides access to ongoing research coverage, media content and regulatory news on CGG. We currently have 0 research reports from 2 professional analysts.
NextSource is uniquely positioned to build a leading vertically integrated position, ex China, in the supply of Lithium-ion battery anode material which is essential for the Energy Transition. The company is commissioning phase 1 of its world-class Molo graphite mine in Madagascar and is in the final permitting process for its first Battery Anode Facility (BAF) to be located in Mauritius. The company is backed by Vision Blue, established by Sir Mick Davis, former CEO of Xstrata. On our calculat
Companies: NextSource Materials Inc
Capital Access Group
Falcon has raised gross proceeds of US$8.9m via a placing and subscription at a price of 6p/share and the granting of overriding royalty interests. The net proceeds, together with Falcon’s existing cash resources (cUS$4.3m) will be used to fund Falcon’s net share of 2024 capex (cUS$9m) associated with the 40MMscf/d Shenandoah South Pilot Project, including the drilling, stimulation, and flow testing of two 10,000ft horizontal wells. The funds will also enable Falcon to fund its share of the cost
Companies: Falcon Oil & Gas Ltd.
Cavendish
Companies: FOG PHC FEN BBSN ELIX
Beowulf is advancing a portfolio of projects in Europe focussed on metals and minerals that are critical to enabling the continent’s transition to a greener economy. Awareness of Europe’s over-reliance on external supply sources for such vital raw materials is driving growing political support for ‘home-grown’ projects. Beowulf is strategically positioned to leverage this fast-evolving trend – its Kallak project in Sweden holds potential to deliver high-quality iron ore to lower the carbon-inten
Companies: Beowulf Mining PLC
Alternative Resource Capital
• Multiple tests over multiple zones in multiple horizons were run at the Mopane-1X exploration well. The flows achieved during the well test reached the maximum allowed limits of 14 mboe/d. The flow rate was constrained by the size of the available surface facilities. • The AVO-1 horizon encountered at Mopane-1X and Mopane-2X are in the same pressure regime, suggesting that the entire area (8 km diameter) between the two wells is connected. Overall, in the Mopane complex alone, and before dril
Companies: SINTANA ENERGY
Auctus Advisors
Companies: Touchstone Exploration Inc
Shore Capital
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SP Angel
Jubilee today reports its Q3 and third quarter operational results from its expanding operations in Zambia (copper) and South Africa (chrome and PGM). South Africa is on a growth trajectory with record chrome production of 409kt in the quarter (Q2 FY2024 381kt) and a monthly record in March of 145kt and production YTD of 1.13Mt (0.94Mt). Jubilee is well underway to its annual target capacity of 2,1Mt/yr especially with the new 300kt/yr chrome plant at Thutse expected to be operational in August
Companies: Jubilee Metals Group PLC
WHIreland
Alien today reports intraday that the Western Australian Government has granted a mining licence for the Hancock iron ore project for a 21-year term. The granting of the mining licence is the latest milestone delivered by Alien as it advances the project towards development and production.
Companies: Alien Metals Ltd
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Liberum
I3 has announced the sale of the majority of its royalty interests in Canada, for US$24.8m cash. This allows the company to fully repay amounts drawn on its debt facility and create a working capital surplus, giving I3 significant additional funding flexibility going forward
Companies: i3 Energy Plc
Zeus Capital
Since November, the JOG share price has moderated from a high of 250p to current levels of 149.5p. This is despite JOG having now made significant progress towards FID on its c.70mmboe Buchan project, with FID upcoming later this year. In our view this share price move is unjustified, with current levels further enhancing the value on offer, and making an attractive opportunity for investors.
Companies: Jersey Oil & Gas PLC
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Adriatic Metals has announced their transition from mining contractor to mining operator at Rupice. The transition is expected to continue to benefit the development and productivity rates being achieved at Rupice mine, as well as result in cost efficiencies and improved HSE standards. The company has also announced a short-term loan facility with Orion of $25m, that is drawable at the option of the company in Q3/4 this year.
Companies: Adriatic Metals Plc Shs Chess Deposit Interests Repr 1 Sh
Tamesis Partners
Trinity has announced a c28% reduction to its 2P reserves following a YE23 review. Despite the decrease in the Company’s 2P reserves, Trinity’s core business remains robust, with a reserves/production ratio of >12.5 years at YE23. Whilst there is significant potential for growth within the current portfolio, this will be difficult to unlock from the current balance sheet and we believe further financing will be required. We update our target price to 76p (from 202p), a c85% premium to the curren
Companies: Trinity Exploration & Production Plc
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