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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)Viridien (VIRI: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: Viridien (VIRI:PAR)Viridien (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: Viridien
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 Viridien. We currently have 44 research reports from 2 professional analysts.
Tlou has released its Q4 update, reporting ongoing progress during recent months on its Lesedi CBM gas-to-power project in Botswana, with first electricity sales continuing to be targeted for 2024.
Companies: Tlou Energy Ltd
Zeus Capital
• Chariot is farming-out up to 55% in Anchois (Lixus licence) and 37.5% of the Rissana exploration licence to Energean for (1) up to US$75 mm in cash equivalents, including a US$50 mm loan convertible into Energean shares at a price of £20/sh or 3 mm Energean shares at Chariot’s option, (2) up to US$850 mm gross carry (US$170 mm net to Chariot based on US$850 mm x 20%) and (3) a 7% royalty on Energean’s share of revenue above a hurdle for gas price (we have assumed US$10/mcf). • The transaction
Companies: Chariot Limited
Auctus Advisors
Companies: 88 Energy Limited (88E:LON)Brighton Pier Group Plc (PIER:LON)
Cavendish
AUCTUS PUBLICATIONS ________________________________________ ADX Energy (ADX AU)C; target of A$0.75 per share: Diversified and high impact newsflow over the balance of 2024 – ADX has confirmed a very busy programme of activity from September. The overall unrisked value of the programme is ~A$1.70 per share, which represents 17x the current share price. In early September, ADX will drill the Anshof-2A side track. The well is expected to intersect thick Eocene reservoirs similar to that encountere
Companies: EQNR ENI GPRK ADX KAR WDS GALP REP REP EOG PANR TRIN ZPHR CHAR TTE ENI EQNR VAR ATOM GALP TCF
We see Panthera Resources plc (PAT.L) as among the most interesting of the gold juniors. This reflects two factors. First, the announcement in late August that Panthera had secured US$13.6m of non-recourse financing for litigation involving India’s alleged de facto expropriation of PAT’s world class Bhukia gold project. Panthera claims that India has breached its obligations under the Australia India Bilateral Investment Treaty (ABIT). If so, Panthera would be entitled to ‘fair and equitable com
Companies: Panthera Resources Plc
Allenby Capital
Condor Energies (CDR CN)C: Signing first LNG framework agreement in Kazakhstan – Condor has signed a first LNG Framework Agreement for the utilization of LNG to fuel Kazakhstan’s rail locomotives. The agreement was also signed by Kazakhstan Temir Zholy (KTZ), the national railway operator of Kazakhstan and Wabtec Corporation, a U.S. based locomotive manufacturer with existing facilities in Kazakhstan. KTZ and Wabtec previously signed a memorandum of understanding which includes modernization wor
Companies: TCFF OKEA MAHAA TNZ MCF ENW PHAR NOG BWEFF MAHAA OKEA EGY
◆ Juggernaut Exploration Ltd. (TSXV: JUGR) owns three highly prospective projects within, and close to, the Golden Triangle in NW BC, a Tier 1 region known for significant discoveries and developments. ◆ Each project is known to host high-grade gold-rich polymetallic discoveries that deserve additional exploration and resource assessment. ◆ The Company is supported by a well-respected fund group Crescat Capital that holds just under 20% of the share capital. ◆ The Company raised C$4.8 million
Companies: Juggernaut Exploration Ltd
Couloir Capital
Companies: Personal Group Holdings Plc (PGH:LON)Reabold Resources plc (RBD:LON)
Edison Investment Research is terminating coverage on Cadence Minerals (KDNC). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Companies: Cadence Minerals PLC
Edison
i3 Energy is an AIM and TSX-listed oil and gas company with a diversified 20kboe/d production base onshore Canada, which offers UK investors attractive exposure to North American E&P themes. The Company's production growth strategy is sensibly hedged to pivot between acquiring producing assets when commodity prices are low and to invest in its low-risk drilling inventory when prices are high.
Companies: i3 Energy Plc
SP Angel
Joiners: No joiners today. Leavers: Medica Group plc has left the Premium Segment of the Main Market. What’s cooking in the IPO kitchen?** Blackpoint Biotech plc, a medical cannabinoids company established to fulfil gaps in the medical cannabis market by creating products that provide fast onset of action and accurate dosing, intends to join intends to join the Access Segment of the AQSE Growth Market. Expected Admission 20 July 2023. Metals One Plc, a company focusing on acquiring natural resou
Companies: TNTAF CRL ITM VAST CMX RENX MAFL HE1
Hybridan
i3 Energy announced that its 2024 guidance consists of expectations to drill 10.5 net wells (7.6 net wells in Central Alberta, 1.9 net wells in Simonette and 1.0 net wells in the Clearwater play) with 85% of capex allocated to the second half of the year. Total capex expenditure for the year is guided at $US 50.9m. The company indicated that it intends to commence pad drilling of its Montney acreage in Q1 2025 and we perceive the company is bulking up for that significant growth opportunity for
I3E is a UK and Canada listed E&P company, with a significant producing asset position onshore Canada in Alberta.
Panthera Resources (PAT.L) recently (25/08/23) made an important announcement that could potentially unlock the value of its world-class Bhukia gold project in Rajasthan, north-west India. Non-recourse litigation financing of US$13.6m has been secured from LCM Funding SG Pty Ltd, a subsidiary of Litigation Capital Management Ltd (LITL: AIM), a leading global disputes funder, to pursue a claim against the Republic of India for a breach of treaty obligations under the 1999 Agreement between Austra
• The northern flank at Hibiscus, appraised by the DHIBM-7P pilot vertical well, is estimated to hold 8-12 mmbbl gross reserves (Panoro WI: 17.5%). • This is above our early estimate of 8 mmbbl. • The well was drilled from the pilot hole of the recently drilled Hibiscus South well that had already encountered 5-6 mmbbl recoverable resources in a north-east extension of the field. • Overall, 13-18 mmbbl reserves have been encountered so far this year at Dussafu, suggesting a very high reserve r
Companies: PANORO ENERGY (PEN:STO)Panoro Energy ASA (PEN:OSL)