CGG 2014 July Presentation

CGG 2014 July Presentation

All results are presented before Non-Recurring Items linked to Fugro (NRFI) and before impairment & write-off, unless stated otherwise

Catherine Leveau, SVP IR : [email protected] Julie Coulot, IR & SRI Officer : [email protected]

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.

Agenda

1.

CGG at a glance : An integrated business model

2.

Equipment Division

3.

Acquisition Division

4.

GGR Division

5.

Financial Review

6.

Conclusion

CGG at a glance:

Integrated business model

Revenues split by activity(3)

Revenues split by region(2)

 Market leader in geoscience industry globally, providing a comprehensive range of leading geological, geophysical and reservoir capabilities

 Market capitalisation of c.$2.5bn (as of July 1st 2014)  _c.9,500(1) _{staff working across the globe}

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

Revenues: $3,766m(2) Net Debt: $2,218m Cash: $530m EBITDAS(4)_{: $1,160m} EBIT(5)(6)_{: $423m} Net Leverage:1.9x FY2013 Financials

(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}

3 bu si ness acti vi ties Diversified business

CGG at a glance: An integrated business model

Geology, Geophysics & Reservoir (“GGR”) Key activities include developing and licensing multi-client seismic surveys, processing seismic data, data and software management, reservoir consulting services

From cyclical and capital-intensive businesses to more profitable, less capital intensive

and more cash generating businesses

Our strategy: 2014-2016 Transformation Plan

6

2013 revenues

_:

_$3.8bn

_{2016 revenues}

_{: >}

_$4.0bn$3.8bn

Strong organic growth for equipment

GGR growth despite reduced MC capex

Equipme

nt

 Revenues: $1,045m

 Ebit margin: 28.0%

 Capital Empl. $0.9bn

 508XT _{& high-channel-count / mega crews}

 New generation of streamers

 Revenues(2)_{: : $1,2-1,3 bn}

 Ebit margin(2)_{: >28.0%}

(1)_{Operating revenues} (2)_{Assuming unchanged market conditions}

Ac

quis

ition  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%} 25% reduction in marine fleet capacity

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%}

35% 35% 30%

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}

7

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

Equipment Division

Equipment: Sercel a leading seismic equipment provider

Streamer:

 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

2013 Key Figures

Market Positioning

Main products

2013 Geographical sales

breakdown

Cable and wireless system:

Digital sensor: MaxiWave Downhole: Vibrator: EBIT $293m EBIT margin 28%

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}

every 10 years for conventional crews  _{Number of crews increasing worldwide}

 _{508XT launched Q413, powerful response to clients} needs, first deliveries July 2014



_{Middle East: seismic for production is key}

expected in 2014-2016

 _{Sercel: strategic supplier agreement with Argas, our} historical long-term partner

2010 2011 2012 2013

km Sentinel® _{sold New builds}

5 15 0 0 800 km Sentinel® _sold New builds 1000 10 600 400 200 10

Sa

OMAN two potential tenders for 250 000 channel count crews expected in 2015-16?

KUWAITtwo tenders ongoing for 240 000 and 30 000 channels count crews

UAE onetender ongoing for 150 000 channel count crew

SAUDI ARABIA two tenders ongoing for 50 000 channel count crews

Evolution of the New Builds Market

Expected tenders of high channel count crews in the Middle East

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 0 15% 20% 25% 30% 35% 40%

Revenue vs. % Operating Income

by quarter

Acquisition Division

Acquisition: Ongoing right sizing

 _{Among top 3 leaders with}

WesternGeco, PGS

 _{High-end player in Land acquisition}  _{A leading Airborne player with}

25-30% market share

Market Positioning

2013 Key Figures

Asset

Portfolio

 _{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

Marine

Land

Airborne

EBIT(1)

$56m

EBIT Margin(1)

2.5%

Oceanic Vega

20 Tow Points

Oceanic Sirius

20 Tow Points 16 Tow Points Geo Coral 16 Tow Points Geo Caspian

Oceanic Champion 14 Tow Points Geo Celtic 12 Tow Points Oceanic Challenger 12 Tow Points Viking Vision 14 Tow Points Viking 10 Tow Points Viking II 8 Tow Points Vantage 10 Tow Points Symphony 12 Tow Points Geowave Voyager 12 Tow Points Viking Vanquish 12 Tow Points Oceanic Endeavour 16 Tow Points Alizé

16 Tow Points Oceanic Phoenix

14 Tow Points

Geo Caribbean

14 Tow Points

Vessel in JV Amadeus _{8 Tow Points}

3D vessels after having de-rigged Symphony

& in JV

15

1

14

Strategic Roadmap: Reduction of the size of the fleet



_{Reformat the fleet down to the critical size of 13 vessels to:}

Used as source vessel De-rigged

Land Acquisition: Refocusing on niche & “techno” markets

& partnerships

15

North America: Refocused on our MC activity &

land contract ongoing restructuring

Rest of the World: Opportunities for franchising /

Technology consulting model

Middle East:

Strengthen our local partnership holding 49% of the new Argas

North Africa: Only direct footprint focus on

technology



_{The Land situation:}

 _{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}

GGR Division

GGR: Geology, Geophysics & Reservoir

 _{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}

2013 Key Figures

Market Positioning

Strong expertise in GGR

 Subsurface Imaging (SI):

46 locations in 32 countries

 _{GeoConsulting /}

GeoSoftware:

Presence in 23 countries

 _{Data Management Services:}

Presence in 9 countries

Footprint per activity

Total sales

$1,296m: $585m Multi-client and $711m SI &

other businesses Number of employees c.3,500 Countries with GGR implantation 36 EBIT $317m EBIT margin 24.5%

For NALA:



– StagSeis DEUXFast Trax available – TROIS (293 blocks) being acquired



– Four new programs on going – 43,000km²of new BroadSeis data

For EAME:



– HORDA: The Largest BroadSeis survey. Acquisition has started

in Norwegian North Sea



_{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

Delivering the right data with the best available technology at the right time

20,000 km²

19,000km²

Multi-Client: Building librairies in key areas

18

3 years program started in July 2012 and finishing end 2014, ahead of 2016-2018 ultra-deep water licensing rounds

Subsurface Imaging: Maintaining our leadership position with our

high skilled people

64 k CPU Cores

84 k CPU Cores

95 k CPU cores

110 k CPU cores

160 k CPU cores

453 k GPU cores / 884 cards

150 k CPU cores

2150 k GPU cores / 3400 cards

CPU GPU 0 1 2 3 4 5 6 7 2008 2009 2010 2011 2012 2013

43 Processing centers worldwide

Growth driven by unique worldwide presence and technology leaps in computing

and imaging algorithms

PFlops 403 ₃₈₇ 442 485 711 2009 2010 2011 2012 2013 Processing Revenue 19 In million $

Graphic Processing Unit (GPU) Computer Processing Unit (CPU)

 _{People, technology, service, performance}

– Integrate technology and operations to solve problems

– over 2,200 experts worldwide, specialists in solving difficult imaging problems

Geoconsulting and Geosoftware: Developing integrated

workflow

20

7.0%



_{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)

Financial Review

Balance Sheet as of end of March 2014

22



_{Net Debt at $2.4bn by end of March 2014}

 _{Euro-denominated component at €1.0bn}  _{Net Debt to Equity ratio at 65%}



_{Total Capital Employed at $6,279m as of end}

of March



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%}

23



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

Accelerated Refinancing Program with Senior Debt

Maturity extended by 2 years

 A €400m High Yield Bond at 5.875% due 2020:

 A $500m High Yield Bond at 6.875% due 2022:

2013 Senior Debt Maturity Profile (in $m)



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

2014 Achievements & Outlook

25



_Equipment

 _{Sercel awarded the 1}st _{tender in Saudi Arabia for 50 000 channels count crews in June 2014}

 1st _{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

2014 Management priorities reaffirmed

Seismic market conditions expected to remain flattish

26

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%



o _{Rebalanced portfolio}

o Operational & commercial efficiency o Cost reductions & tight cash management

Q1 2014 Results: In line with our expectations

28



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%  _{Fleet production rate at 93%}



_{Operating Income at $35m}

 _{In line with our expectations}



_{EBIT at $18m, including a $(17)m contribution}

from the Equity from Investees

 _{Mainly related to Seabed Geosolutions JV}



_{Net Income at $(39)m}



_{CGG backlog as of April 1}

_$1.2bn

 Fleet coverage: 97% in Q2, 60% in Q3 & 10% in Q4

Q1 2013 Q4 2013 Q1 2014 Group Revenue (In million $) 871 806 955 Group EBIT (In million $) Q1 2013 Q4 2013 Q1 2014 128 117 66 73 18 35 Operating Income EBIT

Q1 2013 Q4 2013 Q1 2014

Equipment: 1Q14 Resilient despite lower revenues

29



Total sales were $206m, down 18%

 _{External sales at $163m, down 14%}

• Lower land sales across all regions following strong deliveries in Q4 2013

 _{Internal sales represented 21% of total sales}

versus 24% last year

 _{51% marine equipment sales and 49% land}

equipment sales



EBIT margin at 20.1%

 _{Unfavorable € / $ exchange rate}  _{Low volume of sales}

 _{Unfavorable product mix with lower electronic}

components for land equipment sales

EBIT (In million $) Q1 2013 Q4 2013 Q1 2014 69 102 41 20.1% 32.1% 27.6% Revenue (In million $) 251 317 206 Land Equipment Marine Equipment 51% 37% 63% 41% 54% 46% 49%

Acquisition 1Q 14: Still difficult market conditions

30



_{Acquisition revenue at $559m, down 6%}

 _{External revenue at $353m, down 16%}



_{Land & Airborne revenue at $106m, down 26%}

 _{Record low winter campaign in North America}  _{Airborne impacted by still depressed mining market}



Marine revenue at $453m, quite stable y-o-y and

up 25% sequentially

 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

 _{Negative contribution from Seabed Geosolutions JV}

Acquisition Revenue (In million $) Q1 2013 Q4 2013 Q1 2014 568 559 459 363 453

Land & Airborne Marine Acquisition EBIT (In million $) 38 47 (69) (61) Q1 2013 Q4 2013 (2.8)% 7.9% (13.4)% Q1 2014 449 594 106 95 145 0 (16) Operating Income EBIT

Q1 2013 Q4 2013 Q1 2014

Q1 2013 Q4 2013 Q1 2014

GGR 1Q 14: Continuing Sustained Profitability

31



GGR revenue at $290m, up 12% y-o-y



_{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%}



Subsurface Imaging (SI) & Reservoir at

$163m, up 7% y-o-y

 _{Subsurface Imaging: strong performance}  _{CGG and Baker Hughes signed an exclusive}

agreement for RoqSCANTM _technology



GGR EBIT at $63m, a 21.8% margin

 _{Quite stable y-on-y, excluding the $20m}

Spectrum capital gain

GGR Revenue (In million $) MC Revenue GGR EBIT (In million $) 108 166 127 152 206 163 260 371 290 SI & Reservoir 63 86 81 31.1%* 23.2% 21.8% EBIT margin $20m Spectrum capital gain

Q1 2014 Cash: A typical Q1 pattern



_{EBITDAs : $188m, a 23.4% margin}



Cash Flow from Operations at $118m, up 87%

y-o-y



_{Total Capex of $258m}

 _{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}

Operating Cash Flow / Capex

(In million $) Q1 2013 Q4 2013 Q1 2014 272 280 188 Q1 2013 Q4 2013 Q1 2014 203 63 451 231 258 31.3% 29.3% 23.4% 118 156

Operating Cash Flow Industrial

Multi-client cash capex R&D and other capex

95 117 86 126 65 12 19 16

2014-2016 Strategy: Rebalancing portfolio

Equipment

Acquisition

GGR

Main Drivers

2013

$3.8bn Revenue

2016

>$4.0bn Revenue

 Revenue before intra-group eliminations

 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

 “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

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

22% 43% 35% 30% 35% 35%