Wed, 3 Dec 2008|
Automatically Generated Transcript (may not be 100% accurate)
Good morning everyone. Thank you for joining and thank you for the interest. Does either don't know -- G Veritas we are the world's largest -- physical company and we're the only company and give physics it supports the entire suite of -- -- physical equipment and services across the spectrum of exploration and production. I'd like to start off -- with a little bit about the way we look at the overall world economy and world. -- -- Our first off anytime that we take a look into. The crystal ball. Economic outlook it's very -- it's hard to determine exactly the scope in the -- and the breadth of the world economic. Situation to -- that time the financial market instability -- -- Does that -- linked any impact to the oil and gas industry is difficult to see the depth of any impact well and guess. Industry is hard to see is well. Last week before last was the SEG the largest energy and physical and exhibition in Las Vegas. And during that. -- they were -- and many different customer meetings where we had. Lots of different discussions with our customers and in those discussions. There was a wide variety of different comments that came back some of the company's. Extremely large international oil and gas company specifically. I've stated that they want to changing their -- -- at all others that that they are reducing their cap expanding its specifically. In the US around that gas focused basins another company said that they were continue to latency one thing we did hear though -- quite often was that. Seismic based on its longer term. Window in other words if you want to find new reserves and and replace those reserves -- starting to shoot seismic interpreting the seismic and then drilling the well you're looking at a three year five year window. So a lot of companies and we heard that specifically. -- -- who -- were looking to increase their -- spending not only. Depend it. Completely independent of what the overall -- spending was so when we look at the overall economic global outlook it's unclear when we look at the oil outlook it's it's very clear. We still see that new prospects are becoming more more difficult to find the reserve replacement rates are are continuing to be low. You're still well below a 100% and had a negative trend for. About a ten year cycle and they've been below 100% for the last four years. A wrist rest of course continue to mature they're not getting younger and depletion rates are continued increase in fact recent estimates have shown that the depletion rates increasing even further. So when we look at this this strange balance of -- unsure economic environment but. The oil and gas industry. Demands for reserve replacement -- depletion rights etc. it creates an interesting -- outlook. As we move forward. There's a clear need to find and produce oil from -- rest of wars and I knew as of -- to ensure. A strong picture going forward. If you look at seismic in that picture it's very clear that high -- seismic. That'd that beating capabilities and technology are more more vital. To ensure that that that oil and gas can be found in produced and brought to market. Seismic lowers the risk associated with finding and producing going gas. You see a historically that seismic used to be specifically. Almost. A 100% 9090%. In exploration and today more more we see seismic being used across the overall spectrum. A today in fact about 30% of the spending with -- goes to -- production spending. As we. Look at. -- of wars and how to optimize the -- or production by using. Reza ore delineation -- advanced seismic techniques such as White House -- capabilities or even forty detailed production. To really got the life of the field imaging so. We it if you analyze -- seismic industry one of the things that you can see very clearly uses his tremendous amount of differentiation. -- going on the seismic industry today. All from. Seismic equipment to seismic services from land to marine Mike at Tennessee did you Veritas RH PVA high -- resolution. Alter high channel count that job that we just started. Or what -- we I recently just one and and will be starting. Early next year in Oman and Qatar where we're looking at 25000 channels -- 45000 channel. Account cruise -- a resolution. That it just was on and heard of before that type of differentiation. What we see with White House met with -- Not only -- -- -- -- -- across the past -- spectrum. All the different seismic contractors it clear indicator that this. This need for advanced seismic and and and the ability to improve. Our customers' abilities to see things they could not see -- -- becoming. Increasingly more and more and more important. Whether it's looking at the technology or the it's not entirely clear to the industry. In many conversations that I have -- that seismic. Has actually doubled since 2005 from six billion dollar market to a twelve billion dollar market and it still on the accounts for about 3% of overall in. So again you can see this combination of the overall. A market trends well in gas trends combined seismic creating -- -- Interest in picture looking forward. To how oil and gas companies will continue to address the reserve replacement -- In this current market. And CGG there -- -- we're uniquely. Positioned to address these challenges. We have a worldwide local presence. Around the world in each one of the major locations anywhere that there's -- -- and it's producing oil and gas we we have. The capabilities to some supply does needs whether it's on land or it's on marine. Or with our unique dedicated processing centers. We have -- our -- physical processing center is very close to our clients that we can actually work with them to. To continue to tweak out rhythms to to make them work best for that specific customer. We also have a singular focus on the full spectrum that you physics we are the only company that sells across the spectrum from -- physical equipment that -- physical. Land services to marine services to processing -- -- library -- the only company that provides complete overall focus. And we are singularly focused on we don't. Spread out that he be a different capabilities across the across the wide spectrum of oilfield services I remember when a little kid my idea of -- -- my my grandfather took me to that. Hardware store while we -- the hardware store. I was fascinated by the supplier hammers. Nose pliers and a hammer. And he looked at me and he say unity in in that nice loving -- that only grandfather's conducive don't buy that. He said when you want it when you want a good hammered by the best -- there is when you want a good -- by the best -- because. That fire hammers will never -- each job as well. And and where we are that way focused on -- physics providing the best and you physics when our clients need pure geophysical solution we have the best. Options for the highest and idea physics that are available story we're uniquely focused on the full spectrum of geophysics. We have partner. It's with other companies to provide integration into. The full spectrum of oilfield services if a client request we're uniquely focused on the full -- if -- physics. We also have a unique history of innovation leadership. We shot the first one announcement job in the Gulf of Mexico for BP 1005. We conceded there's been a tremendous amount of following on that now with -- -- -- being the hottest trend in seismic. NG -- is it. -- currently in the industry. From 2005 to now there's about -- nineteen project -- -- have either been started. Completed have enough funding where companies announced them -- -- -- that's tremendous growth. In the in the -- a physical a marketplace in fact if you if you look at -- -- -- -- takes about three times more vessel time to shoot so those those 1920 projects are more like sixty projects. Typical seismic part of the reason that we see this a strong increase in in that you physics -- marketplace. Doubling from 2005. And and and more and more focused on the high end. When you combine all of these different capabilities are high and unique differentiation are unique focus on on -- -- physics combined with our our our. Our history -- of leadership. Yeah and give physics if you think about your physics one way to think about this -- constantly gives. The oil and gas industry the ability to see things that could not be seen before. If you look at ten year old seismic data. Very quickly here I can see why well might have been -- -- prospect might have been -- water reservoir wasn't producing when you compare it to to -- today. And that trend continually happens that that that advance to uncover something that couldn't be seen before. And it CDT Veritas we've had an excellent history and -- covering these sorts of things by applying the latest technology the latest processing and capabilities and -- deep. Relationship with our customers. Worldwide. As an example. You've probably heard of TP before -- was set we have the unique data set in the Santos basin we're currently re processing -- -- -- the only company that provides that. -- contiguous data set in this at this base and and as I mentioned were re processing it to make sure that. That the absolute latest technologies available that data so that. Our customers can find and understand it and truly produce those -- of -- as successfully as possible. Looking at our third quarter just very quickly. We had a good third quarter record revenue topped one billion for the first time that was up 28%. We had record operating margin at 25%. And it was strong in both of our equipment business and our services business we had record net income. And -- 15% margin we had record backlog that that was near two billion plus we get extremely strong net free cash flow and expected to increase. At 65 million so. All in all a very good -- with records across all financial indicators. Looking a little bit more. 28%. -- cell revenues that's our equipment business was up 29% and services revenues up 28%. Operating income was also up a search -- delivered a 33% margin and services delivered a 23% margin. -- that's above the objectives that we stated the beginning of the year that's or sell it at after about 30%. And services at or about 20% so strong performance from both of those groups since in services we've seen -- continued strengthening of those margins. In 2006. They were 16% in 2007 there were 18%. And it 2008 we've said they'd be. -- about 20%. I net income was a 162 million equivalent to an earnings per share of a 74 cents on the Euronext. Or one dollar and fourteen cents on the 880 S on the New York Stock Exchange. Looking at our balance sheet in today's market we have a very strong balance sheet good net debt to equity ratio which we've been lowering since the acquisition and merger with Veritas to create C -- -- Veritas. We're currently at forty. 41% net debt to equity ratio and we expect to be to 38% by the end of the year. We also if you look. You conceive the net book value of the multi client library at 776. Million. We built a very strong and it's the most recent data library in the industry today so we have the youngest data. That the newest data again that ability to see things that couldn't be seen before. In that MC library about 200 million is on land with 80% of that 200 million being based in Canada. The rest is offshore with about 60% of that being in the Gulf of Mexico. Especially with our white -- surveys in the deep central -- and that are available. -- walker ridge. The data sent will be re -- will be processed and available in time for the lease sales -- coming up in March next year. Going into a little bit more detail on our financial indicators for long term debt maturity. You can see we have very strong situation here solid situation with about 450 million in cash. Overalls 735. Million if you look at the -- Reserves in the US and and and France -- debt maturity also is. Long term. The first comes up for renewal two to fourteen. 215 and 217. So that we have long term debt maturity that provides and so insulation from the current market instabilities that we see at that at the present time. So that's a strong balance sheet and a strong. Strong long term debt maturity as we move into 2009. And we do expect our capex to reduce in 2009 we mention this. Is as early as 2007. Men and covered in 2008 as well. Will be reducing our our capex on our multi client data which now stands at about 500 million -- 2000 and it will be reducing that did -- around 200 million. A so we expect in the fourth quarter of this year and into 2009. Our overall cash flow to continue to increase and it and of course that to -- three to all of our financial indicators as for. Looking at -- -- in more detail that this is our land equipment that business total revenue was it 314 million. But there 129%. And operating margin of 33%. -- -- -- if you don't know our business well is a very clear and dominant leader in the industry. And as I mentioned earlier we -- the only company that provides the complete spectrum from seismic equipment to seismic services. We deliver about 80% of -- -- land systems today and about 85% of the new marine systems it's a very strong position. In the overall marketplace and we're continuing to grow. We had two new products. Come out in the marketplace and in the third quarter one was C -- now. For navigating. -- -- offshore seismic vessels. And -- way which is a down hole tool losing -- -- physics more and more into the rounds or more more to the formal. -- -- outlook is very strong based on the near record backlog of of 500 million. We have extremely good visibility of course in the fourth quarter we expect the fourth quarter to be. Another record in and to continue to. A support us in it in meeting our 2008 objectives. We're also. Expect to see continued new technology take up. We've seen an increase of our -- take up at the next generation technology specifically inland. The 428 at excel system and -- in the sentinel solid streamer to these are next generation tools. That are more and more becoming the the the preferred choice in the industry. Looking at services services had a very good quarter as well strong operational performance. As well as -- solid multi client sales. Drew our third quarter revenue. Near record levels as well and a 28% year on year. We could see that operating margins as I mentioned earlier reached 23%. In general. And and looking forward -- -- Veritas is very well positioned for the future. We the set objectives at the beginning of 2008 and we believe it will deliver on those objectives. In 2000 made it work well on track to achieving that through we announces second stronger second half of the year. We could see that very strongly supported by our backlog. And we also see a strong robust outlook and solid foundations not only in our our balance sheet and our cash flow situation. But also. In our equipment sales and you know multi client sales -- and our services. As we continue to me before. Overall. As we look in the 2009 we can see that. The answer cell technology. We'll continue to improve that the land a position in the high end -- select markets. -- select markets are the Middle East and the Arctic where -- -- very strongly position in those areas. And as you know from last week if you are are watching CG Veritas we are a continuing to focus on our. Fleet to optimize it for the future. Specifically we announced. On November 10. The intention to make voluntary tender offer friendly offer. For all the outstanding shares of -- field. -- -- is a company that has eight vessels five high end vessels that instantly strengthens our high end. Fleet. They also have a a leading new technology. -- called -- the plan that is a technology for permanent monitoring. -- of course. Also a very strong match with our -- cell technology in. In our equipment business. So what a way field -- -- did you -- together create a very strong company not only for. Our services business in the rain but also. Force herself. If we look at the transaction terms it's a 100% share transaction. On a basis of of one ordinary share for seven -- who chairs. The implied. Premium is 31% over the closing price as of November 7. It was unanimously welcomed by both the UC did you Veritas boards and the way field boards. And we have attained it commitments already for approximately 25% of the capital tender shares. For the offer our key -- -- conditions for. The -- to move forward is for 85 bird percent acceptance threshold of course -- -- -- Regulatory clearance and no material adverse changes affecting -- -- In in general the Iraqi investment considerations are. One to strengthen our overall fleet capabilities and expertise. Wakefield is known for having operational expertise. In the area and very strong performance. As well as a very strong backlog today they -- have a very good position to. A move into 2009. Together we. Not only improve our. Overall assets but also the team the -- that people. In bringing those assets to their full potential. It also expands our product offering as I mentioned earlier worse or sell with the innovative opt to plan -- that fiber optic system. In fact -- to plan. One way key contract from ConocoPhillips in the third quarter of 2008. The first long term rows of war monitoring on this the sea bed using fiber optics and Dorsey. The overall outcome combined company provides a strong profitable growth potential with good visibility in 2009. And also was immediately creative both on the EPS in the casual basis. If you look at our backlog that's two record backlogs combined. The backlog. -- field goes all the way 32009. And our backlog also represents about nine months of overall business of the two combined -- is a strong visibility into 09 plus. An enhanced overall revenue profile as we look forward. Also we have a sound balance sheet that this simple way to look at this without going into much detail is just too. Say that there's there's no fundamental changes. In the structure between that balance sheet CD -- Erica stand alone or the combined company we had very similar. Net debt to equity ratios and net debt to even ratios as well so. Strong. Strong transaction with sound balance sheet that provides. Good. A good foundation for 2009 and beyond. Timetable. Is very fast with plan to. Close by December 12. So you can see that that processes that we're going through two bring this. This offer to close. CGU Veritas is already very well placed today and into the future. And by combining the strengths of Wakefield receded either -- -- not only at this time. Based on. The current. Market conditions looking forward but also longer term to meet the needs of we reserve replacement rates the increasing depletion rates. And the long term demand for oil and gas that our customers. And that and consumers require. The timing is excellent to bring together -- field and -- GG -- -- -- immediately strengthens our high -- fleet. And he could see from the earlier presentation -- our customers are demanding more more of high end seismic capabilities. It also provides much more flexibility. Two managed that the overall market going forward based on having the larger fleet based world -- It it also expands our product offering in herself with this innovative -- to plan fiber optic technology and provides strong profitable growth. Potential with as I mentioned earlier -- -- clear visibility throughout 2009. And is immediately accretive. Both on earnings per share in cash cash flow basis. Thank you very much.