CGG - 2021 to be a year of two halves.
All,
Please refer to our unchanged analysis here.
The slower than hoped for recovery is far less important than the refinancing that was completed with the dual-tranche USD/EUR bond issuance in March 2021. CGG can now normalise its relationship with clients and the financial markets with no substantial refinancing needed prior to the end of 2025 (RCF, the bonds mature in 2027). At quarter-end, CGG had net liquidity of USD406m.
Expectations:
The slower than expected recovery does put the company behind where we had expected it to be in 2021. However, the recovery has begun, and we would still expect medium-term performance in line with our model. The company reaffirmed its outlook for the full year 2021.
Q1:
CGG's Q121 numbers this week continue to show the ongoing scars of a poor year for the oil industry in 2020.
- Revenue was USD886m vs our model estimates of USD921m as orders continued to lag in Q1. The company still expects full-year low single-digit growth in revenue, (4% would see FY 21 revenue at USD921m vs our model estimates of USD1,078m). LTM run-rate revenue is $846m underlining CGGs expectation of a stronger recovery in H221.
- Adjusted EBITDA was USD39m vs our expectations of USD102m, again reflecting the lower than hoped for Q1 activity. FY EBITDA is expected to be in line with the USD292m achieved in 2020 due to unfavourable business mix.
- Net cash flow for the quarter was USD22m and for the full year it is expected to be “positive”.
Suspending coverage:
With the distressed period behind us, we intend to shelve our coverage of CGG.
Happy to discuss,
Aengus
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E: amcmahon@sarria.co.uk
T: +44 203 744 7055