CGG to cut fleet, jobs after second-quarter loss
PARIS (Bloomberg) -- CGG will cut jobs and accelerate reductions in its fleet of vessels after delayed orders led to a second-quarter loss.
CGG will shrink its fleet to 13 vessels from 18 by the end of the year and cut about 10% of its workforce, or more than 1,000 jobs worldwide, the company said in a statement. Sites in Norway, Nigeria and Venezuela will be closed.
That’s an acceleration of the plan unveiled in December for a 25% reduction in the capacity of its marine fleet through 2016, CEO Jean-Georges Malcor said on a conference call. The company is “clearly at ease” with its leverage and doesn’t need a capital increase, he said.
The surveyor has suffered a drop in demand as oil explorers defer orders for seismic studies to curb spending.
The stock declined 1.3% to 7.635 euros by 10:43 a.m. in Paris trading after initially rising as much as 5%. The shares have slumped by 39% this year.
CGG will dispose of its North American land business to Geokinetics in exchange for a minority stake, the surveyor said in a separate statement, without giving further details.
Its net loss widened to $325 million in the second quarter after restructuring charges, following a loss of $39 million in the prior three months and profit of $36 million a year earlier, the Paris-based company said in a statement. The surveyor’s order backlog declined to $1.1 billion from $1.2 billion at the end of March and $1.35 billion at the end of 2013.
“We anticipate 2014 to remain difficult,” Malcor said, citing “unpredictable” spending by customers, pressure on prices and delays in contracts being awarded.
CGG recorded $230 million in non-recurring charges in the second quarter including $120 million for restructuring costs, according to its statement. Negative free cash flow was $210 million and net debt stood at $2.58 billion, the company said. No “major” payment installment on debt is due before 2019.
“We are at ease with the situation,” CFO Stephane-Paul Frydman said on the conference call.
The surveyor retained a goal of expanding its margin on earnings before interest and taxes by 400 basis points in 2016 from last year, Malcor said.
The company is closely monitoring export controls to Russia after the U.S. and European Union increased sanctions over the crisis in Ukraine. “For the time being from what we know, we don’t anticipate any issue,” Malcor told the conference call.
The seismic market is expected to shrink 6% this year and the market for survey equipment 15%, CGG said in a presentation. Spending by oil companies on exploration will fall 7% and isn’t expected to start increasing until 2016.
In an interview last month, Malcor rejected speculation over the possibility of a hostile takeover of the company.