French geoscience firm CGG is to cut 950 jobs, or 13% of its staff, and reduce its vessel fleet amid the ongoing, prolonged oil price drop.
CGG has already been implementing a fleet reduction program, since announcing its “Transformation Plan” at the end of 2013, when it had 18 vessels. The plan was to reduce the fleet to 13 vessels, but this was revised to 11 3D vessels in the firm’s Q4 2014 results, a figure which has now been achieved and since further dropped.
Today, the firm says it will reduce the fleet to five vessels by Q2 2016, and cut 950 jobs worldwide.
CGG's Q3 results saw stable sequential revenue, at US$470 million, with $4 million operating income, but $101.5 billion in assets impairment and write off and non-recurring charges, due to the vessel fleet reduction and redundancies, as well as other goodwill impairment.
Jean-Georges Malcor, CGG CEO, said: “In a very challenging market, our good cash performance this quarter is the result of the cost and capex reduction measures taken since the end of 2013, in the context of our Transformation Plan which aims at transforming CGG from a seismic acquisition company into an integrated geoscience company.
"Anticipating market conditions that continue to deteriorate in Q4, and that could remain at such levels for longer, we intend to strengthen this strategy, which has been implemented over the last two years. This new major step in our transformation will mainly translate into the resizing of our marine fleet to five vessels, two thirds of their capacity being dedicated to multi-client programs.
"Looking forward, this action will allow our contractual data acquisition activity to represent less than 15% of our consolidated revenue, thereby reducing the group's exposure to this cyclical, highly competitive and high capital-intensive business. This adjustment of our fleet and the cost-reduction measures will result in the cut of around 13% of job positions worldwide. This new phase in our Transformation Plan is being submitted for the approval of our employee representatives to be implemented during the first half of 2016. It triggers $950 million non-cash costs already booked in our Q3 accounts and around $200 million cash costs to be booked in the future.
"We plan to finance the group needs, notably related to the Transformation Plan, through disposal of non-core assets and equity offering or sale of a minority interest.
"This new phase will allow us to build a rebalanced company supported by our unique positions in equipment, in multi-client, in imaging and reservoir and by our technology expertise in data acquisition. CGG should remain resilient all along the downturn of the cycle to become strongly cash-generative when the market bounces back.”
Read more
Subscribe
