This is a stock market frustration for CGG, where revenues tend to rise when oil prices are high, Corporate News

With rapid oil prices (+ 50% since the beginning of the year to date), the Stock Exchange imagined that CGG, which specializes in underground exploration, will take full advantage of it, as its turnover depends on investment in exploration and production of oil companies. , naturally, are more willing to spend money on the discovery of new fields, when the price of crude oil at least covers the costs.

Thus, after the fall in investment in 2020 after the health crisis, companies such as TotalEnergies and Saudi Aramco then sharply reduced their spending to protect their profits and dividends paid to their shareholders. and a timid recovery in 2021, 2022 was full of promise: in early March, Brent prices rose to more than $ 130 a barrel, the highest since 2008. And now, this morning, CGG announces, in connection with the publication of reports for the first quarter, reducing its turnover (-28% to 153 million euros). This is a disappointment for Euronext Paris, where shares, which fell 20%, show the biggest drop in the day, remaining at the top of the charts since the beginning of the year (+ 50%).

Just delay?

Financial analyst Nicola Montel of Portzamparc, owned by BNP Paribas, is surprised to note that CGG’s results are “widely” below expectations. The gross operating surplus of 39 million (+ 31%) is three times lower than expected by the financial community, while the expected operating result will be profitable, with a loss of € 5 million. Given the quarterly copy of the French company, which is able to convert signals with a wide bandwidth sent to the basement, Nicolas Montel no longer advises to buy CGG on the stock exchange; it now has a “hold” recommendation, with a target value reduced to € 0.81 (ie still 20% below the current price).

The consensus of analysts, recorded by the financial information agency Bloomberg, now paints a portrait of a community that is no longer part of the purchase of CGG in the stock market (change in the recommendation of Portzamparc is not yet considered here)

The consensus of analysts, recorded by the financial information agency Bloomberg, now paints a portrait of a community that is no longer part of the purchase of CGG in the stock market (change in the recommendation of Portzamparc is not yet considered here)
The consensus of analysts, recorded by the financial information agency Bloomberg, now paints a portrait of a community that is no longer part of the purchase of CGG in the stock market (change in the recommendation of Portzamparc is not yet considered here) | Photo: Bloomberg

Baptist analyst Lebak of the private bank Oddo BHF considers his advice “neutral” and his target of 1.18 euros to monitor the beginning of the year, which he described as “hard”. Now a scenario of gradual growth over the next three quarters with, according to CGG management, accelerating decision-making and spending by oil client companies in the second half of the year. There is a lag in sales in the second half of the year. CGG demonstrates confidence and confirms its financial goals for 2022, namely a 10% increase in turnover.

Financial analysts, if they also expect an increase in billing, however, are more moderate, especially since in the recent past CGG has regularly failed to achieve its goals. At Portzamparc, Nicolas Montel expects growth of 7.4%, while the overall consensus is approaching 5%. “Rising oil prices must first benefit short-cycle projects and capital expenditures on development [sur les gisements déjà découverts]. In the second stage, the recovery of exploration costs seems more likely, even significant., summarizing the Oddo BHF. If the West wants to do without Russian hydrocarbons, it will have to invest, and not just in renewable energy.