With oil prices rising (+50% YTD at today’s point), the exchange imagined that the activity of CGG, which specializes in the study of tunnels, would benefit fully as its sales volume depends on investments in exploration and production by oil companies, which are of course more A willingness to spend money to discover new fields when the price of crude oil at least covers the costs.
So, after investments plummeted in 2020 in the wake of the health crisis – companies like TotalEnergies and Saudi Aramco then cut their expenses significantly in order to protect their dividends and the dividends paid to their shareholders. And a timid recovery in 2021, 2022 was full of promise, with the beginning of March, as Brent crude rose to more than $ 130 a barrel, the highest level since 2008. And now, this morning, CGG announced, on the occasion of publishing first-quarter accounts , its turnover declined (-28% to 153 million euros). It’s Euronext Paris’ disappointment, where shares, down 20% to 95 cents, posted their biggest drop of the day, while remaining at the top of the charts since the start of the year (+50%).
Surprised, financial analyst Nicholas Montell of Portzamparc, owned by BNP Paribas Group, noted that the CGG results are “Widely” Expectations below. The total operating surplus, at 39 million (+31%), is three times less than what the financial community expected, while the operating result, expected to be profitable, shows a loss of 5 million euros. In view of the quarterly edition prepared by the French company, which is able to convert signals with a wide range of frequencies transmitted in the basement into images, Nicolas Montell no longer advised to buy CGG on the stock exchange; It now has a “hold” recommendation, with the target dropping to €0.81 (ie still 15% below the current price).
Analyst Baptiste Lebacq, from private bank Oddo BHF, maintains his advice as “neutral” and his target of €1.18, on monitoring the start of the year that qualifies by him as ” Difficult “. The scenario now is one of gradual intensification over the next three quarters with, according to CGG management signals, an acceleration in decision-making and spending by client oil companies in the second half of the year. There is a lag in sales during the second half of the year. CGG demonstrates confidence and affirms its financial goals for 2022 and, in particular, a 10% growth in its turnover.
Financial analysts, if they also expect an increase in bills, are nonetheless more moderate, especially since in the recent past, CGG has regularly failed to achieve its goals. At Portzamparc, Nicholas Montell forecasts 7.4% growth, with consensus generally close to 5%. “The rise in oil prices should initially benefit short-cycle projects and development expenditures [sur les gisements déjà découverts]. Second, a rebound in exploration spending seems more and more likely, even necessary.”, we conclude at Oddo BHF. If the West wants to do without Russian oil and gas, it will have to invest, and not only in renewable energies.
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Meanwhile, CGG is undergoing its biggest stock market drop since mid-March 2020 when the announcement of its first bookings in Europe caused a panic in the stock market.