Viridien Société anonyme (VIRI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the CGG Full Year 2020 and Q4 2020 Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Friday, 5th of March 2021. I'd now like to hand the conference over to CGG. Thank you, and please go ahead.

Good morning, ladies and gentlemen. Welcome to this presentation of CGG's fourth quarter and full year 2020 results. The call today is hosted from Paris, where Mrs. Sophie Zurquiyah, our CEO; and Mr. Yuri Baidoukov, our Group CFO, will provide an overview of the fourth quarter and full year results as well as provide comments on our outlook. As a reminder, some of the information contains forward-looking statements. Subject to risks and uncertainties that may change at any time, and therefore, the actual results may differ materially from those that were expected. Following the overview of the quarter and the full year results, we will be pleased to take your questions. And now I will turn the call over to Sophie.

Yes. Thank you, Christophe, and good morning, ladies and gentlemen. Thank you for participating in this Q4 2020 conference call. A presentation will cover our fourth quarter and full year 2020 operational and financial results. So I'm on Slide 5 now, and I'll start with a few remarks on 2020. During the year, we faced one of the worst crisis based on its brutality, speed and magnitude that the industry has ever seen. Our clients reacted very rapidly to the COVID pandemic. And by the end of Q1 have started to cut CapEx dramatically. This led to around 30% reductions for the full year which is, in fact, closer to 50% if we just look at Q2, Q3, Q4 combined. Throughout 2020, most of our large international oil and gas company clients focused on reorganizing and reassessing their oil and gas portfolio for cost reductions and postponements. New activity was paused and only critical projects moved forward. In Europe, we also saw many reposition themselves as energy providers, strengthening the development of the renewable energy road map. Our business continuity at CGG across the challenging year was exceptional. Our processing centers and manufacturing plants continue to operate without interruptions, and we executed all of our multi-client programs offshore and onshore, and we continued client interest, our business continue to plan and our strong acquisition partners. 2020 was a true test of the resilience of the newly repositioned CGG out of acquisition and on to its leading and differentiated businesses, which I would call quite successful. Moving on to Slide 6. Looking at how CGG responded, along with our excellent efforts to maintain business continuity. First, I'm very pleased for our timely completion of the exit from the acquisition business in the first quarter of 2020 and our focus on our core business lines. In 2020, in a shrinking market, we reinforced our market share in all core businesses. In Geoscience, as demand for reservoir development and production optimization was accelerating, our unique best-in-class technology geared towards high-density data sets was well positioned. In Multi-Client, all our 2020 surveys were focused on mature producing sedimentary basins and had good client support and in Equipment, we delivered over 360,000 land channels and enlarged our installed base. In 2020, we also quickly adjusted our cost, adapted to our clients' rapidly changing activity levels while preserving our differentiated capabilities. Our segment free cash flow was positive at $50 million before change in working capital. Overall, the past year validates our strategic road map. And now as market gradually strengthen, we can look forward to building the future. I believe that CGG's new strategic rationale and value in our industry were confirmed in 2020 and remain strong looking forward. Slide 8. After a low Q2 and Q3, the last quarter saw a seasonal uptick of 41% compared to the average of Q2, Q3. This came from strong Multi-Client and Equipment sales. Full year segment revenue was $955 million, down 32% compared to last year and in line with our clients' reductions of E&P CapEx. I know one of the concerns of our investors is our exposure to exploration, which has now reduced to less than 25% of our revenue. Most of our activity is driven by development and production and our revenue dynamics are a proof of that. Adjusted segment EBITDA margin was 43% for the quarter and 42% for the full year, which again demonstrates our resilience. With a very high level of revenue in December and an increase in inventory of land equipment for the 2 large mega crews awarded to our Equipment division, change in working capital was highly negative at 88 -- minus $88 million in Q4. For the full year, segment free cash flow was positive at $50 million before highly negative $89 million negative million -- change in working capital. This puts our liquidity, $385 million at the end of December which allows us to operate comfortably. I'll now cover our Q4 2020 operations by reporting segment. Starting with GGR on Slide 9. In Q4 2020, GGR revenue was $176 million, up 18% sequentially, but down 36% from the previous year. Despite a significant decrease in revenue, GGR delivered a solid 63% adjusted EBITDA margin. Now Slide 10 in Geoscience. In Q4, Geoscience revenue was $75 million, down 2% quarter-on-quarter. As expected, Geoscience production was more resilient than our other businesses because of its backlog coming into the crisis. The business was supported by more stable activity for large independents and national oil companies, along with a sequential increase in GeoSoftware sales. We also continue to experience sustained demand for our products and services for our clients' reservoir development and optimization activities. While we have prioritized most offshore development projects are continuing and require advanced imaging to optimally position production wells. Our GeoSoftware business was successful in retaining maintenance revenue, which also supported our performance. The business continuity of our Geoscience division has been excellent. All projects throughout the pandemic were delivered on time with excellent quality, and the total production per head was fairly stable at 238,000. Slide 11 on -- for Geoscience operational highlights. Advances in acquisition technology, particularly ocean bottom nodes can provide the added data that is required for advanced processing to emit complex subsurface structures, and this can make a big difference in the ultimate economics of a development project. CGG significant lead in imaging technology provides value to our clients, and it's why they tend to privilege CGG solutions when the stakes are high or in complex subsurface environment. Our market share increased in 2020 to 41%, thanks to our Geoscience leading technology that continues to be recognized by our key clients and is also consistently rated #1 in their supplier evaluations. As our clients reconsider reduction in their geoscience teams, and we consider the boundaries between internal and external imaging work, we see more interest in dedicated center models in which they can secure a dedicated pool of people and access CGG's latest innovations. We currently have 7 such long-term contracts that allow a stronger partnership with our clients and provide visibility into future revenue streams. The most recent win was a 3-year extension of our Oman PDO center until 2024, and we have been providing value in this center in that country since 1994. Slide 12. Looking at our technology this quarter, I'd like to highlight satellite mapping, where through our unique capabilities to harness the data from Earth observation satellites to address a diverse range of challenges faced by the energy, mining, engineering, environment and defense sectors. In that case here, clouds can fully partially mass the grand in satellite imagery, for most applications need to be identified and excluded from processing, which is a very time-intensive process. Applying a deep learning approach we achieved results that outperformed the existing benchmark, allowing us to provide more accurate results from algorithms run on this type of data. Now to Slide 13, still with Geoscience technology. And that second example of technology is about the application of our latest imaging algorithms to resolve the subsurface under gas clouds. Takehavet is a large field in the Barents Sea, surrounded by complex gas clouds, which creates significant challenges for imaging at reservoir levels. This example is taken from our Multi-Client top size survey. Our superior top size acquisition configuration enables the recording of extra data when compared to a traditional streamer acquisition, and this, in turn, provides better data for our advanced time lag FWI algorithms. In this example, we're using our time lag FWI to build an incredibly detailed velocity model of a very challenging and complex gas cloud area. We're able to resolve the continuity of layers, faults and generally the subsurface structures, which allows our clients to be much more effective in their interpretation work and down the road, better identify prospects, develop the field or optimize production. Moving on to Multi-Client with Slide 14. Q4 Multi-Client revenue was $101 million, up 38% quarter-on-quarter and down 40% year-on-year. In the quarter, we completed our nodes acquisition in the North Sea as well as a small complementary survey in a Norwegian North Viking Graben area. And by the end of the quarter, had essentially 1 vessel working in Brazil. With lower CapEx levels than previous quarters at $41 million, prefunding was much higher at the 171%, putting us at 89% for the year. Our most active basins are Brazil and Norway, where we have footprint that is particularly attractive to our clients. This leads me to talk about our exposure to federal land in the U.S. I did get questions after the moratorium was announced. At this stage, the most accepted belief is that activity on held acreage should not be affected in the future even if drilling permits might get more difficult to obtain. The GOM, Gulf of Mexico is federal land. But keep in mind that the GOM has been slow for multi-clients for a while already, and we've not made significant investments for many years. Our GOM net book value exposure represents only 5% of our net book value. And in 2020, revenue from the GOM represented 6% of our total Multi-Client revenue. The GOM is very important to our imaging business, but this business is focused on data that has already been acquired on leased acreage and is also development production driven. The recent announcement have thus far not affected our activity, and while we don't expect any impact at current going forward, it is an area that we will continue to watch closely. Our U.S. land footprint is not on federal land, and I do not expect any implications on this basin for us. On the contrary, we're actually already seeing signs of activity picking up as of Q4 on the back of strengthening WTI oil price. Looking at 2020, we started the year with several large committed projects, and it made sense to complete those projects as they had good prefunding and client maintained their interest. This led us to increased CapEx in a year of much lower revenue. All of our projects were either in the core developing basins of the world like Brazil or in mature producing basins with strong economies such as the U.K. North Sea, Norway or in U.S. land. This combined with a maintained level of client interest throughout the challenging year and strong prefunding increased my confidence that this CapEx was well spent and that we'll see good returns for these investments. Now on Slide 16. If you look at our complete Multi-Client footprint, in the last few years, we've made a conscious effort to shift our Multi-Client business away from new frontier exploration. Towards mature fields with a focus on field development, production optimization and near-field step out exploration. With this, we have avoided frontier exploration areas that we believed were less robust. A Multi-Client additions during the last 3 years, as highlighted on this slide, were all focused on the expansion and upgrade of our footprint in key mature and prolific basins. Our presence in the U.S. land was expanded by 15%, offshore Brazil centers and Compass were expanded by 23% and of presents offshore North Sea Boat, U.K. and Norway were extended by 34%. We believe that our exposure to reservoir development, production and infield exploration provides solid resilience through the cycles, particularly with current short and longer-term outlook. We expect that our clients will retrench into their core areas and prioritize capital expenditures on projects with lower risk or higher returns, both to manage through the existing challenging market but also to best support their longer term energy transition goals. Now on Slide -- on the next slide, Multi-Client solutions. In addition, we developed digital solutions to enrich our multi-client offering. We added to our portfolio of seismic data, a library of well data synchronized with our existing footprint. We digitalize our geology library and developed a unique taxonomy that enables the meaningful classification of subsurface information and the extraction of insights for all available data sets. The process that will utilize to classify information with our taxonomy is unique in the industry and is attractive client interest. We've also been working on our client portal that enables them to access information about all of our available data and their entitlement. So moving on to Slide 17 for the equipment and key financial indicators. It was a great quarter with $108 million revenue, more than double Q3. We delivered over 100,000 channels, including a large number for mega crews in Saudi Arabia. Equipment also delivered WiNG land node systems in Latin America. Marine equipment sales remained quite low, driven by spare section sales of Sentinel streamers to install base. 2020 equipment sales were $291 million, down 35% year-on-year and have been more resilient than expected, thanks to North Africa and Middle East land activity. OPINC for Q4 was positive as we were above our breakeven threshold. Moving on to Slide 18. Sercel equipment has been selected for 2 3D mega-crews recently awarded in Saudi Arabia as well as for smaller 2D survey project. These awards confirm the technical superiority of our equipment and the confidence that major clients and local contractors have it in its capabilities. For each crew, we are talking about more than 60,000 channels of our 508XT cross-tech acquisition system, 540,000 XT10 geophones, and over 30 Nomad 65 Neo Vibrators controlled by VES 464 electronics. The fact that we've had Sercel systems running for years on other crews in Saudi Arabia and in the wider region combined with the consistent excellent performance in terms of both data quality and productivity, most likely played a part in those awards. We should also highlight our very flexible manufacturing organization, which has been enabled to manufacture at full speed this equipment and organize the logistics to deliver it in a very short time frame even during the challenging year. In terms of data quality, we see the clear potential for continued innovation in seismic sensors, our third-generation of MEM sensors, quiet size, which is unique in terms of broadband capability and fidelity of the signal required. So far, these cutting-edge sensors equip our 5-weight cross-tech systems and 2 new nodal equipment we recently released, the realtime QC capable WiNG system for onshore and a GPR system for ocean bottom surveys. Marine activity has been slow, limited to spare parts. I do expect that the streamer replacement cycle is getting closer as the streamers that are in use are getting older and older, and there are no more used parts available in the market. With this, I will now give the floor to Yuri for more financial highlights.

Thank you, Sophie. Good morning, ladies and gentlemen. I will now comment on the full year 2020 financial results and start with Slide 20. Looking at the consolidated P&L for 2020. Segment revenue amounted to $955 million, down 32% year-on-year. GGR revenue was $668 million, a 30% decrease year-on-year with 70% weight. Geoscience revenue was $328 million, down only 15% year-on-year, and Multi-Client sales were $340 million, down 41% year-on-year or lower after sales with refunding revenue remaining stable year-on-year. Equipment revenue was $291 million, down 36% year-on-year with 30% weight. Segment EBITDA was $361 million, and adjusted segment EBITDA was $402 million before $42 million severance cash costs, a 42% margin. Adjusted segment EBITDA in 2020 was down 44% year-on-year. Segment operating income was negative $164 million, and adjusted segment operating income before $213 million of nonrecurring charges at the operating level was positive $48 million. Cost of financial debt was stable at $134 million and included a non-cash peak component of $46 million. Net loss from continuing operations was $376 million, including $269 million of non-recurring charges. Net loss from discontinued operations was $63 million and included $67 million of non-recurring charges. Group net loss in 2020 was $438 million including $336 million of non-recurring charges. Please refer to Slide 30, which provides more details on the breakdown and nature of the non-recurring charges in Q4 and for the full year 2020. Moving to Slide 21 and looking at our cash flow. Segment free cash flow for 2020 was negative by $39 million including significant negative change in working capital of $89 million on increased equipment inventories and year-end receivables for mega-crews deliveries in Saudi Arabia as well as year-end receivables in Multi-Client business. Segment free cash flow also included $14 million of paid severance costs. Segment free cash flow before change in working capital was positive at $50 million. It included Multi-Client cash CapEx of $239 million, up 29% year-on-year and prefunded at 89% as well as industrial cash CapEx and R&D costs in our Geoscience and Equipment businesses of $64 million, which were slightly down year-on-year. 2020 cash cost of debt was $80 million and lease repayments were $55 million. Net cash flow from discontinued operations was positive at $15 million, and cash costs related to the implementation of CGG 2021 plan were at negative $87 million. Overall, net cash flow in 2020 was negative at $247 million. Moving to Slide 22 and looking at our balance sheet. Our liquidity at the end of December decreased to $385 million but remained solid. Following the exit from acquisition business, CGG has lower capital intensity and requires around $150 million to operate the business. With no debt maturities before 2023, our current liquidity levels allow us to continue securely navigating through the current market environment. At the end of December 2020, our gross debt was at $1.389 billion, or $1.234 billion before application of IFRS 16 with the following breakdown: $644 million 1st Lien dollar and euro bonds due in 2023. And $577 million 2nd Lien euro and dollar bonds due in 2024, $13 million of other items mainly accrued interest and $155 million lease liabilities, including $42 million of Galileo financial lease and $113 million of operating leases under IFRS 16. Looking at our financial leverage ratios at the end of December 2020, net debt to shareholders' equity ratio was at 90% and segment leverage before IFRS 16 was at 2.8x net debt to EBITDA. At the end of December 2020, our capital employed was at $2.17 billion, down from $2.3 billion at the end of 2019. It included net working capital after IFRS 15 at $212 million. Goodwill was down at $1.19 billion, corresponding to 55% of total capital employed. And Multi-Client library net book value after IFRS 15 was at $492 million including $410 million of marine and $82 million of land net book value. Other assets were at $433 million including $268 million of property, plant and equipment, down from $300 million at year-end 2019. Including $156 million of IFRS 16 right-of-use assets, of which $42 million related to Galileo financial lease. $147 million of other intangible assets, down $13 million year-on-year and $17 million of other non-current assets, down $13 million year-on-year. Other non-current assets and liabilities were $250 million liabilities net. Shareholder equity was at $1.16 billion, including $45 million of minority interest mainly related to [indiscernible]. Now I hand the floor back to Sophie for our 2021 business outlook.

Yes. Thank you, Yuri. I'm on 24 now with the ESG commitment. Greenhouse gas emissions are major concern, and each one of us should play a part in the solution. CGG has a long history of excellent ESG practices. And we are committed to achieve carbon neutrality by 2050 with a 50% reduction of our greenhouse gas emissions by 2030. We have defined this general reduction objective into very specific KPIs that we're monitoring and we'll be improving on every year. For example, 30% of our energy consumption for our data centers comes from green energy. And we will switch more and more of our contracts to green energy as it becomes viable in all of our locations. Keep in mind as well that our technologies significantly help our clients be more effective and efficient with more drilling success, reduced drilling risk, less wells drilled, thus supporting them in reaching their greenhouse gas emission goals. Moving on to Slide 25. We already presented this slide, and I continue to advance, and we continue to advance our strategy and develop and commercialize new technologies in 3 key areas: one, those directly adjacent to our core businesses; two, utilizing our core capabilities in new sectors; and three, leveraging our capabilities to support our clients on their energy transition journey. The sectors that we are focused on at current include digital geoscience, energy transition, earth observation and infrastructure monitoring. These are all areas in which we currently do business and are staffed with experts to deliver the products and services. I mentioned earlier our satellite mapping business, we see many growing areas of interest and activity that use satellite images, combined with the high-end computing, advanced technologies and geoscience expertise. This includes supporting our clients in reaching their ESG and energy transition goals, monitoring of infrastructures and facilities as well as analysis of subsidies and geo hazards. We continue to focus on these areas and today have new commercial engagements around pollution monitoring and mine tailing stability. With Sercel quiet sea sensors, we provide passive acoustic monitoring to detect mammal's presence with an unequalled degree of precision. We have also launched our S-lynks solution offering for the structural health monitoring market. Now moving on to Slide 26 with the market outlook. Given the acceleration of COVID-19 vaccinations across the world and the end of the pandemic crisis in sight, 2021 should be less volatile than 2020. If oil price remains above $50 a barrel, oil and gas companies should gradually increase their spending as their current investment levels are not enough to meet future demand even in a lower energy transition scenario. Oil and gas will remain at the core of oil and gas companies and as its cash flows needed to progressively transform their energy portfolios and meet the world's energy demand through the transition. In this environment, Geoscience imaging technology will continue to play a key role as it enables clients to allocate the investments more effectively. We expect 2021 Geoscience spending to be slightly up in our central scenario, with an acceleration in H2 if the oil price remains in the $55, $65 range. 2021 budget from IOCs were cautious and focused around existing producing areas, but several clients have mentioned potential budget increases if the market further improves. It's also increasingly clear that the crisis has delayed the oil and gas investment that are required to meet future energy demand, and there will eventually be some form of catch-up. New barrels will be more difficult and riskier to extract, and the latest technology will play a key role in the characterization of new prospects and discoveries along with their effective development and production. Slide 27. In 2021, CGG will continue to invest in geoscience technologies that support clients' prioritization towards reservoir development and production optimization. After low Q1, we expect our Geoscience activity will start recovering during the second half of the year. On the back of solid demand for best-in-class subsurface imaging technologies and sustained activities with large NOC. Our Multi-Client business will reduce CapEx, keeping its focus on expanding our unique footprint in offshore Brazil and in the North Sea. We will also continue to reprocess existing data libraries with our latest imaging technologies where we see clear client interest. Our Equipment business should benefit from solid deliveries for land mega-crews in Saudi Arabia in H1 and improved demand for its large portfolio of WiNG nodes onshore and GPR nodes offshore. CGG will continue to hire new talents for our existing core businesses and for our new growth areas as we progressively develop our energy transition businesses, leveraging our core capabilities. In conclusion, on Slide 20, with this outlook and assuming the gradual emergence from the COVID-19 pandemic and no deterioration in oil and gas market conditions, CGG revenue is expected to increase by low single digits year-on-year, with growth in Equipment, gradual recovery in Geoscience in H2 and reduced Multi-Client prefunding revenue. EBITDA is expected to remain stable with a less favorable business mix. Net cash flow is anticipated to be positive. The group will continue to focus on capital discipline and cash generation. Multi-Client cash CapEx is expected to be reduced to around $165 million, and industrial CapEx is expected to be stable around $70 million. Looking at where CGG is today, we are the asset-light company we wanted to be with 3 differentiated businesses all well positioned in their markets, focused with best-in-class technology and increasingly working together to best serve our clients and to develop unique solutions. Together with the ongoing development of our new growth areas, CGG is well positioned for the future. The company celebrated its 90th anniversary this year, and we're setting the stage for our continued success both in 2021 and for well into the future. Thank you for your interest, and we're now ready to take your questions.

Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Jean-Luc Romain from CIC Market Solutions.

It relates to the non-oil and gas sales in the Sercel segment. What kind of percentage of sales could it reach in like 2 and 5 years' time?

I'd say it's a little early to say for sure, and this is something we're working on to better get an understanding on for Capital Market Day at the end of the year. But we're certainly wanting to see some substantial -- we wanted to become substantial in the revenue stream. And we're looking at, say, that at a certain, let's say, 5-year range, it represents something around a 20% to 30% of the equipment revenue. But in the short term, we're looking at a number around $50 million.

And your next question comes from the line of Kevin Roger from Kepler.

Question. I actually had one on the U.S. Gulf of Mexico, but you clearly already answered it during the presentation. Thanks for the color. I have like two questions. The first one is related to the debt position and the refinancing. You did not mention any, let's say, strategy, something like that related to the refinancing. So I wanted to know if you can provide us some color on the potential refinancing in the coming weeks, months, et cetera. And the second question is related to the backlog because when you did the trading update, clearly, we saw a nice increase in your backlog at the end of Q4 compared to end of Q3. I was wondering if you could provide us the backlog number at the 1st of March, for example or the last data that you have available, please.

So I'll give the floor to Yuri. [Foreign Language], Kevin.

Regarding refinancing, to be honest, nothing changed since we spoke last time in the sense that our strategy remains exactly the same. So we're still working on and preparing for potential refinancing. And of course, our objectives are to refinance the existing capital structure, the first and the second lien bond into one instrument, bring back an RCF. And we were publishing our URD or annual report today, which will include audited financial statements, and that will open the first technical window until the very end of April when we enter into the next blackout period before the reporting of Q1 results on the 12th of May. So the market conditions, as you know, are -- remained quite attractive, and we're looking for opportunities.

Okay. So the -- like the window is from today to the end of April, basically?

Technical window, yes, that's correct. But naturally, we will communicate in due course, if and when the transaction happens.

Okay. Okay. And secondly, on the backlog, please, if you can provide the last number that you have in front of you?

Yes. Actually, we don't -- Kevin, we don't publish the backlog every month. And to be honest, it's not so meaningful to look at it on a really monthly basis. And the one we publish is the backlog for Geoscience. But I could give some color on the engagement of our clients. It's been when we came into the year, January has been really slow. I mean, we had good actually order intake in December. It was almost like a sort of an afterthought, say, hey, we need to make sure we send the orders and we secure that at year-end. So January, February, to a certain extent, has been slow. I'm talking here Geoscience. But now we're starting to see a bit more interesting conversation from clients. It seems like they pass the reorganization I'm talking here the IOCs. There has been substantial head count cuts and changes affecting the Geoscience and the Exploration department. So it seems like we're past that, and we're starting to have more meaningful conversation, talking about processing for larger projects. So I feel it's a bit positive. I'm cautiously positive, but it's not necessarily yet in the numbers. Because before, sometimes we get the award, we do get the verbal awards. And I would say the verbal awards are encouraging. And that's for Geoscience. For equipment, we have interest for our OBN. If you remember last year, we were planning to sell so OBN already when -- in Q1, that was an ambition for the year because it was going to be a good year for OBN. And of course, the crisis stopped that, but now we're having again, very interesting conversation for our GPR nodes, and we're hoping to make a big sale this year.

And your next question comes from the line of Christopher Møllerløkken.

Just to clarify the guidance on EBITDA. So when you're guiding a stable EBITDA, is it focus in that from the base of the segment EBITDA of 2020 or the adjusted EBITDA of 2020.

I'll let Yuri address that one.

Yes. The guidance we're giving related to EBITDA, not adjusted EBITDA. Now as Sophie mentioned in her presentation, we need to look obviously at the revenue mix as well and take it into account because the Multi-Client CapEx is significantly lower this year. And therefore, pre-funding revenue in Multi-Client, with still very good prefunding rates, of course, will be lower year-on-year as well. Secondly, and Multi-Client, obviously, EBITDA margins are the highest, right, as you all know. Secondly, we see growth in the equipment part of the business. And of course, again, EBITDA margins in the equipment business are lower than in Geoscience and Multi-Client. So in other words, when talking about EBITDA dollars, which will be stable year-on-year, you need to take those elements into consideration.

And also another clarifying question. You're also guiding positive free cash flow, which is, of course, very positive for 2021. But does that include or exclude the non-recurring cash costs of $65 million?

It includes everything. So we're talking about positive net cash flow, everything in.

And final question for me. We know that Sercel or your equipment business is busy with the deliveries to Saudi Arabia both in Q4 but also in first half, as you said. But will that actually also caused that Sercel will be a more, H1 year -- this year because normally, historically, Sercel has always had a strong fourth quarter and may that impact be less this year due to early deliveries?

So Christopher, on that front, yes, with regard to the land equipment sales for the mega-crews in Saudi Arabia, this is an H1 story. But as Sophie just mentioned, we also have secured orders for the OBN equipment, and this is the H2 story.

[Operator Instructions] and the next question...

Yes. I wanted to -- sorry, I was on mute. I wanted to add to for Christopher, in terms of the equipment cycle. It's too early to know what Q4 will be made of. But keep in mind that on the land side, we're selling to -- we have a huge installed base. And Algeria, India, Pakistan, there's lots of other countries that are quite active. And typically, we run with 3 months' backlog. So we don't know yet what Q4 will be made of but I do expect land activity will continue to be active. And as well that, I hope, now the streamer will start picking up as well.

Your next question comes from the line of Mick Pickup from Barclays.

Very simple for me. A lot has been asked. Can I just take the 10,000-foot view. Clearly, your clients and your -- the Geoscience departments within a lot of your clients have been slashed dramatically. And with the changing focus, I'm assuming at some stage, there's going to be a new generation of E&P players out there in some of the mature basins. Just wondering, thinking longer term, whether you think the crisis of last year probably generates more workloads for you than actually removing workload.

Yes, Mike (sic) [ Mick ]. Yes, it is one of the scenario. It's really difficult know which side the coin will be falling. And every client is different and starting from a different place with a different culture and has a different view of what they consider core and noncore. We already saw in the previous crisis some clients actually flipping over and deciding they didn't want to keep their internal processing groups. And we are heavily engaged with those clients. But I think now it's -- there's a more acute need for those clients to further reduce their head count. And Geoscience is indeed the target because it's difficult to justify keeping fixed costs for a volume of activity that's not necessarily steady because they have so many fields that they need to study at some point in time. And therefore, I do think there is an opportunity. And I mentioned this in my comments that we are engaged with a number of clients in conversations where they want to try and secure our people in a more of a dedicated format, meaning it's like semi having their own resources, but not quite their own resources, so they don't get the fixed cost component of in-house and yet they still get some continuity in the support. So I do think there is an opportunity. And similar to like the '80s where clients made big ships towards revisiting what they did internally and externally. And that's when, if you remember, the service sector really created and consolidated. I do think there's an opportunity around designs this round.

Okay. And can I just look at the seismic business. Clearly, we've got 4 Multi-Client players out there 3.5, depending how we want to look at it, dedicated Multi-Client players, and we've got 2 marine vessel contractors left. Now it seems to me that there's a lot of multi-client players and not many vessel players. How do you think of the balance of the market after the crisis?

Yes. It's a tough question, Mick, because we, of course, look at that. On the marine contractors, we're not too concerned. We have our commitment and special relationship with share water that defines very clearly how we get access to vessels. So we're quite fine on that, and the Polarcus vessels will end up somewhere. They might end up with those 2 players, but they might end up somewhere else and don't forget that you've got the Chinese players [indiscernible] and BGP that also have vessels. So it seems like 2, but it's not quite 2. Now on the Multi-Client players, I get -- I do get the question very often of consolidation. It's not clear to me what you really gain from consolidation because the multi-client is almost like a real estate business. You have your position, and we all have quite different positions. So if the client wants to expand or get some data in the pre-salt area of Brazil, this is CGG. So in that sense, we can operate fairly fine in parallel, as long as we don't sort of fight over the same area, which hasn't traditionally been so much the case. And where we've tried actually to partner when they are risky areas, and that's why the risky areas like we did in the Barents Sea, which is more frontier, and we felt like, okay, we'll do a partnership where it's more risky. So I don't have a clear answer to you. I think it can stay that way. There's no sort of imperative for consolidation, is my view.

And your next question comes from the line of Christopher Møllerløkken.

Just a follow-up on the comments from Mick. Regarding the Multi-Client business. So we do see that, of course, our clients remain cautious to cut exploration spending again this year. At the same time, we see that you and all the other multi-client companies reduced multi-client investments quite significantly. Would you say that when you're planning new projects currently that you actually see less competition for the prefunding money as all the players are reducing investments? Or is it roughly the same, just you are reducing in line with your clients?

Yes. I would say, if anything, it's a little bit less competition than a year before the crisis hits. Now there's a bit less competition, but there's also less projects. I'm not sure what the -- how this -- how all the equation ends up fitting together. But it feels a little bit less competition in the sense of more discipline where perhaps in the past, we would have, if you remember the story with PGS, where we fought against each other in the Gulf of Mexico for the same area, I think that's over. I mean because it's more of more discipline. So in that sense, that reduces a little bit. The competition, there's more sanity about making sure whatever investment we do is good. But the truth is in line with clients' reductions of CapEx, there is less opportunities, but it's not tight. Again, there's always that connection saying like multi-client equals exploration. It's not true anymore at all. Like I said, most of our projects are development and production related, the not at all exploration. Thank God. Otherwise, we would not do much. So -- and we hear clients saying, now for me, we'll do the multi-client only. They don't want to do many of our clients just don't want to go back to the proprietary. They have seen the benefits of multi-client not having to deal with all the permitting and the integration and the visibility. And they finally, realized that at the end of the day, not sharing the data doesn't put them at a lower competitive advantage. What the competitive advantage is about interpretation, it's about the know-how, how they make the decision, how they manage their portfolio and not so much about the seismic data itself.

Thank you. There are no further question at this time. [Operator Instructions]

It sounds like we've covered the questions from everyone. We have upcoming meetings anyway, and we're always available to answer further questions. It's been great to so listen to have you all on the call. And thank you very much for your questions, and I look forward to talking to you in the near future. Thanks a lot.

Thanks, everybody. Goodbye.

Bye. Thank you. Have a good day.

Thank you, everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect.