Viridien Société anonyme (VIRI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the CGG Q2 2022 Financial Results Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your speakers today. Please go ahead.

Thank you. Good afternoon, and good morning, ladies and gentlemen. Welcome to this presentation of CGG's second quarter 2022 results. The call today is hosted from Paris where Mrs. Sophie Zurquiyah, Chief Executive Officer; and Mr. Yuri Baidoukov, Group CFO, will provide a number of view of the quarter results as well as provide comments on our outlook. Let me remind you that 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, we will be pleased to take your questions. And now I will turn the call over to Sophie.

Thank you, Christophe, and good morning, good afternoon, ladies and gentlemen. Thank you for participating in this Q2 2022 conference call. We'll move on to Slide 5, and I'll start with a few comments on the macro environment. The oil and gas market started after years of underinvestment, combined with post COVID strengthened demand and increased geopolitical uncertainty with the war in Ukraine highlighting the importance of energy security. Energy transition continues to progress, but it will be a long process during which all sources of energy will be required. Short-cycle projects and unconventionals will not be sufficient to meet demand, and new resources will progressively need to be discovered. It will take time to bring meaningful new oil and gas supply to the market, which means that we anticipate entering a longer period of sustained high oil and gas prices. While NOCs private equity-backed companies and, to a certain extent, independents, are reacting more swiftly with increased CapEx, IOCs are still constrained by public pressure towards oil and gas investments, along with a capital discipline, deleveraging and shareholder return commitment. Given the significant cash flows generated by the sector, E&P companies are still in a strong position to both respond to the demand for hydrocarbons and invest into the decarbonization of our industry and energy transition. I expect significant increases in E&P CapEx in 2023 and beyond, and we're already seeing the first signs of return to more frontier exploration with longer cycles, particularly offshore this quarter. Overall, in Q2, we saw more active commercial discussions and engagements across our business lines, signaling further upcoming market improvements. In Q2, CGG delivered strong financial performance with segment revenue of $240 million, up 66% pro forma year-on-year; EBITDA at $126 million, multiplied by 3 year-on-year; and positive net income at $16 million. Revenue was driven by the strong activity of our DDE segment, as [ flight ] starting to catch up on Geoscience work and data purchases. Net cash flow was a negative $56 million for the quarter, including a $42 million negative change in working capital and $47 million cash cost of debt. However, we remained net cash flow positive at $13 million for the first half of the year. I'll go on to Slide 7 now. Our core markets continue to recover, and Q2 DDE segment revenue was high this quarter at $194 million, up 100% pro forma year-on-year with growth in both Geoscience and Earth Data. Profitability significantly increased with a high 70% EBITDA margin and a 43% operating income margin, driven by the revenue mix, the full effect of cost savings and some pricing improvement. On Slide 8 for Geoscience. Geoscience external revenue was $70 million in Q2, up 16% pro forma compared to last year. Sequentially, Geoscience revenue was softer this quarter due to the timing of project completion. We continue to anticipate a high single-digit growth for the full year. Total geoscience order intake value was up 61% year-on-year during the period of January to June 2022. The total production per head KPI continues to improve as we're achieving the full effect of cost reductions, combined with efficiency gains and the strengthening commercial environment. We anticipate our HPC capacity to be about 300 petaflops at the end of 2022, which is required to support our near-term growth perspective. The construction of our new European HPC hub in Southeast England that will become operation in [indiscernible] half of 2023 is progressing as planned. Moving on to Slide 9. Imaging activity is the strongest in North America, where customers require advanced technology for infrastructure-led exploration in the Gulf of Mexico. Technology differentiation is the strongest in North -- technology differentiation continues to be key, especially in complex geologies, where we win the majority of opportunities. Our unique technology significantly contributes to reducing drilling [ wells], increasing success rate and optimizing production. And on this slide, we show a beautiful image of the complex geology of the North Cape Basin in the Barents Sea at 500 meters depth. The acquisition was designed to improve the resolution of the shallower depth, and finally image the interface between salt and overburden. Thanks to our recent advanced 200 hertz 4-way form inversion imaging algorithms, we were able to reveal abundant geological detail which will be critical for exploration. Similar technology will prove important for the analysis and monitoring of carbon sequestration and storage reservoirs. In Beyond the Core, we were awarded a large contract over 2 years by BP to support their digitalization journey. And more specifically, we will work with the asset team to help extract the full value from their data and enable more efficient and higher quality data-driven decisions. Our subsurface experts and data scientists will apply our advanced and bespoke machine learning models and data pipeline to transform and curate data to help solve complex asset-specific challenges. On Slide 10, we developed one of the largest, and from our analysis, the most efficient, high-performance computing capability amongst all industries globally because, over the decades, our imaging algorithms, combined with the volumes of data that we utilize, have continuously demanded compute power and storage capability that are beyond general industry offering to effectively respond to our clients' needs. With the emergence of the cloud, our clients are increasingly looking to procure compute power as a service, and we think it is a market that we can serve effectively based on our highly customized technology, middleware and software that is specifically optimized for the unique challenges faced by our industry. Beyond our industry, there are huge quantities of data acquired with the Internet of Things. AI and machine learning requires large concrete power capacity to train the models. And many industries including biomedical, automobile and aeronautics, need access to large and efficient compute power for the modeling of their products. And to be clear, this is not just about the raw compute power, but it's the design of the IT stack to address specific requirements along with all the layers of software and services that make the best use of it. Our experience in optimizing high-performance computing centers spanned over 7 decades, resulted in a highly differentiated HPC solution, much of which can be packaged and offered externally. Agnes Boudot recently joined CGG to lead the continued expansion of the HPC and Cloud Solutions business. Previously, Agnes led HPC AI and Quantum global business line at ATOS where she successfully grew the activity over the last 5 years and captured many references in the academic world and diverse industry around the globe. Moving on to Slide 11. In Q2, we had 2 vessels working on our Earth Data programs in the Norwegian North Sea and 1 vessel offshore Brazil. Earth Data cash CapEx was $75 million this quarter, up 72% year-on-year. Prefunding revenue was $36 million with a prefunding rate of 48%. Earth Data aftersales was $88 million this quarter, significantly up year-on-year, sustained by sales in Latin America, Gulf of Mexico and Norway and significant transfer fee. Moving on to Slide 12. We continue to invest in our core basins with a 12,000 square kilometer and tariff project offshore Brazil in the South Santos Basin and with our Norwegian NVG East West program. These 2 programs are continuing from earlier in the year, and we expect to attract more prefunding in the upcoming quarters. In addition to the StagSeis reprocessing project in the Gulf, we started another reprocessing project in the Brazil Fos Do Amazonas. Both projects are driven by the need to find new exploration targets in the most established and prolific basins in the world. The image on the slide is a nice example of the value of OBN taken from our U.K. North Sea survey. It is an image with velocity overlaid on the seismic image. With OBN data and our unique advanced technology, we can significantly improve the velocity model and increase illumination. As a result, we enable our clients to see geological features more clearly and see some structures that have never been seen before, especially under the salt. And finally, we continue to expand our offering of data to address energy transition, especially CCUS and mining. Moving on to Slide 13. A PaleoSalars study is a good example of what we can deliver to the mineral and mining industry by combining our broad expertise in geology and geophysics along with our geology data in satellite imagery. The Lithium Triangle is an area between Chile, Bolivia and Argentina. This study uses mass of lithology, rock age, surface structures, erosion and topography in the near surface to produce lithium concentration estimates in the different basins. The output plan with a different rates of lithium is used by the exploration departments of mining companies to identify potential new commercial deposits. Moving to SMO now on Slide 14. Our Sensing and Monitoring segment revenue was soft this quarter at $46 million, down 4% year-on-year in the absence of large mega-crew deals and few contracts slipping into Q3 of this year. At this level of sales, the EBITDA of the Sensing and Monitoring business was negative at minus $7 million. We anticipate strong acceleration in the second half of the year with orders either in backlog or currently in negotiation. However, the timing of the Saudi Mega Crews is slipping into 2023 as the acquisition tenders are yet to come out. Typically, there is a 6-month mobilization period between the award and the start of acquisition. Slide 15. During the quarter, land equipment sales represented 28% of total sales due to a shift of some deliveries to Q3 2022. Several land nodal WiNG systems were delivered to Europe and Asia. Marine equipment sales represented 49% of total sales, driven by significant deliveries of GPR300 OBN nodes. Sercel was awarded a major contract for the supply of a complete Sentinel streamer set, the first order of a complete streamer set since 2014. And sales from Beyond the Core business were $6 million, sustained mainly by increasing demand from the defense sector. And in summary, following the slow first half of the year, we anticipate a significant strengthening of the Sensing and Monitoring business in H2 2022 and even more so in 2023, driven notably by the upcoming tenders for large land seismic mega crew and OBN mega crews in the Middle East and North Africa with equipment deliveries expected at the end of 2022 or in H1 2022. Slide 16. During the quarter, Sercel completed the acquisition of Geocomp, which is specialized in high-value services and products for geotechnical risk management and infrastructure monitoring. Headquartered in Acton Massachusetts and present in key U.S. states, Geocomp employs 120 engineers, technicians and support staff. Its 2021 revenue was $20 million. This acquisition is a major step in our strategy to become a significant global player in the fast-growing infrastructure monitoring industry. We strongly believe that the complementary technologies and skills of Geocomp and Sercel will provide cutting-edge solutions to address the numerous infrastructure challenges in the U.S. and into international markets. Also this quarter, Sercel was selected as a successful bidder for the acquisition of ION Geophysical Corporation software business. ION's software business is the leader in navigation software both for vessels and ocean bottom nodes. The integrated navigation systems of ION is at the heart of seismic operations and it has been adapted to serve outside the industry for general marine fleet management. This acquisition is also a great opportunity for Sercel herself to further diversify and to develop a layer of value-added solutions on top of the equipment. Now handing the floor to Yuri to cover the financial details.

Thank you, Sophie. Good morning, and good afternoon, ladies and gentlemen. I will comment on the Q2 financial results. Looking at our income statement on Slide 18. Segment revenue was $240 million, up 66% pro forma year-on-year. The respective contributions from the group's businesses were 29% from Geoscience, 52% from Earth Data, 81% from the DDE segment, and 19% from Sensing and Monitoring. Segment EBITDA was high at $126 million, a 3x increase year-on-year with a 52% margin due to the favorable business mix and the full benefit of cost reduction measures. Adjusted segment EBITDA was $122 million. Segment operating income was $66 million at 28% margin and adjusted segment operating income was $62 million. IFRS 15 adjustment at operating income level was negative $7 million, and IFRS operating income after IFRS 15 adjustment was $59 million. Cost of financial debt was $25 million. The total amount of interest paid during the quarter was $47 million. Other financial items were at negative $4 million. Taxes were up this quarter at $14 million, primarily due to $5 million negative impact of currency exchange rates on deferred tax assets. CAG returned back to black with net income positive at $16 million. Moving to Slide 19 and looking at our simplified cash flow. Segment free cash flow was $9 million, including $34 million net proceeds from the Galileo headquarters building sale and leaseback, $16 million payment for the acquisition of Geocomp, and $42 million negative change in working capital and provisions. Total CapEx was $85 million. Of which, industrial CapEx was $4 million, research and development CapEx was $5 million, and Earth Data cash CapEx was $75 million. After $12 million lease repayments, $5 million CGG 2021 plan cash costs, $1 million negative free cash flow from discontinued operations and $47 million paid cost of debt, the net cash flow was negative $56 million. However, net cash flow for the first half of the year was positive at plus $13 million. Looking at our balance sheet on Slide 20. Group liquidity amounted to $417 million at the end of June 30, 2022, and included cash liquidity of $317 million and $100 million undrawn RCF. Group gross debt before IFRS 16 was $1.13 billion, and net debt was $812 million at the end of June 2022. Group gross debt after IFRS 16 was $1.23 billion, and net debt was $909 million as of June 30, 2022. Segment leverage ratio of net debt to adjusted segment EBITDA was 2.1x at the end of June this year. Capital employed was $1.93 billion, down $63 million from the end of December 2021. Net working capital after IFRS 15 was at $163 million, down from $229 million at the end of December last year, primarily driven by significant reduction in net accounts receivable, lower deferred revenue liability from IFRS 15 and reduction in personnel liabilities, partially offset by growing inventories in Sensing and Monitoring. Goodwill was stable at $1.1 billion, corresponding to 56% of total capital employed. Multi-Client library net book value after IFRS 15 was up at $443 million, including $412 million of Marine and $31 million of Land, and the noncurrent assets were $328 million with $155 million of property, plant and equipment, including $70 million of IFRS 16 right-of-use assets, down $50 million from year-end 2021, primarily due to Galileo sale and leaseback. And $89 million of other intangible assets were stable from year-end 2021. Noncurrent liabilities were at $81 million down $19 million for year-end 2021. And shareholders' equity was up at $1.024 billion, including $40 million of minority interest mainly related to stamp duty. Now I hand the floor back to Sophie for conclusion.

Thank you, Yuri, and we're on Slide 22. Before concluding this Q2 review and opening the floor to questions, I'd like to highlight CGG's contributions to the sustainability of the energy sector value chain. Through our advanced technologies and data, we provide a much more accurate understanding of the earth and subsurface, which can be turned into decisions that help our clients to be more efficient and sustainable, including reducing the carbon footprint. Key risks such as [indiscernible] gas clouds can be avoided, and pure and more productive wells can be drilled. In Beyond the Core, we support our clients with the information needed to enhance the exploration and production of renewals that are required for the energy transition and with the information that is needed to effectively evaluate the potential of carbon storage reservoirs as well as efficiently monitor their operations. Our company's high-end technology business profile, along with our carbon intensity reduction efforts and profile that has been consistently dropping since 2019, is recognized by ESG rating agencies. Only 2 oilfield services companies, including CGG, have achieved an AA rating with MSCI. And with an index of 17.9, CGG is ranked #2 by Sustainalytics among 113 energy service companies. So now I'll conclude on Slide 23. Our industry is entering a favorable multiyear upcycle as it will require time and capital investment to bring new oil and gas on stream in a sustainable and low carbon intensive way, while also developing the renewable sources of energy that are required to effectively manage through the energy transition. Step-up exploration and unconventionals while active will not be sufficient to compensate for the natural depletion of reservoirs, and traditional exploration will have to progressively resume. Our unique and advanced subsurface technology will be key to face the energy challenges. I am convinced that carbon sequestration at scale will be required to meet the world's emission reduction targets, and this will require a comparable level of technology to characterize and monitor the reservoirs for carbon storage. We're heading into this up cycle from a leading market position across our businesses and with unique capabilities that allow us to participate in many markets beyond our core markets. Our ability to deliver exceptional technology, data, earth information, subsurface images, data science, monitoring solutions and high-performance computing, all with outstanding results and excellent services, will be even more important than it is today for our current clients and the clients that we're building beyond the core. As we move into this new world, our clients will increasingly need to rely on the best-in-class partners that have scale and expertise. And I'm convinced that we will develop more of these partnerships moving forward. The CGG organization has been very resilient through the recent difficult times and successfully able to navigate through the post-COVID challenges, including supply chain disruptions. I would like to thank the women and men of CGG for the outstanding commitment and work. As a conclusion, I expect that we will continue to see improvements across all our businesses, core and beyond the core, as the year progresses, and we'll see further accelerated growth in 2023 and beyond. Thank you for your interest, and we're now ready to take questions.

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

Congratulations on your results. Good prospects. I have 2 questions actually. The one is on equipment, and I was wondering you mentioned for the first time prospect for Marine equipment. Is it only for OBN? Or do you have prospects for old streamer sale? That is my first question. Second question is about your aftersales. Do you expect that -- aftersales to remain strong in the second half after this good second quarter performance? And how much was the transfer -- you linked to transfer fees from 1 operator to another.

Okay. Well, thank you Jean-Luc. So I'll start with the first question on SMO. The driver is both actually for -- if you look into 2023, it will be both OBN, ocean bottom nodes, and streamer. So this year, the Marine is very much driven by the OBN already. As you know the OBN is exposed to the production side, and it's experiencing significant growth. And that's why we delivered OBN last year, we're delivering more this year and even more next year. But next year, as we had anticipated the streamer replacement cycle is finally kicking in, actually, we have one complete set of streamer on order for a Korean company, but that's not in seismic sector. It's different applications, but we are anticipating to start seeing that streamer replacement kicking next year as well. So it'll be both. And so the aftersales, we are seeing signals of strong Q4 sales. I can't yet talk about Q3, but I think we'll have a good year, generally speaking, on aftersales and much improved from last year. And we're getting ready to -- for strong Q4 sales. In terms of transfer fees, this is something that we have recurring yearly, I would say. Every year, we do have transfer fees. And I would say, for the full year, the amount of transfer fee is anywhere between $13 million, $15 million on a recurring basis, and this year will be the same.

We'll now take our next question. Please standby. Question is from the line of Kevin Roger from Kepler Cheuvreux.

Sorry if you mentioned that during the early comments, but if I look at the Imaging business [ SIR ] you have a top line that is lower in Q2 than in Q1, while basically the backlog is full, et cetera. So I was wondering if you can explain us why Q2 is lower than Q1 on the imaging business, please, Sophie? The second one is related to the cash and the working cap. So you had a negative movement on the working capital in Q2 from Q1. What should we expect in terms of working cap a [Audio Gap] net cash flow for the H2. Is there any big movements to debate on that side? And the third one is more globally. One of your competitors in the seismic business, Schlumberger had just had the conference call last week, and they had quite very bullish messages on the seismic business saying that there were a lot of discussion currently happening that things were accelerating [indiscernible] areas, that a lot of new survey were coming on, et cetera. Is it something that you see also on your side, Sophie? Do you share the statements that were made by Schlumberger last week during the conference call? Do you share everything with them?

Okay. So what I'll do, I'll -- on the one front, first of all, Kevin, it's good to -- thank you for your questions. I'll answer your first and third question, and then I'll pass it on to Yuri for the cash and working cap. But on Geoscience, the quarter is not necessarily the right metric and especially the variation from quarter-to-quarter. So I think you heard correctly in my comments that the -- generally speaking, this business has been strengthening. We're getting more order intake. Now what happened on Q1 and Q2, and we expected to have the question, is it just the -- how the projects get sequenced, and we had a little bit of up from the project by releasing some provisions. But this is just due to the -- how project completing, new projects starting. There is really nothing to be inferred from the especially lower Q2. So we're still on our trend, and that's why I pointed out that on year-on-year trend we are still on -- first of all, you saw that H1 to H1 was still a double-digit increase. And then for the full year, we're still expecting to have -- to be in the high single digits [ producing ]. So really nothing special to be seen from that slight decrease from Q2 to Q1. The fundamentals are strong.

Sorry. So if I can jump in, sorry, but considering that you say business is entering backlog very well loaded, et cetera, what will be the kind of top end, top line that you can generate with Geoscience with the top line that you can generate with everyone to be loaded, et cetera?

So that's the high single-digit growth from last year and full year, on full year is what we're flat in pro forma is what we indicated in the notes. And then we'll continue to see -- I mean, from the beginning, when we went down, we went down by high single digits or 10%, 15%, but then the way up is somewhat similar. And we are a little bit constrained by the people signed.

Okay. Okay. Understood.

That's one. And then on the comments from Schlumberger, I did read that, and I was quite happy to see that they are bullish on exploration. I think they're seeing -- they're exposed to more parts of exploration than we are, in particular to the well construction and the drilling. And they're seeing that part too. And I would say, if I just look at the -- purely the part that we play in, again, I'm optimistic. I'm sending positive signal that we're entering an up cycle. But as of H1, I wouldn't say this that we would be nearly as bullish as they are based on just Stage 1. But I'm confident about Q4. Again, we're seeing clients coming back to the conversation. I'm convinced there's no choice other than resuming proper exploration or traditional exploration, meaning the ILX, the infrastructure-led exploration, is not going to be enough to meet the demand. So in that sense, I'm very optimistic about 2022 going forward. But I think the H1, at least for us, is good, but we are not bullish really as much as their comments. And now back to Yuri.

Yes. Thank you, Sophie. Yes, Kevin, back to your second question about kind of how is cash and working capital is shaping up in H2. So the -- in equipment business, in SMO business, we do see, as Sophie was already commenting, the year being quite backloaded. And therefore, the negative change in working capital in that particular business will be there. So it will depend also on where we end up at year-end in terms of receivables, right. And the second known -- unknown is, of course, a Multi-Client or Earth Data business. And there, like always, it will depend where we finish the year or December in terms of aftersales, right? So basically, again, we see that overall directionally, Earth Data business will be also backloaded. In other words, Q4 higher than Q3, but ultimately, until midnight December 31, we will not know exactly where we land in terms of receivables at year-end. All in all, on the full year basis, of course, our objective remains the same to be cash flow positive before negative -- before changing working capital, in other words, again, depending on where we land with working capital, we'll see it.

We'll now take our next question. [Operator Instructions] This is from the line of Daniel Thomson from BNP Paribas Exane.

Just 1 clarification, if I may. Last quarter, I think you said your guidance was factoring in SMO one land mega-crew and 1 OBN award in 2022. And there's also some potential upside from tenders in [indiscernible] , Libya and the U.A.E. Is this still your latest outlook given your comments on Saudi Arabia? And has there been any progress on those potential tender announcements related to North Africa and U.A.E?

Yes. Thank you, Daniel, for that question. Yes, I mean, I indicated in my comments that some of the upside that we were seeing for this year, including those mega-crews in Saudi Arabia, have shifted into next year. So technically speaking, the tenders, I'm fairly convinced they will come up this year. But as we are already in July, you need the time to the tenders to come up, for the responses to be given. And then there's a 6-month mobilization. So very likely, you're talking about mobilization sometime in Q1 or Q2, which means the equipment will be sold and required, I think, most likely in 2023. And that is for the Saudi mega-crew. Now there's other deals that we have in the pipeline in North Africa and an OBN that we'll be selling. So if I look at the setup we need to do for the second half of the year for SMO, obviously, the first half is kind of soft. We have a big chunk of it already in the backlog and then another chunk which is already in discussions. So we're missing -- there's a bit of a -- we're missing a little bit of it, but we have a general confidence that we'll be able to see that acceleration in the second half of the year. Now compared to my comments in Q1, we'll end up softer to where I thought 3 months ago. But it doesn't change our guidance basically for an EBITDA an OPINC because I have always had the intention to sort of compensate for it and find other ways to meet our objectives. But if I just look at that business line and we knew coming into the year it would be a sort of a transition year, and it ends up being the case. And [indiscernible] anything on this, but as Yuri points out, we're missing Russia, and that is the case. And it's -- we had talked about a $14 million, sort of $36 million impact. And that's, for sure, we're missing it.

[Operator Instructions] I'll now take our next question. [Operator Instructions] It's from the line of John Olaisen from ABG.

This is John Olaisen from ABG. I have a question regarding fresh news out today that there's been a deal struck between the Senators Schumer and Manchin in the U.S., and that this deal will mean opening up the Gulf of Mexico for lease rounds again. Is that something you're updated on further?

Thank you, John. Actually, I haven't seen the news. And it would be good news because the Gulf of Mexico definitely needs a little bit of a boost. It's been stalled, as you know. And I mean we're busy in the Gulf of Mexico, but on the back of production-related activity or infrastructure-led around existing infrastructure. So we look forward to seeing bit more active activity in the Gulf of Mexico. But it does need that 5-year plan to be reestablished. So basically, we don't -- we're missing that 5-year plan to be able to resume these activity in the Gulf of Mexico.

It seems to be...

P Go ahead.

Yes, there seems to be rumors out that this potentially could be launched even already now in August. But just wondering, if that happens, of course, you have a big library in the Gulf of Mexico. Is it possible to give some indication of what would you expect if that happens? Would you expect strong late sales already from Q4? And also on the Multi-Client investment side, you haven't done any big new conventional [ old ] streamer multiclient services in the Gulf of Mexico for a while. Of course, you've done ILX and OBN. But if Gulf of Mexico opens up again, would you then plan for new conventional 3D seismics or is it [ old ] streamer?

Look at the Gulf of Mexico, and definitely gulf of Mexico in a core area for us. If you look at historically in the Gulf of Mexico, you had layers of technology. And right now, technology that's required is really that OBN technology. So I would expect the Gulf of Mexico is the next. If we were going to invest, it might be -- that'll be either for node or a combination of hybrid node and streamer, but it does require that node to get a much more accurate velocity model because the Gulf of Mexico is complex, and it requires that advance. Now what we've been doing in the Gulf of Mexico is a lot of reprocessing because you need both to get a better image. You can advance the technology through the acquisition itself, having better data, more accurate, more dense data, but also the imaging technology advances and we're able already to provide significant uplift onto existing data set, which is why [indiscernible] data. And that we've been doing throughout the last years. That's something we're continuing. Actually, we did -- I did say we're reprocessing the StagSeis. Remember, StagSeis is our central grown ultra deepwater data sets. And that's where you've had, for example, the North plateau is moving total to shell, for example. So there is -- it's a very prolific area, and there's still interest in that area. And there are some blocks that are held, and we see the interest in the held blocks. I imagine that there is an opening, then all of a sudden, we'll see more [indiscernible] interested in, for example, in the StagSeis. And we started the reprocessing of the StagSeis, sort of because we saw the interest in that area. So we would accelerate and maybe do a larger one because we started with the subset of the data set. So we would go either from the reprocessing because it can give data quicker to clients. And then we would start talking to whoever is interested to -- for that next layer of technology that will be required.

My second question is regarding streamer capacity in the offshore -- in the most steamers are offshore. But streamer capacity in the industry for those who have vessels. Let's talk now that the vessel owners are planning to bring out more vessels due to higher demand. But I guess with the structural changes we've seen over the last 3 years, with Shearwater making their own streamers and it's the same with PGS. Would Sercel be in a position that they could sell more offshore streamers and who would potentially be the clients, please?

And I think definitely, we're in a good position to sell our streamers. And so one of the indicators that we follow is we look at how many vessels are in operation at any point in time. and we look at sort of our market share, if you wish. How many of those vessels are equipped with Sercel equipment. And right now, it is 10 out of 16. So we still have a fairly significant market share of vessels that are in operations, which tells me that, yes, when and if, because you're saying, yes, you would do in PGS have their own streamer, but they're not manufacturing either. I think everybody is kicking the can and trying to delay making any spend in CapEx. And so I do think that we have a significant market share of vessels in operation. And again, our vessel -- our streamers are also used Beyond the Core, so they need for oceanography, [ but as we state that we sold it to Korea ]. And then there are vessels perhaps that are country-specific vessels that maybe don't get counted in that sort of international vessel count, like Turkey has a vessel. So we do sell streamers in those countries as well.

Have you seen...

But the issue we have been facing is that there hasn't been any CapEx spent in streamer replacement. That full stops the story.

And we haven't seen any upticks or any orders or indications of clients asking for price quotes lately?

That conversation is continued throughout, right? Because the need is there. The money, just the investment capacity isn't there. The market hasn't allowed this to happen. And when the market needs, it needs those marine prices to go up, and they are going up, but arguably, they're still not very high. So the service companies need to start generating cash and being comfortable about the outlook as well because now if they are generating cash a quarter, do they have a confident outlook in 2023 and '24 so they could start making this $13 million CapEx investment that's required to change it for streamer set. But another data point I might give you is that we're starting to see an increase of technical downtime. And not just from our side because we are clients of vessels, but it is pretty much across the service providers, which kind of tells me that there is investment required.

So technical downtime on the vessels.

That right. And we're fine.

That's due to streamer issues or engine issues? What we have typically reached.

General equipment state and it's not just us, it's an issue across the industry. It's not equipment to use, they are more than 10 years old. So 10, 11 years old. And there's a point in time where it's not going to continue working.

It'll be interesting when we reach that point, that will be -- should benefit Sercel a bit. My final question, is it possible to quantify the increase that you see in the day rates?

I mean we're not -- I mean the market is -- there isn't a lot of data points, actually. But I would say -- I mean, first, the vessel companies will be better off actually talking about it because we -- we had our -- with Shearwater we have our agreed market rate that we have with our agreement. But eventually, after mid this year, we're going to go to market rates, but we'll see -- I mean there will be a moderate increase in that and that's why I'm saying that the market rates aren't very, very high yet. It does need a -- and then the rates as well, when I look at the rate myself, I include the project cost. And if you look at the project costs where we're paying the fuel and the fuel has gone up as well. So there's other sources of inflation than just vessel providers. But we're far from good -- what I would call a solid market rate around investment. It needs a bit more.

We'll now take our next question. [Operator Instructions] This is from the line of [ Mila Velimukhametova from BlackRock]

I've only got one. I noticed you removed the quantitative guidance, unless I'm mistaken, from your outlook. Just wanted to check if that's -- if my understanding is correct or if I've missed it, perhaps, and you removed it earlier. But yes, I just wanted to check if that's correct. And also, if you could give some sort of indication of obviously, the turn of what the discussion is quite positive. But I just wanted to check if there was something quantitative you could give us in terms of revenue development or yes.

Actually, we didn't remove it. We just -- there wasn't anything changed that we just didn't feel like we needed to repeat it, but it's just unchanged basically. Yuri?

Yes. Yes, that's exactly the case. So basically, we felt that we don't need to reconfirm our guidance every quarter if there's no change, right? So basically, effectively reconfirming it by default. And in this context, we reconfirmed it in Q1 because Q1 was obviously low, but now Q2 is good, and basically, yes, we see -- as Sophie was explaining kind of the upcycle in front of us. So we felt that there is no need, I would say, to reconfirm guidance.

We'll now take our next question. [Operator Instructions] And the question is from the line of [ Baptiste Lebacq from ODDO. ]

Very easy question, I guess, for you regarding lithium business. A couple of years ago, it was in 2020, if I'm not wrong, you decided to exit non-seismic data acquisition. And what is exactly your policy regarding lithium business? Is it just data interpretation? Or can we see you coming back with the data crews in order to make also the collecting of the data upfront?

So I will state it again. There is absolutely no way that we would ever get back in anything that has a acquisition in its name. So no, it is what we provide. We provide an understanding of the subsurface. We provide data processing. We provide data. And like, for example, this is one of the new studies that we believe, this is like analysis of lithium. So we're using our geologies. We're using our geology database to be able to provide information to the mining companies for them to do exploration. Now let's say there is data required to do a lithium exploration project. It might require those -- one of these claims that we sold. We will contract it as we do for the vessels, or the client will contract it and we'll process the information. So it would be exactly the same business model as we do in the seismic portal. So we'll continue focusing on our excellence and our capabilities. We're not going to step up back into anything that has acquisition in it. Yes. I think it is just a commodity, right? And so it's just -- I haven't changed my mind on that. And actually, the -- when I look at what's going on right now, I'm actually even more comforted that we made the right decision.

Thank you. At this time, there are no further questions. So I'll hand back to the speakers.

Great. Well, thank you. Thank you very much for all the great questions and for attending in the day that I know has been busy with the lot of calls today. And of course, we are available for any follow-up questions. Thank you very much, and have a great evening.

Thank you all. Goodbye.

Thank you. This does conclude the conference for today. Thank you for today. Thank you for participating. You may disconnect. Speakers, please stand by.