While the company is certainly positioned in a hot sector, results out of leading seismic company CGG Veritas
In a vacuum, there's nothing obviously wrong with the numbers that the French/Texan (Texrench?) firm reported on Thursday. In dollar terms, revenues were up 33%, operating income increased 50%, and net income doubled. EBITDA margin increased six points to 45%, on strong performance from both the services business and Sercel, arguably the National Oilwell Varco
Part of investors' disappointment may stem from the greater surge experienced by others in the space. Ion Geophysical
Just to get everyone up to speed, seismic surveys use acoustic waves to identify and model potential hydrocarbon-bearing structures. A wide-azimuth survey enhances illumination and resolution of the resulting image, but according to the company, this takes three to six times as much vessel time as a regular 3-D survey. So it wasn't cheap for CGG to add this more detailed data to its Gulf of Mexico library, and it noted on the call that after-market sales were slower than anticipated.
I think the hit to CGG shares is overblown, for two reasons.
Given the frantic moves by Schlumberger
With regard to the new wide-azimuth data, or any newly shot seismic, it's common for amortization charges to obscure the actual cash-generating power of the data. The seismic data business is a beautiful one, in which customers pay for the same data over and over again. Particularly given this data's high quality, I'm sure it will be of economic value far beyond what accounting conventions might dictate.
Related Foolishness:
- I love the smell of seismic in the morning.
- There's even more to learn from the seismic story.