CGG Plunges After Sticking With 2013 Targets on Steady Profit

CGG, the largest seismic surveyor of oilfields, plunged to its lowest level in five months after reporting almost steady second-quarter profit and saying it was “reasonably confident” of meeting financial goals.

“There could have been some disappointment that the company didn’t raise targets,” Christine Ropert, an analyst at Gilbert Dupont in Paris who recommends buying the shares, said by phone. Sales and earnings before interest and taxes exceeded expectations, she wrote separately in a research report.

Net income of $36 million compared with $34 million a year-before, Paris-based CGG said today in a statement. Sales rose 24 percent to $1.03 billion and Ebit 22 percent to $117 million. It held a 2013 target to boost sales by a quarter, Chief Executive Officer Jean-Georges Malcor said in a presentation.

CGG slid as much as 6 percent and fell 3.7 percent to 18.30 euros by 4:34 p.m. in Paris after earlier rising 5.3 percent.

Earnings were spurred by the purchase of Fugro NV’s seismic division, which added four vessels to its fleet, for 1.2 billion euros ($1.6 billion) last year. Oilfield surveyors expect demand to rise for services as explorers spend more on extraction from depleting fields and in the search for new reserves. The seismic business uses equipment to locate oilfields under the sea bed.

“We are reasonably confident we will be within the bracket,” Malcor said of Ebit guidance for 2013 of $580 million to $600 million. CGG posted $279 million for the first half.

“We are in line with our plan, maybe a little ahead,” he said. The target range depends on “strong” equipment and multiclient business in the fourth quarter and no further deterioration of security in locations like the Middle East.

Second-quarter results were “well above expectations,” Bertrand Hodee, an analyst at Raymond James, said in a note.

CGG had a stable 11 percent group Ebit margin. The margin for equipment-supply unit Sercel was 28 percent, down from 32 percent, and 5 percent for the acquisition division, up from 1 percent. The end-June order backlog was $1.3 billion.

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