Thread regarding CGG Veritas layoffs

Grew up in NY, but worked for CGG from 1966 to 1976. First couple of years in Massy-Verrieres (outside Paris), and after that helped found the operation in Calgary. Was their first hire of a programmer back in the days where the transition was being made from analog to digital and remember the initial meetings in the board room, teaching upper management what programming a computer to process seismic data really meant. They had bought an EMR Computer, with some of the management not quite understanding the beast they had gotten involved with. Then got assigned to help some geophysicists make the transition to programmers. A few months later I remember the celebration, champagne and all, when the first digitally process section was successfully produced. The geophysicists learned programming, while I learned geophysics, seismic and a bit of geology, and polished my French. Having a jump on the industry they quickly expanded to be (for a time) the largest geophysical company in world. At 24 it was a thrilling experience, and as a programmer I eventually got to play with the most powerful computers of the era.

In 1976 I got interested in microprocessors, to which the management said "why waste your time with those, when here you have the biggest toys to play with, and those micros will never amount to anything." (!) So I and a fellow employee left to start our own company. But I still have a great fondness for CGG, and I do hope they survive. Milk River, AB, Canada

@5cqd Nailed it on the head, posting separately so more people can see it.

When I read comments I see

• People at the old VeritasDGC thought it was great and a company run correctly

• People at the old CGG thought it was great and a company run correctly

In practice, independently both companies were probably great.

Everyone thought the merger was a disaster.

First we use the CGG geocluster software which eventually gets remarket'ed geovation

Then as the company were unable to get this software to work correctly at the user level and it became so complicated for the seismic processor to manage we dump this and switch to tango, so to fool the clients into thinking progress has been made and the company didn't return to the 2007 version, tango is remarket'ed as geovation2 - the next great improvement.

This incompetent chopping and changing by management causes the poor geophysicist working hard to pull the cart to need to learn, multiple geocluster levels and their quirks (3100, 4000 and 5000), then geovation1, which was geocluster butchered to try at the user level to make it work like tango and finally geovation2 (which was actually tango - where Veritas was back in 2007). How many years and how much money did management waster on making these decisions. With this the display applications kept were nearly 2 decades old.

For the processing geophysicist, with all these different platforms, 4D processing in particular becomes a nightmare. An army of programmers are kept on to manage all the different aspects of each system (more overhead and contribution to the companies high costs) and the processing geophysicist then is advised by management to lie to our clients reasons as to why we cannot repeat a 4D flow. Forget the suggestion of a near perfect repeat, the software problems are such that even a single 3D processing step may be impacted by overnight changes to libraries meaning if a production run takes 3 days to complete, the first sequences of a production run can be processed differently to the mid and final sequences. If we consider these changes in a 3D sense, most are small and would go unnoticed, out of curiosity if a processor immediately rerun the same production run with identical parameters and difference this result to the original, potentially if your module libaries were update the results are different. Therefore with this level of problem how can 4D data be processed with any integrity .

In the mean time Crawley takes its eye off the business ball, the ratio of managers riding the cart increases massively compared to those pulling the cart and with this the costs CGG charge to do business rises. Around these good times, many clients complained direct to management about CGG processing costs, those pulling the cart also fed client cost comments back to management and management instead of listening and looking at why costs rose alarmingly high blamed the clients for being cheap.

As the oil industry is cyclical, eventually the seismic processing market collapses, CGG are losing money fast, around the world management and HR decide to get rid of people, but only those pulling the cart and with appalling behaviour (most notably in Crawley - see other posts in thelayoff). However those sitting on the cart (management and HR) were relatively unaffected. In trying to protect their own jobs they did not reduce the highest overhead employees who do not bring in revenue management contributed to the bankruptcy of the company.

CGG have had some brilliant processing geophysicists, unfortunately too many of these were refused management promotions as they were too good at making money and have left or surprisingly made redundant.

If I was thinking about where to place my bets during chapter 11 and how best to protect my investment;

Where does the blame lie...

What solutions can be put in place...

If the highest levels of CGG management are this incompetent, why would any investor want to give them another go.

=> A major management clear out is required at multiple levels (managers in each of the processing headquarters and at corporate level). Will those left be of caliber to save the company.

=> Or, take what money is left in assets and move on.

It is very sad to see a good company to come to this point. Among all the geophysical service companies CGG always was one of the favorite. I hope they will be able to come out of Chapter 11 successfully. However, in the meanwhile CGG needs to do a thorough house cleaning by getting rid of most of their out-dated incompetent managers and down to team leaders and replace them with more competent ones. Otherwise CGG undoubtedly fall into Chapter 7 bankruptcy.

The thinning of the herd for the geophysical seismic industry. CGG will eventually cease to exist as a company. It will be another historical footnote in the long line of oil and service companies that exist only as a memory. This is good for the other seismic companies that are still able to hang on.

CGG also has to raise an additional $500m to keep going. The question is from where? They did the same thing in 2016 to be able to offer package leaves and better cash flow. Don't think they have a magic money tree!

Due to the market situation and very slow seismic market, CGG cannot stop losing money per quarter. So who is wiling to bet on losing horse? I am not saying it is impossible BUT it is very hard tasks.

From my angle, they went for chapter 11 to buy more time in case to see if something big is actually going to happen in the seismic market . Apart from that I am sure that the top management are acutely aware that they have lost the battle, they just don't want to go down without a final fight. Chapter 7 is coming next. Correct me if I am wrong?

Moody's downgrades CGG

https://www.moodys.com/research/Moodys-downgrades-CGGs-CFR-to-C-and-PDR-to-D--PR_368354

Most bankruptcy cases are where companies can't pay suppliers; those major creditors then get to choose what to do to the company - as with Dolphin or Global Geophysical.

Chapter 11 protects companies from those debts, and lets them carry on trading, to see if there is a chance for the company to survive and everyone to get paid.

If the company is forced into liquidation - where everything that can be sold off, is sold off - then

the creditors might get a few cents on each dollar. If the company survives, they might get more - or all of it.

The challenge in this case is it is the bond holders who haven't been paid, not the suppliers. Companies issue bonds to raise money; bonds are not shares - you don;t own the company - but they have a repayment term and interest. CGG can't make those payments - interest - or pay back the bond holders.

So you have a conflict between the shareholders - who own the company - and the bond holders - who are owned a lot of cash. These are all investors, but different types. The bond holders will be more aggressive, looking for higher risk investments with big returns, very quickly. The shareholders will be banks, pensions schemes and so on who take a longer term view, for the most part.

One route is a debt-for-equity swap - so the debt from bonds become shares. That puts the current bond holders owning ~80-90% of CGG, so the shareholders (who have lost a lot of money since 2012) will go from owning most of CGG to maybe only 10%.

CGG also has to raise an additional $500m to keep going. So the things they have to do to survive are:

• get a business and financial plan that works in place; this might mean more cuts or selling off of company assets (or companies); and get the debt holders to approve this in principle by July

• start the process of raising the new $500m by July

• have the shareholders agree to the plan by end October

• have all of this signed off by the French and US courts by November

• come out of Chapter 11 in February 2018, with all of this in place

https://globenewswire.com/news-release/2017/06/14/1019746/0/en/CGG-Following-Agreement-with-Key-Financial-Creditors-CGG-Begins-Legal-Process-to-Implement-Balance-Sheet-Restructuring-and-Create-Sustainable-Capital-Structure.html

One thing to note is that a couple of French banks/investors on the shareholder side who each own >5% of CGG didn't take part in the discussions; they own about 18% of the shares based on the May press release.

CGG.PA today -4.66%

CGG.Nyse -8 %

New_York_Southern_Bankruptcy_Court

https://www.pacermonitor.com/court/58/New_York_Southern_Bankruptcy_Court

Isnt it now down to the courts to decide how CGG will need to run buisness wise ?

As I can see CGG is obviously not a going concern but the initial restructure especially in the marine dept has been cut to bear minimum, if thats not paying then will the courts decide weather to cut more vessels / departments. Tee worrying thing for CGG is the dormant vessels. They will have to go as assets and sold to highest bidder / scrapped isnt this is what bankruptcy is all about getting money back to stakeholders / investors first ? or is it still up to stakeholders to decide its a very confusing deep topic me thinks

I am ex CGG and got laid off about 6 months ago. I think CGG will be around but much smaller and weaker as of today. The French's management killed CGG already. I am not a financial guy and not sure how chapter 11 will help CGG exactly.

Regarding more CUT, friend of mine who is still on-board told me yesterday that more lay off is coming and probablely shutting down some departments and centers

Does this mean that landlords will start to kick CGG out of their rented offices?

It seems that the debt holders are going to get screwed and the top management will stay in place.

But K-Mart does not have a useless French management team running the show.

It is new. CGG are now bunkrupt. Chapter 11 is US bankruptcy, chapter 15 is US bankruptcy for international companies. Agree that discharging their debt won't save them. They were losing money in the good times.

https://www-marketwatch-com.cdn.ampproject.org/c/www.marketwatch.com/amp/story/guid/3D340D39-CCB8-4FE9-BD98-129D641A63A7

It is true but K-Mart had to close 2000 stores, sold many properties and reduced its staffs to 1/4 after filing for Ch11 in order to pay its due debts on time in order to satisfy the conditions set by bankruptcy court. In addition the market condition at that time started to improve or rather boomed which also helped K-Mart to recover from its bankruptcy.

Does CGG is willing to do the same thing to its employees, offices and properties if they have any? How about the market! There is no any sign that it is going to recover soon.

Although K-Mart saved from bankruptcy it is still struggling and still can not regain its market shares that it has lost to its main rivals Walmart and Target.

Finally if most of CGG debts have accumulated during the booming era how it is possible to pay it when the market is in recession?

CGG can still be around for many years.

Similarly, Kmart filed for Chapter 11 bankruptcy in January 2002.

Kmart is still around now.