CGG (OTC:CGGYY) Q3 2022 Earnings Conference Call November 2, 2022 1:30 PM ET
Company Participants
Christophe Barnini – Head, Group Communications and Investor Relations
Sophie Zurquiyah – Chief Executive Officer
Yuri Baidoukov – Group Chief Financial Officer
Conference Call Participants
Jean-Luc Romain – CIC
Daniel Thomson – Exane BNP Paribas
Kevin Roger – Kepler Cheuvreux
Guillaume Delaby – Societe Generale
Baptiste Lebacq – ODDO BHF
Neyla Velimoukhametova – BlackRock
Christophe Barnini
Good morning, ladies and gentlemen, and good afternoon. Welcome to this presentation of CGG’s Third Quarter 2022 results. The call today is hosted from Paris, where Mrs. Sophie Zurquiyah, our Chief Executive Officer; and Mr. Yuri Baidoukov, our Group CFO, will provide an overview 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. Following the overview of the quarter, we will be pleased to take your questions.
And now I will turn the call over to Sophie.
Sophie Zurquiyah
Thank you, Christophe, and good morning and good afternoon, ladies and gentlemen, and thank you for participating in this Q3 2022 conference call. So let me start with a few comments on the macro environment.
With the combination of continued underinvestment in exploration and production, strengthening of global energy demand and the heightened level of geopolitical uncertainty that has emphasized the importance of energy security, we are seeing positive market signals worldwide and are increasingly confident that our industry is entering a favorable multi-year upcycle. As always, when [entering an upcycle], all markets do not react at the same speed. And today’s unique macro environment has created an unusually high degree of volatility across our client base and across the regions where we operate.
In 2022, the North American market was strong, while Latin America, Europe and Asia lagged. The Middle East began ramping up, but multiple seismic projects were delayed to 2023. We also saw a similar variance across our client base. Independent and private companies reacted first with a progressive increase in their exploration activity, while NOCs maintained their activity levels. In contrast, IOCs continued to focus on shorter-term shareholder returns, energy transition, production levels and infrastructure-led exploration.
Overall, we shaped 2022 into a year of transition for CGG as we began to see the strengthening commercial activity around our core businesses and established our Beyond the Core technology and growth businesses with some key pilots and commercial successes. The underlying fundamentals are more and more clear, and I’m increasingly confident in our path forward.
Energy transition will be a long process, with demand for energy and the requirement for energy security both increasing. With these, the responsible exploration, development and production of oil and gas must play a key role going forward. We see this in action as governments globally move forward with further developing their resources, including U.K., North Sea, Norway, the U.S. Gulf of Mexico and Brazil. Offshore activity is picking up, again, worldwide, Middle East onshore is growing and Asia Pacific is starting to recover.
The underlying industry fundamentals are favorable to CGG despite the business variability and volatility that we saw from our client in 2022 as they took different paths to address market conditions. Demand for our technologies and especially our subsurface imaging is becoming increasingly more important for energy companies to effectively optimize their investments, not only for traditional oil and gas prospects, but also for energy transition, including CCUS.
Our core basins of the U.S. Gulf of Mexico, Brazil, U.K., Norway and U.S. land remain the priority for a majority of E&P companies and will receive a big share of the budget increases. Acquisition contract prices, particularly Marine, are going up, which should strengthen acquisition companies and allow them to renew their equipment. There is more visibility on long-term land contracts in North Africa, Middle East and Asia, supported by NOCs that will require new land equipment.
Order intake for Geoscience was up 37% year-on-year. And SMO order intake was down 6%, but the level of commercial bids is at a historically high level going back to 2016. So despite this high level of commercial interest and activity going forward, Q3 2022 was soft, mainly as our Earth Data and Sensing and Monitoring businesses saw several contracts and projects shift from Q3 to Q4 and to 2023.
Our group’s 2022 top line is expected to remain flat year-on-year, with 18% growth in DDE, offset by lower revenue in SMO. But our 2022 EBITDA should increase pro forma year-on-year by around 15%, with a higher margin which is now expected to be around 42%. More importantly, 2022 free EBITDA is expected to be broadly in line with original guidance.
As the market, industry and CGG have progressed through this year of transition, I have become increasingly confident that we are entering a multi-year upcycle and that CGG will benefit from the increased activity as we move forward.
So we’ll move now on Slide 5. After this general overview, let’s review the third quarter in more detail. So in Q3, CGG saw volatility result in lower financial performance. Segment revenue was $217 million. Segment EBITDA was $77 million, a 35% margin.
Q3 segment revenue was lower than anticipated as some EDA prefunding revenue and SMO projects slipped to Q4 and into 2023. Q3 net cash flow before $19 million M&A cash cost was minus $59 million, including $40 million negative change in working capital.
At the end of September, net cash flow was minus $65 million, including $37 million M&A. In 2022, our CapEx [indiscernible]. We have already invested 90% of our EDA CapEx at the end of September. We also significantly increased the inventory of SMO product, consuming an additional $70 million cash since the beginning of the year to be ready for the large upcoming tenders for land and OBN equipment that are expected to be delivered in 2023.
So moving on to Slide 7. Q3 DDE segment revenue was lower this quarter at $131 million, down 16% pro forma year-on-year, with growth in Geoscience offset by a decrease in Earth Data due to lower prefunding. At the end of September, our core businesses continued to gradually recover as markets strengthened.
Year-to-date DDE revenue climbed 30% pro forma year-on-year. As a result, DDE profitability for the first 9 months is up significantly, with a solid 58% EBITDA margin and a 29% operating income margin, driven mainly by a strong recovery in multi-client after sales.
Slide 8 with Geoscience. Geoscience external revenue was $69 million in Q3, up 8% pro forma. And year-to-date revenue was $214 million, up 19% pro forma compared to last year. We continue to anticipate high single-digit growth for Geoscience in 2022 and in line with our expectations.
Overall, the Geoscience KPIs are progressing, as expected, in the increasingly solid market worldwide with high demand for our technologies. We also see the full effect of efficiency gains in our revenue per head metric.
Slide 9. Commercial activity is increasing worldwide. Total Geoscience dollar order intake was up 37% pro forma year-on-year during the period of January to September 2022. While activity initially picked up in North America in the second half of last year, we now see increasing commercial activity in Europe, Middle East and Asia. In addition, Europe demand is also driven by our Beyond the Core businesses, including our Data Hub technology and Earth Data for CCUS projects.
The picture on this slide is a horizontal depth sliced through the subsurface. It shows ancient buried river systems with greater precision than the industry has ever seen before. CGG’s advanced Full Waveform Inversion technology can resolve not only the larger river channels, but also the much smaller tributaries and streams that fed these rivers. Of course, these old rivers and streams are now filled with rock, which can sometimes be a hazard for drilling or an excellent target for hydrocarbons. Being able to see them this clearly bring significant benefit to our clients.
Now on Slide 10. The success of CGG is built on technology differentiation. Our unique Elastic Full Waveform Inversion, which was developed by our scientists for complex geology and challenging reservoir developments, is the most recent example of this differentiation and the commercial success it drives.
Full Waveform Inversion imaging not only gives improved resolution of shallow heterogeneity, but it also increases certainty with respect to their true locations in the subsurface. These finer details enabled our clients to derisk the drilling and optimally position their wells.
On this picture, it is important to note that the results between the left and the right side are coming from the exact same data set recorded years ago. Initially developed to solve critical Gulf of Mexico challenges, elastic Full Waveform Inversion is now applied outside North America.
As an example, this picture is from offshore Brazil, where, as you know, pre-salt geology is complex and the application of the most advanced technology can bring significant value. Looking forward, with recent advancement in the Elastic Full Waveform Inversion, it may be possible soon to quantitatively provide further rock property information directly to our clients, reducing time frames and increasing the accuracy of interpretations.
Moving on to Slide 11. Our highly specialized and, therefore, highly cost performance HPC capacity has been a key enabler for the continuous release of our new technologies. Often, this technology advance and differentiation requires orders of magnitude, more compute power, and hence, a unique and specialized solution.
Today, we operate three main data centers in Houston, London and Singapore that are interconnected and formed on CGG Cloud. We continue upgrading HPC capabilities to mainly serve our Geoscience activities, but also to ensure our CGG Cloud can be leveraged by our clients as we continue to build our Beyond the Core businesses.
At current, we are constructing a new HPC hub in Southeast England. It is progressing as planned and expected to be operational in the third quarter of 2023. The building of this new data center in the U.K. also gives us the opportunity to use 100% green renewable energy, improving our electricity power usage efficiency ratio and contributing to our greenhouse gas emissions reduction.
Our company’s high-end technology business profile, along with our low-carbon intensity footprint and our continued reductions, have been recognized by [ESG ratings] agencies. Only two oilfield service companies, including CGG, have achieved a AA rating with MSCI. With an index of 17.9%, CGG is also ranked #2 by Sustainalytics among 113 energy service companies. And finally, Gaia Research recently further improved the rating of CGG from 54 last year to 65 in 2022. We’re proud of our ESG leadership and achievements to date and are committed to reaching our goals.
So we’ll move now to Slide 11 with Earth Data. In Q3, as in Q2, we had a total of 3 vessels acquiring data on our programs. Two vessels were working in the Norwegian North Sea, and 1 vessel was working offshore Brazil. Prefunding revenue was low at $19 million as some prefunding of our North Sea multi-client programs shifted to Q4. For the full year, we expect the prefunding level to be in the range of 60% to 70%, lower than usual, but we’re confident that we will catch up in 2023.
Earth Data after-sales were $43 million this quarter, up 32% year-on-year, sustained by sales in South America, U.S. Gulf of Mexico and the North Sea. This is consistent with the overall trend during the year, with our year-to-date after-sales increasing by 2.3x versus 2021. Historically, after-sales have been a good trend indicator for the business.
Moving on to Slide 13. Most of our CapEx goes towards our core basins. In 2022, 90% of our annual CapEx was already spent at the end of September compared to 78% last year.
The acquisition phase of our Antares project offshore Brazil will be completed by the end of November. And the acquisition of our 2022 North Viking Graben East-West plus nodes program offshore Norway is also completed. In addition, we made a modest investment in Suriname, through a consortium, to position in an emerging basin.
The image on this slide shows the large footprint of our North Viking Graben programs, and the perimeter of our hybrid streamer node acquisition program. By adding nodes to stream our acquisitions, we’re able to build a much better velocity model in a much more cost-effective way.
Interest remains high in the APA rounds, which supports our investment in Norway. The U.S. government has restarted lease sales in the U.S. Gulf of Mexico, which is very positive news for our industry.
Now on Slide 14. I mentioned during our Q2 conference call that we continue to expand our data offering to address energy transitions, especially for CCUS and mining. On this slide, you can see a map of our CCUS Gulf of Mexico program, which has industry funding.
The study includes natural CO2 sources, well locations and well lots. All data are from the public domain. The CGG team of experts have applied machine learning and deep domain expertise to clean, process, interpret and integrate the various data types to help our clients accelerate their understanding of the CO2 storage potential in this area.
Moving on to Slide 15 now with Sensing and Monitoring. Our Sensing and Monitoring segment revenue was $86 million, down 15% year-on-year. Thanks to a favorable product mix, EBITDA was at $15 million, with a 17% margin, the same margin as Q3 2021 despite lower revenue. We anticipate Q4 2022 sales to be similar to Q3 as several orders and client projects, either in backlog or in negotiation, have flipped to 2023, including the Saudi mega-crews.
During 2022, SMO manufacturing activity has been quite high, building a large inventory of land and OBN equipment in advance of the large land and OBN tenders planned for delivery in 2023 in the Middle East and North Africa. In 2023, SMO activity is anticipated to increase significantly on the back of orders and backlog, contribution from recently acquired companies and large upcoming Middle East projects.
Now on Slide 16. During the quarter, land equipment sales represented 58% of total sales. We delivered land WiNG nodes and over 100,000 508XT channels. Marine equipment sales represented 28% of total sales, driven by deliveries of GPR300 OBN nodes.
Sales from Beyond the Core businesses in SMO were $6 million, sustained mainly by the defense sector. Also during the quarter, we finalized the acquisition of the software division of ION Geophysical for a total price of $19 million.
After the acquisition of Geocomp at the beginning of June, which is a beachhead to our diversification into the high-growth U.S. market for infrastructure monitoring. The acquisition of ION Software also brings diversification opportunities, thanks notably to the Marlin simultaneous marine operations and management software.
Now on Slide 17. Infrastructure monitoring is the largest opportunity for the Beyond the Core diversification strategy of SMO. It is a $2 billion market, which is expected to be growing at a CAGR of 14% for the next 5 years. The aim is to leverage SMO’s high-definition wireless sensors and data aggregation and processing expertise to deliver full solutions for the monitoring of large infrastructures.
Recently, SMO performed a very successful test of a cable-stayed bridge in the U.S. that was instrumented with S-lynks sensors and a system. As a result, the Sercel S-lynks system was technically validated by the client, which will open doors for future sales.
I will now give the floor to Yuri for more financial highlights.
Yuri Baidoukov
Thank you, Sophie. Good afternoon, ladies and gentlemen, and good morning. I will comment on the Q3 2022 financial results.
Slide 19, Q3 2022 income statement. Let me comment the overall Q3 activity. Segment revenue was $217 million, down 20% and down 16% pro forma year-on-year. The respective contributions from the group’s businesses were 32% from Geoscience, 28% from Earth Data, 60% for the DDE segment and 40% from Sensing and Monitoring.
Segment EBITDA was $77 million, down 35% year-on-year, a 35% margin due to unfavorable business mix, and adjusted segment EBITDA was $75 million. Data, Digital and Energy Transition segment EBITDA was $64 million, a 49% margin, and adjusted segment EBITDA was $66 million, a high 50% margin. SMO segment EBITDA was $18 million, a 21% margin, and adjusted segment EBITDA was $15 million, a 17% margin.
Segment operating income was $25 million, a 12% margin, and adjusted segment operating income was $24 million. IFRS 15 adjustment at operating income level was $2 million, and IFRS operating income after IFRS 15 adjustment was $28 million.
Cost of financial debt was $24 million, taxes were $4 million and net loss from continuing operations was $1 million. And group net loss this quarter was $2 million compared with a net loss of $16 million a year ago. After minority interest, group net income attributable to CGG shareholders was $2 million or EUR 1 million.
A simplified cash flow on Slide 20. Segment operating cash flow was $77 million before $40 million in negative change in working capital and provisions, mainly related to the SMO business. Total CapEx was $82 million, with industrial CapEx at $6 million, research and development CapEx at $4 million and Earth Data cash CapEx at $72 million. Segment free cash flow was negative $45 million before $19 million of acquisition cash costs, mainly related to the acquisition of ION’s software business.
After $60 million of M&A costs, $11 million of lease repayments, $1 million of positive free cash flow from discontinued operations and $7 million negative cash flow related to CGG 2021 Plan cash costs, the net cash flow was $78 million negative this quarter. Excluding M&A cash costs and change in working capital, it was negative $22 million.
Slide 21, group balance sheet and capital structure. Group’s liquidity amounted to $325 million at the end of September 2022 and included cash liquidity of $225 million and $100 million of undrawn RCF.
Group gross debt before IFRS 16 was $1.11 billion, and net debt was $889 million. And group gross debt after IFRS 16 was $1.2 billion, and net debt was $976 million. Our debt structure had $1.070 billion of higher bonds during 2027, $87 million of lease liabilities, $41 million accrued interest and $3 million bank loans.
Segment leverage ratio of net debt to adjusted segment EBITDA was 2.5x at the end of September 2022. Capital employed was $2 billion, slightly up from the end of December 2021. Net working capital after IFRS 15 was $212 million, down from $229 million at the end of September 2021, primarily driven by significant reduction in net accounts receivables, lower deferred revenue liability from IFRS 15, the increase in accounts payable and a reduction in personnel liabilities, partially offset by a significant decrease in inventories in SMO.
Goodwill was stable at $1.1 billion, corresponding to 55% of total capital employed. Multi-client library net book value after IFRS 15 was up at $449 million, including $421 million of marine and $28 million of land net book value.
Noncurrent assets were $321 million, with property, plant and equipment at $149 million, down $65 million from year-end 2021, mainly due to the delay of sale and leaseback. And capitalized development costs were at $87 million. Noncurrent liabilities were at $19 million, down $14 million from year-end 2021. Shareholders’ equity was up at $1.030 billion, including $37 million of minority interest mainly related to stamp duty.
Now I hand the floor back to Sophie for conclusions.
Sophie Zurquiyah
Thank you, Yuri. Now we’re on Slide 23. The shift of client projects into 2023 materialized quite recently and had a heavy impact on 2022 SMO goals, resulting in our CGG 2022 segment revenue now expected to be stable pro forma year-on-year. With the general market progressively strengthening, SMO was not able to compensate for the revenue loss in Russia, as expected, as several Q4 projects slipped into 2023.
The impact on EBITDA and cash for 2022 are minimal. Our 2022 segment EBITDA is anticipated to be around $380 million, with a higher 42% margin. More importantly, our free EBITDA is expected to be very close to our March guidance, thanks to lower CapEx.
Overall, in 2022, we anticipate the DDE segment to be in line with our expectations, with the continued growth performance of Geoscience and EDA’s higher after-sales offsetting lower prefunding. The SMO segment will deliver below expectations due to multiple projects shipped and is now expected significant growth in 2023.
Moving on to Slide 24. This graph shows the expected E&P CapEx and oil price evolution between 2022 and 2025 based on surveys from different brokers. All brokers are pointing to with a continued high oil price during the next 3 years and a double-digit increase in E&P spending. Increased investment in exploration is needed to address the shortfall in supplies following years of underinvestment, intensified by geopolitical uncertainty and increased focus on energy security.
Current activity is increasing, but it’s still heavily driven by short-cycle exploration and production with IOCs, who are remaining very disciplined in their investment, while independents and NOCs are making more aggressive plans to grow production. Energy transition continues to progress and will be a long process, during which all sources of energies will be required.
Short-cycle projects and unconventionals are not sufficient to meet demand and new resources will progressively need to be discovered. With this consideration and the practicality that it will take time to bring meaningful new oil and gas supply to the market, we anticipate entering into a favorable multi-Europe cycle as we move forward.
So in conclusion, on Slide 25, today, after years of underinvestment and lack of supply of oil and gas, we believe that exploration, particularly offshore exploration, will be required to fill the gap. 2022 has been a year of transition for our market and a year of investment for CGG.
In 2022, CGG continued to invest in people, data and technology, both in our core domains and in our new businesses. We also maintained a high level of R&D efforts and made significant progress in achieving our ESG objectives. And importantly, we achieved this with minimal impact on EBITDA and cash and expect a higher EBITDA margin in 2022 than 2021.
We also accelerated the development of our new Beyond the Core businesses, including a new organization to address the HPC and cloud solutions market. In 2022, we bought for a total of $37 million to new technology companies, Geocomp and ION software. Which enhanced our diversification portfolio and will accelerate access to new and growing markets.
Looking forward, we’re entering a favorable multi-year upcycle with a leading and diverse technology position that will support growth in our core and Beyond the Core businesses, with key objectives to grow and deleverage our balance sheet.
Thank you for your interest, and we’re now ready to take your questions.
Question-and-Answer Session
Operator
[Operator Instructions] And the first question comes from the line of Jean-Luc Romain from CIC.
Jean-Luc Romain
I have two. First, you mentioned some delays and projects pushed to 2023 in Brazil, I guess, due to the presidential election. Big projects were all — would you quantify more or less the slip from 2022 to 2024? That’s my first question. Second is on CCUS. You — would it be fair to imagine that companies such as Taylor Energy or Oxy are among the companies interested in your data in the Gulf of Mexico?
Sophie Zurquiyah
Yes. Thank you, Jean-Luc, and thanks for the question. So the delays are actually in multiple areas, some of them are in the — actually in the prefunding of our multi-client projects, and that’s where Brazil comes into play. And then the others are in the SMO, and these are projects that were positioned into year-end that have moved into next year. So those are more the mega-crews, more North Africa equipment sales.
So each mega-crew, you’re talking $50 million to $70 million of equipment each, right? So if you have a few moving into next year, this is a significant amount of equipment. And that’s why we’re quite confident that we’ll see significant growth in SMO next year.
Now when it comes to Brazil, it’s hard to give numbers, but it’s mostly affecting — I mean, there’s been a slip we mentioned in Norway from Q2 to Q4. So this one, we’ll get this year. But in Brazil, it would be more into next year. And the orders of magnitude will be, say, $30 million to $50 million.
Jean-Luc Romain
And then CCUS?
Sophie Zurquiyah
Sorry, CCUS. Yes, absolutely. I mean, we’re working with all of our clients. And as you know, Oxy is definitely in a leading position on CCUS. But there’s more than just Oxy and Talos. It’s pretty much our usual client base is interested in CCUS opportunities, and the area that shallow waters or onshore Gulf of Mexico area is a hotspot. And we do have some old data there, and that’s where we did our project.
Operator
[Operator Instructions] And the next question comes from the line of Daniel Thomson from Exane BNP Paribas.
Daniel Thomson
I was wondering if you could just talk to us a little bit about Q4 late sales, just bearing what to expect, whether you expect sort of the typical kind of budget flush that we’ve seen in previous years? And then maybe a second one, just if you can talk a bit about the implications of the new — the lease sale going ahead in the U.S. Gulf of Mexico and sort of the timing of when you expect to see the benefit of CGG that is — some of it coming into Q4. Or is it mostly 2023 and onward?
Sophie Zurquiyah
Okay. Thank you, Daniel. I think it’s fair to say that Q4 commercial discussions are quite active, and we should see an uptick in Q4. The question is how much of an uptick it will be and how much discipline the IOC will exert to their budgets. So obviously, you’ve all looked at their financial performance, and they do have cash to spend.
We’re still seeing a lot of discipline. But we’re starting to see new names that haven’t bought a lot of data in the last few years come in and starting to say they want to reload their data. So it makes us hopeful that we will indeed see a — I don’t know if I could call it flush, but there will be an uptick that we’ll see in our revenue for Q4.
On the lease sale in the [Gulf], it’s been great news. But I think it’s not materializing quite now into data sales. I think it would come into next year. I think they need to — maybe they’re waiting a little bit for the election’s results and restoring a little bit of confidence into the terms and conditions.
So it’s not just the lease rounds, a resumption that our clients are looking at, but also the ability to get the permits. Because there’s been roadblocks to get seismic permits, to get drilling permits, so we need the whole machine to be resuming as well.
So I think it will take a little bit of time for that confidence to go up. So I would say next year, I was going to say something, not this Q4.
Operator
[Operator Instructions] And the next question comes from the line of Kevin Roger from Kepler Cheuvreux.
Kevin Roger
I have two questions. The first one is related to the equipment, Sophie. And can you give us a bit of details if I missed it, the reason why the sales have been postponed. Because I was thinking that in the current environment that you mentioned is the one working kind of [push] to get the equipment, things like that. So it is related to pricing, to bottleneck whatever. So what are the reasons behind this delay equipment sale? And the second reason — the second question, sorry, on the Imaging business. You are running at $17 million per quarter. Is it basically the maximum you can achieve because you are using your people at full capacity? Or is there anything to expect in terms of earnings improvement in the coming quarters?
Sophie Zurquiyah
Okay. So thank you, Kevin. So on the equipment, it’s actually coming from a number of directions. So it’s mostly on the land side and mostly related to North Africa and Middle East, but also with a bit in Asia. So there’s the big — so what happened is when we came into the year and we realized the $50 million drop-in initially, it was $40 million because we were hoping — linked to Russia, we were hoping to ship $10 million pre-sanctions, but we weren’t able to do that.
So Russia, in the end, was a $15 million hit. And it was early in Q1, and we were seeing the Saudi mega-crew positioning at year-end because the bids were supposed to come out like in April. So we thought, okay, we won’t do the Russia, so we’ll be able to compensate with mega-crews and activity that we’re starting to show in North Africa and Middle East.
But what happened, as we went through the year, we started to see those bids slip, and they only came out in September. And now the bids are due — so this is the client putting the bids for service companies to respond. And now the response has been delayed to early November. Now they have a month then to award the work and then they have 6 months to mobilize.
So now you start putting all this together, the equipment delivery will be sometime in Q1, Q2 next year. So in the first half of the year. So these are the really 2, and I was mentioning those mega-crews. We’re talking $50 million to $70 million each, right? And there’s 2 of them.
Now in addition to that, there’s the OBN, the ocean bottom nodes, so 3 crews. So that’s quite a lot of equipment, and these ones were also delayed. So that’s another big chunk of equipment.
But in addition to that, you have, for example, places like Libya, where we were in discussion and things got delayed in Asia. So it’s — those are smaller amounts, but that just got delayed basically because of geopolitical reasons, budgets or clients. The big chunk is the Saudi bit, but there were other bits and pieces here and there, all related to land and NOCs. So that’s the equipment side.
On the imaging, this is true. We’re kind of running at that $70 million. We did a big step up from H1 last year. So if you look at the history of imaging we were quite low in H1. Then we got a lot of order intake.
We moved a step up in the second half of last year. And we’re kind of out running at that level now. And there was a catch-up effect from our clients, and that’s where we are.
Now again, that commercial activity is quite strong. And I think we could do more. I mean, I was mentioning by region where I would say I’d North America, we’re quite full. But we probably have can do more work in Europe and Asia. And this is where we’re starting to see a little bit of improvement in the conversations in new awards.
Can we do more and grow the revenue? I think we can. But keep in mind that Geoscience is — doesn’t have the volatility, as you see as the others, in the big swings, right? So it goes down less, but goes up a bit less as well.
But on a year-to-date basis, we are, I think, somewhere around 19% year-on-year because of that H1 that was really low last year. And then full year, we’re planning to be in the high single digits, meaning the sort of the rate of growth is stapling up, but that’s linked to the catch-up effect from delayed projects that we started to see in the second half of last year.
And then moving forward, I would expect something similar like this high single-digit growth, both from activity and pricing.
Operator
[Operator Instructions] And the next question comes from the line from Guillaume Delaby from Societe Generale.
Guillaume Delaby
Maybe one question or maybe one confirmation. So we all understand that, basically, there are many causes to — or many delays. Just to be sure to understand your thought process accurately, could we say or could you say that if there was, I would say, one big surprise for you, Sophie, is the fact that IOCs has been, I would say, more disciplined than what you would have expected them to be at this time or at this time of the cycle. Am I correct? And is it for you, I would say, the main surprise?
Sophie Zurquiyah
Thank you, M. Guillaume. I have to admit, I think, I would say, this is the biggest surprise because, yes, IOCs are very disciplined. But if you remember in Q1 call, I was asked the question repeatedly if the situation in Ukraine would change the behavior of our clients. And I remember saying, I don’t believe it would be the case because it was too far into the year. The budgets were set, strategies was set, but I didn’t think really things would change.
I would say the bigger surprise — I would certainly think that by Q4, they would be opening up a little bit more to exploration. So maybe that will be next year. The biggest surprise, I think, was the SMO. I wasn’t expecting such a volatility in that business. Of course, we lost $50 million because of the events, and so that was difficult to catch up. But given the dynamics, the exposure of SMO to NOCs that are really continuing the course, I would have expected less volatility on that side. So to me, the biggest negative surprise was on SMO.
Guillaume Delaby
So maybe a follow-up on that. And sorry about that, but let’s forget the SMO. Globally, if we just try to look at what has happened over the last, I would say, few quarters, when we listen to what you are saying, Sophie, what your peers are saying that, basically, there was, I would say, some kind of consensus of common wisdom that, basically, IOCs were about to come back. It was clear, for example, in the Q2 and Q3 calls from Schlumberger. So — my question or my — maybe I’m going to repeat or elaborate my first question is to what extent can we imagine that this basically is more disciplined than expected pattern from IOCs could be basically extended, maybe a little bit more than what could have been previously expected?
Sophie Zurquiyah
Thank you, Guillaume. I think it’s fair to say that the shape of the cycle and the behavior of our clients during this cycle is quite different from previous cycles. Because historically, in an upcycle, you’d see the exploration start first, which isn’t the case. So our — the large OSS that you were mentioning are seeing the uptick. And I’m very optimistic because they’re exposed to other parts of the value chain that are starting first. So if you look at drilling, drilling wells, anything that’s close to the oil is starting first. And then actually, it is starting to propagate into these other activities. We started with ILX, infrastructure-led exploration. And little by little, it will have to go back into more — I don’t want to call it frontier, but maybe new emerging basins beyond the mature basins.
So yes, it is a different cycle and a different behavior, and we’re observing it. The juries out as to how long it will take for IOCs to come back. But we have also the NOCs that are moving international. That sort of blank or that space that’s left by the IOCs will be filled by other types of players.
So you’re going to have the independents, you’re going to have NOCs starting to play internationally as well. So I do expect that if IOCs don’t come back, which I think they will come back in a disciplined fashion, but they will increase their exploration budgets eventually that we’ll start seeing other types of players come in.
Operator
[Operator Instructions] And the next question comes from the line of Baptiste Lebacq from ODDO BHF.
Baptiste Lebacq
One question dedicated to CapEx and the new industrial CapEx that you disclosed at $60 billion. But could it be seen as a normalized CapEx in the future for the industrial part? And second question, dedicated to computing power, maybe linked also to the question regarding CapEx. You gave some figures regarding computing powers for 2022. What figure do you have in mind over the next 3 or 4 years regarding computing power?
Sophie Zurquiyah
I’ll let Yuri take the first question, and then I’ll comment on the computing power.
Yuri Baidoukov
Yes, I agree, Baptiste, regarding this level of CapEx, we are in the course of budgeting now obviously for 2023, right? But I would say, fundamentally, or directionally, yes, this range of, say, $55 million to $60 million is — will be the roughly the level of industrial CapEx and capitalized development costs because, obviously, it’s 2 elements in there. So that — that direction how we — will be shaping after.
Sophie Zurquiyah
Yes. So M. Baptiste…
Yuri Baidoukov
Yes. Sorry, just to add one more element, that when it comes to the cash element of that, so we — and we did mention that we’re in the process of building this new data center in the U.K. We actually did secure risk financing for that. So in other words, again, the cash outlay would be actually lower than this.
Sophie Zurquiyah
Yes. That was good, M. Baptiste. Yes, I was going to make a comment that, definitely, we — when it comes to computing power, this is an area where we can secure long-term leases basically of equipment. The computing power, I think we’re about 300 petaflop, which is a significant amount of compute power. We haven’t made completely our plans for 2023, but we’ll be probably adding somewhere around, I would say, 30 to 50 petaflops. I don’t have the numbers for the next 3 years. But if you look at 10 years ago, we were probably, I want to say, 50 petaflops, and we multiplied from 50 to 300.
I wouldn’t be surprised that in the next 10 years, as we, again, grow significantly, maybe not multiply by 10, but multiplied by 6, 7, that computing power. I’m not sure what road we will take to get there. But if and when more compute power is required, then we’ll just follow the business basically, whether we can — we need it and then the clients are willing to pay for that compute power as well through our services. But in the short term, probably adding 50% — 10%, 15%.
Operator
[Operator Instructions] And the next question comes from the line of Neyla Velimoukhametova from BlackRock.
Neyla Velimoukhametova
I just had one follow-up on CapEx. So you talked about the industrial CapEx. And I wanted to just get your thoughts on the cash spend on the multi-client part of the business for next year. Obviously, this year, we have a lower prefunding rate. But you’re sticking to the $200 million spend, funding it yourself, I guess, basically. And how should we think about 2023 with regards to the moved revenues or moved CapEx from ’22, and in addition to the CapEx that you do — well, not CapEx, but growth that you expect in ’23 as per your comments of entering the multi-cycle — the multi-year upcycle stage?
Sophie Zurquiyah
Yes, thank you for the question. So with the information I have today, I mean, like I mentioned earlier, we’ve invested a significant amount of CapEx this year. I think it was an increase from last year. I would expect, directionally, to be flat to lower. And the reason for that is that we’re looking at a number of projects more in collaborations. We’re looking at minimizing risk and risk sharing a little bit, like our clients are doing in exploration. They don’t do exploration just by themselves. They just do together with other competitors. So this is something that I think is coming our way that, in the model, we would look at more and more collaborations. So — and probably lowering, I would say, flat to down, it would be directionally what I’m looking for.
But that’s the base case. Now of course, if there’s a great project with hyper funding that comes our way, we would look at it on a case-by-case basis, a little bit as well, like our clients are budgeting. They have their base budget and then they look at opportunities as they come. But directionally, I would say flat to down and higher prefunding because then you would have the catch up from this year.
Neyla Velimoukhametova
Right. Exactly. So I was going to ask on the prefunding. So is it fair to assume it will be closer to 100%? Or is it a little too punchy to assume that?
Sophie Zurquiyah
I think it’s too much to assume that. We never — by doing the [eye] end up the historically. I’ve always said that 90%, 100% is not necessarily a good level. There are levels to shoot for because you want to have future sales, right, the long tail of sales. So that’s why we always said 70% is sort of a good number. 70% to 80% is a good number, which is where we always budget. We always budget around that number, and we try to get more. But 100% is never sort of the base case.
Operator
[Operator Instructions]
Sophie Zurquiyah
Maybe I’ll add a quick comment to the last question is on the prefunding ratio. We tend to look for those surveys that we call really truly multi-client that have a potential of after-sales, and those typically carry lower prefunding. Where some of our competitors in the industry are looking for maybe different, what we call hybrid, they have a higher prefunding initially but less potential for after-sales. So there’s a bit of a difference in philosophy that you’ll find in the market. Our philosophy is to really look for those multi-client with multiple clients, a potential for farm-in, open acreage and, therefore, they have a better — lower prefunding.
Sophie Zurquiyah
And I thank you for your questions. Really good questions. And I look forward to talking to some of you in the future. We’ll soon end shortly, and thank you again.
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