CGG SA (ADR) (NYSE:CGG) To Go It Alone As Potential Buyer Backs Out

CGG SA (ADR) (NYSE:CGG) has been left on its own. The proposal to buy the company at about $10.31 per share has been shelved. Technip had offered to buy out the seismic surveyor but later changed its mind. The move didn’t impress CGG investors as the stock declined to almost a new 52-week low. However, the management of CGG is confident that the company can still survive alone.

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Falling oil prices

Technip and CGG SA (ADR) (NYSE:CGG) failed to reach an agreement on the buyout talks that started last month. As such, Technip announced that it wouldn’t go ahead with the tender offering for the shares of CGG. Shareholders on the side of CGG had hoped that the deal would help them profit from their holdings now that things are falling out for CGG because of weakening oil prices.

Oil companies have shelved capital projects or at least reduced their capital spending for 2015 amid falling oil prices. The reduction of capital projects has put pressure on CGG SA (ADR) (NYSE:CGG). The company offers equipment and services to the companies in the oil and gas exploration and production business.

Although the buyout agreement with Technip has failed, Technip and CGG SA (ADR) (NYSE:CGG) said that it was in a position to tackle the current market difficulties. Such assuring statement should get shareholders hopeful even though oil prices continue to fall while oil companies narrow their capital spending.

Financial highlight

CGG SA (ADR) (NYSE:CGG) reported revenue of $694.2 million in the most recent quarter. The revenue figure was up from $689.6 million in the previous quarter. However, the company’s cash position weakened as it had $252 million in cash and equivalents compared with $385.3 million a year earlier. CGG also suffered a wider loss in the quarter than analysts estimated. It reported a loss of $0.30 per share. Analysts on the average expected positive earnings of $0.04 per share for the quarter.

Technicals

CGG

CGG SA (ADR) (NYSE:CGG) is an excellent example of the technical observation that when a pattern target is achieved in its entirety, frequently that target level acts as a strong support or resistance, depending on the nature of the pattern. A Head & Shoulder pattern was formed in the two years of 2012-13 with the neckline at $20 levels that broke down last December. In just 11 months, it hit the target of $5.50, now a very strong support. If the $5.50 level survives this week, then expect more buyers to merge.

About the Author

Barry is a senior journalist at Us Markets Daily. He reports, shoots and edits many of his own stories by himself.

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