SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934

For the month of September, 2006

General Company of Geophysics

(Translation of Registrant’s Name Into English)

1, rue Léon Migaux 91341 Massy France (33) 1 64 47 3000 (Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F þ      Form 40-F o

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o     No þ

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82 -                    .)

 

 

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS			3
FINANCIAL STATEMENTS			4
Unaudited Interim Consolidated Balance Sheet at June 30, 2006 and Consolidated Balance Sheet at December 31, 2005			4
Unaudited Interim Consolidated Statements of Operations for the three months ended June 30, 2006 and 2005, and for the six months ended June 30, 2006 and 2005			5
Unaudited Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005			6
Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2006 and 2005			7
Notes to Unaudited Interim Consolidated Financial Statements			9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			28
CONTROLS AND PROCEDURES			38

Compagnie generale de Geophysique, S.A.

FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements. We have based these forward-looking statements on our current views and assumptions about future events.

These forward-looking statements are subject to risks, uncertainties and assumptions we have made, including, among other things:

•		changes in international economic and political conditions, and in particular in oil and gas prices;
•		our ability to reduce costs;
•		our ability to finance our operations on acceptable terms;
•		the timely development and acceptance of our new products and services;
•		the effects of competition;
•		political, legal and other developments in foreign countries;
•		the timing and extent of changes in exchange rates for non-U.S. currencies and interest rates;
•		the accuracy of our assessment of risks related to acquisitions, projects and contracts, and whether these risks materialize;
•		our ability to integrate successfully the businesses or assets we acquire, including Exploration Resources ASA;
•		our ability to sell our seismic data library;
•		our ability to access the debt and equity markets during the periods covered by the forward-looking statements, which will depend on general market conditions and on our credit ratings for our debt obligations; and
•		our success at managing the risks of the foregoing.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document might not occur.

Compagnie generale de Geophysique, S.A.

FINANCIAL STATEMENTS

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, S.A.

CONSOLIDATED BALANCE SHEETS

						June 30, 2006				December 31,
(in millions of euros)		Notes				(unaudited)				2005 (audited)
ASSETS
Cash and cash equivalents							206.4				112.4
Trade accounts and notes receivable, net							279.8				297.5
Inventories and work-in-progress, net							164.8				139.5
Income tax assets							14.5				10.1
Other current assets, net							72.5				41.5
Assets held for sale							—				3.5
Total current assets							738.0				604.5
Deferred tax assets							30.3				31.6
Investments and other financial assets, net							16.2				15.3
Investments in companies under equity method							43.6				44.4
Property, plant and equipment, net			3				484.8				480.1
Goodwill and intangible assets, net			4				360.7				389.2
Total non-current assets							935.6				960.6
TOTAL ASSETS							1,673.6				1,565.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts							17.2				9.3
Current portion of financial debt			5				38.3				157.9
Trade accounts and notes payable							140.1				178.5
Accrued payroll costs							63.7				57.8
Income taxes payable							33.6				29.3
Advance billings to customers							27.3				19.5
Provisions – current portion							15.4				17.7
Other current liabilities							31.7				35.2
Total current liabilities							367.3				505.2
Deferred tax liabilities							45.1				56.9
Provisions – non-current portion							20.7				18.4
Financial debt			5				393.4				242.4
Derivative on convertible bonds							—				11.3
Other non-current liabilities							21.6				20.7
Total non-current liabilities							480.8				349.7
Common stock, 26 610 299 shares authorized 17 485 446 shares with a €2 nominal value issued and outstanding at June 30, 2006; 17,081,680 at December 31, 2005			7				35.0				34.2
Additional paid-in capital							389.5				372.3
Retained earnings							314.7				291.0
Treasury shares							2.4				(1.1	)
Net income (loss) for the period – Attributable to the Group							75.3				(7.8	)
Income and expense recognized directly in equity							6.4				(1.4	)
Cumulative translation adjustment							(20.7	)			11.3
Total shareholders’ equity							802.6				698.5
Minority interests							22.9				11.7
Total shareholders’ equity and minority interests							825.5				710.2
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY							1,673.6				1,565.1

The accompanying notes are an integral part of the consolidated financial statements.

Compagnie generale de Geophysique, S.A.

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, S.A.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

						Six months ended								Three months ended
						June 30,								June 30,
						2006				2005				2006				2005
(in millions of euros, except per share data)		Notes								restated (1)								restated (1)
Operating revenues			8				634.5				387.0				312.4				192.6
Other income from ordinary activities							0.9				0.8				0.5				0.6
Total income from ordinary activities							635.4				387.8				312.9				193.2
Cost of operations							(420.4	)			(298.2	)			(218.3	)			(145.7	)
Gross profit			8				215.0				89.6				94.6				47.5
Research and development expenses — net			9				(18.4	)			(14.8	)			(9.6	)			(7.1	)
Selling, general and administrative expenses							(60.3	)			(41.9	)			(31.7	)			(22.1	)
Other revenues (expenses) — net			10				9.8				(0.8	)			8.3				(1.7	)
Operating income							146.1				32.1				61.6				16.6
Expenses related to financial debt							(16.1	)			(21.2	)			(7.8	)			(15.4	)
Income provided by cash and cash equivalents							3.0				1.6				1.7				1.2
Cost of financial debt, net			11				(13.1	)			(19.6	)			(6.1	)			(14.2	)
Derivative and other expenses on convertible bonds			12				(23.0	)			(14.7	)			(10.6	)			0.3
Other financial income (loss)			12				(6.6	)			0.7				(4.9	)			—
Income (loss) from consolidated companies before income taxes							103.4				(1.5	)			40.0				2.7
Income taxes			13				(33.0	)			(14.8	)			(13.4	)			(6.5	)
Net income (loss) from consolidated companies							70.4				(16.3	)			26.6				(3.8	)
Equity in income (losses) of affiliates							5.8				6.7				3.1				2.9
Net income (loss)							76.2				(9.6	)			29.7				(0.9	)
Attributable to :
Shareholders							75.3				(9.6	)			29.1				(0.8	)
Minority interest							0.9				—				0.6				(0.1	)
Weighted average number of shares outstanding							17,219,465				11,736,024				17,246,720				11,709,348
Dilutive potential shares from stock options							364,461				189,706				384,479				197,910
Dilutive potential shares from convertible bonds							—				1,400,000				—				1,400,000
Dilutive weighted average number of shares outstanding							17,583,926				11,736,024				17,631,198				11,709,348
Net income (loss) per share
Basic							4.37				(0.82	)			1.69				(0.07	)
Diluted (2)							4.28				(0.82	)			1.65				(0.07	)

The accompanying notes are an integral part of the consolidated financial statements.

Compagnie generale de Geophysique, S.A.

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Six months ended
		June 30,
		2006				2005
(in millions of euros)						restated (1)
OPERATING
Net income (loss)			76.2				(9.6	)
Depreciation and amortization			48.2				32.1
Multi-client surveys amortization			38.6				31.3
Variance on provisions			2.5				(0.7	)
Expense & income calculated on stock-option			1.4				0.2
Net gain on disposal of fixed assets			(6.7	)			0.8
Equity in income of affiliates			(5.8	)			(6.7	)
Dividends received from affiliates			4.2				4.2
Other non-cash items			28.7				13.5
Net cash including net cost of financial debt and income taxes			187.3				65.1
Less net cost of financial debt			13.1				19.6
Less income taxes expenses			33.0				14.8
Net cash excluding net cost of financial debt and income taxes			233.4				99.5
Income taxes paid			(37.9	)			(17.3	)
Net cash before changes in working capital			195.5				82.2
- change in trade accounts and notes receivable			(8.3	)			(21.0	)
- change in inventories and work in progress			(22.4	)			(7.6	)
- change in other current assets			2.4				5.5
- change in trade accounts and notes payable			(19.1	)			11.1
- change in other current liabilities			5.5				0.3
Impact of changes in exchange rate			(11.6	)			7.4
Net cash provided by operating activities			142.0				77.9
INVESTING
Total purchases of tangible & intangible assets (included variation of fixed assets suppliers)			(94.0	)			(36.8	)
Investments in multi-client surveys			(26.5	)			(15.0	)
Proceeds from disposals tangible & intangible			5.6				0.1
Total net proceeds from financial assets			0.1				—
Acquisition in investments, net of cash and cash equivalents acquired			—				—
Variation in loans granted			—				0.2
Variation in subsidies for Capital Expenditures			0.3				0.2
Variation in other non-current financial assets			(2.2	)			(0.4	)
Net cash from investing activities			(116.7	)			(51.7	)
FINANCING
Repayment of long-term debt			(128.4	)			(177.6	)
Total issuance of long-term debt			214.1				139.1
Reimbursement on leasing			(14.9	)			(7.0	)
Change in short-term loans			8.5				5.4
Financial interest paid			(12.1	)			(21.0	)
Net proceeds from capital increase :
- from shareholders			6.8				5.8
- from minority interest of integrated companies			—				—
Dividends paid and share capital reimbursements
- to shareholders			—				—
- to minority interest of integrated companies			(0.4	)			(0.1	)
Buying & sales from treasury shares			3.5				0.1
Net cash provided by financing activities			77.1				(55.3	)
Effects of exchange rate changes on cash			(8.4	)			11.6
Net increase (decrease) in cash and cash equivalents			94.0				(17.5	)
Cash and cash equivalents at beginning of year			112.4				130.6
Cash and cash equivalents at end of period			206.4				113.1

Compagnie generale de geophysique, S.A.

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)

																						Income and
																						expense																Total
		Number of								Additional												recognized				Cumulative				Total								shareholders’
		shares				Share				paid-in				Retained								directly				translation				shareholders’				Minority				equity and minority
		issued				capital				capital				earnings				Treasury shares				in equity				adjustment				equity				interests				interest
																		(in millions of euros)
Balance at January 01, 2005			11,682,218				23.4				173.4				208.1				1.8				3.7				(17.2	)			393.3				9.1				402.3
Capital increase			114,622				0.2				5.9																				6.1								6.1
Net income															(9.6	)															(9.6	)							(9.6	)
Cost of share-based payment															0.2																0.2				(0.1	)			0.1
Transactions with treasury shares																			0.1												0.1								0.1
Financial instruments :
variance and transfer to income statement (1)																							(8.7	)							(8.7	)							(8.7	)
Foreign currency translation:
variance and transfer to income statement (2)																											26.2				26.2				1.1				27.3
Income and expense recognized directly in equity (1) + (2)																							(8.7	)			26.2				17.5				1.1				17.6
Others (a)											(54.2	)			53.8								0.4								—								—
Balance at June 30, 2005 restated (b)			11,796,840				23.6				125.1				252.5				1.9				(4.6	)			9.0				407.5				10.1				417.6

																						Income and
																						expense																Total
		Number of								Additional												recognized				Cumulative				Total								shareholders’
		shares				Share				paid-in				Retained								directly				translation				shareholders’				Minority				equity and minority
		issued				capital				capital				earnings				Treasury shares				in equity				adjustment				equity				interests				interest
																		(amounts in millions of euros)
Balance at January 01, 2006			17,081,680				34.2				372.3				283.2				(1.1	)			(1.4	)			11.3				698.5				11.7				710.2
Capital increase			128, 852				0.3				6.6																				6.9								6.9
Conversion of convertible bonds			274,914				0.5				10.6				31.1																42.2								42.2
Net income															75.3																75.3				0.9				76.2
Cost of share-based payment															1.4																1.4				(0.3	)			1.1
Transactions with treasury shares																			3.5												3.5								3.5
Actuarial gains/losses on pension plans (1)															(1.0	)															(1.0	)							(1.0	)
Financial instruments :
variance and transfer to income statement (2)																							7.7								7.7								7.7
Financial assets available for sale : variance and transfer to income statement (3)																							0.1								0.1								0.1
Foreign currency translation:
variance and transfer to income statement (4)																											(32.0	)			(32.0	)			(0.8	)			(32.8	)
Income and expense recognized directly in equity (1) + (2) + (3) + (4)															(1.0	)							7.8				(32.0	)			(25.2	)			0.8				(26.0	)
Others (a)																															—				11.4				11.4
Balance at June 30, 2006			17,485,446				35.0				389.5				390.0				2.4				6.4				(20.7	)			802.6				22.9				825.5

Compagnie generale de geophysique, S.A.

Statement of incomes and expenses attributable to shareholders

						June, 30
		June, 30				2005
		2006				restated (1)
		(in millions of euros)
Net income			75.3				(9.6	)
— Actuarial gains and losses on pension plans			(1.0	)			—
— Variance in fair value of hedging instruments			7.7				(8.7	)
— Variance in fair value of available-for-sale financial assets			0.1				—
— Variance in foreign currency translation adjustment			(32.0	)			26.2
Incomes and expenses recognized directly in equity for the period			50.1				7.9

Compagnie generale de geophysique, S.A.

COMPAGNIE GÉNÉRALE DE GÉOPHYSIQUE, S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1—Summary of significant accounting policies

Compagnie Générale de Géophysique, S.A. (“the Company”) and its subsidiaries (together, the “Group”) is a global participant in the geophysical services industry, providing a wide range of seismic data acquisition, processing and interpretation services as well as related processing and interpretation software to clients in the oil and gas exploration and production business. It is also a global manufacturer of geophysical equipment.

Pursuant to European regulation n°1606/2002 dated July 19, 2002, the accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations adopted by the International Accounting Standards Board (IASB) at June 30, 2006.

International Financial Reporting Standards differ in certain significant respects from accounting principles generally accepted in the United States (“U.S. GAAP”). Note 17 describes the principal differences between IFRS and U.S. GAAP as they relate to the Group, and reconciles net income at and for the six months periods ended June 30, 2006 and June 30, 2005 and shareholders’ equity at June 30, 2006 and December 31, 2005 to U.S. GAAP.

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical Accounting Policies

Our significant accounting policies, which we have applied in preparing our interim consolidated financial statements at and for the six months ended June 30, 2006 are the same as those applied in preparing our consolidated financial statements at and for the year ended December 31, 2005, as described in our 20F for the year ended December 31, 2006 filed with the SEC on May 9, 2006.

The following Standards and Interpretations have been effective since January 1, 2006:

IFRS 6 — Exploration for and evaluation of mineral resources
Amendment to IAS 19 — Employee benefits – Actuarial gains and losses, Group Plans and Disclosures
Amendment to IAS 21 — Net investment in a foreign operation
Amendment to IAS 39 — Financial Instruments: Recognition and Measurement — The Fair Value Option
Amendment to IAS 39 — Cash-flow Hedge Accounting of Forecast Intragroup Transactions
Amendment to IAS 39 and to IFRS 4 — Financial Guarantees Contracts
Amendment to IFRS 1 and to IFRS 6 — First time adoption of IFRS 6
IFRIC 4 — Determining whether an arrangement contains a lease
IFRIC 5 — Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds
IFRIC 6 — Liabilities arising from Participating in a Specific Market – Waste electrical and Electronic equipment

These Standards and Interpretations had no significant impact on our consolidated financial statements.

At the date of issuance of these financial statements, the following Standards and Interpretations were issued but not yet effective:

IFRS 7 — Financial instruments — Disclosures
Amendment to IAS 1 – Presentation of financial statements: Capital disclosures
IFRIC 7 — Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies
IFRIC 8 — Scope of IFRS 2
IFRIC 9 — Reassessment of embedded derivatives
IFRIC 10 – Interim Financial Reporting and Impairment

We are currently reviewing these Standards and Interpretations to measure the potential impact on our consolidated financial statements. At this stage, we do not anticipate any significant impact.

Compagnie generale de geophysique, S.A.

Note 2—Acquisitions and divestitures

On March 27, 2006, we signed a Memorandum of Understanding with Industrialization & Energy Services Company (TAQA), our long term Saudi Partner in Argas (Arabian Geophysical and Surveying Company), which is 51% owned by TAQA and 49% by us. Following this agreement, on June 24, 2006, TAQA acquired 49% of the capital of CGG Ardiseis, a newly formed CGG subsidiary dedicated to land and shallow water seismic data acquisition in the Middle East, and we kept a 51% interest. CGG Ardiseis, whose headquarters are located in Dubai, provides its clients with the complete range of CGG land and shallow water acquisition services, focusing on Eye-D, the latest CGG technology for full 3D seismic imaging. As part of the agreement, CGG Ardiseis activities in the Gulf Cooperation Council countries (“GCC”) are operated by Argas.

Note 3— Property, plant and equipment

Analysis of Property, plant and equipment is as follows:

		June 30, 2006												December 31, 2005
						Accumulated												Accumulated
(in millions of euros)		Gross				depreciation				Net				Gross				depreciation				Net
Land			4.6				(0.2	)			4.4				4.7				(0.2	)			4.5
Buildings			60.3				(30.2	)			30.1				60.3				(29.6	)			30.7
Machinery & equipment			445.2				(257.6	)			187.6				457.0				(295.9	)			161.1
Vehicles & vessels			335.6				(90.6	)			245.0				373.1				(104.3	)			268.8
Other tangible assets			37.1				(26.7	)			10.4				35.8				(25.9	)			9.9
Assets under constructions			7.4				—				7.4				5.1				—				5.1
Total Property, plant and equipment			890.1				(405.3	)			484.8				936.0				(455.9	)			480.1

In addition, seismic equipment no longer in use and held to be sold was reclassified as “Assets held for sale” for €3.5 million at December 31, 2005. The seismic equipment was sold in February 2006 for €5.0 million.

		June 30,				December 31,
Variations of the period (in millions of euros)		2006				2005
Balance at beginning of period			480.1				204.1
Acquisitions			87.4				107.7
Acquisitions through capital lease			0.1				17.4
Depreciation			(43.5	)			(67.9	)
Disposals			(4.1	)			(6.0	)
Changes in exchange rates			(28.6	)			35.2
Changes in scope of consolidation			(6.6	)			195.1
Other			—				(5.5	)
Balance at end of period			484.8				480.1

The change in scope of consolidation corresponds in 2005 to the acquisition of Exploration Resources and in 2006 to the adjustment of the fair value of Exploration Resources’ fixed assets acquired in 2005.

Reconciliation of acquisitions with the cash-flow statement and capital expenditures in note 8 is as follows :

		June 30,
(in millions of euros)		2006
Acquisitions of tangible assets (excluding capital lease) – see above			87.4
Development costs capitalized – see note 4			5.3
Additions in other intangible assets (excluding non-exclusive surveys) — see note 4			1.0
Variance of fixed assets suppliers			0.3
Total purchases of tangible and intangible assets according to cash-flow statement			94.0
Acquisitions through capital lease – see above			0.1
Increase in multi-clients surveys – see note 4			26.5
Less variance of fixed assets suppliers			(0.3	)
Capital expenditures according to note 8			120.3

Compagnie generale de geophysique, S.A.

Note 4—Goodwill and Intangible assets

Analysis of goodwill and intangible assets is as follows:

		June 30, 2006												December 31, 2005
						Accumulated												Accumulated
(in millions of euros)		Gross				depreciation				Net				Gross				depreciation				Net
Goodwill of consolidated subsidiaries			238.5				—				238.5				252.9				—				252.9
Multi-clients surveys			579.6				(500.2	)			79.4				568.4				(474.8	)			93.6
Development costs capitalized			33.6				(5.4	)			28.2				29.2				(3.9	)			25.3
Software			26.0				(20.4	)			5.6				25.9				(19.5	)			6.4
Other intangible assets			18.3				(9.3	)			9.0				19.6				(8.6	)			11.0
Total Goodwill and Intangible assets			896.0				(535.3	)			360.7				896.0				(506.8	)			389.2

On March 31, 2006, the Norwegian government decided not to award exploration-production licenses on blocks covered by one of our surveys (Moere). As this decision changed our previous estimate of future sales, this €4.6 million survey was fully depreciated at March 31, 2006.

		June 30,				December 31,
Variations of the period (in millions of euros)		2006				2005
Balance at beginning of period			389.2				225.2
Additions in goodwill			2.9				177.1
Increase in multi-clients surveys			26.5				32.0
Development costs capitalized			5.3				8.2
Other acquisitions			1.0				2.3
Depreciation on multi-client surveys			(38.6	)			(69.6	)
Other depreciation			(4.6	)			(8.4	)
Disposals			(0.2	)			—
Changes in exchange rates			(20.9	)			22.4
Other			0.1				0.1
Balance at end of period			360.7				389.2

Additions in goodwill corresponds in 2005 to the acquisition of Exploration Resources and in 2006 to the adjustment of the fair value of Exploration Resources’ assets acquired and liabilities assumed in 2005 (net of deferred tax).

Note 5— Financial debt

Analysis of financial debt by type is as follows:

		June 30, 2006												December 31, 2005
						Non-												Non-
(in millions of euros)		Current				current				Total				Current				current				Total
Outstanding bonds			—				254.3				254.3				—				146.3				146.3
Bank loans			25.9				80.6				106.5				135.9				28.8				164.7
Capital lease obligations			9.7				58.5				68.2				20.1				67.3				87.4
Sub-total			35.6				393.4				429.0				156.0				242.4				398.4
Accrued interest			2.7												1.9
Total			38.3												157.9

At June 30, 2006, €165.7 million of bank loans and capital lease obligations were secured by tangible assets and receivables.

Compagnie generale de geophysique, S.A.

Analysis of financial debt (including amounts due within one year) by currency is as follows:

		June 30,				December 31,
(in millions of euros)		2006				2005
Euro			1.6				11.8
U.S. dollar			426.9				385.6
Other currencies			0.5				1.0
Total			429.0				398.4

Analysis of financial debt (including amounts due within one year) by interest rate is as follows:

		June 30,				December 31,
(in millions of euros)		2006				2005
Variable rates (effective rate June 30, 2006: 6.38%; December 31, 2005: 7.60%)			95.2				156.6
Fixed rates (effective rate June 30, 2006: 7.24%; December 31, 2005: 7.06%)			333.8				241.8
Total			429.0				398.4

Variable interest rates generally are based on inter-bank offered rates of the related currency. The weighted average interest rate on bank overdrafts was 8.83% and 7.81% at June 30, 2006 and December 31, 2005 respectively.

At June 30, 2006 the Group had €4.5 million available in unused short-term credit lines and overdraft facilities and €31.5 million in unused long-term credit lines with a maturity date less than one year away.

7¹/2 Senior Notes due 2015 – Additional notes

On February 3, 2006, we issued an additional $165 million principal amount of our dollar-denominated 7¹/2% Senior Notes due 2015 issued in April 2005 in a private placement to certain eligible investors. The notes were issued at a price of 103¹/4% of their principal amount, resulting in a Yield-to-Worst of 6.9%. The net proceeds from the notes were used on February 10, 2006 to repay the $140.3 million remaining outstanding under our $375 million bridge credit facility used to finance the acquisition of Exploration Resources and for general corporate purposes.

Additional asset financing agreement

On March 13, 2006, CGG Marine Resources Norge AS concluded an asset financing agreement for U.S.$26.5 million with a bank. The purpose of this agreement was to finance the acquisition of newly-developed “Sentinel” streamers for the vessel Symphony. This financing agreement is guaranteed by a pledge on the streamers. At June 30, 2006, this facility was fully drawn.

Additional credit line

On March 29, 2006, Exploration Resources concluded a credit facility of U.S.$70 million. The proceeds from this credit facility were used to finance the conversion of the Geo-Challenger from a cable laying vessel to a 3D seismic vessel and seismic equipment for the vessels C-Orion and Geo-Challenger. At June 30, 2006, this facility was fully drawn.

Conversion of the remaining part of our 7.75% $85 million convertible bonds due 2012, with
nominal value of $15.3 million

Approximately $70 million of our 7.75% convertible bonds due 2012 were converted in November 2005. A general meeting of bondholders, held on April 5, 2006, and a general meeting of CGG shareholders, held on May 11, 2006, approved a change to the terms and conditions of the remaining convertible bonds to grant bondholders a right to cash payment upon immediate conversion of the bonds. The early conversion period was open on May 12, 2006 only. At the conclusion of the conversion period, all the remaining 2,525 convertible bonds were converted, leading to the issuance of 274,914 new shares. The Group paid a total premium of $2.1 million (€1.6 million) to the bondholders who converted. This premium has been recognized as an expense under the line item “Derivative and other expenses on convertible bonds” in the income statement for the six months period ended June 30, 2006. In addition, the deferred issuance costs attached to the remaining 2,525 convertible bonds were written-off in connection with the early conversion, corresponding to a €0.7 million expense under the line item “Derivative and other expenses on convertible bonds” in the income statement for the six months period ended June 30, 2006.

Compagnie generale de geophysique, S.A.

A component of our convertible bonds due 2012 denominated in U.S. dollars constituted an embedded derivative as the shares to be issued upon conversion are denominated in Euro. A portion of the issuance proceeds was deemed to relate to the fair value of the derivative on issuance and subsequent changes in fair value of the derivative were recorded through earnings. The allocation of a portion of the proceeds to the derivative created a discount on issuance that was being amortized to earnings over the life of the bonds.

The fair value of the embedded derivative has been determined using a binomial model. The fair value increased from €11.3 million at December, 31, 2005 to €32.0 million at May 12, 2006 at the date of the conversion of the remaining 2,525 convertible bonds due 2012. Then, at the conversion, the €32.0 million derivative was reclassified in reserves in the balance sheet.

The global increase of €20.7 million in the value of the derivative from January 1, 2006 to May 12, 2006 is mainly explained by the increase in the CGG share price, although, as regards the derivative related to the bonds effectively converted in May 2006, the value was reduced by the time-component as a result of the conversion into shares, for an amount of €1.6 million.

The €20.7 million increase in the value of the derivative together with the €1.6 million premium paid and the €0.7 million deferred issuance costs written of resulted in aggregate expense of €23.0 million in the six months period ended June 30, 2006, accounted for as “Derivative and other expenses on convertible bonds” in the income statement.

Note 6— Financial Instruments

Foreign currency exposure management

The reporting currency for the Group’s consolidated financial statements is the euro. However, as a result of having primarily customers that operate in the oil and gas industry, more than 90% of the Group’s operating revenues are denominated in currencies other than the euro, primarily the U.S. dollar.

As a result, the Group’s sales and operating income are exposed to the effects of fluctuations in the value of the euro versus the U.S. dollar. A strengthening of the euro compared to the U.S. dollar has a negative effect on the Group’s net sales and operating income denominated in U.S. dollars when translated to euro, while a weakening of the euro has a positive effect. In addition, the Group’s exposure to fluctuations in the euro / U.S. dollar exchange rate has considerably increased over the last few years due to increased sales outside of Europe.

In order to improve the balance of its net position of receivables and payables denominated in foreign currencies, the Group maintains a portion of its financing in U.S. dollars. At June 30, 2006 and at December 31, 2005, the Group’s financial debt denominated in U.S. dollars amounted to U.S.$541.7 million (€426.1 million) and U.S.$454.9 million (€385.6 million), respectively.

In addition, to protect against the reduction in the value of future foreign currency cash flows, the Group follows a policy of selling U.S. dollars forward at average contract maturity dates that the Group attempts to match with future net U.S. dollar cash flows (revenues less costs in U.S. dollars) to be generated by firm contract commitments in its backlog generally over the ensuing six months. A similar policy, to a lesser extent, is carried out with respect to contracts denominated in British pounds. This foreign currency risk management strategy has enabled the Group to reduce, but not eliminate, the positive or negative effects of exchange movements with respect to these currencies.

Compagnie generale de geophysique, S.A.

Details of forward exchange contracts are as follows :

		June 30,				December 31,
		2006				2005
Forward sales of U.S. dollars against euros
Notional amount (in millions of U.S.$)			305.3				183.6
-of which forward sales qualifying as cash-flow hedges			305.3				183.6
-of which forward sales not qualifying as cash-flow hedges			—				—
Weighted average maturity		135 days				91 days
Weighted average forward U.S.$/Euro exchange rate			1.2287				1.2048
Forward sales of U.S. dollars against British pounds
Notional amount (in millions of U.S.$)			10.3				6.5
-of which forward sales qualifying as cash-flow hedges			10.3				6.5
-of which forward sales not qualifying as cash-flow hedges			—				—
Weighted average maturity		84 days				90 days
Weighted average forward U.S.$/G.B. pounds exchange rate			1.7761				1.8871

Effect of forward exchange contracts on financial statements are as follows :

		June 30,				December 31,
(in millions of euros)		2006				2005
Carrying value of forward exchange contracts			6.4				(4.7)
Fair value of forward exchange contracts			6.4				(4.7)
Gains recognized in profit and loss			3.0				—
Losses recognized in profit and loss			—				(2.9)
Gains recognized directly in equity			7.8				—
Losses recognized directly in equity			—				(5.6)

Interest rate risk management

No interest rate cap agreement was subscribed during the first six months of 2006.

Fair value information

The carrying amounts and fair values of the Group’s financial instruments are as follows:

		June 30, 2006								December 31, 2005
		Carrying				Fair				Carrying				Fair
(in millions of euros)		Amount				Value				Amount				Value
Cash and cash equivalents			206.4				206.4				112.4				112.4
Bank overdraft facilities			17.2				17.2				9.3				9.3
Bank loans, vendor equipment financing and shareholder loans:
• Variable rate			95.2				95.2				156.6				156.6
• Fixed rate			333.8				338.7				241.8				244.0
Foreign currency exchange contracts			6.4				6.4				(4.7	)			(4.7	)

Note 7— Common stock and stock option plans

At June 30, 2006, the Company’s share capital consisted of 17,485,446 shares, each with a nominal value of €2.

Dividend rights

Dividends may be distributed from the statutory retained earnings, subject to the requirements of French law and the Company’s Articles of Association (“statuts”). Retained earnings available for distribution at the holding company, CGG S.A., totaled €461.5 million at June 30, 2006.

Compagnie generale de geophysique, S.A.

Stock options

Pursuant to various resolutions adopted by the Board of Directors according to the authorizations voted by the General Shareholders’ meeting, the Group has granted options to purchase Ordinary Shares to certain employees, executive officers and directors of the Group.

Options granted under the provisions of the 2000 option plan which expires eight years from the date of grant could not generally be exercised before 2003 and for the options to subscribe 1,000 shares or more, the shares resulting from the exercise of those options could not be sold before January 18, 2005.

Options granted under the provisions of the 2001 option plan, which expires eight years from the date of grant, are vested by one fifth each year from March 2001 and could not generally be exercised before 2004 and for the options to subscribe 1,000 shares or more, the shares resulting from the exercise of those options could not be sold before January 18, 2005.

Options granted under the 2002 option plan, which expires eight years from the date of grant, are vested by one fifth each year from May 2002 and could not generally be exercised before 2005. Moreover, for options to subscribe 1,000 shares or more, the shares resulting from the exercise of those options could not be sold before May 15, 2006.

Options granted under the 2003 option plan, which expires eight years from the date of grant, are vested by one-fourth each year from May 2003 and could not generally be exercised before May 16, 2006. Moreover, for options to subscribe 1,000 shares or more, the shares resulting from the exercise of those options could not be sold before May 17, 2007.

Options granted under the 2006 option plan, which expires eight years from the date of grant, are vested by one fourth each year from May 2006 and could not generally be exercised before May 2010. Moreover, for options to subscribe 1,000 shares or more, the shares resulting from the exercise of those options could not be sold before May, 2010. Out of the 202,500 options granted in May 2006, 136,000 were granted to the executive managers of the Group.

The exercise price for each option is the average fair market value for the common stock during the 20 trading days ending on the trading day next proceeding the date the option is granted.

According to IFRS 2, fair value of stock-options granted since November 7, 2002 (in the May 2003 and May 2006 plans) was recognized as an expense over the life of the plan, which represented a €1.1 million expense on the six months period ended June 30, 2006 (of which €0.7 million for the executive managers of the Group).

Information relating to options outstanding at June 30, 2006 is summarized below:

						Options				Exercise				Fair value
		Options				outstanding at				price per				per share at
Date of Board of Directors’ Resolution		granted				June 30, 2006				share				the grant date				Expiration date
January 18, 2000			231,000				93,226				€45.83					(a)		January 17, 2008
March 14, 2001			256,000				184,108				€65.39					(a)		March 13, 2009
May 15, 2002			138,100				113,580				€39.92					(a)		May 14, 2010
May 15, 2003			169,900				171,662				€14.53			€	11.13	(b)		May 14, 2011
May 11, 2006			202,500				202,150			€	131.26			€	74.83	(c)		May 10, 2014
Total			997,500				764,726

A summary of the Company’s stock option transactions and related information follows:

		June 30, 2006								June 30, 2005
						Weighted								Weighted
		Number of				average				Number of				average
		options				exercise price				options				exercise price
Outstanding-beginning of period			691,939				43.63				809,050				48.95
Granted			202,500				131.26				—				—
Exercised			(128,852	)			53.06				(114,622	)			53.59
Forfeited			(861	)			69.65				(21,515	)			56.06
Outstanding-end of period			764,726				65.22				672,913				47.93

Compagnie generale de geophysique, S.A.

The General Shareholders’ meeting dated May, 11, 2006 authorized the Board of Directors to implement a plan of allocation of free shares. The maximum number of free shares that may be allocated is 53,200 shares, out of which, 13,100 may be allocated to the executive managers of the Group. The fair value of one free share is 158.2€. The fair value of free shares expected to be allocated was recognized as an expense over the life of the plan, which represented a €0.3 million expense for the six months period ended June 30, 2006 (of which €0.1 million for the executive managers of the Group).

Free shares are allocated according to the following plan:

- Period of acquisition of the rights for allocation and realization of the conditions

Shares will be issued from May 11, 2008 if the realization of the conditions mentioned below has been enacted by the Board of Directors.

- General conditions of allocation

The beneficiaries would become actually owners of the shares, after the two-years acquisition period had expired, only if each beneficiary still has a valid employment contract with CGG or one of its subsidiaries (except specific conditions) at the date the two-years acquisition period expires and if the conditions of allocation are realized.

- Other conditions of allocations – Performance conditions

The Board of Directors also defined two general performance conditions of the Group based on:

- the Group average consolidated net income per share over the year ended December 31, 2006 and 2007.

- the average yearly return before tax on capital employed over the year ended December 31, 2006 and 2007 of either the Group, the Services segment, or the Products segment, according to which segment the beneficiary belongs to.

- Holding Period of the allocated shares

Once allocated, the shares may not be sold for two years from the date of the actual allocation.

Note 8— Analysis by operating segment and geographic zone

The following tables present revenues, operating income and identifiable assets by operating segment, operating revenues by geographic zone (by location of customers and by origin) as well as operating revenues by category.

The Group principally services the oil and gas exploration and production industry and currently operates in two industry segments:

•

Geophysical services, which consist of (i) land seismic data acquisition, (ii) marine seismic data acquisition, (iii) other geophysical data acquisition, including activities not exclusively linked to oilfield services, and (iv) data processing, and data management;

•

Products, which consist of the manufacture and sale of equipment involved in seismic data acquisition, such as recording and transmission equipment and vibrators for use in land seismic acquisition.

Inter-company sales between such industry segments are made at prices approximating market prices and relate primarily to equipment sales made by the geophysical products segment to the geophysical services segment. These inter-segment sales, the related operating income recognized by the geophysical products segment, and the related effect on capital expenditures and depreciation expense of the geophysical services segment are eliminated in consolidation and presented in the column “Eliminations and Adjustments” in the tables that follow.

Operating income represents operating revenues and other operating income less expenses of the industry segment. It includes non-recurring and unusual items, which are disclosed in the operating segment if material. General corporate expenses, which include Group management, financing, and legal activities, have been included in the column “Eliminations and Adjustments” in the tables that follow. The Group does not disclose financial expenses or revenues by operating segment because these items are not monitored by the operating management, financing and investing being mainly managed at the corporate level.

Identifiable assets are those used in the operations of each industry segment and geographic zone. Unallocated and corporate assets consist primarily of financial assets, including cash and cash equivalents.

Net sales originating in France include export sales of approximately €126.0 million for the six months ended June 30, 2006 and €87.1 million for the six months ended June 30, 2005. Net sales of CGG S.A. on a stand alone basis amounted to €150.7 million for the six months period ended June 30, 2006 and to €104.3 million for the six months period ended June 30, 2005.

For the first half of 2006, the Group’s two most significant customers accounted for 14.4% and 5.0%, respectively, of the Group’s consolidated revenues compared with 16.7% and 3.6% for the first half of 2005.

Compagnie generale de geophysique, S.A.

Analysis by operating segment

		Six months ended June 30, 2006																	Six months period ended June 30, 2005
										Eliminations																	Eliminations
										and				Consolidated													and				Consolidated
(in millions of euros)		Services				Products				Adjustments				Total					Services				Products				Adjustments				Total
Revenues from unaffiliated customers			402.3				232.2				—				634.5					248.4				138.6				—				387.0
Inter-segment revenues			0.6				55.0				(55.6	)			—					0.3				20.2				(20.5	)			—
Operating revenues			402.9				287.2				(55.6	)			634.5					248.7				158.8				(20.5	)			387.0
Other income from ordinary activities			0.9				—				—				0.9					0.8				—				—				0.8
Total income from ordinary activities			403.8				287.2				(55.6	)			635.4					249.5				158.8				(20.5	)			387.8
Operating income (loss)			89.7				74.9				(18.5)	(a)			146.1					11.6				30.1				(9.6)	(a)			32.1
Equity income (loss) of investees			5.9				(0.1	)			—				5.8					7.0				(0.3	)			—				6.7
Capital expenditures (b)			124.0				8.5				(12.2	)			120.3					61.9				8.5				(5.1	)			65.3
Depreciation and amortization (c)			82.9				8.0				(4.1	)			86.8					57.2				8.4				(2.2	)			63.4
Investments in companies under equity method			1.0				—				—				1.0					—				—				—				—
Identifiable assets			1,118.1				443.1				(142.4	)			1,418.8					594.6				325.7				(37.2	)			883.1
Unallocated and corporate assets															254.8																	153.0
Total assets															1,673.6																	1,036.1