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Press release from Marketwire

Pulse Seismic Inc. Reports 2011 Results and Declares Quarterly Dividend

Monday, March 19, 2012

Pulse Seismic Inc. Reports 2011 Results and Declares Quarterly Dividend14:20 EDT Monday, March 19, 2012CALGARY, ALBERTA--(Marketwire - March 19, 2012) - Douglas Cutts, President and Chief Executive Officer of Pulse Seismic Inc. ("Pulse" or "the Company") (TSX:PSD), reports the financial and operating results of Pulse for the year ended December 31, 2011. The audited consolidated financial statements, accompanying notes and MD&A will be posted on SEDAR (www.sedar.com) and are available on Pulse's website at www.pulseseismic.com.Mr. Cutts is also pleased to announce that Pulse has declared a quarterly dividend. This dividend is $0.0125 per common share and will be paid on April 11, 2012 to shareholders of record at the close of business on March 28, 2012. The Company does not currently have an active Dividend Reinvestment Plan or Optional Share Purchase Plan. Pulse confirms that all dividends paid to shareholders in 2012, and subsequent years, are designated as "eligible dividends", as defined by the Government of Canada's Bill C-28, entitling Canadian resident individuals to a dividend tax credit based on the grossed-up dividend amount.The year end audited financial results were in line with the preliminary unaudited financial results announced in the Company's news release on February 6, 2012.HIGHLIGHTSSeismic data library sales for the year ended December 31, 2011 were $36.2 million, an increase of 20% over the $30.3 million in data library sales achieved for the year ended December 31, 2010. Seismic data library sales for the three months ended December 31, 2011 were $12.5 million, a 26% decrease from $16.9 million for the same period in 2010. Total seismic revenue (including revenue from participation surveys) for the year ended December 31, 2011 was $51.5 million compared to $33.0 million for the year ended December 31, 2010. Cash EBITDA(c) for the year ended December 31, 2011 was $27.7 million ($0.41 per share basic and diluted), an increase of 28% over the $21.7 million ($0.38 per share basic and diluted) for the year ended December 31, 2010. Shareholder Free Cash Flow(c) for the year ended December 31, 2011 was $23.9 million ($0.36 per share basic and diluted), an increase of 22% over the $19.6 million ($0.35 per share basic and diluted) for the year ended December 31, 2010. Net earnings for the year ended December 31, 2011 were $5.2 million ($0.08 per share basic and diluted) compared to a net loss of $1.3 million ($0.02 per share basic and diluted) for the same period in 2010. In the fourth quarter of 2011, Pulse was conducting a 277 net square kilometre 3D seismic survey in the Edson area of west central Alberta. At December 31, 2011 the survey was 97% complete. Originally scheduled for delivery by December 31, 2011, this survey was delivered in the first quarter of 2012. In October 2011, Pulse commenced operations on two additional 3D participation surveys located within the Deep Basin plays of west central Alberta. The first survey located in the Kaybob area consists of 158 net square kilometres of seismic data. The second survey located in the Simonette area consists of 132 net square kilometres of seismic data. Both surveys were approximately 75% complete at December 31, 2011 and were delivered in March 2012. In 2011 Pulse purchased and cancelled through its normal course issuer bid a total of 1,156,100 common shares at a total cost of approximately $2.3 million, and subsequent to December 31, 2011, Pulse purchased and cancelled 1,668,500 common shares at a total cost of $2.9 million. On March 13, 2012 Pulse announced it had signed a $27.8 million 3D seismic data license agreement. The majority of the seismic data is located in the Cutbank Ridge area of northeast British Columbia.SELECTED FINANCIAL AND OPERATING INFORMATION(thousands of Canadian dollars except per share data and number of shares)Three months ended December 31Year ended December 312011201020112010RevenueData library sales$12,549$16,945$36,194$30,264Participation surveys11,0112,10115,2802,770Total revenue$23,560$19,046$51,474$33,034Amortization of seismic data library$6,667$8,175$31,767$22,771Net earnings (loss) from continuing operations(a)$9,830$4,548$5,203$(745)Net earnings (loss) from continuing operations per share (a):Basic and diluted$0.15$0.07$0.08$(0.01)Net earnings (loss) (a)$9,830$4,021$5,203$(1,251)Net earnings (loss) per share (a):Basic and diluted$0.15$0.06$0.08$(0.02)Funds from operations (a) (b)$19,920$14,490$39,386$22,670Funds from operations per share(a) (b):Basic and diluted$0.30$0.22$0.59$0.40Cash EBITDA (c)$9,717$13,144$27,662$21,687Cash EBITDA per share(c):Basic and diluted$0.15$0.20$0.41$0.38Shareholder free cash flow (c)$8,857$12,238$23,896$19,585Shareholder free cash flow per share (c):Basic and diluted$0.13$0.18$0.36$0.35Capital expendituresParticipation surveys (cost reduction)$(2)$2,521$7,765$2,245Seismic data purchases852472075,575Changes to work in progress16,0721,03814,4262,400Property & equipment additions1955132205Total capital expenditures$16,174$3,638$23,043$80,425Weighted average shares outstanding:Basic and diluted66,147,41167,238,02366,691,13156,662,196Shares outstanding at period end66,045,57167,201,671Seismic library:2D in net kilometres339,991339,9913D in net square kilometres26,51426,446Financial Position and Ratios(thousands of Canadian dollars except ratios and percentage calculations)As at December 3120112010Working capital$5,017$7,878Working capital ratio1.171.38Total assets$150,678$154,438Long-term debt (d)$46,562$61,386TTM cash EBITDA (e)$27,662$21,687Shareholders' equity$83,073$81,827Long-term debt to equity ratio0.560.75Long-term debt to TTM cash EBITDA ratio1.682.83(a) 2010 figures adjusted to conform to IFRS.(b) Funds from operations is an additional GAAP measure. Funds from operations is defined as cash provided by continuing operations as prescribed by IFRS, excluding the impact of changes in non-cash working capital. Funds from operations represents the cash that was generated during the period, regardless of the timing of collection of receivables and payment of payables. Funds from operations per share is defined as funds from operations divided by the weighted average number of shares outstanding for the period.(c) The Company's continuous disclosure documents provide discussion and analysis of "cash EBITDA", "cash EBITDA per share", "shareholder free cash flow" and "shareholder free cash flow per share". These financial measures do not have standard definitions prescribed by IFRS and, therefore, may not be comparable to similar measures disclosed by other companies. The Company has included these non-GAAP financial measures because management, investors, analysts and others use them as measures of the Company's financial performance. The Company's definition of cash EBITDA is cash available for interest payments, cash taxes if applicable, debt servicing, discretionary capital expenditures and the payment of dividends, and is calculated as earnings (loss) from continuing operations before interest, taxes, depreciation and amortization less participation survey revenue, plus any non-cash and non-recurring expenses. Cash EBITDA excludes participation survey revenue as these funds are directly used to fund specific participation surveys and this revenue is not available for discretionary capital expenditures. The Company believes cash EBITDA assists investors in comparing Pulse's results on a consistent basis without regard to participation survey revenue and non-cash items, such as depreciation and amortization, which can vary significantly depending on accounting methods or non-operating factors such as historical cost. Cash EBITDA per share is defined as cash EBITDA divided by the weighted average number of shares outstanding for the period. Shareholder free cash flow further refines the calculation of capital available to invest in growing the Company's 2D and 3D seismic data library, to repay debt, to purchase its common shares and to pay dividends by deducting non-discretionary expenditures from cash EBITDA. Non-discretionary expenditures are defined as debt financing costs (net of deferred financing expenses amortized in the current period) and current tax provisions. Shareholder free cash flow per share is defined as shareholder free cash flow divided by the weighted average number of shares outstanding for the period.(d) Long-term debt is defined as total long-term debt, including current portion, net of debt finance cost.(e) TTM cash EBITDA is defined as the sum of the trailing 12 month's cash EBITDA and is used to provide a comparable annualized measure.OUTLOOKWe foresee a third consecutive year in which Pulse's advantages of low costs, attractive service offering, a strong balance sheet and financial flexibility are deployed amid weak natural gas prices and an industry focused on unconventional oil and the liquids-rich natural gas targets.The outlook for natural gas prices is the weakest in a decade or longer. After sliding through most of 2011, the AECO natural gas price, the main price-setting trading hub for gas produced in western Canada, fell to $1.67 per gigajoule in mid-March 2012. There is no known dry gas play in western Canada where new drilling is profitable at this level - and in some cases, producers are even beginning to shut-in existing production. With a generally mild winter to date and robust United States gas production keeping storage levels high, natural gas prices are forecast to remain low. Experts differ sharply over the duration, with scenarios running from one year to 10 years. Pulse is not counting on a timely rebound in natural gas prices, but is solidly positioned to weather low natural gas prices, just as we came through the 2009 recessionary downturn.Pulse's seismic coverage over light oil and liquids-rich gas plays in unconventional tight sands and shale reservoirs provides an attractive seismic data option for our customers, and can thereby generate solid levels of revenue. We have extensive coverage in the southern and eastern extension of the Montney, which is richer in liquids and also has oil-bearing areas that companies are now drilling. The West Texas Intermediate ("WTI") oil price, the main North American price benchmark and one of the key world price benchmarks, currently in the range of US$90-110 per barrel, is clearly high enough to sustain profitable activity in these oil plays as well as gas plays rich in condensate.With signs also pointing to vigorous industry activity in the liquids-rich parts of the Duvernay, Pulse is well positioned to compete in providing new 3D data for active exploration and production companies. Our focus will be on shooting new 3D data in this under-served area. Accurate placement of the very costly Duvernay horizontal wells - which are close to 5,000 metres in total measured depth and cost $12-$18 million per well to drill and complete - is imperative for achieving drilling success, and 3D seismic is a key tool to that end. Given the play's broad extent, Pulse's business development is focusing on high-quality, liquids-rich areas in which multiple producers are active. In some cases, the same lands will also be prospective for the Montney and shallow Cretaceous zones, creating longer-term potential for multiple licensing of the same dataset.The industry's field activities appear to be brisk. As of late January 2011, 521 rigs were drilling across western Canada; while in the last week of January 2012, 616 rigs were active, according to the Canadian Association of Oilwell Drilling Contractors (CAODC). The CAODC is forecasting the drilling and completion of 12,672 new wells across western Canada in 2012, essentially flat from its 2011 forecast of 12,555, which was significantly exceeded. The Petroleum Services Association of Canada recently revised its 2012 forecast downward to 13,350 wells, which was still up slightly from its 2011 actual count of 12,917 wells.The heavy recent spending on land in Alberta does suggest a certain level of future exploration and development; otherwise the expensively-acquired mineral leases simply expire. The industry's proportion of horizontal wells also continues to increase. A given number of horizontal wells represent greater need for 3D seismic than the same number of vertical wells, since horizontal wells traverse hundreds of metres of reservoir. This increasing demand for 3D seismic data should provide opportunities for Pulse. During one period over the past winter, all seismic crews available in western Canada were active in the field. This represented among the highest levels of survey crew utilization in the industry's history.Pulse's goals for 2012 are to generate solid levels of seismic data library sales and participation survey revenue. The strong cash margins generated from data sales and a low cost structure enable us to continue to pay down long-term debt, purchase Pulse's common shares and to pay a dividend. We will continue seeking opportunities to grow the 3D library through participation surveys that are focused on our core area and are significantly partner-funded, and to purchase existing seismic datasets that meet our key criteria of high data quality, suitable coverage and attractive valuations.Pulse's modest cost structure enables it to generate high cash margins even in periods of weak commodity prices, in the process continuing to build shareholder value. Pulse's shareholders are levered to a future rebound in natural gas prices, the timing of which is unknown. In the meantime, Pulse's current annual dividend of $0.05 per share also provides a reasonable return on investment.On March 13, 2012 Pulse announced a $27.8 million data library sale. This sale further solidifies our strong financial position and provides us the flexibility to maximize our capital allocation in alignment with Pulse's vision and strategy.CONFERENCE CALL FOR THE 2011 YEAR END RESULTSThe Company will host a conference call on Tuesday, March 20, 2012 at 1:00 pm EST (11:00 am MST) to discuss the Company's results for the fourth quarter and year-end 2011. Douglas Cutts, President & CEO will chair the call with Pamela Wicks, VP Finance & CFO and Neal Coleman, VP Sales and Marketing also taking part. A question-and-answer period will follow an update on the Company's strategies and outlook.To participate please dial 416-340-8530 or 877-440-9795 approximately 15 minutes before the commencement of the call. To listen to the webcast of the conference call please visit the Company's website at www.pulseseismic.com.An archival recording of the conference call will be available approximately one hour after the completion of the call until March 27, 2012. To access the replay, please dial 800-408-3053 or 905-694-9451 and enter the pass code 8131074.CORPORATE PROFILEPulse is a market leader in the acquisition, marketing and licensing of 2D and 3D seismic data to the western Canadian energy sector. Pulse owns the second-largest licensable seismic data library in Canada, currently consisting of approximately 27,100 net square kilometres of 3D seismic and 340,000 net kilometres of 2D seismic. The library extensively covers the Western Canada Sedimentary Basin where most of Canada's oil and natural gas exploration and development occur.Forward Looking InformationThis news release contains information that constitutes "forward looking information" or "forward looking statements" (collectively, "forward looking information") within the meaning of applicable securities legislation. This forward looking information includes, among other things, statements regarding:general economic and industry outlook; industry activity levels and capital spending; forecast commodity prices; forecast oil and natural gas drilling activity; forecast oil and natural gas company capital budgets; forecast horizontal drilling activity in unconventional oil and gas plays; estimated future demand for seismic data; estimated future seismic data sales; estimated future demand for participation surveys; Pulse's business and growth strategy; and Other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results and performance.Undue reliance should not be placed on forward-looking information. Forward looking information is based upon current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to vary and in some instances to differ materially from those anticipated in the forward looking information.The sources for forecasts and the material assumptions underlying this forward looking information are noted in the "Outlook" section of this news release.The material risk factors that could cause actual results to differ materially from the forward-looking information include, but are not limited to:economic risks; the demand for seismic data and participation surveys; the pricing of data library license sales; the level of pre-funding of participation surveys, and the ability of the Company to make subsequent data library sales from such participation surveys; the ability of the Company to complete participation surveys on time and within budget; environment, health and safety risks; the effect of seasonality and weather conditions on participation surveys; federal and provincial government laws and regulation, including taxation, royalty rates, environment and safety; competition; dependence upon qualified seismic field contractors; dependence upon key management, operations and marketing personnel; loss of seismic data; and protection of Intellectual Property.The foregoing list of risks is not exhaustive. Additional information on these risks and other factors which could affect the Company's operations or financial results are included in the Risk Factors section of the Company's MD&A for the most recent calendar year and interim periods. Forward looking information is based upon the assumptions, expectations, estimates and opinions of the Company's management at the time the information is presented.FOR FURTHER INFORMATION PLEASE CONTACT: Douglas CuttsPulse Seismic Inc.President and CEO(403) 237-5559 or Toll-free: 1-877-460-5559ORPamela WicksPulse Seismic Inc.VP Finance and CFO(403) 237-5559 or Toll-free: 1-877-460-5559info@pulseseismic.comwww.pulseseismic.com