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Press release from Marketwire

Pulse Seismic Inc. Reports Record Quarterly Results and Updates Capital Allocation Strategy

Friday, May 04, 2012

Pulse Seismic Inc. Reports Record Quarterly Results and Updates Capital Allocation Strategy07:27 EDT Friday, May 04, 2012CALGARY, ALBERTA--(Marketwire - May 4, 2012) - Douglas Cutts, President and Chief Executive Officer of Pulse Seismic Inc. (TSX:PSD) ("Pulse" or "the Company"), reports record financial and operating results of Pulse for the three months ended March 31, 2012. The unaudited condensed consolidated interim financial statements, accompanying notes and MD&A will be filed on SEDAR (www.sedar.com) and will be available on Pulse's website www.pulseseismic.com.Pulse's capital allocation has been updated to reflect the significant cash generated in the first quarter by announcing:a 60% increase in the annual dividend from $0.05 per common share to $0.08 per common share; a $7.0 million penalty-free prepayment on its long-term debt; maximization of the purchase of common shares permitted under its normal course issuer bid; and aggressive growth in the seismic data library by conducting 3D seismic participation surveys in its core areas. Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on June 20, 2012 to shareholders of record at the close of business on June 6, 2012. The Company is terminating the Dividend Reinvestment Plan and Optional Share Purchase Plan.The $7.0 million penalty-free prepayment under its syndicated revolving credit facility will reduce the long-term debt from $42.4 million to $35.4 million, leaving Pulse with $29.6 million available on the facility to finance future participation surveys and seismic data acquisitions.Pulse believes its common shares are undervalued and therefore intends to purchase the remaining maximum allowable 2.6 million common shares permitted under its current normal course issuer bid, within TSX rules and limits.The Company intends to increase its operational efforts on growing the seismic data library through participation surveys. Pulse's customers are expressing interest in acquiring new 3D seismic data in liquids-rich and oil plays, including the Duvernay and Montney, in Pulse's core areas.HIGHLIGHTS FOR THE PERIOD ENDED MARCH 31, 2012Record quarterly seismic data library sales of $34.6 million compared to $11.3 million for the same period in 2011, an increase of 205%. Executed a $27.8 million 3D seismic data license agreement, the Company's single largest seismic data library sale. Funds were received in April 2012. The majority of the seismic data is located in the Cutbank Ridge area of northeast British Columbia. Record quarterly total seismic revenue (including revenue from participation surveys) of $36.4 million compared to $14.1 million for the three months ended March 31, 2011. Cash EBITDA(a) increased 251% to a quarterly record of $32.0 million ($0.49 per share basic and diluted) compared to $9.1 million ($0.14 per share basic and diluted) for the same period in 2011. Record shareholder free cash flow(a) of $31.4 million ($0.48 per share basic and diluted), an increase of 286% from $8.1 million ($0.12 per share basic and diluted) for the three months ended March 31, 2011. Net earnings increased to a record $12.0 million ($0.19 per share basic and diluted) compared to $1.3 million ($0.02 per share basic and diluted) for the same period in 2011. Working capital position at March 31, 2012 was $25.7 million (including cash of $12.7 million, accounts receivable of $38.6 million and current portion of long term debt of $13.0 million) compared to $10.4 million (including cash of $16.2 million, accounts receivable of $11.4 million and current portion of long term debt of $13.0 million) at March 31, 2011 and $5.0 million (including cash of $17.0 million, accounts receivable of $16.6 million and current portion of long term debt of $13.0 million) at December 31, 2011. Completed three 3D participation surveys totaling 567 net square kilometres located in the Company's core areas in Alberta. These surveys commenced in the latter half of 2011. Pulse has purchased and cancelled, through its normal course issuer bid, a total of 2,168,500 common shares (3.3% of the total outstanding shares) at a total cost of approximately $4.0 million. SELECTED FINANCIAL AND OPERATING INFORMATION (thousands of dollars except per share data and number of shares)3 months ended3 months endedYear endedMarch 31,2012December 31,2011March 31,2011(unaudited)(unaudited)Revenue:Data library sales$34,607$11,331$36,194Participation surveys1,7932,75115,280Total revenue$36,400$14,082$51,474Amortization of seismic data library$17,000$9,005$31,767Net earnings$11,985$1,309$5,203Net earnings per share:Basic and diluted$0.19$0.02$0.08Funds from operations (b)$33,156$10,952$39,386Funds from operations per share (b):Basic and diluted:$0.51$0.16$0.59Cash EBITDA$32,001$9,121$27,662Cash EBITDA per share:Basic and diluted$0.49$0.14$0.41Shareholder free cash flow$31,361$8,134$23,896Shareholder free cash flow per share:Basic and diluted$0.48$0.12$0.36Capital expenditures:Participation surveys$3,703$3,698$7,765Seismic data purchases-600720Changes to work in progress-53114,426Property & equipment additions952132Total capital expenditures$3,712$4,881$23,043Weighted average shares outstanding:Basic and diluted64,691,87867,147,33166,691,131Shares outstanding at period end63,877,07167,067,67166,045,571Seismic library:2D in net kilometres339,991339,991339,9913D in net square kilometres27,08926,62426,514Financial Position and Ratios(thousands of dollars except ratio calculations)March 31, 2012March 31, 2011December 31, 2011Working capital$25,708$10,358$5,017Working capital ratio1.991.591.17Total assets$155,726$149,472$150,678Long-term debt(c)$43,351$58,194$46,562TTM cash EBITDA(d)$50,542$27,348$27,662Shareholders' equity$90,283$82,869$83,073Long-term debt to equity ratio0.480.700.56Long-term debt to TTM cash EBITDA ratio0.862.131.68The 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 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. Funds from operations is an additional GAAP measure. Funds from operations is defined as cash provided by 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. Long-term debt is defined as total long-term debt, including current portion, net of debt finance cost. 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. OUTLOOKThe $27.8 million seismic data library sale announced in mid-March has strengthened Pulse financially and created greater flexibility in decision-making regarding the Company's growth initiatives and capital allocation in 2012, in alignment with Pulse's vision and strategy. To date the Company has recovered 88 percent of the $55.5 million cash portion of the significant seismic data acquisition in the third quarter of 2010, which included the datasets licensed in the recent large seismic data library sale. This sale contributed greatly to the first quarter's record results, in which net earnings, cash EBITDA and shareholder free cash flow each exceeded the respective amounts recorded for all of 2011.The Company's strong current financial position, combined with Pulse's high cash margins enhance Pulse's options in deploying its cash to repay long-term debt, engage in participation surveys and data acquisitions, purchase its common shares, pay dividends and pursue other initiatives that increase shareholder value. Following the excellent first quarter of 2012, Pulse is better positioned than it has been in many years to lever its advantages of low operating costs, attractive service offering, strong balance sheet and financial flexibility for the remainder of the year.These advantages will be deployed amidst a commodity market characterized by strong crude oil prices and weak natural gas prices. Recent natural gas prices have been at their weakest in more than a decade, and continued to fall in the first four months of 2012, with an AECO spot price of $1.88 per thousand cubic feet on May 2, 2012. Pulse is not counting on a timely recovery in natural gas prices, but is instead solidly positioned to operate profitably through this period. Pulse's shareholders remain levered to a future rebound in natural gas prices, the timing of which is unknown. In the meantime, Pulse's current quarterly dividend provides a reasonable yield on investment.Oil and natural gas industry activity targeting "dry" (or liquids-free) gas pools in western Canada are at historic lows while crude oil prices are generating vigorous activity focused on unconventional oil and liquids-rich natural gas targets. 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 its customers, and can thereby generate solid levels of revenue.The Company has extensive coverage in the Deep Basin area of Alberta which is characterized with multiple productive zones of liquid rich gas, and also in the southern and eastern extension of the Montney play, which is richer in liquids and also has oil-bearing areas that companies are now drilling. With signs also pointing to accelerating drilling of the liquids-rich parts of the Duvernay shale, Pulse is well positioned to compete in providing new 3D seismic data for active exploration and production companies. 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 shallower Cretaceous zones, creating longer-term potential for multiple licensing of the same dataset.Pulse has been actively seeking opportunities to add new seismic data in areas of active drilling with limited current seismic coverage. Pulse's customers have been expressing interest in acquiring seismic data through new seismic participation surveys, and the Company is currently marketing a number of potential new surveys. Pulse therefore anticipates a busy seismic survey season in the fall/winter 2012. As always, Pulse remains on the lookout for suitable acquisitions of existing seismic data that meet the Company's key criteria of high data quality, suitable coverage and attractive valuations, but on balance is focused primarily on shooting new seismic data in under-served areas.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:Pulse's capital allocation strategy, including dividend policy, normal course issuer bid purchases, and participation survey strategy; 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: 1-877-460-5559info@pulseseismic.comORPamela WicksPulse Seismic Inc.VP Finance and CFO(403) 237-5559 or Toll-free: 1-877-460-5559info@pulseseismic.comwww.pulseseismic.com