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Press release from Marketwire

Pulse Seismic Inc. Reports Record Second Quarter Financial Results and Declaration of Quarterly Dividend

Tuesday, August 07, 2012

Pulse Seismic Inc. Reports Record Second Quarter Financial Results and Declaration of Quarterly Dividend11:02 EDT Tuesday, August 07, 2012CALGARY, ALBERTA--(Marketwire - Aug. 7, 2012) - Pulse Seismic Inc. (TSX:PSD) ("Pulse" or "the Company"), reports record second quarter financial results for the three and six months ended June 30, 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. The financial results are in line with the preliminary results announced in the Company's news release on July 16, 2012.Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on September 20, 2012 to shareholders of record at the close of business on September 6, 2012. HIGHLIGHTSRecord seismic data library sales for the three months ended June 30, 2012 were $13.5 million compared to $5.6 million for the same period in 2011. For the six month period ended June 30, 2012 seismic data library sales were $48.1 million compared to $17.0 million for the period ended June 30, 2011. Total revenue (including revenue from participation surveys) was $13.5 million for the three months ended June 30, 2012 and $49.9 million for the six month period ended June 30, 2012 compared to $6.6 million and $20.7 million for the respective periods in 2011. There was no participation survey revenue in the three months ended June 30, 2012. Cash EBITDA(a) increased to $42.9 million ($0.67 per share basic and diluted) for the six months ended June 30, 2012 compared to $13.0 million ($0.19 per share basic and diluted) for the period ended June 30, 2011, representing an increase of 231% (a 253% increase per share basic and diluted). Shareholder free cash flow(a) was $41.8 million ($0.65 per share basic and diluted) for the six months ended June 30, 2012, an increase of 280% (a 306% increase per share basic and diluted) from $11.0 million ($0.16 per share basic and diluted) from the same period in 2011. Net earnings for the three months ended June 30, 2012 were $1.9 million ($0.03 per share basic and diluted) compared to a loss of $4.1 million ($0.06 per share basic and diluted) for the three months ended June 30, 2011. For the six months ended June 30, 2012 net earnings were $13.9 million ($0.22 per share basic and diluted) compared to a loss of $2.8 million ($0.04 per share basic and diluted) for the same period in 2011. Pulse's working capital position at June 30, 2012 was $18.9 million (including cash of $18.6 million) compared to $8.9 million (including cash of $18.5 million) at June 30, 2011 and $5.0 million (including cash of $17.0 million) at December 31, 2011. The current portion of long-term debt in all periods was $13.0 million. During the three months ended June 30, 2012 Pulse purchased and cancelled, through its normal course issuer bid, a total of 2.0 million common shares at a total cost of $4.5 million. Pulse's capital allocation program reached $27.6 million for the six months ended June 30, 2012: $13.5 million of long-term debt repayment, including a $7.0 million penalty-free payment; the Company's net debt at August 2, 2012 is approximately $6.0 million $3.6 million in 3D seismic participation survey capital expenditures $8.5 million of normal course issuer bid purchases, representing 4.2 million common shares purchased and cancelled (6.4% of the total issued and outstanding number of common shares) $2.0 million in dividends paid to shareholders OPERATIONS UPDATEThe two 3D participation surveys that were previously announced have been expanded to a total of 952 net square kilometres. Total gross capital expenditures are now expected to be approximately $48.0 million. The surveys are located in the Fox Creek vicinity of west central Alberta encompassing the Kaybob, Waskahigan, McKinley and Tony Creek areas, which have the potential for multi-zone production of liquids-rich gas, oil and natural gas and include the extensive Montney and Duvernay shales. Field operations are expected to commence as soon as ground conditions allow, and both surveys are currently expected to be delivered by the end of the first quarter of 2013.Selected Financial and Operating Information($000s except per share data and number of shares)Three months endedSix months ended June 30, June 30,Year ended2012201120122011December 31, (unaudited) (unaudited)2011Revenue:Data library sales$13,486$5,622$48,093$16,953$36,194Participation surveys-9571,7933,70815,280Total revenue$13,486$6,579$49,886$20,661$51,474Amortization of seismic data library$6,782$9,103$23,782$18,108$31,767Net earnings (loss)$1,872$(4,072)$13,857$(2,763)$5,203Net earnings (loss) per share:Basic and diluted$0.03$(0.06)$0.22$(0.04)$0.08Funds from operations (b)$9,529$3,853$42,685$14,805$39,386Funds from operations per share (b):Basic and diluted$0.15$0.06$0.67$0.22$0.59Cash EBITDA$10,925$3,836$42,926$12,957$27,662Cash EBITDA per share:Basic and diluted$0.17$0.06$0.67$0.19$0.41Shareholder free cash flow$10,397$2,848$41,758$10,982$23,896Shareholder free cash flow per share:Basic and diluted$0.17$0.04$0.65$0.16$0.36Capital expenditures:Participation surveys (cost reduction)$(64)$4,069$3,639$7,767$7,765Seismic data purchases and related costs30935309635720Changes to work in progress-(2,919)-(2,388)14,426Property & equipment additions15958168110132Total capital expenditures$404$1,243$4,116$6,124$23,043Weighted average shares outstandingBasic and diluted 62,820,684 66,924,082 63,756,281 67,035,090 66,691,131Shares outstanding at period end 61,840,271 66,697,071 66,045,571Seismic library:2D in net kilometres339,991339,991339,9913D in net kilometres27,08926,69526,514Financial Position and Ratios($000s of dollars except ratio calculations)June 30,June 30,December 31,201220112011Working capital$18,873$8,855$5,017Working capital ratio2.04:11.56:11.17:1Total assets$134,636$138,303$150,678Long-term debt (c)$33,135$54,966$46,562TTM cash EBITDA (d)$57,631$29,460$27,662Shareholders' equity$86,581$78,014$83,073Long-term debt to equity ratio0.38:10.70:10.56:1Long-term debt to TTM cash EBITDA ratio0.57:11.87:11.68:1(a) 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 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. (b) 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. (c) Long-term debt is defined as total long-term debt, including current portion, net of debt finance cost.(d) 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.OUTLOOK The combination of record first-half 2012 revenue, growing cash EBITDA and shareholder free cash flow, declining long-term debt, improving debt ratios and a large working capital balance leaves Pulse in the strongest overall financial position it has ever experienced. First and second quarter results strengthened Pulse financially, increasing flexibility in decision-making regarding the Company's growth initiatives and capital allocation in 2012. These include deploying cash to conduct participation surveys, pay dividends, buy back common shares, and repay debt, all of which are in alignment with Pulse's vision and strategy.In May, Pulse increased its annual dividend by 60 percent, to $0.08 per share, starting with the June 20, 2012 quarterly dividend of $0.02 per share. The Company also repaid an additional $7.0 million of long-term debt, without penalty, reducing long-term debt to $33.1 million at June 30, 2012, and elected to maximize purchases of common shares under its normal course issuer bid. The financial strength also contributed to Pulse's ability to pursue the record $48.0 million, 952 net square kilometres of participation surveys in several active play areas including Kaybob, Waskahigan, McKinley and Tony Creek, which will be Pulse's largest-ever capital expenditure program.Exploration and production companies in Western Canada continue to pursue a variety of light oil and liquids-rich natural gas plays from multiple unconventional zones, including the Montney, Cretaceous Deep Basin, Cardium, Viking, Duvernay shale and others. A number of producers have reported success in several plays, such as the Montney and Cardium. Given the broad extent of these plays, Pulse's business development has been focusing on high-quality, liquids-rich areas in which multiple producers are active. The recently announced participation surveys are of this nature, adding 3D seismic coverage over multiple unconventional zones in an active exploration and development area around Fox Creek in west central Alberta, which bodes well for multiple future licensing sales. In addition, one large data library sale in the first quarter of 2012 covered a generally dry gas area, suggesting that some producers are positioning themselves to resume dry gas activity as soon as natural gas prices recover.Pulse offers seismic data coverage over many of these plays, while focusing on adding new coverage in areas lacking 3D surveys to date. The Company has extensive coverage 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. Pulse will continue to seek opportunities to add new seismic data in areas of active drilling in under-served areas, in addition to the large 3D participation surveys, as the Company anticipates a busy seismic survey season over the coming fall and winter.The Company's management team and Board of Directors look to the remainder of 2012 and towards 2013 with increasing optimism and confidence. Following the excellent first half of 2012, Pulse is better positioned than it has been in many years to lever its advantages of low costs, attractive service offering, strong balance sheet and financial flexibility for the remainder of the year. First half 2012 seismic data library sales have already exceeded the total 2011 seismic data library sales, and discussions with current and potential customers suggest an active second half. The seismic data library business is, however, generally characterized by poor revenue visibility, so the specific nature and magnitude of future seismic data library sales cannot be predicted.North American natural gas prices remain weak, but have recovered slightly from lows reached early in the second quarter, to approximately $2.50 per thousand cubic feet at AECO by late July. This is not sufficient to revive dry natural gas drilling. There are further positive signs, however. First, although natural gas storage in the United States remained above the five-year weekly range throughout July, the once-enormous gap has been closing rapidly, with below-average net injection from late April through late July. If this trend continues, natural gas storage could move back within its historical seasonal range. Second, the number of drilling rigs assigned to natural gas targets in the U.S. has fallen from approximately 900 throughout 2011 to just over 500 in recent weeks. At some level, the number of natural gas rigs will be insufficient to offset production declines on existing gas wells, and U.S. natural gas production will begin to fall. Third, low gas prices plus a very hot late spring and summer across much of North America have spurred natural gas consumption for power generation. In its July 10, 2012 Short-Term Energy Outlook, the U.S. Energy Information Administration forecast that overall U.S. natural gas consumption will increase by 4.9 percent in 2012 over 2011, while natural gas production growth in 2012 will be lower than in 2011 and production could fall during the later months of the year.These are all bullish signals for natural gas prices. Pulse's shareholders remain levered to a future rebound in natural gas, the timing and magnitude of which cannot be predicted. Pulse is not predicating any of its activity nor committing capital based on a near-term recovery in gas prices. The Company remains committed to conservative financial management, including maintaining a strong balance sheet.OTHER MATTERSAs announced on June 21, 2012, Douglas A. Cutts resigned as Pulse's President, CEO and a Director, following more than five years in this position plus a previous five-year period as Vice President, Finance and Chief Financial Officer. Mr. Cutts' time as President and CEO coincided with the world financial crisis and a major downturn in Western Canada's energy sector. He steered Pulse through this period with prudence and steadiness, safeguarding Pulse's balance sheet and restraining its costs while seeking opportunities to continue growing the Company. Pulse's strengthening financial results from late 2010 through the first half of 2012 demonstrate the soundness of this approach, and Mr. Cutts has left the Company in excellent financial and operational health.The Board, his former management team colleagues and all employees of Pulse wish Mr. Cutts the very best of success and fulfillment in his future endeavours.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:Expected size and commencement, completion and delivery dates of participation surveys; Pulse's capital allocation 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: Neal ColemanPulse Seismic Inc.Interim President and VP Sales & Marketing(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