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Press release from Marketwire

Pulse Seismic Inc. Reports Q3 2012 Financial Results and Declaration of Quarterly Dividend

Thursday, November 01, 2012

Pulse Seismic Inc. Reports Q3 2012 Financial Results and Declaration of Quarterly Dividend17:29 EDT Thursday, November 01, 2012CALGARY, ALBERTA--(Marketwire - Nov. 1, 2012) - Pulse Seismic Inc. (TSX:PSD) ("Pulse" or "the Company") is pleased to report its financial and operating results for the three and nine months ended September 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 were in line with the preliminary unaudited financial results announced in the Company's news release on October 15, 2012.Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on December 20, 2012 to shareholders of record at the close of business on December 6, 2012.Pulse is also pleased to announce the appointment of Neal Coleman, currently interim President and Vice President of Sales and Marketing, to the position of President and Chief Executive Officer. "I am honoured by the Board of Directors' confidence and I'm excited about my expanded role at Pulse, including the chance to work with the whole Pulse team in continuing to build the Company's role in Western Canada's most active oil and liquids-rich natural gas plays," said Mr. Coleman.Graham Weir, Chair of Pulse's Board of Directors, stated: "Neal has been instrumental in driving Pulse's business development success, and has clearly demonstrated leadership skills during his time as Interim President. My colleagues on the Board and I are pleased that Neal has accepted this position, and look forward to supporting his executive leadership as the management team and Board continue to build Pulse."FINANCIAL HIGHLIGHTSFor the nine months ended September 30, 2012, Pulse had:Record seismic data library sales of $52.2 million, a 121 percent increase over the same period last year; Total seismic revenue (including participation survey revenue) of $58.6 million, double the level in the same period in 2011; Cash EBITDA(a) of $45.0 million, an increase of 151 percent from the first nine months of 2011 (and an increase of 163 percent on a per-share basis to $0.71 per share basic and diluted); and An increase in shareholder free cash flow(a) of 185 percent period-over-period to $42.7 million (and by 209 percent on a per-share basis to $0.68 per share basic and diluted). For the three months ended September 30, 2012, Pulse had:Seismic data library sales of $4.1 million, compared to $6.7 million in the same period last year; Total seismic revenue (including participation survey revenue) of $8.7 million compared to $7.3 million for the comparable period in 2011; Cash EBITDA of $2.0 million ($0.03 per common share basic and diluted) and shareholder free cash flow of $907,000 ($0.01 per common share basic and diluted). Both were lower than in the comparable period in 2011 because of lower data library sales; and The purchase and cancellation, through its normal course issuer bid, of 715,000 common shares at a cost of $1.8 million through the third quarter. During the first nine months of 2012 a total of 4,920,300 common shares totalling $10.3 million have been purchased and cancelled. OPERATIONS UPDATEPulse commenced operations on a 541 square kilometre 3D participation survey in the third quarter of 2012, which was 31 percent complete at September 30, 2012. Field operations are expected to be completed by the end of the year. A second participation survey totalling 487 square kilometres commenced in mid-October and is expected to be completed by the end of the first quarter of 2013. Both surveys are located in the Fox Creek vicinity of west central Alberta.In September, Pulse executed an agreement to conduct its third participation survey of the season. This 3D survey, totalling 153 square kilometres, is located in the Pembina area of west central Alberta. The estimated total cost of this survey is $6.0 million. Field operations are expected to be conducted in the first quarter of 2013.Selected Financial and Operating Information($000s except per share data and number of shares)Three months ended September 30,Nine months ended September 30,Year ended December 31,20122011201220112011(unaudited)(unaudited)RevenueData library sales$4,062$6,692$52,155$23,645$36,194Participation surveys4,6335616,4264,26915,280Total revenue$8,695$7,253$58,581$27,914$51,474Amortization of seismic data library$6,435$6,992$30,217$25,100$31,767Net earnings (loss)$(362)$(1,864)$13,495$(4,627)$5,203Net earnings (loss) per share:Basic and diluted$(0.01)$(0.03)$0.21$(0.07)$0.08Funds from operations(b)$5,579$4,661$48,264$19,466$39,386Funds from operations per share(b):Basic and diluted$0.09$0.07$0.77$0.29$0.59Cash EBITDA$2,029$4,988$44,955$17,945$27,662Cash EBITDA per share:Basic and diluted$0.03$0.07$0.71$0.27$0.41Shareholder free cash flow$907$4,057$42,665$15,039$23,896Shareholder free cash flow per share:Basic and diluted$0.01$0.06$0.68$0.22$0.36Capital expenditures:Participation surveys$16,786$-$20.425$7,767$7,765Changes to work in progress(8,125)742(8,125)(1,646)14,426Seismic data purchases and related costs504-813635720Property and equipment additions453213113132Total capital expenditures$9,210$745$13,326$6,869$23,043Weighted average shares outstanding:Basic and diluted61,516,45666,561,66363,004,22366,874,65666,691,131Shares outstanding at period end61,125,22266,377,07166,045,571Seismic library:2D in kilometres339,991339,991339,9913D in square kilometres27,08926,51426,514Financial Position and Ratios(thousands of dollars except ratio calculations)September 30,September 30,December 31,201220112011Working capital$9,108$6,020$5,017Working capital ratio1.35:11.31:11.17:1Total assets$135,153$132,788$150,678Long-term debt(c)$29,914$49,767$46,562TTM cash EBITDA(d)$54,672$31,090$27,662Shareholders' equity$83,528$74,691$83,073Long-term debt to equity ratio0.36:10.67:10.56:1Long-term debt to TTM cash EBITDA ratio0.55:11.60:11.68:1(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 International Financial Reporting Standards (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 net 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 costs.(d)TTM cash EBITDA is defined as the sum of the trailing 12 months' cash EBITDA and is used to provide a comparable annualized measure.OUTLOOKPulse is well-positioned to generate growing shareholder free cash flow. Notwithstanding lower seismic data library sales in the third quarter, the Company entered the fourth quarter of 2012 in the strongest overall financial position it has ever experienced. This is due to a combination of record revenue in the first nine months of 2012, more than 150 percent increases to cash EBITDA and shareholder free cash flow over the same period in 2011, the more than one-third reduction in long-term debt from December 31, 2011 to September 30, 2012, improving debt ratios and growing working capital.Pulse has now delivered two successive nine-month periods of significant growth in data library sales and overall revenue. In 2012, nine-month seismic data library sales and overall revenue both exceed the 12- month results of any previous year. Notably, Pulse's key performance indicators have increased more on a per-share basis than in dollar terms, due to the Company's ongoing purchases of its common shares. Since the issuance of 14.3 million shares to partially finance the significant data library acquisition in fall 2010, 6.1 million shares have been repurchased.The strong results of the past three quarters have strengthened Pulse's decision-making flexibility for growth initiatives and capital allocation through year-end and into 2013. Cash deployment options include conducting participation surveys, paying dividends, buying back common shares, and repaying debt, all in alignment with Pulse's vision and strategy.Pulse's data library sales are driven by two largely offsetting types of customer behavior. Higher natural gas prices tend to generate a large number of sales to a myriad of exploration and production companies of varying sizes. When prices decline, the resulting corporate consolidations and joint ventures tend to trigger re-licensing fees and sales of partner licenses to new corporate owners and partners. At present, with natural gas prices remaining low but oil prices high, and producers continuing to invest in light oil and liquids-rich natural gas targets, Pulse is generating both types of sale.Light oil and liquids-rich natural gas targets being pursued include the Montney, Cretaceous Deep Basin, Cardium, Viking, Duvernay shale and others. Pulse offers seismic data coverage over many of these plays while seeking to add new coverage in areas lacking 3D surveys to date. Pulse's business development is concentrating on high-quality, multi-zone, liquids-rich areas in which multiple producers are active. The current participation surveys are of this nature, adding 3D seismic coverage over unconventional zones in an active exploration and development area around Fox Creek in west central Alberta, which bodes well for multiple future licensing sales. The Company already has extensive coverage in the southern and eastern extension of the Montney play, which is rich in liquids and also has oil-bearing areas that companies are now drilling. Pulse will continue to seek opportunities to add new seismic data in areas of active drilling in under- served areas, in addition to the current 3D participation survey programs, as the Company anticipates a busy seismic survey season over the coming winter.Meanwhile, North American natural gas prices have experienced a modest recovery after bottoming early in the second quarter. The AECO benchmark reached $3.31 per thousand cubic feet (mcf) on October 31, above its year-to-date average price of $2.22 per mcf and, coincidentally, exactly equal to its year-earlier price.Possible reasons for the recent rally are several-fold. One is the continued decline in the number of drilling rigs focused on natural gas targets in the U.S., to 422 as of mid-October from approximately 900 throughout 2011. At some level, the number of natural gas rigs will be insufficient to offset production declines on existing gas wells. The U.S. Energy Information Administration, in a recent article, noted that natural gas production in the United States had been essentially flat from January through July 2012 after rising almost continuously since the fall of 2009. Another likely factor is the greater use of natural gas for power generation and residential consumption. A third could be the coverage of short positions by investors responding to the gradual price recovery. Lastly, following a very hot spring, summer and early fall in most of the U.S., recent weather has been much cooler. All of these factors are bullish for natural gas prices. Offsetting this is that natural gas storage volumes in the U.S. remain slightly above the five-year weekly range, suggesting a continued ability to cushion price volatility by accommodating higher consumption and/or lower production over the short term.Capital markets appear to have taken note of the bullish natural gas price signals, with a number of publicly traded Canadian gas-weighted producers experiencing rising share prices in recent weeks. If this trend takes hold on a wider basis, it could contribute to easing capital constraints for exploration and development programs over the coming winter season. While always keeping in mind the so far short duration and limited magnitude of the natural gas price rally, these are positive indicators for field activity, and Pulse believes it will generate good returns on its capital investment in new participation surveys.The Company's management team and Board of Directors look ahead with continued optimism and confidence. 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. The Company remains committed to conservative financial management, including maintaining a strong balance sheet, and intends to keep paying a quarterly dividend while purchasing more of its common shares.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 square kilometres of 3D seismic and 340,000 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, cost and commencement, completion and delivery dates of participation surveys; Pulse's capital allocation strategy; Pulse's belief that it will generate good returns on its capital investment in new participation surveys; Pulse's intention to keep paying a quarterly dividend while purchasing more of its common shares; 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: Contact Information: Pulse Seismic Inc.Neal ColemanPresident and Chief Executive Officer(403) 237-5559 or Toll-free: 1-877-460-5559info@pulseseismic.comPulse Seismic Inc.Pamela WicksVP Finance and Chief Financial Officer(403) 237-5559 or Toll-free: 1-877-460-5559info@pulseseismic.comwww.pulseseismic.com