Pulse Seismic Inc.
TSX : PSD

Pulse Seismic Inc.

March 11, 2011 16:15 ET

Pulse Seismic Inc. Reports 2010 Results

CALGARY, ALBERTA--(Marketwire - March 11, 2011) - 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, 2010. The audited consolidated financial statements, accompanying notes and MD&A will be posted on SEDAR and available on Pulse's website at www.pulseseismic.com.

The year end audited financial results were in line with the preliminary unaudited financial results announced in the Company's news release on January 25, 2011.

HIGHLIGHTS



-- Pulse doubled the size of its 3D seismic data library with the $75.5
million seismic asset acquisition from Divestco Inc. The acquisition
consisted of approximately 13,500 net square kilometres of 3D seismic
data, covering the active plays of the Cutbank Ridge area and the
Montney shale gas play in northeast British Columbia, and approximately
82,000 net kilometres of 2D seismic data.

-- Pulse set a company quarterly record of seismic data library sales,
generating $16.9 million for the three months ended December 31, 2010,
compared to $10.2 million for the same period in 2009. Seismic data
library sales for the year ended December 31, 2010 were $30.3 million
compared to $23.4 million for the year ended December 31, 2009.

-- Total seismic revenue (including revenue from participation surveys) for
the year ended December 31, 2010 was $33.0 million compared to $30.7
million for the year ended December 31, 2009.

-- Pulse also set a company quarterly record for cash EBITDA(a), generating
$13.1 million ($0.20 per share basic and diluted) for the three months
ended December 31, 2010, compared to $7.6 million ($0.14 per share basic
and diluted) for the same period in 2009. Cash EBITDA for the year ended
December 31, 2010 was $21.7 million ($0.38 per share basic and diluted)
compared to $16.4 million ($0.31 per share basic and diluted) for the
year ended December 31, 2009.

-- Net earnings from continuing operations for the three months ended
December 31, 2010 were $4.5 million, compared to $0.4 million for the
same period in 2009. Net loss from continuing operations for the year
ended December 31, 2010 was $848,000 ($0.01 per share basic and diluted)
compared to a net loss of $2.9 million ($0.06 per share basic and
diluted) for the year ended December 31, 2009.

-- Pulse's working capital was $7.9 million (including cash of $17.0
million and current portion of long term debt of $13.0 million) at
December 31, 2010 compared to $19.3 million (including cash of $15.0
million and current portion of long term debt of $7.0 million) at
December 31, 2009.

-- In 2010 Pulse completed one 3D participation survey in its core area,
the Edson-Ft. St. John multi-zone corridor adding 72 net square
kilometres to the library. Two 3D seismic surveys totalling 162 net
square kilometres commenced in late 2010. One of these surveys has been
delivered in the first quarter of 2011 and the second is scheduled for
delivery early in the second quarter of 2011. These two surveys are
located in the Montney and Cardium play areas.

-- In December 2010, Pulse renewed its $65.0 million syndicated revolving
credit facility until December 13, 2011.


FINANCIAL HIGHLIGHTS

Selected Financial and Operating Information
($000s except per share data and number of shares)

Three months ended Year ended
December 31 December 31
----------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------
Revenue
Data library sales $ 16,945 $ 10,235 $ 30,264 $ 23,444
Participation surveys 2,101 48 2,770 7,302
----------------------------------------------------------------------------
Total revenue $ 19,046 $ 10,283 $ 33,034 $ 30,746

Amortization of seismic
data library $ 8,175 $ 5,989 $ 22,771 $ 24,569

Net earnings (loss)
from continuing
operations $ 4,533 $ 434 $ (848) $ (2,924)
Net earnings (loss)
from continuing
operations
per share:
Basic and diluted $ 0.07 $ 0.01 $ (0.01) $ (0.06)

Net earnings (loss) $ 4,006 $ 503 $ (1,354) $ (2,755)
Net earnings (loss) per
share:
Basic and diluted $ 0.06 $ 0.01 $ (0.02) $ (0.05)

Funds from operations
(a) $ 14,338 $ 7,270 $ 22,354 $ 22,084
Funds from operations
(a) per share:
Basic and diluted $ 0.21 $ 0.14 $ 0.39 $ 0.42

Cash EBITDA (a) $ 13,144 $ 7,612 $ 21,687 $ 16,359
Cash EBITDA (a) per
share:
Basic and diluted $ 0.20 $ 0.14 $ 0.38 $ 0.31

Capital expenditures
Seismic data purchases
and related costs $ 24 $ 6 $ 75,575 $ 315
Participation surveys 2,521 3,173 2,245 12,083
Changes to work in
progress 1,038 (3,110) 2,400 (1,681)
Property & equipment
additions 55 4 205 29
----------------------------------------------------------------------------
Total capital
expenditures $ 3,638 $ 73 $ 80,425 $ 10,746

Seismic library:
2D in net kilometres 339,991 257,994 339,991 257,994
3D in net square
kilometres 26,446 12,913 26,446 12,913

Weighted average shares
outstanding:
Basic and diluted 67,238,023 53,077,558 56,662,196 53,150,648
Shares outstanding at
period end 67,201,671 53,071,383 67,201,671 53,071,383

Financial Position and Ratios
($000s except ratios and percentage calculations)

Working capital $ 7,878 $ 19,296
Working capital ratio 1.4 2.8
Total assets $ 154,438 $ 98,219

Long-term debt (b) $ 61,386 $ 27,407

Cash EBITDA (a) $ 21,687 $ 16,359
Shareholders' equity $ 81,827 $ 63,345
Long-term debt to
equity ratio 0.75 0.43
Long-term debt to cash
EBITDA ratio 2.83 1.68


(a) The Company's continuous disclosure documents provide discussion and
analysis of "cash EBITDA", cash EBITDA per share, "funds from
operations" and "funds from operations per share". These financial
measures do not have standard definitions prescribed by GAAP in Canada
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 non-cash and non-
recurring G&A 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. The Company's definition of
funds from operations is cash provided by continuing operations as
prescribed by Canadian GAAP but excluding the impact of changes in non-
cash working capital. Funds from operations represent 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.

(b) Long-term debt is defined as total long-term debt, including current
portion, net of debt financing cost.


OUTLOOK

The industry drivers that, entering 2010, suggested greater sales and revenues for Pulse last year have remained the same or strengthened further entering 2011, providing cause for optimism that 2011 results could exceed those of 2010. The main driver entering 2010 that suggested continued weakness, however, remained equally weak entering 2011. The drivers suggesting strengthening business conditions are crude oil prices, mineral lease auctions, rates of drilling rig utilization, forecast rates of new well drilling across Western Canada and a significantly improved royalty regime in Alberta. The principal driver suggesting continued weakness in business conditions is natural gas prices.

Indicators of strengthening business conditions:



-- Crude oil prices - Crude oil prices remaining in the range of US$85-$100
per barrel W.T.I. are clearly high enough to drive profitable
development of the numerous unconventional shale, sandstone and
carbonate oil plays that have emerged across western Canada. Some of
these, including the Cardium and Viking sandstones, lie within Pulse's
Edson-Fort St. John multi-zone corridor, and expansion of these plays
through new land acquisition and increased drilling is being observed;

-- Crown mineral lease auctions - "Land sales" as they are popularly known
are a leading indicator of future exploration activity and of the need
for seismic data. Alberta generated all-time record sales by dollar
value in 2010, and early indications in 2011 are of continued strong
land sales results;

-- Drilling rig utilization - Following very low rates of drilling rig
utilization in 2009, utilization began to recover in 2010 and in early
2011 strengthened further. According to the Canadian Association of
Oilwell Drilling Contractors, an average of 521 rigs were drilling
across western Canada in January 2011, for a fleet utilization rate of
66 percent. This was up from 53 percent utilization in January 2010;

-- Forecast rates of new well drilling - Publicly available well drilling
forecasts suggest relatively flat year-over-year activity across western
Canada in 2011, following a substantial recovery in 2010 over 2009. This
is suggestive of continued relatively strong industry investment. In
addition, there have been anecdotal reports to Pulse personnel of
healthy exploration capital expenditure budgets for 2011. In early
February the Petroleum Services Association of Canada's (PSAC) update to
its preliminary 2011 forecast increased the number of wells expected to
be drilled across Canada by 500 to 12,750, which would represent an
increase of 600 wells over 2010. Actual drilling data for January 2011
indicate 28 percent more new wells were licensed for drilling than in
January 2010.

Further, 2011 forecasts for the total number of rig-drilling-days and of
horizontal wells as a proportion of all wells drilled remain strong.
PSAC's president was quoted as saying that more than 5,000 horizontal
wells could be drilled in Canada this year. Since horizontal wells
traverse considerable distances within underground reservoirs, each
horizontal well penetrates the reservoir drainage area of a typical
vertical well several times, thereby requiring multiples of required
seismic coverage data compared to a typical vertical well. The overall
trend towards horizontal drilling is, therefore, considered an indirect
indicator of continued land acquisitions and seismic requirements.

-- Improved royalty regime - The changes in the Alberta royalty regime
annnounced on May 27, 2010 became effective on January 1, 2011 and were
put in place to stimulate new energy investment and new technologies.
The changes result in lower crude oil and natural gas royalties and the
retention of certain drilling incentives for deeper wells. The changes
are also especially favourable to mid-depth horizontal wells which are
increasing as a percentage of total wells drilled.


Indicator of continued weaker business conditions:



-- Natural gas prices - With the main AECO-C natural gas benchmark
remaining around or below $4 per gigajoule in the initial weeks of 2011,
the natural gas price clearly provides reason for caution. Weakness in
the forward strip makes it difficult for natural gas producers to hedge
their sales prices effectively, resulting in caution among natural gas
producers concerning capital spendng in the year ahead.

Several unconventional liquids-rich natural gas plays, however,
including the Montney and Deep Basin plays, reportedly remain profitable
at current or even lower natural gas prices, and continue to receive
significant reported capital investment. In the Deep Basin, producers
are focusing on the horizontal development of at least six target
reservoirs. The Wilrich, for example, was drilled horizontally for the
first time just over two years ago. By February 2011 there were more
than 30 known horizontal wells on-stream, with combined production
estimated at 80 million cubic feet per day, and producers were reporting
plans to drill numerous additional such wells. This continued drilling
activity focused on the most economic liquids-rich natural gas targets
in western Canada, and is suggestive of increased demand for associated
seismic data.


In 2010 Pulse experienced a 33 percent year-over-year recovery in its cash EBITDA. At present Pulse is hopeful of continued growth throughout 2011 in its seismic data library sales, potentially levered by the Company's much larger coverage over active play areas of northeast British Columbia thanks to the Divestco asset acquisition. Pulse's personnel continue working to complete integration of the new data set into Pulse's seismic data library, to achieve seamless operation and continued low operating and G&A costs.

Entering 2011 Pulse had two new participation surveys underway, totalling 162 square kilometres, and the Company is hopeful of obtaining interest to initiate further new participation surveys in 2011. In addition Pulse will remain vigilant for acquisition opportunities that meet the Company's three key criteria: seismic data that covers prospective areas with industry activity, 2D and 3D data that is high in quality, and a favourable purchase valuation.

The sustained weakness in natural gas prices provides reason for caution and continued conservative management of the Company's balance sheet, with a particular focus on using anticipated cash EBITDA to pay down a portion of Pulse's long-term debt in 2011.

Growth in revenue is among Pulse's key objectives for 2011. Seismic library data sales to the end of February 2011 have improved over the comparable period of 2010.

CONFERENCE CALL FOR THE 2010 YEAR END RESULTS

The Company will host a conference call on Monday, March 14, 2011 at 1:00 pm EST (11:00 am MST) to discuss the Company's results for the fourth quarter and year-end 2010. Douglas Cutts, President and Chief Executive Officer will chair the call with Pamela Wicks, VP Finance and Chief Financial Officer 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 1 877-440-9795 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 21, 2011. To access the replay, please dial 1 800-408-3053 or 905-694-9451 and enter the pass code 8131074.

CORPORATE PROFILE

Pulse 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 26,400 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 Information

This 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 gas drilling activity;
-- forecast oil and 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;
-- expected completion and delivery dates 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;
-- the price and demand for oil and natural gas;
-- the level of oil and natural gas exploration and development activities;
-- the ability of the Company's customers to raise capital;
-- 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 from other seismic data library companies;
-- 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.

Contact Information

  • Pulse Seismic Inc.
    Douglas Cutts
    President and CEO
    (403) 237-5559 or Toll-free: 1-877-460-5559
    or
    Pulse Seismic Inc.
    Pamela Wicks
    VP Finance and CFO
    (403) 237-5559 or Toll-free: 1-877-460-5559
    info@pulseseismic.com
    www.pulseseismic.com