Pulse Seismic Inc.

Pulse Seismic Inc.

May 05, 2011 07:00 ET

Pulse Seismic Inc. Reports Q1 2011 Results

CALGARY, ALBERTA--(Marketwire - May 5, 2011) - Douglas Cutts, President and Chief Executive Officer of Pulse Seismic Inc. (TSX:PSD) ("Pulse" or "the Company"), reports the financial and operating results of Pulse for the three months ended March 31, 2011. The unaudited condensed consolidated interim financial statements, accompanying notes and MD&A are will be filed on SEDAR. These documents will also be available on Pulse's website www.pulseseismic.com. The Company is now reporting under International Financial Reporting Standards (IFRS).


  • Record first-quarter seismic data library sales totalled $11.3 million for the period ended March 31, 2011 compared to $5.1 million for the same period in 2010.
  • Total seismic revenue (including revenue from participation surveys) for the three months ended March 31, 2011 was $14.1 million compared to $5.1 million for the three months ended March 31, 2010.
  • Record first-quarter cash EBITDA(b) of $9.1 million ($0.14 per share basic and diluted) for the three months ended March 31, 2011 compared to $3.5 million ($0.07 per share basic and diluted) for the same period in 2010.
  • Net earnings for the three months ended March 31, 2011 were $1.3 million ($0.02 per share basic and diluted) compared to a net loss of $1.5 million ($0.03 per share basic and diluted) for the three months ended March 31, 2010.
  • Pulse's working capital position at March 31, 2011 was $10.4 million (including cash of $16.2 million and current portion of long term debt of $13.0 million) compared to $18.1 million (including cash of $20.0 million and current portion of long term debt of $7.0 million) at March 31, 2010 and $7.9 million (including cash of $17.0 million and current portion of long term debt of $13.0 million) at December 31, 2010.
  • Pulse completed one 3D seismic survey totalling 90 net square kilometres located in the Deep Basin area of west central Alberta. A second participation survey located in the Farrell Creek area of northeast British Columbia totalling 71 net square kilometres is scheduled for delivery in May 2011. The total cost for both surveys is expected to be approximately $7.8 million. Pulse also purchased an 88 net square kilometre 3D dataset located in the Edson area of northwest Alberta. This dataset is adjacent to participation surveys recently completed by Pulse.
Selected Financial and Operating Information
($000s except per share data and number of shares)
3 months ended3 months ended
March 31,March 31,Year ended
20112010December 31
Data library sales$11,331$5,116$30,264
Participation surveys2,751-2,770
Total revenue$14,082$5,116$33,034
Amortization of seismic data library$9,005$4,896$22,771
Net earnings (loss) from continued operations(a)$1,309$(1,565)$(745)
Net earnings (loss) from continued operations per share(a):
Basic and diluted$0.02$(0.03)$(0.01)
Net earnings (loss)(a)$1,309$(1,496)$(1,251)
Net earnings (loss) per share (a):
Basic and diluted$0.02$(0.03)$(0.02)
Funds from operations(a)(b)$10,952$3,036$22,670
Funds from operations per share(a)(b):
Basic and diluted$0.16$0.06$0.40
Cash EBITDA(b)$9,121$3,460$21,687
Cash EBITDA per share(b):
Basic and diluted$0.14$0.07$0.38
Capital expenditures:
Participation surveys (cost reduction)$3,698$(276)$2,245
Changes to work in progress531-2,400
Seismic data purchases600-75,575
Property & equipment additions52-205
Total capital expenditures$4,881$(276)$80,425
Seismic library:
2D in net kilometres339,991257,994339,991
3D in net square kilometres26,62412,91326,446
Weighted average shares outstanding:
Basic and diluted67,147,33153,071,38356,662,196
Shares outstanding at period end67,067,67153,071,38367,201,671
Financial Position and Ratios
($000s except ratio and percentage calculations)
Working capital$10,358$18,091$7,878
Working capital ratio1.592.851.38
Total assets$149,472$90,865$154,438
Long-term debt(c)$58,194$22,932$61,386
TTM Cash EBITDA(d)$27,348$19,163$21,687
Shareholders' equity$82,869$61,883$81,827
Long-term debt to equity ratio0.700.370.75
Long-term debt to TTM cash EBITDA ratio2.131.202.83

a) 2010 figures adjusted to conform to the current year's financial statements presentation and to IFRS.

b) 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 IFRS (new Canadian GAAP) 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 continued operations before interest, taxes, depreciation and amortization less participation survey revenue, plus any non-cash and non-recurring SG&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 continued operations as prescribed by IFRS, 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.

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.


Pulse's results in the first quarter bore out the Company's outlook in its 2010 Annual Report, which indicated reasons for optimism offset by weakness in the natural gas price as well as overall economic uncertainty. The quarter's results were a strong outcome given overall conditions, with record first-quarter seismic data sales and cash EBITDA building on the increased seismic data library following the significant seismic acquisition in September, 2010 and the momentum experienced in the latter part of 2010.

The industry drivers that, entering 2011, suggested greater sales and revenue for Pulse have strengthened slightly during the first four months of the year, generating optimism that Pulse's 2011 results could exceed those of 2010. The principal driver suggesting continued weakness, natural gas prices, also remains.

Indicators of strengthening business conditions:

Crude oil prices – Crude oil prices topping $100 per barrel W.T.I., along with rising 2011 average price forecasts, are clearly high enough to drive profitable development of western Canada's numerous unconventional shale, sandstone and other oil plays. Some, including the Cardium and Viking sandstones, lie within Pulse's Edson-Fort St. John multi-zone corridor. Expansion through new land acquisition and increased drilling is being observed. In addition the industry is applying the proven combination of horizontal wells completed with multiple hydraulic fractures to new and existing reservoirs, some of which lie within areas of Pulse's coverage. Although geopolitical instability suggests greater crude oil pricing volatility, the volatility appears to be within a band that is well above the break-even price for most of these unconventional plays;

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 land sales to mid-April were $820 million compared to $622 million in the same period last year, with a number of purchases in Pulse's focus areas. In the first three months of 2011 land sale acreage and revenue in Alberta were the highest since 2006. Land sales in Saskatchewan and Manitoba have also been up year-over-year, although at lower absolute levels than Alberta, while sales in northeast British Columbia, which is mainly focused on natural gas, are down. One industry expert was publicly quoted saying Alberta is on-track to set an all-time record in mineral lease auctions in 2011;

Drilling rig utilization – Following low rates in 2009, utilization began to recover in 2010 and strengthened further during the first four months of 2011. According to the Canadian Association of Oilwell Drilling Contractors, an average 502 rigs were drilling in March, with overall fleet utilization of 64 percent, compared to 350 rigs and 44 percent utilization in March 2010. January and February utilization was also up year-over- year. Well completions totalled 4,278 in the first three months of the year, an increase of 37 percent from 3,133 in the first quarter of 2011;

Forecast rates of new well drilling – Publicly available well drilling forecasts suggest continued moderate growth over the strong recovery experienced in 2010. In late April the Petroleum Services Association of Canada's (PSAC) second update to its 2011 forecast increased the number of wells expected to be drilled across Canada by 200 to 12,950, an increase of 800 wells over 2010. Forecasts for the total number of rig- drilling-days and of horizontal wells as a proportion of all wells drilled remain strong. Each horizontal well penetrates the reservoir drainage area of several typical vertical wells, thereby requiring several times the land area and seismic coverage data of a vertical well. The growth of horizontal drilling is therefore considered an indirect indicator of continued land acquisitions and seismic requirements; and

Improved royalty regime – Changes to the Alberta royalty regime that became effective entering 2011 reduce crude oil and natural gas royalties and retain certain deep drilling incentives. The changes are especially favourable to medium-depth horizontal wells, which are increasing as a percentage of total wells drilled.

Indicator of weaker business conditions:

Natural gas prices – With the main AECO-C natural gas benchmark remaining around or below $4.00 per mcf throughout the first four months of 2011, the natural gas price clearly provides reason for caution. Continued weakness in the 12-month forward strip, which was $4.00 per mcf on April 27 (compared to $4.58 one year earlier), makes it difficult for natural gas producers to hedge their sales prices effectively, resulting in caution among natural gas producers concerning capital spending in the year ahead. In the United States, the primary driver of North American natural gas prices, storage levels remain above the five-year average. The U.S. Energy Information Administration's Short-term Energy Outlook, published in April, forecasts a decline of about 7 percent in average 2011 U.S. benchmark natural gas prices, to US$4.10 per million British thermal units, amid slight year-over-year growth in domestic natural gas production and consumption, mainly in the industrial sector.

Several unconventional liquids-rich natural gas plays in western Canada, however, including the Montney and Deep Basin, reportedly remain profitable and continue to receive significant reported capital investment. In the Deep Basin, producers are targeting at least six reservoirs for horizontal development. One of these, the Wilrich, was first drilled horizontally just over two years ago. By April 2011 there were approximately 45 known horizontal wells on-stream, with combined production estimated at well over 100 million cubic feet per day, and producers were reporting plans to drill numerous additional such wells. This activity in the most economic liquids-rich natural gas plays in western Canada is suggestive of increased demand for associated seismic data.

Pulse experienced first-quarter 2011 cash EBITDA of $9.1 million which was up by 164 percent year-over- year. At present, Pulse is optimistic that there will be continued growth throughout 2011 in its seismic data library sales, levered by the Company's much larger coverage over active play areas of northeast British Columbia resulting from the significant seismic acquisition in 2010. The Company is also experiencing continued 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 financial position. Continued growth in revenue and cash EBITDA are Pulse's key objectives for 2011.


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 26,600 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.

Please visit our website at www.pulseseismic.com.

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

    Pulse Seismic Inc.
    Pamela Wicks
    VP Finance and CFO
    (403) 237-5559 or Toll-free: 1-877-460-5559