Pulse Seismic Inc.

TSX : PSD
OTCQX : PLSDF


Pulse Seismic Inc.

May 01, 2014 07:00 ET

Pulse Seismic Inc. Reports Q1 2014 Results and Declares Quarterly Dividend

CALGARY, ALBERTA--(Marketwired - May 1, 2014) - Pulse Seismic Inc. ("Pulse" or "the Company") (TSX:PSD)(OTCQX:PLSDF) reports the financial and operating results of the Company for the three months ended March 31, 2014. The unaudited condensed consolidated interim financial statements and MD&A will be filed on SEDAR (www.sedar.com) and will be available on Pulse's website (www.pulseseismic.com).

Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on June 20, 2014 to shareholders of record at the close of business on June 6, 2014. Dividends are designated as an eligible dividend for Canadian income tax purposes. For non-resident shareholders, Pulse's dividends are subject to Canadian withholding tax.

HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2014

Pulse's key performance metrics which include cash EBITDA(a), shareholder free cash flow(a), funds from operations(b) and net earnings all declined in the three month period ending March 31, 2014 compared to the prior year. The Company experienced lower data library sales for the quarter and did not have participation surveys in progress.

  • Total seismic revenue of $5.5 million, consisted only of data library sales, compared to $26.9 million during the three months ended March 31, 2013, which included $13.1 million participation survey revenue;
  • Cash EBITDA of $3.8 million, a 67 percent decrease from $11.3 million in the comparable period in 2013, and a 68 percent decrease on a per-share basis from $0.19 to $0.06 per share basic and diluted;
  • Shareholder free cash flow of $3.6 million, a 66 percent decrease from $10.4 million in the comparable period in 2013, and a 65 percent decrease on a per-share basis from $0.17 to $0.06 per share basic and diluted;
  • Funds from operations of $3.6 million ($0.06 per share basic and diluted) compared to $20.7 million ($0.34 per share basic and diluted) for the three months ended March 31, 2013;
  • Net loss of $1.8 million ($0.03 per share basic and diluted) compared to net earnings of $2.5 million ($0.04 per share basic and diluted);
  • Pulse purchased and cancelled, through its normal course issuer bid, a total of 35,000 common shares at a total cost of approximately $117,000 (at an average cost of $3.34 per common share including commissions); and
  • At March 31, 2014 Pulse's cash balance was $787,000 and long-term debt(c) was $18.3 million, resulting in a net debt(d) position of $17.5 million at March 31, 2014. This was an improvement of $6.5 million from a net debt position of $24.0 million at March 31, 2013.
Selected Financial and Operating Information
(thousands of dollars except per share data and number of shares)
Three months ended
March 31, Year ended
2014 2013 December 31,
(unaudited) 2013
Revenue
Data library sales $ 5,506 $ 13,864 $ 27,079
Participation surveys - 13,068 13,429
Total revenue $ 5,506 $ 26,932 $ 40,508
Amortization of seismic data library $ 5,832 $ 20,027 $ 55,619
Net earnings (loss) $ (1,820) $ 2,541 $ (18,834)
Per share basic and diluted $ (0.03) $ 0.04 $ (0.31)
Cash EBITDA (a) $ 3,763 $ 11,341 $ 19,145
Per share basic and diluted (a) $ 0.06 $ 0.19 $ 0.32
Shareholder free cash flow (a) $ 3,550 $ 10,371 $ 20,682
Per share basic and diluted (a) $ 0.06 $ 0.17 $ 0.34
Funds from operations (b) $ 3,611 $ 20,707 $ 27,751
Per share basic and diluted (b) $ 0.06 $ 0.34 $ 0.46
Capital expenditures
Participation surveys $ - $ 20,700 $ 21,265
Seismic data purchases and related costs 183 298 961
Property and equipment additions 14 74 127
Total capital expenditures $ 197 $ 21,072 $ 22,353
Weighted average shares outstanding:
Basic 59,346,453 60,958,068 60,280,876
Diluted 59,346,453 60,998,114 60,280,876
Shares outstanding at period end 59,314,120 60,927,170 59,349,120
Seismic library
2D in kilometres 339,991 339,991 339,991
3D in square kilometres 28,284 27,642 28,284
Financial Position and Ratios
(thousands of dollars except ratio calculations)
March 31, March 31, December 31,
2014 2013 2013
Working capital $ 4,832 $ 11,440 $ 6,476
Working capital ratio 2.32:1 1.85:1 3.71:1
Total assets $ 91,927 $ 148,546 $ 98,017
Long-term debt (c) $ 18,279 $ 25,707 $ 21,850
TTM cash EBITDA (e) $ 11,567 $ 34,032 $ 19,145
Shareholders' equity $ 62,880 $ 97,318 $ 65,962
Long-term debt to equity ratio 0.29:1 0.26:1 0.33:1
Long-term debt to TTM cash EBITDA ratio 1.58:1 0.76:1 1.14:1

(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. Funds from operations for the comparative three months ended March 31, 2013 reflect a reclassification to conform to the current year's financial statement presentation.

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

(d) Net debt is defined as total long-term debt, including current portion, net of debt financing cost less cash.

(e) 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

Pulse remains financially strong and well positioned operationally. Although the timing and level of data library sales are unclear, the Company can continue to operate under low revenue levels and still provide returns to shareholders. Individual data library sales can be large, and Pulse's annual revenues could increase substantially at any time. Pulse's profitability has tremendous leverage against revenues.

The Company maintains its cautious outlook for the remainder of 2014. Following relatively weak data library sales in the first quarter, positive indicators of a potential rebound in seismic revenue are:

  • Continued strength in current natural gas prices. Since the initial price spike in February, the intra-Alberta price at AEOC has held at well above $4 per gigajoule (GJ) and has often been closer to $5 per GJ, with a price of $4.84 per GJ on April 29, 2014 compared to $3.74 per GJ at the same time last year;
  • Record winter gas storage withdrawals in the United States of almost 3 trillion cubic feet, the greatest since the commencement of record-keeping in 1994-1995, with overall stocks falling to approximately 850 bcf in early April, more than 1 trillion cubic feet below the five-year average for the time of year;
  • Growing momentum in asset transactions. Publicly reported mergers and acquisitions and similar capital transactions in the first quarter of 2014 total nearly $9 billion compared to $750 million in the first quarter of 2013; and
  • Growing cash flows among oil and natural gas production companies, and reports of strong field activity among service companies, particularly hydraulic fracturing providers, implying increasing capital spending among oil and natural gas producers.

These positive indicators are offset by continued flat to slightly lower year-over-year drilling activity over the past winter, flat initial forecasts for the year ahead, and by the continuing evolution in the nature of oil and natural gas asset ownership and development cycles in western Canada.

On balance, Pulse is hopeful that the trends noted will lead to greater field capital investment, including on seismic data. In the meantime, Pulse will practise prudent cost and capital management and remain focused on generating returns for shareholders.

CORPORATE UPDATE

Graham Weir will be retiring from the Board of Directors at the Annual General Meeting on May 21, 2014. Mr. Weir has been a director of Pulse since 2002, including Chair of the Board from 2007 to 2012. The Company and the Board of Directors would like to thank Mr. Weir for his extensive contributions and guidance during his 12 years of service and wish him all the best in the future.

CONFERENCE CALL

The Company's next conference call will be held after the release of its year-end 2014 results. Should investors or analysts wish to contact the Company, please feel free to contact Neal Coleman or Pamela Wicks at the information provided below.

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 28,300 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 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:

  • Pulse remains financially strong and well positioned operationally;
  • The Company can continue to operate under low revenue levels and still provide returns to shareholders;
  • Individual data library sales can be very large, and Pulse's annual revenues could increase substantially at any time;
  • General economic and industry outlook;
  • Pulse's capital allocation strategy;
  • Pulse's dividend policy;
  • Industry activity levels and capital spending;
  • Forecast commodity prices;
  • Forecast growing momentum in asset transactions;
  • Forecast oil and natural gas production companies capital budgets and cash flows;
  • Forecast horizontal drilling activity in unconventional oil and natural gas plays;
  • Estimated future demand for seismic data;
  • Estimated future seismic data sales;
  • Estimated future demand for participation surveys;
  • Management's expectations on the sufficiency of Pulse's capital resources;
  • 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.

Often, but not always, forward-looking information uses words or phrases such as: "expects", "does not expect" or "is expected", "anticipates" or "does not anticipate", "plans" or "does not plan", "estimates" or "estimated", "projects" or "projected", "forecasts" or "forecasted", "believes" or "does not believe", "intends" or "does not intend", "likely" or "unlikely", "possible", "probable", "scheduled", "positioned", "goal", "objective", "hopes", "optimistic" or states that certain actions, events or results "should", "may", "could", "would", "might" or "will" be taken, occur or be achieved.

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. Pulse does not publish specific financial goals or otherwise provide guidance, due to the inherently unclear visibility of seismic revenue.

The material risk factors that could cause actual results to differ materially from the forward-looking information include, but are not limited to:

  • oil and natural gas prices;
  • seismic industry cycles and seasonality;
  • the demand for seismic data and participation surveys;
  • the pricing of data library license sales;
  • relicensing (change of control) fees and partner copy 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;
  • protection of Intellectual Property; and
  • the introduction of new products.

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.
    Neal Coleman
    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
    info@pulseseismic.com
    www.pulseseismic.com