Pulse Seismic Inc.

Pulse Seismic Inc.

November 09, 2011 11:07 ET

Pulse Seismic Inc. Reports Q3 2011 Results and Declaration of Quarterly Dividend

CALGARY, ALBERTA--(Marketwire - Nov. 9, 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 and nine months ended September 30, 2011. The unaudited condensed consolidated interim financial statements, accompanying notes and MD&A are being filed on SEDAR. These documents will also be available on Pulse's website www.pulseseismic.com.

Mr. Cutts is also pleased to announce that Pulse has declared a quarterly dividend. This dividend is $0.0125 per common share and will be paid on December 22, 2011 to shareholders of record at the close of business on December 8, 2011. The Company's Dividend Reinvestment Plan and Optional Share Purchase Plan have not been reinstated at this time. Pulse confirms that all dividends paid to shareholders in 2011, and subsequent years, are designated as "eligible dividends", as defined by the Government of Canada's Bill C - 28, entitling Canadian resident individuals to a higher gross up and dividend tax credit.


  • Seismic data library sales for the three months ended September 30, 2011 were $6.7 million compared to $4.8 million for the same period in 2010. For the nine month period ended September 30, 2011 seismic data library sales were $23.6 million, almost double from $13.3 million for the nine month period ended September 30, 2010.
  • Total seismic revenue (including revenue from participation surveys) for the three months ended September 30, 2011 was $7.3 million compared to $5.5 million for the three months ended September 30, 2010. For the nine month period ended September 30, 2011 total seismic revenue was $27.9 million, double from $14.0 million for the same period in 2010.
  • Cash EBITDA(b) for the three months ended September 30, 2011 increased to $5.0 million ($0.07 per share basic and diluted) from $3.4 million ($0.06 per share basic and diluted) for the same period in 2010. For the nine months ended September 30, 2011 cash EBITDA more than doubled to $17.9 million ($0.27 per share basic and diluted) from $8.5 million ($0.16 per share basic and diluted) for the same period in 2010.
  • The net loss for the three months ended September 30, 2011 was $1.9 million ($0.03 per share basic and diluted) compared to $1.1 million ($0.02 per share basic and diluted) for the three months ended September 30, 2010. The net loss for the nine months ended September 30, 2011 decreased to $4.6 million ($0.07 per share basic and diluted) from a net loss of $5.3 million ($0.10 per share basic and diluted) for the same period in 2010.
  • The primary reason for the significant variance between cash EBITDA and the net loss for both the three and nine month periods ended September 30, 2011 is the large non-cash seismic data library amortization expense, which amounted to $7.0 million for the three months ended September 30, 2011 and $25.1 million for the nine month period ended September 30, 2011.
  • During the quarter, Pulse made a penalty-free loan prepayment of $2.0 million, which together with regular monthly payments reduced its long term debt to $49.8 million at September 30, 2011.
  • Pulse's working capital position at September 30, 2011 was $6.0 million (including cash of $15.3 million and current portion of long-term debt of $13.0 million) compared to $1.3 million (including cash of $13.9 million and current portion of long-term debt of $13.0 million) at September 30, 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.
  • In October 2011, the Company renewed its $65.0 million syndicated revolving credit facility until December 12, 2012. All of the members of the lending syndicate (Roynat Inc., Alberta Treasury Branches and Toronto-Dominion Bank) have approved the third consecutive renewal of the credit facility. At November 8, 2011 the Company has drawn $48.9 million on the credit facility, leaving $16.1 million available for future seismic data acquisitions and participation surveys.
  • In the third quarter of 2011, Pulse commenced operations on a 275 net square kilometre 3D seismic survey in the Edson area of west central Alberta. Pulse had previously announced that this survey would be approximately 62 net square kilometres. Field operations commenced mid-September. At September 30, 2011 the survey was 8% complete and is currently expected to be 100% complete with data delivered by December 31, 2011.
  • In October 2011, Pulse commenced operations on two additional 3D participation surveys located within the Deep Basin plays of west central Alberta. The first survey is located in the Kaybob area, consists of 147 net square kilometres of seismic data, and is currently expected to be delivered to the customer prior to year end. The second survey, located in the Simonette area consists of approximately 132 net square kilometres and is currently expected to be delivered to the customer in the first quarter of 2012.
Selected Financial and Operating Information
($000s except per share data and number of shares)
Three months ended Nine months ended Year ended
September 30 , September 30 , December 31 ,
2011 2010 2011 2010 2010
(unaudited ) (unaudited )
Data library sales $ 6,692 $ 4,845 $ 23,645 $ 13,319 $ 30,264
Participation surveys 561 669 4,269 669 2,770
Total revenue $ 7,253 $ 5,514 $ 27,914 $ 13,988 $ 33,034
Amortization of seismic data library $ 6,992 $ 4,833 $ 25,100 $ 14,596 $ 22,771
Net loss from continuing operations(a) $ (1,864 ) $ (1,011 ) $ (4,627 ) $ (5,293 ) $ (745 )
Net loss from continuing operations per share(a):
Basic and diluted $ (0.03 ) $ (0.02 ) $ (0.07 ) $ (0.10 ) $ (0.01 )
Net loss(a) $ (1,864 ) $ (1,105 ) $ (4,627 ) $ (5,272 ) $ (1,251 )
Net loss per share(a):
Basic and diluted $ (0.03 ) $ (0.02 ) $ (0.07 ) $ (0.10 ) $ (0.02 )
Funds from operations(a) (b) $ 4,661 $ 3,742 $ 19,466 $ 8,180 $ 22,670
Funds from operations per share (a)(b):
Basic and diluted $ 0.07 $ 0.07 $ 0.29 $ 0.15 $ 0.40
Cash EBITDA(b) $ 4,988 $ 3,359 $ 17,945 $ 8,543 $ 21,687
Cash EDITBA per share(b):
Basic and diluted $ 0.07 $ 0.06 $ 0.27 $ 0.16 $ 0.38
Shareholder free cash flow(b) $ 4,057 $ 2,999 $ 15,039 $ 7,347 $ 19,585
Shareholder free cash flow per share(b):
Basic and diluted $ 0.06 $ 0.06 $ 0.22 $ 0.14 $ 0.35
Capital expenditures
Participation surveys (cost reduction) $ - $ - $ 7,767 $ (276 ) $ 2,245
Seismic data purchases - 75,443 635 75,551 75,575
Changes to work in progress 742 1,362 (1,646 ) 1,362 2,400
Property & equipment additions 3 93 113 150 205
Total capital expenditures $ 745 $ 76,898 $ 6,869 $ 76,787 $ 80,425
Weighted average shares outstanding:
Basic and diluted 66,561,663 53,177,961 66,874,656 53,098,119 56,662,196
Shares outstanding at period end 66,377,071 67,306,183 67,201,671
Seismic library:
2D in net kilometres 339,991 339,991 339,991
3D in net square kilometres 26,695 26,374 26,446
Financial Position and Ratios
($000s except ratios and percentage calculations)
Working capital $ 6,020 $ 1,274 $ 7,878
Working capital ratio 1.31 1.07 1.38
Total assets $ 132,788 $ 148,528 $ 154,438
Long-term debt(c) $ 49,767 $ 64,571 $ 61,386
TTM Cash EBITDA(d) $ 31,090 $ 16,155 $ 21,687
Shareholders' equity $ 74,691 $ 77,942 $ 81,827
Long-term debt to equity ratio 0.67 0.83 0.75
Long-term debt to TTM cash EBITDA ratio 1.60 4.00 2.83

(a) 2010 figures adjusted to conform to the current year's financial statements presentation. This includes discontinued operations and IFRS.

(b) The Company's continuous disclosure documents provide discussion and analysis of "cash EBITDA", "cash EBITDA per share", "shareholder free cash flow", "shareholder free cash flow 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 continuing 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. 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 repurchase 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. The Company's definition of funds from operations is cash provided by continuing 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.


With the momentum generated by its financial performance in the first three quarters of 2011, Pulse is optimistic that its 2011 seismic revenue and other key performance indicators will surpass 2010 results. The Company's 100 percent growth in total seismic revenue and 110 percent growth in cash EBITDA over the first nine months of 2010 clearly exceed the cautiously optimistic outlook issued in its 2010 Annual Report. Pulse's total seismic revenue, cash EBITDA, shareholder free cash flow and funds from operations to the end of September 2011 all were well over 80 percent of full-year 2010 results, with the year's historically strongest quarter still lying ahead.

This financial performance builds on the enlarged seismic data library created by the significant seismic data acquisition in September 2010 and the momentum that began in the latter part of 2010. Oil and natural gas industry activity, Crown mineral lease auctions, well drilling in Pulse's focus areas and participation survey activity have all been strong through the autumn of 2011, increasing Pulse's optimism.

Pulse has used its growing revenues to further strengthen its balance sheet, including $11.7 million in long- term debt repayment to the end of the third quarter of 2011. The Company's optimism is reflected by the decision to reinstate the dividend in the third quarter, which action has generated strong support from shareholders.

The industry drivers that, entering 2011, suggested greater sales and revenue for Pulse continued to strengthen incrementally over the course of the year, while the principal driver signalling caution, natural gas prices, has weakened further.

Indicators of strengthening business conditions:

  • Crude oil prices – Despite recent volatility, crude oil prices of approximately US$90 per barrel W.T.I. clearly remain high enough to drive profitable development of western Canada's numerous shale tight sands and other unconventional oil plays, while lending support to the economics of liquids -rich gas plays. Some of these plays, including the Montney, Nordegg, Cardium and Viking sandstones, lie within Pulse's core Edson-Fort St. John multi-zone corridor. Expansion through new land acquisition and increased drilling continues to be observed, with no discernible decline during the recent price volatility. The industry continues to apply the proven combination of horizontal well drilling and multiple hydraulic fracture completions to newly developed as well as historical reservoirs;
  • 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 land sales of $3.2 billion to mid-October 2011 compared to $2.4 billion for all of 2010. The year-to-date figure is less than $250 million below the all-time annual record set in 2006. Many sales have taken place in Pulse's core area and were generally at high price levels, suggesting intense industry interest. In the other western provinces, land sales through the first half of the year were down. While not positive, these land sales represent a smaller share of new mineral leases than Alberta;
  • Drilling rig utilization – Utilization across western Canada has continued its strong recovery. According to the Canadian Association of Oilwell Drilling Contractors, the number of rigs drilling has been higher in each of the first 10 months of 2011 than in 2010, with utilization rates climbing above 60 percent in August, September and October. The number of well completions through August was approximately 2,500 above the first eight months of 2010;
  • Forecast rates of new well drilling – Publicly available well drilling forecasts suggest continued moderate growth over the strong recovery experienced in 2010. In July the Petroleum Services Association of Canada's (PSAC) third update to its 2011 forecast increased the number of wells expected to be drilled across Canada by 375 to 13,325, an increase of 1,175 wells, or 10 percent, over 2010 and of 1,075 wells over its initial forecast for 2011. 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 data requirements; and
  • Improved royalty regime – Changes to the Alberta royalty regime that became effective entering 2011 reduced crude oil and natural gas royalties and retained certain deep drilling incentives. The changes are especially favourable to medium-depth horizontal wells, which are increasing as a percentage of total wells drilled. Indicators such as mineral lease auctions and increased industry field activities suggest these changes have been positive.

Indicator of weak business conditions:

  • Natural gas prices – The natural gas price clearly provides reason for caution. The main AECO-C natural gas benchmark underperformed already-low forecasts for 2011 and fell below $3.50 per mcf in summer. The 12-month forward strip and the calendar 2012 strip remained barely above $3.50 per mcf as of late October. This weakness has caused natural gas producers to severely curtail drilling for dry gas, which lacks natural gas liquids content earning crude oil pricing, limiting interest in new seismic data for those regions. Price weakness also makes it difficult for natural gas producers to hedge their sales prices, further tightening producers' natural gas-directed capital spending.

In the United States, the primary driver of North American natural gas prices, average weekly storage levels recently climbed to near the top of the five-year weekly average, after remaining well below the five-year weekly average for much of the summer, according to the Energy Information Administration. This is a bearish price signal. United States natural gas prices have sagged from the range of US$4.50 per million British thermal units (mmbtu) in mid-summer to about $3.50 per mmbtu in mid-October. Despite the price weakness, the number of drilling rigs pursuing natural gas targets in the United States has increased from a range above 850 active rigs in late spring to nearly 930 active rigs in mid-October, according to Baker Hughes Inc.

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 less than three years ago. By July 2011 there were approximately 60 known Wilrich horizontal wells on-stream, with combined production estimated at 135 mmcf per day, and producers were reporting plans to drill numerous additional such wells. Industry activity in emerging shale plays, such as the Duvernay, also appears to be accelerating. This activity in the most economic liquids -rich natural gas plays in western Canada suggests increased demand for associated seismic data.

Although Pulse's optimism about future business conditions and financial results has strengthened over the course of 2011, the Company cannot predict the timing or size of future seismic data library sales. Together with the further weakening of natural gas prices, this calls for overall prudence in managing the Company's affairs. Through continued disciplined management, Pulse intends to maintain its strong record of cost control, which contributed to the Company's positive quarterly results. Maintaining Pulse's strong financial position is another key priority, including ample cash, which facilitates the Company's ability to sustain the quarterly dividend and to make substantial long-term debt repayments and common share repurchases. Pulse's strong balance sheet also helps it maintain extensive credit facilities on good terms and manageable interest rates.

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 data that has 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, cash EBITDA and shareholder free cash flow remain Pulse's key objectives for the remainder of 2011 and entering 2012.

For further analysis and discussion on the business indicators affecting Pulse please refer to the Management and Discussion Analysis for the nine months ended September 30, 2011 that is being posted on our website at www.pulsesseismic.com and filed on SEDAR (www.sedar.com).


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 26,700 net square kilometres of 3D seismic and approximately 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;
  • optimism that 2011 seismic revenue and other key performance indicators will surpass 2010 results;
  • 2011's historically strongest quarter still lying ahead;
  • industry activity levels and capital spending;
  • forecast commodity prices;
  • forecast land sales (Crown mineral lease auctions);
  • forecast oil and natural gas drilling activity;
  • forecast oil and natural company 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;
  • expected commencement, completion and delivery dates for participation surveys;
  • Pulse's dividend policy;
  • 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 where applicable 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