Pulse Seismic Inc.
TSX : PSD
OTCQX : PLSDF

Pulse Seismic Inc.

November 08, 2013 07:00 ET

Pulse Seismic Inc. Reports Third Quarter 2013 Results and Declares Quarterly Dividend

CALGARY, ALBERTA--(Marketwired - Nov. 8, 2013) - Pulse Seismic Inc. (TSX:PSD)(OTCQX:PLSDF) ("Pulse" or "the Company") reports its financial and operating results for the three and nine months ended September 30, 2013. 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. It will be paid on December 20, 2013 to shareholders of record at the close of business on December 6, 2013.

Pulse's key performance metrics of data library sales, cash EBITDA(a) and shareholder free cash flow(a) each improved in the three-month period ended September 30, 2013 over the prior year's comparative period. The results for the nine-month period, however, were significantly lower than in 2012. One transaction in the first quarter of 2012 led to a $27.8 million data library sale, and record data library sales for the comparative nine months in 2012. Revenue fluctuations are a normal part of the seismic data library business.

The current period's data library sales still led to positive cash generation. "The quarter's $4.2 million of sales resulted in $2.5 million of cash EBITDA, and due to an anticipated income tax recovery, shareholder free cash flow is even higher, at $3.8 million for the quarter," commented Neal Coleman, Pulse's President and CEO.

In addition, continued Coleman, "In the first three quarters of this year, we returned over $10.7 million to our shareholders through dividends of $3.6 million and share purchases totalling over $7.1 million. Note that 76% of every dollar of the $22.5 million in data library sales for that nine month period, converts to shareholder free cash flow."

All key performance metrics reported for the periods ended September 30, 2013 are in line with the preliminary results announced on October 10, 2013.

HIGHLIGHTS FOR THE PERIODS ENDED SEPTEMBER 30, 2013

  • Seismic data library sales for the third quarter of 2013 were $4.2 million compared to $4.1 million for the comparable period in 2012. Seismic data library sales for the nine months ended September 30, 2013 were $22.5 million compared to $52.2 million for the first nine months of 2012.
  • Total seismic revenue for the three months ended September 30, 2013 was equal to the $4.2 million in data library sales since there were no participation surveys in progress, whereas the third quarter of 2012 included $4.6 million of participation survey revenue, bringing total seismic revenue to $8.7 million. Total seismic revenue for the nine months ended September 30, 2013 was $35.9 million compared to $58.6 million for the respective period in 2012.
  • Cash EBITDA was $2.5 million ($0.04 per share basic and diluted) for the third quarter of 2013 compared to $2.0 million ($0.03 per share basic and diluted) for the comparable period in 2012. Cash EBITDA was $16.2 million ($0.27 per share basic and diluted) for the nine months ended September 30, 2013 compared to $45.0 million ($0.71 per share basic and diluted) for the nine months ended September 30, 2012.
  • Shareholder free cash flow was $3.8 million ($0.06 per share basic and diluted) for the third quarter of 2013 compared to $907,000 ($0.01 per share basic and diluted) for the comparable period in 2012. Shareholder free cash flow was $17.0 million ($0.28 per share basic and diluted) for the nine months ended September 30, 2013 compared to $42.7 million ($0.68 per share basic and diluted) for the first nine months of 2012.
  • A net loss of $3.7 million (including non-cash amortization expense of $7.1 million) was incurred in the third quarter of 2013, bringing the net loss for the nine months ended September 30, 2013 to $16.3 million (including non-cash amortization expense of $49.4 million). Net loss for the third quarter of 2012 was $362,000 (including non-cash amortization expense of $6.4 million) and for the nine months ended September 30, 2012 there were net earnings of $13.5 million (including non-cash amortization expense of $30.2 million). Pulse's high level of participation survey activity during the 2012/2013 winter season accounted for the higher non-cash amortization in the current year. Pulse recorded approximately $29.0 million in initial amortization expense upon completion of these surveys.
  • In the third quarter Pulse purchased and cancelled, through its normal course issuer bid, 690,150 common shares, bringing the total number of shares purchased in the first nine months of 2013 to 2,108,822 for a total cost of approximately $7.1 million, or $3.36 per share including commissions. The number of shares outstanding has been reduced to approximately 59.7 million as of September 30, 2013.
  • Pulse paid a dividend of $0.02 per share in the third quarter of 2013, totalling $1.2 million.

Selected Financial and Operating Information
(thousands of dollars except per share data and number of shares)

Three months ended Nine months ended
September 30, September 30, Year ended
2013 2012 2013 2012 December 31,
(unaudited) (unaudited) 2012
Revenue
Data library sales $ 4,164 $ 4,062 $ 22,514 $ 52,155 $ 64,040
Participation surveys - 4,633 13,429 6,426 22,313
Total revenue $ 4,164 $ 8,695 $ 35,943 $ 58,581 $ 86,353
Amortization of seismic data library $ 7,090 $ 6,435 $ 49,404 $ 30,217 $ 36,568
Net earnings (loss) $ (3,722) $ (362) $ (16,262) $ 13,495 $ 27,446
Net earnings (loss) per share:
Basic and diluted $ (0.06) $ (0.01) $ (0.27) $ 0.21 $ 0.44
Cash EBITDA(a) $ 2,544 $ 2,029 $ 16,183 $ 44,955 $ 54,692
Per share basic and diluted(a) $ 0.04 $ 0.03 $ 0.27 $ 0.71 $ 0.87
Shareholder free cash flow(a) $ 3,807 $ 907 $ 17,027 $ 42,665 $ 50,046
Per share basic and diluted(a) $ 0.06 $ 0.01 $ 0.28 $ 0.68 $ 0.80
Funds from operations(b) $ 2,326 $ 6,328 $ 25,015 $ 49,013 $ 74,346
Per share basic and diluted(b) $ 0.04 $ 0.10 $ 0.41 $ 0.78 $ 1.19
Capital expenditures:
Participation surveys $ 117 $ 8,661 $ 21,332 $ 12,300 $ 40,261
Seismic data purchases and related costs 190 504 778 813 1,908
Property and equipment additions 19 45 168 213 790
Total capital expenditures $ 326 $ 9,210 $ 22,278 $ 13,326 $ 42,959
Weighted average shares outstanding:
Basic and diluted 60,085,561 61,516,456 60,566,261 63,004,223 62,526,761
Shares outstanding at period end 59,687,520 61,125,222 61,140,442
Seismic library:
2D in kilometres 339,991 339,991 339,991
3D in square kilometres 28,284 27,089 27,089

Financial Position and Ratios
(thousands of dollars except ratio calculations)

September
30, 2013
September
30, 2012
December
31, 2012
Working capital $ 4,295 $ 9,108 $ (1,462)
Working capital ratio 1.95:1 1.35:1 0.96:1
Total assets $ 104,188 $ 135,153 $ 162,454
Long-term debt(c) $ 20,820 $ 29,914 $ 26,688
Trailing twelve-month (TTM) cash EBITDA(d) $ 25,920 $ 54,672 $ 54,692
Shareholders' equity $ 70,947 $ 83,528 $ 96,550
Long-term debt to shareholders' equity ratio 0.29:1 0.36:1 0.28:1
Long-term debt to TTM cash EBITDA ratio 0.80:1 0.55:1 0.49:1

(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-generally accepted accounting principles (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.

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

OUTLOOK

Pulse continues to have limited short-term visibility for energy sector exploration activity and seismic revenue. Some customers are deferring investments in exploration-related activities that would include the need for seismic data. There also is less merger-and-acquisition activity in the energy sector than a year ago, reducing the number of corporate transaction-based seismic sales. Pulse continues to evaluate participation survey opportunities for the coming winter season and beyond, but to date has not found any projects that meet the Company's investment criteria. Pulse's sales team remains engaged in vigorous business development activity for seismic data library sales, especially covering the liquids-rich and oil-prone, multi-zone areas of northwest Alberta.

Traditional leading indicators of potential seismic activity are essentially flat. In late July the Canadian Association of Oilwell Drilling Contractors (CAODC) reported that the number of active drilling rigs, fleet utilization and overall drilling rig days across western Canada in the first and second quarters of 2013 were slightly lower than in the comparable quarters of 2012, and forecast that third-quarter 2013 activity would be almost identical to the third quarter of 2012. Activity in the first three quarters of both years, however, is down from the comparable 2011 results. On October 30, 2013, the Petroleum Services Association of Canada (PSAC) released highlights from its 2014 Drilling Activity Forecast and Industry Outlook. PSAC estimated that 10,800 wells will be drilled in western Canada in 2014, a decrease of 160 or 1.5 percent from 2013.

The natural gas price of $3.35 per thousand cubic feet (mcf) at AECO on November 6, 2013 represents somewhat of a recovery from a weak summer and early fall, and was up slightly over year-earlier prices. As of the same date, year-ahead and calendar 2014 AECO price forecasts are virtually unchanged from comparable projections one year earlier. In the United States, Nymex gas price forecasts are down slightly year-over-year. The current gas price is not considered sufficient to trigger a revival of natural gas-focused drilling in western Canada.

Pulse continues to benefit greatly from its low cost structure, which enables the Company to generate positive cash EBITDA and shareholder free cash flow. Pulse is well prepared for continued depressed market conditions due to its low debt held at favourable terms and its current dividend level.

Pulse will continue to focus on generating as much data library sales revenue, cash EBITDA and shareholder free cash flow per share as conditions allow, while maintaining the integrity of its seismic data library asset. Pulse remains optimistic about its long-term potential for growth. Pulse's continued share purchases reflect the Board of Directors' and management team's belief in the Company's value.

Q3 2013 CONFERENCE CALL

Pulse will host a conference call on Friday, November 8, 2013 at 11:00 am MST (1:00 pm EST) where Neal Coleman, President & CEO and Pamela Wicks, VP Finance & CFO will discuss the Company's results for the third quarter. A question-and-answer period will follow an update on the Company's strategy and outlook.

To participate please dial 416-340-8530 or 877-440-9795 approximately 10 minutes before the commencement of the call. To listen to the audio 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 November 16, 2013. To access the replay, please dial 905-694-9451 or 800-408-3053 and enter the pass code 3376392.

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 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 Pulse continues to have limited short-term visibility for energy sector exploration activity and seismic revenue;

  • Pulse continues to have limited short-term visibility for energy sector exploration activity and seismic revenue;
  • Pulse is well prepared for continued depressed market conditions;
  • Pulse remains optimistic about its long-term potential for growth;
  • 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 natural gas plays;
  • Estimated future demand for seismic data;
  • Estimated future seismic data sales;
  • Estimated future demand 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 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 licensing sales;
  • The level of pre-funding of participation surveys, and the Company's ability to make subsequent data library sales from such participation surveys;
  • The Company's ability to complete participation surveys on time and within budget;
  • Environmental, health and safety risks;
  • The effect of seasonality and weather on participation surveys;
  • Federal and provincial government laws and regulations, including those pertaining to taxation, royalty rates, environmental protection and safety;
  • Competition;
  • Dependence on qualified seismic field contractors;
  • Dependence on key management, operations and marketing personnel;
  • The loss of seismic data; and
  • Protection of intellectual property rights.

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