Tesla Exploration Ltd.

November 15, 2010 17:32 ET

Tesla Reports 2010 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 15, 2010) - Tesla Exploration Ltd. ("Tesla or the "Company") (TSX:TXL) today announces its 2010 third quarter operating and financial results.

(000s, except per
share data) Three Months Ended Nine Months Ended
(unaudited) September 30 September 30
2010 2009 Change 2010 2009 Change
$ $ % $ $ %
Revenue 26,060 17,116 52 78,283 69,118 13
Revenue excluding
reimbursables(1) 21,831 15,763 38 67,700 60,282 12
Gross margin(1) 6,772 (1,209) n/m 21,666 13,588 59
As a % of revenue
reimbursables(1) 31% -8% 32% 23%
Net loss (4,158) (7,081) n/m (1,589) (7,341) n/m
Per share - basic (0.18) (0.45) n/m (0.08) (0.46) n/m
EBITDA (2) 2,372 (4,421) n/m 9,804 4,088 140
Per share - basic 0.10 (0.28) n/m 0.49 0.26 88
Cash flow from
operations (3) 1,205 (4,198) n/m 6,203 1,950 218
Per share - basic 0.05 (0.27) n/m 0.31 0.12 158
Weighted average
shares outstanding
for the period -
basic 22,770 15,807 44 20,033 15,814 27
expenditures, gross 6,710 3,552 89 7,698 12,101 (36)
As at September December
30 31
2010 2009 Change
$ $ %
Working capital 5,530 1,257 340
Total assets 120,917 82,081 47
Total long-term
borrowings (4) 31,134 23,222 34

1. Gross margin is defined as revenue less direct expenses. Gross margin is
a measure that does not have a meaning prescribed under Canadian GAAP
and accordingly, may not be comparable to similar measures used by other
2. EBITDA is defined as income before interest, taxes, depreciation,
amortization and impairments, gains or losses on foreign exchange, sales
of capital assets, gain on business combination, bad debt provisions and
stock-based compensation. EBITDA for the three and nine months ended
September 30, 2010 includes $nil and $914,000 of transaction costs
related to Tesla's combination with Norex. EBITDA and EBITDA per share
are presented because they are frequently used by securities analysts
and others for evaluating companies and their ability to service debt.
EBITDA is a measure that does not have any standardized meaning
prescribed under Canadian GAAP and accordingly, may not be comparable to
similar measures used by other companies. The Company is consistent with
its calculation of EBITDA year over year.
3. Cash flow from operations is defined as "Cash provided by operating
activities before changes in non-cash working capital." Cash flow from
operations and cash flow from operations per share are measures that
provide shareholders and potential investors with additional information
regarding the Company's liquidity and its ability to generate funds to
finance its operations. Management utilizes these measures to assess the
Company's ability to finance operating activities and capital
expenditures. Cash flow from operations and cash flow from operations
per share are not measures that have any standardized meaning prescribed
by Canadian GAAP, and accordingly, may not be comparable to similar
measures used by other companies. The Company is consistent with its
calculation of cash flow from operations year over year.
4. Includes capital lease obligations and long-term debt, including current

Third Quarter Highlights:

-- Tesla generated $2.4 million of EBITDA(2)with strong contributions from
the International and Offshore business segments partially offset by the
North American Land segment's results which were impacted by seasonality
of operations and a higher than normal summer repairs and maintenance
-- Purchased 10,000 stations of three-component ("3C") recording equipment
to support high demand for the Canadian winter season.
-- Tesla operated two crews in Canada during the seasonally slower summer
months and up to three crews in the US compared to a periodic single
crew in the comparative quarter of 2009.
-- Tesla Offshore had a strong third quarter with deep tow vessel work and
the continuance of the summer construction season. Tesla Offshore
continued to provide rapid response survey services to support
customers' efforts related to the blow out in the Gulf of Mexico.
-- Tesla-IMC's client funded demobilization from Ethiopia continued and is
now substantially complete which provided positive cash flows throughout
the quarter. A small crew remains in Ethiopia working on projects that
should extend into 2011.
-- Tesla-IMC's land and lake seismic acquisition project in Uganda
continued throughout the quarter and has been extended through mid-
November. A third international crew started up in the U.K. early in the
quarter and will continue operating on committed projects into early

Third Quarter Financial Results:

Consolidated revenues in 2010 were 52% ahead of the comparative 2009 third quarter. North American land operations were well ahead of last year with up to five crews working during the quarter compared to only one crew for a portion of the quarter in 2009. This is a reflection of the combination with Norex which expanded the Company's presence across North America specifically in eastern Canada and north eastern US. Tesla's Offshore activity matched the comparative quarter benefiting from deep tow work during the quarter and a comparable summer construction season despite restrictions in place in the Gulf of Mexico as a result of the oil spill. These results were somewhat offset by the impact of a weaker US dollar on translation. International revenues were in line with the comparative quarter as the weaker Pound Sterling offset increased project activity levels.

Gross margin increased in the third quarter of 2010 compared to 2009 with a significant improvement in International land operations offset by declines in North American land and Offshore segment margins. International operations showed significant improvement with margins returning to historical levels after substantial non-recurring issues encountered in the third quarter of 2009. North American land operations were impacted by a greater than normal summer repairs and maintenance program preparing equipment for the coming winter's expected increase in activity levels when equipment utilization will reach full capacity. Offshore margin declined slightly due to a more competitive environment with the restrictions currently in place in the Gulf of Mexico.

The Company's EBITDA increased in the third quarter of 2010 compared to 2009 due to the improvement in gross margin offset by cost increases related to the business combination with Norex.

The third quarter was negatively impacted by a $0.6 million pre-tax bad debt provision and a $1.3 million pre-tax impairment of the data library intangible; both relating to a program recorded for a US data brokerage firm in early 2009.


North America Land Operations

The integration of Tesla and Norex has gone well and the Company is moving forward with a strong team to tackle what appears to be a positive change in the Canadian marketplace. Despite the low natural gas price which has historically driven seismic exploration activity levels in western Canada, developments in the oil sands and shale plays are growing, creating increased seismic activity for a large number of operators in these areas. With bid activity and project awards for the fall and specifically winter (Q1 2011) well ahead of last year, Tesla has completed the purchase of 10,000 stations of three- component ("3C") recording equipment and has secured additional rental equipment to service this work. Tesla's Canadian crew count is expected to rise to six crews during the fourth quarter of 2010 and plans to operate ten to twelve crews during the first quarter of 2011. The size of crews in terms of equipment employed has grown dramatically. The Company is forecast to operate over 100,000 channels in Canada this winter. Several of these crews are also expected to continue operating into April 2011 depending on the timing of spring break-up.

In the US, Tesla-Conquest still faces a challenging market due to natural gas pricing and a continued competitive landscape for a reduced number of programs. Tesla-Conquest had three crews working early in the fourth quarter but expects this number to be reduced to one by the end of the year. Until the US economic outlook changes and natural gas prices improve, the US marketplace will be abnormally competitive. Tesla-Conquest will continue to be selective in the programs it undertakes given the price sensitive environment. Excess equipment and personnel will be utilized where appropriate to support the expected busy Canadian winter season.

International Land Operations

Following the suspension of Tesla-IMC's Ethiopian operations under the force majeure termination provisions of the contract (due to safety concerns), a settlement agreement was reached with the customer to cover the costs of the demobilization of the equipment out of the country. This demobilization is substantially complete with a significant portion of the equipment relocated to Djibouti. A small crew remains in Ethiopia working on projects into early 2011.

A crew continues work on a large project in Uganda which is expected to run through mid-November with the possibility of follow-on work in the area. Tesla-IMC's European crew has work scheduled through the early part of the first quarter of 2011. Bid activity remains busy with a multitude of prospective work programs in the UK, Europe, Asia and throughout Eastern Africa. Tesla-IMC expects to be successful in obtaining work from these opportunities to extend its current backlog.

Offshore Operations

Fourth quarter activity started strong with deep tow activity for our geophysical vessel along with the continuation of the busy summer construction season. Tesla Offshore also began work on a special project in the Bahamas as the Company looks to expand its area of operations. Activity levels for both the geophysical and construction divisions are expected to decline as the fourth quarter progresses and the winter season arrives in the Gulf of Mexico.

The cancellation of any future offshore lease sales by the US Government leaves Tesla Offshore's operations in unfamiliar territory. If new lease sales do not occur, or are not structured to allow operators to secure new lease properties, there will be no requirement for geophysical surveys for the purpose of securing drilling permits. The drilling moratorium has now been lifted, but lease sales have still not been re-scheduled (normally scheduled for March and August). Until regulations are put in place for operations in the Gulf of Mexico including the reinstatement of the Gulf of Mexico's lease sales and the timely issuance of drilling permits, the long-term outlook for Tesla Offshore's operations is uncertain.


The UK technical services office remains steady with a number of processing and interpretation projects recently awarded and underway with full utilization of capacity expected to continue. The Jakarta processing office is facing increased competition and lower processing prices, but has a backlog of projects that should keep the office busy through the end of the year. The Jakarta processing office has moved into the depth migration market by way of a revenue sharing agreement with an international software provider in order to expand offerings for customers. Additional opportunities continue to be pursued to maintain backlog.

Forward-looking Statements:

Certain information set forth in this press release, including management's assessment of the Company's future plans and operations, contains forward-looking statements, which are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "expects", "anticipates", "believes", "projects", "intends", "continues", "estimates", "objective", "ongoing", "may", "will", "should", "might", "plans" and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements are based on current expectations, estimates and projections that involve a number of known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These include, but are not limited to, the risks outlined in the "Business Risks" section of the Company's MD&A for the three and nine months ended September 30, 2010.

The information contained in this press release should not be considered all-inclusive as it excludes changes that may occur in general economic, political and environmental conditions. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Investors are cautioned against attributing undue certainty to forward-looking statements. The forward looking information and statements contained in this press release speak only as of the date hereof and, subject to its obligations under applicable law, the Company does not intend, and does not assume any obligation, to update these forward-looking statements if conditions or opinions should change.

About Tesla

Tesla provides geophysical and related services in Canada, internationally through its wholly owned subsidiary Tesla-IMC International Ltd., and in the United States through Tesla-Conquest Inc. and Tesla Offshore LLC. Since the Company's inception in 2000, Tesla has grown both organically and through acquisitions funded by retained earnings and prudent levels of borrowing, from a Canadian focused land seismic business to a global provider of a broad suite of geophysical and related services. Tesla trades on the TSX under the symbol "TXL".

Contact Information

  • Tesla Exploration Ltd.
    Mr. Richard Habiak
    President and CEO
    (403) 216-0990
    Tesla Exploration Ltd.
    Mr. Stuart Craven
    Vice President and CFO
    (403) 692-4602