Tesla Exploration Ltd.
TSX : TXL

May 19, 2011 09:20 ET

Tesla Reports 2011 First Quarter Results

CALGARY, ALBERTA--(Marketwire - May 19, 2011) - Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today announces its 2011 first quarter operating and financial results.

(000s, except per share data) Three Months Ended
(unaudited) March 31
20112010Change
$$%
Revenue85,12529,898185
Revenue excluding reimbursables55,46025,850115
Gross margin 116,7938,142106
As a % of revenue excluding reimbursables30%31%
Net earnings (loss)5,559(69)n/m
Per share - basic0.24(0.00)n/m
EBITDA 213,0634,564186
Per share - basic0.570.2999
Cash flow from operations 312,8984,150211
Per share - basic0.570.26116
Weighted average shares outstanding for the period - basic22,79515,81044
Capital expenditures1,443546164
As atMarch 31December 31
20112010Change
$$%
Working capital20,2877,521170
Total assets158,158127,81524
Total long-term borrowings 434,72935,859(3)
  1. Gross margin is defined as gross profit before depreciation and amortization. Gross margin is a measure that does not have a meaning prescribed under IFRS in Canada and accordingly, may not be comparable to similar measures used by other companies.
  2. EBITDA is defined as income before interest, taxes, depreciation, amortization and impairments, gains or losses on foreign exchange, gains or losses on sales of capital assets, bad debt provisions and stock-based compensation. EBITDA for the three months ended March 31, 2010 includes $750,000 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 IFRS in Canada 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 IFRS in Canada, 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 portions.
First Quarter Highlights:
  • Tesla generated $13.1 million of EBITDA in the first quarter of 2011, a significant improvement over the first quarter of 2010 due to a sharp increase in activity in Canada.
  • Tesla operated eleven crews and over 100,000 channels in Canada during the first quarter of 2011 almost all of which was on three-dimensional ("3D") and three-component ("3C") programs.
  • Canadian operations utilized over 30,000 stations of 3C recording equipment, including 10,000 stations owned by the Company. This equipment is particularly valuable to understanding the unique geophysical aspects of the unconventional resource plays in North America such as the oilsands and oil shale plays where a large portion of Tesla's current workload was located.
  • Tesla operated up to three crews in the US during the quarter.
  • Tesla Offshore's vessel underwent an overhaul of its hull and generators along with under standard repairs and maintenance while in dry dock before returning to geophysical survey and deep tow projects.
  • Tesla-IMC operated a crew in the UK throughout the first quarter. Preparations began for significant projects in northern Ethiopia and Uganda.
  • Tesla incorporated a new subsidiary, Tesla Exploration Trinidad Ltd., and was awarded an approximate $25 million project in the country further expanding the Company's geographical footprint.

First Quarter Financial Results:

The Company's consolidated revenues including reimbursables increased 185% in the first quarter of 2011 compared to the first quarter of 2010. North American land operations were the main driver behind the increase with up to eleven crews operational during the quarter in Canada compared to a maximum of four crews in 2010. The US division operated three crews early in the quarter before resources were moved up to Canada compared to a single crew operating on a limited basis in 2010. These improvements in activity levels are a reflection of the combination with Norex and increased demand for the Company's services driven by the increasing price of oil that has led to growing activity in the oil sands. Tesla Offshore's operations were limited in the first quarter of 2011 with the continued impact of the Macondo oil spill on activity levels in the Gulf and were well behind the comparative quarter which benefitted from several deep tow projects. International revenues were also reduced from the comparative quarter with one crew operating in the UK and ongoing preparations for an east Africa project, whereas during the first quarter of 2010 two large crews were working in Ethiopia with another crew in the UK.

Gross margin increased in the first quarter of 2011 compared to the first quarter of 2010 supported by the significant improvement in North American land activity levels as noted above partially offset by a decline in International and Offshore operations. Gross margin as a percentage of total revenue (including reimbursables) decreased in the first quarter of 2011 compared to the first quarter of 2010 due to the significant increase in flow-through reimbursables associated with the North American land acquisition revenues. Gross margin as a percentage of revenue (excluding reimbursables) remained steady despite a significant decline in Offshore's contribution.

The Company's EBITDA increased in the first quarter of 2011 compared to the first quarter of 2010 due to the increased revenue and absolute gross margin offset by increased general and administrative costs associated with the business combination with Norex.

Outlook:

North America Land Operations

Delays in project start ups in the first quarter and the extended winter in much of western Canada resulted in six crews continuing operations into April with four crews remaining active until the middle of the month on large 3C term contracts. The Company has seen improvements in bid activity for summer work and expects a comparable level of activity as experienced in 2010 with two crews operating throughout Canada following the spring thaw in late May and through the third quarter.

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 but has seen bid activity increase for summer and fall programs. With a number of recent project awards and continued bid activity, Tesla-Conquest expects to operate two crews in the second quarter of 2011 and up to four crews in the third quarter of 2011. Tesla-Conquest will continue to be selective in the programs it undertakes given the price sensitive environment.

International Land Operations

Tesla-IMC's active UK crew will continue on scheduled projects into the third quarter with bid activity suggesting work in the fourth quarter as well.

Tesla-IMC is currently in the final stages of mobilizing a crew for a project in northern Ethiopia that was delayed from its planned start date. The project should last into the third quarter.

A second African crew is preparing for mobilization onto a 2D transition zone project in Uganda that will be followed by a delayed marine and transition zone cross-border project in Uganda and the Democratic Republic of Congo which is expected to run during the third 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 additional work from these opportunities to extend its current backlog.

Offshore Operations

The lack of definitive timing for 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 adequately evaluate 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) and operators report that drilling permit approvals on existing leases are moving forward very slowly. Until reinstatement of the Gulf lease sales and the timely issuance of drilling permits, the short-term outlook for Tesla Offshore's operations is uncertain.

Poor weather in April has impacted operations further with limited geophysical backlog in place heading into the historically busy summer months. Construction activity is expected to pick up in May when special projects resume and the weather improves. However, workloads for long term clients have been significantly reduced in the current environment which limits Tesla Offshore's survey support.

Tesla Offshore has increased the number of project tender responses and the amount of attention and effort put toward opportunities outside the Gulf of Mexico. As long-term clients expand into areas such as Canada and Alaska, Tesla Offshore is configuring systems and staff to profitably provide services in those areas. This is expected to help during this unstable period in the Gulf of Mexico, as well as providing additional revenue sources continuing into the future.

Processing

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 several projects underway and additional opportunities continue to be pursued to maintain backlog.

Tesla Trinidad

Tesla Trinidad was incorporated during the first quarter of 2011 and was recently awarded a significant project in the country that will see front end operations begin in May with seismic acquisition planned during the fourth quarter. Tesla will work with its operating partners in Trinidad in an attempt to secure future work in the country.

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 months ended March 31, 2011.

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 subsidiaries Tesla-IMC International Ltd. and Tesla Exploration Trinidad 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