Tesla Exploration Ltd.

August 12, 2011 17:10 ET

Tesla Reports 2011 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 12, 2011) - Tesla Exploration Ltd. (TSX:TXL) ("Tesla" or the "Company") today announces its 2011 second quarter operating and financial results.

                     Three Months Ended           Six Months Ended          
(000s, except per               June 30                    June 30          
 share data)              2011     2010   Change     2011     2010   Change 
(unaudited)                  $        $        %        $        $        % 
Revenue                 30,768   22,325       38  115,893   52,223      122 
Revenue excluding                                                           
reimbursables           19,589   19,990       (2)  75,049   45,839       64 
Gross margin(1)          1,883    6,752      (72)  18,675   14,895       25 
 As a % of revenue                                                          
 reimbursables              10%      34%               25%      32%         
Net earnings (loss)     (5,370)   2,594      n/m      189    2,525      (93)
 Per share - basic       (0.24)    0.12      n/m     0.01     0.13      (94)
EBITDA (2)              (1,951)   2,954      n/m   11,063    7,517       47 
 Per share - basic       (0.09)    0.14      n/m     0.49     0.40       22 
Cash flow from                                                              
operations (3)          (2,146)   1,610      n/m   10,702    5,760       86 
 Per share - basic       (0.09)    0.07      n/m     0.47     0.30       54 
Weighted average                                                            
outstanding for the                                                         
period - basic          22,795   21,738        5   22,795   18,938       20 
Capital expenditures     4,940      442    1,017    6,383      988      546 

                                                  June 30       31          
                                                     2011     2010   Change 
As at                                                   $        $        % 
Working capital                                     4,912    7,521      (35)
Total assets                                      120,523  127,815       (6)
Total long-term                                                             
borrowings (4)                                     26,764   35,859      (25)

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 and six months ended June 30,
    2010 includes $164,000 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 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

Second Quarter Highlights:

--  Tesla Exploration Trinidad Ltd. began operations in May on an
    approximate $25 million project in the country further expanding the
    Company's geographical footprint. 
--  Tesla operated four crews in Canada well into April on three-dimensional
    ("3D") and three-component ("3C") programs taking advantage of the
    extended winter. 
--  To meet growing demand, Tesla purchased an additional 3,000 stations of
    3C recording equipment, bringing the total to 13,000 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 equipment is being utilized. 
--  Tesla operated up to three crews in the US during the quarter and
    prepared numerous programs for the second half of the year. 
--  Tesla Offshore's activity levels climbed significantly with the
    beginning of the summer construction season supporting client operations
    on as many as 16 vessels. 
--  Tesla-IMC operated a crew in the UK throughout the second quarter. A
    significant mobilization was undertaken for a project in Northern
    Ethiopia which began operations in late June. 

Second Quarter Financial Results:

The Company's consolidated revenues including reimbursables increased 38% in the second quarter of 2011 compared to the second quarter of 2010. North American land operations were the main driver behind the increase with Canadian operations seeing an extended winter season going well into April with work on large 3D and three-component ("3C") programs prior to western Canada's spring break up compared to an early end to the winter season in 2010. The US division operated up to three crews throughout the second quarter but faced significant standby time due to poor weather conditions. A maximum of two crews operated in the US in the second quarter of 2010. Tesla Trinidad started up operations in May contributing mainly third party contractor revenues related to survey, line clearance and drilling. Tesla Offshore's activity levels improved from the first quarter of 2011 with seasonal construction projects underway but remained significantly behind the second quarter of 2010. The continued impact of the Macondo oil spill and resulting lease sale cancelations has reduced activity levels in the Gulf including deep tow projects that were undertaken in the second quarter of 2010. International revenues declined from the comparative quarter despite a full workload for the UK crew due to continued delays in the start up of two projects in east Africa. In the second quarter of 2010 revenues were earned from standby charges and ultimate demobilization from eastern Ethiopia, a significant project in Uganda and a series of projects in the UK. The Company's revenue excluding reimbursables remained consistent with the comparable quarter.

Gross margin declined in the second quarter of 2011 compared to the second quarter of 2010. The Company had declines in gross margin in US land operations due to poor weather conditions during the quarter. International and Offshore gross margins also dropped with the decline in revenues. Gross margin as a percentage of total revenue (including reimbursables) decreased in the second quarter of 2011 compared to the second quarter of 2010 due to the significant increase in flow-through reimbursables associated with the North American land acquisition revenues and increased field overheads in Canada to handle the large volume of owned and rented equipment returned to base from the field following spring break up. Margin percentage was further reduced by the reimbursable nature of third party contractor costs in the early phases of the Trinidad operations, significant low margin mobilization revenues for the Ethiopian operations and reduced margin percentage in the Gulf due to competition for reduced work following the Macondo oil spill. Gross margin as a percentage of revenue (excluding reimbursables) declined for similar reasons.

The Company's EBITDA declined in the second quarter of 2011 compared to the second quarter of 2010 due to the reduction in absolute gross margin partially offset by slightly reduced general and administrative costs.


North America Land Operations

Wet weather conditions during the second quarter of 2011 delayed several projects in western Canada going into the third quarter. Canada currently expects of two crews operating throughout the third quarter despite reduced activity in eastern Canada compared to 2010. The Company is seeing strong demand for fall and winter programs and is expecting a comparable level of activity to that experienced in late 2010 and early 2011. The Company anticipates operating up to five crews during the fourth quarter of 2011 and up to ten crews during the first quarter of 2012. This increased demand should lead to increased rates and earlier start dates where possible. Tesla is working to secure appropriate personnel and equipment to support what is shaping up to be another busy winter season.

In the US, Tesla-Conquest also faced poor weather conditions that delayed programs into the third quarter. The Company is currently operating four crews, one of which is operating a wireless system, throughout the US supported by Canadian personnel and has scheduled projects that will keep three of those crews active throughout the fourth quarter of 2011. Tesla-Conquest continues to see a rise in activity levels and pricing improvements as utilization rates increase across the industry with high channel count third party multi-client programs driving demand for services.

Tesla Trinidad's operations began in May and front end work continues on the current project with survey, line clearance and drilling all in progress. Labour challenges caused periodic delays during July, but operations have now returned to normal with seismic acquisition planned for the fourth quarter and a target completion date of the end of the year. Tesla is working with its operating partners in Trinidad in an attempt to secure future work in the country.

International Operations

After a lengthy client funded mobilization, Tesla-IMC began recording data at the end of June for a project in northern Ethiopia. The project was anticipated to last throughout the third quarter, but indications are that the program will be extended into 2012 on term rates.

A second African crew completed its mobilization onto a 2D transition zone project in Uganda in early July and began recording at that time. This project is expected to last into mid-August with management assessing alternatives for follow on projects in the area.

Tesla-IMC's UK crew has secured projects that will see it continue work into early 2012.

Additional contracts have been signed for work in eastern Africa for early 2012 and bid activity remains busy with prospective work programs in the UK, Europe, the Middle East and throughout Eastern Africa.

Tesla-IMC expects to be successful in obtaining additional work from these opportunities to extend its current backlog.

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 continues to face increased competition and lower processing prices, but has several projects underway and additional opportunities continue to be pursued to maintain backlog.

Offshore Operations

There have been recent reports that a western Gulf of Mexico lease sale will occur in December 2011 or January 2012. There will also be a central and eastern Gulf of Mexico lease sale no later than June 2012. This is positive news for Tesla Offshore. New lease sales should lead to an increase in geophysical operations as operators will require geophysical surveys for the purpose of securing drilling permits and evaluating new lease properties. The drilling moratorium has now been lifted and operators report that drilling permit approvals on existing leases are moving forward very slowly.

Geophysical operations continue to keep Tesla Offshore's vessel utilized, including a series of deep tow projects scheduled for August, however, activity levels and revenue rates remain low in the aftermath of the Macondo oil spill. Construction activity has picked up with special projects underway and improved weather. Tesla Offshore will support up to 15 vessels throughout the third quarter before winding down early in the fourth quarter.

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. Tesla Offshore will also be supporting Tesla Trinidad's operations in the fourth quarter of 2011.

Tesla Offshore submitted a claim to the Gulf Coast Claims Facility in July 2011 for damages suffered as a result of the Macondo oil spill. The amount of compensation and timing of claim settlement is unknown at this time.

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 six months ended June 30, 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