Tesla Exploration Ltd.
TSX : TXL

November 14, 2011 17:56 ET

Tesla Reports 2011 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2011) - Tesla Exploration Ltd. ("Tesla" or the "Company")(TSX:TXL) today announces its 2011 third quarter operating and financial results.

(000s, except per share data) Three Months Ended Nine Months Ended
(unaudited) September 30 September 30
2011 2010 Change 2011 2010 Change
$ $ % $ $ %
Revenue 47,237 26,060 81 163,130 78,283 108
Revenue excluding reimbursables 31,120 21,861 42 106,169 67,700 57
Gross margin 1 9,393 6,772 39 28,068 21,666 30
As a % of revenue excluding reimbursables
30
%
31
%
26
%
32
%
Net earnings (loss) (332 ) (3,982 ) (92 ) (143 ) (1,457 ) (90 )
Per share - basic (0.01 ) (0.18 ) (92 ) (0.01 ) (0.07 ) (91 )
EBITDA 2 5,375 2,404 124 16,439 9,921 66
Per share - basic 0.24 0.11 123 0.72 0.50 46
Cash flow from operations 3 5,642 1,589 255 16,344 7,349 122
Per share - basic 0.25 0.07 255 0.72 0.37 95
Weighted average shares outstanding for the period - basic
22,795

22,770

n/m

22,795

20,033

14
Capital expenditures 1,852 6,710 (72 ) 8,235 7,698 7

As at September 30 December 31
2011 2010 Change
$ $ %
Working capital 11,911 7,521 58
Total assets 125,075 127,815 (2 )
Total long-term borrowings 4 31,341 35,859 (13 )
Equity 57,667 55,388 4
  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 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 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.

Third Quarter Highlights:

  • Tesla operated two crews in Canada during the historically slower summer period. Further, Tesla built a significant backlog in Canada for the fourth quarter of 2011 and the first quarter of 2012 including work commitments for the Company's 13,000 stations of 3C recording equipment for oilsands projects and shale plays where a large portion of Tesla's workload is located.

  • Tesla operated four crews in the US during the quarter and prepared remaining programs for the fourth quarter. Two crews gained valuable experience utilizing wireless systems further developing strategic alliances with clients.

  • Tesla Trinidad continued survey, line cutting and drilling operations during the quarter and prepared for an additional area of difficult terrain which has expanded the scope of the project.

  • Tesla Offshore's activity levels remained strong during the summer construction season supporting client operations on as many as 14 vessels. Geophysical activity was steady throughout the quarter including deep tow operations through all of August.

  • Tesla International operated crews in northern Ethiopia and the UK throughout the quarter with a third crew completing a significant transition zone project in Uganda in mid-August.

Third Quarter Financial Results:

The Company's consolidated revenues including reimbursables increased 81% in the third quarter of 2011 compared to the third quarter of 2010. North American land operations were the main driver behind the improvement with a significant increase in US activity along with the continued progress of Tesla Trinidad's current operation. The US division operated four crews continuously throughout the third quarter compared to up to three crews operating periodically in the third quarter of 2010. This increased activity also led to a corresponding increase in reimbursable third party contractor revenues. Tesla Trinidad continued with front end operations on its program during the third quarter generating mainly third party contractor revenues related to survey, line clearance and drilling. Canadian revenues also improved with a strong September and a greater amount of 3D work during the quarter compared to the third quarter of 2010 where crews worked primarily on 2D programs. International revenues increased over the comparative quarter with a full workload for the UK crew, operating activity and standby charges on the program in northern Ethiopia and a project in Uganda. In the third quarter of 2010 revenues were earned from the demobilization from eastern Ethiopia, a significant project in Uganda and a series of projects in the UK. Tesla Offshore's activity levels continued to improve from the first half of 2011 with seasonal construction projects in full swing during the third quarter and deep tow work during most of August but overall activity remained behind the third quarter of 2010. The continued impact of the Macondo oil spill and resulting lease sale cancelations has reduced activity levels in the Gulf from those in 2010. The Company's revenue excluding reimbursables increased 42%.

Gross margin grew in the third quarter of 2011 compared to the third quarter of 2010. The Company had improvements in gross margin in Canada and US land operations which more than offset the decline in Offshore gross margin. Canada gross margins benefitted from increased activity levels and lower than expected repairs and maintenance charges on rental equipment utilized during the early part of 2011. US gross margins followed the increase in activity levels while Offshore gross margins fell in line with reduced activity levels. International gross margins also improved slightly and Trinidad contributed positive gross margin during the front end phase of operations. Gross margin as a percentage of revenue (excluding reimbursables) declined slightly to 30% in the third quarter of 2011 compared to 31% in the third quarter of 2010 as improvements in Canada and US land operations were offset by declines in International and Offshore operations.

The Company's EBITDA improved in the third quarter of 2011 compared to the third quarter of 2010 due to the growth in absolute gross margin along with reduced general and administrative costs.

The Company's working capital increased $7.0 million during the quarter to $11.9 million including a net cash surplus of $3.4 million. Operating cash flows during the quarter contributed to fund working capital requirements in Canada, the US and Trinidad.

Total long-term borrowings climbed $4.5 million during the quarter to $31.3 million. The Company debt financed the acquisition of 3,000 stations of recording equipment. Slight increases in long-term debt were offset by regular payments on outstanding finance leases. At September 30, 2011, the Company had $36.1 million of unused committed bank credit and lease facilities.

Shareholders' equity increased $2.5 million to $57.7 million during the quarter due to the growth in accumulated other comprehensive income with the weakening of the Canadian dollar against the base currencies of the Company's foreign subsidiaries.

Outlook:

North America Land Operations

The Company continues to see strong demand for fall and winter programs in Canada and is expecting a comparable level of activity to that experienced in late 2010 and early 2011. The Company anticipates ramping up to seven crews during the fourth quarter of 2011 and up to ten crews during the first quarter of 2012. This increased demand has resulted in increased rates and earlier start dates where possible but has also increased personnel costs as competition for certain skill sets increases. Tesla is focused on securing appropriate personnel and equipment to support what is expected to be another busy winter season.

In the US, the Company expects to continue operating four crews during most of the fourth quarter of 2011, three of which are operating wireless systems. Three of the crews will wind up in late 2011 or early 2012 as personnel and equipment are redeployed to Canada to support the peak winter season. The Company continues to see a rise in activity levels in shale plays such as the Bakken, Utica and Marcellus along with 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 continue with front end work on the current project with survey, line clearance and drilling all in progress. The crew is preparing for an additional area of difficult terrain which has expanded the scope of the project and will extend the timeline of the program. Seismic acquisition is expected to commence shortly with a target completion date early in 2012. Tesla is working with its operating partners in Trinidad in an attempt to secure future work in the country.

International Operations

Tesla International continues work on a program in northern Ethiopia. The first phase of the project will last until the end of November. The second phase of this project is projected to start sometime during the first quarter of 2012 and will be awarded through a competitive bid process. The Company believes it is well positioned to be successful on this award and its ability to secure additional opportunities in the area to minimize any recording crew downtime.

A second African crew has also completed its mobilization onto a 2D transition zone project in the Democratic Republic of the Congo in early November with recording to begin in mid-November. The project is expected to last late into the year.

Tesla International's UK crew has secured projects that will see it continue work into early 2012 on projects throughout the UK, Ireland and France.

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 International 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

The western Gulf of Mexico lease sale has been set for December 14, 2011. While this is not a significant lease sale historically, it does start the reactivation process for activity in the Gulf of Mexico. The more significant central and eastern Gulf of Mexico lease sale is expected 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, albeit slowly.

Geophysical operations have slowed down considerably heading into winter as activity levels and revenue rates remain low in the aftermath of the Macondo oil spill. Construction activity remained strong into the early parts of the fourth quarter and will also wind down heading into the slower winter season.

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. Tesla Offshore is currently working on a project in Israel and will be supporting Tesla Trinidad's operations in the fourth quarter of 2011. 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 submitted a claim to the Gulf Coast Claims Facility in July 2011 for damages suffered as a result of the Macondo oil spill. This claim was denied. Tesla Offshore has now joined the multi-district litigation claim as a moratorium affected claimant. 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 nine-months ended September 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 Exploration International Ltd. (formerly Tesla-IMC International Ltd.) and Tesla Exploration Trinidad Ltd., and in the United States through Tesla Exploration Inc. (formerly 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