CALGARY, ALBERTA--(Marketwired - Aug. 2, 2013) - Pulse Seismic Inc. ("Pulse" or "the Company") (TSX:PSD)(OTCQX:PLSDF) reports its financial and operating results for the three and six months ended June 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. This dividend will be paid on September 20, 2013 to shareholders of record at the close of business on September 6, 2013.
Pulse's key performance metrics, which include cash EBITDA(a), shareholder free cash flow(a) and net earnings, all declined in the three and six-month periods ended June 30, 2013 from the prior year's comparative periods. Following quarterly records achieved in the first two quarters of 2012, lower data library sales were experienced in both the first and second quarters of 2013, accounting for the weaker results.
All key performance metrics are in line with the preliminary results announced on July 16, 2013, except for a change in shareholder free cash flow resulting from a tax reclassification.
HIGHLIGHTS FOR THE PERIODS ENDED JUNE 30, 2013
- Seismic data library sales for the second quarter of 2013 were $4.5 million compared to $13.5 million for the comparable period in 2012. Seismic data library sales for the six months ended June 30, 2013 were $18.4 million compared to $48.1 million for the first half of 2012.
- Total seismic revenue (including revenue from participation surveys) was $4.8 million for the three months ended June 30, 2013 and $31.8 million for the six months ended June 30, 2013 compared to $13.5 million and $49.9 million for the respective periods in 2012.
- Cash EBITDA was $2.3 million ($0.04 per share basic and diluted) for the second quarter of 2013 compared to $10.9 million ($0.17 per share basic and diluted) for the comparable period in 2012. Cash EBITDA was $13.6 million ($0.22 per share basic and diluted) for the six months ended June 30, 2013 compared to $43.0 million ($0.67 per share basic and diluted) for the six months ended June 30, 2012.
- Shareholder free cash flow was $2.9 million ($0.05 per share basic and diluted) for the second quarter of 2013 compared to $10.4 million ($0.17 per share basic and diluted) for the comparable period in 2012. Shareholder free cash flow was $13.2 million ($0.22 per share basic and diluted) for the six months ended June 30, 2013 compared to $41.8 million ($0.65 per share basic and diluted) for the first half of 2012. The amounts for the second quarter and first half of 2013 are lower than the preliminary numbers published on July 16, 2013 due to the reclassification of $548,000 from current tax recovery to deferred income tax reduction.
- A net loss of $15.1 million (including non-cash amortization expense of $22.3 million) was incurred in the second quarter of 2013, bringing the net loss for the six months ended June 30, 2013 to $12.5 million (including non-cash amortization expense of $42.3 million), following positive earnings in the first quarter of 2013. Net earnings for the second quarter of 2012 were $1.9 million (including non-cash amortization expense of $6.8 million) and for the six months ended June 30, 2012 were $13.9 million (including non-cash amortization expense of $23.8 million). Pulse's high level of participation survey activity accounted for the higher non-cash amortization in the current period, contributing approximately $29.0 million in amortization expense in the first half of the year.
- The 2012/13 winter 3D participation survey program was completed on-time and on-budget during the second quarter. The three surveys totalled 1,182 square kilometres, with total gross capital expenditures amounting to $57.9 million. The 540-square-kilometre McKinley 3D survey had been completed and delivered in the first quarter. At the end of the first quarter, two of the three surveys, the Fox Creek and Pembina 3D surveys, totalling 642 square kilometres, were in the final stages of processing. Processing was completed in the second quarter, the data was delivered to the client and the costs were moved from participation surveys in progress to the seismic data library.
- In the second quarter Pulse purchased and cancelled, through its normal course issuer bid, 549,500 common shares, bringing the total shares purchased in the first six months of 2013 to 1,418,672 for a total cost of approximately $4.4 million, or $3.13 per share including commissions. The number of shares outstanding has been reduced to approximately 60.4 million as of June 30, 2013.
- Also in the second quarter, Pulse made a $5.0 million payment against its revolving syndicated credit facility. At June 30, 2013 long-term debt(c) was $20.8 million with $28.9 million remaining available for future draws.
- Pulse paid two dividends of $0.02 per share each, in the second quarter, totalling $2.4 million. The first, paid in April, had been declared in the first quarter and the second was both declared and paid in the second quarter of 2013.
"In the first half of 2013 Pulse converted $0.72 of each dollar of seismic data library sales revenue into shareholder free cash flow," stated Neal Coleman, Pulse's president and CEO. "The low fixed costs associated with being a 30-person, pure-play seismic data library company factors into our ability to generate continuing cash in periods of lower sales activity."
In addition, said Coleman, "In the first two quarters, we returned over $6.8 million to our shareholders, via dividends of $2.4 million and share repurchases totalling over $4.4 million."
| Selected Financial and Operating Information |
| (thousands of dollars except per share data and number of shares) |
| |
| |
Three months ended
June 30, |
|
Six months ended
June 30, |
Year ended |
| |
2013 |
|
2012 |
|
2013 |
|
2012 |
December 31, |
| (unaudited) |
|
|
|
(unaudited) |
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Data library sales |
$ |
4,486 |
|
$ |
13,486 |
|
$ |
18,350 |
|
$ |
48,093 |
$ |
64,040 |
| |
Participation surveys |
|
361 |
|
|
- |
|
|
13,429 |
|
|
1,793 |
|
22,313 |
| Total revenue |
$ |
4,847 |
|
$ |
13,486 |
|
$ |
31,779 |
|
$ |
49,886 |
$ |
86,353 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization of seismic data library |
$ |
22,287 |
|
$ |
6,782 |
|
$ |
42,314 |
|
$ |
23,782 |
$ |
36,568 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) |
$ |
(15,081 |
) |
$ |
1,872 |
|
$ |
(12,540 |
) |
$ |
13,857 |
$ |
27,446 |
| Net earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic and diluted |
$ |
(0.25 |
) |
$ |
0.03 |
|
$ |
(0.21 |
) |
$ |
0.22 |
$ |
0.44 |
| Funds from operations(b) |
$ |
1,982 |
|
$ |
9,529 |
|
$ |
22,689 |
|
$ |
42,685 |
$ |
74,346 |
| Funds from operations per share(b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic and diluted |
$ |
0.03 |
|
$ |
0.15 |
|
$ |
0.37 |
|
$ |
0.67 |
$ |
1.19 |
| Cash EBITDA(a) |
$ |
2,298 |
|
$ |
10,925 |
|
$ |
13,639 |
|
$ |
42,926 |
$ |
54,692 |
| Cash EBITDA per share(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic and diluted |
$ |
0.04 |
|
$ |
0.17 |
|
$ |
0.22 |
|
$ |
0.67 |
$ |
0.87 |
| Shareholder free cash flow(a) |
$ |
2,849 |
|
$ |
10,397 |
|
$ |
13,220 |
|
$ |
41,758 |
$ |
50,046 |
| Shareholder free cash flow per share(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic and diluted |
$ |
0.05 |
|
$ |
0.17 |
|
$ |
0.22 |
|
$ |
0.65 |
$ |
0.80 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Participation surveys (cost reduction) |
$ |
515 |
|
$ |
(64 |
) |
$ |
21,215 |
|
$ |
3,639 |
$ |
40,261 |
| |
Seismic data purchases and related costs |
|
290 |
|
|
309 |
|
|
588 |
|
|
309 |
|
1,908 |
| |
Property and equipment additions |
|
75 |
|
|
159 |
|
|
149 |
|
|
168 |
|
790 |
| Total capital expenditures |
$ |
880 |
|
$ |
404 |
|
$ |
21,952 |
|
$ |
4,116 |
$ |
42,959 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic and diluted |
60,664,740 |
|
62,820,684 |
|
60,810,594 |
|
63,756,281 |
62,526,761 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares outstanding at period end |
|
|
|
|
|
|
60,377,670 |
|
61,840,271 |
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) |
| |
| |
June 30, |
June 30, |
December 31, |
|
| |
2013 |
2012 |
2012 |
|
| Working capital |
$ |
4,600 |
$ |
18,873 |
$ |
(1,462 |
) |
| Working capital ratio |
|
2.16:1 |
|
2.04:1 |
|
0.96:1 |
|
| Total assets |
$ |
110,784 |
$ |
134,636 |
$ |
162,454 |
|
| Long-term debt(c) |
$ |
20,791 |
$ |
33,135 |
$ |
26,688 |
|
| Trailing twelve-month (TTM) cash EBITDA(d) |
$ |
25,405 |
$ |
57,631 |
$ |
54,692 |
|
| Shareholders' equity |
$ |
78,255 |
$ |
86,581 |
$ |
96,550 |
|
| Long-term debt to equity ratio |
|
0.27:1 |
|
0.38:1 |
|
0.28:1 |
|
| Long-term debt to TTM cash EBITDA ratio |
|
0.82:1 |
|
0.57:1 |
|
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 seism ic 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
Short-term visibility for industry activity and seismic revenue remains very unclear. Although Pulse is discussing potential participation surveys with its customers for the upcoming fall/winter survey season, no survey plans have been finalized as yet. Some of the Company's customers continue to evaluate initial results from certain unconventional plays, such as the Duvernay shale and liquids-rich Montney, before committing to major development programs requiring new seismic. Pulse, accordingly, remains fully prepared for ongoing quarterly variations in activity and data library sales, including additional weak quarters.
Short-term industry signals are mixed. Natural gas prices, following the modest rally in fall 2012 and spring 2013, were well below $3.00 per gigajoule at AECO as of late July. At least one Canadian investment bank has lowered its gas price forecast for 2014. Although U.S. natural gas storage remains slightly below the five-year weekly average for the time of year, and far below last year's record volumes, gas prices in the U.S. have weakened as well. New gas supply from the Marcellus shale continues to soar, driving overall higher shale gas production in the United States, despite the low natural gas-focused drilling rig count of approximately 360.
On the positive side, in late May the Canadian Association of Oilwell Drilling Contractors issued a revised 2013 forecast predicting that there will be 10,649 wells drilled in Canada and a total of 121,126 rig days for the year, up slightly from the organization's initial forecast. While the number of active drilling rigs throughout the first six months of 2013 was lower than in each of the corresponding months in 2012, the CAODC noted that the industry continues to drill mainly complex horizontal wells. Such wells cover more land area than vertical wells, representing potentially greater need for seismic data.
Pulse is continuing with vigorous business development activity for seismic data library sales, especially in the liquids-rich and oil-prone, multi-zone areas of northwest Alberta, and for new participation surveys. Industry corporate level activity such as mergers and acquisitions, joint ventures, assets sales and farm-ins/farm-outs represent an additional potential source of transaction based of seismic data.
Pulse's strong balance sheet, moderate debt, improved working capital and credit facility provide a solid financial base from which to operate with decision-making flexibility. The Company's proven approach to capital allocation - investment in participation surveys and dataset acquisitions that meet key criteria, continued purchase of Pulse shares under the normal course issuer bid, payment of a sustainable dividend, and prudent management of the revolving credit facility - will continue to guide Pulse's business.
As the second quarter demonstrated, Pulse can generate positive cash EBITDA and shareholder free cash flow, and continue to pay its dividend, under moderately low quarterly data sales. As industry capital spending and field activities vary along with business conditions and opportunities, 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 seeking opportunities to grow.
Q2 2013 CONFERENCE CALL
Pulse will host a conference call on Friday, August 2, 2013 at 11:00 am MDT (1:00 pm EDT) to discuss the Company's results for the second quarter. Neal Coleman, President & CEO, will chair the call with Pamela Wicks, VP Finance & CFO, taking part. 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 August 10, 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.
Forward Looking Information
This news release contains information that constitutes "forward looking information" or "forward looking statements" (collectively, "forward looking information") within the meaning of applicable securities legislation. This forward looking information includes, among other things, statements regarding:
- Short term visibility for industry activity and seismic revenue;
- Pulse remains fully prepared for ongoing quarterly variations in activity and data library sales, including additional weak quarters;
- Pulse's capital allocation strategy;
- Pulse can generate positive cash EBITDA and shareholder free cash flow, and continue to pay its dividend, under moderately low quarterly data sales;
- 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 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 license sales;
- the level of pre-funding of participation surveys, and the ability of the Company to make subsequent data library sales from such participation surveys;
- the ability of the Company to complete participation surveys on time and within budget;
- environment, health and safety risks;
- the effect of seasonality and weather conditions on participation surveys;
- federal and provincial government laws and regulation, including taxation, royalty rates, environment and safety;
- competition;
- dependence upon qualified seismic field contractors;
- dependence upon key management, operations and marketing personnel;
- loss of seismic data; and
- protection of Intellectual Property.
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.