CALGARY, ALBERTA--(Marketwired - March 17, 2014) - Pulse Seismic Inc. (TSX:PSD)(OTCQX:PLSDF) ("Pulse" or "the Company") reports the financial and operating results of the Company for the year ended December 31, 2013. The year-end audited financial results were in line with the preliminary unaudited financial results announced in the Company's news release on January 16, 2014. The audited consolidated financial statements, accompanying notes and MD&A are being filed on SEDAR (www.sedar.com) and will be available on Pulse's website at www.pulseseismic.com.
Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on April 11, 2014 to shareholders of record at the close of business on March 28, 2014. Dividends are designated as an eligible dividend for Canadian income tax purposes. For non-resident shareholders, Pulse's dividends are subject to Canadian withholding tax.
HIGHLIGHTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2013
- Seismic data library sales of $27.1 million, a 58 percent decrease from the record $64.0 million achieved in 2012;
- Total seismic revenue (including participation survey revenue) of $40.5 million compared to $86.4 million in 2012;
- Cash EBITDA(a) of $19.1 million, a 65 percent decrease from $54.7 million in 2012, and a 63 percent decrease on a per-share basis from $0.87 to $0.32 per share basic and diluted;
- Shareholder free cash flow(a) of $20.7 million, a 59 percent decrease from $50.0 million in 2012, and a 58 percent decrease on a per-share basis from $0.80 to $0.34 per share basic and diluted;
- Funds from operations(b) of $27.8 million ($0.46 per share basic and diluted) compared to $74.3 million ($1.19 per share basic and diluted) for 2012*;
- Pulse completed three 3D participation surveys totalling 1,182 square kilometres, with total gross capital expenditures amounting to $58.0 million. Some of these survey costs were incurred in 2012 when the surveys were initiated;
- Pulse purchased and cancelled, through its normal course issuer bid, a total of 2,447,222 common shares (4 percent of the total outstanding at December 31, 2012) at a total cost of approximately $8.4 million (at an average cost of $3.42 per common share including commissions);
- Pulse paid four quarterly dividends of $0.02 per common share at a total cost of $4.8 million; and
- At December 31, 2013 Pulse's cash balance was $1.7 million and long-term debt(c) was $21.8 million, resulting in a net debt position of $20.1 million.
HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2013
- Seismic data library sales of $4.6 million, down 62 percent from $11.9 million in the same period of 2012;
- Total seismic revenue consisting of data library sales of $4.6 million compared to $27.8 million, including participation survey revenue of $15.9 million, for the comparable period in 2012;
- Cash EBITDA(a) of $3.0 million or $0.05 per share basic and diluted compared to $9.7 million or $0.16 per share basic and diluted in the fourth quarter of 2012;
- Shareholder free cash flow(a) of $3.7 million or $0.06 per share basic and diluted compared to $7.4 million or $0.12 per share basic and diluted in the fourth quarter of 2012;
- Funds from operations of $2.7 million ($0.05 per share basic and diluted) compared to $25.3 million ($0.41 per share basic and diluted) for the three months ended December 31, 2012*.
* Funds from operations for the comparative three and twelve month periods ended December 31, 2012 reflect a reclassification to conform to the current year's financial statement presentation.
| Selected Financial and Operating Information |
| (thousands of dollars except per share data and number of shares) |
| |
| |
Three months ended December 31, |
Year ended December 31, |
| |
2013 |
2012 |
2013 |
2012 |
| Revenue |
|
|
|
|
| |
Data library sales |
$ 4,565 |
$ 11,885 |
$ 27,079 |
$ 64,040 |
| |
Participation surveys |
- |
15,887 |
13,429 |
22,313 |
| Total revenue |
$ 4,565 |
$ 27,772 |
$ 40,508 |
$ 86,353 |
| |
|
|
|
|
| Amortization of seismic data library |
$ 6,215 |
$ 6,351 |
$ 55,619 |
$ 36,568 |
| |
| Net earnings (loss) |
$ (2,572) |
$ 13,951 |
$ (18,834) |
$ 27,446 |
| |
Per share basic and diluted |
$ (0.04) |
$ 0.23 |
$ (0.31) |
$ 0.44 |
| |
| Cash EBITDA (a) |
$ 2,962 |
$ 9,737 |
$ 19,145 |
$ 54,692 |
| |
Per share basic and diluted (a) |
$ 0.05 |
$ 0.16 |
$ 0.32 |
$ 0.87 |
| |
| Shareholder free cash flow (a) |
$ 3,655 |
$ 7,381 |
$ 20,682 |
$ 50,046 |
| |
Per share basic and diluted (a) |
$ 0.06 |
$ 0.12 |
$ 0.34 |
$ 0.80 |
| |
| Funds from operations (b) |
$ 2,736 |
$ 25,333 |
$ 27,751 |
$ 74,346 |
| |
Per share basic and diluted (b) |
$ 0.05 |
$ 0.41 |
$ 0.46 |
$ 1.19 |
| |
| Capital expenditures: |
|
|
|
|
| |
Participation surveys (cost reduction) |
$ (67) |
$ 27,961 |
$ 21,265 |
$ 40,261 |
| |
Seismic data purchases and related costs |
183 |
1,095 |
961 |
1,908 |
| |
Property and equipment additions (cost reduction) |
(41) |
577 |
127 |
790 |
| Total capital expenditures |
$ 75 |
$ 29,633 |
$ 22,353 |
$ 42,959 |
| |
| Weighted average shares outstanding: |
|
|
|
|
| |
Basic |
59,434,027 |
61,104,706 |
60,280,876 |
62,526,761 |
| |
Diluted |
59,434,027 |
61,109,999 |
60,280,876 |
62,526,761 |
| Shares outstanding at period end |
|
|
59,349,120 |
61,140,442 |
| |
|
|
|
|
| Seismic library: |
|
|
|
|
| 2D in net kilometres |
|
|
339,991 |
339,991 |
| 3D in net square kilometres |
|
|
28,284 |
27,089 |
| |
| Financial Position and Ratios |
| (thousands of dollars except ratio calculations) |
| |
|
|
As at December 31, |
| |
|
|
2013 |
2012 |
| Working capital |
|
|
$ 6,476 |
$ (1,462) |
| Working capital ratio |
|
|
3.71:1 |
0.96:1 |
| Total assets |
|
|
$ 98,017 |
$ 162,454 |
| Long-term debt (c) |
|
|
$ 21,850 |
$ 26,688 |
| TTM cash EBITDA (d) |
|
|
$ 19,145 |
$ 54,692 |
| Shareholders' equity |
|
|
$ 65,962 |
$ 96,550 |
| Long-term debt to equity ratio |
|
|
0.33:1 |
0.28:1 |
| Long-term debt to TTM cash EBITDA ratio |
|
|
1.14:1 |
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 IFRS and, therefore, may not be comparable to similar measures disclosed by other companies. The Company has included these non-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 seismic 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 debt finance cost.
(d) TTM cash EBITDA is defined as the sum of the trailing 12 month's cash EBITDA and is used to provide a comparable annualized measure.
OUTLOOK
Pulse remains financially strong and very well positioned operationally, even though the timing and level of data library sales continue to be unclear. The Company can continue to operate under low revenue levels and still provide returns to shareholders. At the same time, individual data library sales can be very large, and Pulse's annual revenues could increase substantially with no advance indicators. As 2012 demonstrated, Pulse and its shareholders benefit greatly when revenues accelerate, because Pulse can deliver a major increase in revenue with little increase in costs, resulting in an increase in shareholder free cash flow, which provides flexibility and options for capital allocation. Once Pulse is past break-even, profitability has tremendous leverage against revenues.
Overall, Pulse is cautious going into 2014. On a positive note, natural gas pricing is markedly higher than a year ago, having climbed to what could be a sustained level above $4 per GJ, not counting the cold-weather-related price spike in February. In addition, there is better visibility for expansion of takeaway capacity for oil and natural gas out of western Canada. This is offset by the much lower provincial mineral lease auction revenue or land sales in 2013, historically a leading indicator of seismic activity, as well as forecasts for another year of relatively low oil and natural gas well drilling.
Energy services companies generally reported weaker activity in 2013, consistent with Pulse's experience. More recently, some reported a pickup in activity and financial results for the fourth quarter and/or issued considerably stronger outlooks for 2014. Greater drilling and hydraulic fracturing activity for service companies implies higher capital budgets among oil and natural gas producers. While traditional leading indicators are less directly linked to Pulse's seismic data sales than in the past, they are still positive, as are recent reports of asset transactions plus some investment research anticipating a busier year for mergers and acquisitions.
Regarding the longer term, the producing sector and investment community have shown great interest in proposed liquefied natural gas (LNG) export facilities on British Columbia's Pacific Coast. This is a complex story, with many factors remaining uncertain. The gas demand from two or three LNG projects would be enormous, triggering increased upstream activity. A typical, 1.5-billion-cubic-foot-per-day liquefaction facility would take in 12 percent of Canada's current gas production. This is equivalent to the output of the country's largest natural gas producer, or over half the gas currently produced by the entire Montney play. One published research report estimated that providing a dedicated 20-year gas supply for one LNG export facility would require drilling 6,000 Montney wells.
Pulse offers good data coverage over some of the critical LNG supply areas - the Montney and Duvernay in particular - as well as areas likely to experience secondary effects, such as the Alberta Deep Basin. Strong gas demand for LNG could even revive drilling for traditional "dry" gas. Anything that stimulates field activity should be good for Pulse's business. In principle, the same goes for any added takeaway capacity, such as new pipelines or greater oil-by-rail exports. LNG should exert the greatest leverage, however, because the product would go to markets where natural gas has been priced at $12-$18 per GJ for years. Even modest capture of the price differential would be highly beneficial to Canada's gas producers.
So far in 2014, sales have tracked to the Company's modest first quarter budget. Pulse has a record of delivering strong years set amidst weaker years, and its revenues could accelerate at any time. In the meantime, Pulse will practise prudent cost and capital management and remain focused on generating returns for shareholders.
Q4 2013 CONFERENCE CALL
Pulse will hold a conference call and live audio webcast on Tuesday, March 18, 2014 at 11:00 am MT (1:00 pm ET) where Neal Coleman, President & CEO and Pamela Wicks, VP Finance & CFO will discuss the Company's fourth quarter and year-end 2013 results. A question-and-answer period will follow an update on the Company's strategies and outlook.
To participate please dial 416-340-8530 or 1-877-440-9745 approximately 10 minutes before the commencement of the call. To listen to the 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 March 25, 2014. To access the replay, please dial 1 800-408-3053 or 905-694-9451 and enter the pass code 4144913.
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 square kilometres of 3D seismic and 340,000 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:
- Pulse remains financially strong and very well positioned operationally, even though the timing and level of data library sales continue to be unclear;
- The Company can continue to operate under low revenue levels and still provide returns to shareholders;
- Individual data library sales can be very large, and Pulse's annual revenues could increase substantially with no advance indicators;
- Pulse has a record of delivering strong to record years set amidst weaker years, and revenues could accelerate at any time;
- General economic and industry outlook;
- Pulse's capital allocation strategy;
- Pulse's dividend policy;
- 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 natural gas plays;
- Potential future development of liquefied natural gas (LNG) export facilities and the potential associated effects on gas drilling;
- Estimated future demand for seismic data;
- Estimated future seismic data sales;
- Estimated future demand for participation surveys;
- Management's expectations on the sufficiency of Pulse's capital resources;
- 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.
Often, but not always, forward-looking information uses words or phrases such as: "expects", "does not expect" or "is expected", "anticipates" or "does not anticipate", "plans" or "does not plan", "estimates" or "estimated", "projects" or "projected", "forecasts" or "forecasted", "believes" or "does not believe", "intends" or "does not intend", "likely" or "unlikely", "possible", "probable", "scheduled", "positioned", "goal", "objective", "hopes", "optimistic" or states that certain actions, events or results "should", "may", "could", "would", "might" or "will" be taken, occur or be achieved.
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:
- oil and natural gas prices;
- seismic industry cycles and seasonality;
- the demand for seismic data and participation surveys;
- the pricing of data library license sales;
- relicensing (change of control) fees and partner copy 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;
- protection of Intellectual Property; and
- the introduction of new products.
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.