Pulse Seismic Inc. reports Q1 2016 results

TSX: PSD
OTCQX: PLSDF

CALGARY, April 28, 2016 /CNW/ - Pulse Seismic Inc. ("Pulse" or "the Company") reports its financial and operating results for the three months ended March 31, 2016. The unaudited condensed consolidated interim financial statements and management's discussion and analysis will be filed on SEDAR (www.sedar.com) and will be available on Pulse's website (www.pulseseismic.com).

"The increase in quarterly seismic data library sales over the first quarter of 2015 is positive and it is encouraging that 100 percent of first-quarter sales were classified as 'traditional' sales, despite low commodity prices and field activity," stated Neal Coleman, Pulse's President and CEO. "Our outlook for 2016 remains cautious and we will remain conservative in our cost control and spending. Following on our successful addition to the data library in January, we continue to seek further opportunities for counter-cyclical acquisitions."

HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2016

Financial highlights for the three-month period are:

  • Seismic data library sales for the first quarter of 2016 increased to $1.8 million from $1.3 million for the comparable period in 2015;

  • Total seismic revenue was $1.8 million compared to $4.5 million for the three months ended March 31, 2015. There was one participation survey completed during the first quarter of 2015 which generated $3.2 million of participation survey revenue;

  • The net loss was $3.5 million ($0.06 loss per share basic and diluted) compared to a net loss of $3.3 million ($0.06 loss per share basic and diluted) for the same period in 2015;

  • Cash provided by operating activities was $3.5 million ($0.06 per share basic and diluted) versus $5.9 million ($0.10 per share basic and diluted) for the comparable period of 2015;

  • Cash EBITDA(a) was $266,000 ($0.00 per share basic and diluted) compared to negative $240,000 ($0.00 per share basic and diluted) for the comparable period of 2015;

  • Shareholder free cash flow(a) was $225,000 ($0.00 per share basic and diluted) compared to negative $347,000 ($0.01 negative per share basic and diluted) for the comparable period in 2015;

  • In the three-month period ended March 31, 2016 Pulse purchased and cancelled, through its normal course issuer bid, a total of 54,000 common shares at a total cost of approximately $123,000 (at an average cost of $2.27 per common share including commissions); and

  • At March 31, 2016 Pulse was debt-free and had cash of $1.0 million. The $30.0 million revolving credit facility is undrawn and fully available to the Company.

Operational and Corporate Update

  • On January 26, 2016 the Company added approximately 107,000 net kilometres of 2D seismic data and 58 net square kilometres of 3D seismic data, increasing Pulse's 2D seismic data library by 31.5 percent from approximately 340,000 net kilometres to approximately 447,000 net kilometres.

  • Brent Gale, a director of the Company, will be retiring from the Pulse Board of Directors as of the annual general meeting (AGM) on May 18, 2016. Mr. Gale was a co-founder of Pulse in 1983. He retired from the position of Senior Vice President and Chief Operating Officer in 2013 and was elected to the Board at the May 2013 AGM. We wish to thank Mr. Gale for his dedication and many contributions to the Company and wish him well in the future.

SELECTED FINANCIAL AND OPERATING INFORMATION



Three months ended March
31,

Year ended

(thousands of dollars except per share data,

2016

2015

December 31,

number of shares and kilometres of seismic data)

(unaudited)

2015

Revenue





Data library sales

1,771

1,316

21,214


Participation surveys

-

3,220

3,220

Total revenue

1,771

4,536

24,434





Amortization of seismic data library

4,909

7,292

22,836

Impairment loss

-

-

937

Net earnings (loss)

(3,494)

(3,347)

(5,308)


Per share basic and diluted

(0.06)

(0.06)

(0.09)

Cash provided by operating activities

3,506

5,925

17,094


Per share basic and diluted

0.06

0.10

0.30

Cash EBITDA (a)

266

(240)

15,121


Per share basic and diluted (a)

0.00

0.00

0.27

Shareholder free cash flow (a)

225

(347)

14,745


Per share basic and diluted (a)

0.00

(0.01)

0.26

Capital expenditures





Participation surveys

-

3,968

3,959


Seismic data purchases, digitization and related costs

2,150

183

933


Property and equipment additions

6

6

14

Total capital expenditures

2,156

4,157

4,906

Weighted average shares outstanding





Basic and diluted

56,043,039

56,990,683

56,628,524

Shares outstanding at period-end

56,208,332

56,882,889

55,592,689

Seismic library





2D in kilometres

447,000

339,991

339,991


3D in square kilometres

28,613

28,409

28,555


FINANCIAL POSITION AND RATIOS


March 31,

March 31,

December 31,

(thousands of dollars except ratios)

2016

2015

2015

Working capital

2,944

1,862

4,996

Working capital ratio

3.62:1

1.38:1

4.44:1

Total assets

50,945

70,786

54,618

Long-term debt

-

5,397

-

TTM cash EBITDA(b)

15,627

24,612

15,121

Shareholders' equity

43,341

52,796

45,389

Long-term debt to TTM cash EBITDA ratio

0.00:1

0.22:1

0.00:1

Long-term debt to equity ratio

0.00:1

0.10:1

0.00:1


(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, repayment of debt, purchase of its shares,  discretionary capital expenditures and the payment of dividends (if applicable), 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 (if applicable) 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) 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

Pulse's short-term outlook remains more cautious than one year ago. Although the Company's first-quarter 2016 seismic data library sales were higher than in the first quarter of 2015, consisting 100 percent of traditional sales, it is still possible that traditional sales for the year will be lower than in 2015.

So far in 2016, oil and natural gas prices remain considerably weaker than one year ago and mineral lease auctions or "land sales" in Alberta and B.C. are extremely low. According to the Canadian Association of Oilwell Drilling Contractors (CAODC), the number of active oil and gas drilling rigs in western Canada in the first three months of 2016 averaged approximately half the level of the same period in 2015, while utilization rates in the first half of April were under 10 percent of the total rig fleet. The CAODC is forecasting that 4,728 wells will be drilled in western Canada in 2016, compared to 5,394 wells in 2015. The Petroleum Services Association of Canada's updated 2016 drilling forecast is for 4,900 wells in 2016 compared to 5,300 wells in 2015 and 11,500 wells in 2014. All of this is suggestive of low traditional seismic data sales.

Pulse continues, however, to see improved prospects for merger and acquisition activity in 2016. With commodity prices remaining low and first- and second-quarter cash flows among E&P companies widely expected to decline or even become negative, causing debt ratios to increase sharply, banks are expected to strongly encourage their borrowers to narrow bid-ask spreads and close transactions.

Following a year of surprisingly low M&A spending and weak deal-flow, dozens of asset packages representing millions of acres of mineral rights and hundreds of thousands of barrels of production are being marketed in 2016, and a number of deals were announced in the first three months of the year. Greater M&A activity would create favourable conditions for additional transaction-based seismic data sales.

The unpredictability of transaction-based sales, however, means that Pulse will continue to lack visibility as to its 2016 revenues. Corporate transactions are a necessary but not sufficient condition to generate seismic data relicensing fees; generating transaction-based sales depends on the nature of the underlying corporate transaction and on the purchaser's plans for the assets in question.

Pulse's critical strengths continue to be its very low costs and strong balance sheet, including zero long-term debt and zero current short-term borrowing. The Company's ability to generate cash EBITDA and shareholder free cash flow in the first quarter, with sales of only $1.8 million, demonstrates how low the Company's costs have become.

With its annual cash costs having been reduced to approximately $6.0 million, immaterial financing costs and no dividend, Pulse can continue to generate cash EBITDA and shareholder free cash flow at low revenue while buying back additional shares and maintaining the financial flexibility to grow its seismic data library. Pulse's revised $30.0 million credit facility is undrawn as of this date and includes an accordion feature for expansion to $70.0 million.

Pulse's long-term goal continues to be growing into Western Canada's largest licensable data library. The Company's history demonstrates that its revenues could accelerate at any time, and could increase significantly with virtually no increase in operating costs, making Pulse a high-margin business under even modestly positive industry conditions.

CONFERENCE CALL

The Company's next conference call will be held after the release of its year-end 2016 results, in March 2017. Should investors or analysts wish to contact the Company, please feel free to contact Neal Coleman or Pamela Wicks at the e-mail address or telephone number provided below.

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 28,600 square kilometres of 3D seismic and 447,000 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.

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 which includes, among other things, statements regarding:

  • Pulse's short term outlook remains more cautious than one year ago;
  • It is possible that traditional sales for the year will be lower than in 2015;
  • Pulse continues to see improved prospects for merger and acquisition activity in 2016;
  • Pulse's capital allocation strategy;
  • Pulse's dividend policy;
  • Oil and natural gas prices;
  • Oil and natural gas drilling activity and land sales activity;
  • Oil and natural gas company capital budgets;
  • Future demand for seismic data;
  • Future seismic data sales;
  • Future demand for participation surveys;
  • 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 on 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. Pulse does not publish specific financial goals or otherwise provide guidance, due to the inherently poor visibility of seismic revenue.

The material risk factors include, without limitation:

  • Oil and natural gas prices;
  • Seismic industry cycles and seasonality;
  • The demand for seismic data and participation surveys;
  • The pricing of data library licensing sales;
  • Relicensing (change-of-control) fees, partner copy sales and asset disposition-related sales;
  • The level of pre-funding of participation surveys, and the Company's ability to make subsequent data library sales from such participation surveys;
  • The Company's ability to complete participation surveys on time and within budget;
  • Environmental, health and safety risks;
  • The effect of seasonality and weather conditions on participation surveys;
  • Federal and provincial government laws and regulations, including those pertaining to taxation, royalty rates, environmental protection and safety;
  • Competition;
  • Dependence on qualified seismic field contractors;
  • Dependence on key management, operations and marketing personnel;
  • The loss of seismic data;
  • Cybersecurity threats;
  • Protection of intellectual property rights; and
  • The introduction of new products.

The foregoing list is not exhaustive. Additional information on these risks and other factors which could affect the Company's operations and financial results is included under "Risk Factors" for the most recently completed financial year and interim periods. Forward-looking information is based on the assumptions, expectations, estimates and opinions of the Company's management at the time the information is presented.

SOURCE Pulse Seismic Inc.

For further information: Neal Coleman, President and CEO, Or; Pamela Wicks, VP Finance and CFO, Tel.: 403-237-5559, Toll-free: 1-877-460-5559, E-mail: info@pulseseismic.com. Please visit our website at www.pulseseismic.com.

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http://www.pulseseismic.com

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