Pulse Seismic Inc. Reports Q3 2015 Results and Suspension of Quarterly Dividend

TSX: PSD
OTCQX: PLSDF

CALGARY, Nov. 5, 2015 CNW / - Pulse Seismic Inc. ("Pulse" or "the Company") reports its financial and operating results for the three and nine months ended September 30, 2015. The unaudited financial results are in line with the preliminary unaudited financial results announced in the Company's news release on October 13, 2015. 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).

The management and Board of Directors of Pulse believe that intelligent disciplined capital allocation is critical to the long term success of the Company. With the lower period-over-period seismic data library sales associated with challenging market conditions and the strong possibility of an extended downturn, the Company has deemed it financially prudent and in the best interest of its shareholders to suspend the regular quarterly dividend of $0.02 per share.

"We have reduced Pulse's operating costs, have repaid all remaining debt and are continuing to generate shareholder free cash flow," stated Neal Coleman, Pulse's President and CEO. "The proactive decision to suspend the dividend conserves an additional $1.1 million in cash per quarter and will be to the long-term benefit of our shareholders. The further strengthening of our balance sheet will increase Pulse's ability to weather an extended downturn while providing financial flexibility with regard to potential reinvestment opportunities."

HIGHLIGHTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015

Lower period-over-period data library sales decreased Pulse's key performance metrics for 2015 versus 2014.

Highlights for the three-month and nine-month periods are:

  • Seismic data library sales for the third quarter of 2015 decreased to $4.7 million from $14.5 million for the comparable period in 2014. Seismic data library sales for the nine months ended September 30, 2015 were $12.5 million compared to $27.4 million for the comparable period of 2014;

     

  • Total seismic revenue was $15.7 million for the nine months ended September 30, 2015 compared to $27.4 million for the nine months ended September 30, 2014. 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 $1.6 million ($0.03 loss per share basic and diluted) for the third quarter of 2015 compared to net earnings of $5.1 million ($0.09 per share basic and diluted) for the same period in 2014. The net loss for the nine months ended September 30, 2015 was $6.0 million ($0.10 loss per share basic and diluted) compared to net earnings of $2.7 million ($0.04 per share basic and diluted) for the first nine months of 2014;

     

  • Cash provided by operating activities was $7.8 million ($0.14 per share basic and diluted) for the three months ended September 30, 2015 and $6.6 million ($0.11 per share basic and diluted) for the comparable period of 2014. Cash provided by operating activities for the first nine months of 2015 was $14.2 million ($0.25 per share basic and diluted) and $14.9 million ($0.25 per share basic and diluted) for the same period in 2014;

     

  • Cash EBITDA(a) was $3.3 million ($0.06 per share basic and diluted) for the third quarter of 2015 compared to $12.7 million ($0.21 per share basic and diluted) for the comparable period of 2014. Cash EBITDA was $8.1 million ($0.14 per share basic and diluted) for the nine months ended September 30, 2015 compared to $22.0 million ($0.37 per share basic and diluted) for the nine months ended September 30, 2014;

     

  • Shareholder free cash flow(a) was $3.2 million ($0.06 per share basic and diluted) for the third quarter of 2015 compared to $12.5 million ($0.21 per share basic and diluted) for the comparable period in 2014. Shareholder free cash flow was $7.8 million ($0.14 per share basic and diluted) for the nine months ended September 30, 2015 compared to $21.3 million ($0.36 per share basic and diluted) for the nine months ended September 30, 2014;

     

  • In the nine-month period ended September 30, 2015 Pulse purchased and cancelled, through its normal course issuer bid, a total of 865,100 common shares at a total cost of approximately $2.4 million (at an average cost of $2.72 per common share including commissions);
    • At September 30, 2015 Pulse had long-term debt of $1.5 million and cash of $845,000. The long-term debt balance was repaid on October 6 upon the collection of accounts receivable. At November 4, 2015, the Company is debt-free and the $50.0 million revolving credit facility is undrawn and fully available to the Company;

       

    • In 2015, Pulse has paid three quarterly dividends of $0.02 per share totalling $3.4 million;

       

    • The Company added 136 square kilometres of new high-quality 3D seismic data to the library through the completion of a survey in west central Alberta which commenced in January and was completed in March 2015; and
      • On October 16, 2015 the Company acquired, from an oil and gas company, 146 square kilometres of high-quality 3D data located in west central Alberta.

       

      SELECTED FINANCIAL AND OPERATING INFORMATION











      Three months ended September 30,

      Nine months ended September 30,

      Year ended

      (thousands of dollars except per share data,

      2015

      2014

      2015

      2014

      December 31,

      number of shares and kilometres of seismic data)

      (unaudited)

      (unaudited)

      2014

      Revenue







      Data library sales

      4,678

      14,531

      12,455

      27,358

      35,743


      Participation surveys

      -

      -

      3,220

      -

      -

      Total revenue

      4,678

      14,531

      15,675

      27,358

      35,743







      Amortization of seismic data library

      5,262

      5,554

      17,857

      17,228

      22,507

      Net earnings (loss)

      (1,579)

      5,086

      (5,966)

      2,654

      3,478

      Per share basic and diluted

      (0.03)

      0.09

      (0.10)

      0.04

      0.06

      Cash provided by operating activities

      7,832

      6,580

      14,193

      14,865

      27,985


      Per share basic and diluted

      0.14

      0.11

      0.25

      0.25

      0.47

      Cash EBITDA(a)

      3,332

      12,724

      8,078

      21,954

      28,615


      Per share basic and diluted (a)

      0.06

      0.21

      0.14

      0.37

      0.49

      Shareholder free cash flow (a)

      3,249

      12,547

      7,773

      21,343

      27,858


      Per share basic and diluted (a)

      0.06

      0.21

      0.14

      0.36

      0.47

      Capital expenditures






      Participation surveys (cost reduction)

      (9)

      -

      3,959

      -

      36

      Seismic data digitization and related costs

      -

      183

      183

      550

      733

      Property and equipment additions

      -

      -

      14

      21

      64

      Total capital expenditures

      (9)

      183

      4,156

      571

      833

      Weighted average shares outstanding







      Basic and diluted

      56,618,252

      59,314,120

      56,826,409

      59,324,779

      58,957,072

      Shares outstanding at period-end



      56,352,989

      59,314,120

      57,247,843

      Seismic library







      2D in kilometres



      339,991

      339,991

      339,991


      3D in square kilometres



      28,409

      28,284

      28,284







       

       

      FINANCIAL POSITION AND RATIOS







      September 30,

      September 30,

      December 31,

      (thousands of dollars except ratios)


      2015

      2014

      2014

      Working capital



      1,988

      12,396

      5,296

      Working capital ratio



      2.76:1

      5.19:1

      2.79:1

      Total assets



      56,496

      87,655

      75,482

      Long-term debt



      1,456

      11,338

      5,367

      TTM cash EBITDA (b)



      14,739

      24,916

      28,615

      Shareholders' equity



      46,396

      64,782

      58,401

      Long-term debt to TTM cash EBITDA ratio



      0.10:1

      0.46:1

      0.19:1

      Long-term debt to equity ratio



      0.03:1

      0.18:1

      0.09:1

       

       (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, 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) 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

      With repayment of the remaining $1.5 million of its long-term debt on October 6, 2015, Pulse is even better positioned to withstand a potential prolonged downturn. With data library sales in the first half of 2015 having more than covered the year's estimated operating expenses, third quarter sales ensure a modest level of shareholder free cash flow for 2015. A modest level of further sales in the fourth quarter will be accretive to 2015 shareholder free cash flow.

      Concurrently, Pulse has made further cost reductions, enabling it to generate higher shareholder free cash flow at an even lower level of data library sales. With all debt repaid and the suspension of the dividend, shareholder free cash flow can be deployed to buying back shares and accumulating cash reserves for future data library growth opportunities and weathering any potential periods of negative cash flow.

      The outlook for the remainder of 2015 and into 2016 remains weak. The downturn that began with the fall in crude oil prices in the second half of 2014 is continuing. The WTI benchmark crude oil price was only US$46.32 per bbl as of November 4, while the AECO spot gas price was only Cdn$2.55 per mcf.

      According to the Canadian Association of Oilwell Drilling Contractors (CAODC), drilling rig utilization in western Canada was 23 percent in September, approximately half the ratio of a year earlier. The number of rigs actively drilling was the lowest in more than 15 years, lower even than during the 2009 downturn. The CAODC previously reduced its 2015 drilling rig operating day forecast by 49 percent from 2014. The Petroleum Services Association of Canada's (PSAC) November drilling forecast update is for 5,340 oil and natural gas wells to be drilled across Canada this year, a 47 percent decline from PSAC's original 2015 forecast. Additionally, the PSAC forecast for 2016 is even less, with 5,150 wells expected to be drilled.

      In consequence, the outlook for traditional seismic data library sales is weak for the foreseeable future. The Company continues to anticipate future opportunities to generate further transaction-based sales, although their timing and amount are uncertain. Capital scarcity in the oil and natural gas producing sector, along with declining cash flows and increasing corporate debt servicing challenges, all encourage asset sales, bringing in of partners and corporate mergers and acquisitions.

      The pace of such transactions has been lower than expected in 2015 owing to the typically large spreads between bid and asking prices for oil and natural gas assets. With low commodity prices and capital scarcity continuing, Pulse anticipates a narrowing of bid-ask spreads in 2016, which could accelerate the pace of transactions.

      In addition, Pulse continues to believe that the North America-wide combination of continued low commodity prices and very low field activity is not sustainable. As of mid-October fewer than 800 rigs were drilling in the United States, including fewer than 200 rigs focused on natural gas, according to Baker Hughes Inc. These were further declines from summertime levels. This extended trend continues to be suggestive of falling North American oil and natural gas production, followed by a draw-down in inventories and storage levels.

      Although U.S. natural gas in storage during the early fall once again climbed to the upper end of its five-year weekly average, according to the Energy Information Administration, after nearly 18 months at or below the five-year weekly average, the recently observed plateauing in shale gas production at approximately 42 bcf per day is continuing and shale gas production may be starting to decline.

      Pulse perceives continuing uncertainty surrounding development of liquefied natural gas (LNG) export facilities on Canada's West Coast. The timing and strength of a North American rebalancing of field activity and commodity pricing, and the effects on Pulse's business, remain unpredictable. In the meantime, the poor overall conditions will encourage further reductions in costs for oil and natural gas drilling, completion and energy services.

      Throughout what may become an extended period of weaker sales, Pulse will continue to rely on its advantages of a very strong balance sheet, low costs and minimal capital spending commitments.

      CONFERENCE CALL

      The Company's next conference call will be held after the release of its year-end 2015 results. 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 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:

      • The outlook for the remainder of 2015 and into 2016 remains weak;
      • The outlook for traditional seismic data library sales is weak for the foreseeable future;
      • The Company continues to anticipate future opportunities to generate further transaction-based sales, although their timing and amount are uncertain;
      • Pulse anticipates a narrowing of bid-ask spreads for oil and gas transactions in 2016, which could accelerate the pace of transactions;
      • Pulse continues to believe that the North America-wide combination of continued low commodity prices and very low field activity is not sustainable;
      • Pulse perceives continuing uncertainty surrounding development of LNG export facilities on Canada's West Coast;
      • The timing and strength of a North American rebalancing of field activity and commodity pricing, and the effects on Pulse's business, remain unpredictable;
      • 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;
      • Estimated future demand for seismic data;
      • Estimated future seismic data sales;
      • Estimated 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.

      Often, but not always, forward-looking information uses words or phrases such as: "foresees", "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, 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 related to taxation, royalty rates, environmental protection 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.

      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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