CALGARY, Nov. 7, 2014 /CNW/ - Pulse Seismic Inc. ("Pulse" or "the Company") reports its financial and operating results for the three and nine months ended September 30, 2014. 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. It will be paid on December 18, 2014 to shareholders of record at the close of business on December 4, 2014.
Pulse's key performance metrics of seismic data library sales, cash EBITDA(a) and shareholder free cash flow(a) each improved significantly in the three and nine-month periods ended September 30, 2014 over the prior year's comparative periods. A $10.3 million data library sale in the third quarter was responsible for the improvement. Such revenue fluctuations are a normal part of the seismic data library business.
"Pulse's low fixed cost business model results in substantial cash margins, which increase in higher revenue quarters," commented Neal Coleman, Pulse's President and CEO. "For the nine months ended September 30, 2014, 78 percent of the $27.4 million of data library sales converted to $21.3 million of shareholder free cash flow, while for the third quarter alone, 86 percent of the $14.5 million in data library sales generated $12.5 million in shareholder free cash flow."
HIGHLIGHTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2014
- Seismic data library sales for the third quarter of 2014 were $14.5 million compared to $4.2 million for the comparable period in 2013. Seismic data library sales for the nine months ended September 30, 2014 were $27.4 million compared to $22.5 million for the comparable period in 2013.
- Total seismic revenue for the nine months ended September 30, 2014 was equal to the $27.4 million in data library sales, as no participation surveys were in progress during the period. By comparison, total seismic revenue for the comparable period in 2013 was $35.9 million and included $13.4 million of participation survey revenue.
- Cash EBITDA was $12.7 million ($0.21 per share basic and diluted) for the third quarter of 2014 compared to $2.5 million ($0.04 per share basic and diluted) for the comparable period in 2013. Cash EBITDA was $22.0 million ($0.37 per share basic and diluted) for the nine months ended September 30, 2014 compared to $16.2 million ($0.27 per share basic and diluted) for the nine months ended September 30, 2013.
- Shareholder free cash flow was $12.5 million ($0.21 per share basic and diluted) for the third quarter of 2014 compared to $3.8 million ($0.06 per share basic and diluted) for the third quarter of 2013. Shareholder free cash flow was $21.3 million ($0.36 per share basic and diluted) for the nine months ended September 30, 2014 compared to $17.0 million ($0.28 per share basic and diluted) for the comparable period in 2013.
- Net earnings of $5.1 million (including non-cash amortization expense of $5.6 million) were realized in the third quarter of 2014, bringing Pulse's net earnings for the nine months ended September 30, 2014 to $2.7 million (including non-cash amortization expense of $17.2 million). By comparison, the net loss for the third quarter of 2013 was $3.7 million (including non-cash amortization expense of $7.1 million) and the net loss for the nine months ended September 30, 2013 was $16.3 million (including non-cash amortization expense of $49.4 million). Pulse's high level of participation survey activity during the 2012/2013 winter season accounted for the high amortization expense in 2013. Pulse recorded approximately $29.0 million of amortization in the first half of 2013 upon completion of these surveys.
- Pulse paid a dividend of $0.02 per share in the third quarter of 2014, totalling $1.2 million.
- As of November 5, 2014 Pulse has purchased and cancelled, through its normal course issuer bid, 1,452,413 common shares in 2014 at a total cost of approximately $4.4 million, at an average cost of $3.02 per share including commissions. The number of shares outstanding has been reduced to approximately 57.9 million.
- Pulse repaid $4.5 million in long-term debt on the revolving credit facility in the third quarter of 2014, bringing total repayments for the year to $10.6 million. As of September 30, 2014 the principal balance is $11.5 million and there is $38.5 million available for future draws.
- As of November 5, 2014 Pulse has a net debt position of $5.0 million.
|Selected Financial and Operating Information|
|(thousands of dollars except per share data, number of shares and seismic data coverage)|
|Three months ended||Nine months ended|
|September 30||September 30||Year ended|
|Data library sales||$||14,531||$||4,164||$||27,358||$||22,514||$||27,079|
|Amortization of seismic data library||$||5,554||$||7,090||$||17,228||$||49,404||$||55,619|
|Net earnings (loss)||$||5,086||$||(3,722)||$||2,654||$||(16,262)||$||(18,834)|
|Per share basic and diluted||$||0.09||$||(0.06)||$||0.04||$||(0.27)||$||(0.31)|
|Cash EBITDA (a)||$||12,724||$||2,544||$||21,954||$||16,183||$||19,145|
|Per share basic and diluted (a)||$||0.21||$||0.04||$||0.37||$||0.27||$||0.32|
|Shareholder free cash flow (a)||$||12,547||$||3,807||$||21,343||$||17,027||$||20,682|
|Per share basic and diluted (a)||$||0.21||$||0.06||$||0.36||$||0.28||$||0.34|
|Funds from operations (b)||$||12,590||$||2,326||$||24,997||$||25,015||$||27,751|
|Per share basic and diluted (b)||$||0.21||$||0.04||$||0.42||$||0.41||$||0.46|
|Seismic data purchases & related costs||183||190||550||778||961|
|Property and equipment additions||-||19||21||168||127|
|Total capital expenditures||$||183||$||326||$||571||$||22,278||$||22,353|
|Weighted average shares outstanding|
|Basic and diluted||59,314,120||60,085,561||59,324,779||60,566,261||60,280,876|
|Shares outstanding at period-end||59,314,120||59,687,520||59,349,120|
|Seismic library data|
||2D in kilometres||339,991||339,991||339,991|
|3D in square kilometres||28,284||28,284||28,284|
|Financial Position and Ratios|
|(thousands of dollars except ratio calculations)|
|September 30,||September 30,||December 31,|
|Working capital ratio||5.19:1||1.95:1||3.71:1|
|Total debt (c)||$||11,500||$||21,100||$||22,100|
|TTM cash EBITDA (d)||$||24,916||$||25,920||$||19,145|
|Total debt to equity ratio||0.18:1||0.30:1||0.34:1|
|Total debt to TTM cash EBITDA ratio||0.46:1||0.81:1||1.15:1|
|(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 3D and 2D 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) Total debt is defined as long-term debt, including current portion, excluding deferred financing costs.|
|(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.|
Pulse's third quarter and nine-month results include the Company's highest quarterly data library sales since the first quarter of 2012, with nine-month data library sales exceeding data library sales for all of 2013.
- Substantiate Pulse's view that large seismic data library sales can happen at any time. The large sale in the third quarter marks the fourth year in the past five in which Pulse has had a significant sale that materially increased revenue in an otherwise weak period;
- Demonstrate the quality and suitability of Pulse's seismic data to service the current focus areas of oil and natural gas drilling activity in western Canada;
- Show once again that the business value or cash-generating ability of Pulse's high-quality seismic data is unrelated to its book value, level of amortization or vintage; and
- Underscore the importance of maintaining a strong balance sheet and low cost structure, so that any substantial sale adds materially not only to revenue but to cash EBITDA and shareholder free cash flow for the period.
The results so far this year further strengthen the Pulse management team's confidence that the Company has the right business model for long-term success.
Given the unpredictability of seismic data library sales, however, Pulse's outlook for the remainder of 2014 and 2015 remains cautious. Traditional leading indicators of future seismic sales remain weak and somewhat uncertain:
- Crude oil prices have weakened considerably in recent weeks;
- The intra-Alberta natural gas spot price has eased, falling into the range of $3.50 per GJ as of late October;
- The previous strengthening of natural gas prices was not sufficient to revive "dry" gas drilling or vertical conventional gas drilling;
- According to the Canadian Association of Oilwell Drilling Contractors, drilling rig utilization in September 2014 was approximately equal to September 2013;
- So far this year, merger and acquisitions-related activity in the oil and gas producing sector has exceeded 2013, a weak year; and
- Although industry optimism regarding development of liquefied natural gas export facilities remains strong, serious risks remain and the time-horizon to first exports will clearly be a number of years.
Given these conditions, Pulse will continue to prudently manage costs and capital allocation and remain focused on generating returns for shareholders.
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;
- Pulse's outlook for the remainder of 2014 and 2015 remains cautious;
- Traditional leading indicators of future seismic sales remain weak and somewhat uncertain;
- 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;
- 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. Pulse does not publish specific financial goals or otherwise provide guidance, due to the inherently unclear visibility of seismic revenue.
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 licensing sales;
- Relicensing (change of control) fees and partner copy 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 on participation surveys;
- Federal and provincial government laws and regulations, including those pertaining to taxation, royalty rates, environmental protection and safety;
- Dependence on qualified seismic field contractors;
- Dependence on key management, operations and marketing personnel;
- The loss of seismic data;
- Protection of intellectual property rights; 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.
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