Pulse Seismic Inc. · TSX:PSD
Pulse Seismic — Q2 2013 Earnings Presentation
25 slides from Pulse Seismic's earnings presentation, August 2013
Slide 1: Hitting Targets Q2 2013 Corporate Presentation
HITTING TARGETS Q2 2013 CORPORATE PRESENTATION PULSESEISMIC.COM I TSX:PSD OTCQX:PLSDF
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS FORWARD LOOKING INFORMATION This presentation 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 inf
Slide 3: Oil & Gas – The Hidden Treasure
OIL & GAS – THE HIDDEN TREASURE • Exploring for oil and gas is like looking for the “X” on a treasure map. • The key is seismic data the modern day equivalent of a treasure map. 3
Slide 4: Pulse Owns the Treasure Maps
PULSE OWNS THE TREASURE MAPS 4
Slide 5: Pulse – A Cash Flow Story
PULSE – A CASH FLOW STORY • We are a pure play seismic data library company with historic operating cash margins of 75%-85% on data sales • Shareholder free cash flow and Cash EBITDA are our key metrics • Cash EBITDA is our proxy for EBITDA: we deduct participation survey revenue • Shareholder free
Slide 6: 2013 Q1 Financial Highlights
2013 Q1 FINANCIAL HIGHLIGHTS Year Ended 3 Months Ended June 30 6 Months Ended June 30 Dec. 31 ($mm except per share) 2013 2012 2013 2012* 2012 Seismic data library sales 4.5 13.5 18.4 48.1 64.0 Total seismic revenue (including participation 4.8 13.5 31.8 49.9 86.4 survey revenue) Cash EBITDA 2.3 10.
Slide 7: The Value of Seismic – 3D Seismic
A CLOSER LOOK AT OUR BUSINESS: THE VALUE OF SEISMIC – 3D SEISMIC • Pulse owns 28,300 square kilometres (10,925 square miles) of high-quality 3D seismic • 3D seismic generated 70% of Pulse’s total data library sales in the first half of 2013 (full year 2012 – 87%) • 3D seismic is newer and more expen
Slide 8: 2D Seismic Data Retains Its Value
A CLOSER LOOK AT OUR BUSINESS: 2D SEISMIC DATA RETAINS ITS VALUE 2D Revenue 2D Data Library Generated by By Date of Seismic Vintage Recording (2008-2012) 1960s: 8% 1970s: 25% 1960s: $1.0 mm 1970s: $7 mm 1980s: 47% 1990s: 17% 1980s: $20 mm 1990s: $18 mm 2000s: 3% 2000s: $11 mm Total of $57 mm in 2D d
Slide 9: Pulse vs. Canadian Competitors
A CLOSER LOOK AT OUR BUSINESS: PULSE VS. CANADIAN COMPETITORS Estimated Canadian 2D Market Estimated Canadian 3D Market (km) (km2) Olympic: 650,000 Olympic: 36,000 Pulse: 28,300 Pulse: 340,000 CGG Veritas: 20,100 TGS Arcis: 14,810 Others: 230,000 Others: 7,000 Schlumberger 11,000 9
Slide 10: Drivers of Data Library Sales
DRIVERS OF DATA LIBRARY SALES M&A, JV’s and Licensing of Economically New Pipelines & New Players Asset Sales Existing Data Viable Development Infrastructure 10
Slide 11: How We Grow Our Data Library
HOW WE GROW OUR DATA LIBRARY Pulse’s total seismic coverage: • 3D – 28,300 square km ALBERTA Focus Area of Current • 2D – 340,000 linear km Deep Basin Activity 3D – 7,210 sq. km 2D – 9,440 lin. km BRITISH COLUMBIA There are 2 ways we grow our library: Montney Tight Sands Play Cardium Light Oil Play
Slide 12: Acquiring Divestco's Assets – A Game Changer
ACQUIRING DIVESTCO’S ASSETS – A GAME CHANGER • Doubled the size of Pulse’s 3D data library; closed September ‘10 • 13,500 km sq of 3D seismic and 82,000 km of 2D seismic • Purchase price of $75.5 million including $55.5 million in cash plus 14.3 million Pulse common shares issued. • Minimal increase
Slide 13: Participation Surveys – Our Current Growth Focus
PARTICIPATION SURVEYS – OUR CURRENT GROWTH FOCUS • Pulse partners with oil and gas companies to “shoot” participation surveys • Pulse owns the seismic data and has the right to market the data; participants retain a licensed copy • Focused on adding 3D coverage in Pulse’s core areas • Focused on liq
Slide 14: Participation Surveys – The Duvernay Reservoir
PARTICIPATION SURVEYS – THE DUVERNAY RESERVOIR • Land rush began in 2009 • Reservoir area estimated at 100,000 sq. km • Numerous majors/international companies • Well costs average $13 mm • Seismic is a small portion of the drilling costs • Three 3D surveys totaling over 1,180 sq. km completed Map s
Slide 15: Return on Net Participation Survey Costs
RETURN ON NET PARTICIPATION SURVEY COSTS • Total survey cost $215.5 million • Pulse net survey cost $66.1 million 30 • Data library sales $106.4 million Pulse Net Cost 25 Library Sales • Return of data sales on Pulse net cost is 161% 20 Cdn $mm 15 10 5 0 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’
Slide 16: Return on 2004 Net Survey Cost – Explained
RETURN ON 2004 NET SURVEY COST – EXPLAINED Cumulative Annual Cash Return 30 $27.7 mm • 7 surveys shot; 1,104 sq. km 0.9 ’13 25 3.6 ’12 • Gross CAPEX $24.8 mm 2.3 ’11 • 78% prefunded, survey revenue 20 2.3 ’10 $19.4 mm 0.8 ’09 • Pulse net cost in 2004 = $5.4 mm ($mm) 15 6.6 ’08 • Total library sales
Slide 17: Shareholder Free Cash Flow (SFCF) Calculation
SHAREHOLDER FREE CASH FLOW (SFCF) CALCULATION 6 months ended June 30, Year ended Dec. 31, ($mm except per share) 2013 2012 2012 Data library sales 18.4 48.1 64.0 Participation survey revenue 13.4 1.8 22.3 Less: Salaries, internal commissions & benefits (3.3) (4.6) (7.9) Other SG&A (1.8) (1.6) (3.1)
Slide 18: Seismic Data Library Sales & SFCF Correlation
SEISMIC DATA LIBRARY SALES & SFCF CORRELATION Seismic Data Library Sales SFCF per Share ($mm) ($/diluted weighted shares outstanding) 07 41.2 07 0.59 08 36.9 08 0.49 09 23.4 09 0.28 10 30.3 10 0.35 11 36.2 11 0.36 12 64.0 12 0.80 Q2 YTD 2013 18.4 Q2 YTD 2013 0.22 18
Slide 19: Capital Allocation Strategy
CAPITAL ALLOCATION STRATEGY • Strong balance sheet provided flexibility for our 2012 capital allocation program : • Winter CAPEX program 2012/13 of ~ $58 million - completed three 3D seismic participation surveys totaling 1,180 sq. km • Share buyback totaling $10.5 million (5.0 million common shares
Slide 20: Current Financial Position – Strong Balance Sheet
CURRENT FINANCIAL POSITION – STRONG BALANCE SHEET ($mm) • Cash on Hand (June 30, 2013) 2.6 • Total long-term debt (June 30, 2013) 20.8 • Undrawn portion on long-term debt facility (June 30, 2013) 28.9 • Net debt (June 30, 2013) 18.2 *New $50 million, 3-year extendible, revolving credit facility was
Slide 21: Share Structure
SHARE STRUCTURE • TSX:PSD Listed since 2001 • Shares outstanding (June 30, 2013) 60.4 mm • Insiders 17% • Institutional ~50% • Retail/float ~33% • Share price (June 30, 2013) $4.07 • 52 week trading range $2.07 - $4.07 • Market capitalization (June 30, 2013) $246 mm • Enterprise value (June 30, 2013
Slide 22: Reasons to Invest in Pulse
REASONS TO INVEST IN PULSE • High barriers to entry – replacement value of our seismic data library estimated at over $2 billion • Unique asset; broad coverage in the WCSB with no competing 3D data • Increasing international demand for Canadian natural gas • Increase in joint venture and M&A activit
Slide 23: Reasons to Invest in Pulse
REASONS TO INVEST IN PULSE • We license our seismic data even in a low price commodity cycle • Leveraged to the recovery in natural gas prices • Historic cash margins between 75-85% on our data sales; our business model is scalable • Emphasis on return of capital to shareholders • We pay an annual d
Slide 24: Who We Are
WHO WE ARE 28 Full-time employees Executive Management Team • Neal Coleman, President and Chief Executive Officer • Pamela Wicks, Vice President Finance and C.F.O. • Jeff Bectold, Vice President Operations • Trevor Meier, Vice President Sales & Marketing Directors • Robert Robotti, Chair of Pulse, P
Slide 25: Pulse Seismic Inc.
Pulse Seismic Inc. 2400, 639 – 5th Ave. S.W. Calgary, Alberta T2P 0M9 Toll-free: 1-877-460-5559 Telephone: 1-403-237-5559 Email: info@pulseseismic.com www.pulseseismic.com TSX:PSD OTCQX:PLSDF 25