TSX Symbol - PSD
CALGARY, Nov. 7 /CNW/ - Douglas Cutts, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or "the Company"), is pleased to report the financial and operating results of Pulse for the three and nine months ended September 30, 2007, which included new records in seismic data library sales and a more than 80 percent increase in free cash flow.
Mr. Cutts is also pleased to announce that Pulse has declared its eighteenth consecutive quarterly dividend. The dividend is $0.05 per common share (a 33% increase from the previous quarter) and will be paid on December 20, 2007 to shareholders of record at the close of business on December 6, 2007. Pulse's closing share price on November 7, 2007 of $2.86 per share results in an effective yield of approximately 7.0%. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend.
A conference call to review the third quarter results has been scheduled for 1:00 pm EST (11:00 am MST) on Thursday November 8, 2007. The conference call dial-in number is (416) 644-3429 (Toronto) and 1-800-588-4490. A live webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2066680.
HIGHLIGHTS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2007
- Third consecutive record quarterly seismic data library sales, as
seismic data library sales increased by 30 percent to $9.1 million
from $7.0 million in the third quarter of 2006.
- New nine-month data library sales record through a 27 percent
increase over highest previous nine-month data library sales,
attaining $30.2 million in revenue compared to $23.7 million for the
same period in 2006.
- Strategic acquisitions of seismic data with the addition of 1,536 net
square kilometres of 3D data and 65 net kilometres of 2D data in two
data purchases during the third quarter.
- Commenced Cutbank River 3D participation survey and delivered the
first 79 net square kilometres in September, with the balance
delivered subsequent to the end of the quarter.
- Increase of 84 percent in free cash flow to $19.6 million for the
current nine-month period from $10.7 million in the nine months ended
September 30, 2006.
- Working capital of $9.0 million (including cash of $11.8 million) at
September 30, 2007 compared to $5.7 million (including cash of
$2.2 million) at December 31, 2006.
- On September 21, 2007 the Board of Directors approved a 33 percent
increase in the annual dividend rate from $0.15 to $0.20 per common
share.
- Repurchased 240,900 common shares through the Normal Course Issuer
Bid at a total cost of $701,000.
Subsequent to the end of the third quarter:
- On October 19, 2007 Pulse shareholders overwhelmingly rejected a
hostile takeover bid.
- On October 29, 2007 Pulse executed a non-binding Letter of Intent to
sell its wholly-owned Terrapoint business unit. The scheduled closing
date is November 16, 2007.
- Pulse completed the $7.5 million Cutbank River 3D seismic
participation survey, adding 169 net square kilometres to the seismic
library in addition to the 79 net square kilometres completed in
September 2007, for a total of 248 net square kilometres.
Financial Highlights
(000s except per share data
and numbers of shares)
Three months ended Nine months ended Year ended
September 30, September 30, Dec. 31,
------------- ------------- --------
2007 2006 2007 2006 2006
---- ---- ---- ---- ----
(unaudited) (unaudited) (audited)
Revenue from
continuing
operations:
Data library
sales $ 9,070 $ 6,976 $ 30,220 $ 23,708 $ 34,214
Participation
surveys $ 1,700 $ - $ 1,700 $ 3,058 $ 3,058
Corporate
& other $ - $ - $ - $ - $ (130)
-----------------------------------------------------------
Total revenue
from
continuing
operations $ 10,770 $ 6,976 $ 31,920 $ 26,766 $ 37,142
Amortization
of seismic
data library $ 7,291 $ 5,024 $ 19,867 $ 16,987 $ 22,574
Net earnings
(loss) from
continuing
ops $ (279) $ (288) $ 894 $ 1,478 $ 3,474
Net earnings
(loss) from
continuing
ops per share:
Basic and
diluted $(0.01)(a) $(0.01)(a) $ 0.02 $ 0.03 $ 0.07
Net earnings
(loss) $ (4,767) $ 446 $ (5,287) $ (4,629) $ (3,290)
Net earnings
(loss) per
share:
Basic and
diluted $(0.09)(a) $ 0.01 $(0.11)(a) $(0.10)(a) $(0.07)(a)
Funds from
continuing
operations(b) $ 7,569 $ 4,975 $ 21,900 $ 17,742 $ 25,851
Funds from
continuing
operations
per share(b):
Basic $ 0.14 $ 0.11 $ 0.44 $ 0.38 $ 0.55
Diluted $ 0.14 $ 0.10 $ 0.44 $ 0.37 $ 0.54
Free cash
flow(b) $ 5,290 $ 4,972 $ 19,621 $ 10,671 $ 19,155
Working
capital $ 9,001 $ 13,437 $ 9,001 $ 13,437 $ 5,681
Total assets $ 134,978 $ 108,954 $ 134,978 $ 108,954 $ 131,910
Capital
expenditures:
Seismic data
purchases $ 11,738 $ 3,850 $ 11,738 $ 3,850 $ 36,850
Participation
surveys $ 2,279 $ 3 $ 2,279 $ 7,071 $ 6,696
Changes to
work in
progress $ 3,991 $ (11) $ 3,991 $ (192) $ (192)
Property &
equipment
additions $ (242) $ (1,374) $ (53) $ 112 $ 128
-----------------------------------------------------------
Total capital
expenditures $ 17,766 $ 2,468 $ 17,955 $ 10,841 $ 43,482
Total long-term
debt (net of
current
maturities and
debt financing
costs) $ 25,514 $ 14,010 $ 25,514 $ 14,010 $ 31,996
Shareholders'
equity $ 81,975 $ 75,479 $ 81,975 $ 75,479 $ 75,357
Weighted
average shares
outstanding:
Basic 52,634,778 46,834,854 49,544,392 46,351,164 47,145,373
Diluted 53,609,240 47,638,555 50,303,149 47,351,039 48,007,006
Shares
outstanding at
period-end 54,589,002 47,634,337 54,589,002 47,634,337 47,919,342
(a) Basic weighted average shares outstanding are used to calculate loss
per share.
(b) These non-GAAP financial measures are defined below.
Seismic Library:
2D in net
kilometres 257,281 243,267 257,281 243,267 257,216
3D in net
square
kilometres 11,438 9,903 11,438 9,903 9,823
FINANCIAL SUMMARY
The Company's continuous disclosure documents provide discussion and analysis of "free cash flow", "funds from operations" and "funds from operations per share". These financial measures do not have standard definitions prescribed by Canadian generally accepted accounting principles (GAAP) 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 free cash flow is cash available for debt servicing, discretionary capital expenditures and the payment of dividends, and is calculated as funds from operations less participation survey additions to the seismic data library. The Company's definition of funds from operations is cash flow from operations as prescribed by GAAP, but excluding the impact of changes in non-cash working capital. Funds from operations per share is defined as funds from operations divided by the weighted average number of shares outstanding for the period.
Overview
Free cash flow for the first nine months of 2007 was $19.6 million, compared to free cash flow of $10.7 million for the first nine months of 2006. This 83.9 percent period-over-period increase in free cash flow is attributable to the increase of 19.3 percent in total seismic revenue and lower participation survey costs incurred in the first nine months of 2007.
At September 30, 2007 Pulse had working capital of $9.0 million (including cash of $11.8 million) compared to working capital of $13.4 million (cash of $15.5 million) at September 30, 2006 and $5.7 million (cash of $2.2 million) at December 31, 2006.
Net earnings from continuing operations for the nine months ended September 30, 2007 totalled $894,000 ($0.02 per share basic and diluted), compared to net earnings from continuing operations of $1.5 million ($0.03 per share basic and diluted) for the same period in 2006. This decrease, in spite of record seismic data library sales, was due to significant unplanned corporate transaction costs during the first nine months of 2007 and increased amortization and interest expense. The net loss from continuing operations for the three months ended September 30, 2007 was $279,000 ($0.01 per share basic and diluted) compared to a net loss of $288,000 ($0.01 per share basic and diluted) for the comparable period of 2006. These results also reflect that the higher seismic data library sales for the period were offset by significant unplanned corporate transaction costs and increased amortization expense and interest expense.
The net loss for the nine months ended September 30, 2007 was $5.3 million ($0.11 per share basic and diluted) compared to a net loss of $4.6 million ($0.10 per share basic and diluted) for the same period in 2006. The net loss for the three months ended September 30, 2007 was $4.8 million ($0.09 per share basic and diluted) compared to net earnings of $446,000 ($0.01 per share basic and diluted) for the same period in 2006. A significant factor contributing to this increase in the loss for both the three-month and nine-month periods ended September 30, 2007 was the write-down of certain Terrapoint assets of $3.3 million after tax in the third quarter of 2007, in addition to the increased expenses in continuing operations discussed in the previous paragraph. When calculating the loss per share for the nine months ended September 30, 2007 and 2006, as well as the quarter ended September 30, 2007, the basic number of shares outstanding was utilized as using diluted shares would have the effect of inappropriately decreasing the net loss per share.
Funds from continuing operations for the first nine months of 2007 totalled $21.9 million ($0.44 per share basic and diluted) compared to $17.7 million ($0.38 per share basic and $0.37 per share diluted) for the first nine months of 2006. Funds from continuing operations per share for the first nine months of 2007 and 2006 are based on the weighted average shares outstanding of 49,544,392 (diluted - 50,303,149) for the first nine months of 2007, compared to 46,351,164 (diluted - 47,351,039) for the comparable period of 2006. Funds from continuing operations for the three months ended September 30, 2007 were $7.6 million ($0.14 per share basic and diluted), compared to $5.0 million ($0.11 per share basic and $0.10 per share diluted) for the third quarter of 2006. The funds from continuing operations per share for the third quarters of 2007 and 2006 are based on the weighted average shares outstanding of 52,634,778 (diluted - 53,609,240) for the third quarter of 2007 compared to 46,834,854 (diluted - 47,638,555) for the comparable period in 2006.
On July 27, 2007 Pulse closed a "bought-deal" private placement financing of 6.44 million common shares at an issue price of $2.70 per common share for total gross proceeds of $17,388,000 (the "offering"). The offering included a private placement of 4.5 million common shares at $2.70 per share, an Underwriter's Option that was fully exercised for 1.1 million common shares at $2.70 per share, and an Overallotment Option granted to the underwriters that was fully exercised for an additional 840,000 common shares at $2.70 per common share. Pulse used the proceeds of the offering to finance a 3D seismic data acquisition of $11.1 million from a joint venture partner and, subsequently, to partially fund a 3D seismic participation survey program consisting of 248 net square kilometres in the Deep Basin area of west-central Alberta.
During the nine months ended September 30, 2007, the Company repurchased 240,900 common shares under its Normal Course Issuer Bid at an average price of $2.91, for a total cost of $701,000.
Pulse paid its seventeenth consecutive quarterly dividend of $0.0375 per common share on September 20, 2007.
Pulse announced on September 21, 2007 that as a result of another record quarter of data library sales and increased free cash flow, the Board of Directors had approved a 33 percent increase in the annual dividend rate, from $0.15 to $0.20 per share.
Revenue
Revenue from continuing operations includes seismic data library sales and participation survey revenues. One 3D participation survey was begun in the first nine months of 2007, compared to one 3D participation survey completed in the comparable period in 2006. The 2007 survey generated $1.7 million of participation survey revenue for the first nine months of 2007 compared to participation survey revenue of $3.1 million from the program in 2006. For the nine months ended September 30, 2007, seismic data library sales increased by 27.5 percent to $30.2 million from $23.7 million for the comparable period in 2006. For the three months ended September 30, 2007, seismic data library sales were $9.1 million compared to $7.0 million for the comparable period in 2006. The increases in seismic data library sales for both the third quarter and first nine months of 2007 were due in part to higher demand for seismic data for exploration from junior oil and natural gas companies, along with the additional sales generated from the Foothills 2D dataset which Pulse purchased in November 2006, and in part to a general price increase for seismic data library licences effective January 1, 2007.
Data Library
Pulse acquires seismic data to grow its data library through two main methods. The Company purchases proprietary rights to complementary seismic data sets when the opportunity arises, and conducts participation surveys. During the third quarter of 2007, Pulse acquired the remaining 50 percent interest in certain 3D data that it already partially owned from an industry partner. The data consists of 1,388 net square kilometres of 3D seismic data and 65 net kilometres of 2D seismic data. In a second, smaller transaction, Pulse purchased the remaining 50 percent interest in another 3D dataset that it partially owned, which consisted of 148 net square kilometres of 3D data. In July 2007 Pulse commenced a 248 net square kilometre 3D participation survey in west-central Alberta, of which a portion was completed and delivered in September 2007. Progress on this survey was hampered by bad weather in August and September, delaying delivery of the remainder of the data to the clients until October. In comparison, during the first nine months of 2006 the Company completed a 237 net square kilometre 3D participation survey in west-central Alberta at a cost of $6.7 million.
Liquidity, Capital Resources and Capital Requirements
At September 30, 2007 the working capital position of Pulse, including the current portion of long-term debt of $8.0 million, was $9.0 million, compared to $5.7 million at December 31, 2006. For the nine months ended September 30, 2007 Pulse generated $21.9 million in funds from continuing operations, had a positive net change in non-cash working capital items relating to continuing operations of $6.5 million, and utilized working capital for long-term debt repayment ($6.0 million), dividends ($5.3 million) and to finance its Terrapoint business unit ($6.4 million). Additionally, the Company raised $16.2 million after transaction costs through a private placement, sold certain investments for $0.7 million, purchased seismic data for $11.8 million, conducted and completed a portion of a participation survey for $2.3 million and had an increase of $4.0 million of participation survey work in progress at September 30, 2007. All of these items resulted in an increase from December 31, 2006 of $9.6 million to the cash balance, which was $11.7 million at September 30, 2007.
With three quarters of record data library sales and a good start to the fourth quarter, Pulse management expects that the Company's funds from operations will be sufficient to finance future operations, service debt, pay dividends and carry out the budgeted capital expenditures through 2007. The ongoing growth in the Company's seismic data library continues to position Pulse to be a leading provider of valuable seismic data to industry participants well into the future. Historical data sales analysis shows that most seismic data retains its value for many years. Utilizing the recent technological advancements in data reprocessing, the Company's clients are able to enhance the quality of older seismic data in the Company's library.
PULSE DATA INC.
Interim Consolidated Balance Sheets
(In thousands of dollars) (unaudited)
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 11,827 $ 2,181
Accounts receivable 12,347 16,191
Prepaid expenses 260 233
Assets held for sale 4,043 3,809
-------------------------------------------------------------------------
28,477 22,414
Seismic data library 94,838 100,688
Participation surveys in progress 3,991 -
Assets held for sale 6,919 6,943
Property and equipment 697 904
Investments - 351
Other 56 610
-------------------------------------------------------------------------
$ 134,978 $ 131,910
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 6,613 $ 4,002
Deferred revenue 3,902 3,781
Current portion of long-term debt 8,004 8,004
Liabilities held for sale 957 946
-----------------------------------------------------------
19,476 16,733
Long-term debt 25,514 31,996
Future income taxes 8,013 7,824
Shareholders' equity:
Share capital 71,961 54,887
Contributed surplus 1,839 1,305
Retained earnings 8,175 19,165
-------------------------------------------------------------------------
81,975 75,357
-------------------------------------------------------------------------
$ 134,978 $ 131,910
-------------------------------------------------------------------------
PULSE DATA INC.
Interim Consolidated Statements of Earnings (loss) and Retained Earnings
(In thousands of dollars, except per share data) (unaudited)
-------------------------------------------------------------------------
Three months Nine months
ended September 30, ended September 30,
----------------------- -----------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
Revenue
Data library sales $ 9,070 $ 6,976 $ 30,220 $ 23,708
Participation survey 1,700 - 1,700 3,058
-------------------------------------------------------------------------
Total revenue 10,770 6,976 31,920 26,766
Expenses:
Amortization of seismic
data library 7,291 5,024 19,867 16,987
Operating 841 899 2,550 2,959
Depreciation and
amortization 5 89 154 269
Loss on assets held for
trading - - 6 -
General and administrative 1,585 1,436 4,394 4,210
Corporate transaction
costs 876 - 1,750 -
Interest:
Long-term debt 687 417 2,111 1,276
Other (147) (188) (312) (428)
-------------------------------------------------------------------------
540 229 1,799 848
-------------------------------------------------------------------------
Earnings (loss) from
continuing operations
before income taxes (368) (701) 1,400 1,493
Income taxes:
Current (recovery) (279) - 398 2,182
Future (reduction) 190 (413) 108 (2,167)
-------------------------------------------------------------------------
(89) (413) 506 15
-------------------------------------------------------------------------
Net earnings (loss) from
continuing operations (279) (288) 894 1,478
Earnings (loss) from
discontinued operations,
net of income taxes (4,488) 734 (6,181) (6,107)
-------------------------------------------------------------------------
Net earnings (loss) $ (4,767) $ 446 $ (5,287) $ (4,629)
Retained earnings,
beginning of period 15,368 20,952 19,165 29,545
Change in accounting policy - - 322 -
Normal course issuer bid (384) - (384) -
Dividends paid (2,042) (1,776) (5,641) (5,294)
-------------------------------------------------------------------------
Retained earnings, end
of period $ 8,175 $ 19,622 $ 8,175 $ 19,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per
share from continuing
operations, basic and
diluted $ (0.01) $ (0.01) $ 0.02 $ 0.03
Earnings (loss) per share,
basic and diluted $ (0.09) $ 0.01 $ (0.11) $ (0.10)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PULSE DATA INC.
Interim Consolidated Statements of Cash Flows
(In thousands of dollars) (unaudited)
-------------------------------------------------------------------------
Three months Nine months
ended September 30, ended September 30,
----------------------- -----------------------
2007 2006 2007 2006
-------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Net earnings (loss) $ (279) $ (288) $ 894 $ 1,478
Items not involving cash:
Amortization of seismic
data library 7,291 5,024 19,867 16,987
Depreciation and
amortization 5 89 154 269
Future income taxes
(reduction) 190 (413) 108 (2,167)
Unrealized loss (gain)
on foreign exchange - 3 - (71)
Stock-based
compensation 325 545 759 1,195
Loss on assets held
for trading - - 6 -
Other 37 15 112 51
-------------------------------------------------------------------------
7,569 4,975 21,900 17,742
Net change in non-cash
working capital items
related to continuing
operations 8,105 (671) 11,413 7,555
-------------------------------------------------------------------------
Cash flow from continuing
operations 15,674 4,304 33,313 25,297
Discontinued operations:
Net change in cash from
discontinued operations (405) (128) (2,264) 1,095
Additions to property
and equipment (1,571) (206) (4,097) (1,843)
-------------------------------------------------------------------------
(1,976) (334) (6,361) (748)
Financing:
Repayment of long-term
debt (2,001) (3,757) (6,003) (6,857)
Proceeds from sale of
subsidiary - 1,714 - 1,714
Issue of share capital 16,131 487 16,171 1,571
Increase in deferred
charges (22) - (19) -
Dividends paid - net (1,970) (1,572) (5,347) (5,090)
-------------------------------------------------------------------------
12,138 (3,128) 4,802 (8,662)
Investing:
Additions to seismic
data library through
participation surveys (2,279) (3) (2,279) (7,071)
Seismic data purchases (11,738) (3,850) (11,738) (3,850)
(Increase) decrease in
participation surveys
in progress (3,991) 11 (3,991) 192
(Additions) disposal of
property and equipment 242 (32) 53 (112)
Sale of investments - 81 729 81
Net change in non-cash
working capital items
related to investing (4,882) (179) (4,882) (1,035)
-------------------------------------------------------------------------
(22,648) (3,972) (22,108) (11,795)
-------------------------------------------------------------------------
Increase (decrease) in
cash position 3,188 (3,130) 9,646 4,092
Cash and cash equivalents,
beginning of period 8,639 18,659 2,181 11,437
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 11,827 $ 15,529 $ 11,827 $ 15,529
-------------------------------------------------------------------------
OUTLOOK
The record quarterly seismic data library sales set in the first, second and third quarters of 2007 - which combined for a record nine-month period - are attributable to the ongoing growth in Pulse's seismic data library and to the successful efforts of the Company's strong sales and marketing team. Pulse's business model is based on continuous growth of the seismic data library and effective sales and marketing, and the quarterly results in 2007 indicate that the business model is working.
The third quarter for Pulse is historically one of the weaker revenue-generating periods of the year. However, the third-quarter record in data library sales, attained during an oil and natural gas industry slowdown, strengthens our confidence in the value of Pulse's seismic data library. Of note, total seismic revenue has been virtually constant for each of the last four fiscal quarters, in contrast to substantial quarterly fluctuations in previous years. Free cash flow has been increasing substantially, enabling the recent increase to the quarterly dividend. Going into the fourth quarter the Company's working capital position was also strong, with an increase of $9.6 million in cash on hand since the end of 2006.
For the remainder of this year, uncertainty within the oil and natural gas industry concerning natural gas prices, the decision by the Alberta government to increase oil and natural gas royalties effective in 2009, and further reductions to the projected pace of field activity over the coming year all create cause for caution. These conditions appear to be translating into some decision-making hesitancy by oil and natural gas companies regarding exploration-related activities and the level of capital expenditures, including seismic purchases. Pulse is taking a cautious outlook with respect to the fourth quarter of 2007 and beyond into 2008.
Despite this, Pulse has had a good start to the fourth quarter of 2007, with seismic data library sales being on budget and the completion and delivery of the balance of the participation survey as discussed above. So far we are on-track to achieve our internal sales revenue budget for the fourth quarter. The current level of activity reinforces our confidence in the Pulse business model.
Further to the notes in the Company's Directors' Circular of October 10, 2007, Pulse's management has had numerous discussions with a potential strategic buyer that had expressed an interest in a possible acquisition of Pulse. As a result of a significant disagreement on the value and the future capital structure of Pulse, both parties have ceased discussions.
By building on the solid momentum of seismic data sales generated in the first nine months of 2007, Pulse continues to foresee reasonable levels of licensing activity, revenue, operating margin and free cash flow in the months ahead. We will maintain our overall philosophy of acquiring quality seismic data in whichever way is most efficient and expedient, whether through acquisition of additional existing data sets or through further participation surveys. Pulse is encouraged by the recent progress towards the disposition of the Terrapoint business unit, which Pulse is now targeting to complete by the middle of November, 2007.
CORPORATE PROFILE
Pulse is a Calgary-based company specializing in seismic data acquisition, licensing and marketing. Pulse's seismic library at the end of the third quarter consists of approximately 11,400 net square kilometres of 3D seismic data and 257,300 net kilometres of 2D seismic data.
Pulse trades on the Toronto Stock Exchange under the symbol PSD.
Certain information contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Investors are encouraged to review the "Risk Factors" section of the Management's Discussion and Analysis in the Company's most recent annual and interim reports for a discussion of risks that could affect the Company's operations and financial results. Forward-looking statements are based upon management's assumptions, expectations and estimates at the time that such statements are made. Pulse does not update forward-looking statements should circumstances change or management's assumptions, expectations or estimates change, except as required by law.