TSX Symbol - PSD
CALGARY, Aug. 6 /CNW/ - Douglas Cutts, President and Chief Executive Officer of Pulse Seismic Inc. ("Pulse" or "the Company"), reports the financial and operating results of Pulse for the three and six months ended June 30, 2009. The interim consolidated financial statements, accompanying notes and MD&A have been filed on SEDAR. These documents are also available on Pulse's website www.pulseseismic.com.
HIGHLIGHTS
- Seismic data library sales for the three months ended June 30, 2009
were $8.4 million compared to $10.9 million for the same period in
2008.
- Cash EBITDA(a) for the three months ended June 30, 2009 was
$6.7 million ($0.13 per share basic and diluted), compared to
$8.8 million ($0.16 per share basic and diluted) for the three months
ended June 30, 2008.
- Net earnings from continuing operations were $872,000 ($0.02 per
share basic and diluted) for the three months ended June 30, 2009
compared to net earnings from continuing operations of $1.3 million
($0.02 per share basic diluted) for the same period in 2008.
- The working capital position was $15.5 million (including cash of
$14.6 million) at June 30, 2009 compared to $12.8 million (including
cash of $11.3 million) at June 30, 2008 and $14.4 million (including
cash of $13.2 million) at December 31, 2008.
- In the second quarter of 2009 a total of 32,700 common shares were
purchased and cancelled through the normal course issuer bid program
for a total cost of approximately $41,000.
FINANCIAL HIGHLIGHTS
(000s of dollars except per share data)
3 months ended 6 months ended Year ended
June 30 June 30 Dec. 31
---------------------- ----------------------- -----------
2009 2008 2009 2008 2008
---- ---- ---- ---- ----
(re- (re-
(unaudited) stated)(b) (unaudited) stated)(b)
Revenue from
continuing
operations:
Data library
sales $ 8,379 $ 10,895 $ 10,531 $ 18,724 $ 36,894
Participation
surveys - 437 4,872 437 8,509
-----------------------------------------------------------
Total revenue
from
continuing
operations $ 8,379 $ 11,332 $ 15,403 $ 19,161 $ 45,403
Amortization
of seismic
data library $ 4,899 $ 6,582 $ 13,755 $ 13,228 $ 32,438
Net earnings
(loss) from
continuing
ops $ 872 $ 1,340 $ (2,053) $ 331 $ 880
Net earnings
(loss) from
continuing
ops per
share:
Basic and
diluted $ 0.02 $ 0.02 $ (0.04) $ 0.01 $ 0.02
Net earnings
(loss) $ 872 $ 1,478 $ (2,053) $ 37 $ 586
Net earnings
(loss) per
share:
Basic and
diluted $ 0.02 $ 0.03 $ (0.04) $ 0.00 $ 0.01
Funds from
continuing
opera-
tions(a) $ 6,324 $ 8,854 $ 11,500 $ 14,312 $ 35,188
Funds from
continuing
operations
per share(a):
Basic and
diluted $ 0.12 $ 0.16 $ 0.22 $ 0.26 $ 0.65
Cash
EBITDA(a) $ 6,731 $ 8,847 $ 7,394 $ 14,742 $ 28,196
Working
capital:
Cash $ 14,576 $ 11,287 $ 14,576 $ 11,287 $ 13,244
Non-cash
working
capital 7,919 9,475 7,919 9,475 7,918
Current
portion of
long term
debt (6,998) (8,004) (6,998) (8,004) (6,798)
-----------------------------------------------------------
Total working
capital $ 15,497 $ 12,758 $ 15,497 $ 12,758 $ 14,364
Total assets $ 101,261 $ 109,178 $ 101,261 $ 109,178 $ 112,383
Capital
expenditures:
Seismic data
purchases $ - $ 2,033 $ - $ 2,033 $ 4,557
Participation
surveys 9 - 8,909 - 16,433
Changes to
work in
progress 12 823 (1,629) 823 1,681
Property &
equipment
additions 3 149 25 499 556
-----------------------------------------------------------
Total capital
expenditures $ 24 $ 3,005 $ 7,305 $ 3,355 $ 23,227
Total long-
term debt
(net of
current
maturities
and debt
financing
costs) $ 23,734 $ 19,305 $ 23,734 $ 19,305 $ 26,188
Shareholders'
equity $ 63,972 $ 71,686 $ 63,972 $ 71,686 $ 66,288
Weighted
average
shares
outstanding:
Basic 53,146,780 53,966,092 53,325,489 54,185,449 53,985,299
Diluted 53,146,780 54,574,330 53,325,489 54,728,623 54,160,333
Shares
outstanding
at period
end 53,127,783 53,822,950 53,127,783 53,822,950 53,397,583
Seismic
library:
2D in net
kilometres 257,281 257,281 257,281 257,281 257,281
3D in net
square
kilometres 12,805 11,779 12,805 11,779 12,514
(a) The Company's continuous disclosure documents provide discussion and
analysis of "cash EBITDA", "funds from operations" and "funds from
operations per share". These financial measures do not have
standard definitions prescribed by GAAP in Canada 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 before
interest, taxes, depreciation and amortization less participation
survey revenue, plus non-cash and non-recurring G&A 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. The Company's definition of funds
from operations is cash flow from operations as prescribed by
Canadian GAAP but excluding the impact of changes in non-cash working
capital. Funds from operations represent 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.
(b) Comparative figures for 2008 have been restated to reflect the change
in participation survey revenue recognition policy on July 1, 2008
from the completed contract method to the percentage of completion
method. Under the percentage of completion method, participation
survey revenue is recognized proportionately with the degree of
completion of the survey projects.
OPERATIONS UPDATE
Subsequent to the end of the second quarter, the Company commenced initial work on a 108 net square kilometre 3D participation survey located in the Deep Basin area of west-central Alberta. It is anticipated that the survey will be completed by the end of the third quarter or the beginning of the fourth quarter of 2009. It is expected that the new data will be delivered to the participants in two phases; with approximately $1.0 million of participation survey revenue being recognized with the initial delivery in 2009 and approximately $1.5 million of participation survey revenue recognized when the remainder of the new data is delivered in January 2010.
OUTLOOK
Pulse had an encouraging second quarter of 2009 given ongoing industry and economic circumstances, experiencing an improved level of seismic data library sales and cash EBITDA and generating positive earnings. But the Company expects continued low levels of oil and natural gas exploration activity in Western Canada and associated expenditures on seismic throughout 2009. There is an ongoing lack of clarity concerning future commodity prices (particularly natural gas prices), capital market conditions and the effects of Alberta's royalty changes and subsequent incentive programs, all of which cloud the task of forecasting the timing and strength of a recovery in the energy industry's capital expenditures.
Pulse's seismic data sales outlook remains similarly uncertain. The Company closed two large sales during the second quarter and continues to work hard on business development, focusing on major oil and natural gas producers that are maintaining some exploration spending. Sales success cannot be predicted, however, and Pulse is not banking on a turnaround in the near term. The third quarter is historically Pulse's weakest of the year, and July sales were very weak. It is possible that the second half of 2009 will be even weaker than the first.
According to the Canadian Association of Oilwell Drilling Contractors (CAODC), the weekly rig count as of July 21, 2009 had recovered somewhat from extraordinarily low levels in May and early June, but overall fleet utilization remained a very low 18 percent. In early July the CAODC reduced its 2009 drilling forecast, estimating that fleet utilization would average only 26 percent through 2009 (down from 40 percent in 2008), and forecasting that only 8,787 wells would be drilled in western Canada during the year. In 2008, 16,800 wells were drilled in western Canada. The CAODC now foresees little recovery in drilling activity towards year-end, due to continued weakness in natural gas prices. Sales of mineral leases, a leading indicator of field activities including seismic spending, remained extremely weak in Alberta through spring and into summer. On the plus side, certain unconventional natural gas projects were reportedly proceeding, including in the Deep Basin region of west central Alberta where Pulse is active.
Natural gas prices remain key to reviving energy industry activity. Prices were weak throughout the second quarter and into July. Both AECO Canadian dollar and Henry Hub U.S. dollar prices were in the low to mid $3-per-mcf range as of late July. This is well below the level required to stimulate conventional natural gas drilling. In May, North American gas storage volume broke out of the upper end of its five-year weekly range, and the gap widened throughout June and July. Overall storage reached nearly 3 trillion cubic feet as of July 17, according to the U.S. Energy Information Administration, almost 500 billion cubic feet above the five-year average for the comparable week. Notwithstanding speculation that some of the storage volume represented inventory to meet forward sales made to take advantage of higher 2010 contract prices, such massive storage is widely considered bearish for natural gas prices.
Any return to more robust exploration capital expenditures in western Canada will require a combination of higher natural gas prices, improved company cash flows and better access to debt and/or equity capital. The Company is therefore maintaining a highly cautious and conservative financial stance, focused on cash conservation and balance sheet integrity, that it adopted entering 2009. This strategy has included reducing capital expenditures, identifying opportunities for internal cost savings, reducing share repurchases and suspending the payment of cash dividends. The latter move alone will result in cash savings of approximately $10 million in 2009.
Pulse continues to benefit from a number of advantages that position it to
weather this period of uncertainty and weak sales revenue, including:
- Ample working capital and a strong cash position;
- Moderate debt with low interest costs and access to additional credit
if required;
- A low operating and G&A cost structure;
- Meaningful internal cost savings achieved year-to-date, with combined
operating and G&A expenses for the first half of 2009 reduced by
nearly $900,000 from the first half of 2008;
- Low capital commitments throughout 2009; and
- Overall good liquidity.
In summary, the Company is financially sound and is prepared for continued low levels of revenue. If necessary, Pulse could continue to operate this way throughout 2009 and 2010.
CORPORATE PROFILE
Pulse is a market leader in the acquisition, marketing and licensing of 2D and 3D seismic data for the western Canadian energy sector. Pulse owns the second-largest licensable seismic data library in Canada, currently consisting of approximately 257,300 net kilometres of 2D seismic and 12,800 net square kilometres of 3D seismic. The library extensively covers the Western Canada Sedimentary Basin where most of Canada's oil and natural gas exploration and development occurs. The replacement value of Pulse's library is currently estimated at over $1 billion based on current field replacement costs.
Forward Looking Information
This document 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:
- estimated future demand for seismic data;
- estimated future seismic data sales;
- estimated future demand for participation surveys;
- estimated costs, funding, size, commencement dates and delivery dates
of participation surveys;
- planned future participation surveys;
- planned growth of the seismic data library;
- planned future normal course issuer bid purchases;
- Pulse's business 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: "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 include, but are not limited to:
- the demand for seismic data and participation surveys;
- the pricing of data library license sales;
- the level of pre-funding of participation surveys, and the ability of
the Company to make subsequent data library sales from such
participation surveys;
- the ability of the Company to complete participation surveys on time
and within budget;
- the price and demand for oil and natural gas;
- the level of oil and natural gas exploration and development
activities;
- the ability of the Company's customers to raise capital;
- environment, health and safety risks;
- the effect of seasonality and weather conditions on participation
surveys;
- federal and provincial government laws and regulation, including
taxation, royalty rates, environment and safety;
- competition from other seismic data library companies;
- dependence upon qualified seismic field contractors;
- dependence upon key management, operations and marketing personnel;
and
- protection of Intellectual Property.
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.