Pulse Seismic Inc. press release
Pulse Data Inc. reports 20% increase in total seismic revenue for Q3 2008 and declaration of quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, Nov. 6 /CNW/ - Douglas Cutts, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or "the Company") reports the financial and operating results of Pulse for the three and nine months ended September 30, 2008.
Mr. Cutts is also pleased to announce that Pulse has declared its twenty second consecutive quarterly dividend. This dividend is $0.05 per common share and will be paid on December 19, 2008 to shareholders of record at the close of business on December 5, 2008. 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 EDT (11:00 am MDT) on Friday, November 7, 2008. The conference call dial-in number is 1 800-594-3615 and (416) 644-3424 (Toronto). A live webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2443320.
HIGHLIGHTS
Total seismic revenue was $14.0 million for the three-month period ended September 30, 2008, compared to $11.6 million for the same period in 2007, representing a 20 percent increase and second highest quarter recorded for total seismic revenue. Total seismic revenue was $33.1 million for the nine-month period ended September 30, 2008, compared to $32.8 million for the same period in 2007.
Seismic data library sales were $8.1 million for the three months ended September 30, 2008 ($26.8 million for nine months) compared to $9.1 million during the same period in 2007 ($30.2 million for nine months), and participation survey revenue increased to $5.9 million for the three months ended September 30, 2008 from $2.5 million (restated)(c) for the same period in 2007.
Net earnings for the three month period ended September 30, 2008 were $2.2 million ($0.04 per share basic and diluted) compared to a net loss of $4.2 million ($0.08 per share basic and diluted) for the same period in 2007. Net earnings for the nine months ended September 30, 2008 were also $2.2 million ($0.04 per share basic and diluted) compared to a net loss of $4.7 million ($0.09 per share basic and diluted) for the same period in 2007.
Cash EBITDA(b) for the three months ended September 30, 2008 were $6.1 million compared to $7.2 million for the same period in 2007, and Cash EBITDA for the nine months ended September 30, 2008 were $20.8 million compared to $24.1 million for the same period in 2007.
The working capital position was $7.3 million (including cash of $8.9 million) at September 30, 2008 compared to $9.9 million (including cash of $11.8 million) at September 30, 2007.
In Q3 2008 Pulse added 193 net square kilometres of 3D seismic data with the completion of one participation survey in the west central area of Alberta. The second participation survey that commenced in July 2008, consisting of 355 net square kilometres of 3D seismic data, was approximately 73% completed at September 30, 2008 and is scheduled to be delivered in the fourth quarter of 2008.
Financial Highlights
('000's except per share data)
Three months ended Nine months ended Year ended September 30, September 30, December 31, 2008 2007 2008 2007 2007 (restated)(c) (restated)(c) (unaudited) (unaudited) Revenue from continuing operations: Data library sales $ 8,103 $ 9,070 $ 26,827 $ 30,220 $ 41,215 Partici- pation surveys 5,870 2,549 6,307 2,549 3,010 Total revenue from continuing operations $ 13,973 $ 11,619 $ 33,134 $ 32,769 $ 44,225
Amortization of seismic data library $ 8,321 $ 7,291 $ 21,549 $ 19,867 $ 28,345
Net earnings from continuing operations $ 2,189 $ 320 $ 2,520 $ 1,493 $ 2,511 Net earnings from continuing operations per share: Basic and diluted $ 0.04 $ 0.00 $ 0.05 $ 0.03 $ 0.05
Net earnings (loss) $ 2,189 $ (4,168) $ 2,226 $ (4,688) $ (4,982) Net earnings (loss) per share: Basic and diluted $ 0.04 $ (0.08)(a) $ 0.04 $ (0.09)(a) $ (0.10)(a)
Funds from continuing operations(b)$ 11,640 $ 8,418 $ 25,950 $ 22,749 $ 31,208 Funds from continuing operations per share(b): Basic $ 0.22 $ 0.16 $ 0.48 $ 0.46 $ 0.61 Diluted $ 0.21 $ 0.16 $ 0.48 $ 0.45 $ 0.61
Cash EBITDA(b) $ 6,105 $ 7,180 $ 20,845 $ 24,147 $ 33,038 Working capital: Cash $ 8,860 $ 11,827 $ 8,860 $ 11,827 $ 6,528 Non-cash working capital 6,468 6,027 6,468 6,027 13,735 Current portion of long- term debt (8,004) (8,004) (8,004) (8,004) (8,004) Total working capital $ 7,324 $ 9,850 $ 7,324 $ 9,850 $ 12,259
Total assets $ 110,634 $ 134,978 $ 110,634 $ 134,978 $ 124,473 Capital expenditures: Seismic data purchases $ - $ 11,738 $ 2,033 $ 11,738 $ 11,738 Partici- pation surveys 5,075 2,279 5,075 2,279 6,979 Changes to partici- pation surveys in progress 7,438 3,991 8,261 3,991 - Property & equipment additions 45 (242) 544 (53) 422 Total capital expenditures $ 12,558 $ 17,766 $ 15,913 $ 17,955 $ 19,139
Total long- term debt (net of debt financing costs) $ 25,337 $ 33,518 $ 25,337 $ 33,518 $ 31,547 Shareholders' equity $ 71,498 $ 82,574 $ 71,498 $ 82,574 $ 79,174
Weighted average shares outstanding: Basic 53,843,690 52,634,778 54,067,344 49,544,392 50,828,071 Diluted 54,293,635 53,609,240 54,476,972 50,303,149 51,378,310 Shares outstanding at period- end 53,894,946 54,589,002 53,894,946 54,589,002 54,481,601
Operational Highlights:
Seismic library: 2D in net kilometres 257,281 257,281 257,281 257,216 257,281 3D in net square kilometres 11,972 11,438 11,972 11,438 11,607
(a) Basic weighted average shares outstanding are used to calculate loss per share.
(b) These non-GAAP financial measures are defined below.
(c) See Financial Summary below.
FINANCIAL SUMMARY
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 general and administrative expenses. 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 per share is defined as funds from operations divided by the weighted average number of shares outstanding for the period.
On July 1, 2008 the Company changed its participation survey revenue recognition policy 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 participation survey projects.
Management considers that the new policy is preferable because it results in a more transparent treatment of participation survey revenue and is consistent with industry practice, making the Company's financial statements more comparable. This change in accounting policy has been accounted for retrospectively, and the comparative statements for 2007 have been restated. The percentage of completion method is compliant with the current International Financial Reporting Standards for revenue recognition.
The effect of this change in participation survey revenue recognition on the interim financial statements for the three-month and nine-month periods ended September 30, 2008 and 2007 is as follows:
Three months Nine months ended September 30, ended September 30, 2008 2007 2008 2007 Income statement
Increase in participation survey revenue $ 2,456 $ 849 $ 2,893 $ 849 (Increase) in future income tax expense (712) (250) (839) (250) Increase in net earnings $ 1,744 $ 599 $ 2,054 $ 599 Increase in net earnings per share (basic and diluted) $ 0.03 $ 0.01 $ 0.04 $ 0.01
Balance sheet September December 30, 31, 2008 2007 Decrease in deferred revenue $ 1,527 $ - Increase in accounts receivable and accrued revenue $ 1,366 $ - (Increase) in future income tax liability $ (839) $ - Increase in retained earnings, end of period $ 2,054 $ -
Overview
Total seismic revenue for the three months ended September 30, 2008 was $14.0 million, comprised of $8.1 million in data library sales and $5.9 million in participation survey revenue, compared to $11.6 million for the third quarter of 2007, comprised of $9.1 million in data library sales and $2.5 million (restated) in participation survey revenue. These results represent a 20 percent increase in total seismic revenue for the three-month period, and the second highest quarter for total seismic revenue in Pulse's history.
Total seismic revenue for the nine months ended September 30, 2008 was $33.1 million, compared to $32.8 (restated) million for the nine months ended September 30, 2007. Data library sales for the nine months ended September 30, 2008 were $26.8 million, an 11 percent decrease from $30.2 million for the comparable period in 2007. Participation survey revenue for the nine months ended September 30, 2008 was $6.3 million, compared to $2.5 million (restated) for the same period in 2007. The slight increase in total seismic revenue for the nine month period ended September 30, 2008 was due mainly to the increase in participation survey revenue, partially offset by a decrease in data library sales.
Sixty-four percent of seismic data library revenue was generated from the 2D library and 36 percent from the 3D library for the third quarter of 2008, while 51 percent of seismic data library revenue was generated from the 2D library and 49 percent from the 3D library for the first nine months of 2008. Geographically, the sales breakdown of seismic data library in the third quarter of 2008 was 53 percent from data located in Alberta, 42 percent from British Columbia and the remaining 5 percent from Saskatchewan and the Northwest Territories. For the nine months ended September 30, 2008 the Alberta seismic data generated 65 percent of the seismic data library sales, British Columbia generated 27 percent and the remaining 8 percent came from data located in Saskatchewan, Manitoba and the Northwest Territories.
Net earnings from continuing operations for the three months ended September 30, 2008 were $2.2 million ($0.04 per share basic and diluted) compared to $320,000 ($0.00 per share basic and diluted) for the comparable period in 2007. This improvement reflects higher total seismic revenue for the period and a decrease in interest and general and administrative expenses, including corporate transaction costs. This was partially offset by higher seismic data library amortization expense, resulting in an overall increase of $1.9 million in net earnings from continuing operations for the three months ended September 30, 2008 from the comparable period in 2007.
Net earnings from continuing operations for the nine months ended September 30, 2008 were $2.5 million ($0.05 per share basic and diluted), compared to $1.5 million ($0.03 per share basic and diluted) for the same period in 2007. The increase reflects higher participation survey revenue for the period and decreased interest and general and administrative expenses, including corporate transaction costs. This was partially offset by a decrease in data library sales and higher seismic data library amortization expense, resulting in an overall increase of $1.0 million in net earnings from continuing operations for the nine months ended September 30, 2008 from the comparable period in 2007.
Net earnings for the three months ended September 30, 2008 were $2.2 million ($0.04 per share basic and diluted) compared to a net loss of $4.2 million ($0.08 per share basic and diluted) for the same period in 2007. Net earnings for the nine months ended September 30, 2008 were $2.2 million ($0.04 per share basic and diluted) compared to a net loss of $4.7 million ($0.09 per share basic and diluted) for the same period in 2007. Both the three and nine month periods ended September 30, 2007 included losses from discontinued operations. The three month loss from discontinued operations was $4.5 million and the nine month loss from discontinued operations was $6.2 million. When calculating the loss per share for the three and nine months 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 three months ended September 30, 2008 were $11.6 million ($0.22 per share basic and $0.21 per share diluted), compared to $8.4 million ($0.16 per share basic and diluted) for the third quarter of 2007. Funds from continuing operations per share for the third quarter of 2008 are based on the weighted average shares outstanding of 53,843,690 (diluted - 54,293,635), compared to 52,634,778 (diluted - 53,609,240) for the comparable period in 2007.
Funds from continuing operations for the first nine months of 2008 totaled $26.0 million ($0.48 per share basic and diluted), compared to $22.7 million ($0.46 per share basic and $0.45 per share diluted) for the first nine months of 2007. Funds from continuing operations per share for the first nine months of 2008 are based on the weighted average shares outstanding of 54,067,344 (diluted - 54,476,972), compared to 49,544,392 (diluted - 50,303,149) for the comparable period in 2007.
Cash EBITDA for the third quarter of 2008 was $6.1 million compared to cash EBITDA of $7.2 million for the same period in 2007, and cash EBITDA for the first nine months of 2008 was $20.8 million compared to cash EBITDA of $24.1 million for the comparable period in 2007.
Pulse had working capital of $7.3 million (including cash of $8.9 million) at September 30, 2008 compared to working capital of $9.9 million (including cash of $11.8 million) at September 30, 2007 and $12.3 million (including cash of $6.5 million) at December 31, 2007. At each date, working capital included $8.0 million of current portion of long-term debt.
During the nine months ended September 30, 2008 the Company repurchased and cancelled 1,459,200 common shares under its Normal Course Issuer Bid at an average purchase price of $2.72 per share, before brokerage fees, for a total cost of approximately $4.0 million. No shares were repurchased during the third quarter of 2008.
During the third quarter of 2008 the Company added 193 net square kilometres of 3D seismic data with the completion of one participation survey in the west central area of Alberta for a total cost of $5.1 million. This brings the total 3D seismic data acquired for the first nine months of 2008 to 365 net square kilometres.
On September 19, 2008, Pulse paid its twenty-first consecutive quarterly dividend. The dividend rate for the third quarter of 2008 was $0.05 per common share.
Liquidity, Capital Resources and Capital Requirements
At September 30, 2008 the working capital position of Pulse, including the current portion of long-term debt of $8.0 million, was $7.3 million, a decrease of $5.0 million from $12.3 million at December 31, 2007. For the nine months ended September 30, 2008 Pulse generated $26.0 million in funds from continuing operations, had a positive net change of $5.2 million in non-cash working capital items relating to continuing operations and investing, generated $1.4 million from the exercise of stock options and had net cash flow from discontinued operations of $3.7 million. Pulse utilized working capital for long-term debt repayment of $6.0 million and for payment of dividends (net of DRIP receipts) of $7.7 million. Additionally, the Company purchased $2.0 million of seismic data, incurred a total of $13.3 million in participation survey costs, including participation surveys in progress, acquired $544,000 of property and equipment, incurred $302,000 in deferred charges and purchased $4.0 million of its common shares through the Company's Normal Course Issuer Bid. All of these items resulted in an increase in cash from December 31, 2007 of $2.3 million to $8.9 million at September 30, 2008.
Although there is uncertainty surrounding seismic data library sales for the remainder of 2008, Pulse's 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 2008. Since the Company's ability to pay dividends depends upon data library sales and cash EBITDA, the Company will continue to closely monitor data library sales and cash EBITDA in the current economic climate. 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 ongoing technological advancements in data reprocessing, the Company's clients are able to enhance the quality of older data in the library.
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 also conducts participation surveys. During the first nine months of 2008, Pulse completed one 3D participation survey and began a second 3D participation survey program. Pulse also purchased 172 net square kilometres of 3D seismic data through three transactions, the largest of which was a 117 net square kilometre survey in southeast Saskatchewan.
The two current 3D participation surveys are located in the west-central area of Alberta. In June 2008 Pulse commenced the first participation survey, consisting of 193 net square kilometres of 3D data, which was completed and delivered in September 2008 at a cost of $5.1 million. In July 2008 Pulse commenced the second participation survey, consisting of 355 net square kilometres of 3D data which was approximately 73% completed at September 30, 2008, with an expected delivery date in Q4 2008. In September 2008 Pulse commenced initial work on a third participation survey, with expected delivery to the customer in the first quarter of 2009.
OUTLOOK
Pulse entered the second half of 2008 positioned as a pure-play seismic data library company providing 2D and 3D seismic to the oil and natural gas industry in western Canada. The benefits of divesting its non-core assets include enabling Pulse's management team and directors to focus their time and effort, as well as the Company's capital, on optimizing and growing the Company's core business. The Company's success in continuing to generate a respectable level of seismic data library sales indicates that Pulse's business model is working.
The worsening of the global credit crisis, severely declining valuations on equity markets worldwide, weakening economic growth and sharp falls in commodity prices, all occurring late in the third quarter and early in the fourth quarter of 2008, have generated significant uncertainty for the energy sector in Western Canada. Several major producers recently announced cutbacks to capital spending. Given depressed trading multiples, energy producers can be expected to encounter poor terms in accessing new equity capital, while their credit conditions may tighten despite low interest rates. Mitigating the recent weakness in crude oil and natural gas prices is the decline in the Canadian dollar relative to the U.S. dollar, which improves U.S. dollar based revenue to oil and natural gas producers in western Canada. Pulse's sales force has observed that in some cases energy producers are delaying making spending commitments for the coming winter and 2009 drilling season.