Pulse Seismic Inc. press release
Pulse Data Inc. reports Q2 2007 results and declaration of quarterly dividend
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, Aug. 13 /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 six months ended June 30, 2007.
Mr. Cutts is also pleased to announce that Pulse has declared its seventeenth consecutive quarterly dividend. The dividend is $0.0375 per common share and will be paid on September 20, 2007 to shareholders of record at the close of business on September 6, 2007. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend.
HIGHLIGHTS FOR THE SECOND QUARTER AND FIRST HALF OF 2007
Seismic data library sales increased by 59 percent to a second- quarter record of $10.5 million for the three months ended June 30, 2007, from $6.6 million for the second quarter of 2006. Seismic data library sales also achieved a first-half record, increasing by 26 percent to $21.1 million for the six months ended June 30, 2007 from $16.7 million for the first half of 2006. First-half free cash flow(b) set a record of $14.3 million for the six-month period ended June 30, 2007, compared to $5.7 in the first half of 2006, representing an 151 percent increase period- over-period. Pulse had working capital of $8.0 million (including cash of $8.6 million) at June 30, 2007 compared to $5.7 million at December 31, 2006 and $16.4 million at June 30, 2006. During the second quarter Pulse repurchased 34,200 common shares through the Normal Course Issuer Bid at a total cost of $89,000.
Subsequent to the end of the second quarter:
On July 11, 2007 Pulse commenced a 3D seismic participation survey in the Deep Basin area of west-central Alberta. 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 $17.4 million. On July 31, 2007, Pulse acquired the remaining 50 percent interest in certain seismic data owned jointly with a partner, consisting of 1,388 net square kilometres of 3D seismic data and 65 net kilometres of 2D seismic data, for $11.1 million, bringing Pulse's interest in this data to 100 percent.
Financial Highlights (000s except per share data)
Three months ended Six months ended Year ended June 30, June 30, Dec. 31 2007 2006 2007 2006 2006 (unaudited) (unaudited) (audited) Revenue from continuing operations: Data library sales $ 10,527 $ 6,634 $ 21,150 $ 16,732 $ 34,214 Participation surveys $ - $ 3,058 $ - $ 3,058 $ 3,058 Corporate and other $ - $ - $ - $ - $ (130) Total revenue from continuing operations $ 10,527 $ 9,692 $ 21,150 $ 19,790 $ 37,142 Amortization of seismic data library $ 6,288 $ 7,284 $ 12,576 $ 11,963 $ 22,574 Net earnings from continuing operations $ 336 $ 314 $ 1,173 $ 1,766 $ 3,474 Net earnings from continuing ops per share: Basic and diluted $ 0.01 $ 0.01 $ 0.02 $ 0.04 $ 0.07 Net loss for the period $ (50) $ (5,114) $ (520) $ (5,075) $ (3,290) Net loss per share: Basic and diluted $ 0.00(a) $(0.11)(a) $(0.01)(a) $(0.11)(a) $(0.07)(a) Funds from continuing operations(b) $ 6,481 $ 5,933 $ 14,331 $ 12,767 $ 25,851 Funds from continuing operations per share(b): Basic $ 0.13 $ 0.13 $ 0.30 $ 0.28 $ 0.55 Diluted $ 0.13 $ 0.12 $ 0.29 $ 0.27 $ 0.54 Free cash flow(b) $ 6,481 $ (1,229) $ 14,331 $ 5,699 $ 19,155 Working capital $ 7,999 $ 16,398 $ 7,999 $ 16,398 $ 5,681 Total assets $ 121,996 $ 112,928 $ 121,996 $ 112,928 $ 131,910 Capital expenditures: Seismic data purchases $ - $ - $ - $ - $ 36,850 Participation surveys $ - $ 7162 $ - $ 7,068 $ 6,696 Changes to work in progress $ - $ (1,113) $ - $ (181) $ (192) Property and equipment additions $ 115 $ 1,434 $ 189 $ 1,486 $ 128 Total capital expenditures $ 115 $ 7,483 $ 189 $ 8,373 $ 43,482 Total long-term debt (net of current maturities and debt financing costs) $ 27,478 $ 17,872 $ 27,478 $ 17,872 $ 31,996 Shareholders' equity $ 72,256 $ 75,573 $ 72,256 $ 75,573 $ 75,357 Weighted average shares outstanding: Basic 48,016,084 46,792,140 47,973,196 46,336,770 47,145,373 Diluted 48,857,668 48,078,834 48,603,615 47,531,182 48,007,006 Shares outstanding at period end 48,070,787 47,254,519 48,070,787 47,254,519 47,919,342
(a) Basic weighted average shares outstanding are used to calculate loss per share. (b) These non-GAAP financial measures are defined in the Financial Summary below.
Seismic Library:
2D in net kilometres 257,216 239,822 257,216 239,822 257,216 3D in net square kilometres 9,823 9,679 9,823 9,679 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 generally accepted accounting principles (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 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 data library. 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.
Overview
Free cash flow for the first half of 2007 was $14.3 million, compared to free cash flow of $5.7 million for the first half of 2006. This 151.5 percent period-over-period increase in free cash flow is attributable to the increase of 26.3 percent in data library sales and to the Company not completing any seismic participation surveys in the first half of 2007.
Pulse had working capital of $8.0 million (including cash of $8.6 million) at June 30, 2007 compared to working capital of $16.4 million (cash of $17.6 million) at June 30, 2006 and $5.7 million (cash of $2.2 million) at December 31, 2006.
Net earnings from continuing operations for the six months ended June 30, 2007 was $1.2 million ($0.02 per share basic and diluted), compared to net earnings from continuing operations of $1.8 million ($0.04 per share basic and diluted) for the same period in 2006. This decrease, in spite of record seismic data library sales, was due to increased amortization, general and administrative expense and interest expense. Net earnings from continuing operations for the three months ended June 30, 2007 were $336,000 ($0.01 per share basic and diluted) compared to $314,000 ($0.01 per share basic and diluted) for the comparable period of 2006. This improvement reflects higher data library sales for the period, and lower amortization expense due to the 2006 amortization including $2.5 million related to the participation survey completed in the second quarter of 2006.This was offset by higher general and administrative and interest expenses, resulting in a 7 percent increase to net earnings over the comparable period.
The net loss for the six months ended June 30, 2007 was $520,000 ($0.01 per share basic and diluted) compared to a net loss of $5.1 million ($0.11 per share basic and diluted) for the same period in 2006. The net loss for the three months ended June 30, 2007 was $50,000 ($0.00 per share basic and diluted) compared to a net loss of $5.1 million ($0.11 per share basic and diluted) for the same period in 2006. A significant factor contributing to this reduction in the loss for both the second quarter and the first half of 2007 is due to the writedown of certain Terrapoint assets of $767,000, after tax, in the first quarter for 2006 and $4.86 million, after tax, in the second quarter of 2006. When calculating the loss per share for the six months and quarters ended June 30, 2007 and 2006, the basic number of shares outstanding has been utilized, as using diluted shares would have the effect of inappropriately decreasing the net loss per share.
Funds from continuing operations for the first six months of 2007 totalled $14.3 million ($0.30 per share basic and $0.29 per share diluted), compared to $12.8 million ($0.28 per share basic and $0.27 per share diluted) for the first six months of 2006. Funds from operations per share for 2007 and 2006 are based on the weighted average shares outstanding of 47,973,196 (diluted - 48,603,615) for the first six months of 2007, compared to 46,336,770 (diluted - 47,531,182) for the comparable period of 2006. Funds from continuing operations for the three months ended June 30, 2007 were $6.5 million ($0.13 per share basic and diluted), compared to $5.9 million ($0.13 per share basic and $0.12 per share diluted) for the second quarter of 2006. The funds from operations per share for the second quarters of 2007 and 2006 are based on the weighted average shares outstanding of 48,016,084 (diluted - 48,857,668) for the second quarter of 2007, compared to 46,792,140 (diluted - 48,078,834) for the comparable period of 2006.
During the quarter ended June 30, 2007, the Company repurchased 34,200 common shares under the Normal Course Issuer Bid at an average price of $2.60, for a total cost of $89,000.
Pulse paid its sixteenth consecutive quarterly dividend of $0.0375 per common share on June 20, 2007.
Subsequent to the end of the reporting periods, 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 fund a 3D seismic participation survey program consisting of a minimum 150 net square kilometres in the Deep Basin area of west-central Alberta.
Revenue
Revenue from continuing operations includes data library sales and participation survey revenues. There were no participation surveys completed in the first half of 2007. There was one 3D participation survey completed in the first half of 2006, which generated participation survey revenue of $3.1 million. For the six months ended June 30, 2007, seismic data library sales reached $21.1 million, compared to $16.7 million for the same period in 2006, an increase of 26.3 percent. For the three months ended June 30, 2007, seismic data library sales were $10.5 million, compared to $6.6 million for the same period in 2006. The increases for both the second quarter and first half of 2007 were due in part to greater demand for seismic data for exploration from junior oil and natural gas companies, in part to the additional sales generated from the newly acquired 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 first six months of 2007, Pulse did not acquire any additional seismic data, and did not complete any participation survey programs. Pulse commenced a participation survey in July 2007, subsequent to the end of the second quarter, in the west-central Alberta area, consisting of a minimum of 150 net square kilometres of 3D seismic data. Pulse expects to obtain at least 65 percent pre-funding for this planned survey and expects to deliver the data to the customers by the end of the third quarter of 2007. There is no exclusivity period associated with this participation survey which permits the Company to commence licensing of the seismic data immediately after delivery. In comparison, during the first six months of 2006 the Company completed a 237-square-kilometre 3D participation survey in west-central Alberta at a cost of $6.7 million.
Liquidity, Capital Resources and Capital Requirements
At June 30, 2007 the working capital position of Pulse, including the current portion of long-term debt of $8.0 million, was $8.0 million, compared to $5.7 million at December 31, 2006. For the six months ended June 30, 2007 Pulse generated $14.3 million in funds from continuing operations, had a net change of $3.3 million in non-cash working capital items relating to continuing operations and utilized working capital for long-term debt repayment ($4.0 million), dividends ($3.6 million) and to finance its LiDAR operations ($4.4 million). This resulted in an increase of $6.5 million to the cash balance, which was $8.6 million at June 30, 2007.
With the continued trend of strong seismic data sales, 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 data in the library.
PULSE DATA INC. Interim Consolidated Balance Sheets
(In thousands of dollars)(unaudited) June 30, December 31, 2007 2006 Assets
Current assets: Cash and cash equivalents $ 8,639 $ 2,181 Accounts receivable 9,310 16,191 Prepaid expenses 103 233 Assets held for sale 4,393 3,809 22,445 22,414
Seismic data library 88,113 100,688 Assets held for sale 10,453 6,943 Property and equipment 943 904 Investments - 351 Other 42 610
$ 121,996 $ 131,910
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 1,944 $ 4,002 Deferred revenue 2,162 3,781 Current portion of long-term debt 8,004 8,004 Liabilities held for sale 2,336 946 14,446 16,733
Long-term debt 27,478 31,996 Future income taxes 7,816 7,824
Shareholders' equity: Share capital 55,228 54,887 Contributed surplus 1,660 1,305 Retained earnings 15,368 19,165 72,256 75,357
$ 121,996 $ 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 Six months ended June 30 ended June 30 2007 2006 2007 2006 Revenue: Data library sales $ 10,527 $ 6,634 $ 21,150 $ 16,732 Participation survey - 3,058 - 3,058 Total Revenue $ 10,527 $ 9,692 $ 21,150 $ 19,790
Expenses: Amortization of seismic data library 6,288 7,284 12,576 11,963 Operating 907 1,091 1,709 2,060 Depreciation and amortization 78 87 149 180 (Gain) loss on assets held for trading (42) - 6 - General and administrative expenses 2,237 1,225 3,683 2,774
Interest: Long-term debt 682 439 1,424 859 Other (87) (163) (165) (240) 595 276 1,259 619
Earnings (loss) from continuing operations before income taxes 464 (271) 1,768 2,194 Income taxes: Current 608 1,418 677 2,182 Future (reduction) (480) (2,003) (82) (1,754) 128 (585) 595 428 Net earnings from continuing operations $ 336 $ 314 $ 1,173 $ 1,766
Loss from discontinued operations, net of income taxes (386) (5,428) (1,693) (6,841)
Net loss $ (50) $ (5,114) $ (520) $ (5,075) Retained earnings, beginning of period 17,219 27,834 19,165 29,545 Change in accounting policy - - 322 - Dividends paid (1,801) (1,768) (3,599) (3,518)
Retained earnings, end of period $ 15,368 $ 20,952 $ 15,368 $ 20,952
Net earnings per share from continuing operations, basic and diluted $ 0.01 $ 0.01 $ 0.02 $ 0.04 Net loss per share, basic and diluted $ 0.00 $ (0.11) $ (0.01) $ (0.11)
PULSE DATA INC. Interim Consolidated Statements of Cash Flows
(In thousands of dollars)(unaudited) Three months Six months ended June 30 ended June 30 2007 2006 2007 2006
Cash provided by (used in):
Continuing operations: Net earnings $ 336 $ 314 $ 1,173 $ 1,766 Items not involving cash: Amortization of seismic data library 6,288 7,284 12,576 11,963 Depreciation and amortization 78 87 149 180 Unrealized (gain) loss on foreign exchange 37 (112) - (74) Future income taxes (reduction) (480) (2,003) (82) (1,754) Stock-based compensation 226 346 434 650 (Gain) loss on assets held for trading (42) - 6 - Other 38 17 75 36 Funds from continuing operations 6,481 5,933 14,331 12,767 Net change in non-cash working capital items related to continuing operations (927) 4,473 3,308 8,226 5,554 10,406 17,639 20,993 Discontinued operations: Funds from discontinued operations (534) (259) (2,221) (778) Additions to property and equipment (141) (135) (2,526) (231) Net change in non-cash working capital items related to discontinued operations (711) 1,655 362 2,001
(1,386) 1,261 (4,385) 992 Financing: Repayment of long-term debt (2,001) (1,524) (4,002) (3,100) Issue of share capital 19 895 40 1,084 Increase in deferred charges 3 - 3 - Dividends paid (3,377) (3,518) (3,377) (3,518) (5,356) 4,147 (7,336) (5,534) Investing: Additions to seismic data library through participation surveys - (7,162) - (7,068) Decrease in participation surveys in progress - 1,113 - 181 Additions to property and equipment (115) (1,434) (189) (1,486) Cash sales of investments 729 - 729 - Net change in non-cash working capital items related to investing - (365) - (856) 614 (7,848) 540 (9,229) Increase (decrease) in cash position (574) 7,966 6,458 7,222 Cash and cash equivalents, beginning of period 9,213 9,796 2,181 10,540 Cash and cash equivalents, end of period $ 8,639 $ 17,762 $ 8,639 $ 17,762
OUTLOOK
Pulse's record first and second quarter seismic data library sales were in line with the Company's expectations. Of note, data library sales have been virtually the same for each of the last three fiscal quarters. The Company's working capital position is solid, with an increase of $6.5 million in cash on hand since the end of 2006.
The second quarter for Pulse is historically more volatile than the first; some years it is quite weak, while in others it is even stronger than the first quarter. This year, uncertainty within the oil and natural gas industry concerning commodity prices and the pace of field activity over the coming year appears to be translating into some decision-making hesitancy regarding exploration-related activities, including seismic purchases. Pulse is taking a cautious outlook with respect to the third and fourth quarters of 2007.
Pulse continues to benefit from the seismic sub-sector's position within the overall service industry's price and activity dynamic. Because spending on seismic data represents a small proportion of oil and natural gas company's capital budgets, and because seismic interpretation remains key to producers' longer-term growth and success, spending on seismic data tends not to move in lockstep with commodity prices and drilling rates. This tends to insulate seismic providers, at least partially, from price-driven industry volatility.
By building on the solid momentum of seismic data sales generated in the first half of 2007, Pulse continues to foresee reasonable levels of licensing activity, revenue, operating margin and free cash flow in the months ahead. We are also optimistic about a strong year ahead for the Company in 2008. 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 management expects that its funds from operations will be sufficient to finance operations, service debt, and continue to pay dividends and carry out the budgeted capital expenditures through 2007. Pulse continues to work towards a disposition of the Terrapoint business unit by the end of the third quarter of 2007.