CALGARY, ALBERTA--(Marketwire - March 18, 2013) - Pulse Seismic Inc. ("Pulse" or "the Company") (TSX:PSD) (OTCQX:PLSDF) reports the financial and operating results of the Company for the year ended December 31, 2012. The year-end audited financial results were in line with the preliminary unaudited financial results announced in the Company's news release on January 30, 2013. The audited consolidated financial statements, accompanying notes and MD&A are being filed on SEDAR (www.sedar.com) and will be available on Pulse's website at www.pulseseismic.com.
Pulse has declared a quarterly dividend of $0.02 per common share. This dividend will be paid on April 11, 2013 to shareholders of record at the close of business on March 28, 2013. Dividends are designated as an eligible dividend for Canadian income tax purposes. For non-resident shareholders, Pulse's dividends are subject to Canadian withholding tax.
HIGHLIGHTS FOR THE 12 MONTHS ENDED DECEMBER 31, 2012
Pulse achieved the following record results:
- Seismic data library sales of $64.0 million, a 77 percent increase over $36.2 million achieved in 2011;
- Total seismic revenue (including participation survey revenue) of $86.4 million compared to $51.5 million in 2011;
- Cash EBITDA(a) of $54.7 million, a 98 percent increase over $27.7 million in 2011 (and a 112 percent increase on a per-share basis to $0.87 per share basic and diluted);
- Shareholder free cash flow(a) of $50.0 million, a 109 percent increase over $23.9 million in 2011 (and a 122 percent increase on a per-share basis to $0.80 per share basic and diluted); and
- Net earnings of $27.4 million ($0.44 per share basic and diluted) compared to $5.2 million ($0.08 per share basic and diluted) in 2011.
Record levels of cash generated in 2012 have allowed Pulse to:
- Purchase and cancel 5.0 million common shares at a cost of $10.5 million, reducing the total issued and outstanding common shares by 7.6 percent to 61.1 million shares;
- Reduce long term debt by 43 percent through a combination of $13.0 million in regularly scheduled payments and a $7.0 million penalty-free prepayment;
- Increase the annual dividend by 60% from $0.05 per common share to $0.08 per common share;
- Complete three 3D seismic participation surveys that had commenced in Q3 and Q4 2011, adding 567 square kilometres of new 3D data to the seismic data library; and
- Commence operations in the fall of 2012 on two new 3D seismic participation surveys, with total gross CAPEX estimated at $52.5 million. Field operations on both the McKinley survey, totalling 541 square kilometres, and the Fox Creek survey, totaling 487 square kilometres, have now been completed. Both surveys are located within the Fox Creek vicinity in west central Alberta encompassing the Kaybob, Waskahigan, McKinley and Tony Creek areas, which have the potential for multi-zone production of liquids-rich gas, oil and natural gas and include the extensive Montney and Duvernay shales.
HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012
- Seismic data library sales of $11.9 million, compared to $12.5 million in the same period last year;
- Total seismic revenue (including participation survey revenue) of $27.8 million compared to $23.6 million for the comparable period in 2011;
- Cash EBITDA of $9.7 million was generated in the fourth quarter of each of 2012 and 2011 ($0.16 and $0.15 per share basic and diluted respectively in 2012 and 2011);
- Shareholder free cash flow of $7.4 million ($0.12 per share basic and diluted) compared to $8.9 million ($0.13 per share basic and diluted) in the fourth quarter of 2011;
- Secured a third new 3D participation survey, located in the Pembina area of west central Alberta covering 153 square kilometres. Field operations commenced in January 2013 and are expected to be completed by the end of March.
|Selected Financial and Operating Information|
|(thousands of Canadian dollars except per share data and number of shares)|
|Three months ended December 31,|| ||Year ended December 31,|
| || ||2012|| ||2011|| ||2012|| ||2011|
|Revenue|| || || || || || || || |
| ||Data library sales||$||11,885||$||12,549||$||64,040||$||36,194|
| ||Participation surveys|| ||15,887|| ||11,011|| ||22,313|| ||15,280|
| || || || || || || || || |
|Amortization of seismic data library||$||6,351||$||6,667||$||36,568||$||31,767|
| || || || || || || || || |
|Net earnings per share:|| || || || || || || || |
| ||Basic and diluted||$||0.23||$||0.15||$||0.44||$||0.08|
| || || || || || || || || || |
|Funds from operations (b)||$||23,321||$||19,920||$||71,585||$||39,386|
|Funds from operations per share(b):|| || || || || || || || |
| ||Basic and diluted||$||0.38||$||0.30||$||1.14||$||0.59|
| || || || || || || || || || |
|Cash EBITDA (a)||$||9,737||$||9,717||$||54,692||$||27,662|
|Cash EBITDA per share(a):|| || || || || || || || |
| ||Basic and diluted||$||0.16||$||0.15||$||0.87||$||0.41|
| || || || || || || || || || |
|Shareholder free cash flow (a)||$||7,381||$||8,857||$||50,046||$||23,896|
|Shareholder free cash flow per share (a):|| || || || || || || || |
| ||Basic and diluted||$||0.12||$||0.13||$||0.80||$||0.36|
|Capital expenditures:|| || || || || || || || |
| ||Participation surveys||$||27,961||$||16,070||$||40,261||$||22,191|
| ||Seismic data purchases and related costs|| ||1,095|| ||85|| ||1,908|| ||720|
| ||Property & equipment additions|| ||577|| ||19|| ||790|| ||132|
|Total capital expenditures||$||29,633||$||16,174||$||42,959||$||23,043|
|Weighted average shares outstanding:|| || || || || || || || |
| ||Basic|| ||61,104,706|| ||66,147,411|| ||62,526,761|| ||66,691,131|
| ||Diluted|| ||61,109,999|| ||66,147,411|| ||62,526,761|| ||66,691,131|
|Shares outstanding at period end|| || || || || ||61,140,442|| ||66,045,571|
|Seismic library:|| || || || || || || || |
|2D in net kilometres|| || || || || ||339,991|| ||339,991|
|3D in net square kilometres|| || || || || ||27,089|| ||26,514|
|Financial Position and Ratios|| || || || || |
|(thousands of Canadian dollars except ratio calculations) || || || |
| || ||As at December 31,|
| || ||2012|| || ||2011|
|Working capital ratio|| ||0.96:1|| || ||1.17:1|
|Total assets||$||162,454|| || $|| 150,678|
|Long-term debt (c)||$||26,688|| ||$||46,562|
|TTM cash EBITDA (d)||$||54,692|| ||$||27,662|
|Shareholders' equity||$||96,550|| ||$||83,073|
|Long-term debt to equity ratio|| ||0.28:1|| || ||0.56:1|
|Long-term debt to TTM cash EBITDA ratio|| ||0.49:1|| || ||1.68:1|
||The Company's continuous disclosure documents provide discussion and analysis of "cash EBITDA", "cash EBITDA per share", "shareholder free cash flow" and "shareholder free cash flow per share". These financial measures do not have standard definitions prescribed by IFRS 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 (loss) from operations before interest, taxes, depreciation and amortization less participation survey revenue, plus any non-cash and non-recurring 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. Cash EBITDA per share is defined as cash EBITDA divided by the weighted average number of shares outstanding for the period. Shareholder free cash flow further refines the calculation of capital available to invest in growing the Company's 2D and 3D seismic data library, to repay debt, to purchase its common shares and to pay dividends by deducting non-discretionary expenditures from cash EBITDA. Non-discretionary expenditures are defined as debt financing costs (net of deferred financing expenses amortized in the current period) and current tax provisions. Shareholder free cash flow per share is defined as shareholder free cash flow divided by the weighted average number of shares outstanding for the period.
||Funds from operations is an additional GAAP measure. Funds from operations is defined as cash provided by operations as prescribed by IFRS, excluding the impact of changes in non-cash working capital. Funds from operations represents 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.
||Long-term debt is defined as total long-term debt, including current portion, net of debt finance cost.
||TTM cash EBITDA is defined as the sum of the trailing 12 month's cash EBITDA and is used to provide a comparable annualized measure.
Western Canada's oil and natural gas industry faced largely the same array of risks entering 2013 as it had a year earlier. Natural gas prices were in the range of Cdn$3 per mcf at AECO, high regional crude oil price differentials were reducing Canadian oil producers' revenues, political uncertainty surrounded the crucial Keystone XL and Northern Gateway oil export pipeline projects, and many producers' share prices were weak. Internationally, numerous regions faced profound economic uncertainty and some regions were experiencing geopolitical instability.
Notwithstanding these risks, Pulse's management team and Board of Directors view 2013 with greater optimism and confidence than any of the previous four years. The unprecedented strength of Pulse's finances, including the recently closed new credit facility, is the first of two main reasons for this outlook. The Company will have increased flexibility to direct its capital spending in 2013 in pursuit of those initiatives that it anticipates will generate the greatest returns.
Field operations for both the 541 square km McKinley and the 487 square km Fox Creek 3D participation surveys have been completed. The 153 square km Pembina 3D participation survey began in January and field operations are expected to be completed by the end of March. The Company anticipates opportunities for additional participation surveys in the Duvernay and Montney plays, areas that remain highly active and also contain multiple other prospective zones, creating the sought-after prospect of future re-licensing sales.
Pulse anticipates western Canada's producing sector's continued repositioning into unconventional liquids-rich natural gas and oil play areas. It cannot be predicted whether the high level of licensing sales and transfer (change of control) fees related to transactions among Pulse's customers in 2012 was exceptional or indicative of the future. The high capital needs and technical risks of these plays, plus pressure from mineral lease expiries, do help encourage companies to reduce their risks and access outside capital through joint ventures, farm-outs, asset sales or outright corporate sale.
Pulse is hopeful of seeing further such transactions in areas where it holds or is shooting data. As always, the Company cautions that seismic data library sales levels have intrinsically poor visibility and can be very uneven from quarter to quarter. Pulse can generate solid shareholder free cash flow and continue to pay its dividend under moderately low year-over-year data sales.
Commodity prices remain uncertain. There are signs that the multi-year ramp-up of U.S. natural gas production is decelerating, and the U.S. Energy Information Administration is forecasting essentially flat overall production for 2013. Any subsequent price effects will depend on the demand side and continued gradual draw-down of natural gas storage. Pulse does not have a view of natural gas prices in 2013. On the crude oil side, numerous Canadian producers and marketing organizations are reporting efforts to transport oil by rail into the U.S. and to eastern Canadian markets. If successful on a reasonable scale, this could help to ease the regional price differential somewhat. Producers' netbacks will still depend on the movement of international benchmark prices interacting with the regional differential.
In its annual drilling forecast for the year ahead, issued in November 2012, the Petroleum Services Association of Canada forecast that 11,400 oil and natural gas wells would be drilled across Canada in 2013, little changed from 11,250 in 2012. Of the total, approximately 70 percent will be horizontal wells and 87 percent will target crude oil. According to the Canadian Association of Oilwell Drilling Contractors, the number of active drilling rigs in November 2012, December 2012 and January 2013 was lower than in each of the corresponding months one year earlier.
For the longer term, Pulse regards the planned construction of one or more export terminals for liquefied natural gas (LNG) on Canada's West Coast as a long-term strategic opportunity for the energy industry and western Canada's economy. The Government of Canada's recent approvals of major foreign investment in the energy sector, including by a major international LNG participant, are highly positive. The export volumes of even the smaller proposed LNG plants would require a considerable increase in western Canada's natural gas-related drilling. The largest of these projects would require more than 2 billion cubic feet per day or roughly 15 percent of western Canada's current production. Each quarter of progress towards construction increases the impetus for the producing sector to accelerate natural gas development. The LNG facilities depend on concluding firm long-term sales agreements with international customers, which cannot be predicted.
With a significant amount of recently shot 3D seismic data, the significant dataset acquisition in 2010, wide coverage over some of western Canada's most promising unconventional oil and liquids-rich gas plays, plus the financial strength to pursue a range of opportunities, Pulse is positioned to thrive in both the short and longer terms. As industry capital spending and field activities go up and down along with business conditions and opportunities, Pulse will continue to focus on generating as much sales revenue, cash EBITDA and shareholder free cash flow per share as conditions allow, while seeking opportunities to grow. The Company's proven four-pronged approach to capital allocation - investment in capital programs (participation surveys and dataset acquisitions that meet key criteria), repurchase of Pulse shares, payment of a sustainable dividend, and to a lesser extent this year, debt reduction - will continue to guide Pulse's business throughout 2013.
ADVANCE NOTICE REQUIREMENT FOR NOMINATING DIRECTORS
Pulse's board of directors has approved the adoption of an Advance Notice Bylaw of the Company, which requires advance notice to Pulse by shareholders who wish to nominate a person for election as a director of the Company (other than pursuant to a requisition of a meeting or a shareholder proposal made pursuant to the provisions of the Canada Business Corporations Act).
Among other things, the By-law fixes a deadline by which shareholders must submit a notice of director nominations to Pulse prior to any annual or special meeting of shareholders where directors are to be elected and sets forth the information that a shareholder must include in the notice for it to be valid.
In the case of an annual meeting of shareholders, notice to Pulse must be given not less than 30 nor more than 65 days prior to the date of the annual meeting; provided, however, that if the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice may be given not later than the close of business on the 10th day following such public announcement.
In the case of a special meeting of shareholders (that is not also an annual meeting), notice to Pulse must be given not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made.
The By-law is effective immediately. At the annual and special meeting of shareholders on May 22, 2013, shareholders will be asked to confirm the By-law. A copy of the By-law is being filed and will be available under Pulse's profile at www.sedar.com.
Pulse believes that adopting the By-law is considered to be good corporate governance. The By-law facilitates an orderly and efficient annual or special meeting process and it ensures that all shareholders receive adequate notice of director nominations with sufficient information with respect to all nominees. This allows Pulse and its shareholders to evaluate the proposed nominees' qualifications and suitability as directors, which further allows shareholders to cast an informed vote for the election of directors.
CONFERENCE CALL FOR THE 2012 YEAR END RESULTS
Pulse will host a conference call on Tuesday, March 19, 2013 at 11:00 am MT (1:00 pm ET) to discuss the Company's results for the fourth quarter and year-end 2012. Neal Coleman, President & CEO will chair the call with Pamela Wicks, VP Finance & CFO taking part. A question-and-answer period will follow an update on the Company's strategies and outlook.
To participate please dial 416-340-2216 or 866-226-1792 approximately 10 minutes before the commencement of the call. To listen to the webcast of the conference call please visit the Company's website at www.pulseseismic.com.
An archival recording of the conference call will be available approximately one hour after the completion of the call until March 26, 2013. To access the replay, please dial 905-694-9451 or 800-408-3053 and enter the pass code 1025519.
Pulse is a market leader in the acquisition, marketing and licensing of 2D and 3D seismic data to the western Canadian energy sector. Pulse owns the second-largest licensable seismic data library in Canada, currently consisting of approximately 27,630 net square kilometres of 3D seismic and 340,000 net kilometres of 2D seismic. The library extensively covers the Western Canada Sedimentary Basin where most of Canada's oil and natural gas exploration and development occur.
Forward Looking Information
This news release 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:
- Pulse's management team and Board of Directors view 2013 with greater optimism and confidence than any of the previous four years;
- Expected size, cost and completion dates for participation surveys;
- Pulse anticipates opportunities for additional participation surveys in the Duvernay and Montney plays;
- Pulse anticipates western Canada's producing sector's continued repositioning into unconventional liquids-rich natural gas and oil play areas;
- Pulse can generate solid shareholder free cash flow and continue to pay its dividend under moderately low year-over-year data sales;
- Pulse's capital allocation strategy;
- Pulse's dividend policy
- Pulse's business and growth 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 that could cause actual results to differ materially from the forward-looking information include, but are not limited to:
- economic risks;
- 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;
- 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;
- dependence upon qualified seismic field contractors;
- dependence upon key management, operations and marketing personnel;
- loss of seismic data; 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.