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| 8-K - FORM 8-K - SEITEL INC | sei-20140930x8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: | Marcia Kendrick |
713-881-8900
SEITEL ANNOUNCES THIRD QUARTER 2014 RESULTS
Cash Resales of $29.4 million; Total Revenue of $41.3 million
HOUSTON, November 10, 2014 - Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the third quarter ended September 30, 2014.
Third Quarter Highlights -
($ in millions) | Third Quarter | First Nine Months | |||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Cash Resales | $ | 29.4 | $ | 18.5 | 59 | % | $ | 87.8 | $ | 63.6 | 38 | % | |||||||||
Total Revenue | 41.3 | 44.4 | (7 | )% | 145.7 | 143.3 | 2 | % | |||||||||||||
Cash EBITDA | 23.3 | 13.9 | 67 | % | 69.6 | 48.3 | 44 | % | |||||||||||||
Net Income | 4.5 | 0.2 | 1,793 | % | 9.0 | 8.3 | 7 | % | |||||||||||||
Total revenue for the third quarter of 2014 was $41.3 million compared to $44.4 million in the third quarter of 2013. Total revenue is primarily comprised of underwriting revenue related to new data acquisition and resale licensing revenue. These revenue components totaled $11.2 million and $29.2 million, respectively, in the third quarter of 2014 compared to $22.4 million and $20.8 million, respectively, in the third quarter of 2013. New data acquisition activity in the third quarter of 2014 was primarily focused in the Eagle Ford/Woodbine unconventional area. Cash resales, a component of resale licensing revenue, were $29.4 million, an increase of $10.9 million, or 59%, in the third quarter of 2014 compared to cash resales of $18.5 million in the third quarter of 2013. Cash resales increased between the quarters primarily due to an increase in licensing of data in conventional areas. Solutions and other revenue was $1.0 million in the third quarter of 2014 compared to $1.2 million in the third quarter of 2013.
Total revenue for the nine months ended September 30, 2014 was $145.7 million compared to $143.3 million for the first nine months of 2013. Acquisition underwriting revenue was $42.5 million for the first nine months of 2014, reflecting 69% underwriting on new data acquisition projects, compared to $62.9 million in the first nine months of 2013, reflecting 67% underwriting on new data acquisition projects. The decrease between years is attributable to successful execution of our cash generation strategy in 2014, which focuses on reduced, but targeted, investment. This reduction directly impacts acquisition underwriting revenue. The majority of our new data acquisition activity in the first nine months of 2014 occurred in the Eagle Ford/Woodbine, Utica/Marcellus, Permian and Montney unconventional plays in North America. Total resale licensing revenue was $100.0 million in the first nine months of 2014 compared to $76.8 million in the first nine months of 2013. For the first nine months of 2014, cash resales were $87.8 million, an increase of $24.2 million, or 38%, compared to $63.6 million in the first nine months of 2013. The increase in cash resales between the nine month periods was driven by an increase in licensing activity in both unconventional and conventional areas. Solutions and other revenue was $3.1 million in the first nine months of 2014 compared to $3.6 million in the first nine months of 2013.
“We have experienced strong cash resale activity in 2014 with a good distribution of sales both geographically and across data vintages,” commented Rob Monson, president and chief executive officer. “In fact, our year-to-date cash resales are fairly evenly distributed between data acquired prior to 2010 and newer data acquired since then. In 2014, the majority of our new investments have been focused in the Eagle Ford and Permian plays, areas in which our clients have the most activity and where we expect to achieve the best returns.”
Net income was $4.5 million for the third quarter of 2014 compared to $0.2 million for the third quarter of 2013 and was $9.0 million in the first nine months of 2014 compared to $8.3 million in the first nine months of 2013. The increase in net income
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between quarters was primarily due to lower amortization expense associated with our data library partially offset by a reduction in revenue primarily resulting from lower acquisition underwriting revenue, an increase in variable selling, general and administrative (“SG&A”) expenses and higher income tax expense resulting from U.S. operations. For the nine month period, the increase in net income was mainly due to an increase in revenue primarily resulting from increased resale activity, lower amortization of seismic data and lower interest expense partially offset by an increase in variable SG&A expenses and higher income tax expense resulting from U.S. operations. Additionally, the first nine months of 2013 included a $1.5 million charge related to the early extinguishment of our debt.
Cash EBITDA, generally defined as cash resales and solutions revenue less cash operating expenses (excluding various non-recurring items), was $23.3 million in the third quarter of 2014 compared to $13.9 million in the same period of 2013. Cash EBITDA was $69.6 million in the first nine months of 2014 compared to $48.3 million in the first nine months of last year. The increase from 2013 to 2014 in both periods resulted from higher levels of cash resale activity during 2014. Cash EBITDA for the last twelve months ended September 30, 2014 was $96.4 million.
SG&A expenses were $7.2 million in the third quarter of 2014 compared to $5.9 million in last year's third quarter. SG&A expenses were $21.5 million in the first nine months of 2014 compared to $19.6 million in the same period last year. The increases were primarily due to an increase in variable compensation tied to revenue and Cash EBITDA.
In the first nine months of 2014, our net cash capital expenditures were $23.7 million. Gross capital expenditures totaled $66.4 million, of which $61.9 million related to new data acquisition. Our forecast of net cash capital expenditures for the remainder of 2014 is $9.0 million, bringing our total estimated net cash capital expenditures for the year to $32.7 million. Our current backlog of net cash capital expenditures related to acquisition programs is $21.4 million, of which we expect approximately $7 million to be incurred in the fourth quarter.
CONFERENCE CALL
Seitel will hold its quarterly conference call to discuss third quarter results for 2014 on Tuesday, November 11, 2014 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). The dial-in number for the call is 800-374-2540, Conference ID 13915118. A replay of the call will be available until November 18, 2014 by dialing 800-585-8367, Conference ID 13915118 and will be available following the conference call at the Investor Relations section of the company's website at http://www.seitel.com.
ABOUT SEITEL
Seitel is a leading provider of onshore seismic data to the oil and gas industry in North America. Seitel's data products and services are critical in the exploration for and development of oil and gas reserves by exploration and production companies. Seitel has ownership in an extensive library of proprietary onshore and offshore seismic data that it has accumulated since 1982 and that it licenses to a wide range of exploration and production companies. Seitel believes that its library of 3D onshore seismic data is the largest available for licensing in North America and includes leading positions in oil and liquids-rich unconventional plays. Seitel has ownership in over 41,000 square miles of 3D onshore data, over 10,000 square miles of 3D offshore data and approximately 1.1 million linear miles of 2D seismic data concentrated in the major active North American oil and gas producing regions. Seitel serves a market which includes over 1,600 companies in the oil and gas industry.
This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Statements contained in this press release about our future outlook, prospects, strategies and plans, and about industry conditions, demand for seismic services and the future economic life of our seismic data are forward-looking, among others. All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of historical fact, are forward-looking. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “target,” “foresee,” “should,” “intend,” “may,” “will,” “would,” “could,” “potential” and similar expressions are intended to identify forward-looking statements. Forward-looking statements represent our present belief and are based on our current expectations and assumptions with respect to future events and their potential effect on us. While we believe our expectations and assumptions are reasonable, they involve risks and uncertainties beyond our control that could cause the actual results or outcome to differ materially from the expected results or outcome reflected in our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release may not occur. Such risks and uncertainties include, without limitation, actual customer demand for our seismic data and related services, the timing and extent of changes in commodity prices for natural gas, crude oil and condensate and natural gas liquids, conditions in the capital markets during the periods covered by the forward-looking statements, the effect of economic conditions, our ability to obtain financing on satisfactory terms if internally generated funds and our current credit facility are insufficient to fund our capital needs, the impact on our financial condition as a result of our debt and our debt service, our ability to obtain and maintain normal terms with our vendors and service providers, our ability to maintain contracts that are critical to our operations, changes in the oil and gas industry or the economy generally and changes in the exploration budgets of our customers. For additional information regarding known material factors that could cause our actual results to differ, please see
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our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
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The forward-looking statements contained in this press release speak only as of the date hereof and readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All forward-looking statements attributable to Seitel, Inc. or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein, in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and future reports filed with the SEC.
This press release also includes certain non-GAAP financial measures as defined under SEC rules. Non-GAAP financial measures include cash resales, for which the most comparable GAAP measure is total revenue; cash EBITDA, for which the most comparable GAAP measure is net income; and net cash capital expenditures, for which the most comparable GAAP measure is total capital expenditures. Reconciliations of each non-GAAP financial measure to its most comparable GAAP measure are included at the end of this press release.
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SEITEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) | |||||||||
September 30, 2014 | December 31, 2013 | ||||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 56,581 | $ | 31,353 | |||||
Receivables, net | 40,818 | 45,119 | |||||||
Net seismic data library | 175,006 | 195,778 | |||||||
Net property and equipment | 3,750 | 4,611 | |||||||
Prepaid expenses, deferred charges and other | 9,205 | 9,844 | |||||||
Intangible assets, net | 11,174 | 14,762 | |||||||
Goodwill | 196,742 | 201,535 | |||||||
Deferred income taxes | 83,881 | 92,511 | |||||||
TOTAL ASSETS | $ | 577,157 | $ | 595,513 | |||||
LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||
LIABILITIES | |||||||||
Accounts payable and accrued liabilities | $ | 33,912 | $ | 37,777 | |||||
Income taxes payable | 707 | 787 | |||||||
Senior Notes | 250,000 | 250,000 | |||||||
Obligations under capital leases | 2,359 | 2,676 | |||||||
Deferred revenue | 27,439 | 41,739 | |||||||
Deferred income taxes | 5,872 | 7,578 | |||||||
TOTAL LIABILITIES | 320,289 | 340,557 | |||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
STOCKHOLDER'S EQUITY | |||||||||
Common stock, par value $.001 per share; 100 shares authorized, | |||||||||
issued and outstanding | — | — | |||||||
Additional paid-in capital | 400,058 | 399,641 | |||||||
Retained deficit | (149,501 | ) | (158,454 | ) | |||||
Accumulated other comprehensive income | 6,311 | 13,769 | |||||||
TOTAL STOCKHOLDER'S EQUITY | 256,868 | 254,956 | |||||||
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | $ | 577,157 | $ | 595,513 | |||||
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SEITEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
REVENUE | $ | 41,299 | $ | 44,410 | $ | 145,686 | $ | 143,305 | ||||||||
EXPENSES: | ||||||||||||||||
Depreciation and amortization | 18,309 | 32,085 | 85,938 | 89,252 | ||||||||||||
Cost of sales | 29 | 188 | 282 | 290 | ||||||||||||
Selling, general and administrative | 7,181 | 5,912 | 21,499 | 19,553 | ||||||||||||
25,519 | 38,185 | 107,719 | 109,095 | |||||||||||||
INCOME FROM OPERATIONS | 15,780 | 6,225 | 37,967 | 34,210 | ||||||||||||
Interest expense, net | (6,306 | ) | (6,202 | ) | (18,724 | ) | (21,655 | ) | ||||||||
Foreign currency exchange gains (losses) | (901 | ) | 714 | (1,344 | ) | (1,104 | ) | |||||||||
Loss on early extinguishment of debt | — | — | — | (1,504 | ) | |||||||||||
Other income | 5 | 16 | 64 | 17 | ||||||||||||
Income before income taxes | 8,578 | 753 | 17,963 | 9,964 | ||||||||||||
Provision for income taxes | 4,092 | 516 | 9,010 | 1,621 | ||||||||||||
NET INCOME | $ | 4,486 | $ | 237 | $ | 8,953 | $ | 8,343 | ||||||||
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Cash resales represent new contracts for data licenses from our library, including data currently in progress, payable in cash. We believe this measure is important in assessing overall industry and client activity. Cash resales are likely to fluctuate quarter to quarter as they do not require the longer planning and lead times necessary for new data creation. The following table summarizes the components of Seitel's revenue and shows how cash resales (a non-GAAP financial measure) are a component of total revenue, the most directly comparable GAAP financial measure (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total acquisition underwriting revenue | $ | 11,175 | $ | 22,440 | $ | 42,512 | $ | 62,926 | ||||||||
Resale licensing revenue: | ||||||||||||||||
Cash resales | 29,405 | 18,527 | 87,771 | 63,602 | ||||||||||||
Non-monetary exchanges | — | 926 | 177 | 1,511 | ||||||||||||
Revenue recognition adjustments | (248 | ) | 1,305 | 12,086 | 11,680 | |||||||||||
Total resale licensing revenue | 29,157 | 20,758 | 100,034 | 76,793 | ||||||||||||
Total seismic revenue | 40,332 | 43,198 | 142,546 | 139,719 | ||||||||||||
Solutions and other | 967 | 1,212 | 3,140 | 3,586 | ||||||||||||
Total revenue | $ | 41,299 | $ | 44,410 | $ | 145,686 | $ | 143,305 | ||||||||
Cash EBITDA represents cash generated from licensing data from our seismic library net of recurring cash operating expenses. We believe this measure is helpful in determining the level of cash from operations we have available for debt service and funding of capital expenditures (net of the portion funded or underwritten by our customers). Cash EBITDA includes cash resales plus all other cash revenues other than from data acquisitions, less cost of goods sold and cash selling, general and administrative expenses (excluding non-routine and other corporate expenses such as severance and legal, financial and other expenses related to corporate and strategic transactions). The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, net income (in thousands):
Last Twelve Months Ended September 30, 2014 | ||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Cash EBITDA | $ | 23,279 | $ | 13,927 | $ | 69,597 | $ | 48,284 | $ | 96,377 | ||||||||||
Add (subtract) other revenue components not included in cash EBITDA: | ||||||||||||||||||||
Acquisition underwriting revenue | 11,175 | 22,440 | 42,512 | 62,926 | 66,898 | |||||||||||||||
Non-monetary exchanges | — | 926 | 177 | 1,511 | 322 | |||||||||||||||
Revenue recognition adjustments | (248 | ) | 1,305 | 12,086 | 11,680 | 14,082 | ||||||||||||||
Add (subtract) other items included in net income: | ||||||||||||||||||||
Depreciation and amortization | (18,309 | ) | (32,085 | ) | (85,938 | ) | (89,252 | ) | (118,284 | ) | ||||||||||
Non-cash operating expenses | (113 | ) | (185 | ) | (417 | ) | (683 | ) | (603 | ) | ||||||||||
Non-routine and other corporate expenses | (4 | ) | (103 | ) | (50 | ) | (256 | ) | (205 | ) | ||||||||||
Interest expense, net | (6,306 | ) | (6,202 | ) | (18,724 | ) | (21,655 | ) | (24,920 | ) | ||||||||||
Foreign currency gains (losses) | (901 | ) | 714 | (1,344 | ) | (1,104 | ) | (2,462 | ) | |||||||||||
Loss on early extinguishment of debt | — | — | — | (1,504 | ) | — | ||||||||||||||
Other income | 5 | 16 | 64 | 17 | 535 | |||||||||||||||
Benefit (provision) for income taxes | (4,092 | ) | (516 | ) | (9,010 | ) | (1,621 | ) | 82,551 | |||||||||||
Net income | $ | 4,486 | $ | 237 | $ | 8,953 | $ | 8,343 | $ | 114,291 | ||||||||||
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Net cash capital expenditures represent total capital expenditures less cash underwriting revenue from our clients and non-cash additions to the seismic data library. We believe this measure is important as it reflects the amount of capital expenditures funded from our operating cash flow. The following table summarizes our actual capital expenditures for the nine months ended September 30, 2014 and our estimate for the year ending December 31, 2014 and shows how net cash capital expenditures (a non-GAAP financial measure) are derived from total capital expenditures, the most directly comparable GAAP financial measure (in thousands):
Nine Months Ended September 30, 2014 | Estimate for Remainder of 2014 | Total Estimate for 2014 | ||||||||||
New data acquisition | $ | 61,879 | $ | 28,921 | $ | 90,800 | ||||||
Cash purchases and data processing | 3,710 | 690 | 4,400 | |||||||||
Non-monetary exchanges | 177 | 523 | 700 | |||||||||
Property and equipment and other | 603 | 697 | 1,300 | |||||||||
Total capital expenditures | 66,369 | 30,831 | 97,200 | |||||||||
Less: | ||||||||||||
Non-monetary exchanges | (177 | ) | (523 | ) | (700 | ) | ||||||
Cash underwriting | (42,512 | ) | (21,288 | ) | (63,800 | ) | ||||||
Net cash capital expenditures | $ | 23,680 | $ | 9,020 | $ | 32,700 | ||||||
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