Seitel Announces First Quarter 2012 Results

HOUSTON--(BUSINESS WIRE)--Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the first quarter ended March 31, 2012.

First Quarter Highlights –

($ in millions)		First Quarter
	2012		2011		% Increase
Cash Resales	$	39.2	$	26.3	49	%
Total Revenue		72.5		59.5	22	%
Cash EBITDA		32.7		21.7	51	%

Cash resales for the first quarter of 2012 were $39.2 million compared to $26.3 million for the first quarter of last year, a 49% increase. Cash resales from 3D unconventional plays increased slightly from the first quarter of 2011 to the first quarter of 2012 to $20.5 million compared to $19.5 million last year. Cash resales related to conventional 3D, 2D and offshore data increased to $18.7 million in the first quarter of 2012 compared to $6.8 million in the same period last year. This increase was primarily attributable to an increase in activity in our U.S. 3D conventional data library.

Total revenue for the first quarter of 2012 was $72.5 million compared to $59.5 million during the first quarter of 2011. The 22% increase in revenue was primarily due to a 55% increase in acquisition revenue. Acquisition revenue was $36.6 million in the first quarter of 2012, reflecting continuing strong activity in unconventional plays. Total resale revenue was $34.7 million in both first quarters of 2012 and 2011. Solutions revenue was $1.3 million in this year’s first quarter compared to $1.1 million last year.

For the first quarter of 2012, net income was $14.7 million compared to last year’s net income of $0.5 million. The increase in revenue and lower interest expense were the primary drivers of the improved results.

Cash EBITDA, generally defined as cash resales and solutions revenue less cash operating expenses (excluding various non-recurring items), was $32.7 million for the first quarter of 2012 compared to $21.7 million in the same period of 2011. This increase was primarily due to a $13.0 million improvement in cash revenue partially offset by a $0.6 million increase in cash operating expenses.

“We are pleased with the strong results we generated in the first quarter,” commented Rob Monson, president and chief executive officer. “The activity in cash resales this quarter demonstrates the optionality of our data library.

“We are executing on our capital expenditure campaign for 2012, with the majority of our new data acquisition activity focused on the oil and liquids-rich areas in unconventional plays in the U.S. and Canada,” stated Monson.

Selling, general and administrative (“SG&A”) expenses were $8.1 million for the first quarter of 2012 compared to $7.6 million last year. Cash SG&A expenses were $7.9 million and $7.2 million, respectively, while non-cash SG&A expenses were $0.1 million and $0.3 million, respectively.

Our cash balances on March 31, 2012 were $63.4 million. Cash consumption during the first quarter was $11.5 million, as cash EBITDA of $32.7 million was offset by net cash capital expenditures for the quarter of $29.7 million, $13.5 million in interest payments and $1.5 million in current tax payments. Working capital generated $1.1 million during the quarter.

Gross capital expenditures for the first quarter of 2012 were $65.7 million, of which $64.2 million related to new data acquisition. Our underwriting revenue during the first quarter of 2012 was 57% of the gross investment. Our net cash capital expenditures totaled $29.7 million for the first quarter.

Our forecast of net cash capital expenditures for the remainder of 2012 is $53.3 million. Our current backlog of net cash capital expenditures related to acquisition programs is $51.6 million of which we expect approximately 78% to be incurred in 2012.

ABOUT SEITEL

Seitel is a leading provider of onshore seismic data to the oil and gas industry in North America with a leading position in many of the premier unconventional plays. Seitel's data products and services are critical for the exploration for, and development and management of, oil and gas reserves by oil and gas 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 oil and gas companies. Seitel believes that its library of onshore seismic data is the largest available for licensing in North America. Seitel's seismic data library includes both onshore and offshore 3D and 2D data. Seitel has ownership in over 46,000 square miles of 3D 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.

The press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” or “anticipates” or similar expressions that concern the strategy, plans or intentions of the Company. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, actual results may differ materially from management expectations reflected in our forward-looking statements. These risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, a copy of which may be obtained from the Company without charge. Management undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The press release also includes certain non-GAAP financial measures as defined under the 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 income from operations; net cash capital expenditures, for which the most comparable GAAP measure is total capital expenditures; and cash operating expenses for which the most comparable GAAP measure is total operating expenses.


SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	(Unaudited)
	March 31,			December 31,
	2012			2011
ASSETS

Cash and cash equivalents	$	63,415		$	74,894
Receivables, net		56,865			56,489
Net seismic data library		149,454			120,694
Net property and equipment		4,847			5,039
Investment in marketable securities		347			262
Prepaid expenses, deferred charges and other		10,284			10,244
Intangible assets, net		25,465			26,814
Goodwill		207,598			205,838
Deferred income taxes		56			56

TOTAL ASSETS	$	518,331		$	500,330

LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities	$	59,420		$	60,550
Income taxes payable		2,401			1,464
Debt:
Senior Notes		275,000			275,000
Notes payable		79			95
Obligations under capital leases		3,176			3,161
Deferred revenue		48,575			48,845
Deferred income taxes		2,420			1,375
TOTAL LIABILITIES		391,071			390,490

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY

Common stock, par value $.001 per share; 100 shares authorized,
issued and outstanding at March 31, 2012 and December 31, 2011		-			-
Additional paid-in capital		398,084			398,011
Retained deficit		(294,479	)		(309,185	)
Accumulated other comprehensive income		23,655			21,014
TOTAL STOCKHOLDER'S EQUITY		127,260			109,840

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	518,331		$	500,330


SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2012			2011

REVENUE	$	72,547		$	59,496

EXPENSES:
Depreciation and amortization		39,384			42,414
Cost of sales		97			16
Selling, general and administrative		8,092			7,565
		47,573			49,995

INCOME FROM OPERATIONS		24,974			9,501

Interest expense, net		(7,219	)		(10,159	)
Foreign currency exchange gains		411			232
Gain on sale of marketable securities		-			1,487
Other income		81			49

Income before income taxes		18,247			1,110
Provision for income taxes		3,541			599

NET INCOME	$	14,706		$	511

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 gauging new business activity. We expect cash resales to generally follow a consistent trend over several quarters, while considering our normal seasonality. Volatility in this trend over several consecutive quarters could indicate changing market conditions. 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
	March 31,
	2012			2011

Acquisition revenue:
Cash underwriting	$	35,304		$	22,612
Underwriting from non- monetary exchanges		1,268			1,039
Total acquisition revenue		36,572			23,651
Resale licensing revenue:
Cash resales		39,169			26,265
Non-monetary exchanges		709			6,015
Revenue recognition adjustments		(5,173	)		2,438
Total resale licensing revenue		34,705			34,718

Total seismic revenue		71,277			58,369

Solutions and other		1,270			1,127
Total revenue	$	72,547		$	59,496

The following table reconciles cash resales to revenue recognized for 3D data located in unconventional plays for the periods indicated (in thousands):


	Quarter Ended March 31,
	2012			2011

Unconventional 3D data cash resales	$	20,516		$	19,497
Other revenue components:
Acquisition revenue		36,572			23,651
Non-monetary exchanges		-			5,873
Revenue recognition adjustments		(909	)		(36	)
Unconventional 3D data total revenue	$	56,179		$	48,985

The following table reconciles cash resales to revenue recognized for conventional 3D, 2D and offshore data for the periods indicated (in thousands):


	Quarter Ended March 31,
	2012			2011

Conventional 3D, 2D and offshore data cash resales	$	18,653		$	6,768
Other revenue components:
Non-monetary exchanges		709			142
Revenue recognition adjustments		(4,264	)		2,474
Conventional 3D, 2D and offshore data total revenue	$	15,098		$	9,384

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, plus gains on sales of marketable securities obtained as part of licensing our seismic data, less cost of goods sold and cash selling, general and administrative expenses (excluding non-recurring corporate expenses such as severance costs). The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, operating income (in thousands):


	Three Months Ended
	March 31,
	2012			2011

Cash EBITDA	$	32,673		$	21,697
Add other revenue components
not included in cash EBITDA:
Acquisition revenue		36,572			23,651
Non-monetary exchanges		709			6,015
Revenue recognition adjustments		(5,173	)		2,438
Solutions non-cash revenue		20			-
Less:
Gain on sale of marketable securities		-			(1,487	)
Depreciation and amortization		(39,384	)		(42,414	)
Non-recurring corporate expenses		(298	)		(62	)
Non-cash operating expenses		(145	)		(337	)
Operating income	$	24,974		$	9,501

The following table summarizes the cash and non-cash components of our total operating expenses (cost of sales and selling, general and administrative (“SG&A”) expenses) for the three months ended March 31, 2012 and 2011 (in thousands):


	Three Months Ended
	March 31,
	2012		2011

Cost of Sales	$	97	$	16
Cash SG&A expenses		7,947		7,228
Cash operating expenses		8,044		7,244
Non-cash equity compensation expense		73		264
Non-cash rent expense		72		73
Total	$	8,189	$	7,581

The following table summarizes our actual capital expenditures for the three months ended March 31, 2012 and our estimate for the year ending December 31, 2012 (in thousands):


	Three Months
	Ended			Estimate for			Total
	March 31,			Remainder			Estimate
	2012			of 2012			for 2012

New data acquisition	$	64,186		$	139,814		$	204,000
Cash purchases and data processing		573			2,427			3,000
Non-monetary exchanges		709			5,291			6,000
Property and equipment and other		250			1,750			2,000
Total capital expenditures		65,718			149,282			215,000
Less:
Non-monetary exchanges		(709	)		(5,291	)		(6,000	)
Cash underwriting		(35,304	)		(90,696	)		(126,000	)
Net cash capital expenditures	$	29,705		$	53,295		$	83,000