Seitel Announces Second Quarter 2012 Results

HOUSTON--()--Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the second quarter ended June 30, 2012.

Second Quarter Highlights –

          (in millions)   Second Quarter     First Six Months
2012     2011 2012     2011
Cash Resales $ 23.1 $ 27.9 $ 62.3 $ 54.1
Total Revenue 46.0 35.5 118.6 95.0
Cash EBITDA 18.4 23.3 51.1 45.0
 

Total revenue for the second quarter of 2012 was $46.0 million compared to $35.5 million during the second quarter of 2011. The 29% increase in revenue resulted from a $5.5 million, or 48%, increase in acquisition revenue and a $4.3 million, or 18%, increase in total resale revenue from our library. Acquisition revenue was $16.9 million in the second quarter of 2012 and occurred in the key active unconventional plays in North America including Eagle Ford, Marcellus, Niobrara, Granite Wash, Montney and Cardium. Cash resales in the second quarter of 2012 were $23.1 million and were comprised of $15.1 million, or 65%, from 3D data located in unconventional plays and $8.0 million from conventional 3D, 2D and offshore data. This compares to cash resales in the second quarter of 2011 of $27.9 million that were comprised of $18.0 million, or 65%, from 3D data located in unconventional plays and $9.8 million from conventional 3D, 2D and offshore data. Solutions revenue was $1.6 million compared to $1.0 million in the same period last year.

Total revenue for the six months ended June 30, 2012 was $118.6 million, a 25% increase from the 2011 six month level of $95.0 million. Acquisition revenue increased $18.4 million to $53.5 million and total resale licensing revenue increased $4.3 million to $62.2 million for the first half of 2012. For the six months of 2012, cash resales were $62.3 million compared to $54.1 million in the same period last year. Cash resales in the first half of 2012 were comprised of $35.6 million, or 57%, from 3D data located in unconventional plays and $26.7 million from conventional 3D, 2D and offshore data. This compares to the first half of 2011 of $37.5 million, or 69%, from 3D data located in unconventional plays and $16.6 million from conventional 3D, 2D and offshore data. Solutions revenue was $2.9 million for the first six months of 2012 compared to $2.1 million in the same period of 2011.

For the second quarter of 2012, our net income was $1.3 million compared to last year’s net loss of $5.0 million. For the six months ended June 30, 2012, our net income was $16.0 million compared to the $4.5 million net loss for the same period last year. The increase in revenue was the primary reason for the improved results in both periods.

Cash EBITDA, generally defined as cash resales and solutions revenue less cash operating expenses (excluding various non-recurring items), was $18.4 million for the second quarter of 2012 compared to $23.3 million in the same period of 2011. Cash EBITDA was $51.1 million in the first six months of 2012 compared to $45.0 million in the first half of last year.

We are pleased with our improved results for the first half of the year,” commented Rob Monson, president and chief executive officer. “The pipeline of new data acquisition projects remains robust. We have over 2,400 square miles of data currently in progress, focusing in the oil and liquids-rich unconventional plays. This new data acquisition activity will continue to build on our already strong data library.”

Selling, general and administrative (“SG&A”) expenses were $7.7 million for the second quarter of 2012 compared to $7.9 million in last year’s second quarter. Cash SG&A expenses decreased $0.4 million between the quarters mainly due to a decrease of $0.8 million in non-recurring expenses related to severance costs partially offset by an increase of $0.4 million in various expenses associated with our increased revenue and acquisition activities in 2012. SG&A expenses were $15.8 million in the first six months of 2012 compared to $15.5 million in the same period last year.

Our cash balances on June 30, 2012 were $59.6 million. Cash consumption during the second quarter was $3.8 million, as cash EBITDA of $18.4 million was offset by net cash capital expenditures for the quarter of $11.9 million and $0.4 million in current tax payments. Cash utilized by working capital totaled $9.7 million in the quarter.

Gross capital expenditures for the first six months of 2012 were $95.8 million, of which $91.1 million related to new data acquisition. Total underwriting revenue for the first six months of 2012 was $53.5 million. Our net cash capital expenditures totaled $41.6 million for the first half of 2012.

Our forecast of net cash capital expenditures for the last half of 2012 is $47.4 million bringing our total estimated net cash capital expenditures for the year to $89.0 million. Our current backlog of net cash capital expenditures related to acquisition programs is $46.5 million, of which we expect approximately $31.5 million to be incurred in the remainder of 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.

(Tables to follow)

   

SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 
(Unaudited)

June 30,

December 31,
2012 2011
ASSETS
 
Cash and cash equivalents $ 59,575 $ 74,894
Receivables, net 42,680 56,489
Net seismic data library 148,859 120,694
Net property and equipment 5,245 5,039
Investment in marketable securities - 262
Prepaid expenses, deferred charges and other 14,369 10,244
Intangible assets, net 23,785 26,814
Goodwill 205,636 205,838
Deferred income taxes 56 56
 
TOTAL ASSETS $ 500,205 $ 500,330
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 41,647 $ 60,550
Income taxes payable 2,176 1,464
Debt:
Senior Notes 275,000 275,000
Notes payable 63 95
Obligations under capital leases 3,160 3,161
Deferred revenue 50,605 48,845
Deferred income taxes 2,021 1,375
TOTAL LIABILITIES 374,672 390,490
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDER'S EQUITY
 
Common stock, par value $.001 per share; 100 shares authorized,
issued and outstanding at June 30, 2012 and December 31, 2011 - -
Additional paid-in capital 398,329 398,011
Retained deficit (293,209 ) (309,185 )
Accumulated other comprehensive income 20,413 21,014
TOTAL STOCKHOLDER'S EQUITY 125,533 109,840
 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 500,205 $ 500,330
       

SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands)

 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
 
REVENUE $ 46,028 $ 35,545 $ 118,575 $ 95,041
 
EXPENSES:
Depreciation and amortization 29,837 23,246 69,221 65,660
Cost of sales 151 39 248 55
Selling, general and administrative 7,705 7,925 15,797 15,490
37,693 31,210 85,266 81,205
 
INCOME FROM OPERATIONS 8,335 4,335 33,309 13,836
 
Interest expense, net (7,253 ) (10,265 ) (14,472 ) (20,424 )
Foreign currency exchange gains (losses) (426 ) 225 (15 ) 457
Gain on sale of marketable securities 230 980 230 2,467
Other income 402 115 483 164
 
Income (loss) before income taxes 1,288 (4,610 ) 19,535 (3,500 )
Provision for income taxes 18 416 3,559 1,015
 
NET INCOME (LOSS) $ 1,270 $ (5,026 ) $ 15,976 $ (4,515 )
 

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 Six Months Ended
June 30, June 30,
2012     2011 2012   2011
 
Acquisition revenue:
Cash underwriting $ 16,531 $ 11,034 $ 51,835 $ 33,646
Underwriting from non- monetary exchanges 360 344 1,628 1,383
Total acquisition revenue 16,891 11,378 53,463 35,029
 

Resale licensing revenue:

Cash resales 23,129 27,883 62,298 54,148
Non-monetary exchanges - - 709 6,015
Revenue recognition adjustments 4,367 (4,676 ) (806 ) (2,238 )
Total resale licensing revenue 27,496 23,207 62,201 57,925
 
Total seismic revenue 44,387 34,585 115,664 92,954
 
Solutions and other 1,641 960 2,911 2,087
Total revenue $ 46,028 $ 35,545 $ 118,575 $ 95,041
 

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

   
Three Months Ended Six Months Ended
June 30, June 30,
2012   2011 2012   2011
 
Unconventional 3D data cash resales $ 15,123 $ 18,037 $ 35,639 $ 37,534
Other revenue components:
Acquisition revenue 16,837 11,378 53,409 35,029
Non-monetary exchanges - - - 5,873
Revenue recognition adjustments 5,559 (1,558 ) 4,650 (1,594 )
Unconventional 3D data total revenue $ 37,519 $ 27,857 $ 93,698 $ 76,842
 

Percentage of total cash resales

65

%

65

%

57

%

69

%

Percentage of total revenue

82

%

78

%

79

%

81

%

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

   
Three Months Ended Six Months Ended
June 30, June 30,
2012   2011 2012   2011
 
Conventional 3D, 2D and offshore data cash resales $ 8,006 $ 9,846 $ 26,659 $ 16,614
Other revenue components:
Acquisition Revenue 54 - 54 -
Non-monetary exchanges - - 709 142
Revenue recognition adjustments (1,192 ) (3,118 ) (5,456 ) (644 )
Conventional 3D, 2D and offshore data total revenue $ 6,868 $ 6,728 $ 21,966 $ 16,112
 

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 and cash distributions from investments 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 and debt restructure 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 Six Months Ended
June 30, June 30,
2012   2011 2012   2011
 
Cash EBITDA $ 18,432 $ 23,308 $ 51,105 $ 45,005
Add (subtract) other revenue components
not included in cash EBITDA:
Acquisition revenue 16,891 11,378 53,463 35,029
Non-monetary exchanges - - 709 6,015
Revenue recognition adjustments 4,367 (4,676 ) (806 ) (2,238 )
Solutions non-cash revenue - - 20 -
Less:
Gain on sale of marketable securities (230 ) (980 ) (230 ) (2,467 )
Cash distributions from investments (400 ) - (400 ) -
Depreciation and amortization (29,837 ) (23,246 ) (69,221 ) (65,660 )
Non-recurring corporate expenses (573 ) (1,293 ) (871 ) (1,355 )
Non-cash operating expenses (315 ) (156 ) (460 ) (493 )
Operating income $ 8,335 $ 4,335 $ 33,309 $ 13,836
 

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 and six months ended June 30, 2012 and June 30, 2011 (in thousands):

     
Three Months Ended Six Months Ended
June 30, June 30,
2012     2011 2012     2011
 
Cost of Sales $ 151 $ 39 $ 248 $ 55
Cash SG&A expenses (1) 7,390 7,769 15,337 14,997
Cash operating expenses 7,541 7,808 15,585 15,052
Non-cash equity compensation expense 245 82 318 346
Non-cash rent expense 70 74 142 147
Total $ 7,856 $ 7,964 $ 16,045 $ 15,545
(1)   Includes $0.6 million, $1.3 million, $0.9 million and $1.4 million of non-recurring corporate expenses for the three months ended June 30, 2012 and 2011 and for the six months ended June 30, 2012 and 2011, respectively.
 

The following table summarizes our actual capital expenditures for the three and six months ended June 30, 2012 and our estimate for the year ending December 31, 2012 (in thousands):

       
Three Months Six Months Estimate for Total
Ended Ended Remainder Estimate
June 30, 2012 June 30, 2012 of 2012 for 2012
 
New data acquisition $ 26,912 $ 91,098 $ 103,402 $ 194,500
Cash purchases and data processing 561 1,134 9,866 11,000
Non-monetary exchanges 1,680 2,389 3,611 6,000
Property and equipment and other 918 1,168 332 1,500
Total capital expenditures 30,071 95,789 117,211 213,000
Less:
Non-monetary exchanges (1,680 ) (2,389 ) (3,611 ) (6,000 )
Cash underwriting (16,531 ) (51,835 ) (66,165 ) (118,000 )
Net cash capital expenditures $ 11,860 $ 41,565 $ 47,435 $ 89,000

Contacts

Seitel, Inc.
Marcia Kendrick, 713-881-8900

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Contacts

Seitel, Inc.
Marcia Kendrick, 713-881-8900