Seitel Announces Second 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 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