Seitel Announces Third Quarter 2012 Results

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

Total revenue for the nine months ended September 30, 2012 was $170.1 million, an increase of $22.9 million, or 16%, from the 2011 nine month level of $147.2 million. Activity for new data acquisition continues to be strong with acquisition revenue for the first nine months of 2012 totaling $78.6 million, an increase of $28.9 million as compared to the same period in 2011. We continue to add data in the key active unconventional plays in North America including Eagle Ford, Utica/Marcellus, Niobrara, Granite Wash, Montney and Cardium. Total resale licensing revenue was $87.0 million for the first nine months of 2012 compared to $94.2 million in 2011. For the nine months of 2012, cash resales were $77.8 million and were comprised of $47.9 million, or 62%, from 3D data located in unconventional plays and $29.9 million from conventional 3D, 2D and offshore data. This compares to cash resales of $92.1 million in the same period last year which were comprised of $70.1 million, or 76%, from 3D data located in unconventional plays and $22.0 million from conventional 3D, 2D and offshore data. Solutions revenue was $4.6 million for the first nine months of 2012 compared to $3.3 million in the same period of 2011.

Total revenue for the third quarter of 2012 was $51.6 million compared to $52.2 million in the third quarter of 2011. Acquisition revenue was $25.1 million in the third quarter of 2012 compared to $14.7 million in the same period in 2011. Total resale licensing revenue was $24.8 million in the third quarter of 2012 compared to $36.3 million in the same period last year. Cash resales in the third quarter of 2012 were $15.5 million and were comprised of $12.2 million, or 79%, from 3D data located in unconventional plays and $3.3 million from conventional 3D, 2D and offshore data. This compares to cash resales in the third quarter of 2011 of $38.0 million that were comprised of $32.6 million, or 86%, from 3D data located in unconventional plays and $5.4 million from conventional 3D, 2D and offshore data. Solutions revenue was $1.7 million compared to $1.2 million in the same period last year.

For the nine months ended September 30, 2012, our net income was $17.1 million compared to a $9.6 million net loss for the same period last year. The increase in revenue was the primary reason for the improved results for the first nine months of this year. For the third quarter of 2012, our net income was $1.1 million compared to last year's net loss of $5.1 million which included a $7.9 million charge for early extinguishment of debt.

Cash EBITDA, generally defined as cash resales and solutions revenue less cash operating expenses (excluding various non-recurring items), was $63.8 million in the first nine months of 2012 compared to $77.1 million in the first nine months of last year.

"We have generally experienced solid activity, especially in our ability to grow our market share in acquiring data for our library through underwritten new surveys," commented Rob Monson, president and chief executive officer. "This is particularly true of our client underwriting partners working with us to acquire new data in unconventional plays as reflected in our strong acquisition revenue in the quarter and first nine months. While cash resales can fluctuate quarter to quarter depending on the overall industry environment, availability of new data and timing of client approval processes, we are encouraged about the cash resale pipeline for both the fourth quarter and going into 2013 as many of our new surveys are expected to be completed over the next several quarters. We continue to grow our resale opportunity list based on client land positions in our growing unconventional oriented data. We are confident that our quick new-survey payback and return on investment will continue as our fundamental business approach remains constant."

Selling, general and administrative (“SG&A”) expenses were $4.8 million for the third quarter of 2012 compared to $7.6 million in last year's third quarter. SG&A expenses were $20.6 million in the first nine months of 2012 compared to $23.1 million in the same period last year. SG&A expenses decreased between the periods primarily due to a decrease in annual cash incentive compensation.

We have focused investment in our seismic data library on areas that we believe will drive future growth in cash flows over many years. As a result, to date in 2012, approximately 2,300 square miles have been added to our data library with an additional 2,200 square miles in progress. Gross capital expenditures for the first nine months of 2012 were $144.4 million, of which $130.6 million related to new data acquisition. Total underwriting revenue for the first nine months of 2012 was $78.6 million. Our net cash capital expenditures totaled $66.0 million for the first nine months of 2012.

Our forecast of net cash capital expenditures for the last quarter of 2012 is $23.2 million bringing our total estimated net cash capital expenditures for the year to $89.2 million. Our current backlog of net cash capital expenditures related to acquisition programs is $39.4 million, of which we expect approximately half 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 47,000 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)

September 30,
2012

December 31,
2011

ASSETS
 
Cash and cash equivalents $ 42,819 $ 74,894
Receivables, net 49,097 56,489
Net seismic data library 164,052 120,694
Net property and equipment 5,138 5,039
Investment in marketable securities

-

262
Prepaid expenses, deferred charges and other 9,210 10,244
Intangible assets, net

22,543

26,814
Goodwill 209,163 205,838
Deferred income taxes 56   56  
 
TOTAL ASSETS $ 502,078   $ 500,330  
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 43,464 $ 60,550
Income taxes payable 3,803 1,464
Debt:
Senior Notes 275,000 275,000
Notes payable 46 95
Obligations under capital leases 3,210 3,161
Deferred revenue 43,092 48,845
Deferred income taxes 1,499   1,375  
TOTAL LIABILITIES 370,114   390,490  
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDER'S EQUITY
 
Common stock, par value $.001 per share; 100 shares authorized,
issued and outstanding at September 30, 2012 and December 31, 2011

-

-

Additional paid-in capital 398,530 398,011
Retained deficit (292,080 ) (309,185 )
Accumulated other comprehensive income 25,514   21,014  
TOTAL STOCKHOLDER'S EQUITY 131,964   109,840  
 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 502,078   $ 500,330  
                 

SEITEL, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

(In thousands)

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
 
REVENUE $ 51,556 $ 52,208 $ 170,131 $ 147,249
 
EXPENSES:
Depreciation and amortization 37,703 34,052 106,924 99,712
Cost of sales 104 13 352 68
Selling, general and administrative   4,845     7,637     20,642     23,127  
  42,652     41,702     127,918     122,907  
 
INCOME FROM OPERATIONS 8,904 10,506 42,213 24,342
 
Interest expense, net (7,266 ) (7,198 ) (21,738 ) (27,622 )
Foreign currency exchange gains (losses) 1,051 (1,631 ) 1,036 (1,174 )
Loss on early extinguishment of debt

-

(7,912 )

-

(7,912 )
Gain on sale of marketable securities

-

-

230 2,467
Other income   227     44     710     208  
 
Income (loss) before income taxes 2,916 (6,191 ) 22,451 (9,691 )
Provision (benefit) for income taxes   1,787     (1,080 )   5,346     (65 )
 
NET INCOME (LOSS) $ 1,129   $ (5,111 ) $ 17,105   $ (9,626 )
 

Cash resales represent new contracts for data licenses from our library, including data currently in progress, payable in cash. We believe this measure, along with new data acquisition activity, 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,
2012 2011 2012 2011
Acquisition revenue:
Cash underwriting $ 23,458 $ 13,741 $ 75,293 $ 47,387

Underwriting from non-monetary exchanges

  1,645   931     3,273   2,314  
Total acquisition revenue   25,103   14,672     78,566   49,701  
Resale licensing revenue:
Cash resales 15,512 37,999 77,810 92,147
Non-monetary exchanges 584 856 1,293 6,871
Revenue recognition adjustments   8,665   (2,531 )   7,859   (4,769 )
Total resale licensing revenue   24,761   36,324     86,962   94,249  
 
Total seismic revenue   49,864   50,996     165,528   143,950  
 
Solutions and other   1,692   1,212     4,603   3,299  
Total revenue $ 51,556 $ 52,208   $ 170,131 $ 147,249  
 

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
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
Unconventional 3D data cash resales $ 12,222 $ 32,576 $ 47,861 $ 70,110
Other revenue components:
Acquisition revenue 24,955 14,672 78,364 49,701
Non-monetary exchanges

-

733

-

6,606
Revenue recognition adjustments   7,813     (1,813 )   12,463     (3,407 )
Unconventional 3D data total revenue $ 44,990   $ 46,168   $ 138,688   $ 123,010  
 
Percentage of total cash resales 79 % 86 % 62 % 76 %
Percentage of total revenue 87 % 88 % 82 % 84 %
 

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
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
Conventional 3D, 2D and offshore data cash resales $ 3,290 $ 5,423 $ 29,949 $ 22,037
Other revenue components:
Acquisition Revenue 148

-

202

-

Non-monetary exchanges 584 123 1,293 265
Revenue recognition adjustments   852   (718 )   (4,604 )   (1,362 )
Conventional 3D, 2D and offshore data total revenue $ 4,874 $ 4,828   $ 26,840   $ 20,940  
 

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):

               
Nine Months Ended
September 30,
2012 2011
Cash EBITDA $ 63,756 $ 77,060
 
Add (subtract) other revenue components not included in cash EBITDA:
Acquisition revenue 78,566 49,701
Non-monetary exchanges 1,293 6,871
Revenue recognition adjustments 7,859 (4,769 )
Solutions non-cash revenue 20 69
Less:
Gain on sale of marketable securities (230 ) (2,467 )
Cash distributions from investments (400 )

-

Depreciation and amortization (106,924 ) (99,712 )
Non-recurring corporate expenses (994 ) (1,792 )
Non-cash operating expenses   (733 )   (619 )
Operating income $ 42,213   $ 24,342  
 

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 nine months ended September 30, 2012 and September 30, 2011 (in thousands):

                 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
Cost of Sales $ 104 $ 13 $ 352 $ 68
Cash SG&A expenses (1)   4,572   7,511   19,909   22,508
Cash operating expenses 4,676 7,524 20,261 22,576
Non-cash equity compensation expense 201 54 519 400
Non-cash rent expense   72   72   214   219
Total $ 4,949 $ 7,650 $ 20,994 $ 23,195
 
  (1)   Includes $0.1 million, $0.4 million, $0.9 million and $1.8 million of non-recurring corporate expenses for the three months ended September 30, 2012 and 2011 and for the nine months ended September 30, 2012 and 2011, respectively.
 

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

                 
Three Months
Ended
September 30, 2012

Nine Months
Ended
September 30, 2012

Estimate for
Remainder of
2012

Total
Estimate for
2012

New data acquisition $ 39,511 $ 130,609 $ 53,191 $ 183,800
Cash purchases and data processing 8,205 9,339 1,961 11,300
Non-monetary exchanges 726 3,115 885 4,000
Property and equipment and other   203     1,371     129     1,500  
Total capital expenditures 48,645 144,434 56,166 200,600
Less:
Non-monetary exchanges (726 ) (3,115 ) (885 ) (4,000 )
Cash underwriting   (23,458 )   (75,293 )   (32,107 )   (107,400 )
Net cash capital expenditures $ 24,461   $ 66,026   $ 23,174   $ 89,200  

Contacts

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

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Contacts

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