Seitel Announces Fourth Quarter and Year End 2012 Results

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

Fourth Quarter and Full Year Highlights -

                       
(in millions) Fourth Quarter Full Year
2012       2011 2012       2011
Cash Resales $ 58.4 $ 42.4 $ 136.2 $ 134.5
Total Revenue 70.3 70.8 240.5 218.0
Cash EBITDA 51.6 35.0 115.3 112.0
 

Total revenue for the fourth quarter of 2012 was $70.3 million, consisting of acquisition underwriting revenue of $28.7 million, total resale licensing revenue of $40.6 million and Solutions and other revenue of $1.1 million. This compares to total revenue for the fourth quarter of 2011 of $70.8 million, consisting of acquisition underwriting revenue of $27.7 million, total resale licensing revenue of $42.0 million and Solutions and other revenue of $1.1 million. Cash resales in the fourth quarter of 2012 were $58.4 million, an increase of 38%, compared to $42.4 million in the fourth quarter of 2011.

Total revenue for the year ended December 31, 2012 was $240.5 million, an increase of $22.5 million, or 10%, from the 2011 level of $218.0 million. Activity for new data acquisition continues to be strong with acquisition underwriting revenue for 2012 totaling $107.3 million, an increase of $29.8 million as compared to 2011. We continue to add data in the key active unconventional plays in North America focused on oil and liquids-rich hydrocarbons including Eagle Ford, Utica/Marcellus, Niobrara, Granite Wash (Panhandle Plays), Montney and Cardium. Total resale licensing revenue was $127.5 million in 2012 compared to $136.3 million in 2011. For the year ended December 31, 2012, cash resales were $136.2 million compared to cash resales of $134.5 million last year. In 2012, cash resales were distributed across most basins in which we have seismic data, including unconventional and conventional areas, with a focus on oil and liquids-rich areas. Solutions and other revenue was $5.7 million for 2012 compared to $4.4 million in 2011.

For the fourth quarter of 2012, our net income was $19.9 million compared to the 2011 fourth quarter net income of $11.8 million. Lower amortization on our seismic data library was the primary reason for the improvement in net income between quarters. For the year ended December 31, 2012, our net income was $37.1 million compared to $2.2 million in 2011. The increase in revenue and lower interest expense were the primary drivers for the improved results year over year, along with 2011 including 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 $51.6 million for the fourth quarter of 2012 compared to $35.0 million for the fourth quarter of 2011. Cash EBITDA was $115.3 million for the year ended December 31, 2012 compared to $112.0 million in 2011.

"We ended the year on a strong note, generating $58.4 million in cash resales in the fourth quarter, the highest in the company's history," commented Rob Monson, president and chief executive officer. "Our newer data as well as older data continue to generate cash resales. We grew our data library by 2,800 square miles in 2012, focusing on data in oil and liquids-rich areas of the key unconventional plays in North America. We now have 17,450 square miles of unconventional data in our library, with 2.400 square miles in progress. The significant investments made in 2011 and 2012 are expected to drive growth in the future."

Selling, general and administrative (“SG&A”) expenses were $8.4 million for the fourth quarter of 2012 compared to $8.5 million in the fourth quarter of last year. SG&A expenses were $29.1 million for the year ended December 31, 2012 compared to $31.6 million in the same period last year. SG&A expenses decreased between the periods primarily due to a decrease in variable compensation.

We made a strategic decision to increase our capital investments in 2012 to take advantage of the strong opportunities to increase the size of our data library. Gross capital expenditures for 2012 were $192.6 million, of which $176.1 million related to new data acquisition. Total acquisition underwriting revenue for the year was $107.3 million. Our net cash capital expenditures totaled $87.5 million for 2012.

We have reduced our expected level of net cash capital expenditures for 2013 given the strong level of investment made in the last two years in order to generate additional free cash flow. Currently, we are forecasting our net cash capital expenditures for 2013 to be approximately $60.0 million. Our current backlog of net cash capital expenditures related to acquisition programs is $36.8 million, of which we expect the majority to be incurred in 2013.

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 for the exploration for and development 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 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 37,000 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.

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)

 

        December 31,       December 31,
2012 2011
ASSETS
 
Cash and cash equivalents $ 61,891 $ 74,894
Receivables, net 64,212 56,489
Net seismic data library 180,117 120,694
Net property and equipment 4,818 5,039
Investment in marketable securities

-

262
Prepaid expenses, deferred charges and other 10,774 10,244
Intangible assets, net 20,828 26,814
Goodwill 208,020 205,838
Deferred income taxes 84   56  
 
TOTAL ASSETS $ 550,744   $ 500,330  
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 37,521 $ 36,593
Accrued liabilities 19,569 16,856
Employee compensation payable 5,693 7,101
Income taxes payable 4,134 1,464
Debt:
Senior Notes 275,000 275,000
Notes payable 29 95
Obligations under capital leases 3,113 3,161
Deferred revenue 52,857 48,845
Deferred income taxes 2,470   1,375  
TOTAL LIABILITIES 400,386   390,490  
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDER'S EQUITY
 

Common stock, par value $.001 per share; 100 shares authorized, issued and outstanding at December 31, 2012 and December 31, 2011

-

-

Additional paid-in capital 398,772 398,011
Retained deficit (272,135 ) (309,185 )
Accumulated other comprehensive income 23,721   21,014  
TOTAL STOCKHOLDER'S EQUITY 150,358   109,840  
 
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 550,744   $ 500,330  
 
 

SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

 

                             
(Unaudited)
Quarter Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
 
REVENUE $ 70,327 $ 70,759 $ 240,458 $ 218,008
 
EXPENSES:
Depreciation and amortization 32,830 43,251 139,754 142,963
Cost of sales 112 32 464 100
Selling, general and administrative   8,446     8,522     29,088     31,649  
  41,388     51,805     169,306     174,712  
 
INCOME FROM OPERATIONS 28,939 18,954 71,152 43,296
 
Interest expense, net (7,273 ) (7,145 ) (29,011 ) (34,767 )
Foreign currency exchange gains (losses) (355 ) 448 681 (726 )
Loss on early extinguishment of debt

-

-

-

(7,912 )
Gain on sale of marketable securities

-

-

230 2,467
Other income   70     42     780     250  
 
Income before income taxes 21,381 12,299 43,832 2,608
Provision for income taxes   1,436     457     6,782     392  
 
NET INCOME $ 19,945   $ 11,842   $ 37,050   $ 2,216  
 

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):

             
Quarter Ended Year Ended
December 31, December 31,
2012       2011 2012       2011
 
Total acquisition underwriting revenue $ 28,688 $ 27,705 $ 107,254 $ 77,406
 
Resale licensing revenue:
Cash resales 58,424 42,350 136,234 134,497
Non-monetary exchanges 261 738 1,554 7,609
Revenue recognition adjustments (18,116 ) (1,087 ) (10,257 ) (5,856 )
Total resale licensing revenue 40,569   42,001   127,531   136,250  
 
Total seismic revenue 69,257   69,706   234,785   213,656  
 
Solutions and other 1,070   1,053   5,673   4,352  
Total revenue $ 70,327   $ 70,759   $ 240,458   $ 218,008  
 

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 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, operating income (in thousands):

               
Quarter Ended Year Ended
December 31, December 31,
2012       2011 2012       2011
Cash EBITDA $ 51,591 $ 34,971 $ 115,347 $ 112,031
Add (subtract) other revenue components not included in cash EBITDA:
Acquisition underwriting revenue 28,688 27,705 107,254 77,406
Non-monetary exchanges 261 738 1,554 7,609
Revenue recognition adjustments (18,116 ) (1,087 ) (10,257 ) (5,856 )
Solutions non-cash revenue

-

2 20 71
Less:
Gain on sale of marketable securities

-

-

(230 ) (2,467 )
Cash distributions from investments

-

-

(400 )

-

Depreciation and amortization (32,830 ) (43,251 ) (139,754 ) (142,963 )
Non-recurring corporate expenses (234 )

-

(1,228 ) (1,792 )
Non-cash operating expenses (421 ) (124 ) (1,154 ) (743 )
Operating income $ 28,939   $ 18,954   $ 71,152   $ 43,296  
 

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 periods indicated (in thousands):

               
Quarter Ended Year Ended
December 31, December 31,
2012       2011 2012       2011
Cost of Sales $ 112 $ 32 $ 464 $ 100
Cash SG&A expenses (1) 8,025   8,398   27,934   30,906
Cash operating expenses 8,137 8,430 28,398 31,006
Non-cash equity compensation expense 242 53 761 453
Non-cash rent expense 179   71   393   290
Total $ 8,558   $ 8,554   $ 29,552   $ 31,749
 

(1)

      Includes $0.2 million, $1.2 million and $1.8 million of non-recurring corporate expenses for the quarter ended December 31, 2012, the year ended December 31, 2012 and the year ended December 31, 2011, respectively.
 

The following table summarizes our actual capital expenditures for 2012 and our 2013 estimated capital expenditures (in thousands):

               
Estimate for
Year Ended Year Ending
Dec. 31, 2012 Dec. 31, 2013
New data acquisition $ 176,062 $ 181,500
Cash purchases and data processing 11,678 5,600
Non-monetary exchanges 3,376 7,400
Property and equipment and other 1,517   1,900  
Total capital expenditures 192,633 196,400
Less:
Non-monetary exchanges (3,376 ) (7,400 )
Cash underwriting (101,803 ) (129,000 )
Net cash capital expenditures $ 87,454   $ 60,000  
 

Contacts

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

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Contacts

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