Pulse Seismic Inc. is pleased to report its financial and operating results for the three and nine months ended September 30, 2020. The unaudited condensed consolidated interim financial statements, accompanying notes and MD&A are being filed on SEDAR (www.sedar.com) and will be available on Pulse’s website at www.pulseseismic.com.
HIGHLIGHTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
CORPORATE AND COVID-19 UPDATE
Pulse continues to respond to very challenging business conditions brought about by the combined impact of the COVID-19 pandemic and the precipitous decline of oil prices brought on by the unprecedented demand fallout from COVID-19. These global events have caused significant declines in the 2020 capital budgets of Pulse’s customers in the oil and natural gas sector of Western Canada. While the Company continues to see a lack of clarity into future seismic data licensing opportunities, Pulse remains engaged with customers to monitor their seismic data requirements.
Pulse also remains committed to the health and safety of its employees. In response to the public health measures associated with the pandemic, Pulse implemented its disaster recovery plan and staff began working remotely as of March 13, 2020. Since the third quarter began, the Company has a combination of staff working both remotely and in the office, following strict policies and procedures which were developed using the guidance of the health authorities. Pulse’s business is supplying licences to a digitally-based product, seismic data, and as a result, staff are able to respond to customer needs in a timely manner. The Company’s primary focus and attention at this time continues to be the safety of its employees, preserving cash and protecting the balance sheet while weathering these uncertain and unprecedented times.
At September 30, 2020 the Company was in compliance with all covenants related to its syndicated credit facility. As announced in June, with the ongoing uncertainty as to the length and continued severity of this oil and gas downturn, Pulse negotiated with its lending syndicate for its senior credit facility to amend its financial covenants to ensure additional flexibility in future quarters, beginning July 1, 2020. The details are disclosed in the financial statements as well as in the liquidity, capital resources and capital requirements section of the MD&A, for the three and nine months ended September 30, 2020.
Beginning in the first quarter, and continuing through the year, Management and the Board of Directors of the Company implemented cost-cutting measures in reaction to the decline in commodity prices and uncertainty surrounding the continuation of the low oil price environment. Pulse has implemented salary reductions ranging from 7.5 percent to 20 percent for all its employees. Director fees for the chair of the Board were reduced by 50% and all other independent director’s fees were reduced by 40%. All administrative and operating expenses and capital spending plans have been evaluated and reduced where appropriate. The Company also received $135,000 from the Canada Emergency Wage Subsidy (CEWS) program for the third quarter for a total of $357,000 received so far in 2020. The CEWS program has been extended to June 2021 and the Company may receive additional subsidy, but this is dependent on meeting the criteria. The criteria for 2021 has yet to be announced.
SELECTED FINANCIAL AND OPERATING INFORMATION | ||||||||||
(thousands of dollars except per share data, | Three months ended September 30, | Nine months ended September 30, | Year ended | |||||||
numbers of shares and kilometres of seismic data) | 2020 | 2019 | 2020 | 2019 | December 31, | |||||
(unaudited) | (unaudited) | 2019 | ||||||||
Revenue | ||||||||||
Data library sales | 1,829 | 2,460 | 5,869 | 18,354 | 23,635 | |||||
Other revenue | 76 | 127 | 257 | 437 | 520 | |||||
Total revenue | 1,905 | 2,587 | 6,126 | 18,791 | 24,155 | |||||
Amortization of seismic data library | 2,489 | 3,557 | 8,855 | 10,700 | 14,200 | |||||
Net loss | (1,937 | ) | (2,861 | ) | (7,073 | ) | (2,652 | ) | (3,411 | ) |
Per share basic and diluted | (0.04 | ) | (0.05 | ) | (0.13 | ) | (0.05 | ) | (0.06 | ) |
Cash provided by operating activities | 603 | (1,609 | ) | 3,062 | 7,478 | 8,605 | ||||
Per share basic and diluted | 0.01 | (0.03 | ) | 0.06 | 0.14 | 0.16 | ||||
Cash EBITDA (a) | 1,222 | 1,325 | 3,290 | 13,678 | 17,557 | |||||
Per share basic and diluted (a) | 0.02 | 0.02 | 0.06 | 0.25 | 0.33 | |||||
Shareholder free cash flow (a) | 861 | 1,072 | 2,395 | 10,624 | 13,605 | |||||
Per share basic and diluted (a) | 0.02 | 0.02 | 0.04 | 0.20 | 0.25 | |||||
Capital expenditures | ||||||||||
Seismic data purchases, digitization and related costs | 96 | – | 287 | 61,029 | 61,029 | |||||
Property and equipment | – | – | 7 | 398 | 439 | |||||
Total capital expenditures | 96 | – | 294 | 61,427 | 61,468 | |||||
Weighted average shares outstanding | ||||||||||
Basic and diluted | 53,793,317 | 53,793,317 | 53,793,317 | 53,793,317 | 53,793,317 | |||||
Shares outstanding at period-end | 53,793,317 | 53,793,317 | 53,793,317 | |||||||
Seismic library | ||||||||||
2D in kilometres | 829,207 | 829,207 | 829,207 | |||||||
3D in square kilometres | 65,310 | 65,310 | 65,310 | |||||||
FINANCIAL POSITION AND RATIOS |
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September 30, | September 30, | December 31, | ||||||||
(thousands of dollars except ratios) | 2020 | 2019 | 2019 | |||||||
Working capital | 2,007 | 579 | 596 | |||||||
Working capital ratio | 1.6:1 | 1.1:1 | 1.1:1 | |||||||
Cash and cash equivalents | 282 | 814 | 1,356 | |||||||
Total assets | 56,901 | 70,994 | 69,807 | |||||||
Long-term debt | 28,417 | 31,854 | 31,511 | |||||||
Trailing twelve-month (TTM) cash EBITDA (b) | 7,169 | 16,887 | 17,557 | |||||||
Shareholders’ equity | 24,909 | 32,674 | 31,973 | |||||||
Long-term debt to TTM cash EBITDA ratio | 3.96 | 1.90 | 1.79 | |||||||
Long-term debt to equity ratio | 1.14 | 0.97 | 0.99 | |||||||
These non-GAAP financial measures are defined, calculated and reconciled to the nearest GAAP financial measures in the Management’s Discussion and Analysis.
OUTLOOK
The current extreme economic uncertainty renders it difficult for Pulse to issue a specific outlook concerning industry and market conditions over the next 12 months. The plunge in domestic Canadian crude oil prices and further reductions to oil and natural gas producers’ capital expenditures make it very likely that industry activity will be extremely low over the next several quarters. Accordingly, Pulse expects low traditional seismic data library sales. Transaction-based sales however, occur as a result of industry merger and acquisition and asset sales and could happen at any time.
Having spent the past five years reducing controllable costs, maximizing efficiencies, maintaining a strong balance sheet and optimizing its access to credit, Pulse is well-prepared to weather an extended period of weak sales. As demonstrated in the first three quarters of 2020, the Company can generate positive shareholder free cash flow with sales of $5.9 million. Pulse will continue to seek further cost reductions where possible, without impairing the Company’s ability to serve its clients, conduct sales and act on attractive opportunities. The seismic library’s data does not deteriorate or expire and incurs minimal maintenance costs.
CORPORATE PROFILE
Pulse is a market leader in the acquisition, marketing and licensing of 2D and 3D seismic data to the western Canadian energy sector. Pulse owns the largest licensable seismic data library in Canada, currently consisting of approximately 65,310 square kilometres of 3D seismic and 829,207 kilometres of 2D seismic. The library extensively covers the Western Canada Sedimentary Basin where most of Canada’s oil and natural gas exploration and development occur.
For further information, please contact:
Neal Coleman, President and CEO
Or
Pamela Wicks, Vice President Finance and CFO
Tel.: 403-237-5559
Toll-free: 1-877-460-5559
E-mail: info@pulseseismic.com.
Please visit our website at www.pulseseismic.com