Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today
announces its 2012 third quarter operating and financial
results.
Selected Highlights
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(000s, except per
share data) Three months ended Nine Months Ended
(unaudited) September 30 September 30
2012 2011 Change 2012 2011 Change
$ $ % $ $ %
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue 28,853 47,237 (39) 149,936 163,130 (8)
Revenue excluding
reimbursables 24,918 38,035 (34) 126,739 113,548 12
Gross margin(1) 5,826 9,393 (38) 40,060 28,069 43
As a % of
revenue
excluding
reimbursables
23% 25% 32% 25%
Net earnings
(loss) (3,903) (332) n/m 6,101 (143) n/m
Per share -
basic (0.17) (0.01) n/m 0.27 (0.01) n/m
EBITDA (2) 1,311 5,375 (76) 25,620 16,439 56
Per share -
basic 0.06 0.24 (76) 1.13 0.72 56
Cash flow from
operations (3) 2,317 5,642 (59) 25,130 16,344 54
Per share -
basic 0.10 0.25 (59) 1.11 0.72 54
Weighted average
shares
outstanding for
the period -
basic 22,701 22,795 n/m 22,725 22,795 n/m
Capital
expenditures 2,214 1,852 20 23,667 8,235 187
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September December
As at 30 31
2012 2011 Change
$ $ %
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Working capital 828 10,411 (92)
Total assets 117,412 141,088 (17)
Total long-term
borrowings (4) 20,269 29,073 (30)
Equity 63,186 57,993 9
1. Gross margin is defined as gross profit before depreciation and
amortization. Gross margin is a measure that does not have a meaning
prescribed under IFRS in Canada and accordingly, may not be comparable
to similar measures used by other companies.
2. EBITDA is defined as income before interest, taxes, depreciation,
amortization and impairments, gains or losses on foreign exchange, gains
or losses on sales of capital assets, bad debt provisions and stock-
based compensation. EBITDA and EBITDA per share are presented because
they are frequently used by securities analysts and others for
evaluating companies and their ability to service debt. EBITDA is a
measure that does not have any standardized meaning prescribed under
IFRS in Canada and accordingly, may not be comparable to similar
measures used by other companies. The Company is consistent with its
calculation of EBITDA year over year.
3. Cash flow from operations is defined as "Cash provided by operating
activities before changes in non-cash working capital." Cash flow from
operations and cash flow from operations per share are measures that
provide shareholders and potential investors with additional information
regarding the Company's liquidity and its ability to generate funds to
finance its operations. Management utilizes these measures to assess the
Company's ability to finance operating activities and capital
expenditures. Cash flow from operations and cash flow from operations
per share are not measures that have any standardized meaning prescribed
by IFRS in Canada, and accordingly, may not be comparable to similar
measures used by other companies. The Company is consistent with its
calculation of cash flow from operations year over year.
4. Includes capital lease obligations and long-term debt, including current
portions.
Third Quarter Highlights:
-- Tesla USA successfully utilized its recently purchased 10,000 stations
(30,000 channels) of wireless multi-component seismic acquisition system
("Hawk") throughout the third quarter of 2012 under the previously
announced agreement with a multi-client geophysical company.
-- Tesla Offshore significantly improved revenues from the comparative
quarter benefitting from work on up to four geophysical vessels, most of
which was on large scale day rate projects. This supplemented the
historically strong summer construction season supporting client
operations on up to 12 vessels.
-- Tesla Offshore expanded its operations outside of the Gulf of Mexico,
its historical operating area, with special construction projects in
Alaska, Israel and Argentina.
-- The Company hired and appointed Nathaniel Usher as Director of
Geoscience for Tesla Offshore. Mr. Usher previously worked for ARCO/BP
for 30 years and will assist Tesla Offshore in optimizing use of state
of the art technology in geophysical survey operations, including the
Autonomous Underwater Vehicle ("AUV") service line, and to further the
development of geohazards interpretation services for clients worldwide.
Subsequent to September 30, the Company approved a $6 million capital
expenditure to acquire a Bluefin AUV which is expected to be operational
by July 2013.
-- Tesla Canada operated two crews periodically during the historically
slower summer period including projects in Ontario and Quebec. Further,
Tesla built a significant backlog in Canada for the fourth quarter of
2012 and the first quarter of 2013 including work commitments for the
Company's 13,000 stations (39,000 channels) of three-component ("3C")
recording equipment and the 10,000 station Hawk system.
-- Tesla International operated a crew in the UK and Denmark on hydrocarbon
and mineral projects throughout the quarter. Tesla International also
secured land and marine projects in Tanzania and the Democratic Republic
of the Congo ("DRC") that will operate in the fourth quarter of 2012 and
the first quarter of 2013.
Third Quarter Financial Results:
The Company's consolidated revenues including reimbursables
decreased 39% in the third quarter of 2012 compared to the third
quarter of 2011 while the Company's revenue excluding reimbursables
decreased 35%. Significant declines in activity levels for Tesla
International and Tesla Trinidad were only partially offset by an
improvement in activity levels for Tesla Offshore. There were also
slight declines in activity for Tesla Canada and Tesla USA. Tesla
International was negatively impacted by a reduced level of
activity in Africa during the third quarter of 2012 whereas
revenues were generated from operations for two crews in Africa
during the third quarter of 2011. Activity levels in the UK and
Europe during the third quarter of 2012 were similar to those in
the third quarter of 2011. Tesla Trinidad completed the
Guayaguayare program in April of 2012. As such, no revenues were
generated in the third quarter of 2012. Significant revenues were
generated from this project in the third quarter of 2011 relating
to front- end operations. Tesla Offshore's geophysical and
construction activity levels both improved in the third quarter of
2012 compared to the third quarter of 2011 when operations were
limited with the continued negative impact of the Macondo oil spill
on activity levels in the Gulf. The third quarter remained slow for
Tesla Canada due to limited activity for the industry with
continued low natural gas prices reducing the number of summer
programs. Several programs were also delayed into the fourth
quarter. Tesla USA's third quarter activity levels increased
significantly from the second quarter of 2012 with two crews
operational including programs for Tesla USA's recently purchased
wireless multi-component "Hawk" system under an extended seismic
services agreement with a multi-client geophysical company. In the
third quarter of 2011, Tesla USA operated four crews with a
significantly higher level of third party contractor revenues.
Gross margin dropped in the third quarter of 2012 compared to
the third quarter of 2011 due to declines in margin from Tesla
Canada and Tesla International partially offset by improvements
from Tesla USA and Tesla Offshore. Tesla USA margins improved
despite the slight drop in revenues benefitting from the
utilization of the Hawk system and a significant reduction in
rental costs. Tesla Offshore's gross margin benefitted with the
increase in activity. Margins from Tesla Canada decreased due to a
reduction in revenues from the comparative quarter along with an
increase in overhead costs. Tesla International's gross margin
declined with the lack of work in Africa. Gross margin as a
percentage of total revenue (including reimbursables) remained at
20% in the third quarter of 2012 consistent with the third quarter
of 2011. Current quarter gross margin percentage benefitted from
improved results for Tesla USA, an increased contribution from
Tesla Offshore, a significant decrease in flow-through
reimbursables associated with Tesla USA revenues and the
reimbursable nature of third party contractor costs incurred during
the front end phase of the Trinidad operations in the third quarter
of 2011. Gross margin as a percentage of revenue (excluding
reimbursables) declined slightly quarter over quarter.
The Company's EBITDA in the third quarter of 2012 decreased
compared to the third quarter of 2011 due to the decline in
absolute gross margin along with an increase in general and
administrative costs across most segments. The Company's
consolidated net loss increased in the third quarter of 2012
exceeding the consolidated net loss in the third quarter of 2011
due to the reduced EBITDA, increased depreciation related to the
Hawk system and reduced gains from disposals and foreign exchange.
This was partially offset by a reduction in tax expense.
The Company's working capital decreased $5.3 million during the
quarter to $0.8 million including a net cash deficit of $5.9
million. Cash and operating lines were required to fund working
capital requirements in certain jurisdictions, repay $2.4 million
of regular finance leases and related interest and fund $2.4
million of capital expenditures during the third quarter of
2012.
Total long-term borrowings were reduced by $2.1 million during
the quarter to $20.3 million. At September 30, 2012, the Company
had $43.2 million of unused committed bank credit and lease
facilities.
Shareholders' equity decreased $4.7 million to $63.2 million
during the quarter due to the loss incurred along with a decrease
in accumulated other comprehensive income with the strengthening of
the Canadian dollar against the US dollar functional currency of
the Company's US subsidiaries. This was partially offset by the
exercise of options and an increase in contributed surplus relating
to share-based payment charges.
Outlook:
North America Land Operations
The Company has seen a recent drop in demand for fall and winter
programs in Canada. Tesla Canada expects a comparable level of
activity to that experienced in late 2011 and anticipates peaking
at five crews during the fourth quarter of 2012. However,
significant winter programs have been cancelled due to foreign
investment complications for a major client. Tesla Canada now plans
to operate six crews during the first quarter of 2013 (down from
eight), with a continued focus on 3C technology for oilsands
projects and shale plays in western Canada. Tesla Canada will also
utilize the Company's Hawk system on a large program throughout the
first quarter of 2013. Committed crew rates remain strong and
reduced rental commitments due to utilization of the Company's
expanded channel count should benefit margins. However, these
benefits may be partially offset by depressed rates on any future
projects due to excess capacity created by project cancellations
across the industry. Tesla is working to secure appropriate
personnel in a competitive environment for the busy winter
season.
Tesla USA continues to utilize the 10,000 station Hawk system on
2D and 3D programs under an agreement with a multi-client
geophysical company. Production is in line with planned results and
should continue to generate improved margins from those realized
under current industry metrics. This crew expects to continue work
under the agreement for the remainder of 2012 at which point the
Hawk system will be moved to Canada for committed work throughout
the first quarter of 2013. The Hawk system will be returned to the
US for early April 2013 to continue work with the multi-client
geophysical company. Tesla USA is pursuing work for a second crew.
The slow increase in natural gas pricing continues to be reflected
within the industry by increased activity levels focused on oil and
liquids rich shale plays such as the Bakken, Utica (eastern Ohio)
and Marcellus (western Pennsylvania and West Virginia) which may
lead to an additional multi-component 3D recording crew at the end
of the second quarter of 2013. Activity in the Denver-Julesburg
("DJ") Basin has been slower than projected but is expected to
increase in the second quarter of 2013. Pricing of services
continues to be the driving factor in this competitive market with
requirements for higher channel counts, wireless recording systems
and third-party multi-client programs driving the demand for
services.
International Operations
Tesla International's UK and European crew has seen a sustained
demand for acquisition services in both the hydrocarbon and
minerals sectors. Indicators suggest that this demand will be
maintained. This crew should be fully utilized for the remainder of
the year and has secured commitments for projects during parts of
2013. Management is pursuing opportunities to fill gaps in the
current 2013 work schedule.
Tesla International is currently in the mobilization process for
a land and marine project in Tanzania with operational activity
expected to begin shortly. This project will last well into the
first quarter of 2013. Tesla International is also mobilizing for a
land and marine project in the DRC. This project is a continuation
of work performed in late 2011 and early 2012. The land portion of
this program is expected to begin in December with the larger
marine portion to follow once the Tanzania marine program is
completed during the first quarter of 2013.
Tesla International is currently maintaining equipment in a Duty
Free Zone near Djibouti, with vibrosies units in Oman, in order to
facilitate efficient mobilization to potential projects in the
region. The Company is currently pursuing projects in East Africa
and surrounding areas to utilize this equipment.
Bid activity remains busy with a multitude of prospective work
programs in the UK and Europe. Key areas of East Africa and North
Africa are expected to see a return to greater activity following
political stabilization and the interest of some of the major
operators in developing their activities in the area. Tesla
International expects to be successful in obtaining additional work
from both of these opportunities and from exploiting some potential
new areas of activity to extend its current backlog. Tesla
International also recently opened a branch office in Islamabad to
explore opportunities in the region.
The UK technical services office remains steady with a number of
processing and interpretation projects recently awarded and
underway with full utilization of capacity expected to continue.
The Jakarta processing office has recently been awarded some
sizable projects that will keep the office fully utilized through
early 2013. Additional opportunities continue to be pursued to
maintain backlog.
Tesla continues to investigate opportunities in South America,
specifically Colombia, Ecuador and Suriname. Relationships with
exploration companies are being developed with Tesla's capabilities
and experience in comparable terrains and environments being
highlighted for potential programs in the region.
Offshore Operations
Tesla Offshore is benefitting from increased activity levels in
the Gulf of Mexico. Tesla Offshore operated two geophysical vessels
on large scale day rate exploration projects through the early part
of the fourth quarter of 2012. With winter coming, these contracts
will be put on hold and continued in the spring of 2013. Tesla
Offshore is utilizing a deep tow system aboard a third geophysical
vessel and will remain operational into November on day rate
projects.
The central and eastern Gulf of Mexico lease sale was held on
June 20, 2012. This was positive news for Tesla Offshore. New lease
sales generally lead to an increase in geophysical operations as
operators require geophysical surveys for the purpose of securing
drilling permits and evaluating new lease properties. In addition,
hurricane Isaac's path through the Gulf of Mexico has resulted in
government mandated survey requirements for operators in certain
regions of the Gulf of Mexico. Tesla Offshore has obtained a
healthy backlog of both turnkey and day rate work as a direct
result of the lease sale and hurricane Isaac that should keep
multiple vessels occupied throughout the winter months.
Construction activity remained strong in the early part of the
fourth quarter but is now in the process of winding down heading
into the historically slower winter months.
Tesla Offshore has increased the number of project tender
responses and the amount of attention and effort put toward
opportunities outside the Gulf of Mexico. Tesla Offshore continues
work on a multi-year project in Alaska and a special project in
Israel. As long-term clients expand into these and other areas,
Tesla Offshore is configuring systems and staff to profitably
provide services to support their operations.
Continuing this growth plan, Tesla Offshore recently committed
to the purchase of a $6 million Bluefin AUV which has the ability
to acquire high resolution ocean bottom data. Tesla Offshore
expects the AUV to be delivered and operational by July 2013. This
will open new markets for Tesla Offshore related to deep water oil
and gas field development, along with governmental, environmental
and academic applications. Tesla Offshore plans to operate the AUV
not only in the Gulf of Mexico, where the US Government now
requires data across most of the deep water Gulf of Mexico blocks
to be acquired by an AUV, but on a global basis. Tesla Offshore
hired Nathaniel Usher (as noted above) and has reassigned George
Loy as General Manager of AUV Operations and Special Projects, to
spearhead the implementation of this new technology. George Loy's
replacement in the Prairieville office will be Jay Northcutt, who
also has AUV experience from his years of managing those operations
for one of our competitors. The AUV team is also in the process of
identifying other AUV specialists, to support field operations.
Forward-looking Statements:
Certain information set forth in this press release, including
management's assessment of the Company's future plans and
operations, contains forward-looking statements, which are based on
the Company's current internal expectations, estimates,
projections, assumptions and beliefs, which may prove to be
incorrect. Some of the forward-looking statements may be identified
by words such as "expects", "anticipates", "believes", "projects",
"intends", "continues", "estimates", "objective", "ongoing", "may",
"will", "should", "might", "plans" and similar expressions. These
statements are not guarantees of future performance and undue
reliance should not be placed on them. Such forward-looking
statements are based on current expectations, estimates and
projections that involve a number of known and unknown risks and
uncertainties, which may cause the Company's actual performance and
financial results in future periods to differ materially from any
projections of future performance or results expressed or implied
by such forward-looking statements. These include, but are not
limited to, the risks outlined in the "Business Risks" section of
the Company's MD&A for the three and nine months ended
September 30, 2012.
The information contained in this press release should not be
considered all-inclusive as it excludes changes that may occur in
general economic, political and environmental conditions. The
Company cautions that actual performance will be affected by a
number of factors, many of which are beyond its control. Investors
are cautioned against attributing undue certainty to
forward-looking statements. The forward-looking information and
statements contained in this press release speak only as of the
date hereof and, subject to its obligations under applicable law,
the Company does not intend, and does not assume any obligation, to
update these forward-looking statements if conditions or opinions
should change.
About Tesla
Tesla provides geophysical and related services in Canada,
internationally through its wholly owned subsidiaries Tesla
Exploration International Ltd. and Tesla Exploration Trinidad Ltd.,
and in the United States through Tesla Exploration Inc. and Tesla
Offshore LLC. Since the Company's inception in 2000, Tesla has
grown both organically and through acquisitions funded by retained
earnings and prudent levels of borrowing, from a Canadian focused
land seismic business to a global provider of a broad suite of
geophysical and related services. Tesla trades on the TSX under the
symbol "TXL".
Requests for shareholder information should be directed to Mr.
Richard Habiak or Mr. Stuart Craven.
Contacts: Tesla Exploration Ltd. Mr. Richard Habiak President
and CEO (403) 216-0990 Tesla Exploration Ltd. Mr. Stuart Craven
Vice President and CFO (403) 692-4602