Geokinetics Inc. (NYSE Amex: GOK) today announced its financial
results for the third quarter ended September 30, 2010.
Highlights for the three months ended September 30, 2010:
-- Third quarter revenues increased 38% to $134.0 million from $96.8
million in the third quarter of 2009.
-- EBITDA (a non-GAAP financial measurement, defined below) was $1.5
million, compared to $16.4 million in the same period in 2009.
-- Reported a loss applicable to common stockholders of $38.6 million, or
$2.18 per basic and diluted share.
-- The Company added over $250 million in work during the quarter, which
includes awards for new projects and extensions to existing projects in
Latin America, North and West Africa, Australia, the Far East and the
United States.
-- Backlog increased to $642 million as of September 30, 2010, of which
$523 million, or 81%, is for international projects and $119 million,
or 19%, is for North American (excluding Mexico) projects. This
compares to $428 million at the end of the first quarter 2010 and $519
million at the end of the second quarter 2010.
Richard F. Miles, President and Chief Executive Officer,
commented, "Our third quarter results were impacted by start up
delays for both OBC crews, weak late sales related to our
Multi-Client data library and weather downtime in Australia and
Mexico. On a more positive note, the majority of the crews we
expect to work in the fourth quarter started working towards the
end of September or early October and we also expect to deliver a
significant amount of processed Multi-Client data, which gives us
the confidence that fourth quarter results should improve
meaningfully over the third quarter. Furthermore, bidding activity
continues to be solid, backlog continues to increase and our proven
track record of successful project execution positions us for a
strong start to 2011.
"In North America, excess capacity seems to have abated and
market dynamics continue to improve. There continues to be interest
in our Multi-Client data library, despite weak late sales in the
third quarter, and our focus will remain on Multi-Client work in
the U.S. for the foreseeable future. We currently have four crews
working on Multi-Client projects in the Marcellus shale and one
Multi-Client crew working in the Haynesville shale and there are
real possibilities to expand this expertise into other areas. In
fact, we just recently executed our first fully funded Multi-Client
contract in the Niobrara shale for approximately 1,000 square
miles.
"Our utilization is currently increasing internationally as we
ramp up and begin to execute on our existing backlog. Margins
continue to be higher in international regions and we expect to
realize those higher margins as our utilization rises. We remain
steadfast in our belief that our equipment and people are
positioned in the high potential growth markets where we also
retain a competitive advantage with respect to our strong
relationships with many national oil companies (NOCs), which
together should enable us to win our fair share of project
awards."
Third Quarter 2010 Results
Total revenues in the third quarter of 2010 increased 38% to
$134.0 million from $96.8 million in the third quarter of 2009. The
increase in revenues was mainly driven by higher crew utilization
in North America, which ultimately was a result of the addition of
the PGS Onshore operations and the contribution from the
Multi-Client data library business. The Company had no significant
Multi-Client revenues during the comparable quarter of 2009. In
addition, reimbursable revenues in North America also contributed
to top line results during the quarter. On the contrary, revenues
from the international data acquisition segment were negatively
impacted by a job mix that included less shallow water work,
project commencement delays and weather downtime that contributed
to lower overall utilization.
Direct operating expenses increased to $112.6 million in the
third quarter of 2010 from $67.2 million in the third quarter of
2009, mainly due to increased costs related to operating additional
PGS Onshore crews in the U.S. and abroad. Reimbursable expenses
also contributed to the overall increase in direct operating
costs.
G&A expenses increased 52% to $20.0 million during the
quarter when compared to the third quarter of 2009. The majority of
the increase can be attributed to the additional costs associated
with PGS Onshore entities and implementation costs related to the
Company's Oracle stabilization project.
EBITDA (as defined below) for the third quarter of 2010 was $1.5
million, compared to $16.4 million in the third quarter of
2009.
Depreciation and amortization expense rose by 62% year-over-year
to $26.4 million during the quarter, reflecting $7.0 million of
amortization expense related to the Company's Multi-Client business
in the U.S and the addition of the PGS assets and their ensuing
write-up.
The Company reported a loss applicable to common stockholders of
$38.6 million, or $2.18 per basic and diluted share, in the third
quarter of 2010 compared to a loss applicable to common
stockholders of $10.2 million, or $0.95 per basic and diluted
share, for the same quarter in 2009. Despite the reported loss
before taxes, the Company incurred a tax expense of $0.3 million,
primarily related to the Company's international operations.
Selected Third Quarter Segment Data
(All data in millions, except gross margin percentages)
Three Months Ended September 30, 2010:
Data Acquisition
North Inter- Data
America national Processing Consolidated
--------- --------- ---------- ------------
Revenues $ 57.6 $ 74.5 $ 1.9 $ 134.0
Direct Operating Expenses $ 39.1 $ 71.5 $ 2.0 $ 112.6
Gross Margin % 32% 4% -5% 16%
Three Months Ended September 30, 2009:
Data Acquisition
North Inter- Data
America national Processing Consolidated
--------- --------- ---------- ------------
Revenues $ 11.4 $ 82.9 $ 2.5 $ 96.8
Direct Operating Expenses $ 9.9 $ 55.3 $ 2.0 $ 67.2
Gross Margin % 13% 33% 20% 31%
Selected Nine Month Segment Data
(All data in millions, except gross margin percentages)
Nine Months Ended September 30, 2010:
Data Acquisition
North Inter- Data
America national Processing Consolidated
--------- --------- ---------- ------------
Revenues $ 136.0 $ 216.5 $ 6.8 $ 359.3
Direct Operating Expenses $ 95.8 $ 196.1 $ 6.9 $ 298.8
Gross Margin % 30% 9% -1% 17%
Nine Months Ended September 30, 2009:
Data Acquisition
North Inter- Data
America national Processing Consolidated
--------- --------- ---------- ------------
Revenues $ 65.4 $ 315.4 $ 7.8 $ 388.6
Direct Operating Expenses $ 53.0 $ 218.5 $ 6.4 $ 277.9
Gross Margin % 19% 31% 18% 28%
Third Quarter Operations Review and Fourth Quarter 2010
Operational Outlook
The Company is providing this update to assist shareholders in
understanding the operations of the Company in the third quarter of
2010 and the operational expectations for the fourth quarter of
2010.
International
Latin America -- Operated 3 to 6 crews during the third quarter,
with an average of 4.5 crews operating in Brazil, Mexico, Peru and
Trinidad. The Company expects to operate an average of 6 crews
during the fourth quarter in Brazil, Mexico, Peru and Trinidad.
EAME -- Operated 3 to 5 crews during the third quarter, with an
average of 4 crews operating in Angola, Gabon, Cameroon, Libya and
Algeria. The Company expects to operate an average of 4 crews in
Angola, Libya and Algeria during the fourth quarter.
Australasia / Far East -- Operated 1 to 2 crews during the third
quarter, with an average of 1.5 crews operating in Indonesia and
Malaysia. The Company expects to operate an average of 2 crews in
Indonesia, Malaysia and Australia during the fourth quarter.
North America
United States -- Operated 5 to 7 crews during the third quarter
for an average of 6.5 crews. The Company expects to operate an
average of 7.5 crews in the United States during the fourth
quarter, of which an average of 4.75 crews will be working on
Multi-Client projects.
Canada -- Operated an average of a half a crew during the third
quarter. The Company expects to operate an average of a half a crew
in Canada during the fourth quarter.
Backlog
Backlog increased sequentially by approximately $123 million
during the third quarter to $642 million as of September 30, 2010
compared to $519 million as of June 30, 2010 and $259 million as of
September 30, 2009. Of the current backlog, approximately $523
million, or 81%, is for international business (excluding Canada)
with the remaining $119 million, or 19%, for North America, of
which approximately $82 million is attributable to the Multi-Client
business in the United States. Of the Company's international
backlog, approximately $243 million, or 46%, is with national oil
companies (NOCs) or partnerships including NOCs. Approximately $256
million of the international backlog, or 49%, is in shallow water
transition zones and OBC environments. It is anticipated that
approximately 30% of the backlog at September 30, 2010 will be
realized during the fourth quarter of this year with the remaining
amount to be realized in 2011 and 2012.
Capital Expenditures
Capital expenditures for 2010 are currently estimated at
approximately $43 million, $41.0 million of which has already been
spent, an increase from $38.8 million of capital expenditures in
2009. In addition, 2010 Multi-Client data library investments are
anticipated to be approximately $51 million, $30.6 million of which
has already been spent, and include Multi-Client investments
related to PGS Onshore's business as well as expansion of the
Company's existing Multi-Client data library interests. All of
these Multi-Client investments have pre-funding levels in excess of
90% of their expected cash costs.
Cash and Liquidity
Cash, cash equivalents and restricted cash totaled $57.3 million
as of September 30, 2010, of which $3.6 million was restricted
cash. On June 30 and September 30, 2010, the Company was unable to
satisfy certain maintenance covenants related to its revolving
credit facility. The Company received waivers of the covenants that
it was unable to meet at June 30 and September 30, 2010. In
connection with these waivers, the Company amended its revolving
credit facility to reduce the maximum borrowings available from $50
to $40 million. In addition, the Company is required to adhere to
monthly consolidated total revenue and consolidated cumulative
EBITDA targets commencing with the month ending September 30, 2010
through the month ending November 30, 2010. The Company complied
with the revised financial covenants for the month ending September
30, 2010, and currently believes it should be in compliance with
the monthly financial covenants for the months of October and
November. However, based on the Company's current forecast and
despite improving activity levels, the Company believes that it is
likely that it will not be able to maintain the original covenants
required at the December 31, 2010 measurement date and possibly
beyond, which are based on results from the trailing twelve months.
As such, the Company is currently in discussions with its lenders
about potential solutions that would provide future covenant
relief. There can be no assurance that the Company will be
successful in doing so on commercially reasonable terms, if at
all.
Conference Call and Webcast Information
Geokinetics has scheduled a conference call for Wednesday,
November 10, 2010, at 11:00 a.m. Eastern Time. To participate in
the conference call, dial (888) 396-2386 for domestic callers, and
(617) 847-8712 for international callers a few minutes before the
call begins using pass code 31763183 and ask for the Geokinetics
3rd Quarter 2010 Earnings Conference Call. A replay of the call
will be available approximately two hours after the live broadcast
ends and will be accessible until November 17, 2010. To access the
replay, dial (888) 286-8010 for domestic callers or (617) 801-6888
for international callers, in both cases using pass code
66072267.
The webcast may be accessed online through Geokinetics' website
at www.geokinetics.com in the Investor Relations section. A webcast
archive will also be available at www.geokinetics.com shortly after
the call and will be accessible for approximately 90 days. For more
information regarding the conference call, please contact Scott
Zuehlke, Director of Investor Relations, by dialing 713-850-7600 or
by email at scott.zuehlke@geokinetics.com.
Geokinetics Inc. is a leading provider of seismic data
acquisition, seismic data processing services and multi-client
seismic data to the oil and gas industry worldwide. Headquartered
in Houston, Texas, Geokinetics is the largest Western contractor
acquiring seismic data onshore and in transition zones in oil and
gas basins around the world. Geokinetics has the crews, experience
and capacity to provide cost-effective world class data to our
international and North American clients. For more information on
Geokinetics, visit www.geokinetics.com.
Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements, other than statements of
historical facts, included in this earnings release that address
activities, events or developments that Geokinetics expects,
believes or anticipates will or may occur in the future are
forward-looking statements. These statements include but are not
limited to statements about the business outlook for the year,
backlog and bid activity, business strategy, related financial
performance and statements with respect to future events. These
statements are based on certain assumptions made by Geokinetics
based on management's experience and perception of historical
trends, industry conditions, market position, future operations,
profitability, liquidity, backlog, capital resources and other
factors believed to be appropriate. Such statements are subject to
a number of assumptions, risks and uncertainties, many of which are
beyond the control of Geokinetics, which may cause actual results
to differ materially from those implied or expressed by the
forward-looking statements. These include risks relating to
financial performance and results, job delays or cancellations,
reductions in oil and gas prices, the continued disruption in
worldwide financial markets, impact from severe weather conditions
and other important factors that could cause actual results to
differ materially from those projected, or backlog not to be
completed, as described in the Company's reports filed with the
Securities and Exchange Commission. Backlog consists of written
orders and estimates of Geokinetics' services which it believes to
be firm, however, in many instances, the contracts are cancelable
by customers so Geokinetics may never realize some or all of its
backlog which may lead to lower than expected financial
performance.
Although Geokinetics believes that the expectations reflected in
such statements are reasonable, it can give no assurance that such
expectations will be correct. All of Geokinetics' forward-looking
statements, whether written or oral, are expressly qualified by
these cautionary statements and any other cautionary statements
that may accompany such forward-looking statements. Any
forward-looking statement speaks only as of the date on which such
statement is made and Geokinetics undertakes no obligation to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise.
Geokinetics Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2009 2010 2009 2010
---------- ---------- ---------- ----------
Revenue:
Seismic acquisition $ 94,338 $ 132,111 $ 380,796 $ 352,566
Data processing 2,511 1,909 7,812 6,750
---------- ---------- ---------- ----------
Total revenue 96,849 134,020 388,608 359,316
---------- ---------- ---------- ----------
Expenses:
Seismic acquisition and
multi-client 65,203 110,585 271,507 291,965
Data processing 2,010 1,998 6,420 6,869
Depreciation and
amortization 16,315 26,360 41,678 70,562
General and
administrative 13,205 19,980 39,113 61,022
---------- ---------- ---------- ----------
Total expenses 96,733 158,923 358,718 430,418
---------- ---------- ---------- ----------
Loss on disposal of
property and equipment (1,406) (700) (2,142) (1,750)
---------- ---------- ---------- ----------
Income (loss) from
operations (1,290) (25,603) 27,748 (72,852)
---------- ---------- ---------- ----------
Other income (expenses):
Interest income 12 477 198 1,429
Interest expense (1,244) (10,037) (4,526) (30,007)
Loss on early redemption
of debt -- -- -- (2,517)
Gain (loss) from change
in fair value of
derivative liabilities (4,999) (3,454) (9,628) 1,370
Foreign exchange gain
(loss) 1,169 407 1,299 (412)
Other, net 96 2,272 192 2,817
---------- ---------- ---------- ----------
Total other expenses,
net (4,966) (10,335) (12,465) (27,320)
---------- ---------- ---------- ----------
Income (loss) before income
taxes (6,256) (35,938) 15,283 (100,172)
Provision for income taxes 1,482 311 18,281 2,625
---------- ---------- ---------- ----------
Net loss (7,738) (36,249) (2,998) (102,797)
---------- ---------- ---------- ----------
Returns to preferred
stockholders:
Dividend and accretion
costs (2,463) (2,317) (7,261) (6,525)
---------- ---------- ---------- ----------
Loss applicable to common
stockholders $ (10,201) $ (38,566) $ (10,259) $ (109,322)
========== ========== ========== ==========
For Basic and Diluted
Shares:
Loss per common share $ (0.95) $ (2.18) $ (0.95) $ (6.31)
Weighted average common
shares outstanding 10,776 17,698 10,542 17,337
Geokinetics Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
December 31, September 30,
2009 2010
------------ -------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 10,176 $ 53,772
Restricted cash 121,837 3,574
Accounts receivable, net of allowance for
doubtful accounts of $1,167 at December 31,
2009 and $3,894 at September 30, 2010 143,944 126,216
Deferred costs 14,364 36,527
Prepaid expenses and other current assets 10,488 22,610
------------ -------------
Total current assets 300,809 242,699
------------ -------------
Property and equipment, net 187,833 278,786
Restricted cash to be used for PGS Onshore
acquisition 183,920 --
Goodwill 73,414 126,988
Multi-client data library, net 6,602 47,221
Deferred financing costs, net 10,819 10,874
Other assets, net 8,293 16,614
------------ -------------
Total assets $ 771,690 $ 723,182
============ =============
LIABILITIES, MEZZANINE AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term debt and current portion of
long-term debt and capital lease
obligations $ 68,256 $ 27,572
Accounts payable 55,390 69,951
Accrued liabilities 61,814 78,077
Deferred revenue 14,081 48,384
Income taxes payable 15,335 7,328
------------ -------------
Total current liabilities 214,876 231,312
Long-term debt and capital lease obligations,
net of current portion 296,601 296,421
Deferred income tax 6,486 22,516
Mandatorily redeemable preferred stock 32,104 32,278
Derivative liabilities 9,317 8,514
------------ -------------
Total liabilities 559,384 591,041
------------ -------------
Commitments & Contingencies
Mezzanine equity:
Preferred stock, Series B Senior
Convertible, $10.00 par value; 2,500,000
shares authorized, 290,197 shares issued
and outstanding as of December 31, 2009 and
311,940 shares issued and outstanding as of
September 30, 2010 66,976 72,935
------------ -------------
Stockholders' equity:
Common stock, $.01 par value; 100,000,000
shares authorized, 15,578,528 shares issued
and 15,296,839 shares outstanding as of
December 31, 2009 and 18,104,619 shares
issued and 17,697,731 shares outstanding as
of September 30, 2010 156 179
Additional paid-in capital 215,859 232,509
Accumulated deficit (70,705) (173,502)
Accumulated other comprehensive income 20 20
------------ -------------
Total stockholders' equity 145,330 59,206
------------ -------------
------------ -------------
Total liabilities, mezzanine and stockholders'
equity $ 771,690 $ 723,182
============ =============
Geokinetics Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------
2009 2010
---------- ----------
OPERATING ACTIVITIES
Net loss $ (2,998) $ (102,797)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 41,675 70,562
Loss on prepayment of debt, amortization of
deferred financing costs, and accretion of debt
discount 349 5,613
Stock-based compensation 1,611 2,059
Loss on sale of assets and insurance claims 2,092 1,750
(Gain) loss from change in fair value of
derivative liabilities 9,628 (1,370)
Changes in operating assets and liabilities:
Restricted cash 7,907 (1,620)
Accounts receivable (25,878) 81,984
Prepaid expenses and other assets (2,274) (4,221)
Accounts payable (12,879) (3,163)
Accrued and other liabilities 40,210 (9,807)
---------- ----------
Net cash provided by operating activities 59,443 38,990
---------- ----------
INVESTING ACTIVITIES
Investment in multi-client data library (7,490) (30,637)
Acquisition, net of cash acquired -- (180,832)
Proceeds from disposal of property and equipment
and insurance claims 885 1,210
Purchases of property and equipment (26,517) (40,999)
Purchase of other assets -- (3,295)
Change in restricted cash held for purchase of
PGS Onshore -- 303,803
---------- ----------
Net cash (used in) provided by investing
activities (33,122) 49,250
---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings 118,840 26,000
Stock issuance costs (145) (92)
Proceeds from stock issuance -- 1,806
Payments of debt issuance costs -- (3,047)
Payments on capital lease obligations and vendor
financings (30,251) (24,447)
Payments on debt (108,711) (44,864)
---------- ----------
Net cash provided by (used in) financing
activities (20,267) (44,644)
---------- ----------
Net increase in cash 6,054 43,596
Cash at beginning of period 13,341 10,176
---------- ----------
Cash at end of period $ 19,395 $ 53,772
========== ==========
Supplemental disclosures related to cash flows:
Interest paid $ 4,671 $ 15,355
Taxes paid $ 5,838 $ 11,386
Purchase of equipment under capital lease and
vendor financing obligations $ 4,569 $ --
Capitalized depreciation on multi-client data
library $ -- $ 709
GAAP Reconciliation
The Company defines EBITDA as Net Income before Taxes, Interest,
Other Income (Expense) (including derivative liabilities' fair
value gains/losses, foreign exchange gains/losses, gains/losses on
sale of equipment and insurance proceeds, warrant expense and other
income/expense), and Depreciation and Amortization. EBITDA is not a
measure of financial performance derived in accordance with
Generally Accepted Accounting Principles (GAAP) and should not be
considered in isolation or as an alternative to net income as an
indication of operating performance. See below for reconciliation
from Income Applicable to Common Stockholders to EBITDA amounts
referred to above:
(Unaudited)
Three Months Ended
September 30,
----------------------
2009 2010
---------- ----------
Net Loss Applicable to Common Stockholders $ (10,201) $ (38,566)
Preferred Stock Dividends 2,463 2,317
---------- ----------
Net Loss (7,738) (36,249)
Provision for Income Taxes 1,482 311
Interest Expense, net (including Lender Fees) 1,232 9,560
Other Expense (as defined above) 5,140 1,475
Depreciation and Amortization 16,315 26,360
---------- ----------
EBITDA $ 16,431 $ 1,457
========== ==========
(Unaudited)
Nine Months Ended
September 30,
----------------------
2009 2010
---------- ----------
Net Loss Applicable to Common Stockholders $ (10,259) $ (109,322)
Preferred Stock Dividends 7,261 6,525
---------- ----------
Net Loss (2,998) (102,797)
Provision for Income Taxes 18,281 2,625
Interest Expense, net (including Lender Fees) 4,328 31,095
Other Expense (as defined above) 10,279 (2,025)
Depreciation and Amortization 41,678 70,562
---------- ----------
EBITDA $ 71,568 $ (540)
========== ==========
Contact: Scott M. Zuehlke Director of Investor Relations
Geokinetics (713) 850-7600
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