Tesla Reports 2012 Third Quarter Results
14 November 2012 - 10:18AM
Marketwired Canada
Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today announces its
2012 third quarter operating and financial results.
Selected Highlights
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(000s, except per
share data) Three months ended Nine Months Ended
(unaudited) September 30 September 30
2012 2011 Change 2012 2011 Change
$ $ % $ $ %
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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
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September December
As at 30 31
2012 2011 Change
$ $ %
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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.
FOR FURTHER INFORMATION PLEASE CONTACT:
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
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