Tesla Reports 2013 First Quarter Results
14 May 2013 - 9:18AM
Marketwired Canada
Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today announces its
2013 first quarter operating and financial results.
(000s, except per share data) Three Months Ended
(unaudited) March 31
2013 2012 Change
$ $ %
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Revenue 66,356 102,825 (35)
Revenue excluding reimbursables 53,919 84,906 (36)
Gross margin(1) 25,279 33,683 (25)
As a % of revenue excluding reimbursables 47% 40%
Net earnings (loss) 10,289 16,948 (39)
Per share - basic 0.46 0.74 (39)
EBITDA (2) 19,076 28,336 (33)
Per share - basic 0.84 1.24 (32)
Cash flow from operations (3) 15,776 25,622 (38)
Per share - basic 0.70 1.12 (38)
Weighted average shares outstanding for the
period - basic 22,579 22,784 (1)
Capital expenditures 3,088 1,607 92
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As at March 31 December 31
2013 2012 Change
$ $ %
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Working capital 16,791 3,330 404
Total assets 141,666 129,443 9
Total long-term borrowings (4) 25,290 22,185 14
Equity 72,366 63,374 14
(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.
First Quarter Highlights:
-- Tesla generated $19.1 million of EBITDA(2) and $10.3 million of net
income on $66.4 million of revenues in the first quarter of 2013.
-- Tesla Canada peaked at eight crews and operated over 80,000 channels
during the seasonally strong first quarter of 2013 almost all of which
was on three-dimensional ("3D") and three- component ("3C") programs in
the oil sands region. Canadian operations utilized 23,000 stations
(69,000 channels) of 3C recording equipment, including 13,000 stations
(39,000 channels) owned by the Company.
-- Tesla Canada also utilized the Company's multi-component wireless
acquisition system ("Hawk") on the first phase of a significant program
during the first quarter of 2013 with completion of the project expected
in the fourth quarter of 2013.
-- Tesla Canada received 100% on its 2013 Workplace Safety Certificate of
Recognition ("COR") audit performed by an external Enform auditor
supporting the Company's commitment to safety.
-- Tesla Canada is optimistic regarding fall work based upon early bid
requests and several substantial 3D/3C projects planned for the fourth
quarter of 2013.
-- Tesla USA returned to work under an extended seismic services agreement
with a multi-client geophysical company in mid-March utilizing the Hawk
system and has built up a backlog for additional crews in the second
half of the year.
-- Tesla incorporated a new subsidiary, Tesla Exploration Colombia S.A.S.
("Tesla Colombia") in early 2013 further expanding the Company's
geographical footprint in South America.
-- Tesla Offshore continued to generate positive results during the
historically slow first quarter with work on up to four geophysical
vessels. Tesla Offshore has developed a lengthy backlog of turnkey and
day rate geophysical projects as a direct result of last year's lease
sale and large scale day rate exploration commitments.
-- The Company's acquisition of a Bluefin Autonomous Underwater Vehicle
("AUV") remains on schedule and is expected to be operational by
September 2013. Tesla Offshore continues to hire experienced personnel
to support the AUV service line and develop international markets.
-- Tesla International operated two crews during the quarter. One in the UK
and Europe on hydrocarbon and mineral projects while a crew in Africa
completed a land and marine project in Tanzania and the land phase of a
project in the Democratic Republic of the Congo ("DRC").
-- Tesla International also began the mobilization phase of a day rate
contract in Somaliland. The project has a minimum number of operating
days and is likely to begin in June once appropriate security is in
place.
First Quarter Financial Results:
The Company's consolidated revenues including reimbursables decreased 35% in the
first quarter of 2013 compared to the first quarter of 2012 due to an expected
decline in North American land activity. The Company's revenue excluding
reimbursables decreased 36%. Improvements in activity levels for Tesla
International were more than offset by declines in activity levels for Tesla
Canada, Tesla USA and Tesla Trinidad. Tesla Offshore enjoyed a consistent level
of activity. The Company's gross margin declined in the first quarter of 2013
compared to the first quarter of 2012 due to the drop in revenues. However,
gross margin as a percentage of total revenue (including reimbursables)
increased to 38% in the first quarter of 2013 from 33% in the first quarter of
2012 due to a heavier weighting of continued strong margins in Canada and
improvements for Tesla International. Gross margin as a percentage of revenue
excluding reimbursables also improved to 47% in the first quarter of 2013
compared to 40% in the first quarter of 2012 for similar reasons. Reimbursable
revenues declined proportionately to total revenues.
Tesla Canada was able to operate up to eight crews during the first quarter of
2013 compared with up to nine crews operating in the first quarter of 2012.
While rates remained comparable to the previous winter, Tesla Canada saw reduced
activity levels due to the previously reported cancellation or deferral of
several significant projects during the quarter. Tesla Canada's gross margin was
negatively impacted by the reduced revenues but gross margin percentage remained
strong with high utilization of the Company's 3C equipment in the oil sands
region.
Operations in the US were limited during the first quarter of 2013 with the Hawk
system in Canada until early March when Tesla USA returned to work under its
agreement with a multi-client geophysical company. Tesla USA operated three
crews for most of the first quarter of 2012 on large 3D programs. Tesla USA's
gross margin was limited during the first quarter and declined from the
comparative period with the reduction in activity levels.
As expected, there was no activity for Tesla Trinidad during the current quarter
compared to significant activity on the Guayaguayare program during the first
quarter of 2012. Tesla Trinidad generated gross margin from recording and
recognition of turnkey revenues in the first quarter of 2012.
Tesla International's revenues improved from the comparative quarter due to
increased revenues from operations in Africa. During the first quarter of 2013,
Tesla International completed a land and marine project in Tanzania, the land
phase of a project in the DRC and began mobilization into Somaliland for a
contract in the country. Tesla International also completed projects in Europe
and the UK. The first quarter of 2012 included a full workload for the UK crew,
the demobilization from northern Ethiopia and operations on a lake project in
the DRC. Gross margins benefitted from the increased revenues and a heavier
weighting of operational income. Cost overruns on demobilizations from the DRC
and Ethiopia negatively impacted gross margin during the first quarter of 2012.
Tesla Offshore's activity during the first quarter of 2013 remained consistent
with the first quarter of 2012. The first quarter of 2013 benefitted from
significantly increased activity levels in the Gulf of Mexico for the
geophysical division with a healthy backlog of both turnkey and day rate work.
The first quarter of 2012 was buoyed by Tesla Offshore's support role on the
project in Trinidad and the mobilization of the deep tow system. Tesla
Offshore's gross margin was similar to the comparative quarter but was limited
by poor weather conditions in the Gulf of Mexico. Gross margin during the first
quarter of 2012 included a heavy weighting of lower margin support work on the
project in Trinidad.
The Company's EBITDA decreased in the first quarter of 2013 compared to the
first quarter of 2012 due to the decline in revenues and absolute gross margin
along with a slight increase in general and administrative costs associated with
increased business development expenses. The Company's consolidated net income
also declined quarter over quarter due to the reduction in EBITDA and increased
depreciation related to the Hawk system. This was partially offset by a
corresponding reduction in tax expense.
The Company's working capital increased $13.5 million during the quarter to
$16.8 million including net cash of $6.0 million. Operating cash flows and a
$4.0 million draw on long-term debt during the quarter were required to fund
increased working capital working capital requirements in certain jurisdictions,
repay $1.3 million of regular finance leases, purchase $0.7 million of the
Company's shares under its Normal Course Issuer Bid ("NCIB") and fund $2.2
million of capital expenditures. The Company also repaid $11.4 million on its
operating lines of credit during the quarter.
Total long-term borrowings grew by $3.1 million during the quarter to $25.3
million. Draws on long-term debt of $4.0 million were partially offset by
regular payments made on outstanding finance leases. Subsequent to March 31,
2013, the Company repaid $5.0 million on long-term debt reducing total long-
term borrowings to $20.3 million.
Further, the Company renewed its Canadian credit facility agreement consisting
of a $15 million operating loan, a $30 million revolving credit facility and a
$24 million (previously $20 million) finance lease facility. All facilities are
available in either Canadian or US currency at Tesla's discretion. The Company
also expanded its UK subsidiary's overdraft facility to GBP 4 million
(previously GBP 2 million). These facilities provide the Company with
flexibility with respect to capital expenditures and potential acquisitions.
Shareholders' equity increased $9.0 million to $72.4 million during the quarter
due to the earnings generated during the quarter, an increase in accumulated
other comprehensive income due to the weakening of the Canadian dollar against
the functional currency of the Company's foreign subsidiaries and the repurchase
of shares under the Company's NCIB. This was partially offset by a reduction in
contributed surplus due to the modification of the Company's stock option plan
which now includes a cashless exercise feature.
Outlook:
North America Land Operations
Tesla Canada operated two crews into early April as spring break-up hit western
Canada. Low natural gas prices will continue to limit exploration activity
during the summer months. The Company expects to operate one crew periodically
during May and June with one to two crews operational during the third quarter
with potential activity in both western and eastern Canada. There is optimism
regarding fall work based upon early bid requests and several substantial 3D/3C
projects planned for the fourth quarter of 2013.
The Hawk system is back working on 3D programs under an agreement with a
multi-client geophysical company. The Hawk crew should continue operating for
the remainder of 2013 and should continue to generate improved margins from
those realized under current industry metrics. The US seismic market remains
soft with heavy competition for available projects. 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. Activity levels remain
focused on oil and liquids rich shale plays such as the Bakken, Utica (eastern
Ohio) and Marcellus (western Pennsylvania and West Virginia). Activity in the
Denver-Julesburg ("DJ") Basin has been slower than projected but is also
expected to increase in the second half of 2013. Tesla USA has managed to secure
additional contracts and expects to operate at least one additional
multi-component 3D recording crew in the second half of 2013. The Company is
investigating long-term rental and purchase options to service this demand.
South America Operations
Tesla Colombia was formed in February 2013 to provide seismic acquisition
services to companies in Colombia. An experienced management team has spent the
better part of a year researching the South American market. In recent years,
there has been increased foreign investment in Colombian natural resources,
growing exploration activity and a strong demand for experienced and reliable
seismic acquisition companies with modern equipment and experience in comparable
terrains and environments. Meetings continue to be held and relationships
continue to be built with both oil and gas and mining companies operating in
Colombia. Many of these companies are Canadian-based or international operators
that Tesla has done work for in other regions of the world. Management has also
focused on developing relationships with local companies that can provide
support to Tesla's operations in Colombia and provide access to potential
clients. While no projects have been awarded at this time, the management team
continues to pursue a number of opportunities that have been identified during
Tesla's presence in the country. Tesla continues to investigate other
opportunities in South America, specifically in Trinidad, Ecuador and Suriname.
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. Additional applications of seismic
data in the areas of gas storage and CO2 sequestration have been active
indicating a possible opportunity for growth in previously non-perspective areas
of Europe. This crew should be fully utilized for a good portion of 2013 after
securing commitments for a number of projects throughout the year. Management is
pursuing opportunities to fill remaining gaps in the current 2013 work schedule.
After completing the land phase of a project in the DRC during the first quarter
of 2013, Tesla International is in the final stages of mobilizing for the marine
phase of the project on Lake Albert. There remains significant interest in the
lake zones of the Rift Valley with Tesla International well placed to exploit
the transition zone ("TZ") acquisition opportunities in the area. As such the TZ
crew is expected to remain busy during a significant portion of 2013.
Tesla International is also in the final stages of mobilizing equipment to
Somaliland after securing work on a long-term day-rate project. The start-up of
the project has been delayed until June to ensure appropriate security is in
place. The project is expected to last through the end of the year with bonus
incentives for early completion.
Two key areas of East Africa are expected to see a return to greater activity
following political stabilisation and the interest of some of the Major
operators in developing their activities in the area. The first key area
involves interests along the Great Lakes Trend from Tanzania into Ethiopia. This
interest is in chasing analog plays based on the recent discoveries in Uganda
and successes in Northern Kenya. The second area of increased exploration
activity is near coastal blocks from Mozambique northward to Somalia which are
hinged on recent major gas discoveries offshore East Africa. Tesla International
expects to be successful in obtaining additional work from both these
opportunities and from exploiting some potential new areas of activity to extend
its current backlog. In particular, Tesla International has seen and is
expecting numerous bids related to the latest concession awards in Kenya and the
associated work commitments. Tesla International will also maintain a presence
in Islamabad to explore opportunities in Pakistan as well as explore further
possibilities in co-venturing with resident entities in other countries such as
Libya, Tunisia and Iraq.
The UK technical services office remains steady with a number of in-seam
seismic, unconventional gas (coal bed and shale), and geophysical interpretation
projects recently awarded and underway with high utilization of capacity
expected to continue.
The Jakarta processing office continues to work through a backlog of projects
that has seen the office fully utilized through early 2013. Additional
opportunities continue to be pursued to maintain backlog.
Offshore Operations
Tesla Offshore is benefitting from increased activity levels in the Gulf of
Mexico. With 2013's Central Gulf lease sale returning to the standard March
schedule, a significant increase in opportunities during the fair weather season
are expected. Tesla Offshore has a healthy backlog of both turnkey and day rate
work as a direct result of last year's lease sale that is keeping multiple
vessels occupied. Poor weather in the Gulf of Mexico during April has limited
productivity on this work. In late April, Tesla Offshore remobilized two
geophysical vessels to continue the large scale day rate exploration projects
that were put on hold for the winter months.
Construction activity has remained slow in April as the historically slow winter
months come to an end. Construction activity is expected to pick up in May as
trawling, positioning work and special projects resume.
Tesla Offshore continues to pursue opportunities outside the Gulf of Mexico and
is entering the second year of a multi-year project in Alaska, although this
work may be delayed until 2014 due to lack of approved drilling permits. As
long-term clients expand into international areas, Tesla Offshore is configuring
systems and staff to profitably provide services to support their operations.
Focusing on this growth plan, Tesla Offshore committed to the purchase of a
Bluefin AUV which has the ability to acquire high resolution ocean bottom data.
Tesla Offshore expects the AUV to be delivered and operational in September
2013. In addition to addressing a much needed service to our existing customer
base, 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 several experienced personnel to manage and optimize use of state
of the art technology in geophysical survey operations, including the AUV
service line, and to further the development of geo-hazards interpretation
services for clients worldwide. 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 months ended March 31, 2013.
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 through Tesla
Exploration Partnership, internationally through its wholly owned subsidiaries
Tesla Exploration International Ltd., Tesla Exploration Trinidad Ltd. and Tesla
Exploration Colombia S.A.S., 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".
FOR FURTHER INFORMATION PLEASE CONTACT:
Tesla Exploration Inc.
Mr. Richard Habiak
President and CEO
(403) 216-0990
Tesla Exploration Inc.
Mr. Stuart Craven
Vice President and CFO
(403) 692-4602
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