Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TSL) today announces its
2013 second quarter operating and financial results.
----------------------------------------------------------------------------
(000s, except per share Three months
data) ended Six months ended
(unaudited) June 30, June 30,
2013 2012 Change 2013 2012 Change
$ $ % $ $ %
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Revenue 27,107 18,258 48 93,463 121,083 (23)
Revenue excluding
reimbursables 23,806 16,915 41 77,725 101,821 (24)
Gross margin(1) 7,038 551 1,177 32,317 34,234 (6)
As a % of revenue
excluding
reimbursables 30% 3% 42% 34%
Net earnings (loss) (3,863) (6,945) n/m 6,426 10,004 (36)
Per share - basic (0.17) (0.31) n/m 0.29 0.44 (35)
EBITDA (2) 2,079 (4,029) n/m 21,155 24,310 (13)
Per share - basic 0.09 (0.18) n/m 0.94 1.07 (12)
Cash flow from
operations (3) 4,233 (2,809) n/m 20,009 22,812 (12)
Per share - basic 0.19 (0.12) n/m 0.89 1.00 (11)
Weighted average shares
outstanding for the
period - basic 22,422 22,689 (1) 22,500 22,737 (1)
Capital expenditures 14,249 19,847 (28) 17,337 21,453 (19)
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December
As at June 30, 31,
2013 2012 Change
$ $ %
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Working capital 4,231 3,330 27
Total assets 132,188 129,443 2
Total long-term
borrowings (4) 26,147 22,185 18
Equity 69,805 63,374 10
(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.
Second Quarter Highlights:
-- Tesla generated $7.0 million of gross margin and $2.1 million of
EBITDA(2) on $27.1 million of revenues during the second quarter of
2013, a significant improvement over the comparative quarter.
-- Tesla Canada is optimistic regarding fall and winter work based upon
committed contracts, early bid requests and several substantial 3D/3C
projects planned for the upcoming winter.
-- Tesla USA continued work under an extended seismic services agreement
with a multi-client geophysical company utilizing 10,000 stations of a
wireless multi-component seismic acquisition system ("Hawk").
-- Tesla purchased an additional 6,000 stations of Hawk and auxiliary
equipment at a cost of approximately $9.0 million which was financed out
of cash on hand ($2.5 million) and lease financing ($6.5 million). The
system was immediately put to use with the start-up of Tesla USA's
second crew in early June.
-- Tesla Offshore improved results with continuous work on three
geophysical vessels. Tesla Offshore has developed a lengthy backlog of
turnkey and day rate geophysical projects as a direct result of recent
lease sales and large scale day rate exploration commitments.
-- Tesla Offshore's Bluefin Autonomous Underwater Vehicle ("AUV") is
expected to be operational by October 2013 with projects committed in
the Gulf of Mexico in the fourth quarter of 2013.
-- Tesla International operated two crews during the quarter. One in the UK
and mainland Europe on hydrocarbon and mineral projects while a crew in
Africa demobilized from Tanzania and began work on a transition zone
("TZ") project in the Democratic Republic of the Congo ("DRC").
-- Tesla International restarted the mobilization phase of a day rate
contract in Somaliland following a stand down period. The project will
utilize a wireless nodal system and is likely to begin in late August
with appropriate security for personnel in place. This project is
expected to last approximately 300 days.
-- Tesla renewed and increased 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 Tesla International's
overdraft facility to GBP 4 million ($6.4 million) (previously GBP 2
million ($3.2 million)).
Second Quarter Financial Results:
The Company's consolidated revenues including reimbursables increased 48% in the
second quarter of 2013 compared to the second quarter of 2012. The Company's
revenue excluding reimbursables increased 41%. Improvements in activity levels
for Tesla International and Tesla USA were partially offset by declines in
activity levels for Tesla Canada and Tesla Trinidad. Tesla Offshore enjoyed a
consistent level of activity. The Company's gross margin improved significantly
in the second quarter of 2013 compared to the second quarter of 2012 due to
increased revenues and improved margin percentage for Tesla International and
Tesla USA. Gross margin as a percentage of total revenue (including
reimbursables) increased to 26% in the second quarter of 2013 from 3% in the
second quarter of 2012 due to a heavier weighting of improved margins for Tesla
International and Tesla USA. Gross margin as a percentage of revenue excluding
reimbursables also improved to 30% in the second quarter of 2013 compared to 3%
in the second quarter of 2012 for similar reasons. Reimbursable revenues
increased with the increase in total revenues.
The second quarter is historically a slow quarter in Canada due to spring break
up. Tesla Canada had two winter crews operate into early April but no activity
during the remainder of the quarter which led to a decline from the comparative
quarter of 2012 when one crew was active subsequent to spring break up. Tesla
Canada's gross margin during the second quarter of 2013 was consistent with the
second quarter of 2012 despite reduced revenues due to a reduction in field
overhead costs.
Tesla USA saw a significant increase in activity while operating a Hawk crew
throughout the quarter under its agreement with a multi-client geophysical
company. A second Hawk crew operated for most of June. Tesla USA only operated
two crews for part of June during the second quarter of 2012. Tesla USA's gross
margin improved significantly with the increase in activity levels and the
benefit of high utilization of the Company's Hawk system under the agreement
noted above.
There was no activity in South America during the current quarter compared to
the second quarter of 2012 when the Guayaguayare program in Trinidad was
completed.
Tesla International's revenues improved significantly from the comparative
quarter due to increased revenues from operations in Africa. During the second
quarter of 2013, Tesla International began a TZ project in the DRC following the
demobilization from Tanzania and restarted the mobilization phase of a day rate
contract in Somaliland following a stand down period that lasted for most of the
current quarter. Tesla International also completed projects in Europe and the
UK. There was no activity in Africa during the second quarter of 2012. The
second quarter of 2013 included a full workload for the UK crew consistent with
the comparative period of 2012. Gross margins benefitted from the increased
revenues and improved recovery on mobilization and demobilization costs.
Tesla Offshore's activity during the second quarter of 2013 remained consistent
with the second quarter of 2012. The second quarter of 2013 continued to benefit
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.
However, this was offset by a reduction in construction revenues and a later
start than normal for recurring special project work. Tesla Offshore's gross
margin and gross margin percentage both improved slightly compared to the prior
period.
The Company's EBITDA increased in the second quarter of 2013 compared to the
second quarter of 2012 due to the increase in revenues and absolute gross margin
partially offset by an increase in general and administrative costs associated
with increased share-based compensation, bad debt and business development
expenses. The Company reduced its consolidated net loss quarter over quarter due
to the improvement in EBITDA. This was partially offset by increased
depreciation related to the Hawk system and a reduced tax recovery.
The Company's working capital decreased $12.6 million during the quarter to $4.2
million including net cash of $2.1 million. Operating cash flows generated
during the first quarter were used to repay $5.0 million of long-term debt,
repay $1.5 million of regular finance leases, purchase $0.2 million of the
Company's shares under its Normal Course Issuer Bid ("NCIB") and fund $6.1
million of capital expenditures (net of $6.9 million of lease financed
expenditures). Operating lines were utilized to fund ongoing operations in
certain jurisdictions during the second quarter.
Total long-term borrowings grew by $0.8 million during the quarter to $26.1
million. New finance leases of $6.9 million, including $6.6 million for a
portion of the 6,000 station Hawk system purchase was partially offset by the
repayment of $5.0 million on long-term debt and $1.5 million of regular payments
made on outstanding finance leases. At June 30, 2013, the Company had $39.6
million of unused committed bank credit and lease facilities.
During the quarter, 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 Tesla International's overdraft facility
to GBP 4 million ($6.4 million) (previously GBP 2 million ($3.2 million)). These
facilities provide the Company with flexibility with respect to capital
expenditures and potential acquisitions.
Shareholders' equity decreased $3.6 million to $68.8 million during the quarter
due to the net loss incurred during the quarter and the repurchase of shares
under the Company's NCIB. This was partially offset by 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.
2013 Year-to-date Financial Results:
As expected, the Company's consolidated revenues including reimbursables were
down 23% year-to- date compared to 2012 with no contribution from Tesla Trinidad
following the conclusion of the Guayaguayare project in April of 2012. The
Company's revenue excluding reimbursables decreased 24%. Improvements in
activity levels for Tesla International were more than offset by declines in
activity levels for Tesla Canada, Tesla USA and especially Tesla Trinidad. Tesla
Offshore had comparable activity levels. Despite the drop in revenues, the
Company's gross margin year-to-date was only 6% less than 2012 due to improved
margin percentage for Tesla International and Tesla USA. Gross margin as a
percentage of total revenue (including reimbursables) increased to 35% in 2013
from 28% in 2012 due to a heavier weighting of improved margins for Tesla
International and Tesla USA. Gross margin as a percentage of revenue excluding
reimbursables also improved to 42% in 2013 compared to 34% in 2012 for similar
reasons.
The Company's EBITDA decreased year-to-date compared to 2012 due to the decline
in revenues and absolute gross margin along with an increase in general and
administrative costs. The Company's consolidated net income also declined year
over year 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.
Outlook:
After generating positive EBITDA during the second quarter of 2013, which has
historically been a challenging quarter, there is optimism throughout the
Company moving forward as well. Significant contracts are in place across all
segments and backlog remains strong. Tesla continues to look for ways to expand
its service offerings and the geographical areas in which it operates.
North America Land Operations
In Canada, low natural gas prices and wet weather continue to limit exploration
activity during the summer months. Projects are generally being deferred into
the fall when crops come off. Tesla Canada expects periodic work for one crew
during the third quarter with potential for a second crew late in the quarter.
There is optimism regarding fall work based upon committed contracts, early bid
requests and several substantial 3D/3C projects planned for the upcoming winter.
The Company anticipates operating up to five crews during the fourth quarter of
2013 including a crew utilizing 12,000 stations of Hawk. The Company expects to
operate up to nine crews during the first quarter of 2014, consistent with the
first quarter of 2013 with continued focus on three-component ("3C") technology.
In the US, a 10,000 station Hawk crew continues work on 3D programs under an
agreement with a multi- client geophysical company. This crew should continue
operating for the remainder of 2013 generating improved margins that exceed
those realized under current industry metrics. A second crew utilizing the
recently purchased 6,000 station Hawk system was mobilized in June and will
continue working on a series of projects until the beginning of fourth quarter
when the Hawk system will be relocated to Canada. 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.
South America Operations
Tesla Colombia was formed in February 2013 to provide seismic acquisition
services to companies in Colombia and to expand the Company's footprint in South
America. An experienced management team 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, Peru 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. This crew has secured commitments
for several projects during the remainder of 2013 with management pursuing
opportunities to fill remaining gaps in the current 2013 work schedule.
Tesla International is currently working on a transition zone project on Lake
Albert in the DRC which is expected to last until mid-August. There remains
significant interest in the lake zones of the Rift Valley with Tesla
International well placed to exploit the TZ acquisition opportunities in the
area. No further contracts are currently in place but several opportunities
exist that could have this crew operating again before the end of the year.
Tesla International restarted the mobilization phase of a day rate contract in
Somaliland following a stand down period. The project will utilize a wireless
nodal system and is likely to begin in late August with appropriate security in
place. This project is expected to last approximately 300 days.
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.
Further, there is an increasing demand for geophysical service providers in
other sub-Saharan countries where several exploration companies are looking to
fulfill their exploration commitments. Tesla International also continues to
explore the possibilities of co-venturing with resident entities in other
countries such as Pakistan, 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 and is pursuing additional projects to strengthen backlog. The Jakarta
processing office continues to work through a backlog of projects that has seen
the office fully utilized through the first half of 2013. Additional
opportunities continue to be pursued.
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 customary March
schedule, significant increased opportunities during the fair weather season are
now being realized. Tesla Offshore has a healthy backlog of both turnkey and day
rate work as a direct result of recent lease sales and two large scale day rate
exploration commitments, the combination of which will keep three geophysical
vessels occupied until late in the year and a minimum of two through the end of
the year.
Construction activities remain lower than historical levels. While trawling
activity has begun to pick up, there is a reduced level of positioning work in
the Gulf of Mexico and special project start dates are later than in previous
years. Expanding out of a successfully completed rig-approach route survey,
Tesla Offshore's Construction group recently completed successful positioning of
a moveable drilling rig, indicating a potential for increased activities in an
area of services not typically provided.
Tesla Offshore continues to pursue opportunities outside the Gulf of Mexico.
While the multi-year project in Alaska is an ongoing activity, operations have
been reduced to minimum equipment installation levels until further
determination regarding system reconfigurations and continued pursuit 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. The Company has recently seen increased interest on
a worldwide basis, including an international procurement and contracting team,
associated with one of Tesla Offshore's best Gulf of Mexico customers, arriving
from Milan, Italy and arranging an extensive in-depth review of the Company and
its service offerings.
Tesla Offshore has completed development and has now begun submitting proposals
for newly developed services such as 3D seismic interpretation. Alliance
agreement structures and service development continues in areas such as
geotechnical acquisition and multi-streamer, high-resolution shallow seismic
services, further expanding the Company's opportunities.
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 has experienced delays in the delivery of its AUV due to supplier
procurement challenges. Tesla Offshore now expects it to be delivered and
operational before the end of 2013 (previously September) with customer
commitments already in place in the Gulf of Mexico. 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 and six months ended June 30, 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:
Requests for shareholder information should be directed to:
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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