CALGARY, ALBERTA--(Marketwire - May 14, 2012) - Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today announces its 2012 first quarter operating and financial results.
| Selected Highlights |
| (000s, except per share data) | Three Months Ended | ||||||
| (unaudited) | March 31 | ||||||
| 2012 | 2011 | Change | |||||
| $ | $ | % | |||||
| Revenue | 102,825 | 85,125 | 21 | ||||
| Revenue excluding reimbursables | 84,906 | 55,460 | 53 | ||||
| Gross margin1 | 33,683 | 16,793 | 101 | ||||
| As a % of revenue excluding reimbursables |
40 |
% |
30 |
% | |||
| Net earnings | 16,948 | 5,559 | 205 | ||||
| Per share - basic | 0.74 | 0.24 | 205 | ||||
| EBITDA 2 | 28,336 | 13,063 | 117 | ||||
| Per share - basic | 1.24 | 0.57 | 117 | ||||
| Cash flow from operations 3 | 25,622 | 12,898 | 99 | ||||
| Per share - basic | 1.12 | 0.57 | 99 | ||||
| Weighted average sharesoutstanding for the period - basic |
22,784 |
22,795 |
n/m |
||||
| Capital expenditures | 1,607 | 1,443 | 11 | ||||
| As at | March 31 | December 31 | |||||
| 2012 | 2011 | Change | |||||
| $ | $ | % | |||||
| Working capital | 34,783 | 10,411 | 234 | ||||
| Total assets | 155,936 | 141,088 | 11 | ||||
| Total long-term borrowings 4 | 28,062 | 29,073 | (3 | ) | |||
| Equity | 74,131 | 57,993 | 28 | ||||
| 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 record financial results with $28.3 million of EBITDA2 and $16.9 million of net income on $102.8 million of revenues in the first quarter of 2012, a significant increase over the first quarter of 2011 with improvements across all segments and significant growth in margins in Canada and Trinidad.
- Tesla peaked at nine crews and operated over 100,000 channels in Canada during the first quarter of 2012 almost all of which was on three-dimensional ("3D") and three-component ("3C") programs.
- Canadian operations utilized 23,000 stations of 3C recording equipment, including 13,000 stations owned by the Company. This equipment is particularly valuable to our clients in understanding the unique geophysical aspects of the unconventional resource plays in North America such as the oilsands and shale plays where a large portion of Tesla's workload was located.
- Tesla operated three crews in the US during the first quarter of 2012. Multiple crews gained valuable experience utilizing wireless systems further developing strategic alliances with clients and equipment suppliers.
- Tesla Trinidad continued work on the Guayaguayare project in Trinidad throughout the quarter completing front-end operations and substantially all of the recording. The program was completed in mid-April.
- Tesla Offshore continued to generate positive results during the historically slow winter period. Construction activity benefitted from support work on the Trinidad project while geophysical activity benefitted from deep tow projects during the quarter.
- Tesla International operated two crews during the quarter. One in the UK and Europe on hydrocarbon and mineral projects while the other crew operated on a lake project in the Democratic Republic of Congo ("DRC").
First Quarter Financial Results:
The Company's consolidated revenues including reimbursables increased 21% in the first quarter of 2012 compared to the first quarter of 2011. North American land operations were the main driver behind the improvement with a significant increase in activity in the US and Trinidad along with another strong winter season in Canada. Revenues in Canada improved slightly with up to nine crews operating throughout the first quarter of 2012 compared to a peak of eleven crews in the first quarter of 2011. Despite the decline in number of crews, Tesla Canada saw rate improvements driven by continued demand for 3C services in the oil sands region. Tesla USA operated three crews for most of the first quarter of 2012 on large 3D programs requiring increased levels of equipment and personnel. In the first quarter of 2011, three crews operated on smaller programs early in the quarter before resources were moved to support Canadian winter operations. Tesla Trinidad completed front-end operations and almost all of the recording on the Guayguayare program during the first quarter of 2012 contributing revenues related to operations and weather standby. International revenues almost doubled from the comparative quarter due to increased revenues from operations in Africa. The first quarter of 2012 included a full workload for the UK and European crew, the demobilization from northern Ethiopia and operations on a lake project in the DRC. In the first quarter of 2011 revenues were earned from the demobilization from eastern Ethiopia and a series of projects in the UK. Tesla Offshore's activity levels improved in the first quarter of 2012 due to its support role on the project in Trinidad and the mobilization of the deep tow system. Tesla Offshore's operations were limited in the first quarter of 2011 with the continued impact of the Macondo oil spill on activity levels in the Gulf. The Company's revenue excluding reimbursables increased 53%.
Gross margin grew considerably in the first quarter of 2012 compared to the first quarter of 2011. The Company had improvements in gross margin across all segments with the biggest growth coming from Tesla Canada and Tesla Trinidad. Tesla Canada gross margins benefitted from improved rates compared to the first quarter of 2011 driven by continued demand for 3C services, better productivity due to the mild winter and a reduced level of rental equipment. Tesla USA gross margins improved with the increase in activity levels and term nature of a large portion of the work performed. Tesla Trinidad contributed margin with almost all of the recording on the current program completed during the quarter allowing for the recognition of turnkey revenues that had been deferred at the end of 2011. Tesla Offshore and Tesla International gross margins both improved with the increase in activity. Gross margin as a percentage of total revenue (including reimbursables) increased to 33% in the first quarter of 2012 from 20% in the first quarter of 2011 due to improvements in margins in Canada, the US and Trinidad along with a decrease in flow-through reimbursables associated with Tesla Canada acquisition revenues. This was partially offset by low margins realized by Tesla International. Gross margin as a percentage of revenue (excluding reimbursables) improved to 40% in the first quarter of 2012 compared to 30% in the first quarter of 2011.
The Company's EBITDA in the first quarter of 2012 improved significantly compared to EBITDA in the first quarter of 2011 due to the growth in absolute gross margin partially offset by increased general and administrative costs associated with increased bonus accruals in Canada and general wage increases.
The Company's working capital increased $24.4 million during the quarter to $34.9 million including cash of $13.1 million. Operating cash flows during the quarter funded increased working capital requirements in Canada and $1.5 million of capital expenditures. Operating lines were fully repaid during the quarter.
Total long-term borrowings were reduced by $1.0 million during the quarter to $28.1 million. Subsequent to March 31, 2012, the Company made further repayments of $15.0 million on long-term debt reducing total long-term borrowings to $13.1 million. At March 31, 2012, the Company had $37.1 million of unused committed bank credit and lease facilities.
Subsequent to March 31, 2012, the Company renewed and increased its Canadian credit facility which consists of a $15 million operating loan, a $30 million revolving credit facility and a $20 million (previously $15 million) finance lease facility. All facilities are available in either Canadian or US currency at Tesla's discretion.
Shareholders' equity increased $16.1 million to $74.1 million during the quarter due to the significant earnings generated and an increase in contributed surplus relating to share-based payment charges. This was partially offset by a decline in accumulated other comprehensive income with the strengthening of the Canadian dollar against the functional currency of the Company's US subsidiaries.
Outlook:
North America Land Operations
In Canada, the mild weather this winter led to an early spring break-up with a limited amount of winter work extending into April this year. Low natural gas prices will continue to limit exploration activity during the summer months although there are signs of an improvement over last summer. The Company expects to operate one crew periodically during May and June with additional crews operational during the third quarter with activity in both western and eastern Canada.
The Company recently signed a letter of intent with a multi-client geophysical company regarding an extended seismic services agreement (the "Agreement"). Under the Agreement, the Company is guaranteed 18 crew months of activity during a 24 month period with an option to extend for an additional 24 months by mutual agreement of both parties. To service the Agreement, the Company plans to purchase 10,000 stations of a wireless multi-component seismic acquisition system and auxiliary equipment at a cost of approximately $18.0 million to be financed out of cash on hand, long-term debt or lease financing.
With the Agreement, a number of recent project awards and continued bid activity, the Company expects to operate two crews in the US from late-May through the summer months. With the low natural gas price, the Company continues to see a rise in activity levels in oil and liquids rich shale plays such as the Bakken, Utica (Eastern Ohio) and Marcellus (Pennsylvania and West Virginia). Activity is expected to increase in the Denver-Julesburg ("DJ") Basin in the third quarter. Pricing of services continues to be the driving factor in this market with improvements in utilization rates increasing due to requirements for higher channel counts and third-party multi-client programs driving the demand for services.
The project in Trinidad was completed in mid-April after a successful and efficient recording phase despite continued weather and vandalism delays, both of which were covered by standby charges allowing for cost recovery. The Company realized planned margins on the recording phase of operations and turnkey margins were released as the project reached completion. The turnkey margin is at a reduced level than originally planned due to the delays in the project and resulting cost overruns. Tesla is working with its operating partners in Trinidad and other nearby countries in an attempt to secure future work in the region.
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, and potentially increased during 2012, offering potential for further growth to Tesla International's operations in this area. This crew continues to be fully utilized and has secured projects that will see it continue work through to the end of the third quarter of 2012 on projects throughout the UK and Europe.
Delays due to regulatory export issues have kept Tesla International in the final stages of moving equipment from northern Ethiopia to a Duty Free Zone in order to facilitate efficient remobilization following the successful completion of a project in the region. The Company will maintain a presence in the region and is currently pursuing projects in Ethiopia and surrounding areas.
Tesla International is also in the final stages of moving vessels and other equipment back to its base in Uganda following the completion of a transition zone ("TZ") project on Lake Albert in the DRC in the first quarter of 2012. There remains significant interest in the Rift Valley basin trend with Tesla International well placed to exploit both the TZ and terrestrial acquisition opportunities in the area. One contract has already been awarded and will see the TZ crew active in the third quarter with other potential opportunities for the remainder of 2012.
Bid activity remains busy with a multitude of prospective work programs in the UK and Europe. Key areas of East 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.
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 continues to face increased competition and lower processing prices, but has several projects underway and additional opportunities continue to be pursued to maintain backlog.
Offshore Operations
The reactivation process for activity in the Gulf of Mexico is underway with the central and eastern Gulf of Mexico lease sale scheduled for June 20, 2012. This is positive news for Tesla Offshore. New lease sales should lead to an increase in geophysical operations as operators will require geophysical surveys for the purpose of securing drilling permits and evaluating new lease properties. The drilling moratorium has now been lifted and operators report that drilling permit approvals on existing leases are moving forward, albeit slowly.
Geophysical activity is picking up following the historically slower winter months. Tesla Offshore has managed to land several significant projects heading into the second quarter of 2012 that will see two geophysical vessels active starting in early May. Construction activity is also expected to increase during the second quarter as trawling and special projects resume.
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 recently completed support work on Tesla Trinidad's operations and has secured a multi-year project in Alaska. 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.
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, 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".
