CALGARY, ALBERTA--(Marketwired - Aug 13, 2013) - Tesla Exploration Ltd. ("Tesla" or the "Company") (TSL.TO) today announces its 2013 second quarter operating and financial results.
|(000s, except per share data)||Three months ended||Six months ended|
|(unaudited)||June 30,||June 30,|
|Revenue excluding reimbursables||23,806||16,915||41||77,725||101,821||(24||)|
|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||)|
|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||)|
|As at||June 30,||December 31,|
|Total long-term borrowings (4)||26,147||22,185||18|
(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 £4 million ($6.4 million) (previously £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 £4 million ($6.4 million) (previously £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.
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.
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.
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.
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.
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".