EX-99.1 2 a2q14earningsrelease.htm EARNINGS RELEASE 2Q14 Earnings Release


Exhibit 99.1

FOR IMMEDIATE RELEASE
Contact:        Marcia Kendrick
713-881-8900


SEITEL ANNOUNCES SECOND QUARTER 2014 RESULTS
Cash Resales of $26.1 million; Total Revenue of $47.3 million

HOUSTON, August 13, 2014 - Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the second quarter ended June 30, 2014.

Second Quarter Highlights -
($ in millions)
Second Quarter
 
First Six Months
 
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Cash Resales
$
26.1

 
$
22.6

 
15
 %
 
$
58.4

 
$
45.1

 
29
 %
Total Revenue
47.3

 
47.5

 
—
 %
 
104.4

 
98.9

 
6
 %
Cash EBITDA
20.2

 
17.7

 
14
 %
 
46.3

 
34.4

 
35
 %
Net Income
2.6

 
6.4

 
(60
)%
 
4.5

 
8.1

 
(45
)%

Total revenue for the second quarter of 2014 was $47.3 million compared to $47.5 million in the second quarter of 2013. Total revenue is primarily comprised of underwriting revenue related to new data acquisition and resale licensing revenue. These revenue components totaled $14.5 million and $31.8 million, respectively, in the second quarter of 2014 compared to $15.4 million and $31.2 million, respectively, in the second quarter of 2013. The majority of new data acquisition activity in the second quarter of 2014 occurred in the Eagle Ford/Woodbine, Utica/ Marcellus and Permian unconventional areas. Cash resales, a component of resale licensing revenue, were $26.1 million, an increase of $3.5 million, or 15%, in the second quarter of 2014 compared to cash resales of $22.6 million in the second quarter of 2013. Cash resales increased between the quarters primarily due to an increase in licensing of data in unconventional areas. Solutions and other revenue was $1.0 million in both the second quarter of 2014 and the second quarter of 2013.

Total revenue for the six months ended June 30, 2014 was $104.4 million compared to $98.9 million for the same period last year. Acquisition underwriting revenue was $31.3 million for the first six months of 2014 compared to $40.5 million in the first six months of 2013. The decrease between years is attributable to successful execution of our cash generation strategy, which focuses on reduced, but targeted, investment. Although this lowers gross underwriting revenue, we have focused on a higher relative underwriting percentage. Our overall underwriting percentage increased from 64% for the first six months of 2013 to 70% for the first six months of 2014. The majority of our activity in the first half of 2014 occurred in the Eagle Ford/Woodbine, Utica/Marcellus, Permian and Montney unconventional plays in North America. Total resale licensing revenue was $70.9 million in the first six months of 2014 compared to $56.0 million in the first six months of 2013. For the first six months of 2014, cash resales were $58.4 million, an increase of $13.3 million, or 29%, compared to $45.1 million in the first six months of 2013. The increase in cash resales between the six month periods was driven by an increase in licensing activity in unconventional areas both in the U.S. and Canada, as well as an increase in conventional areas. Solutions and other revenue was $2.2 million in the first six months of 2014 compared to $2.4 million in the first six months of 2013.

“Our cash resale activity has shown improvement year over year in both the first and second quarters despite lower investment levels,” commented Rob Monson, president and chief executive officer. “We have seen good cash resale activity due to significant investments in recent years in strategic areas for our clients. These increases in cash resales are the driver to our improved Cash EBITDA.”

Net income was $2.6 million for the second quarter of 2014 compared to $6.4 million for the second quarter of 2013 and was $4.5 million in the first six months of 2014 compared to $8.1 million in the first six months of 2013. The decrease in net income between periods was primarily due to higher amortization expense associated with our data library and an increase in income tax expense resulting from U.S. federal tax expense being recorded in 2014. For the six month period, the decrease in net

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income was partially offset by an increase in revenue and lower interest expense. Additionally, the first six months of 2013 included a $1.5 million charge related to the early extinguishment of our debt.

Cash EBITDA, generally defined as cash resales and solutions revenue less cash operating expenses (excluding various non-recurring items), was $20.2 million in the second quarter of 2014 compared to $17.7 million in the same period of 2013. Cash EBITDA was $46.3 million in the first six months of 2014 compared to $34.4 million in the first half of last year. The increase from 2013 to 2014 in both periods resulted from higher levels of cash resale activity during 2014. Cash EBITDA for the last twelve months ended June 30, 2014 was $87.0 million.

Selling, general and administrative (“SG&A”) expenses were $6.9 million in the second quarter of 2014 compared to $6.3 million in last year's second quarter. SG&A expenses were $14.3 million in the first six months of 2014 compared to $13.6 million in the same period last year. The increases were primarily due to an increase in variable compensation tied to revenue and Cash EBITDA.

In the first six months of 2014, our net cash capital expenditures were $17.1 million with gross capital expenditures of $48.6 million, of which $45.0 million related to new data acquisition. Our forecast of net cash capital expenditures for the remainder of 2014 is $18.1 million, bringing our total estimated net cash capital expenditures for the year to $35.2 million. Our current backlog of net cash capital expenditures related to acquisition programs is $19.6 million, of which we expect approximately $13.8 million to be incurred in 2014.

CONFERENCE CALL
Seitel will hold its quarterly conference call to discuss second quarter results for 2014 on Thursday, August 14, 2014 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). The dial-in number for the call is 800-374-2540, Conference ID 82519492. A replay of the call will be available until August 21, 2014 by dialing 800-585-8367, Conference ID 82519492 and will be available following the conference call at the Investor Relations section of the company's website at http://www.seitel.com.
    
ABOUT SEITEL
Seitel is a leading provider of onshore seismic data to the oil and gas industry in North America. Seitel's data products and services are critical in the exploration for and development of oil and gas reserves by exploration and production companies. Seitel has ownership in an extensive library of proprietary onshore and offshore seismic data that it has accumulated since 1982 and that it licenses to a wide range of exploration and production companies. Seitel believes that its library of 3D onshore seismic data is the largest available for licensing in North America and includes leading positions in oil and liquids-rich unconventional plays. Seitel has ownership in approximately 41,000 square miles of 3D onshore data, over 10,000 square miles of 3D offshore data and approximately 1.1 million linear miles of 2D seismic data concentrated in the major active North American oil and gas producing regions. Seitel serves a market which includes over 1,600 companies in the oil and gas industry.

This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Statements contained in this press release about our future outlook, prospects, strategies and plans, and about industry conditions, demand for seismic services and the future economic life of our seismic data are forward-looking, among others. All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of historical fact, are forward-looking. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “target,” “foresee,” “should,” “intend,” “may,” “will,” “would,” “could,” “potential” and similar expressions are intended to identify forward-looking statements. Forward-looking statements represent our present belief and are based on our current expectations and assumptions with respect to future events and their potential effect on us. While we believe our expectations and assumptions are reasonable, they involve risks and uncertainties beyond our control that could cause the actual results or outcome to differ materially from the expected results or outcome reflected in our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release may not occur. Such risks and uncertainties include, without limitation, actual customer demand for our seismic data and related services, the timing and extent of changes in commodity prices for natural gas, crude oil and condensate and natural gas liquids, conditions in the capital markets during the periods covered by the forward-looking statements, the effect of economic conditions, our ability to obtain financing on satisfactory terms if internally generated funds and our current credit facility are insufficient to fund our capital needs, the impact on our financial condition as a result of our debt and our debt service, our ability to obtain and maintain normal terms with our vendors and service providers, our ability to maintain contracts that are critical to our operations, changes in the oil and gas industry or the economy generally and changes in the exploration budgets of our customers. For additional information regarding known material factors that could cause our actual results to differ, please see our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

The forward-looking statements contained in this press release speak only as of the date hereof and readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by federal and state securities laws, we undertake

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no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All forward-looking statements attributable to Seitel, Inc. or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein, in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and future reports filed with the SEC.

This press release also includes certain non-GAAP financial measures as defined under SEC rules. Non-GAAP financial measures include cash resales, for which the most comparable GAAP measure is total revenue; cash EBITDA, for which the most comparable GAAP measure is net income; and net cash capital expenditures, for which the most comparable GAAP measure is total capital expenditures. Reconciliations of each non-GAAP financial measure to its most comparable GAAP measure are included at the end of this press release.

(Tables to follow)


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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


 
 
 
(Unaudited)
 
 
 
 
 
June 30,
2014
 
December 31, 2013
ASSETS
 
 
 
 
Cash and cash equivalents
$
43,017

 
$
31,353

 
Receivables, net
43,261

 
45,119

 
Net seismic data library
178,751

 
195,778

 
Net property and equipment
4,037

 
4,611

 
Prepaid expenses, deferred charges and other
9,665

 
9,844

 
Intangible assets, net
12,402

 
14,762

 
Goodwill
201,183

 
201,535

 
Deferred income taxes
88,655

 
92,511

TOTAL ASSETS
$
580,971

 
$
595,513

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
 
LIABILITIES
 
 
 
 
Accounts payable and accrued liabilities
$
36,057

 
$
37,777

 
Income taxes payable
784

 
787

 
Senior Notes
250,000

 
250,000

 
Obligations under capital leases
2,540

 
2,676

 
Deferred revenue
25,835

 
41,739

 
Deferred income taxes
6,604

 
7,578

TOTAL LIABILITIES
321,820

 
340,557

 
 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
STOCKHOLDER'S EQUITY
 
 
 
 
Common stock, par value $.001 per share; 100 shares authorized,
 
 
 
 
 
issued and outstanding at June 30, 2014 and December 31, 2013
—

 
—

 
Additional paid-in capital
399,945

 
399,641

 
Retained deficit
(153,987
)
 
(158,454
)
 
Accumulated other comprehensive income
13,193

 
13,769

 
TOTAL STOCKHOLDER'S EQUITY
259,151

 
254,956

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
580,971

 
$
595,513



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands)


 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
REVENUE
$
47,334

 
$
47,544

 
$
104,387

 
$
98,895

 
 
 
 
 
 
 
 
 
EXPENSES:
 
 
 
 
 
 
 
 
Depreciation and amortization
29,771

 
27,829

 
67,629

 
57,167

 
Cost of sales
127

 
63

 
253

 
102

 
Selling, general and administrative
6,893

 
6,254

 
14,318

 
13,641

 
 
36,791

 
34,146

 
82,200

 
70,910

 
 
 
 
 
 
 
 
 
INCOME FROM OPERATIONS
10,543

 
13,398

 
22,187

 
27,985

 
 
 
 
 
 
 
 
 
Interest expense, net
(6,211
)
 
(6,138
)
 
(12,418
)
 
(15,453
)
Foreign currency exchange gains (losses)
831

 
(1,171
)
 
(443
)
 
(1,818
)
Loss on early extinguishment of debt
—

 
—

 
—

 
(1,504
)
Other income
73

 
—

 
59

 
1

 
 
 
 
 
 
 
 
 
Income before income taxes
5,236

 
6,089

 
9,385

 
9,211

Provision (benefit) for income taxes
2,661

 
(279
)
 
4,918

 
1,105

 
 
 
 
 
 
 
 
 
NET INCOME
$
2,575

 
$
6,368

 
$
4,467

 
$
8,106





















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Cash resales represent new contracts for data licenses from our library, including data currently in progress, payable in cash. We believe this measure is important in assessing overall industry and client activity. Cash resales are likely to fluctuate quarter to quarter as they do not require the longer planning and lead times necessary for new data creation. The following table summarizes the components of Seitel's revenue and shows how cash resales (a non-GAAP financial measure) are a component of total revenue, the most directly comparable GAAP financial measure (in thousands):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2014
 
2013
 
2014
 
2013
Total acquisition underwriting revenue
$
14,500

 
$
15,397

 
$
31,337

 
$
40,486

 
 
 
 
 
 
 
 
 
Resale licensing revenue:
 
 
 
 
 
 
 
 
Cash resales
26,089

 
22,630

 
58,366

 
45,075

 
Non-monetary exchanges
—

 
261

 
177

 
585

 
Revenue recognition adjustments
5,757

 
8,303

 
12,334

 
10,375

 
Total resale licensing revenue
31,846

 
31,194

 
70,877

 
56,035

 
 
 
 
 
 
 
 
 
Total seismic revenue
46,346

 
46,591

 
102,214

 
96,521

 
 
 
 
 
 
 
 
 
Solutions and other
988

 
953

 
2,173

 
2,374

Total revenue
$
47,334

 
$
47,544

 
$
104,387

 
$
98,895


Cash EBITDA represents cash generated from licensing data from our seismic library net of recurring cash operating expenses. We believe this measure is helpful in determining the level of cash from operations we have available for debt service and funding of capital expenditures (net of the portion funded or underwritten by our customers). Cash EBITDA includes cash resales plus all other cash revenues other than from data acquisitions, less cost of goods sold and cash selling, general and administrative expenses (excluding non-recurring corporate expenses such as severance and legal, financial and other expenses related to corporate and strategic transactions). The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, net income (in thousands):
 
 
 
 
 
 
 
 
 
 
Last Twelve Months Ended June 30, 2014
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2014
 
2013
 
2014
 
2013
 
Cash EBITDA
$
20,200

 
$
17,701

 
$
46,318

 
$
34,357

 
$
87,025

Add other revenue components not included in cash EBITDA:
 
 
 
 
 
 
 
 
 
 
Acquisition underwriting revenue
14,500

 
15,397

 
31,337

 
40,486

 
78,163

 
Non-monetary exchanges
—

 
261

 
177

 
585

 
1,248

 
Revenue recognition adjustments
5,757

 
8,303

 
12,334

 
10,375

 
15,635

Add (subtract) other items included in net income:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
(29,771
)
 
(27,829
)
 
(67,629
)
 
(57,167
)
 
(132,060
)
 
Non-cash operating expenses
(126
)
 
(272
)
 
(304
)
 
(498
)
 
(675
)
 
Non-recurring corporate expenses
(17
)
 
(163
)
 
(46
)
 
(153
)
 
(304
)
 
Interest expense, net
(6,211
)
 
(6,138
)
 
(12,418
)
 
(15,453
)
 
(24,816
)
 
Foreign currency gains (losses)
831

 
(1,171
)
 
(443
)
 
(1,818
)
 
(847
)
 
Loss on early extinguishment of debt
—

 
—

 
—

 
(1,504
)
 
—

 
Other income
73

 
—

 
59

 
1

 
546

 
Benefit (provision) for income taxes
(2,661
)
 
279

 
(4,918
)
 
(1,105
)
 
86,127

Net income
$
2,575

 
$
6,368

 
$
4,467

 
$
8,106

 
$
110,042


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Net cash capital expenditures represent total capital expenditures less cash underwriting revenue from our clients and non-cash additions to the seismic data library. We believe this measure is important as it reflects the amount of capital expenditures funded from our operating cash flow. The following table summarizes our actual capital expenditures for the six months ended June 30, 2014 and our estimate for the year ending December 31, 2014 and shows how net cash capital expenditures (a non-GAAP financial measure) are derived from total capital expenditures, the most directly comparable GAAP financial measure (in thousands):
 
 
Six Months
Ended
June 30, 2014
 
Estimate for Remainder of 2014
 
Total Estimate for 2014
New data acquisition
$
45,014

 
$
53,586

 
$
98,600

Cash purchases and data processing
3,048

 
852

 
3,900

Non-monetary exchanges
177

 
4,523

 
4,700

Property and equipment and other
356

 
1,044

 
1,400

Total capital expenditures
48,595

 
60,005

 
108,600

Less:
 
 
 
 
 
 
Non-monetary exchanges
(177
)
 
(4,523
)
 
(4,700
)
 
Cash underwriting
(31,337
)
 
(37,363
)
 
(68,700
)
Net cash capital expenditures
$
17,081

 
$
18,119

 
$
35,200





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