Tesla Exploration Ltd. ("Tesla" or the "Company") (TSX:TXL) today announces its
2013 third quarter operating and financial results.
Selected Highlights
----------------------------------------------------------------------------
(000s, except per share
data) Three months ended Nine months ended
(unaudited) September 30, September 30,
2013 2012 Change 2013 2012 Change
$ $ % $ $ %
----------------------------------------------------------------------------
Revenue 31,812 28,853 10 125,275 149,936 (16)
Revenue excluding
reimbursables 25,862 24,918 4 103,587 126,739 (18)
Gross margin(1) 6,571 5,827 13 38,888 40,060 (3)
As a % of revenue
excluding reimbursables 25% 23% 38% 32%
Net earnings (loss) (3,700) (3,903) n/m 2,725 6,101 (55)
Per share - basic (0.17) (0.17) n/m 0.12 0.27 (56)
EBITDA(2) 1,647 1,311 26 22,801 25,620 (11)
Per share - basic 0.07 0.06 17 1.02 1.13 (10)
Cash flow from operations(3) 3,288 2,317 42 23,298 25,129 (7)
Per share - basic 0.15 0.10 50 1.04 1.11 (6)
Weighted average shares
outstanding for the period
- basic 22,392 22,701 (1) 22,464 22,725 (1)
Capital expenditures 3,074 2,214 39 20,411 23,667 (14)
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As at September 30, December 31,
2013 2012 Change
$ $ %
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Working capital 2,373 3,330 (29)
Total assets 128,415 129,443 (1)
Total long-term borrowings(4) 24,248 22,185 9
Equity 65,432 63,374 3
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.
Third Quarter Highlights:
-- Tesla generated $6.6 million of gross margin and $1.6 million of
EBITDA(2) on $31.8 million of revenues during the third quarter of 2013,
an improvement over the comparative quarter.
-- Tesla Canada has committed contracts and outstanding proposals for
several substantial three- dimensional ("3D") three-component ("3C")
projects planned for the upcoming winter. These work commitments will
utilize all of the Company's 3C recording equipment along with
additional rented 3C cable and wireless multi-component seismic
acquisition systems ("Hawk").
-- Tesla Canada also continued to expand the Company's wireless multi-
component seismic acquisition system base with the purchase of 6,000
multi-component geophones for utilization this winter.
-- Tesla USA continued work under an extended seismic services agreement
with a multi-client geophysical company utilizing 10,000 stations of
Hawk. Existing work commitments extend well into 2014. Tesla USA also
utilized its recently purchased 6,000 stations of Hawk and auxiliary
equipment on a second crew.
-- Tesla Offshore continued work on three geophysical vessels throughout
the quarter. Tesla Offshore's backlog of turnkey and day rate
geophysical projects will allow it to continue operating a geophysical
vessel throughout the winter months. This supplemented the summer
construction season supporting client operations on up to 11 vessels.
-- Tesla Offshore's Bluefin Autonomous Underwater Vehicle ("AUV") is
expected to be operational in late-November 2013 with projects committed
in the Gulf of Mexico.
-- Tesla International operated two crews during the quarter. One in the UK
on hydrocarbon and mineral projects while a crew in Africa completed and
ultimately demobilized from a transition zone ("TZ") project in the
Democratic Republic of the Congo ("DRC").
-- Tesla International's contract in Somaliland was terminated by the
client due to security concerns prior to start-up. Under terms of the
contract, the client has paid a termination fee and is contractually
required to pay all committed costs and demobilization fees. This crew
is now in the process of mobilizing to a recently signed project in
Kenya.
Third Quarter Financial Results:
The Company's consolidated revenues including reimbursables increased 10% in the
third quarter of 2013 compared to the third quarter of 2012. The Company's
revenue excluding reimbursables increased 4%. Improvements in activity levels
for Tesla International and Tesla USA were partially offset by declines in
activity levels for Tesla Canada and to a lesser extent Tesla Offshore. The
Company's gross margin also improved in the third quarter of 2013 compared to
the third quarter of 2012 due to increased revenues for Tesla International and
improved margin percentage for Tesla Offshore. Gross margin as a percentage of
total revenue (including reimbursables) increased to 21% in the third quarter of
2013 from 20% in the third quarter of 2012 due to a heavier weighting of
improved margins for Tesla International and Tesla Offshore partially offset by
increased reimbursable revenues for Tesla USA. Gross margin as a percentage of
revenue excluding reimbursables also improved to 25% in the third quarter of
2013 compared to 23% in the third quarter of 2012 due to a heavier weighting of
improved margins for Tesla International and Tesla Offshore. Reimbursable
revenues increased due to front-end work undertaken by Tesla USA preparing
fourth quarter programs.
The third quarter remained slow for Tesla Canada with low levels of activity
throughout the industry. One crew completed a limited number of small projects
during the quarter supplemented by front-end work for fall programs leading to a
decline in revenues from the comparative quarter of 2012 when two crews operated
periodically. Tesla Canada had negative gross margin during the third quarter of
2013 consistent with the third quarter of 2012 due to low revenues being more
than offset by fixed field overhead costs related to maintaining and preparing
equipment for the fall and peak winter season.
Despite a softening of the US seismic land acquisition market, Tesla USA saw an
increase in revenues mainly driven by increased reimbursables related to
front-end activities preparing for fall programs. Activity levels declined
slightly with two Hawk crews operating throughout the quarter until early
September when the crews stood down between projects until late September. Tesla
USA operated two crews throughout the third quarter of 2012. Although revenues
decreased, Tesla USA's gross margin percentage improved due to the utilization
of additional Hawk equipment purchased in June.
Tesla International's revenues improved significantly from the comparative
quarter due to increased revenues from operations in Africa. During the third
quarter of 2013, Tesla International completed and demobilized from a transition
zone ("TZ") project in the Democratic Republic of the Congo ("DRC"). Tesla
International also realized revenues resulting from the client termination of a
contract in Somaliland. There was little activity in Africa during the third
quarter of 2012. The third quarter of 2013 included a slightly reduced level of
activity for the UK crew compared to the third quarter of 2012. Gross margins
benefitted from the contracted termination fee on the Somaliland project.
Tesla Offshore's activity declined during the third quarter of 2013 compared to
the third quarter of 2012. The third quarter of 2013 continued to benefit from
significantly increased activity levels for the geophysical division with both
turnkey and day rate work. However, this was offset by an industry-wide
reduction in construction activity with reduced trawling and positioning
projects and a later start than normal for recurring special project work.
Despite the drop in revenue, Tesla Offshore's gross margin improved compared to
the prior period due to improved gross margin percentage from a heavier
weighting of geophysical work.
The Company's EBITDA increased in the third quarter of 2013 compared to the
third 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 business development expenses. The Company's consolidated net
loss was slightly lower than the consolidated net loss in the comparative
quarter. The improvement in EBITDA was partially offset by increased
depreciation related to the Hawk system along with a reduced tax recovery.
The Company's working capital decreased $1.8 million during the quarter to $2.4
million including net cash of $1.2 million. Operating cash flows and operating
lines of credit were used to repay $1.4 million of regular finance leases and
fund $4.7 million of capital expenditures during the quarter. Operating lines
were utilized to fund ongoing operations in certain jurisdictions.
Total long-term borrowings declined by $1.9 million during the quarter to $24.2
million due to $1.4 million of regular payments made on outstanding finance
leases and the strengthening of the Canadian dollar against US dollar
denominated long-term borrowings. At September 30, 2013, the Company had $37.6
million of unused committed bank credit and lease facilities.
Shareholders' equity decreased $4.4 million to $65.4 million during the quarter
due to the net loss incurred during the quarter. Additionally, there was a
decrease in accumulated other comprehensive income due to the strengthening of
the Canadian dollar against the functional currency of the Company's US
subsidiaries.
2013 Year-to-date Financial Results:
The Company's year-to-date consolidated revenues including reimbursables remain
behind 2012 with no contribution from Tesla Trinidad following the conclusion of
the Guayaguayare project in April of 2012. The Company's revenue including
reimbursables decreased 16% while revenue excluding reimbursables decreased 18%.
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 3% 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
31% in 2013 from 27% 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 38% in 2013 compared to 32% 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 third quarter of 2013 despite
challenges in certain regions, the outlook remains positive throughout the
Company. 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, permit delays, a late harvest and wetter than normal ground
conditions have delayed exploration activity into the late fall. Further, there
appears to be a reduced number of fall programs combined with aggressive
competition. Due to weakness in the US, certain competitors are focusing their
efforts in Canada. Competitors and equipment rental companies have provided an
increased capacity in Canada for both single component and three component
wireless equipment which is also contributing to increased pricing pressure.
Tesla Canada expected to ramp up operations during October; however, the permit
delays and weather related challenges have deferred the start-up of four crews
until early November. These crews will utilize the Company's 3C recording
equipment along with rented multi- component Hawk systems throughout the
quarter. While opportunities for 3D/3C projects (including Hawk) remain strong,
the industry will be negatively impacted by the effect of a few larger oil and
gas companies cancelling or delaying significant portions of their planned work
due to budget cuts and challenges with First Nations approvals. Tesla Canada now
plans to operate six crews during the first quarter of 2014 (lower than the
previously anticipated activity level), with a continued focus on 3C and
wireless technology for oilsands projects and shale plays in western Canada.
Despite the recent softening in oil prices, significant oilsands projects
continue to be announced. Continued domestic and international funding of these
long-term projects will continue to drive demand for exploration and monitoring
work commitments in the region.
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 will be operating
in Pennsylvania into early 2014 with pending projects to follow. Tesla USA is
currently working on an extension to the existing multi-year agreement. A second
crew utilizing the recently purchased 6,000 station Hawk system is working on a
project in Wyoming into mid-November before moving on to projects in North
Dakota. Tesla USA is hopeful in securing additional projects for this smaller
Hawk system; alternatively the system will be relocated to Canada for the winter
season. 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), Marcellus (western Pennsylvania and
West Virginia) and Denver-Julesburg ("DJ") Basin.
South and Central 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
and Central America. In recent years there has been increased foreign investment
in 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 South and Central America. 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 South and
Central America 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 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 both in the UK
and mainland Europe for a prolonged period of time. While there are gaps in the
short-term work schedule, bid activity and scoping exercises suggest that this
demand will continue in 2014. Management is also pursuing opportunities to
expand its European presence.
Tesla International is in the final stages of demobilizing from Somaliland
following termination of a contract by the client due to security concerns prior
to start-up. Under terms of the contract, the client has paid a termination fee
and is contractually required to pay all committed costs and demobilization
fees. Tesla International has engaged with the Somaliland Ministry of Energy to
leave a limited asset base in Somaliland pending the outcome of active bids in
the region.
Equipment and personnel will now be mobilized to a recently signed project in
Kenya expected to begin before the end of the year. Tesla International is
pursuing additional projects related to the latest concession awards in Kenya
and the associated work commitments in the region in order to extend backlog.
Two key areas of East Africa are experiencing greater levels of 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 Rift Valley Trend from Tanzania into
Ethiopia. This interest is in chasing analog plays based on the recent
discoveries in Uganda and successes in Northern Kenya. There remains significant
interest in the lake zones of this Rift Valley Trend with Tesla International
well placed to exploit the TZ acquisition opportunities in the area. 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.
The UK technical services office remains steady with a number of in-seam
seismic, unconventional gas (coal bed and tight reservoirs), and geophysical
interpretation projects and is pursuing additional projects to strengthen
backlog.
Offshore Operations
Tesla Offshore saw a continuation of increased activity levels in the Gulf of
Mexico through the summer and is expecting the seasonal slowdown of fall and
winter to begin impacting activities. However, with Central and Western Gulf of
Mexico lease sales returning to their customary schedules during 2013, the
expectation is that activity levels should stabilize to pre-BP crisis levels in
the foreseeable future. Tesla Offshore has a healthy backlog of not only turnkey
work, but also some day rate work, which is an anomaly for this time of the
year. Due to an early and unexpected deterioration in the weather, the two large
scale day rate exploration projects have ceased operations for this year, but
will resume early in 2014.
Construction activities remain lower than historical levels. While trawling
activity has been consistent, there is a reduced level of positioning work in
the Gulf of Mexico and special project start dates were later than in previous
years. While there are a number of opportunities in play, this department will
see reduced activity levels while the industry remains abnormally slow,
especially heading into the winter months.
Tesla Offshore continues to pursue opportunities outside the Gulf of Mexico. The
multi-year project in Alaska is ongoing; however, the operations have been
placed on standby awaiting word of approved permit clarifications and a return
to full operations. As long-term clients continue to expand into international
areas, Tesla Offshore continues configuring systems and staff to profitably
provide services to support those expansions.
Tesla Offshore has completed development, begun submitting proposals and has
landed the first major client for the newly developed provision of 3D seismic
interpretation. Tesla Offshore continues to pursue alliances and broaden service
offerings such as geotechnical acquisition and multi-streamer along with
high-resolution shallow seismic services to further expand the Company's
opportunities.
As previously disclosed, a significant focus of Tesla Offshore's commitment to
expansion centers on the Company's purchase of a Bluefin 21 AUV. The system is
currently in the final stages of acceptance testing at the build facility and is
expected to be delivered to Tesla Offshore in mid to late November. It appears
the delays that Tesla Offshore has experienced have come to an end and target
schedules are now more certain. In addition to addressing this much needed
service to our existing customer base, offering AUV services worldwide has
opened new markets for Tesla Offshore related to deep water oil and gas field
development across the globe. Tesla Offshore has customer commitments already in
place for the Gulf of Mexico and is optimistic regarding significant AUV work in
Southeast Asia. Tesla Offshore has recently hired several experienced personnel
to manage and optimize use of state of the art technology in geophysical survey
operations, including the AUV service line. This includes the bringing on staff
of one of our longstanding top contractors to manage AUV operations, as well as
a seasoned AUV Party Chief with thirteen years of experience performing AUV
operations worldwide. The company also continues to further the development of
geo-hazards interpretation services for local and international clients.
On October 30, 2013, the Company received notice that a claim has been filed
against the Company by an unrelated third party in the United States District
Court for the Eastern District of Louisiana. The third party is seeking damages
from the Company resulting from an incident involving a vessel under contract to
the Company in November 2012. The Company's management is consulting with its
legal counsel to determine the Company's response to this claim. Although the
direction and financial consequences of the claim cannot be determined at this
time, the Company expects its regular business insurance will cover any and all
claims arising from this matter.
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 nine months ended September 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:
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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