Q2
Selected Financial and
Operating Information
Three months ended June 30, | |||||
(unaudited) | |||||
(thousands of dollars except per share data, | |||||
numbers of shares and kilometres of seismic data) | 2022 | 2021 | |||
Revenue | |||||
Data library sales | 3,028 | 18,973 | |||
Other revenue | 69 | 115 | |||
Total revenue | 3,097 | 19,088 | |||
Amortization of seismic data library | 2,443 | 2,503 | |||
Net earnings (loss) | (1,766) | 10,159 | |||
Per share basic and diluted | (0.03) | 0.19 | |||
Cash provided by operating activities | 1,773 | 9,133 | |||
Per share basic and diluted | 0.03 | 0.17 | |||
EBITDA(a) | 818 | 17,609 | |||
Per share - basic and diluted(a) | 0.02 | 0.33 | |||
Shareholder free cash flow(a) | 1,224 | 12,819 | |||
Per share - basic and diluted(a) | 0.02 | 0.24 | |||
Capital expenditures | |||||
Seismic data digitization and related costs | - | 95 | |||
Property and equipment | 8 | 3 | |||
Total capital expenditures | 8 | 98 | |||
Weighted average shares outstanding | |||||
Basic and diluted | 53,731,237 | 53,793,317 | |||
Shares outstanding at period-end | |||||
Seismic library |
- 2D in kilometres
- 3D in square kilometres
For the three and | Q | |||||
six months ended | 2 | |||||
2022 30, June | ||||||
Six months ended June 30, | Year ended | |||||
(unaudited) | December 31, | |||||
2022 | 2021 | 2021 | ||||
4,771 | 23,713 | 48,717 | ||||
182 | 200 | 433 | ||||
4,953 | 23,913 | 49,150 | ||||
4,958 | 5,001 | 10,010 | ||||
(4,284) | 10,192 | 21,514 | ||||
(0.08) | 0.19 | 0.40 | ||||
10,402 | 18,215 | 29,799 | ||||
0.19 | 0.34 | 0.55 | ||||
827 | 21,339 | 42,632 | ||||
0.03 | 0.40 | 0.79 | ||||
1,412 | 15,387 | 32,082 | ||||
0.03 | 0.29 | 0.60 | ||||
- | 191 | 350 | ||||
12 | 3 | 8 | ||||
12 | 194 | 358 | ||||
53,739,960 | 53,793,317 | 53,792,984 | ||||
53,720,317 | 53,793,317 | 53,784,717 | ||||
829,207 | 829,207 | 829,207 | ||||
65,310 | 65,310 | 65,310 |
PSD TSX: PLSDFOTCQX:
Financial Position and Ratios
June 30, | June 30, | December 31, | ||||
(thousands of dollars except ratios) | 2022 | 2021 | 2021 | |||
Working capital | 6,522 | 4,272 | 9,749 | |||
Working capital ratio | 6.9:1 | 1.9:1 | 2.7:1 | |||
Cash and cash equivalents | 5,910 | - | - | |||
Total assets | 40,064 | 51,488 | 52,899 | |||
Long-term debt | - | 10,356 | 2,265 | |||
Trailing twelve-month (TTM) EBITDA(b) | 22,120 | 26,770 | 42,632 | |||
Shareholders' equity | 38,400 | 35,484 | 44,141 | |||
Long-term debt to TTM EBITDA ratio | 0.00 | 0.39 | 0.05 | |||
Long-term debt to equity ratio | 0.00 | 0.29 | 0.05 |
- This non-GAAP financial measure is defined, calculated and reconciled to the nearest GAAP financial measure in the Management's Discussion and Analysis.
- TTM EBITDA is defined as the sum of EBITDA generated over the previous 12 months and is used to provide a comparable annualized measure.
Management's Discussion and Analysis
Q 2
of Financial Condition And Results Of Operations
Three and six months ended June 30, 2022
Contents
Overview | 2 | Liquidity, Capital Resources and |
Key Performance Indicators | 2 | Capital Requirements |
Seismic Revenue Fluctuations | 3 | Non-Capital Resources |
Outlook | 3 | Non-GAAP Financial Measures |
and Reconciliations | ||
Discussion of Operating Results | 4 | Financial Instruments |
Review of Financial Position | 7 | New IFRS Standards |
Financial Summary of | Critical Accounting Estimates | |
Quarterly Results | 9 | |
Contractual Obligations | 10 |
Disclosure Controls and Procedures
10 (DC&P) and Internal Controls over
13 | Financial Reporting (ICFR) | 15 |
Risk Factors | 16 | |
13 | Additional Information | 16 |
15 | Forward-Looking Information | 16 |
15 | ||
15 |
The following Management's Discussion and Analysis (MD&A) of the financial condition and results of operations of Pulse Seismic Inc. ("Pulse" or the "Company") for the three and six months ended June 30, 2022 was prepared taking into consideration information available to July 20, 2022 and should be read with the unaudited condensed consolidated interim financial statements and related notes for the three and six months ended June 30, 2022. This MD&A is supplemental to the MD&A, audited consolidated financial statements and related notes for the year ended December 31, 2021.
The unaudited condensed consolidated interim financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) with comparative figures for the prior year. Certain comparative figures were reclassified to conform to the current year's presentation. The unaudited condensed consolidated interim financial statements and the MD&A were reviewed by Pulse's Audit and Risk Committee and approved by Pulse's Board of Directors. All financial information is reported in Canadian dollars. This MD&A discusses matters which Pulse's management considers material. Management determines whether information is material based on whether it believes a reasonable investor's decision whether or not to buy, sell or hold shares in the Company would likely be influenced or changed if the information were omitted or misstated. Readers should also read the cautionary statement in "Forward-Looking Information".
SEISMIC PULSE | |
2022 Q2 Report | 1 |
SEISMIC PULSE
2
Overview
ABOUT PULSE
Pulse is a market leader in the acquisition, marketing and licensing of two-dimensional (2D) and three-dimensional (3D) seismic data for the energy sector in Western Canada. Seismic data is used by oil and natural gas exploration and development companies to identify portions of geological formations that have the potential to hold hydrocarbons, as well as by companies exploring for non-traditional forms of energy and related resources, for example helium and lithium, that utilize advanced geophysics to maximize the probability of project success. Seismic data is used in conjunction with well logging data, well core comparisons, geological mapping and surface outcrops to create a detailed map of the Earth's subsurface at various depths.
Pulse owns the largest licensable seismic data library in Canada, currently consisting of approximately 65,310 net square kilometres of 3D seismic and 829,207 net kilometres of 2D seismic. The library extensively covers the Western Canada Sedimentary Basin (WCSB), where most of Canada's oil and natural gas exploration and development occur.
Pulse calculates net kilometres of 2D data and net square kilometres of 3D data by multiplying the number of kilometres of seismic data in each 2D line and the number of square kilometres of seismic data in each individual 3D seismic dataset by Pulse's percentage of ownership in each.
MISSION AND STRATEGY
Pulse is a pure-play seismic data library company focused on the acquisition, marketing and licensing of seismic data to the western Canadian oil and natural gas and new energy sectors. The Company's business model is designed to generate a growing stream of cash flow by repeatedly licensing the data in its seismic data library to oil and natural gas companies and more recently to companies exploring for non-traditional forms of energy.
Pulse is working with partners to explore the use of sophisticated processing technologies that provide advanced interpretation and visualization of seismic data to reduce the geological and drilling risks in exploring for subsurface targets. The application of such technologies is intended to increase the attractiveness and range of uses of Pulse's seismic dataset for existing and potential new customers. These include companies in emerging energy-transition projects such as lithium, carbon capture and sequestration, and geothermal, as well as helium resource extraction and Pulse's traditional core focus of oil and natural gas development. The Company recently increased its in-house technical capability to support this initiative, which will not require material capital investment. Pulse is partnering with third parties to evaluate the range of potential applications with the intention to enhance its sales and marketing activities.
Current seismic processing and visualization software allows historical 2D and 3D data to be reprocessed and reinterpreted, thereby maintaining the technical usefulness and marketability of historical data and, through repeated licensing sales, generating recurring revenue. The Company is continuously seeking and evaluating opportunities to expand its data library by acquiring high-quality 2D and 3D datasets that cover some of western Canada's most prospective current exploration regions, are complementary to its current library, and are available at favourable valuations.
Pulse's strategy is to pursue growth opportunities that meet its financial and technical criteria while maintaining a low cost structure.
Key Performance Indicators
The key performance indicators used by Pulse's management to analyze business results are seismic data library sales, net earnings, EBITDA and shareholder free cash flow. The definitions, calculations and reconciliations of EBITDA and shareholder free cash flow to the nearest GAAP financial measures are provided in "Non-GAAP Financial Measures and Reconciliations".
2022 Q2 Report
Q 2
Results for the key performance indicators for the three and six months ended June 30, 2022, with comparative figures for 2021, are set out in the following table:
(thousands of dollars except per share data)
Data library sales
Other revenue
Total seismic revenue
Net earnings (loss)
Per share basic and diluted
Cash generated by operating activities
-
Per share basic and diluted
EBITDA - Per share basic and diluted
Shareholder free cash flow
Per share basic and diluted
Three months ended June 30, | Six months ended June 30, |
2022 | 2021 | Variance | 2022 | 2021 | Variance |
3,028 | 18,973 | (15,945) | 4,771 | 23,713 | (18,942) |
69 | 115 | (46) | 182 | 200 | (18) |
3,097 | 19,088 | (15,991) | 4,953 | 23,913 | (18,960) |
(1,766) | 10,159 | (11,925) | (4,284) | 10,192 | (14,476) |
(0.03) | 0.19 | (0.22) | (0.08) | 0.19 | (0.27) |
1,773 | 9,133 | (7,360) | 10,402 | 18,215 | (7,813) |
0.03 | 0.17 | (0.14) | 0.19 | 0.34 | (0.15) |
818 | 17,609 | (16,791) | 827 | 21,339 | (20,512) |
0.02 | 0.33 | (0.31) | 0.03 | 0.40 | (0.37) |
1,224 | 12,819 | (11,595) | 1,412 | 15,387 | (13,975) |
0.02 | 0.24 | (0.22) | 0.03 | 0.29 | (0.26) |
For the three months ended June 30, 2022, Pulse generated $3.1 million of revenue compared to $19.1 million for the same period in 2021. For the six months ended June 30, 2022, Pulse generated $5.0 million of revenue compared to $23.9 million for the same period in 2021.
The decrease in data library sales during the three and six months ended June 30, 2022 from the same periods of 2021 is the main factor contributing to the period-over-period decrease in all the Company's key performance metrics.
In the second quarter of 2021, the Company closed two material transactions. Both contracts were transaction-based data library sales related to mergers and acquisitions.
Pulse had an excellent year in 2021, largely driven by transaction-based sales related to exploration and production industry consolidation. Pulse generated the second-highest annual seismic data library sales in its history, after the record $64.0 million achieved in 2012.
Seismic Revenue Fluctuations
Revenue fluctuations are a normal part of the seismic data library business, and data library sales can vary significantly year-over-year.
Traditional data library sales can occur at any time. This is due to the nearly continual changes in oil and natural gas industry conditions.
Transaction-based sales can also occur at any time. This is due to corporate merger-and-acquisition, joint venture and asset disposition activity involving Pulse's customers, which is unpredictable.
Outlook
Despite low seismic data library sales in the first half, the Company regards overall trends in Western Canada as positive and conditions favourable for both types of seismic data sales. Numerous producing oil and natural gas asset packages are on the market, while industry capital investment, drilling rates and mineral lease auctions or "land sales" are continuing to rebound in response to high commodity prices and robust global demand. Crude oil and natural gas remain critical sources of energy worldwide, and recognition continues to grow that security of supply is important to manage geopolitical risks.
2022 Q2 Report
SEISMIC PULSE
3
SEISMIC PULSE
4
With zero debt, a low cost structure, high cash margin, no capital spending commitments, access to credit on favourable terms, Canada's largest licensable seismic data library providing coverage in all major non-oil-sands oil and natural gas plays across western Canada, strong customer relations, and its ongoing initiative to enhance the attractiveness of its data for broader application in new-energy as well as traditional projects, Pulse is favourably positioned to benefit from an industry growth cycle as well as to weather weaker sales.
A transaction-based data library sale of any size can occur at any time, and sales in any quarter can be higher or lower than in the previous quarter or in the comparable quarter of a previous year. Pulse also cautions that there is no direct linkage between industry field conditions and demand for seismic data, resulting in innately poor visibility as to Pulse's future traditional sales.
Pulse remains focused on the business practices that have enabled it to navigate and thrive through the full range of conditions: maintaining a strong balance sheet with access to credit on favourable terms, careful management of cash resources including distributing cash to shareholders when prudent, a low cost structure, a disciplined and rigorous approach to growth opportunities, an experienced and capable management team, and excellent customer care.
Discussion of Operating Results
SUMMARY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
EARNINGS (LOSS) BEFORE INCOME TAXES
For the three months ended June 30, 2022, the Company generated a loss before income taxes of $1.7 million ($0.03 per share basic and diluted) compared to earnings before income taxes of $13.8 million ($0.26 per share basic and diluted) for the comparable period of 2021.
For the six months ended June 30, 2022, the Company generated a loss before income taxes of $4.4 million ($0.08 per share basic and diluted) compared to earnings before income taxes of $14.4 million ($0.27 per share basic and diluted) for the comparable period of 2021.
DATA LIBRARY SALES
Data library sales were $3.0 million for the three months ended June 30, 2022 compared to $19.0 million for the three months ended June 30, 2021.
Data library sales were $4.8 million for the six months ended June 30, 2022 compared to $23.7 million for the six months ended June 30, 2021.
As mentioned above, the second quarter of 2021 included two material transactions. Both contracts were transaction-based data library sales related to mergers and acquisitions.
DISAGGREGATED DATA LIBRARY SALES BREAKDOWN
Pulse uses three ways to disaggregate its data library sales. The following graphs illustrate the comparative disaggregated sales for the three-andsix-month periods ended June 30, 2022 and 2021.
The first breakdown, transaction type, separates sales between traditional and transaction-based sales. These two types fluctuate greatly from period to period and year to year. A ten-year historical breakdown is also provided in the MD&A for the year ended December 31, 2021.
DISAGGREGATED SALES | DISAGGREGATED SALES | |||||||||||||||||||||||
TRADITIONAL/TRANSACTION-BASED SALES (%) | TRADITIONAL/TRANSACTION-BASED SALES (%) | |||||||||||||||||||||||
Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||||||
Traditional | Transaction-based | Traditional | Transaction-based | |||||||||||||||||||||
98 | ||||||||||||||||||||||||
2022 | 100 | 2021 | ||||||||||||||||||||||
0 | 2 | |||||||||||||||||||||||
22 | ||||||||||||||||||||||||
2021 | 2020 | 20 | ||||||||||||||||||||||
78 | 80 | |||||||||||||||||||||||
0 | 20 | 40 | 60 | 80 | 100 | 0 | 20 | 40 | 60 | 80 | 100 |
2022 Q2 Report
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Pulse Seismic Inc. published this content on 20 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 July 2022 22:53:04 UTC.