Seitel Announces Its Intention to Sell DDD Energy, Changes in Executive Compensation, Changes in Executive Contracts, and Third Quarter Results
Highlights
- Seitel, Inc. intends to sell approximately 90% of its interests in DDD
Energy through an Initial Public Offering during first quarter 2000.
- Use of proceeds from the sale of DDD Energy will be to reduce Seitel's
debt and provide funds to add to the seismic data library.
- Sale of DDD Energy should have a positive impact on 2000 earnings by
reducing interest expense and SG&A, and provide capital for core
seismic business.
- Two senior executives have agreed not to renew their employment
contracts.
- Board of Directors proposes limit on cash compensation.
- Resales were the highest for a third quarter in company history.
Resales through the first nine months of 1999 are within $2 million of
full-year 1998, a record year.
- Balance sheet continues to strengthen despite industry weakness: cash
and receivables increased 16% over 2Q99, net data bank increased 23%
over YE98, accounts payable decreased 41% over YE98 and stockholders'
equity increased 3% over YE98.
- Third quarter earnings were $0.03 per share.
HOUSTON, Nov. 4 /PRNewswire/ -- Seitel, Inc. (NYSE: SEI), announced today several structural changes to the company that are anticipated to lower costs, increase margins and strengthen its financial position. The company has announced its intention to sell DDD Energy through an Initial Public Offering. The IPO is expected to be completed during first quarter 2000. The use of proceeds from the sale of DDD Energy will focus on three areas -- to reduce Seitel, Inc. debt, to acquire seismic data libraries, and for general corporate purposes. Earnings in 2000 are expected to be enhanced by the sale of DDD Energy due to lower interest expense and lower selling, general and administrative expenses relating to personnel. In addition, Seitel, Inc. will eliminate DDD Energy's fiscal year 2000 exploration and development capital expenditure budget of approximately $27 million. Seitel President and CEO, Paul Frame, commented, "When we formed DDD in 1993 it was with the express purpose of using our expertise in acquiring 3D seismic to participate in successful oil and gas drilling and production activity. Since that time, Seitel has invested, through DDD, approximately $150,000,000 in seismic acquisition, exploration and development activities and has built substantial reserves in DDD. However, it is clear that Seitel's ability to deliver growth and create value will be enhanced by separating Seitel and DDD and allowing each of the companies to pursue their individual strategies in a much more effective and focused manner. Seitel plans to refocus on its core business -- licensing seismic data from its library to the major participants in the oil and gas exploration and production business."
Horace Calvert, Chief Operating Officer of Seitel, Inc. and President of DDD Energy, and David Lawi, Chairman of the Executive Committee, have agreed to terminate the automatic renewal feature of their employment contracts with Seitel, Inc., so that these contracts will expire four years from January 1, 2000, absent intervening events which could result in an earlier expiration. Mr. Calvert will assume the position of chairman and chief executive officer of DDD Energy upon completion of the IPO. Additionally, on October 27, 1999, the Seitel, Inc. Board of Directors proposed to amend the compensation of senior management to limit the amount of cash compensation that could be received in any one year starting in 2000. The balance of compensation would be paid in company stock, thus further aligning senior management with shareholders. Company shareholders will be, asked to approve this compensation change at the 2000 Annual Meeting.
The company reported third quarter 1999 earnings of $0.03 per basic and diluted share, reflecting the continued cautious capital expenditure environment for new data creation. However, demand continued at record levels for existing library data for the quarter. Third quarter 1999 net income from core operations was $0.8 million ($0.03 per diluted share based on 24.5 million shares outstanding) compared with net income from core operations of $6.1 million ($0.27 per diluted share) in the same period last year. Third quarter 1999 revenue totaled $24.6 million, versus 1998 third quarter revenue of $38.3 million. Operating profit before tax was $4.8 million, versus $11.2 million.
"During the third quarter we continued to focus on client interest in our existing data library versus the new data creation market. This shift translated into our highest level of third quarter library resales, $11.9 million up 31% from year ago levels. While we expect revenue during the fourth quarter to increase over third quarter levels, we believe earnings will likely approximate $0.10 per share. For fiscal year 2000, new data creation activity is expected to increase. Based on the expected industry environment and with anticipated cost savings from the sale of DDD Energy, we believe an earnings estimate of $1.00 per share and cash flow estimate of $4.00 per share are reasonable," said Paul A. Frame, President and Chief Executive Officer.
In the third quarter of 1999, revenue from Seitel's seismic division totaled $19.8 million versus $33.7 million last year. Revenue from oil and natural gas production was $4.8 million, up from third quarter 1998 revenue of $4.6 million despite the reduction in volumes resulting from the sale of the North Gillis production in July 1999. Natural gas production was 1,150 million cubic feet during the third quarter of 1999 versus 1,622 million cubic feet during the third quarter of 1998. Oil and natural gas liquids production totaled 101,000 barrels, up from third quarter 1998 production of 88,000 barrels. Seitel's third quarter 1999 average natural gas and oil price realization was $2.65 per mcf and $16.50 per barrel, respectively. This compares to $2.20 per mcf and $11.22 per barrel during the same period last year.
Despite weak industry conditions during the first nine months of 1999, Seitel, Inc.'s balance sheet improved in several key areas. Cash and receivables totaled $60.7 million, an increase of $8.4 million or 16% over second quarter 1999. Net data bank increased 23% to $323.3 million versus $263.0 million at year-end 1998. Accounts payable fell 41% to $42.5 million versus $71.6 million at year-end 1998. Stockholders' equity increased 3% to $244.6 million versus $237.6 million at year-end 1998.
EBITDA (earnings before interest, taxes, depreciation and amortization) from core operations for the third quarter of 1999 amounted to $16.6 million or $0.68 per diluted share, versus third quarter 1998 EBITDA of $30.7 million, or $1.35 per diluted share.
Commenting on third quarter earnings, Mr. Frame said, "Earning $0.03 per share, while disappointing, reflects the current state of the industry. Management's decision to pull back on data creation and conserve capital during fiscal 1999 was the correct business decision despite its short-term negative impact on earnings. Our clients' interests in exploration has been improving since early September, giving us comfort that 2000 will be a good year financially for Seitel and its shareholders."
For the 1999 nine months, revenue totaled $96.6 million, versus $106.2 million a year ago. Net income from core operations reached $11.6 million, versus last year's $17.2 million. Earnings per share, based on more shares outstanding in this year's first nine months, were $0.48 per basic share and $0.47 per diluted share versus $0.77 per basic share and $0.75 per diluted share last year. The nine month 1999 results are from core operations (seismic marketing and oil and gas) before the effect of equity in loss of affiliate and impairment due to dividend distribution of affiliate. |
