Seitel Details Second Quarter and Six Months 2002 ResultsProvides Update on Negotiations with Noteholders, Reductions in Overhead and Other Matters
BUSINESS WIRE - September 05, 2002 19:39
HOUSTON, Sep 5, 2002 (BUSINESS WIRE) -- Seitel, Inc. (NYSE: SEI) today issued the following news release to provide information that is responsive to a number of inquiries from shareholders, the financial community, customers, employees and others regarding the Company's current status.
Second Quarter and Six Months Financial Results
Seitel recently filed with the Securities and Exchange Commission its Form 10-Q for the second quarter and first six months of 2002. Among other things, it reported a substantial increase in net losses over the first quarter due to special charges. The Company reported that revenues from its core seismic database business more than doubled over the first quarter of 2002 and that cash sales increased over the first quarter of 2002 and comparable second quarter of 2001. The Company also reported its cash position has improved considerably and that substantial reductions in overhead have been and are being implemented.
Seitel reported the following financial results in the second quarter:
Second Quarter Operating Results -- A net loss of $78.9 million, or $3.11 per share, for the quarter compared to a net loss of $18.3 million, or $0.73 per share, in the first quarter of 2002, and a net loss of $3.2 million, or $0.12 per diluted share in the second quarter of 2001. The second quarter of 2002 net loss reflects charges, net of tax, of (i) $56.8 million related to the discontinuation of DDD Energy, Inc.'s operations, (ii) $16.7 million related to the impairment of seismic data, (iii) $5.7 million related to the allowance for the recovery of former executives' advances and receivables and Company funds improperly converted for the personal benefit of former executives, (iv) $1.2 million related to unusual professional fees and (v) $1.1 million related to a valuation allowance on deferred income tax assets, exclusive of amounts related to discontinued operations. The first quarter of 2002 net loss reflects the change in accounting policy adopted in the second quarter of 2002 related to the Company's amortization of its created seismic data retroactive to January 1, 2002. In the first quarter of 2002, the Company recorded special charges of $16,000, net of tax, related to Company funds improperly converted for the personal benefit of former executives, and a loss of $876,000 related to discontinued operations. In the second quarter of 2001, Seitel recorded special charges of $131,000, net of tax, related to Company funds improperly converted for the personal benefit of former executives, and a loss of $4.5 million related to discontinued operations. Second Quarter Revenues -- Revenue from Seitel's core seismic division was $46.9 million - more than double the $22.5 million in the first quarter of 2002. -- Of these $46.9 million in revenues, new cash sales (as opposed to recognition of previously deferred revenue) were $25.2 million in the quarter, compared to $13.4 million in the first quarter of 2002, and $24.8 million in the second quarter of 2001. New non-cash sales of seismic data were $5.6 million, compared to $3.1 million in the first quarter of 2002, and $8.3 million in the second quarter of 2001. New non-cash sales represented 18% of total new sales in the second quarter of 2002. Progress Update on Status with Senior Noteholders
Seitel has met all milestones under its standstill agreement with its lenders, including the submission of a proposed three-year comprehensive strategic plan in furtherance of negotiations toward a long term restructuring of the Company's debt. The proposed Strategic Plan provides that the Company would focus on the core seismic database business and maximize the value of its multi-client seismic library. The proposed Plan also provides for overhead reductions consistent with the Company's strategic goals and commits management to focus on maximizing cash flow and profitability, and to transparency in financial reporting and accounting issues.
As previously announced, Seitel executed a standstill agreement with its Senior Noteholders on July 17, 2002, as a result of the violation of various loan covenants. Seitel is in compliance with all conditions and milestones of that agreement. It is current on the payment of all interest and principal to the Noteholders, and the Company has never missed a payment of principal or interest to the Noteholders. In accordance with the Noteholder agreement, all outstanding interest on the Senior Notes accrued as of August 2, 2002 in the amount of $7.1 million was paid. Seitel has agreed to pay interest monthly beginning with September 2002. Although there can be no assurances that the Company will be able to reach an agreement with the Noteholders to restructure its debt, Seitel continues to have a constructive and positive dialogue with the Noteholders.
Second Quarter Cash/Receivables Position -- As of August 15, 2002, Seitel had cash and equivalents of $20.4 million -- $11.5 million in cash and $8.9 million in cash in an escrow account pursuant to the standstill agreement with the Company's Noteholders. This compares to cash and cash equivalents of $13.2 million at March 31, 2002, and $7.2 million at June 30, 2002. -- At June 30, 2002 the Company had receivables of $41.4 million and deferred revenue of $75.3 million. -- In addition, as of June 30, 2002 the Company had outstanding $275.1 million in long-term debt, including capital lease obligations. Reduction in Overheads and Capital Expenditures Seitel has: -- Reduced personnel by approximately 23%, relocated its headquarters to its data center in West Houston at a projected savings of approximately $800,000 annually, and expects to reduce its total personnel compensation expenses from $29 million in 2001 to a budgeted $17 million for FY 2003. -- Reduced its capital expenditure budget from $140.2 million in 2001 to an expected $89.8 million in 2002. In the second quarter of 2002, capital expenditures were $26.4 million, which includes $19.0 million for seismic data additions (of which $5.6 million are non-cash additions), $2.7 million for oil and gas properties and $4.7 million for other property, plant and equipment. -- Focused on strategic acquisitions of data and creation of data with the objective of having customers finance 65% or more of the direct costs of the creation of data. -- Scaled down expenditures on Seitel Solutions in order for Solutions to primarily service the Company's own seismic data library. Sale of DDD Energy
On August 5, 2002, Seitel announced the sale of the substantial majority of the assets of DDD Energy, Inc., Seitel's wholly-owned subsidiary involved in the direct exploration and production of oil and natural gas, to Rising Star Energy, L.L.C., for net cash proceeds of $23.8 million. A final adjustment, if any, is to be made within 90 days following the closing of the sale. The sale of DDD Energy will allow Seitel to better focus on its core seismic data business. Additionally, the cash received from the sale has improved Seitel's liquidity position. The Company announced today that Rising Star has agreed to purchase two additional oil and gas properties from Seitel for approximately $1.75 million. The Company expects that sale to close on or about September 13, 2002. Seitel's remaining oil and gas properties are currently being actively marketed.
Core Seismic Personnel Base Remains Intact
As Seitel has focused on its seismic data library business, it has retained the core personnel engaged in providing services ranging from multi-client seismic surveys to servicing the wide-ranging needs of its customers in seismic data acquisition and providing clients with high-quality data from its seismic data library.
In addition, Seitel announced that it has hired John Lentsch as the President of Seitel Solutions Canada. Mr. Lentsch has over 30 years experience in the scientific computing and IT field, with 20 years of this experience in the oil and gas industry. He has held technical and managerial positions with Atlantic Richfield and several oil service companies, including Teknica-GECO Geophysical, Schlumberger GeoQuest and QC Data. While he was with QC Data, he was the Managing Director of QC Data UK, Ltd., whose principal client was Common Data Access Limited, an industry consortium formed to reduce the cost of storing and retrieving E&P data and to improve efficiency and accessibility to that data.
Transparency in Financial Reporting -- Seitel's CEO and acting CFO certified the second quarter financial results in compliance with the Sarbanes-Oxley legislation. -- Effective January 1, 2002, the Company adopted a new accounting policy related to amortization of its created seismic data. Under its new accounting policy, the Company determines amortization for created seismic data as the greater of the income forecast method or 10-year straight line amortization at the individual survey level. Seismic Data Library Book Value and Other Financial Disclosures
Seitel reported that its seismic data library had a net book value of $416.0 million as of June 30, 2002. In the second quarter of 2002, Seitel recorded a one-time non-cash impairment charge of $25.7 million ($16.7 million net of tax) related to the marine and Rocky Mountain region portion of its seismic data library. This impairment charge is related to lower than expected revenues in these areas due to, among other factors, energy industry conditions. As of June 30, 2002, after the impairment, the marine portion of the seismic data library had a book value of approximately $63 million.
In the quarter ended June 30, 2002, Seitel recorded a pre-tax book loss of $56.8 million related to the sale of assets of DDD Energy, Inc. This writedown reflects the difference between the book value of the DDD assets and the purchase price for the producing properties sold along with the projected value of proven reserves and unevaluated properties remaining after the sale.
Updates on Regulatory Matters, NYSE Listing -- The Company continues to cooperate fully with the SEC with respect to the SEC's investigation of the alleged improprieties committed by the Company's former CEO and CFO. Additionally, Seitel recently received notification from the U.S. Attorney's Office for the Southern District of Texas of its inquiry into the alleged improprieties committed by the Company's former CEO and CFO, and the Company intends to fully cooperate. -- As previously announced, the Company received notification from the New York Stock Exchange (NYSE) that the Company's stock has fallen below the NYSE continued listing standards due to the Company's stock trading at a price of below $1.00 per share for a consecutive 30-day trading period. In accordance with the rules and procedures of the NYSE, the Company has six months within which to cure this price per share deficiency, prior to the NYSE commencing suspension and de-listing procedures. The Company has responded to the notification letter, informing the NYSE of the Company's intent to cure the deficiency. In addition, Seitel has received a second notification from the NYSE that the Company has fallen below the NYSE continued listing standard requiring market capitalization of $15 million or greater. The Company is in the process of responding to this second notification, which will include a proposed business plan for the Company's future operations.
Seitel markets its proprietary seismic information/technology to more than 400 petroleum companies, selling data from its library and creating new seismic surveys under multi-client projects. |
