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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Vgs Seismic Canada Com Npv | TSXV:VGS | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
Hot Features
Premium
VGS Seismic Canada Inc. ("VGS" or "the Company") (TSX VENTURE:VGS) is pleased to
announce results of operations for the three and six month periods ended June
30, 2008.
At June 30, 2008 VGS had grown its seismic data library to 5,016 square
kilometres of 3-D seismic data and 5,013 linear kilometres of 2-D seismic data
with a total capital cost of $75.0 million.
VGS contracted a small 2D shoot at the end of June 2008, field work was
completed and data was delivered to the processor in August 2008.
VGS had a net loss of $2.5 million ($0.08 per share basic and fully diluted),
from revenues of $2.1 million compared to a net loss of $2.0 ($0.06 per share
basic and fully diluted) from gross revenues of $2.0 million for the three
months ended June 30, 2007. The most significant expense contributing to the
current period loss was amortization of $2.9 million. The year to date net loss
is $4.5 million ($0.14 per share basic and fully diluted) compared to $1.6
million ($0.05) per share basic and fully diluted) for the six months ended June
30, 2007, with the most significant difference being amortization of $9.0
million for the current year to date compared with $3.9 million a year ago. The
increased amortization is largely the result of a $3.6 million initial charge
representing 35% of the cost of a survey completed in the first quarter.
Three Three Six Six
months months months months
ended June ended June ended June ended June
30, 2008 30, 2007 30, 2008 30, 2007
$ $ $ $
Data acquisition revenue - - 4,434,065 -
License sales revenue 2,039,300 1,796,375 2,376,666 5,936,781
License sales - non monetary
exchange 36,000 - 786,000 -
Brokerage and other revenue 29,319 138,376 116,222 215,574
-----------------------------------------------
2,104,619 1,934,741 7,712,953 6,152,355
Other operating expenses 881,495 1,093,901 1,757,645 2,267,988
-----------------------------------------------
EBITDA (Non-GAAP measure) 1,223,124 840,840 5,955,308 3,884,367
-----------------------------------------------
Interest on debt 366,829 404,327 704,229 801,361
Accretion of convertible
debentures & deferred costs 429,811 413,612 748,962 810,448
-----------------------------------------------
796,640 817,939 1,453,191 1,611,809
Amortization 2,921,011 2,002,289 8,983,302 3,894,547
-----------------------------------------------
Net income (loss) (2,494,527) (1,979,388) (4,481,185) (1,621,989)
Loss per share
Basic & diluted $ (0.08) $ (0.06) $ (0.14) $ (0.05)
Total shares outstanding 30,979,771 30,979,771 30,979,771 30,979,771
-----------------------------------------------
Cash EBITDA (Non-GAAP
measure) 1,187,124 840,840 735,243
-----------------------------------------------
Cash EBITDA is Calculated as follows:
Three Three Six Six
months months months months
ended June ended June ended June ended June
30, 2008 30, 2007 30, 2008 30, 2007
$ $ $ $
Earnings before interest,
taxes,depreciation and
amortization 1,223,124 840,840 5,955,308 3,884,367
Less:
Non-monetary exchange
revenue (36,000) - (786,000) -
Acquisition revenue - - (4,434,065) -
-----------------------------------------------
Cash EBITDA 1,187,124 840,840 735,243 3,884,367
-----------------------------------------------
Data acquisition revenue recognized in the quarter was nil, the same as the
comparable quarter last year. VGS did contract a small 2D shoot to commence in
Q3 of 2008, and completed a large 3D acquisition project in Q1. Previously, data
acquisition revenue was deferred until the data was released from its
proprietary period and available for sale to the industry. In late 2007, the
Company prospectively adopted a policy of recognizing this revenue on a
percentage of completion basis, and taking the initial amortization charge on
the data in the month the survey is completed. This policy change resulted in
$4.4 million in acquisition revenue being recognized in the first half of 2008,
compared to nil acquisition revenue in the first six months of the prior year.
For the quarter ended June 30, 2008, VGS had cash license sales of $2.0 million
compared to $1.8 million for Q2, 2007, which management believes to be the
result of a better sales environment, although overall for the year to date,
cash license sales are down to $2.4 million from $5.9 million a year ago. VGS
believes this decrease in sales revenue is attributable weak natural gas prices
and a general reduction in gas exploration in areas where VGS owns data in the
first quarter. Cash EBITDA was also higher in Q2 2008 than the comparable
quarter of 2007 due to both higher sales and lower operating costs, as VGS
continued its efforts to reduce operating expenses. Year to date cash EBITDA is
lower due to weak license sales figures in the first quarter. Natural gas prices
continue to be relatively high for summer months, and management believes this
will lead to a renewed interest in exploration of gas prone areas, particularly
North East British Columbia. Brokerage and other income is $29,319 for the
quarter compared to $138,376 in the same quarter last year, and year to date
brokerage revenue is down 46%. This decrease is due to the fact that there was
one large sale comprising the majority of the revenue in the second quarter of
2007, and no similar transaction was completed in Q2 of 2008.
Amortization for the quarter is $2.9 million, compared to $2.0 million for the
same quarter ended 2007. This 45% increase is due to an increase to both the
size and cost of the database from the prior year.
Despite an increase in the net debt outstanding, interest and accretion on long
term debt has decreased 2.6% to $796,640 from $817,939, as a result of the
extension of the maturity date giving a longer period over which to accrete the
debentures and deferred financing costs, as well as a reduction in the "ticking
fee" paid on funds not yet drawn. The decrease in interest and fees on debt for
the year to date is 9.8% for the same reasons, and the fact that interest was
only payable on the 2008 draws for the last portion of the first quarter. The
total long term debt has increased since December 31, 2007, proceeds of which
were used to pay for data purchase and creation opportunities committed to in
2007. Interest on the convertible debenture is 9.5 per cent plus all applicable
withholding taxes, payable semi-annually at February 15 and August 15. There is
no option of early repayment and the Company cannot force conversion, and the
lender can convert at any time up to maturity on February 16, 2010.
General and administrative expenses are $660,144, down 8% from the first quarter
of 2008, and 10.9% year to date compared with 2007 as management focused on cost
reduction. Sales commissions are lower by 15.4% to $99,596 compared to $117,728
for the same quarter in the prior year. Commission rates vary depending on the
source of the referral coming from external brokers or internal sales staff.
Year to date sales commissions are down 48%, most significantly due to lack of
sales in the first quarter. Professional and consulting fees are 61% lower than
Q1 of 2007 and 50.4% lower for the six months ended June 30 due to management
focusing on reducing any discretionary spending, and staff having more
experience dealing with public reporting requirements.
Non-GAAP Measures
The terms working capital, EBITDA, and cash EBITDA are not measures that have
any standardized meaning prescribed by Canadian GAAP and are considered non-GAAP
measures. Therefore, these measures may not be comparable to similar measures
presented by other issuers. Accordingly, these measures have been described and
presented in this press release to provide shareholders and potential investors
with additional information regarding the Company's financial position, results,
liquidity, and its ability to generate future cash flows.
These non-GAAP measures are calculated as follows: working capital is defined as
current assets less current liabilities; EBITDA is used to describe earnings
before any deduction for interest, taxes, depreciation and amortization; and
cash EBITDA is defined as EBITDA less data acquisition revenue and non-monetary
exchange (NME) revenue. NME revenue is generated when license to data owned by
the company is granted in exchange for delivery of title to data owned by the
customer, and no cash changes hands.
Cash EBITDA is an important metric for VGS because in some periods, there can be
large portions of acquisitions and NME revenue, which are non-cash. Cash EBITDA
is an accurate measure of cash license sales against cash operating costs.
Balance Sheets
As at As at
June 30, December 31,
2008 2007
$ $
Assets
Current assets
Cash and cash equivalents 100 8,946
Accounts receivable 2,414,369 6,568,093
Prepaid expenses and deposits 77,319 64,094
----------------------------
2,491,788 6,641,133
Seismic data libraries 42,454,391 39,145,800
Property and equipment 1,880,093 1,927,507
----------------------------
46,826,272 47,714,440
----------------------------
----------------------------
Liabilities
Current liabilities
Bank indebtedness 932,895 1,024,218
Accounts payable and accrued liabilities 5,667,201 5,249,524
GST payable 57,229 367,006
Deferred revenue 81,872 2,230,303
Income taxes payable - 62,250
----------------------------
6,739,197 8,933,301
Convertible debentures 12,188,671 7,560,266
----------------------------
18,927,868 16,493,567
----------------------------
Shareholders' equity
Share capital 20,276,468 20,276,468
Contributed surplus 359,129 330,035
Warrants 701,152 692,088
Equity portion of convertible debentures 4,738,761 3,618,203
Retained earnings 1,822,894 6,304,079
----------------------------
27,898,404 31,220,873
----------------------------
46,826,272 47,714,440
----------------------------
----------------------------
Statements of Operations, Comprehensive Income (Loss) and Retained Earnings
for the periods ended June 30
Three months ended Six months ended
June 30, June 30,
------------------------------------------------
2008 2007 2008 2007
$ $ $ $
Revenue 2,104,619 1,934,741 7,712,953 6,152,355
------------------------------------------------
Expenses
Interest on short-term debt 13,300 22,073 16,649 25,972
General and administrative 660,144 717,894 1,293,975 1,452,675
Sales commissions 99,596 117,728 181,010 349,267
Consulting and professional fees 89,613 232,714 200,237 403,568
Stock-based compensation 19,079 13,140 38,158 24,420
Advertising and promotion 13,063 12,425 44,265 38,058
------------------------------------------------
894,795 1,115,974 1,774,294 2,293,960
------------------------------------------------
1,209,824 818,767 5,938,659 3,858,395
Amortization 2,921,011 2,002,289 8,983,302 3,894,547
------------------------------------------------
(1,711,187) (1,183,522) (3,044,643) (36,152)
------------------------------------------------
Interest on long-term debt 353,529 382,254 687,580 775,389
Accretion of convertible
debentures 375,927 313,542 641,195 610,310
Accretion of deferred financing
costs 53,884 100,070 107,767 200,138
------------------------------------------------
783,340 795,866 1,436,542 1,585,837
------------------------------------------------
Loss and comprehensive loss
for the period (2,494,527) (1,979,388) (4,481,185) (1,621,989)
Retained earnings -
Beginning of period 4,317,421 6,112,712 6,304,079 5,755,313
------------------------------------------------
Retained earnings - End of
period 1,822,894 4,133,324 1,822,894 4,133,324
------------------------------------------------
------------------------------------------------
Loss per share
Basic and diluted (0.08) (0.06) (0.14) (0.05)
Statements of Cash Flows for the periods ended June 30
Three months ended Six months ended
June 30, June 30,
--------------------------------------------------
2008 2007 2008 2007
$ $ $ $
Cash provided by (used in)
Operating activities
Loss and comprehensive
loss for the period (2,494,527) (1,979,388) (4,481,185) (1,621,989)
Items not affecting cash
Amortization of seismic
database libraries 2,889,971 1,968,309 8,920,672 3,826,414
Amortization of property
and equipment 31,040 33,980 62,630 68,133
Accretion of deferred
financing costs 53,884 100,070 107,767 200,138
Stock-based compensation 19,079 13,140 38,158 24,420
Accretion of convertible
debentures 375,927 313,542 641,195 610,310
--------------------------------------------------
875,374 449,653 5,289,237 3,107,426
Net change in non-cash
working capital items
Accounts receivable (1,523,443) 1,021,169 4,153,724 210,288
Due from related party - 40,000 - 40,000
GST payable 570,374 (123,592) (309,777) 179,021
Prepaid expenses and
deposits 4,089 (2,493) (13,225) (39,852)
Accounts payable and
accrued liabilities (410,410) (1,439,743) 497,752 1,345,647
Income tax payable - (37,000) (62,250) (37,000)
Deferred revenue 81,873 977,483 (2,148,430) 4,081,831
--------------------------------------------------
(402,143) 885,477 7,407,031 8,887,361
--------------------------------------------------
Financing activities
Change in short-term
financing - 3,000,000 - 3,000,000
Bank indebtedness 166,584 87,795 (91,323) 87,795
Repayment of office
condominium mortgage - (298,321) - (300,229)
Issue of convertible
debentures - - 5,000,000 -
--------------------------------------------------
166,584 2,789,474 4,908,677 2,787,566
--------------------------------------------------
Investing activities
Purchase of property and
equipment 2,213 - (15,215) (29,873)
Additions to seismic data
libraries - (2,272,508) (12,229,264) (12,534,267)
Change in non-cash
working capital 224,860 (2,052,045) (80,075) 365,363
--------------------------------------------------
227,073 (4,324,553) (12,324,554) (12,198,777)
--------------------------------------------------
Decrease in cash and cash
equivalents (8,486) (649,602) (8,846) (523,850)
Cash and cash equivalents
Beginning of period 8,586 666,586 8,946 540,834
--------------------------------------------------
Cash and cash equivalents
- End of period 100 16,984 100 16,984
--------------------------------------------------
--------------------------------------------------
Cash paid for
Interest 9,929 170,394 659,677 807,154
Taxes paid - 37,000 60,565 37,000
Seismic license sold in
exchange for data ownership 36,000 - 750,000 -
Outlook
Accessing existing seismic data is a means for exploration and production
companies to mitigate the risk of drilling unsuccessful wells. Therefore, as
long as it is economical for companies to explore for oil and gas, VGS expects
there will be a market for seismic data. The Company does acknowledge that lower
commodity prices typically lead to explorers and producers having less capital
to spend on the products provided by VGS. The first quarter of 2008 was a
difficult one for VGS, as license sale revenues were well below expectations,
and while sales were improved in the second quarter, the year to date results
are not generating sufficient funds for VGS to grow its data library. It is the
Company's desire to continue to grow the seismic library by creating new data
and purchasing pre-existing data in areas where license sales are expected to be
strong. Until VGS can generate sufficient cash flow internally to participate in
more seismic acquisition projects, it is management's intent to attempt to grow
the data base by leveraging off the data the Company currently owns. As always,
the availability of external capital at acceptable terms, in conjunction with
the Company's ability to generate cash flow internally, will be the most
important factors in determining the rate at which VGS will add to its library.
Forward-Looking Information
Certain information contained in this press release, including information and
statements which may contain words such as "could", "plans", "should",
"anticipates", "expects", "believes", "will", "forecasts", "budget", "projects",
"estimates", "potential" and similar expressions and statements relating to
matters that are not historical facts are forward-looking information including,
but not limited to, information related to future: seismic surveys, data sales,
revenue, cash-flow, seismic annuity streams, expenditures, drilling activity
levels, oil and gas prices and demand, expansion and other development trends of
the oil and gas industry; business strategy, expansion and growth of VGS's
business and operations, including VGS's market share and other such matters.
This forward-looking information is based on certain material factors,
assumptions and analyses made by VGS in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances.
However, whether actual results, performance or achievements will conform with
VGS's conclusions, forecasts, projections, expectations and predictions
expressed or implied by the forward-looking information in this press release is
subject to known and unknown risks and uncertainties which could cause actual
results to differ materially from VGS's conclusions, forecasts, projections,
expectations and predictions expressed or implied by the forward-looking
information in this press release, including: fluctuations in the price and
demand for oil and gas; fluctuations in the level of oil and gas exploration and
development activities; fluctuations in the demand for VGS's services; the
ability of VGS to raise capital and to meet its debt service requirements; the
ability of VGS's clients to raise capital for seismic data and surveys; the
ability of VGS to secure participants to conduct seismic surveys; the existence
of competitors; technological changes and developments in the oil and gas
industry; the effects of weather conditions on operations and facilities; the
seasonal impact on conducting seismic surveys; the ability of VGS to participate
financially in large seismic surveys due to increases in costs of conducting
such seismic surveys; the ability of VGS to protect its proprietary rights to
the seismic data; the existence of operating risks inherent in VGS's services;
the lack of availability of qualified personnel or management; VGS's dependence
on qualified seismic acquisition contractors to conduct seismic surveys; general
economic, market or business conditions, including stock market volatility;
changes in laws or regulations, including taxation and environmental
regulations; other unforeseen conditions which could impact the use of services
supplied by VGS and those risks and uncertainties described in VGS's continuous
disclosure filings, including those referred to in the Management's Discussion
and Analysis of VGS for the most recently completed financial year end, which
may be found on SEDAR at www.sedar.com. If any of the above risks or
uncertainties materialize, or if the material factors, assumptions and analyses
applied by VGS are incorrect, actual results may vary materially from those
expected in the forward looking information in this press release.
Consequently, all of the forward-looking information contained in this press
release is qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by VGS, as
expressed or implied by the forward-looking information, will be realized or,
even if substantially realized, that actual results or developments will have
the expected consequences to, or effects on, VGS or its business operations.
Except as required by law, VGS assumes no obligation to update publicly any such
forward-looking information, whether as a result of new information, future
events or otherwise. Readers should not place undue reliance on forward-looking
information.
Based in Calgary, Alberta, VGS Seismic Canada Inc. identifies, creates and
markets digital seismic data for licensing to oil and natural gas exploration
companies. To date, the Corporation's growing data library is concentrated in
British Columbia, Southern Alberta and Eastern Saskatchewan. VGS shares trade on
the TSX Venture Exchange under the symbol VGS.
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