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Seitel Announces Second Quarter 2018 Results

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Seitel, Inc., a leading provider of onshore seismic data to the oil and
gas industry in North America, today reported results for the second
quarter ended June 30, 2018.

Second Quarter Highlights -

  • Total revenue was $12.3 million compared to $23.7 million in Q2 2017.
  • Cash resales totaled $11.5 million compared to $12.9 million in Q2
    2017.
  • Cash flows from (used in) operating activities were $(1.4) million
    compared to $6.7 million in Q2 2017.
  • Cash EBITDA was $7.3 million compared to $8.4 million in Q2 2017.

First Six Months Highlights -

  • Total revenue was $31.8 million compared to $44.3 million in 2017.
  • Cash resales totaled $25.8 million compared to $26.9 million in 2017.
  • Cash flows from operating activities were $18.9 million compared to
    $20.9 million in 2017.
  • Cash EBITDA was $16.4 million compared to $17.3 million in 2017.

Total revenue for the second quarter of 2018 was $12.3 million,
consisting of acquisition underwriting revenue of $1.4 million, resale
licensing revenue of $10.3 million and solutions and other revenue of
$0.6 million. This compares to total revenue of $23.7 million in the
second quarter of 2017, consisting of acquisition underwriting revenue
of $4.4 million, resale licensing revenue of $18.9 million and solutions
and other revenue of $0.5 million. Cash resales, a component of resale
licensing revenue, were $11.5 million in the second quarter of 2018
compared to cash resales of $12.9 million in the second quarter of 2017.

Total revenue for the six months ended June 30, 2018 was $31.8 million
compared to $44.3 million for the same period last year. Acquisition
underwriting revenue was $4.6 million for the first six months of 2018
compared to $11.3 million in the first six months of 2017. New data
acquisition activity in the first six months of 2018 was focused in the
Niobrara, Permian and Austin Chalk areas in the U.S. and in the Duvernay
area in Canada. Total resale licensing revenue was $26.1 million in the
first six months of 2018 compared to $32.1 million in the first six
months of 2017. For the first six months of 2018, cash resales were
$25.8 million compared to $26.9 million in the first six months of 2017,
reflecting continued disciplined capital spending by our E&P clients.
Solutions and other revenue was $1.1 million in the first six months of
2018 compared to $1.0 million in the first six months of 2017.

"Our cash resales activity in the first half of 2018 remained relatively
flat when compared to the first half of last year as E&P companies
remain judicious with capital spending," commented Rob Monson, president
and chief executive officer. "We remain cautiously optimistic that we
will see improvements in seismic spending from our E&P clients in the
second half of the year.

"We continue to make disciplined investments in our library across
premium plays. Year-to-date, we have added approximately 400 square
miles of data to our library with new surveys or purchases completed in
the Permian, EagleFord/Woodbine and Duvernay areas and have 400 square
miles of new surveys in progress in the Niobrara and Austin Chalk
plays," stated Monson.

Our net loss was $9.8 million for the second quarter of 2018 compared to
$9.6 million for the second quarter of 2017 and $11.7 million for the
first six months of 2018 compared to $23.0 million for the first six
months of 2017. The increase in net loss between the second quarter of
2017 and the second quarter of 2018 was primarily due to a decrease in
total revenues and a $4.5 million goodwill impairment charge partially
offset by a decrease in amortization expense associated with our seismic
data library and an increase in income tax benefit. The decrease in net
loss between the first six-month periods of 2017 and 2018 was primarily
due to a decrease in amortization expense associated with our seismic
data library and an increase in income tax benefit partially offset by a
decrease in total revenues and the goodwill impairment charge. The
goodwill impairment charge recorded in the second quarter and first six
months of 2018 resulted from a change of ownership at our parent company
in July 2018 and was based on the purchase price paid in such
transaction.

Cash flows from (used in) operating activities were ($1.4) million in
the second quarter of 2018 compared to $6.7 million in the second
quarter of 2017. The decrease in cash flows between quarters was
primarily due to lower collections on acquisition underwriting revenue.
Cash flows from operating activities were $18.9 million for the first
six months of 2018 compared to $20.9 million for the first six months of
2017. The decrease between periods was primarily due to lower
collections on acquisition underwriting revenue and higher income tax
payments, partially offset by lower payments of annual incentive
compensation.

Cash EBITDA, a non-GAAP measure, generally defined as cash resales and
solutions revenue less cash operating expenses (excluding severance and
other non-routine items), was $7.3 million in the second quarter of 2018
compared to $8.4 million in the second quarter of 2017 and $16.4 million
in the first six months of 2018 compared to $17.3 million in the first
six months of 2017. The decrease between periods was primarily the
result of lower cash resales.

Selling, general and administrative ("SG&A") expenses were relatively
flat between the quarter and year-to-date periods. SG&A expenses totaled
$4.8 million in the second quarter of 2018 compared to $5.0 million in
the second quarter of 2017 and $10.5 million in the first six months of
2018 compared to $10.7 million in the first six months of 2017.

In the first six months of 2018, gross capital expenditures were $9.1
million, of which $6.7 million related to new data acquisition projects
primarily located in the Niobrara, Permian and Austin Chalk areas in the
U.S. and in the Duvernay area in Canada. Our net cash capital
expenditures, a non-GAAP measure, defined as total capital expenditures
less cash underwriting revenue and non-cash capital expenditures,
totaled $4.5 million in the first six months of 2018. Our current
backlog of capital expenditures relates to new data acquisition projects
located in the Niobrara and Austin Chalk areas and totals $13.6 million,
of which we have obtained cash underwriting of $9.2 million. We expect
the majority of our $4.4 million committed net cash capital expenditures
to be incurred in the second half of 2018 with the remainder to be
incurred in 2019.

CONFERENCE CALL

Seitel's next conference call will be held after the release of its
year-end 2018 results in February 2019. Should investors or analysts
wish to contact the Company, please feel free to contact Marcia Kendrick
at the email address or telephone number provided in this release.

ABOUT SEITEL

Seitel is a leading provider of onshore seismic data to the oil and gas
industry in North America. Seitel's data products and services are
critical in the exploration for and development of oil and gas reserves
by exploration and production companies. Seitel has ownership in an
extensive library of proprietary onshore and offshore seismic data that
it has accumulated since 1982 and that it licenses to a wide range of
exploration and production companies. Seitel believes that its library
of 3D onshore seismic data is one of the largest available for licensing
in North America and includes leading positions in oil, liquids-rich and
natural gas unconventional plays as well as conventional areas. Seitel
has ownership in over 47,000 square miles of 3D onshore data, over
10,000 square miles of 3D offshore data and approximately 1.1 million
linear miles of 2D seismic data concentrated in the major active North
American oil and gas producing regions. Seitel has also expanded into
Mexico through the reprocessing of existing 2D seismic data for
licensing to oil and gas companies. Seitel serves a market which
includes over 1,500 companies in the oil and gas industry.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" within the
meaning of the federal securities laws, which involve risks and
uncertainties. Statements contained in this press release about our
future outlook, prospects, strategies and plans, and about industry
conditions, demand for seismic services and the future economic life of
our seismic data are forward-looking, among others.
All
statements that express belief, expectation, estimates or intentions, as
well as those that are not statements of historical fact, are
forward-looking. The words "believe," "expect," "anticipate,"
"estimate," "project," "propose," "plan," "target," "foresee," "should,"
"intend," "may," "will," "would," "could," "potential" and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future performance, but
represent our present belief, based on our current expectations and
assumptions, with respect to future events and their potential effect on
us. While we believe our expectations and assumptions are reasonable,
they involve risks and uncertainties beyond our control that could cause
the actual results or outcome to differ materially from the expected
results or outcome reflected in our forward-looking statements. Such
risks and uncertainties include, without limitation, actual customer
demand for our seismic data and related services, the timing and extent
of changes in commodity prices for natural gas, crude oil and condensate
and natural gas liquids, conditions in the capital markets during the
periods covered by the forward-looking statements, the effect of
economic conditions, our ability to obtain financing on satisfactory
terms if internally generated cash flows are insufficient to fund our
capital needs, the impact on our financial condition as a result of our
debt and our debt service, our ability to obtain and maintain normal
terms with our vendors and service providers, our ability to maintain
contracts that are critical to our operations, changes in the oil and
gas industry or the economy generally and changes in the capital
expenditure budgets of our customers. For additional information
regarding known material factors that could cause our actual results to
differ, please see our filings with the Securities and Exchange
Commission ("SEC"), including our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K.

The forward-looking statements contained in this press release speak
only as of the date hereof and readers are cautioned not to place undue
reliance or project future results based on such forward-looking
statements or present or prior earnings levels. Except as required by
applicable law, we disclaim any duty to update or revise any
forward-looking statements, whether as a result of new information,
future events or any other reason. All forward-looking statements
attributable to Seitel, Inc. or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements
contained or referred to herein, in our Annual Report on Form 10-K, our
Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and
future reports filed with the SEC.

INFORMATION RELATED TO FINANCIAL MEASURES

We report our financial results in accordance with U.S. generally
accepted accounting principles ("GAAP"), but believe that certain
non-GAAP financial measures, such as cash EBITDA and net cash capital
expenditures, provide useful supplemental information to investors
regarding the company's operating and financial performance and are
useful for period-over-period comparisons. Non-GAAP financial measures
should be considered as a supplement to, and not as a substitute for, or
superior to, the financial measures prepared in accordance with GAAP.
Non-GAAP financial measures included in this press release are cash
EBITDA, for which the most comparable GAAP measure is cash flows from
operating activities and net cash capital expenditures, for which the
most comparable GAAP measure is total capital expenditures.
Reconciliations of each non-GAAP financial measure to its most
comparable GAAP measure are included at the end of this press release.

(Tables to follow)

 

SEITEL, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share and per share amounts)

           
(Unaudited)
June 30,
2018
December 31,
2017
ASSETS
Cash and cash equivalents $ 75,153 $ 70,581
Receivables, net 13,649 27,138
Net seismic data library 64,594 74,542
Net property and equipment 1,426 1,599
Prepaid expenses, deferred charges and other 4,915 1,842
Intangible assets, net 900 900
Goodwill 178,980 187,243
Deferred income taxes 219   203  
TOTAL ASSETS $ 339,836   $ 364,048  
 
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES

Accounts payable and accrued liabilities

$ 13,840 $ 20,198
Income taxes payable 33 2,777
Senior Notes 248,834 248,142
Obligations under capital leases 1,166 1,363
Deferred revenue 15,186 13,095
Deferred income taxes 748   1,359  
TOTAL LIABILITIES 279,807   286,934  
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDER'S EQUITY
Common stock, par value $.001 per share; 100 shares authorized,
issued and outstanding
Additional paid-in capital 400,595 400,592
Retained deficit (326,194 ) (314,671 )
Accumulated other comprehensive loss (14,372 ) (8,807 )
TOTAL STOCKHOLDER'S EQUITY 60,029   77,114  
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 339,836   $ 364,048  
           

SEITEL, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)

 

(In thousands)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
 
REVENUE $ 12,324 $ 23,700 $ 31,813 $ 44,295
 
EXPENSES:
Depreciation and amortization 8,081 21,969 18,392 44,232
Impairment of goodwill 4,496 4,496
Cost of sales 88 33 105 43
Selling, general and administrative 4,807   5,005   10,514   10,651  
17,472   27,007   33,507   54,926  
 
LOSS FROM OPERATIONS (5,148 ) (3,307 ) (1,694 ) (10,631 )
 
Interest expense, net (6,032 ) (6,187 ) (12,086 ) (12,397 )
Foreign currency exchange gains (losses) 470 (34 ) 1,112 (85 )
Other income 63   96   72   96  
 
Loss before income taxes (10,647 ) (9,432 ) (12,596 ) (23,017 )
Provision (benefit) for income taxes (836 ) 204   (882 ) (2 )
 
NET LOSS $ (9,811 ) $ (9,636 ) $ (11,714 ) $ (23,015 )
 

Cash resales represent new contracts for data licenses from our library,
including data currently in progress, payable in cash. We believe cash
resales are an important measure of our operating performance and are
useful in assessing overall industry and client activity. Cash resales
are likely to fluctuate quarter to quarter as they do not require the
longer planning and lead times necessary for new data creation. Cash
resales were $11.5 million in the second quarter of 2018 compared to
$12.9 million in the second quarter of 2017 and $25.8 million in the
first six months of 2018 compared to $26.9 million in the first six
months of 2017.

The following table summarizes the components of Seitel's revenue (in
thousands):

       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Total acquisition underwriting revenue $ 1,432 $ 4,359 $ 4,633 $ 11,272
 
Resale licensing revenue:
Cash resales 11,538 12,904 25,820 26,925
Non-monetary exchanges 1,000 1,250
Revenue recognition adjustments (1,281 ) 4,974   253   3,898
Total resale licensing revenue 10,257   18,878   26,073   32,073
 
Total seismic revenue 11,689   23,237   30,706   43,345
 
Solutions and other 635   463   1,107   950
Total revenue $ 12,324   $ 23,700   $ 31,813   $ 44,295
 

Cash EBITDA represents cash generated from licensing data from our
seismic library net of recurring cash operating expenses. We believe
this measure is helpful in determining the level of cash from operations
we have available for debt service and funding of capital expenditures
(net of the portion funded or underwritten by our customers). Cash
EBITDA includes cash resales plus all other cash revenues other than
from data acquisitions, less cost of goods sold and cash selling,
general and administrative expenses (excluding severance and other
non-routine costs). The following is a quantitative reconciliation of
this non-GAAP financial measure to the most directly comparable GAAP
financial measure, cash flows from operating activities (in thousands):

       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
Cash EBITDA $ 7,250 $ 8,409 $ 16,382 $ 17,259
Add (subtract) other components not included in cash EBITDA:
Cash acquisition underwriting revenue 1,432 4,272 4,633 11,146
Revenue recognition adjustments from contracts payable in cash (1,344 ) 4,974 190 3,898
Severance and other non-routine costs (103 ) (105 ) (103 )
Interest expense, net (6,032 ) (6,187 ) (12,086 ) (12,397 )
Amortization of deferred financing costs 350 317 692 627
Other cash operating income 9 18
Current income tax benefit (expense) 270 (177 ) (95 ) (583 )
Changes in operating working capital (3,354 ) (4,785 ) 9,306   1,007  
Net cash provided by (used in) operating activities $ (1,419 ) $ 6,720   $ 18,935   $ 20,854  
 

Net cash capital expenditures represent total capital expenditures less
cash underwriting revenue from our clients and non-cash additions to the
seismic data library. We believe this measure is important as it
reflects the amount of capital expenditures funded from our operating
cash flow. The following table summarizes our actual capital
expenditures for the six months ended June 30, 2018 and shows how net
cash capital expenditures (a non-GAAP financial measure) are derived
from total capital expenditures, the most directly comparable GAAP
financial measure (in thousands):

     

Six Months
Ended
June 30, 2018

New data acquisition $ 6,711
Cash purchases and data processing 2,223
Property and equipment 173  
Total capital expenditures 9,107
Less:
Cash underwriting revenue (4,633 )
Net cash capital expenditures $ 4,474  

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