Crew Upgrades in the United States and Strong International Sales
Drive Significant Increases in Revenues and EBITDA HOUSTON, Aug. 6
/PRNewswire-FirstCall/ -- Geokinetics Inc. (AMEX:GOK) announced
today financial results of operations for the three and six months
ending June 30, 2008. Highlights include: -- Increased revenue in
seasonally low quarter by 59% from 2007 to $113.6 million for the
three months ended June 30, 2008. Increased revenue by 28% from
2007 to $233.7 million for the six months ended June 30, 2008. --
Increased EBITDA by 1,140% from 2007 to $12.4 million for the three
months ended June 30, 2008. EBITDA increased by 58% from 2007 to
$30.9 million for the six months ended June 30, 2008. -- Reduced
loss applicable to common stockholders by 88% from 2007 to $1.8
million, or ($0.18) per diluted share, for the three months ended
June 30, 2008. Income applicable to common stockholders of $0.7
million, or $0.07 per diluted share for the six months ended June
30, 2008 as compared to a loss applicable to common stockholders of
$10.3 million, or ($1.53) per diluted share for the six months
ended June 30, 2007. -- Invested $50.7 million in the first half of
2008 (including $25.0 million in the three months ended June 30,
2008), primarily to increase channel count in international
markets, as part of the Company's recently expanded $80 million
capital budget for 2008. -- Increased backlog to $413 million at
June 30, 2008, from $321 million at June 30, 2007, down slightly
from the quarterly record of $417 million at March 31, 2008. Three
Months Results In the three months ended June 30, 2008, revenue
increased 59% to $113.6 million compared to $71.6 million for the
same period of 2007. Revenue consisted of $44.1 million for North
American data acquisition (compared to $32.7 million in 2007),
$66.4 million for international data acquisition (compared to $36.1
million in 2007) and $3.1 million from data processing (compared to
$2.9 million in 2007). Increased revenues were driven primarily by
improved weather and the impact of crew upgrades in the United
States, stronger international data acquisition revenues as a
result of increased demand for the Company's services and increased
recording capacity resulting from the Company's extensive capital
investment program in 2007 and the first half of 2008. Direct
operating costs increased 43% to $91.6 million in the three months
ended June 30, 2008 compared to $64.1 million for the same period
of 2007. Of this amount, $33.8 million related to North America
data acquisition (compared to $28.1 million in 2007), $55.5 million
related to international data acquisition (compared to $33.2
million in 2007) and $2.3 million related to data processing
(compared to $2.7 million in 2007). The Company's gross margin
(excluding depreciation and amortization and general and
administrative expenses) for consolidated operations was 19% in the
three months ended June 30, 2008 as compared to 10% in the three
months ended June 30, 2007. North America data acquisition gross
margin was 23% (compared to 14% in 2007), international data
acquisition gross margin was 16% (compared to 8% in 2007) and data
processing gross margin was 26% (compared to 7% in 2007). EBITDA
(as defined below) increased significantly to $12.4 million for the
second quarter of 2008, compared to $1.0 million in the second
quarter of 2007. EBITDA improved in North America and international
data acquisition as well as data processing due to higher activity
levels and operational improvements as well as improving operating
margins. The Company had a loss applicable to common stockholders
of $1.8 million, or ($0.18) per diluted share, in the second
quarter of 2008, compared to a loss applicable to common
stockholders of $15.5 million, or ($1.95) per diluted share, for
the same quarter in 2007. The reduced loss was primarily due to
higher activity levels in all segments, decreased interest expense
and the $6.9 million loss on the redemption of the Company's
floating rate notes which occurred in the second quarter of 2007.
These were partially offset by higher depreciation expense
resulting from the Company's extensive capital investment program
over the past 18 months. Six Months Results In the six months ended
June 30, 2008, revenue increased 28% to $233.7 million compared to
$182.6 million for the first six months of 2007. Revenue consisted
of $105.8 million for North American data acquisition (compared to
$83.3 million in 2007), $121.9 million for international data
acquisition (compared to $93.8 million in 2007) and $6.0 million
from data processing (compared to $5.5 million in 2007). Increased
revenues were driven primarily by a stronger Canadian winter season
in 2008, the impact of crew upgrades in the United States, stronger
international data acquisition revenues resulting from increased
demand for the Company's services, and increased recording capacity
resulting from the Company's extensive capital investment program
in 2007 and the first half of 2008. Direct operating costs
increased 25% to $184.0 million in the six months ended June 30,
2008 compared to $147.2 million for the same period of 2007. Of
this amount, $80.9 million related to North America data
acquisition (compared to $69.2 million in 2007), $98.5 million
related to international data acquisition (compared to $72.9
million in 2007) and $4.6 million related to data processing
(compared to $5.1 million in 2007). The Company's gross margin
(excluding depreciation and amortization and general and
administrative expenses) for consolidated operations of 21% in the
six months ended June 30, 2008 as compared to 19% in the same
period of 2007. North America data acquisition gross margin was 24%
(compared to 17% in 2007), international data acquisition gross
margin was 19% (compared to 22% in 2007) and data processing gross
margin was 23% (compared to 9% in 2007). The decreased gross margin
in the international operations is primarily due to the results for
2007 including a very large international project that accelerated
and produced a very high gross margin that was not repeated during
the 2008 period. EBITDA (as defined below) increased to $30.9
million for the first six months of 2008, compared to $19.6 million
in the first six months of 2007. EBITDA improved in data processing
and North America, both in Canada as a result of a stronger winter
season and in the U.S. due to improved weather, improved contract
terms and the results of crew upgrades. EBITDA also improved
internationally due to increased activity levels. The Company had
income applicable to common stockholders of $0.7 million, or $0.07
per diluted share, in the first six months of 2008, compared to a
loss applicable to common stockholders of $10.3 million, or ($1.53)
per diluted share, for the same period in 2007. The improvement in
income was primarily due to improved operating results, lower
interest expense and a $6.9 million loss on the redemption of
floating rate notes in the six months ended June 30, 2007. Selected
Balance Sheet Data Cash and cash equivalents and restricted cash
totaled $16.7 million at June 30, 2008, of which $1.2 million was
restricted cash. Total debt was $103.3 million with $24.9 million
of that amount being current. Total debt to capitalization was
34.5% at June 30, 2008 as compared to 29.4% at December 31, 2007.
The increase was primarily the result of additional borrowings to
fund the Company's capital investment program. On July 28, 2008,
the Company completed the sale of 120,000 shares of its Series B
Convertible Preferred Stock along with warrants to purchase 240,000
shares of the Company's common stock, for net proceeds of $29.4
million. These proceeds were immediately used to reduce borrowings
under the Company's revolving credit facility, however, the Company
expects to use these amounts to fund its capital expenditure budget
and working capital requirements. Backlog Remains Strong The
Company's backlog at the end of the second quarter was $413
million, slightly down from its record quarterly high of $417
million at March 31, 2008 but up substantially from $321 million at
June 30, 2007. Approximately $274 million or 66% of current backlog
is related to international business (excluding Canada), with the
remaining $139 million or 34%, in North America ($132 million of
this amount is attributed to the United States). Backlog in the
United States reduced from $176 million at March 31, 2008 to $132
million as a result of increased price competition in the land
seismic market during the second quarter as competitors sought to
increase utilization and future backlog. The Company, however,
chose to avoid matching industry discounts in the United States as
Company-wide backlog remained extremely robust and near record
levels. In addition, as part of its profit improvement program in
the United States, the Company began increasing the amount of
business under term contracts and reducing third-party surveying
and drilling costs by shifting the responsibility for these
directly to clients, which reduces future revenues but improves job
margins. The Company expects the amount of work performed under
term contracts in the United States to increase 46% in 2008 as
compared to 2007. Also during the quarter, a customer cancelled two
jobs in Australia scheduled for the third and fourth quarter. The
affected crew will be re-deployed to Angola during the third
quarter and is expected to return to Australia in 2009. Operations
Overview During the second quarter, the Company experienced its
normal seasonal decline in crew activity and utilization in North
America from first quarter levels. However, higher crew activity in
international markets helped to somewhat offset the seasonal
decrease experienced in North America. As expected, one crew
operated for approximately half of the second quarter in Canada and
incurred some routine additional costs for repair and maintenance
from the winter season. In the United States, a total of eight
crews worked actively in Central Texas, Oklahoma, Arkansas and the
Texas/Louisiana Gulf Coast region, although two of these were
hampered by weather early in the quarter. In Latin America, the
Company operated four to six crews during the quarter in Bolivia,
Brazil and Colombia, and is in the early stages of mobilizing a
crew to Suriname expected to commence working in the late third or
early fourth quarter. In the Eastern Hemisphere, marketing efforts
initiated in 2007 continued to deliver positive results. The
Company operated its transition zone crew in Egypt most of the
quarter, with minimal downtime as the crew moved between projects.
The Company's ocean bottom cable ("OBC") crew in Australia worked
just over one month in the quarter after restarting in late May.
The Company operated one crew in Bangladesh for two months of the
quarter, one crew in Tanzania for the majority of the quarter and
mobilized a crew into Mozambique, which commenced operations late
in the quarter. Finally, the Company started up a new transition
zone crew in Australia which operated for approximately one month
before moving to New Zealand for additional work. Capital
Investments In the second quarter of 2008, the Company continued to
invest in revenue-generating equipment and recording capacity. A
total of $25.0 million was invested primarily in international
operations, bringing total capital investments for the year to
$50.7 million. The Company added 800 stations (3,200 channels) of
additional Sercel SeaRay recording equipment and fitted out three
new vessels for its OBC operations, as well as adding additional
support equipment for its Latin American and Eastern Hemisphere
operations. As of June 30, 2008, the Company had approximately
94,700 stations of single-component and 8,250 stations of
multi-component recording equipment, equating to a total channel
count of 121,000. This compares to 108,000 channels at December 31,
2007 and 94,400 channels at June 30, 2007, using this methodology.
Additional channels increase the Company's revenue generating
capacity through improved technology, the ability to operate
larger, higher channel count crews and by reducing equipment
downtime. Third Quarter 2008 Activity Outlook The Company is
providing this update to assist shareholders in understanding the
operational expectations for the third quarter of 2008. A large
portion of the Company's equipment that operates in Canada during
the winter has been moved to markets outside North America and only
one crew is expected to operate in Canada for part of the third
quarter at activity levels consistent with the second quarter. The
Company expects to continue operating eight crews in the United
States as it did in the second quarter of 2008 and expects to have
strong utilization for the remainder of the third quarter. Activity
levels in Colombia are expected to remain strong, up slightly from
the second quarter, and a crew is mobilizing to Suriname to begin a
new job expected to start in the late third or early fourth
quarter. One crew is expected to operate in Brazil, consistent with
the second quarter and the Company expects increasing activity
levels for its one crew in Bolivia. In the Eastern Hemisphere, the
Company's OBC crew working in Australia is expected to operate
there for approximately one month and then move to Angola to
commence work on a new job late in the quarter. The Company's new
transition zone crew in Australia has mobilized to New Zealand and
is expected to operate approximately half of the third quarter. In
Egypt, the Company's crew is expected to work the majority of the
quarter, with the exception of time needed for a move between
projects. The Company's crew in Tanzania is expected to continue
working in the third quarter at a slightly reduced level from the
second quarter while the crew in Mozambique is expected to operate
the entire third quarter compared to a short period during the
second quarter. The Company's land crew in Bangladesh is being
converted to a transition zone crew and is expected to commence
operations in Malaysia mid-quarter. Finally, the Company is in the
early stages of mobilizing for a land project in Angola (in
addition to the OBC project mentioned above), which is not expected
to commence until the fourth quarter. Management Comment Richard
Miles, President and Chief Executive Officer, said: "Continued
investment in recording channel capacity and crew upgrades,
combined with our international expansion efforts contributed to
significantly improved results in the second quarter of 2008.
Typically, our second quarter revenues and profits seasonally
decline in North America from the first quarter, as the Canadian
thaw results in the majority of these crews going idle with this
year being no exception. Through improved control over our Canadian
idle costs, improved performance in the United States land market
and increased activity levels internationally, normal seasonal
impacts were significantly reduced this year. Our backlog remains
strong and I am excited about our revenue visibility into next
year. I am encouraged by the ability of our new transition zone and
OBC crews to penetrate new, fast-growing international seismic
markets and our success in maintaining our strong competitive
position in the attractive U.S. land seismic market. The continued
strength of our order book, and the increasing amount of
international and shallow water work included, is a testament to
the increasing demand for our innovative solutions, which help our
customers maximize the returns from their complex E&P
projects." Miles continued, "Robust customer demand is driving our
capital investment decisions to add increased revenue generating
capacity. In the second quarter we spent $25.0 million on new
equipment to increase our OBC recording capacity and prepare for
upcoming work in new international markets. We continue to focus on
improving our worldwide operations for improved efficiency and
service to our customers, profitability and stockholder value."
Below are condensed consolidated Statements of Results of
Operations. More detailed information is available in the Company's
Form 10-Q for the three and six months ended June 30, 2008 which
will be filed by August 11, 2008. For the Three Months Ended June
30, 2008 2007 (In thousands, except per share amounts) Revenue
$113,579 $71,604 Expenses: Operating expenses 91,567 64,072 General
and administrative 9,586 6,532 Depreciation and amortization 11,787
8,188 Total expenses 112,940 78,792 Other gain (loss), net 293 206
Income (loss) from operations 932 (6,982) Other income (expense):
Interest expense, net (1,456) (2,939) Loss on redemption of
floating rate notes (6,936) Other 172 862 (1,284) (9,013) Loss
before income taxes (352) (15,995) Provision for income taxes 193
(1,749) Net loss (545) (14,246) Preferred stock dividend and
accretion costs 1,301 1,204 Income applicable to common
stockholders $(1,846) $(15,450) Loss per common share - basic
$(0.18) $(1.95) Loss per common share - diluted $(0.18) $(1.95)
Weighted average common shares outstanding - basic 10,355 7,918
Weighted average common shares outstanding - diluted 10,355 7,918
For the Six Months Ended June 30, 2008 2007 (In thousands, except
per share amounts) Revenue $233,733 $182,568 Expenses: Operating
expenses 183,982 147,201 General and administrative 18,888 15,752
Depreciation and amortization 22,778 15,720 Total expenses 225,648
178,673 Other gain (loss), net 212 1,748 Income from operations
8,297 5,643 Other income (expense): Interest expense, net (2,777)
(6,826) Loss on redemption of floating rate notes (6,936) Other
(489) 1,115 (3,266) (12,647) Income (loss) before income taxes
5,031 (7,004) Provision for income taxes 1,713 938 Net income 3,318
(7,942) Preferred stock dividend and accretion costs 2,577 2,382
Income (loss) applicable to common stockholders $741 $(10,324)
Income (loss) per common share - basic $0.07 $(1.53) Income (loss)
per common share - diluted $0.07 $(1.53) Weighted average common
shares outstanding - basic 10,336 6,750 Weighted average common
shares outstanding - diluted 10,583 6,750 The Company defines
EBITDA as Earnings before Interest, Taxes, Other Income (Expense)
(including returns to preferred stockholders, foreign exchange
gains/losses, gains/losses on sale of equipment and insurance
proceeds, warrant expense and other income/expense), and
Depreciation and Amortization. EBITDA is not a measure of financial
performance derived in accordance with Generally Accepted
Accounting Principles ("GAAP") and should not be considered in
isolation or as an alternative to net income as an indication of
operating performance. See below for reconciliation from Net Income
to Common Stockholders to EBITDA amounts referred to above: For the
Three Months Ended June 30, 2008 2007 (In thousands) Net Loss to
Common Stockholders $(1,846) $(15,450) Preferred Stock Dividends
and Accretion Costs 1,301 1,204 Net Loss (545) (14,246) Provision
for income taxes 193 (1,749) Interest Expense, net 1,456 9,875
Other Expense (Income) (as defined above) (465) (1,068)
Depreciation and Amortization 11,787 8,188 EBITDA $12,426 $1,000
For the Six Months Ended June 30, 2008 2007 (In thousands) Net
Income (Loss) to Common Stockholders $741 $(10,324) Preferred Stock
Dividends and Accretion Costs 2,577 2,382 Net Income (Loss) 3,318
(7,942) Provision for income taxes 1,713 938 Interest Expense, net
2,777 13,762 Other Expense (Income) (as defined above) 277 (2,863)
Depreciation and Amortization 22,778 15,720 EBITDA $30,863 $19,615
Conference Call and Webcast Information Geokinetics has scheduled a
conference call and webcast on Thursday, August 7, 2008, beginning
at 11:00 a.m. Eastern Daylight Time and 10:00 a.m. Central Daylight
Time to discuss its second quarter and first half 2008 financial
and operational results. The webcast may be accessed online through
Geokinetics' website at http://www.geokinetics.com/ in the Investor
Relations section. A limited number of telephone lines will also be
available to participants ten minutes prior to the start of the
webcast by dialing (877) 407-8035 for domestic or (201) 689-8035
for international. A replay of the webcast will be available online
at http://www.geokinetics.com/ in the Investor Relations section
and at http://www.investorcalendar.com/. A telephone audio replay
will also be available through August 21, 2008, by dialing (877)
660-6853 for domestic or (201) 612-7415 for international, account
#286 and conference ID#289410. If you have any questions regarding
this procedure, please contact Diane Anderson at (713) 850-7600.
About Geokinetics Inc. Geokinetics Inc., based in Houston, Texas,
is a leading global provider of seismic acquisition and high-end
seismic data processing services to the oil and gas industry.
Geokinetics has strong operating presence in North America and is
focused on key markets internationally. Geokinetics operates in
some of the most challenging locations in the world from the Arctic
to mountainous jungles to the transition zone environments. More
information about Geokinetics is available at
http://www.geokinetics.com/. Forward-Looking Statements This press
release includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements, other than statements of historical facts, included
in this earnings release that address activities, events or
developments that Geokinetics expects, believes or anticipates will
or may occur in the future are forward- looking statements. These
statements include but are not limited to statements about the
business outlook for the year, backlog and bid activity, business
strategy, related financial performance and statements with respect
to future benefits. These statements are based on certain
assumptions made by Geokinetics based on management's experience
and perception of historical trends, industry conditions, market
position, future operations, profitability, liquidity, backlog,
capital resources and other factors believed to be appropriate.
Such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of Geokinetics,
which may cause actual results to differ materially from those
implied or expressed by the forward-looking statements. These
include risks relating to financial performance and results, job
delays or cancellations, impact from severe weather conditions and
other important factors that could cause actual results to differ
materially from those projected, or backlog not to be completed, as
described in the Company's reports filed with the Securities and
Exchange Commission. Backlog consists of written orders and
estimates of Geokinetics' services which it believes to be firm,
however, in many instances, the contracts are cancelable by
customers so Geokinetics may never realize some or all of its
backlog, which may lead to lower than expected financial
performance. Although Geokinetics believes that the expectations
reflected in such statements are reasonable, it can give no
assurance that such expectations will be correct. All of
Geokinetics' forward-looking statements, whether written or oral,
are expressly qualified by these cautionary statements and any
other cautionary statements that may accompany such forward-looking
statements. Any forward-looking statement speaks only as of the
date on which such statement is made and Geokinetics undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise.
DATASOURCE: Geokinetics Inc. CONTACT: Scott A. McCurdy, Vice
President and CFO of Geokinetics Inc., +1-713-850-7600, Fax,
+1-713-850-7330 Web site: http://www.geokinetics.com/
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