Strong International Demand Drives Significant Increases in
Revenues and EBITDA, Backlog Remains at Record Level HOUSTON, March
5 /PRNewswire-FirstCall/ -- Geokinetics Inc. (NYSE Alternext US:
GOK) announced today financial results of operations for the three
and twelve months ending December 31, 2008. Highlights for the year
ended December 31, 2008 include: -- Revenue increased 33% from 2007
to $474.6 million. -- EBITDA (a non-GAAP financial measurement,
defined below) increased 89% from 2007 (excluding $3.2 million of
one-time, non-recurring severance and reorganization costs in 2007)
to $65.0 million. -- Loss Applicable to Common Stockholders
narrowed to $5.3 million, or ($0.51) per share, compared to a loss
before one-time, non-recurring charges ($3.2 million mentioned
above and $6.9 million loss on redemption of Notes in 2007) of
$10.7 million, or ($1.25) per share, for the twelve months ended
December 31, 2007. Highlights for the quarter ended December 31,
2008 include: -- Revenue increased 38% from the fourth quarter of
2007 to $117.8 million. -- EBITDA (a non-GAAP financial
measurement, defined below) increased 587% from the fourth quarter
of 2007 to $15.8 million. -- Loss Applicable to Common Stockholders
narrowed to $6.3 million, or ($0.60) per share, compared to a loss
of $9.0 million, or ($0.87) per share, for the three months ended
December 31, 2007. Additionally: -- The Company invested $77.1
million during the year (including $7.5 million in the fourth
quarter), primarily to increase its international drilling and
recording capacity. Overall channel count increased 13% from
year-end 2007 to 122,500 channels. In addition, the Company further
bolstered its shallow water operations through the development and
addition of multiple new special purpose vessels which are already
deployed on existing contracts. -- Backlog increased approximately
33% to $548 million at December 31, 2008, from $411 million at
December 31, 2007, up approximately 8% from $509 million at
September 30, 2008. The increase is primarily related to
international projects targeting oil prospects with 84% of backlog
at year-end associated with orders from international customers.
Management Comment Richard F. Miles, President and Chief Executive
Officer, said: "Although oil and natural gas prices have declined
precipitously from their highs in 2008, our backlog remains at
record levels and demand remains strong in our international data
acquisition segment where all crews are currently active. In fact,
a significant amount of our backlog was added after last fall's
collapse in the credit markets and subsequent decline in commodity
prices. Equally important, our financial structure is strong. Our
debt level remains relatively low and we intend to reduce
outstanding borrowings in 2009 while operating within cash flow."
"Our international order book continues to grow, as state-owned
National Oil Companies (NOCs) and international oil companies
increase their efforts to search for oil, often in challenging
operational environments. Over the past two years, we have invested
over $170 million to increase recording channel capacity, increase
our fleet of transition zone vessels, add Ocean Bottom Cable (OBC)
capacity and upgrade our crews' abilities to meet the changing
global demand for seismic services. As planned, our transition zone
and OBC crews have opened new international markets and have
achieved strong customer acceptance for operational performance and
safety. We have been awarded some very large, long-term
international projects during 2008 in Africa, the Far East and
Latin America, most of which are now well underway. Although our
international business is driving most of our growth, we have
maintained our strong competitive position in North America and
have seen the benefits of our reorganization efforts through
improved results in the profitable data processing and U.S. land
seismic markets." "In North America, demand for land seismic
services has declined in response to deteriorating commodity
prices. As a result we reduced our crew count in the United States
from eight to six crews in the first quarter of 2009 and plan to
operate only three crews during the Canadian winter season as
compared to five in 2008. We plan to move one of the U.S. crews
overseas and combine the other with an existing crew for a large
12,500-channel job beginning in the second quarter." "Despite
softening demand in North America, orders from customers outside
North America remain strong, driving our backlog to new highs and
providing us with good revenue visibility throughout 2009 and in
some areas into 2010." Miles continued: "After several years of
significant investments to expand our operating capabilities and
enhance operating efficiencies, our 2009 capital expenditure budget
of $37 million reflects our intention to reduce debt and operate
within cash flow. We are confident that we have adequate cash flow,
cash-on-hand and credit availability to execute our business
strategy throughout 2009. We will continue to maintain our focus on
improving the efficiency and profitability of our worldwide
operations." Three Months Results Selected information by segment
is included below (all data in millions except for Gross Margin
percentages): Three months ended December 31, 2008: Data
Acquisition North America International Data Processing
Consolidated ------------- ------------- ---------------
------------ Revenues $36.0 $79.0 $2.8 $117.8 Direct operating
costs 29.2 60.6 2.1 91.9 Gross Margin % 19% 23% 25% 22% Three
months ended December 31, 2007: Data Acquisition North America
International Data Processing Consolidated -------------
------------- --------------- ------------ Revenues $43.4 $39.5
$2.6 $85.5 Direct operating costs 36.3 35.5 2.4 74.2 Gross Margin %
16% 10% 8% 13% Revenue increased 38% in the three months ended
December 31, 2008, compared to the same period of 2007. Revenue
increases were driven by strong demand for international data
acquisition services and increased recording capacity resulting
from the Company's extensive capital investment program in 2007 and
2008. International revenue improvements were partially offset by
decreased revenues in North America as the result of lower activity
in Canada and reduced front-end revenues in the United States
resulting from decreasing demand in North America. Direct operating
costs increased 24% in the three months ended December 31, 2008,
compared to the same period of 2007. The Company's gross margin
(excluding depreciation and amortization and general and
administrative expenses) for consolidated operations was 22% in the
fourth quarter, compared to 13% for the same period of 2007.
International gross margins improved due to increased operating
efficiencies and increased utilization of the Company's shallow
water crews. North America gross margins improved as the result of
increased operational efficiencies generated by new investments in
crew upgrades combined with higher levels of term contracts. Data
processing gross margins improved as the result of lower costs and
improved productivity. EBITDA (as defined below) increased 587% to
$15.8 million for the fourth quarter of 2008, compared to $2.3
million in the fourth quarter of 2007. EBITDA improved as a result
of higher gross margins in all operating segments, increased
activity in international markets and increased activity in
high-margin shallow water markets. The Company narrowed its loss
applicable to common stockholders to $6.3 million, or ($0.60) per
share, in the fourth quarter of 2008, compared to a loss applicable
to common stockholders of $9.0 million, or ($0.87) per share for
the same quarter in 2007. This was primarily the result of
operational improvements mentioned above offset by higher
depreciation and amortization expense resulting from the Company's
extensive capital expenditure programs in 2007 and 2008, increased
foreign income taxes and higher dividends resulting from the sale
of additional shares of preferred stock in July 2008. Full-Year
Results Selected information by segment is included below: Twelve
months ended December 31, 2008: Data Acquisition North America
International Data Processing Consolidated -------------
------------- --------------- ------------ Revenues $177.5 $285.1
$12.0 $474.6 Direct operating costs 138.2 223.1 8.9 370.2 Gross
Margin % 22% 22% 26% 22% Twelve months ended December 31, 2007:
Data Acquisition North America International Data Processing
Consolidated ------------- ------------- ---------------
------------ Revenues $166.6 $180.3 $10.8 $357.7 Direct operating
costs 135.6 144.6 10.6 290.8 Gross Margin % 19% 20% 2% 19% Revenue
increased 33% in the twelve months ended December 31, 2008,
compared to the same period of 2007. Revenue increases were driven
primarily by increased recording capacity resulting from the
Company's extensive capital investment programs in 2007 and 2008,
stronger demand for international data acquisition services, a
stronger Canadian winter season in 2008 and the beneficial impact
of crew upgrades in the United States. Direct operating costs
increased 27% in the twelve months ended December 31, 2008,
compared to the same period of 2007. The Company's gross margin
(excluding depreciation and amortization and general and
administrative expenses) for consolidated operations was 22% in the
twelve months ended December 31, 2008 as compared to 19% in the
same period of 2007. International gross margins increased as a
result of capital investments, improved crew efficiencies and the
expansion of the Company's shallow water operations. North America
gross margins improved as the result of increased efficiencies
generated from the Company's investments in crew upgrades and a
higher percentage of term contracts. Data processing gross margins
improved as the result of lower costs and the impact of
restructuring measures taken in the second half of 2007. EBITDA (as
defined below) increased 89% to $65.0 million for the twelve months
of 2008, compared to $34.3 million in the twelve months of 2007
(excluding $3.2 million of one-time, non-recurring severances and
reorganization costs in 2007). EBITDA improved in all operating
segments as a result of improved contract terms, increased
recording capacity and activity levels and the results of crew
upgrades. The Company narrowed its loss applicable to common
stockholders to $5.3 million, or ($0.51) per share, in the twelve
months of 2008, from a loss of $20.8 million, or ($2.44) per share,
for the same period in 2007. This was primarily the result of
improved operational performance, lower interest expense and
non-recurring losses recognized in 2007 of $6.9 million for a loss
on the redemption of floating rate notes and $3.2 million for
severance and reorganization costs. The improvement was partially
offset by increased depreciation and amortization expense resulting
from the Company's extensive capital expenditure programs in 2007
and 2008, increased foreign income taxes and higher dividends
resulting from the sale of additional shares of preferred stock in
July 2008. Backlog Remains Strong Geokinetics' backlog at year-end
2008 was approximately $548 million, up 33% from $411 million at
December 31, 2007 and nearly 8% higher than $509 million at
September 30, 2008. Approximately $463 million or 84% of current
backlog is related to international business (excluding Canada),
with the remaining $85 million or 16% in North America ($73 million
of which is attributable to the United States). The Company
continues to see increasing demand for its services
internationally, especially in shallow water environments and for
NOCs targeting oil prospects. Of the Company's international
backlog, approximately $355 million or 77% is with NOCs or
partnerships including NOCs. Approximately $201 million or 43% is
in shallow water transition zones and OBC environments. The Company
expects its international backlog to begin decreasing in the
short-term as the Company is in the very early stages of many
long-term contracts and follow-on work for these crews is not
likely to be awarded until nearer the completion of these long-term
contracts. Capital Investments In the fourth quarter of 2008, the
Company made additional investments in equipment to meet demand,
improve seismic image quality and upgrade its information systems.
A total of $7.5 million was invested bringing total capital
investments for 2008 to $77.1 million. Significant investments made
during the quarter include support equipment for the Company's
international operations, new special purpose, highly transportable
vessels and equipment for the Company's shallow water operations
and for the integration of new information technology systems. In
addition, the Company has made significant investments in new
drilling and surveying equipment for its international operations.
As of December 31, 2008, the Company had approximately 95,750
stations of single-component and 8,250 stations of multi-component
recording equipment, equating to total channel count of 122,500, an
increase of more than 13% from 108,000 channels at December 31,
2007. 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. The Company's capital expenditure budget for 2009 is
$37.3 million. The Company expects these investments to be targeted
toward maintenance, the selective additions of additional special
purpose vessels and other equipment to improve the efficiency of
the Company's shallow water operations, support equipment for
long-term projects in South America and West Africa and the
continued integration of new information technology systems.
Selected Balance Sheet Data Cash and cash equivalents and
restricted cash totaled $23.2 million at December 31, 2008, of
which $9.9 million was restricted cash. Total debt was $90.9
million with $33.1 million of that amount being current. Total
debt-to-book capitalization was 28.8% at December 31, 2008, as
compared to 29.4% at year-end 2007 and 29.2% at September 30, 2008.
The Company expects to continue making prudent investments to meet
demand and believes it has adequate cash flow, cash resources and
borrowing availability to fund its capital expenditure budget and
working capital requirements for the foreseeable future. Fourth
Quarter Operations Review and First Quarter 2009 Operational
Outlook The Company is providing this update to assist shareholders
in understanding the operations of the Company in the fourth
quarter of 2008 and the operational expectations for the first
quarter of 2009. North America Canada - Operated two crews, one for
most of and one for half of the fourth quarter. The Company expects
to operate three crews for most of the first quarter in Canada's
winter season. United States - Operated eight crews in the fourth
quarter. The Company expects to operate six crews throughout the
first quarter. Two additional crews will work the first half of the
quarter before shutting down. One of these crews will be relocated
to South America for work in the second quarter and the equipment
from the other will be combined with an existing crew for a large
project that will start in the second quarter requiring 12,500
channels of equipment. The data acquired on this project will be
jointly owned by the Company and its customer and as such will be
accounted for as an investment with all costs deferred and
amortized against the Company's share of future data license
revenues which will be recognized upon delivery of processed data.
The Company does not expect to earn any license revenues until the
latter part of 2009, however, the Company expects that license
revenues already committed will be sufficient to cover the
Company's share of cash costs for data acquisition. International
Latin America - Operated five to seven crews during the fourth
quarter, with an average of six crews operating in Brazil,
Colombia, Peru and Suriname. The Company expects to operate six to
seven crews during the first quarter, with an average of six and a
half crews operating in Bolivia, Brazil, Colombia, Peru and
Suriname. The Company is restarting a crew in Bolivia mid-quarter
which is expected to operate on one project until late in the
fourth quarter. EAME - Operated two to three crews during the
fourth quarter, with an average of two and a half crews operating
in Angola, Cameroon, Egypt and Mozambique. The Company expects to
operate two to five crews in the first quarter, with an average of
three crews operating during the quarter. The Company's OBC crew in
Angola commenced operations mid-October and is expected to continue
on the same project into early 2010. Australasia / Far East -
Operated one crew during the entire fourth quarter in Malaysia. The
Company expects to operate one to two crews during the first
quarter with the one in Malaysia continuing through the entire
quarter and another crew working for half of the quarter in India
and then mobilizing for a project in Bangladesh. Below are
condensed Consolidated Statements of Results of Operations. More
detailed information is available in the Company's Form 10-K for
the twelve months ended December 31, 2008 which will be filed by
March 16, 2009. For the Three Months Ended December 31, 2008 2007
(In thousands, except per share amounts) Revenue $117,758 $85,529
Expenses: Operating expenses 91,924 74,169 General and
administrative 10,056 9,045 Depreciation and amortization 13,275
8,269 Total expenses 115,255 91,483 Other gain (loss), net (366)
(915) Income from operations 2,137 (6,869) Other income (expense):
Interest expense, net (1,677) (1,009) Other 352 347 Total other
income (expense) (1,325) (662) Income before income taxes 812
(7,531) Provision for income taxes 5,122 185 Net income (loss)
(4,310) (7,716) Preferred stock dividend and accretion costs 1,982
1,252 Income (loss) applicable to common stockholders $(6,292)
$(8,968) Income (loss) per common share - basic $(0.60) $(0.87)
Income (loss) per common share - diluted $(0.60) $(0.87) Weighted
average common shares outstanding - basic 10,470 10,307 Weighted
average common shares outstanding - diluted 10,470 10,307 For the
Twelve Months Ended December 31, 2008 2007 (In thousands, except
per share amounts) Revenue $474,598 $357,677 Expenses: Operating
expenses 370,238 290,800 General and administrative 39,341 35,717
Depreciation and amortization 48,990 32,352 Total expenses 458,569
358,869 Other gain (loss), net (130) 572 Income from operations
15,899 (620) Other income (expense): Interest Expense, net (6,176)
(15,184) (2007 includes loss on redemption of Notes of $6.9
million) Other 531 2,120 Total other income (expense): (5,645)
(13,064) Income (loss) before income taxes 10,254 (13,684)
Provision for income taxes 9,268 2,252 Net income (loss) 986
(15,936) Preferred stock dividend and accretion costs 6,325 4,866
Income (loss) applicable to common stockholders $(5,339) $(20,802)
Income (loss) per common share - basic $(0.51) $(2.44) Income
(loss) per common share - diluted $(0.51) $(2.44) Weighted average
common shares outstanding - basic 10,390 8,513 Weighted average
common shares outstanding -diluted 10,390 8,513 GAAP Reconciliation
The Company defines EBITDA as Net Income before Taxes, Interest,
Other Income (Expense) (including 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 Income Applicable to
Common Stockholders to EBITDA amounts referred to above: For the
Three Months Ended December 31, 2008 2007 (In thousands) Income
(Loss) Applicable to Common Stockholders $(6,292) $(8,968)
Preferred Stock Dividends and Accretion Costs 1,982 1,252 Net
Income (Loss) (4,310) (7,716) Provision for Income Taxes 5,122 185
Interest Expense, net 1,677 1,009 Other Expense (Income) (as
defined above) 14 568 Depreciation and Amortization 13,275 8,269
EBITDA $15,778 $2,315 For the Twelve Months Ended December 31, 2008
2007 (In thousands) Income (Loss) Applicable to Common Stockholders
$(5,339) $(20,802) Preferred Stock Dividends and Accretion Costs
6,325 4,866 Net Income (Loss) 986 (15,936) Provision for Income
Taxes 9,268 2,252 Interest Expense, net 6,176 15,184 (2007 includes
loss on redemption of Notes of $6.9 million) Other Expense (Income)
(as defined above) (401) (2,692) Depreciation and Amortization
48,990 32,352 EBITDA $65,019 $31,160 Conference Call and Webcast
Information Geokinetics has scheduled a conference call and webcast
on Friday, March 6, 2009, beginning at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) to discuss its fourth quarter and
full-year 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) 407-9210 for domestic or (201) 689-8049 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 April 6, 2009, by dialing (877) 660-6853
for domestic or (201) 612-7415 for international, account #286 and
conference ID #313638. 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 international provider of seismic data acquisition and
high-end seismic data processing services to the oil and gas
industry. Geokinetics operates in some of the most challenging
locations in the world from mountainous jungles, swamps and surf
transition zones and ocean bottom 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, reductions in oil and gas prices, the
continued disruption in worldwide financial markets, 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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