Seitel Announces 2007 Fourth Quarter Results

Business Wire, March 12, 2008

Cash Resales of $43.1 Million a New Quarterly High

HOUSTON -- Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the fourth quarter ended December 31, 2007. Because the company was acquired by ValueAct Capital on February 14, 2007, the fourth quarter financial statements include purchase accounting adjustments that resulted in significantly higher non-cash expenses. Since our fourth quarter results are not fully comparable to the pre-merger fourth quarter of 2006, the impact from the purchase accounting adjustments on our financial results are highlighted in the discussion below.

Revenue for the fourth quarter of $53.8 million included a $6.7 million reduction related to purchase accounting adjustments to our deferred revenue balance. Without this adjustment, total revenue for the quarter would have attained $60.5 million, as compared to revenue of $52.8 million in the fourth quarter of 2006. Cash resales for the quarter reached $43.1 million, compared to $29.2 million for the third quarter and to $38.1 million for the fourth quarter of last year. The $7.7 million year-on-year growth in fourth quarter adjusted revenue reflected a $6.8 million increase in selections revenue before purchase accounting adjustments, as well as $5 million increases in both cash resales and non-monetary exchanges. Acquisition revenue increased by $2.2 million on completion of weather delayed projects in Texas. An $11.7 million increase in deferrals partially offset the above improvements.

For the year, revenue of $148.8 million included an $18.3 million reduction related to purchase accounting adjustments. Without these adjustments, total revenue for 2007 would have reached $167.1 million as compared to revenue of $191.9 million in 2006. The $24.8 million reduction in adjusted revenue reflected primarily an $18.4 million increase in deferrals, partially from higher library cards. Acquisition revenue decreased $4.2 million mainly due to our decision to reduce shooting in Canada, and to a lower acquisition underwriting percentage than in 2006. Cash resales were $3.2 million lower due to weak marine sales which was partially offset by increased licensing on land in both the US and Canada. Non-monetary exchanges of $8.0 million increased by $2.1 million.

For the fourth quarter of 2007, the company reported a net loss of $14.8 million that included $28.1 million from purchase accounting adjustments to the value of assets and liabilities, as well as $0.6 million of merger related expenses. Excluding the above items, net income for the fourth quarter was $13.9 million, compared to net income of $13.9 million for the 2006 quarter. The additional margin on the $7.7 million adjusted revenue increase was mostly offset by a $5.1 million increase in net interest expense.

The net loss for the year was $93.4 million that included $88.8 million from purchase accounting adjustments and $24.1 million of merger related expenses. Part of merger expenses was a $4.0 million fee for bridge financing reported as interest expense. Excluding the above items, 2007 net income was $19.5 million compared to net income of $47.2 million in 2006. The $27.7 million adjusted net income reduction was mainly the result of lower revenue and a $17.6 million increase in net interest expense excluding bridge financing fees.

Cash EBITDA, defined as cash revenue less cash operating expenses, was $37.7 million for the fourth quarter of 2007, an increase of 24% from $30.4 million in 2006. This increase was primarily driven by a $5.4 million increase in cash revenue and a $1.9 million reduction in cash operating expenses essentially from lower compensation expense. For the year, cash EBITDA was $100.2 million as compared to $99.2 million in 2006, as a $5.2 million reduction in cash revenue was offset by a $6.2 million improvement in cash operating expenses.

"2007 closed with a quarterly record for cash resales," commented Rob Monson, president and chief executive officer. "Our onshore data licensing was strong during the full year. Both the U.S. and Canada grew year on year partially offsetting lagging sales from our marine library. Despite lower drilling activity in Canada and some concerns about the royalty situation in Alberta, our Canadian library continued to perform, with robust resales in the fourth quarter and full year growth.

"In 2007, we continued to add significant amounts of data to our onshore library," said Monson. "One of our key objectives is to grow our onshore library by 10% per year and we were close to our target. Our onshore 3D square miles grew by 9% during 2007 at a lower cost per square mile than we had anticipated. As a result, our cash capex spend on seismic data was lower than we had forecast.

"2008 has started with some uncertainty in the macro environment, but the oil and gas industry continues to benefit from strong demand for hydrocarbons and a favorable price environment for both commodities. Natural gas storage remains at reasonable levels with falling imports of Canadian natural gas and LNG. I believe most of the ingredients are in place for another solid year for the seismic industry in North America."