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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period to .
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Commission File Number 0-14488
SEITEL, INC.
(Exact name of registrant as specified in charter)
DELAWARE 76-0025431
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Briar Hollow Lane
West Building, 7th Floor
HOUSTON, TEXAS 77027
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(Address of principal (Zip Code)
executive offices)
(713) 627-1990
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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Yes X No
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As of May 14, 1997 there were 10,398,509 shares of the Company's common stock,
par value $.01 per share, outstanding.
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<PAGE>
INDEX
Page
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 (Unaudited) and December 31, 1996................3
Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 1997 and 1996..............4
Consolidated Statements of Stockholders' Equity (Unaudited)
for the Three Months Ended March 31, 1997.......................5
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1997 and 1996..............6
Notes to Consolidated Interim Financial Statements..............8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................9
PART II. OTHER INFORMATION...................................................12
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share And Per Share Amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and equivalents $ 4,824 $ 3,340
Receivables
Trade 45,461 52,509
Notes and other 5,185 6,618
Net data bank 133,265 126,998
Net oil and gas properties 91,025 86,572
Net geophysical and other property and equipment 21,224 14,022
Investment in affiliate 914 914
Advances to oil and gas operators 4,822 1,235
Prepaid expenses, deferred charges and other assets 4,364 2,471
-------- --------
TOTAL ASSETS $ 311,084 $ 294,679
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 23,916 $ 25,130
Income taxes payable 156 302
Debt
Senior Notes 75,000 75,000
Line of credit 5,000 -
Term Loans 15,911 9,025
Obligations under capital leases 2,400 2,463
Contingent payables 274 274
Deferred income taxes 10,907 9,793
Deferred revenue 17,580 17,051
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TOTAL LIABILITIES 151,144 139,038
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CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; authorized
5,000,000 shares; none issued -
Common stock, par value $.01 per share; authorized
20,000,000 shares; issued and outstanding 10,385,170
and 10,362,102 at March 31, 1997 and December 31,
1996, respectively 104 104
Additional paid-in capital 105,797 105,544
Retained earnings 55,269 51,185
Treasury stock, 409 shares at cost at
March 31, 1997 and December 31, 1996 (4) (4)
Notes receivable from officers and employees (1,205) (1,205)
Cumulative translation adjustment (21) 17
-------- --------
TOTAL STOCKHOLDERS' EQUITY 159,940 155,641
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 311,084 $ 294,679
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
REVENUE $ 27,219 $ 20,266
EXPENSES
Depreciation, depletion and amortization 10,108 8,046
Cost of sales 5,042 3,270
Selling, general and administrative expenses 4,718 3,503
Net interest expense 1,039 584
------- -------
20,907 15,403
------- -------
Income before provision for income taxes 6,312 4,863
Provision for income taxes 2,228 1,799
------- -------
NET INCOME $ 4,084 $ 3,064
======= =======
Earnings per share:
Primary $ .38 $ .31
======= =======
Assuming full dilution $ .38 $ .30
======= =======
Weighted average number of common and
common equivalent shares:
Primary 10,873 10,036
======= =======
Assuming full dilution 10,890 10,241
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
Notes
Receivable
Common Stock Additional Treasury Stock from Cumulative
------------------- Paid-In Retained -------------- Officers Translation
Shares Amount Capital Earnings Shares Amount & Employees Adjustments
--------- -------- ---------- -------- ------ ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 5,987,388 $ 60 $ 25,709 $ 17,942 (414) $ (4) $(2,039) $ (85)
Sale of common stock through public offering 1,061,200 11 31,906 - - - - -
Net proceeds from issuance of common stock 770,364 7 7,280 - - - - -
Tax reduction from exercise of stock options - - 1,879 - - - - -
Conversion and exchanges of subordinated
debentures 1,006,667 10 8,837 - - - - -
Payments received on notes receivable
from officers and employees - - - - - - 488 -
Foreign currency translation adjustment - - - - - - - 13
Net income - - - 9,315 - - - -
----------- ----- -------- ------- ---- --- ------ ----
Balance, December 31, 1994 8,825,619 88 75,611 27,257 (414) (4) (1,551) (72)
Net proceeds from issuance of common stock 445,939 4 6,894 - - - - -
Tax reduction from exercise of stock options - - 1,900 - - - - -
Conversion and exchanges of subordinated
debentures 165,296 2 1,416 - - - - -
Payments received on notes receivable
from officers and employees - - - - - - 156 -
Foreign currency translation adjustment - - - - - - - (2)
Net income - - - 8,679 - - - -
----------- ----- -------- ------- ---- --- ------ ----
Balance, December 31, 1995 9,436,854 94 85,821 35,936 (414) (4) (1,395) (74)
Net proceeds from issuance of common stock 578,869 7 11,142 - 5 - - -
Acquisition of equity interest in affiliate 132,075 1 3,499 - - - - -
Tax reduction from exercise of stock options - - 3,204 - - - - -
Conversions and exchanges of subordinated
debentures 214,304 2 1,878 - - - - -
Payments received on notes receivable from
officers and employees - - - - - - 190 -
Foreign currency translation adjustment - - - - - - - 91
Net Income - - - 15,249 - - - -
----------- ----- -------- ------- ---- --- ------ ----
Balance, December 31, 1996 10,362,102 104 105,544 51,185 (409) (4) (1,205) 17
Net proceeds from issuance of common stock 23,068 - 253 - - - - -
Foreign currency translation adjustment - - - - - - - (38)
Net Income - - - 4,084 - - - -
----------- ----- ------- ------- ---- --- ------ ----
Balance, March 31, 1997 (unaudited) 10,385,170 $ 104 $105,797 $ 55,269 (409) $ (4) $(1,205)$ (21)
=========== ===== ======== ======= ==== === ====== ====
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 34,695 $ 22,979
Cash paid to suppliers and employees (14,822) (10,813)
Interest paid (323) (82)
Interest received 136 119
Income taxes paid (40) -
--------- ---------
Net cash provided by operating activities 19,646 12,203
--------- ---------
Cash flows from investing activities:
Cash invested in seismic data (14,910) (7,365)
Cash invested in oil and gas properties (8,059) (2,944)
Cash paid to acquire property and equipment (7,067) (550)
Cash from disposal of property and equipment 28 59
Collections on loans made 154 58
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Net cash used in investing activities (29,854) (10,742)
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Cash flows from financing activities:
Borrowings under line of credit agreement 27,000 -
Principal payments under line of credit (22,000) -
Borrowings under term loans 7,564 433
Principal payments on term loans (678) (278)
Principal payments under capital lease obligations (363) (314)
Proceeds from issuance of common stock 255 27
Costs of debt and equity transactions (2) (26)
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Net cash provided by (used in) financing activities 11,776 (158)
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Effect of exchange rate changes (84) -
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Net increase in cash and equivalents 1,484 1,303
Cash and cash equivalents at beginning of period:
Continuing operations 3,340 6,242
Discontinued operations - 234
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Total cash and equivalents at beginning of period 3,340 6,476
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Cash and equivalents at end of period:
Continuing operations 4,824 7,394
Discontinued operations - 385
========= =========
Total cash and equivalents at end of period $ 4,824 $ 7,779
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 4,084 $ 3,064
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 10,485 8,344
Deferred income tax provision 1,114 899
Amortization of deferred revenue (2,253) -
Discount on note receivable (26) -
Gain on sale of property and equipment (16) (22)
Decrease in receivables 8,278 3,269
Decrease (increase) in other assets (6,240) 230
Increase (decrease) in other liabilities 4,220 (2,851)
--------- ---------
Total adjustments 15,562 9,869
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Net cash provided by (used in) operating activities of:
Continuing operations 19,646 12,933
Discontinued operations - (730)
--------- ---------
$ 19,646 $ 12,203
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Regulation S-X. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain reclassifications
have been made to the amounts in the prior year's financial statements to
conform to the current year's presentation. Operating results for the three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. For further information,
refer to the financial statements and notes thereto for the year ended December
31, 1996.
NOTE B-EARNINGS PER SHARE
Earnings per share is based on the weighted average number of
outstanding shares of common stock during the respective periods, including
common equivalent shares applicable to assumed exercise of stock options and
warrants when such common stock equivalents are dilutive, and the Company's
other potentially dilutive securities. The following is a reconciliation of the
weighted average number of shares used in the earnings per share computation (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
March 31, 1997 March 31, 1996
-------------------- --------------------
Fully Fully
Primary Diluted Primary Diluted
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 10,368 10,368 9,487 9,487
Common stock equivalents 505 522 549 754
------ ------ ------ ------
Weighted average shares used
for earnings per share 10,873 10,890 10,036 10,241
====== ====== ====== ======
</TABLE>
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 - "Earnings
per Share" effective for interim and annual periods after December 15, 1997.
This statement replaces primary earnings per share ("EPS") with a newly defined
basic EPS and modifies the computation of diluted EPS. Basic earnings per common
share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per
common share is computed by dividing net income by the weighted average number
of shares of common stock during the period plus the effect of dilutive
potential common shares. If the provisions of SFAS No. 128 had been adopted in
the first quarter of 1997 and 1996, the pro forma EPS would have been $.39 per
share for basic and $.38 per share for diluted for the first quarter of 1997 and
$.32 per share for basic and $.31 per share for diluted for the first quarter of
1996.
<PAGE>
NOTE C-DATA BANK
Costs incurred in the creation of proprietary seismic data, including
the direct and incremental costs of Company personnel engaged in project
management and design, are capitalized. Seismic data costs are amortized for
each project in the proportion that its revenue for a period relates to
management's estimate of its ultimate revenue. Since inception, management has
established guidelines regarding its annual charge for amortization. Under these
guidelines, 90% of the cost incurred in the creation of proprietary seismic data
is amortized within five years of inception for two-dimensional seismic data and
within seven years of inception for three-dimensional data, and the final 10% is
amortized on a straight-line basis over fifteen years. Costs of existing seismic
data libraries purchased by the Company are fully amortized within ten years
from date of purchase. On a periodic basis, the carrying value of seismic data
is compared to its estimated future revenue and, if appropriate, is reduced to
its estimated net realizable value.
NOTE D-OIL AND GAS PROPERTIES
The Company accounts for its oil and gas exploration and production
activities using the full-cost method of accounting. Under this method, all
costs associated with acquisition, exploration and development of oil and gas
reserves are capitalized, including directly related overhead costs, and
interest costs related to its unevaluated properties and certain properties
under development which are not currently being amortized. For the three months
ended March 31, 1997 and 1996, exploration and development related overhead
costs of $322,000 and $236,000, respectively, have been capitalized to oil and
gas properties. For the three months ended March 31, 1997 and 1996, interest
costs of $479,000 and $268,000, respectively, have been capitalized to oil and
gas properties.
NOTE E-SUPPLEMENTAL CASH FLOW INFORMATION
Significant non-cash investing and financing activities are as follows:
1. During the first quarter of 1997, capital lease obligations totaling
$300,000 were incurred when the Company entered into leases for
property and equipment.
2. During the first three months of 1996, the Company issued 214,304
shares of its common stock upon the conversion and exchange of
$1,989,000 of its 9% convertible subordinated debentures. In
connection with these conversions and exchanges, unamortized bond
issue costs totaling $109,000 during the first three months of 1996
have been charged to additional paid-in capital.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
----------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total revenue increased 34% during the first quarter of 1997 as compared to
the first quarter of 1996. Revenue primarily consists of revenue generated from
the seismic business and oil and gas production.
Seismic revenue increased from $17,881,000 during the first quarter of 1996
to $19,282,000 during the first quarter of 1997. The increase is primarily
attributable to an increase in demand for three-dimensional seismic data
resulting in an increase in proprietary data acquisition performed for
non-affiliated parties by the Company's crew subsidiary and licensing of data
from the Company's data library.
Oil and gas revenue increased from $2,385,000 during the first quarter of
1996 to $7,937,000 during the first quarter of 1997. The increase in oil and gas
revenue is primarily due to higher production resulting from more wells being on
line in the first quarter of 1997 (99 wells at March 31, 1997) as compared to
the first quarter of 1996 (79 wells at March 31, 1996). Net production of oil
and gas increased from 67,000 barrels and 600 million cubic feet (mmcf) for the
first quarter of 1996 to 116,500 barrels and 1,949 mmcf for the first quarter of
1997. Average oil prices received by the Company decreased from $17.36 to $15.45
per barrel for the first quarter of 1996 and 1997, respectively. Average gas
prices received by the Company increased from $1.88 to $3.09 per mcf for the
first quarter of 1996 and 1997, respectively.
Depreciation, depletion and amortization consists primarily of data bank
amortization. Refer to Note C for a description of the Company's amortization
policy. Data bank amortization decreased from $6,990,000 during the first
quarter of 1996 to $5,898,000 during the first quarter of 1997. As a percentage
of revenue from licensing seismic data, data bank amortization was 43% and 49%
for the first quarter of 1997 and 1996, respectively. These decreases are
primarily due to the mix of sales of 2D and 3D data amortized at varying
percentages based on each data program's current and expected future revenue
stream. The remaining depreciation, depletion and amortization of $4,210,000
relates to depletion of oil and gas property costs and depreciation of fixed
assets. The increase from $1,056,000 during the first quarter of 1996 to
$4,210,000 during the first quarter of 1997 is due to increased oil and gas
production and additional property and equipment.
<PAGE>
Cost of sales consists of expenses associated with the acquisition of
seismic data for non-affiliated parties, seismic resale support services and oil
and gas production. The increase in cost of sales from $3,270,000 for the first
quarter of 1996 to $5,042,000 for the first quarter of 1997 is primarily due to
an increase in the corresponding revenue from these areas. Revenue from these
areas increased from $5,784,000 during the first quarter of 1996 to $12,686,000
during the first quarter of 1997.
The Company's selling, general and administrative expenses increased
from $3,503,000 during the first quarter of 1996 to $4,718,000 during the first
quarter of 1997 primarily as a result of variable expenses related to the
increased volume of business. As a percentage of total revenue, these expenses
were 17% for both the first quarter of 1996 and 1997.
Net interest expense increased from $584,000 in the first quarter of
1996 to $1,039,000 in the first quarter of 1997 primarily due to additional
amounts outstanding on the Company's senior Notes in 1997 as compared to 1996.
During the first quarter of 1996, $52.5 million was outstanding, whereas, during
the first quarter of 1997, $75 million was outstanding.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On December 28, 1995, the Company completed a private placement of
three series of unsecured Senior Notes totaling $75 million. The Company
contemporaneously issued its Series A Notes and Series B Notes, which total
$52.5 million and bear interest at a fixed rate of 7.17%. On April 9, 1996, the
Company issued its Series C Notes, which total $22.5 million and bear interest
at a fixed rate of 7.48%. The Series A Notes mature on December 30, 2001, and
require annual principal payments of $8.333 million beginning December 30, 1999.
The Series B and Series C Notes mature on December 30, 2002, and require
combined annual principal payments of $10 million beginning December 30, 1998.
Interest on all series of the notes is payable semi-annually on June 30 and
December 30.
<PAGE>
The Company filed a registration statement on Form S-3 (the "Shelf
Registration Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated, (ii)
preferred stock, par value $0.01 per share, and (iii) common stock, par value
$.01 per share, or any combination of the foregoing, at an aggregate initial
offering price not to exceed $75,000,000. The Shelf Registration Statement was
declared effective by the Securities and Exchange Commission on June 30, 1994.
In August 1994, the Company completed a public offering of 1,061,200 shares of
its common stock priced at $32 per share pursuant to the Shelf Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering expenses) totaled $31,917,000. After this sale of common stock at an
initial aggregate offering price of $33,958,400, the Company may offer
additional securities in the future for up to an aggregate initial offering
price of $41,041,600 pursuant to the Shelf Registration Statement.
On May 1, 1997, the Company increased its $25,000,000 unsecured
revolving line of credit facility to $50,000,000. The facility bears interest at
a rate determined by the ratio of the Company's debt to cash flow from
operations. Pursuant to the interest rate pricing structure, funds can currently
be borrowed at LIBOR plus 3/4%, the bank's prevailing prime rate, or the sum of
the Federal Funds effective rate for such day plus 1/2%. The facility matures on
July 22, 1999. As of May 14, 1997, the balance outstanding on the revolving line
of credit amounted to $10,000,000 bearing an interest rate of 6.44%.
On February 6, 1997, a wholly-owned subsidiary of the Company obtained
two term loans aggregating $7,564,000 for the purchase of a third 3D seismic
recording system and other related equipment. The first loan has a principal
amount of $558,000, is for a term of three years and bears interest at the rate
of 7.73%. Monthly principal and interest payments total $17,000. The balance
outstanding on this loan at May 14, 1997 is $558,000. The second loan has a
principal amount of $7,006,000, is for a term of five years and bears interest
at the rate of 7.98%. Monthly principal and interest payments on the second term
loan total $142,000. The balance outstanding on this loan at May 14, 1997 is
$7,006,000.
On July 9, 1996, a wholly-owned subsidiary of the Company obtained two
term loans aggregating $7,264,000 for the purchase of land and marine seismic
equipment which secures the debt. The first term loan has a principal amount of
$5,902,000, is for a term of five years and bears interest at the rate of 8%.
Monthly principal and interest payments total $120,000. The balance outstanding
on this loan at May 14, 1997 was $5,160,000. The second term loan has a
principal amount of $1,362,000, is for a term of three years and bears interest
at the rate of 8.06%. Monthly principal and interest payments on the second term
loan total $43,000. The balance outstanding on this loan at May 14, 1997 was
$1,087,000. The majority of this equipment is under a five year rental agreement
expiring June 30, 2001, whereby the Company receives $138,000 per month.
From 1993 to April 1997, the Company and three of its wholly-owned
subsidiaries obtained six separate term loans totaling $5,829,000, five of which
have a three year term and one which has a five year term. Two of the loans bear
interest at the rate of 8.413%, two at the rate of 7.9%, one at the rate of
7.61% and one at the rate of 7.52%. The proceeds were used for the purchase of
certain property and equipment which secures the debt. Monthly principal and
interest payments total approximately $134,000. The balance outstanding on the
loans at May 14, 1997, was $2,133,000.
<PAGE>
In June 1996, a wholly-owned subsidiary of the Company sold a
volumetric production payment for $19 million to certain limited partnerships.
Under the terms of the production payment agreements, the Company conveyed a
mineral property interest of approximately 7.6 billion cubic feet of certain
natural gas and approximately 363,000 barrels of other hydrocarbons to the
purchasers. The Company retains responsibility for its working interest share of
the cost of operations. The proceeds of the sale were applied toward the
acquisition cost of certain oil and gas properties. The Company accounted for
the proceeds received in the transaction as deferred revenue which will be
amortized into revenue and income as natural gas and other hydrocarbons are
produced and delivered during the term of the volumetric production payment
agreements.
During 1994, 1995 and 1997, the Company entered into three capital
leases which relate to the purchase of a 3D seismic recording system and a
seismic data processing center. These lease agreements are for terms of three to
five years. Monthly principal and interest payments total approximately
$127,000. The balance outstanding under these capital lease obligations was
$2,262,000 at May 14, 1997.
During the first quarter of 1997, the Company received $255,000 from
the exercise of common stock purchase warrants and options and the Company's
401(k) stock purchases. From April 1, 1997, through May 14, 1997, the Company
received $57,000 from the exercise of common stock options and the Company's
401(k) stock purchases.
In February 1996, the Company called for the March 31, 1996 redemption
of its 9% convertible subordinated debentures, thereby eliminating future
interest and sinking fund payments. All remaining outstanding debentures
converted to common stock.
During the first quarter of 1997, gross seismic data bank additions and
capitalized oil and gas exploration and development costs amounted to
$12,130,000 and $8,050,000, respectively. These capital expenditures, as well as
taxes, interest expenses, cost of sales and general and administrative expenses,
were funded by operations, borrowings under the Company's unsecured revolving
line of credit and proceeds received from the exercise of common stock purchase
warrants and options. Acquisitions of geophysical equipment and other property
and equipment were funded partially by cash from operations and the remainder
through capital lease financing and term loans.
Currently, the Company anticipates capital expenditures for 1997 to
total approximately $80 million. Such expenditures include approximately $50
million for the creation of proprietary seismic data, and approximately $30
million for oil and gas exploration and development efforts. The Company
believes its current cash balances, revenues from operating sources and proceeds
from the exercise of common stock purchase warrants and options, combined with
its available revolving line of credit, should be sufficient to fund the 1997
capital expenditures, along with expenditures for operating and general and
administrative expenses. Additionally, the Company could arrange for additional
debt or equity financing during 1997; however, there can be no assurance that
the Company would be able to accomplish any such debt or equity financing on
terms satisfactory to it.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
- ------------------------------------------------
This Quarterly Report on Form 10-Q 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. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, changes in the exploration budgets of the Company's
seismic data and related services customers, actual customer demand for the
Company's seismic data and related services, the extent of the Company's success
in acquiring oil and gas properties and in discovering, developing and producing
reserves, the timing and extent of changes in commodity prices for natural gas,
crude oil and condensate and natural gas liquids and conditions in the capital
markets and equity markets during the periods covered by the forward looking
statements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 25, 1995, Seitel Geophysical, Inc. ("SGI"), a wholly-owned
subsidiary of the Company, filed suit in United States District Court for the
Eastern District of Louisiana against Greenhill Petroleum Corporation
("Greenhill") for breach of contract. This lawsuit was tried in late May, 1996,
and judgment was entered on June 10, 1996 in favor of SGI for damages of
approximately $940,000, including legal fees, expenses, and pre-judgment
interest. The trial court denied Greenhill's counter-claims against SGI. On May
5, 1997, the United States Court of Appeals for the Fifth Circuit upheld the
trial court's judgment and modified it to include additional pre-judgment
interest. The Court of Appeals remanded the case to the trial court to determine
the amount of such additional pre-judgment interest. Post-judgment interest of
5.62%, which is based on the rate of one year Treasury Bills immediately prior
to entry of the judgment, is accruing on the full amount of the judgment.
ITEMS 2., 3., 4., AND 5. Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Second Amendment to Revolving Credit Agreement dated as of
July 22, 1996, among Seitel, Inc. and The First National
Bank of Chicago.
10.2 Ratable Note in the amount of $20,000,000 among Seitel, Inc.
and Bank One, Texas, N.A. dated as of May 1, 1997.
10.3 Ratable Note in the amount of $30,000,000 among Seitel, Inc.
and The First National Bank of Chicago dated as of May 1,
1997.
(b) Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEITEL, INC.
Dated: May 14, 1997 /s/ Paul A. Frame
---------------------------------
Paul A. Frame
President
Dated: May 14, 1997 /s/ Debra D. Valice
--------------------------------
Debra D. Valice
Chief Financial Officer
Dated: May 14, 1997 /s/ Marcia H. Kendrick
--------------------------------
Marcia H. Kendrick
Chief Accounting Officer
EXHIBIT 10.1
<PAGE>
SECOND AMENDMENT TO
SEITEL, INC. REVOLVING CREDIT AGREEMENT
This Second Amendment to Seitel, Inc. Revolving Credit Agreement dated as
of May 1, 1997 (this "Second Amendment") is among Seitel, Inc., a Delaware
corporation (the "Borrower"), the lenders set forth on the signature pages
hereto (the "Lenders") and The First National Bank of Chicago, individually and
as agent for the Lenders (in such capacity, the "Agent").
FOR VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Unless amended pursuant hereto or unless the context
otherwise requires, all terms used herein which are defined in the Revolving
Credit Agreement dated as of July 22, 1996, as amended (the "Credit Agreement")
among the Borrower, the Agent and the Lenders shall have the meanings assigned
to them in the Credit Agreement.
2. AMENDMENTS. Upon the satisfaction of the conditions precedent set forth
in Section 4 of this Second Amendment and effective as of the date first set
forth above (the "Effective Date"), the Credit Agreement shall be amended as
follows:
(a) The Commitment of The First National Bank of Chicago is hereby
increased to $30,000,000.
(b) The Commitment of Bank One, Texas, N.A. is hereby increased to
$20,000,000.
(c) Exhibit "B" to the Credit Agreement is hereby amended by deleting
the amount "$25,000,000" on the first page thereof and replacing it with
the amount "$50.000.000".
(d) Schedule 6 to the Credit Agreement is hereby amended to read in
its entirety asset forth in Schedule 6 attached hereto.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms, reaffirms
and restates as of the date hereof the representations and warranties set forth
in Article V of the Credit Agreement, PROVIDED that, with respect to the
representations and warranties set forth in Section 5.15, the references to
"July 15, 1996" therein shall be deemed to read "May 1, 1997."
4. CONDITIONS PRECEDENT. This Second Amendment and the amendments to the
Credit Agreement provided for in Section 2 hereof shall become effective as of
the Effective Date when all of the following conditions precedent shall have
been satisfied:
(a) The Agent shall have received counterparts of this Second
Amendment duly executed and delivered by the Borrower and by all of the
Lenders and consented to by all of the Subsidiary Guarantors.
<PAGE>
(b) The Agent shall have received from the Borrower new Ratable Notes
payable to the order of each Lender in the amount of such Lender's
Commitment as revised hereby and new Competitive Bid Notes payable to the
order of each Lender substantially in the form of Exhibit "B" as amended
hereby, each duly executed and delivered by the Borrower.
(c) The Agent shall have received from the Borrower a certificate of a
Senior Financial Officer attaching and certifying resolutions adopted by
the Board of Directors of the Borrower on or prior to the Effective Date
authorizing the Borrower to borrow money pursuant to the Credit Agreement
from time to time in an aggregate principal amount at any one time
outstanding not in excess of $50,000,000, and certifying that such
resolutions remain in full force and effect and have not been modified or
rescinded or attaching and certifying, if applicable, any amendments to
such resolutions.
(d) On the Effective Date and after giving effect to the terms of this
Second Amendment, no Default or Unmatured Default shall have occurred and
be continuing.
5. EFFECT ON THE CREDIT AGREEMENT. Except to the extent of the amendments
expressly provided for herein, all of the representations, warranties, terms,
covenants and conditions of the Loan Documents (a) shall remain unaltered, (b)
shall continue to be, and shall remain, in full force and effect in accordance
with their respective terms, and (c) are hereby ratified and confirmed in all
respects. Upon the effectiveness of this Second Amendment, all references in the
Credit Agreement (including references in the Credit Agreement as amended by
this Second Amendment) to "this Agreement" (and all indirect references such as
"hereby", "herein", "hereof" and "hereunder") shall be deemed to be references
to the Credit Agreement as amended by this Second Amendment.
6. ENTIRE AGREEMENT. This Second Amendment, the Credit Agreement as amended
by this Second Amendment and the other Loan Documents embody the entire
agreement and understanding among the parties hereto and supersede any and all
prior agreements and understandings between the parties hereto relating to the
subject matter hereof.
7. APPLICABLE LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
8. HEADINGS. The headings, captions and recitals used in this Second
Amendment are for convenience only and shall not affect the interpretation of
this Second Amendment.
9. COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Page 2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed as of the date first above written.
SEITEL, INC.
By: /s/ Debra D. Valice
---------------------------------
Title: Senior Vice President
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
INDIVIDUALLY AND AS AGENT
By: /s/ Leo Loughead
---------------------------------
Title: Corporate Banking Officer
---------------------------------
BANK ONE, TEXAS, N.A.
By: /s/ Linda Masera
---------------------------------
Title: Vice President
---------------------------------
Page 3
<PAGE>
ACKNOWLEDGMENT AND CONSENT BY SUBSIDIARY GUARANTORS
Each of the undersigned Subsidiary Guarantors (i) acknowledges its
receipt of a copy of and hereby consents to all of the terms and conditions of
the foregoing Second Amendment and (ii) reaffirms its obligations under the
Subsidiary Guaranty dated as of July 22, 1996 in favor of The First National
Bank of Chicago, as agent.
SEITEL DATA CORP.
By: /s/ Barbara J. Steen
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL DELAWARE, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL MANAGEMENT, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: President
---------------------------------------
SEITEL GEOPHYSICAL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
DDD ENERGY, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
Page 4
<PAGE>
SEITEL GAS & ENERGY CORP.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL POWER CORP.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL NATURAL GAS, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
MATRIX GEOPHYSICAL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
EXSOL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
DATATEL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
Page 5
<PAGE>
SEITEL OFFSHORE CORP.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
GEO-BANK, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
ALTERNATIVE COMMUNICATIONS
ENTERPRISES, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL INTERNATIONAL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
AFRICAN GEOPHYSICAL, INC.
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
SEITEL DATA LTD.
BY: SEITEL DELAWARE, INC. ITS GENERAL PARTNER
By: /s/ Debra D. Valice
---------------------------------------
Title: Vice President
---------------------------------------
Page 6
<PAGE>
SCHEDULE 6
INDEBTEDNESS AND LIENS
1. Note Purchase Agreement dated December 28, 1995, between Seitel, Inc. and
the Series A, Series B and Series C Noteholders relating to Senior Notes in
the original principal balance of USD 75,000,000.00. As of May 1, 1997, the
outstanding balance of this debt was USD 75,000,000.00.
2. Master Equipment Lease Agreement dated March 4, 1994, and related schedules
between Seitel, Inc. and NationsBanc Leasing Corporation relating to the
lease by Seitel, Inc. of certain geophysical computer processing equipment
and related furniture fixtures in the original amount of USD 324,350.00. As
of May 1, 1997, the outstanding balance under this lease was approximately
USD 134,000.00.
3. Promissory Note dated July 7, 1995, between DDD Inc. and CoreStates Bank,
N.A. relating to a term the original principal amount of USD 329,701.36
primarily by certain computer equipment and agreements. As of May 1, 1997,
the outstanding of this debt was approximately USD 137,000.00.
4. Promissory Note dated November 29, 1995, between Seitel, Inc. and
CoreStates Bank, N.A. relating to a term the original principal amount of
USD 386,663.62 primarily by a Marathon Coach Bus, and agreements. As of May
1, 1997, the outstanding of this debt was approximately USD 204,000.00.
5. Loan and Security Agreement dated as of April 15, 1997 among DDD Energy,
Inc., Seitel Management, Inc. and NationsBanc Leasing Corporation of North
Carolina and related Secured Term Note A and Secured Term Note B, relating
to term loans in the aggregate principal amount of USD 350,553.16 secured
by certain computer and telephone equipment. As of May 1, 1997 the
outstanding balance of this debt was USD 350,533.16.
EXHIBIT 10.2
<PAGE>
RATABLE NOTE
$20,000,000 May 1, 1997
Seitel, Inc., a Delaware corporation (the "Borrower'), promises to pay to
the order of BANK ONE, TEXAS, N.A. (the "Lender") the lesser of the principal
sum of Twenty Million and 00/100 Dollars or the aggregate unpaid principal
amount of all Ratable Loans made by the Lender to the Borrower pursuant to
Section 2.4 of the Agreement (as hereinafter defined), in immediately available
funds at the main office of The First National Bank of Chicago in Chicago,
Illinois, as Agent, together with interest on the unpaid principal amount hereof
at the rates and on the dates set forth in the Agreement. The Borrower shall pay
the principal of and accrued and unpaid interest on the Ratable Loans in full on
the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Ratable Loan and the date and amount of each
principal payment hereunder, PROVIDED that the failure by the Lender to so
record or any mistake in so recording shall not affect the obligations of the
Borrower hereunder.
This Ratable Note is one of the Notes issued pursuant to, and is subject to
the terms of and entitled to the benefits of, the Revolving Credit Agreement
dated as of July 22, 1996 (which, as it may be amended or modified and in effect
from time to time, is herein called the "Agreement"), among the Borrower, the
lenders party thereto, including the Lender, and The First National Bank of
Chicago, as Agent, to which Agreement reference is hereby made for a statement
of the terms and conditions governing this Ratable Note, including the terms and
conditions under which this Ratable Note may be prepaid or its maturity date
accelerated. This Ratable Note is guaranteed pursuant to the Subsidiary
Guaranty, all as more specifically described in the Agreement, and reference is
made thereto for a statement of the terms and provisions thereof. Capitalized
terms used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
THIS RATABLE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
SEITEL, INC.
By: /s/ Debra D. Valice
---------------------------------
Print Name: Debra D. Valice
---------------------------------
Title: Vice President
---------------------------------
EXHIBIT 10.3
<PAGE>
RATABLE NOTE
$30,000,000 May 1, 1997
Seitel, Inc., a Delaware corporation (the "Borrower"), promises to pay to
the order of THE FIRST NATIONAL BANK OF CHICAGO (the "Lender") the lesser of the
principal sum of Thirty Million and 00/100 Dollars or the aggregate unpaid
principal amount of all Ratable Loans made by the Lender to the Borrower
pursuant to Section 2.4 of the Agreement (as hereinafter defined), in
immediately available funds at the main office of The First National Bank of
Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Ratable Loans in full on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Ratable Loan and the date and amount of each
principal payment hereunder, PROVIDED that the failure by the Lender to so
record or any mistake in so recording shall not affect the obligations of the
Borrower hereunder.
This Ratable Note is one of the Notes issued pursuant to, and is subject to
the terms of and entitled to the benefits of, the Revolving Credit Agreement
dated as of July 22, 1996 (which, as it may be amended or modified and in effect
from time to time, is herein called the "Agreement"), among the Borrower, the
lenders party thereto, including the Lender, and The First National Bank of
Chicago, as Agent, to which Agreement reference is hereby made for a statement
of the terms and conditions governing this Ratable Note, including the terms and
conditions under which this Ratable Note may be prepaid or its maturity date
accelerated. This Ratable Note is guaranteed pursuant to the Subsidiary
Guaranty, all as more specifically described in the Agreement, and reference is
made thereto for a statement of the terms and provisions thereof. Capitalized
terms used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
THIS RATABLE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
SEITEL, INC.
By: /s/ Debra D. Valice
---------------------------------
Print Name: Debra D. Valice
---------------------------------
Title: Vice President
---------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,824
<SECURITIES> 0
<RECEIVABLES> 50,982
<ALLOWANCES> 336
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 137,615<F2>
<DEPRECIATION> 25,366
<TOTAL-ASSETS> 311,084
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 98,311
0
0
<COMMON> 104
<OTHER-SE> 159,836
<TOTAL-LIABILITY-AND-EQUITY> 311,084
<SALES> 27,219
<TOTAL-REVENUES> 27,219
<CGS> 5,042
<TOTAL-COSTS> 5,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,039
<INCOME-PRETAX> 6,312
<INCOME-TAX> 2,228
<INCOME-CONTINUING> 4,084
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,084
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
<FN>
<F1> The Company does not present a classified balance sheet; therefore, current
assets and current liabilities are not reflected in the Company's financial
statement.
<F2> PP&E does not include seismic data bank assets with a cost of $296,977,000
and related accumulated amortization of $163,712,000.
</FN>
</TABLE>
