Seitel (SELA) Announces Expiration of Consent Solicitation

Recently, Seitel (SELA.ob), announced that:

"Certain proposed amendments to the indenture governing the Notes (the "Indenture") has expired without receiving the requisite number of consents."

As explained in a previous post, these  proposed amendments would have increased the Company´s  capital expenditures in 2006 and beyond, reducing the amount of free cash-flow that could be returned to shareholders. The refusal of bondholders to agree to a new cap-ex budget is bullish for Seitel (SELA.ob) equity holders.

Regarding, the expiration, Rob Monson, Seitel's Chief Executive Officer, said:

"We thought the proposal presented an opportunity for both our noteholders and our stockholders. While we are disappointed that the solicitation was not successful, the Company does not expect the outcome of the consent solicitation to materially affect its business plan."

Translation: "We were excited to waste cash on new capital expenditures programs, despite the fact that since we are in a upturn in the seismic industry, it is probably more prudent to use our excess cash to pay down debt. Since, our proposal to waste cash was rejected, we look forward to finding other ways to squeeze cash out of Seitel, and we hope shareholders and noteholders don´t bother us much."

Bottom-line: I am still quite bullish on Seitel (SELA.ob) for 2006. The company´s free cash-flow will show huge growth in the coming year and the company should show positive net earnings as opposed to losses. As is obvious, I´m not too confident in management´s ability to invest this new cash wisely and prudently, but since they have such a small stake in the company, I doubt they will have much say on where the cash is invested. I hope that large shareholders and noteholders will continue to demand that cash be used to repay debt and/or buy back shares. It seems clear from this latest piece of news, that noteholders at least are not going to allow management to waste excess cash. That is good news for shareholders.