Dawson Geophysical Co (DWSN) 2020 Q4 法說會逐字稿

Statements made by management during this call with respect to forecasts, estimates or other expectations regarding future events or which provide any information other than historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control, that may cause the company's actual future results or performance to materially differ from any future results of performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the company from time to time in its filing with the SEC, including in the company's annual report on Form 10-K filed with the SEC on March 6, 2020, and any subsequent quarterly reports on Form 10-Q filed with the SEC.

Furthermore, as we start this call, please also refer to statements regarding forward-looking statements incorporated in the company's press release issued this morning. And please note that the contents of the company's conference call this morning is covered by those statements.

During this conference call, management will make references to EBITDA, which is a non-GAAP financial measure. A reconciliation of the non-GAAP measure to the applicable GAAP measure can be found in the company's current earnings release, a copy of which is located on the company's website, www.dawson3d.com. The call is scheduled for 30 minutes and the company will not provide any guidance. Today's call is being recorded.

And I would now like to turn the call over to Stephen Jumper, Chairman, President and CEO of Dawson Geophysical Company. Please go ahead, sir.

Well, thank you, April. Good morning, and welcome to Dawson Geophysical Company's Fourth Quarter 2020 Earnings and Operations Conference Call. As April said, my name is Steve Jumper, Chairman, President and CEO of the company. Joining me on the call is Jim Brata, Executive Vice President and Chief Financial Officer.

Before I start the call, just a few things to go over. If you would like to listen to a replay of today's call, it will be available via webcast by going to the Investor Relations section of the company's website at www.dawson3d.com. Information report on this call speaks only of today, Thursday, March 11, 2021. And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening.

Turning to our preliminary fourth quarter and 12 months ended December 31, 2020, financial results. For the fourth quarter ended December 31, 2020, the company reported revenues of $8.9 million, a decrease of approximately 74% compared to $33.6 million for the quarter ended December 31, 2019. For the fourth quarter of 2020, the company reported a net loss of $7.8 million or $0.33 loss per share common stock compared to a net loss of $5.8 million or $0.25 loss per share of common stock for the quarter ended December 31, 2019. The company reported negative EBITDA of $4.2 million for the quarter ended December 31, 2020, compared to negative EBITDA of $788,000 for the quarter ended December 31, 2019.

For the year ended December 31, 2020, the company reported revenues of $86.1 million, a decrease of approximately 41% compared to $145.8 million for the year ended December 31, 2019. For the full year of '19, the company narrowed its loss to $13.2 million or $0.56 loss per share of common stock compared to a net loss of $15.2 million or $0.60 loss per share of common stock for the year ended December 9 -- December 31, 2019, that should have been full year 2020. The company reported EBITDA of $3.7 million for the year ended December 31, 2020, a decrease of approximately 41% for the year ended December 31, 2020, compared to $6.3 million for the year ended December 31, 2019.

During the fourth quarter of 2020, the company operated 1 data acquisition crew with periods of low utilization in the United States. The 1 crew was inactive for the latter part of the third quarter and well into the fourth quarter. Based on currently available information, the company anticipates offering -- operating 1 crew in the U.S. through the first quarter of '21 with likely sustained periods of downtime, and 1 crew in Canada for the winter season, ending at the end of the first quarter of 2021.

While visibility remains limited beyond the first quarter, the company maintains the ability to deploy additional crews on short notice when market conditions improve. Reflected in both the fourth quarter and year-end results is a noncash impairment of approximately $1.6 million related to a note receivable and bad debt expense.

I will now turn control of the call over to Jim Brata, who will review the financial results, and I will return to some final remarks and our outlook in the first quarter of 2020. Jim?

Thank you, Steven. Good morning. Revenues for the fourth quarter of 2020 were $8.9 million, a decrease of approximately 74% compared to $33.6 million for the quarter ended December 31, 2019. As stated in our earnings release issued this morning, during the fourth quarter of 2020, the company operated 1 data acquisition crew with periods of low utilization in the U.S. The 1 crew was inactive for the latter part of the third quarter and well into the fourth quarter. Based on currently available information, the company anticipates operating 1 crew in the U.S. through the first quarter with likely sustained periods of downtime, and 1 crew in Canada for the winter season, ending at the end of the first quarter of 2021.

Cost of services in the fourth quarter of 2020 were $10.8 million, a decrease of 65%, compared to $30.8 million in the same quarter of 2019. General and administrative expenses were $2.7 million in the fourth quarter of 2020, a decrease of 28%, compared to $3.8 million in the fourth quarter of 2019. Depreciation and amortization expense in the fourth quarter of 2020 was $3.8 million, a decrease of 27%, compared to $5.2 million in the same quarter of 2019. Net loss for the fourth quarter of 2020 was $7.8 million or a $0.33 loss per common share compared to a net loss of $5.8 million or a $0.25 loss per common share in the fourth quarter of 2019. We recorded income tax expense of $9,000 in the fourth quarter of 2020 compared to an income tax benefit of $93,000 in the same quarter of 2019.

EBITDA in the fourth quarter of 2020 was negative $4.2 million compared to negative EBITDA of $788,000 in the same period of 2019. An EBITDA reconciliation was provided in our earnings release issued this morning.

And now I'll highlight some results from the year ended December 31, 2020. Revenues for the year ended December 31, 2020, were $86.1 million, a decrease of 41%, compared to $145.8 million in the year ended December 31, 2019. Cost of services for the year of 2020 were $69 million, a decrease of 44%, compared to $123 million for the year ended December 31, 2019.

General and administrative expenses were $13.9 million for the year ended December 31, 2020, a decrease of 19%, compared to $17.2 million for the year ended December 31, 2019. Depreciation and amortization expense for the year ended December 31, 2020, was $17.2 million, a decrease of 21%, compared to $21.8 million for the year ended December 31, 2019.

We narrowed our net loss for the year ended December 31, 2020, to $13.2 million or $0.56 loss per common share compared to a net loss of $15.2 million or $0.66 loss per common share for the year ended December 31, 2019. EBITDA for the year of 2020 was $3.7 million compared to EBITDA of $6.3 million for the year of 2019. The EBITDA reconciliation was provided in our earnings release issued this morning.

And now I'll highlight some balance sheet items. Our balance sheet continues to remain strong. As of December 31, 2020, we had debt, including obligations under financing leases, of approximately $138,000. We had cash and short-term investments of $46.5 million. Our current ratio was 7.9:1. And working capital was approximately $51.1 million.

And with that, I'll turn the call back to Steve for some comments on our operations.

Well, thank you, Jim. As stated in our earnings release issued this morning, fiscal 2020 was a year of unprecedented adversity. The company started out the first half of the year with its best financial and operational results in many years. We operated 3 large channel count crews in the U.S. and up to 3 crews in the Canadian market during the first quarter of 2020. The company continued profitability in the second quarter with the operation of 2 large channel count crews.

As reported in our second quarter earnings release, the company began to experience the dramatic impact of the COVID-19-related economic lockdown in late spring and early summer. As oil prices begin to trade at significantly low levels, exploration and production companies reduced their capital budgets and spending, which in turn, negatively impacted demand for our services. As a result, crew deployment lessened and utilization of our existing channels dropped. Utilization levels went from strong and promising in the first half of the year to weak for periods of time in the second half of the year.

Even though we have seen some gradual uptick in oil prices, current requests for proposals for our services in both the U.S. and Canada remain challenged. We are beginning to see signs of modest recovery in the oil service space as the oil and gas industry has experienced slight economic improvements in the number of active drilling rigs and hydraulic fracturing crews deployed in the U.S.

On a different note, the decrease in overall activity and financial difficulties led to an increase in M&A activity as some E&P companies have chosen to consolidate with others. At this time, we are unable to forecast the impact of this activity will have on the demand for our services as E&P companies reevaluate their capital spending projects.

However, this recent M&A activity indicates E&P companies will continue their focus on shareholder returns and disciplined capital spending as they seek to develop and produce oil and natural gas, with increased efficiency by prioritizing the most economic drilling locations. This need for increased efficiency promotes demand for seismic data access services and the services we provide. As in the most recent down cycle, we anticipate recovery in seismic data acquisition would somewhat lag behind increases in drilling and completion activities.

In response to these difficult conditions, we are maintaining our focus on cost-saving measures while balancing the ability to respond rapidly when market conditions improve. As reported in our previous press releases this year, we have taken steps to outsource several ancillary services. These steps, including permitting and surveying, has resulted in reduced salary costs and lower general and administrative expenses. Moreover, as previously reported in our second quarter 2020 earnings press release, the company anticipates approximately $4.3 million in annual cost savings as a result of these previously enacted cost-saving measures.

Capital expenditures for the fourth quarter were $25,000 and totaled $2.8 million for the 12 months ended December 31, 2020, primarily for maintenance capital items. The company's Board of Directors has approved an initial capital budget of $1 million for 2021.

Despite the setback stressed upon us by the worldwide COVID-19 pandemic, we are determined to press forward and deliver the highest quality services for our clients. Our state-of-the-art equipment inventory, our strong and unleveraged balance sheet and our dedicated workforce position us for healthy recovery when market conditions improve. As mentioned above, conditions are difficult and will remain so for the near term, pending continued improvement and stabilization in oil prices. But I'm confident in the future and that we are properly focused on upcoming opportunities.

I thank all of our hard working employees, our valued clients and our trusted shareholders as we work toward better times ahead. And with that, April, I believe we are ready to take questions.

(Operator Instructions) And we'll first hear from John Potratz of Researched Investment.

You did very well for the quarter given how everything are going. Just wondering on business prospects. The Wall Street Journal, they talked about Exxon going into using CO2 storage in the ground. Does this raise the prospects of seismic activity given that putting CO2 back in the ground and versus drilling for oil and gas? Is this a different seismic data and then for work, more business for you?

Jay, I appreciate your interest and your question as always. We have been involved over the years in several isolated, what you would consider or call, CO2 sequestration projects. The ones that we have been involved with today, as I understand it, have involved a commercial aspect, an academic aspect or component, as well as some government funding to look at the CO2 projects.

And so we've done -- we actually did one probably, I don't know if it was late third, early fourth quarter of '20, where we did a fairly small 3D survey that was academic-driven. The intent is to get an image of the subsurface and see if you can identify a secure location to inject CO2 back in the ground and hold. It's a different process than what we -- it's the same science, but it's a different application. What we typically do day-to-day is build geologic images. And we look places that are -- earth models that are conducive to the accumulation of hydrocarbons. And so this takes our imagery and looks to see if they can find a secure closed reservoir to inject CO2.

We have had some projects recently. Most of them small in nature that come across, that are a combination -- that are primarily commercial related. There are some companies out there over the years that specialize in this, and we've been exposed to some of the CO2 type work in the past.

And so the answer to the question is, yes, I think it is an opportunity that will present itself going forward. But the projects from a CO2 standpoint tend to be smaller in nature and a little more isolated than what you would get from the typical E&P exploration and production project.

But still, it's a new business prospectively for -- from someone like Exxon to give you more business, which you have the crews available to do work.

Correct. Correct. We -- yes, correct.

And right now, with the crews being down and not working, this is good work to have?

It is. And the -- we're certainly looking at several of those projects currently. And they typically have a little bit of lead time because there's quite a bit of geologic work that has to go in behind them or in front of them.

Okay. At least it's work. Okay. I noticed like -- my question is, Biden to cancel leases on federal land. Did a lot of your customers' locked-in drilling have the ability to do more seismic work? Did they lock it in before Biden closed the town so that they have the ability to hire you later, that they have the ability to get the geophysical areas?

Yes. That's something that, Jay, that we're a little uncertain on at this time as to how that process works. I'm confident that when we're dealing with federal lands, which typically occur, or are located in the Western U.S., the Mexico, Utah, Wyoming, Colorado, places like that, I am confident that many of our customers have their leases in position. And they -- I'm confident many of them are sitting on drilling permits for years to come. And so the delay is going to affect some new entry and new permits, but it's not going to, in my opinion, stop that activity completely.

However, when you go in to do a seismic project in advance of drilling, you still have to go through a permit process with the several federal authorities, the Bureau of Land Management, Fish and Wildlife and agencies like that. And so we don't currently have anything in the pipeline that is on federal land. We don't anticipate it to be a huge issue, other than what it's typically been in the past, where it's just taking time and making sure you're doing the right things and getting the necessary approvals and studies and those types of things done in advance. But how it's going to affect actual seismic permits at this point, we're unclear.

But at least, they have the land that they could essentially do drilling and get the permits. At least that they do have the basic permits in place to be able to do the work. And that's...

Yes, yes. And as I understand that executive order -- and I'm by no means, an expert on it. As I understand it, it just put a moratorium of 60 days on new leases and new drilling permits. And so as I understand it, most of the E&P companies that have access or have operations on federal lands will have permits well in advance of drilling. So I think from a drilling permit and leasing standpoint, I think that with continued activity -- as I said, how it affects an upfront, I don't think it will stop it. But how it affects an upfront seismic project is yet to be determined.

We've worked on federal lands for forever. We have a good relationship with the federal land folks. We know what needs to be done the right way. We know what surveys need to be done. And we take great care on federal lands as we do on private lands to make sure we're doing all the right things. So I'm confident that we're just unclear as to what effect that's going to have in the near term.

Okay. At least it does -- it looks like it's not a big constraint for future seismic work in the West because people have anticipated it and relationships are still there.

Correct.

Sounds great. There have been several recent 13G filings. That's amazing. What -- why did so much people become attracted to you lately?

Well, I think most of the 13G filings that you're seeing out there are many of our long-term shareholders that have held greater than 5% of our company for quite some time. And I'm think what you're seeing for the most part today are just updated routine filings.

(Operator Instructions) And it appears there are no further questions at this time.

Okay. Well, April, thank you. I want to take this opportunity to thank everybody for listening in. As I said earlier, I want to take this opportunity to thank our employees who are working very hard and diligently on behalf of our clients and our shareholders. I certainly want to thank our clients for the opportunities they provide, and really want to take this opportunity to thank our shareholders for their trust and support in -- through these difficult times.

We are -- as we've said in our press release and on this call, it continues to be a very challenging time, probably the most challenging I've been through. We are encouraged. We're encouraged with the recent uptick in oil prices, the $65. We will see how the improvement in oil prices flow through the capital budget plans and spending plans with our E&P customers. We are seeing some uptick in drilling and the completions, which certainly are encouraging.

We really had about a year long standstill more or less on drilling and completion. So there's some catch-up work to be done in '21 on behalf of our E&P customers. But we're optimistic about the future of our company and our industry. The -- our balance sheet remains strong. We have had significant cutback in cost-saving measures, but we maintain the ability to respond very quickly. And our equipment is in good shape and ready to respond when things turn around.

And with that, I'll close this call. Thank you again for your time and your interest. And we'll talk to you in about 60 days. Thank you.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.