Earnings Call Transcript - DWSN Q4 2020

Operator, Operator

Please standby.

Stephen Jumper, Chairman, President and CEO

Okay. 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 reported 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 at 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 of 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.

Jim Brata, Executive Vice President and Chief Financial Officer

Thank you, Steve, and 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 the earnings release issued this morning, during the fourth quarter of 2020, the company operated one data acquisition crew with periods of low utilization in the U.S. The one 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 one crew in the U.S. through the first quarter, with likely sustained periods of downtime and one 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.

Stephen Jumper, Chairman, President and CEO

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 three large channel count crews in the U.S. and up to three crews in the Canadian market during the first quarter of 2020.

Operator, Operator

Thank you. And we’ll first hear from John Potratz of Researched Investments.

John Potratz, Analyst

Good morning, Stephen. And you did very well for the quarter given how everything is going. Just wondering on business prospects, in the Wall Street Journal they talked about Exxon going into using CO2 storage in the ground. Does this raise the prospects for seismic activity given that they are putting CO2 back in the ground as opposed to drilling for oil and gas? Just there is a different seismic data and therefore more business for you?

Stephen Jumper, Chairman, President and CEO

Jay, thank you for your interest and question. Over the years, we have participated in several isolated CO2 sequestration projects. Currently, these projects have included commercial, academic, and some government-funded components focused on CO2. One example is a small 3D survey we conducted, which was primarily academic, probably in late Q3 or early Q4 of 2020. The goal was to visualize the subsurface and identify a secure location for CO2 injection to ensure it can be retained underground. While the science remains the same, this application differs from our usual work. Typically, we create geological images to find areas within our models that favor hydrocarbon accumulation. In this case, we’re using our imaging to locate a secure reservoir for CO2 injection.

John Potratz, Analyst

But still it’s new business respectively for someone like Exxon to give you more business, which you have the crews available to do the work?

Stephen Jumper, Chairman, President and CEO

Correct. Correct.

John Potratz, Analyst

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

Stephen Jumper, Chairman, President and CEO

It is. And 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 or in front of them.

John Potratz, Analyst

Okay. But it’s work. Okay. I know it's like a big question as Biden canceled leases on federal land. Did a lot of your customers lock in drilling, having the ability to do more scientific work that they locked it in before Biden closed down, so that they have the ability to hire you later that they have the ability to get the geophysical areas?

Stephen Jumper, Chairman, President and CEO

We are a bit uncertain about how the process works at this time. I believe that when it comes to federal lands, which are primarily found in the Western U.S. such as New Mexico, Utah, Wyoming, and Colorado, many of our customers have their leases secured and are likely holding drilling permits for several years. While delays may impact new entries and permits, I do not think it will completely halt such activities. However, for seismic projects ahead of drilling, there is still a permitting process that needs to be navigated with federal authorities like the Bureau of Land Management and Fish and Wildlife. Currently, we do not have any projects on federal lands in the pipeline, and we do not expect it to pose a major issue beyond the usual time it takes to ensure compliance and obtain the necessary approvals and studies. We are, however, unclear about how this will impact actual seismic permits at this stage.

John Potratz, Analyst

Like we still have the land that they could essentially do drilling and now you will didn’t get the permits.

Stephen Jumper, Chairman, President and CEO

Yes.

John Potratz, Analyst

At least they do have the basic permits in place to be able to do that?

Stephen Jumper, Chairman, President and CEO

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 there will be continued activity. As I said, how it affects an upfront. I don’t think it will stop it. How it affects an upfront seismic project is yet to be determined. We’ve worked on federal lands 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, but we’re just unclear as to what effect that’s going to have in the near-term.

John Potratz, Analyst

Okay. At least it will affect. It’s not a big constraint for future seismic work in the West, because people have anticipated it and relationships are still there.

Stephen Jumper, Chairman, President and CEO

Correct.

John Potratz, Analyst

Sounds great. There have been several recent 13D filings. It's impressive. What is attracting people to you lately?

Stephen Jumper, Chairman, President and CEO

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

John Potratz, Analyst

Okay.

Stephen Jumper, Chairman, President and CEO

Yeah.

John Potratz, Analyst

Very good. Thank you very much. Next question from someone else. Thank you.

Operator, Operator

And it appears there are no further questions at this time.

Stephen Jumper, Chairman, President and CEO

Thank you, April. I appreciate everyone for tuning in. I want to express my gratitude to our employees for their hard work on behalf of our clients and shareholders. I also want to thank our clients for the opportunities they offer, and a special thanks to our shareholders for their continued support during these tough times. As mentioned in our press release and during this call, we are navigating a challenging phase, perhaps the most difficult I have experienced. However, we are encouraged by the recent increase in oil prices to $65. It will be interesting to see how this affects the capital and spending plans of our E&P customers. We are noticing some activity in drilling and completions, which is promising. We experienced about a year of stagnation in these areas, so there is some catch-up work to be done in 2021 for our E&P clients. We remain optimistic about the future of our company and the industry. Our balance sheet is strong. While we have implemented significant cost-saving measures, we are ready to respond quickly, and our equipment is well-maintained for when the market improves. With that, I will conclude this call. Thank you for your time and interest, and we look forward to speaking with you in about 60 days. Thank you.

Operator, Operator

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