Earnings Transcript for DWSN - Q4 Fiscal Year 2020

Operator: Please standby.

Stephen Jumper: Okay.

Operator: 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.

Stephen Jumper: 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 a 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: 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 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: 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: Thank you. And we’ll first hear from John Potratz of Researched Investments.

John Potratz: 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 and versus drilling for oil and gas. Just there is a different seismic data and therefore more business for you?

Stephen Jumper: Jay , appreciated your interest and your question as always. We have been involved over the years in several isolated what you would consider are called Co2 sequestration projects. The ones that we have been involved with today, as I understand it have involved 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 quarter, 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, do geologic images and we look for places at our 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.

John Potratz: 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: Correct. Correct.

John Potratz: Okay. Okay.

Stephen Jumper: We -- yes. Correct.

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

Stephen Jumper: 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 or in front of them.

John Potratz: Okay. But it’s work. Okay. I know it’s like a big question as Biden cancel of leases on federal land, did a lot of your customers locked 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: Yeah. 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, are located in the Western U.S., New Mexico, Utah, Wyoming, Colorado, places like that. I’m confident that that many of our customers have their leases in position and they -- I am 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’re -- you still have to go through a permit process with the several federal authorities, 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 lands. 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 -- we’re unclear.

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

Stephen Jumper: Yes.

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

Stephen Jumper: 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 permanents 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: Okay. That 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 is still there.

Stephen Jumper: Correct.

John Potratz: Sounds great. There have been several recent 13D filings. It’s amazing. What it’s -- like it’s so people come attracted to you lately?

Stephen Jumper: 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 filing.

John Potratz: Okay.

Stephen Jumper: Yeah.

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

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

Stephen Jumper: Okay. 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 trusted support in through these difficult times. We are, as we’ve said in our press release and on this call, it continued to be a very challenging time, probably the most challenging I’ve been through. We are encouraged -- we are encouraged with the recent uptick in oil prices to $65. We will see how the improvement of oil prices flow through, the capital budget plans and spending plans of our E&P customers. We are seeing some uptake in drilling and completions, which certainly are encouraging. We really had about a year long stand still more or less on drilling and completions. So there’s some ketchup 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 cutbacks 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. 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.

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