DWSN

Dawson Geophysical Company (DWSN)

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Dawson Geophysical Company (DWSN)

F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

May 5, 2010 10:00 am ET

Executives

Steve Jumper – President and CEO

Christina Hagan – EVP and CFO

Analysts

Marshall Adkins – Raymond James

Neal Dingmann – Wunderlich Securities

Veny Aleksandrov – Pritchard Capital Partners

Pierre Conner – Capital One Southcoast

Presentation

Operator

Good morning. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dawson Geophysical Company’s second quarter earnings and update conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions). Thank you.

Mr. Steve Jumper, you may begin our conference.

Steve Jumper

Thank you, Tamika. Good morning and welcome to Dawson Geophysical Company's second quarter 2010 earnings and operations conference call. As Tamika said, my name is Steve Jumper, President and Chief Executive Officer of the company. Joining me on the call are Christina Hagan, Executive Vice President and Chief Financial Officer; and Decker Dawson, Founder and Chairman of the company.

As in the past, today's call will be presented in three segments. Following opening remarks, Chris will discuss our financial results. Then I will then return for an operations update, then the call will be opened up for questions. The call is scheduled for half and hour and we will not provide any guidance.

At this point, I will turn control of the call over to Chris Hagan, our CFO, to discuss our financial results.

Christina Hagan

Thank you, Steve. First, let us go through our Safe Harbor provision. In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, Dawson Geophysical Company cautions that statements made today in this conference call, which are forward-looking and which provide other than historical information involve risks and uncertainties that may materially affect the company's actual results of operations.

These risks include but are not limited to the volatility of oil and natural gas prices, disruptions in the global economy, dependence upon energy industry spending, cancellations of service contracts, high fixed costs of operations, weather interruptions, inability to obtain land access rights of way, industry competition, limited number of customers, credit risk related to our customers, the availability of capital resources and operational disruptions. A discussion of these and other factors, including risks and uncertainties, is set forth in the company's Form 10-K for the fiscal year ending September 30, 2009. Dawson Geophysical Company disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future events or otherwise.

During this conference call, Dawson will make reference to EBITDA, which is a non-GAAP financial measure. A reconciliation of this non-GAAP measure to the applicable GAAP measure can be found on Dawson's current earnings release, a copy of which is located on the Dawson’s web site www.dawson3d.com.

This morning, we reported revenues of $48,585,000 for the quarter ending March 31, 2010, our second quarter of fiscal 2010, compared to $64,625,000 for the same quarter in fiscal 2009, representing a decrease of 25%. Net loss for the second quarter of fiscal 2010 was $2,706,000, compared to net income of $6,170,000 in the same quarter of fiscal 2009. Loss per share for the second quarter of fiscal 2010 was $0.35, compared to income per share of $0.79 for the second quarter of fiscal 2009. EBITDA for the second quarter of fiscal 2010 was $2,488, 000, compared to $16,814,000 in the same quarter of fiscal 2009.

The revenue decrease in the quarter compared to the same quarter of fiscal 2009 was primarily the result of previously announced reductions in active crew count from 16 to 9 crews, which began in the second quarter of fiscal 2009 with four crews; and in the third quarter of fiscal 2009, two additional crews; and in the first quarter of fiscal 2010, one additional crew. Revenues in the quarter continued to include relatively high third-party charges related to the use of helicopter support services, specialized survey technologies and dynamite energy sources, and we are reimbursed for these expenses by our clients. Steve?

Steve Jumper

Well, thank you, Chris. Our second quarter of fiscal 2010 results showed significant improvement over our first quarter fiscal 2010 results.

EBITDA increased from a loss of $2,11,000 in the first quarter to a gain of $2,488,000 in the second quarter. During the second quarter, we redeployed two seismic data acquisition crews, and operated 11 crews for much of the quarter. Utilization rates were improved from what we experienced in recent quarters, particularly the first quarter of fiscal 2010, although difficult weather conditions, including heavy snowfalls across the country, which included record levels in Pennsylvania, along with wet and icy conditions across many areas of the country negatively impacted our utilization rates and our quarterly results.

The weather impact in the quarter reduced revenue levels due to increased downtime, and that the same time increased expenses on several crews by requiring us to employ additional personnel and equipment to complete projects in a timely manner. In addition, weather conditions forced us to temporarily discontinue a project, which in turn negatively impacted utilization rates for a short period of time.

We plan to return to this project in the early fall timeframe. The third party reimbursable charges for the quarter increased to very high levels as a percentage of revenue. The percentage increase is related to lower crew revenue, but more importantly reflect an increase in activity in areas such as the Marcellus, Haynesville, and Fayetteville shale basins, which require more preparatory work and lead time than many other regions of the country.

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