MIDLAND, Texas, May 7,
2020 /PRNewswire/ -- Dawson Geophysical Company (NASDAQ: DWSN)
(the "Company") today reported unaudited financial results for its
first quarter ended March 31, 2020.
For the quarter ended March 31, 2020, the Company reported
revenues of $38,979,000 compared to
$51,164,000 for the quarter ended
March 31, 2019. For the first quarter of 2020, the Company
reported net income of $993,000, or
$0.04 per common share, compared to a
net loss of $137,000 or $0.01 loss per common share for the first quarter
of 2019. The Company reported EBITDA of $5,831,000 for the quarter ended March 31,
2020 compared to EBITDA of $5,960,000
for the quarter ended March 31, 2019.
During the first quarter of 2020, the Company operated three
large channel count crews in the United
States ("U.S."), primarily in the Permian Basin, and a peak
of three crews in Canada with
varying utilization rates of the active crews during the quarter
compared to a peak of five total crews, two of which were larger
channel count, in the U.S. and a peak of four crews in Canada in the first quarter of 2019. The
winter season in Canada concluded
at the end of the first quarter of 2020 with limited seismic
activities anticipated until the next winter season. Equipment
stationed in Canada will be
redeployed to the U.S. to service the Company's clients, as needed.
As in recent quarters, the majority of the Company's projects are
on behalf of multi-client companies in the U.S.
Capital expenditures for the first quarter of 2020 totaled
$2,344,000 primarily for maintenance
capital items and purchases of additional recording channels (as
opposed to leasing such channels on less favorable terms). The
Company's Board of Directors has approved an initial capital budget
of $5,000,000 for 2020. The Company's
balance sheet remains strong with $30,202,000 of cash, restricted cash and
short-term investments and $50,744,000 of working capital as of March 31, 2020. The Company had notes payable and
finance leases of $3,126,000 as of
March 31, 2020.
The Company received loan proceeds of approximately $6.4 million on April 15,
2020 under the Paycheck Protection Program (the "PPP")
established under the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") administered by the U.S. Small Business
Administration ("SBA"). Since the issuance of the loan to the
Company, additional guidance has been issued by the SBA and the
Treasury Department that creates uncertainty regarding the
qualification requirements for a PPP loan. Out of an abundance of
caution and in light of the new guidance, the Company has
determined to repay the PPP loan and intends to do so on or before
May 14, 2020.
Stephen C. Jumper, President and
Chief Executive Officer, said, "First quarter results were
favorably impacted by the continued operation of three large
channel count crews in the United
States and a better than anticipated Canadian season. While
we are pleased with our first quarter results, there have been
numerous changes to the oil and gas industry and the overall market
since we reported December 31, 2019
results in late February. The combination of the dissolution of
OPEC oil production quotas, primarily by Saudi Arabia and Russia in early March, and the economic impact
and resulting reductions in demand for oil caused by the COVID-19
pandemic, resulted in an oversupply of oil worldwide which caused
oil prices to plummet from approximately $52 per barrel on February
1, 2020 to below $15 per
barrel in March. Oil futures even went negative for a brief period
in April. The drop in oil prices, despite the subsequent
agreement between Saudi Arabia and
Russia to withhold approximately
9.7 million barrels of oil from the world markets, has forced
exploration and production companies to cut capital budgets 30% to
50%, resulting in rapid reductions in the number of new wells being
drilled and completed. As in prior periods of capital expenditure
reductions by our clients, demand for our services has declined
accordingly. Since the onset of these unforeseen circumstances, we
have experienced a reduction in requests for proposals and several
large projects have been postponed. We continue to maintain close
communication with our client base who are experiencing the same
level of uncertainty as our company."
Jumper continued, "Based on current, but rapidly changing
information, we anticipate continued operation of two large channel
count crews through the second quarter and into the third quarter
of 2020. The second quarter will be somewhat negatively impacted as
we redeploy a third smaller channel crew on a previously completed
project, which experienced limited data drops from an undetected
operational issue. In the current market environment, our
visibility beyond the early part of the third quarter is limited.
In response to this uncertainty, we reduced our non-field level
support staff in April, which, after severance costs of
$1.4 million in the second quarter,
ultimately should result in annual savings of approximately
$4.3 million. In addition, we reduced
the base salaries of each of our senior executives by approximately
20% effective March 30, 2020 until
February 11, 2023, unless otherwise
determined by the Board, and many other employees have taken
temporary salary reductions of varying levels, which we currently
expect should result in an annual saving of approximately
$0.9 million.
In response to the COVID-19 pandemic and its impact on our
people, we instituted recommended CDC guidelines in early March
including, but not limited to, social distancing, hygiene
recommendations, small group limits, enhanced work-from-home
guidelines, minimized office hours and weekly town hall telephone
conferences to update employees and their families on the Company's
practices and protocols. We continue to observe applicable
shelter-in-place directives and now that we are seeing certain
areas in Texas and other locations
begin to open up, we are reopening business locations provided that
proper CDC guidelines are rigorously followed.
We continue to provide additional flexibility to work from home
for those with pre-existing health concerns, child care issues,
elderly in-home residents or other general concerns. At the crew
level, we have implemented policies to eliminate large group
gatherings, provided additional vehicles to reduce the number of
people in a single vehicle traveling to and from project locations,
increased utilization of radio communication, secured ample safe
daily water supply, offered increased housing flexibility and
relaxed field schedules to allow for individual needs. Most of our
day to day operations consist of small, often times individual,
isolated work groups.
While we face difficult challenges, perhaps some of the most
difficult the oil and gas industry has ever faced, we are confident
that the steps we have taken, both today and throughout the years,
such as our commitment to a strong balance sheet, a scalable
business structure that allows us to quickly adjust our operations
and expenses up or down depending on market conditions, and an
unremitting commitment to our employees, clients and shareholders,
favorably positions us during these challenging times. Although
there are significant near-term headwinds, we continue to believe
that over the long term, seismic data will continue to add value to
exploration and production companies' drilling and development
programs by helping to identify optimum well locations. I would
like to personally thank all of our hard working employees, our
valued clients and shareholders for their continued commitment and
support during these challenging times."
Conference Call Information
Dawson Geophysical Company will host a conference call to review
its first quarter 2020 financial results on May 7, 2020 at
9 a.m. CT. Participants can access the call at
1-866-548-4713 (U.S.) and 1-323-794-2093 (Toll/International). To
access the live audio webcast or the subsequent archived recording,
visit the Dawson website at www.dawson3d.com. Callers can access
the telephone replay through June 7, 2020 by dialing
1-844-512-2921 (Toll-Free) and 1-412-317-6671 (Toll/International).
The passcode is 8318998. The webcast will be recorded and available
for replay on Dawson's website until June 7, 2020.
About Dawson
Dawson Geophysical Company is a leading provider of North
American onshore seismic data acquisition services with operations
throughout the continental United
States and Canada. Dawson
acquires and processes 2-D, 3-D and multi-component seismic data
solely for its clients, ranging from major oil and gas companies to
independent oil and gas operators, as well as providers of
multi-client data libraries.
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding the Company's preliminary and unaudited results as
determined by generally accepted accounting principles ("GAAP"),
the Company has included in this press release information about
the Company's EBITDA, a non-GAAP financial measure as defined by
Regulation G promulgated by the U.S. Securities and Exchange
Commission. The Company defines EBITDA as net income (loss) plus
interest expense, interest income, income taxes, and depreciation
and amortization expense. The Company uses EBITDA as a supplemental
financial measure to assess:
- the financial performance of its assets without regard to
financing methods, capital structures, taxes or historical cost
basis;
- its liquidity and operating performance over time in relation
to other companies that own similar assets and that the Company
believes calculate EBITDA in a similar manner; and
- the ability of the Company's assets to generate cash sufficient
for the Company to pay potential interest costs.
The Company also understands that such data are used by
investors to assess the Company's performance. However, the term
EBITDA is not defined under GAAP, and EBITDA is not a measure of
operating income, operating performance or liquidity presented in
accordance with GAAP. When assessing the Company's operating
performance or liquidity, investors and others should not consider
this data in isolation or as a substitute for net income (loss),
cash flow from operating activities or other cash flow data
calculated in accordance with GAAP. In addition, the Company's
EBITDA may not be comparable to EBITDA or similar titled measures
utilized by other companies since such other companies may not
calculate EBITDA in the same manner as the Company. Further, the
results presented by EBITDA cannot be achieved without incurring
the costs that the measure excludes: interest, taxes, and
depreciation and amortization. A reconciliation of the Company's
EBITDA to its net loss is presented in the table following the text
of this press release.
Forward-Looking Statements
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions that
statements in this press release 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. Such forward-looking statements are based on
the beliefs of management as well as assumptions made by and
information currently available to management. Actual results could
differ materially from those contemplated by the forward-looking
statements as a result of certain factors. These risks include, but
are not limited to, dependence upon energy industry spending;
changes in exploration and production spending by our customers and
changes in the level of oil and natural gas exploration and
development; the results of operations and financial condition of
our customers, particularly during extended periods of low prices
for crude oil and natural gas; the volatility of oil and natural
gas prices; changes in economic conditions; the severity and
duration of the COVID-19 pandemic, related economic repercussions
and the resulting negative impact on demand for oil and gas; the
current significant surplus in the supply of oil and the ability of
the Organization of the Petroleum Exporting Countries (OPEC) to
agree on and comply with supply limitations; the duration and
magnitude of the unprecedented disruption in the oil and gas
industry currently resulting from the impact of the foregoing
factors, which is negatively impacting our business; the potential
for contract delays; reductions or cancellations of service
contracts; limited number of customers; credit risk related to our
customers; reduced utilization; high fixed costs of operations and
high capital requirements; operational challenges relating to the
COVID-19 pandemic and efforts to mitigate the spread of the virus,
including logistical challenges, protecting the health and
well-being of our employees and remote work arrangements; industry
competition; external factors affecting the Company's crews such as
weather interruptions and inability to obtain land access rights of
way; whether the Company enters into turnkey or day rate contracts;
crew productivity; the availability of capital resources; and
disruptions in the global economy. A discussion of these and other
factors, including risks and uncertainties, is set forth in the
Company's Annual Report on Form 10-K that was filed with the
U.S. Securities and Exchange Commission (the "SEC") on
March 6, 2020 and in our recent Forms 10-Q and 8-K filed with
or furnished to the SEC, as well as our Quarterly Report on Form
10-Q for the quarter ended March 31,
2020, which is expected to be filed with the SEC on
May 7, 2020. The Company disclaims
any intention or obligation to revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
DAWSON GEOPHYSICAL
COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
(unaudited and
amounts in thousands, except share and per share
data)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Operating
revenues
|
$
|
38,979
|
|
$
|
51,164
|
|
Operating
costs:
|
|
|
|
|
|
|
Operating expenses
|
|
29,016
|
|
|
40,856
|
|
General
and administrative
|
|
3,674
|
|
|
4,544
|
|
Depreciation and amortization
|
|
4,904
|
|
|
6,081
|
|
|
|
37,594
|
|
|
51,481
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
1,385
|
|
|
(317)
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Interest
income
|
|
105
|
|
|
142
|
|
Interest
expense
|
|
(40)
|
|
|
(158)
|
|
Other
(expense) income, net
|
|
(458)
|
|
|
196
|
|
Income (loss)
before income tax
|
|
992
|
|
|
(137)
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
1
|
|
|
—
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
993
|
|
|
(137)
|
|
|
|
|
|
|
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
Net
unrealized (loss) income on foreign exchange rate translation,
net
|
|
(1,199)
|
|
|
209
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
$
|
(206)
|
|
$
|
72
|
|
|
|
|
|
|
|
|
Basic income
(loss) per share of common stock
|
$
|
0.04
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
Diluted income
(loss) per share of common stock
|
$
|
0.04
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
Weighted average
equivalent common shares outstanding
|
|
23,287,410
|
|
|
23,057,546
|
|
|
|
|
|
|
|
|
Weighted average
equivalent common shares outstanding - assuming
dilution
|
|
23,465,651
|
|
|
23,057,546
|
|
|
|
|
|
|
|
|
DAWSON GEOPHYSICAL
COMPANY
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(amounts in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2020
|
|
2019
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
22,852
|
|
$
|
26,271
|
|
Restricted cash
|
|
5,000
|
|
|
5,000
|
|
Short-term investments
|
|
2,350
|
|
|
2,350
|
|
Accounts
receivable, net
|
|
32,518
|
|
|
24,356
|
|
Current
maturities of notes receivable
|
|
67
|
|
|
66
|
|
Prepaid
expenses and other current assets
|
|
9,739
|
|
|
7,575
|
|
Total current
assets
|
|
72,526
|
|
|
65,618
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
50,315
|
|
|
53,549
|
|
Right-of-use
assets
|
|
6,251
|
|
|
6,605
|
|
Notes receivable,
net of current maturities
|
|
1,380
|
|
|
1,394
|
|
Intangibles,
net
|
|
356
|
|
|
385
|
|
Long-term deferred
tax assets, net
|
|
—
|
|
|
57
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
130,828
|
|
$
|
127,608
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
5,397
|
|
$
|
3,952
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
Payroll costs and
other taxes
|
|
3,463
|
|
|
1,963
|
|
Other
|
|
3,559
|
|
|
3,599
|
|
Deferred
revenue
|
|
5,168
|
|
|
3,481
|
|
Current
maturities of notes payable and finance leases
|
|
3,049
|
|
|
4,062
|
|
Current
maturities of operating lease liabilities
|
|
1,146
|
|
|
1,200
|
|
Total current
liabilities
|
|
21,782
|
|
|
18,257
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
Notes
payable and finance leases, net of current maturities
|
|
77
|
|
|
96
|
|
Operating lease liabilities, net of current maturities
|
|
5,635
|
|
|
5,940
|
|
Deferred
tax liabilities, net
|
|
22
|
|
|
—
|
|
Other
accrued liabilities
|
|
150
|
|
|
150
|
|
Total long-term
liabilities
|
|
5,884
|
|
|
6,186
|
|
|
|
|
|
|
|
|
Operating
commitments and contingencies
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Preferred stock-par value $1.00 per share; 4,000,000 shares
authorized, none
outstanding
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
Common
stock-par value $0.01 per share; 35,000,000 shares authorized,
23,335,855 shares issued, and
23,287,410 shares outstanding at March 31, 2020 and
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
233
|
|
Additional paid-in capital
|
|
154,438
|
|
|
154,235
|
|
Retained
deficit
|
|
(48,738)
|
|
|
(49,731)
|
|
Treasury
stock, at cost; 48,445 shares
|
|
—
|
|
|
—
|
|
Accumulated other comprehensive loss, net
|
|
(2,771)
|
|
|
(1,572)
|
|
Total stockholders'
equity
|
|
103,162
|
|
|
103,165
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
130,828
|
|
$
|
127,608
|
|
|
|
|
|
|
|
|
Reconciliation of
EBITDA to Net Income (Loss)
|
|
|
|
|
|
|
(amounts in
thousands)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
993
|
|
$
|
(137)
|
|
Depreciation and
amortization
|
|
4,904
|
|
|
6,081
|
|
Interest (income)
expense, net
|
|
(65)
|
|
|
16
|
|
Income tax
benefit
|
|
(1)
|
|
|
0
|
|
EBITDA
|
$
|
5,831
|
|
$
|
5,960
|
|
|
|
|
|
|
|
|
Reconciliation of
EBITDA to Net Cash Used in Operating Activities
|
|
|
|
|
|
|
(amounts in
thousands)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$
|
(173)
|
|
$
|
(1,567)
|
|
Changes in working
capital and other items
|
|
6,508
|
|
|
8,237
|
|
Noncash adjustments
to net income (loss)
|
|
(504)
|
|
|
(710)
|
|
EBITDA
|
$
|
5,831
|
|
$
|
5,960
|
|
|
|
|
|
|
|
|
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SOURCE Dawson Geophysical Company