DWSN — Dawson Geophysical Company

Summary of DWSN Q3 2021 Earnings Call

1. Key Financial Results and Metrics

• Revenues: $1.9 million for Q3 2021, down 78% from $8.7 million in Q3 2020.
• Net Loss: $7.9 million, or $0.33 per share, consistent with a net loss of $7.8 million in Q3 2020.
• EBITDA: Negative $4.7 million for Q3 2021, worsening from negative $3.8 million in Q3 2020.
• Nine-Month Results: Revenues of $13.9 million (down 82% YoY), net loss of $22.1 million ($0.94 per share), and negative EBITDA of $12.2 million compared to positive $7.8 million in the same period of 2020.
• Balance Sheet: Cash and short-term investments of $41.6 million; current ratio of 8.8:1; working capital of $39.4 million.

2. Strategic Updates and Business Highlights

• The company operated one seismic data acquisition crew in the Lower 48, which faced low utilization and was idled for part of the quarter.
• The Canadian operations are expected to ramp up with two crews operating in the latter half of Q4 2021.
• A merger agreement with Wilks Brothers, LLC was announced, with a tender offer of $2.34 per share expected to close in Q4 2021.

3. Forward Guidance and Outlook

• The near-term outlook for onshore seismic data acquisition remains challenging, with limited visibility into 2022.
• Anticipated demand for services is low, with capital spending from E&P companies expected to remain below 2019 levels.
• The company does not foresee a significant increase in demand for seismic services in the near future.

4. Bad News, Challenges, or Points of Concern

• Significant revenue decline and ongoing cash burn due to low demand for seismic services.
• Declining bid activity and softening prices for services.
• Staffing challenges and inability to maintain a sufficient workforce to meet potential demand.
• The company’s capital expenditures have been drastically reduced, limiting future growth potential.

5. Notable Q&A Insights

• Management has been actively attempting to rightsize the company but faces challenges in further reducing costs without impacting operational capacity.
• The current large crew working on a 65,000 channel project has limited visibility beyond February 2022, with smaller projects not providing sufficient revenue.
• Management emphasized the compelling nature of the Wilks merger as a liquidity opportunity for shareholders, given the current market conditions and the company's financial challenges.
• Concerns were raised about the long-term viability of the business without a dramatic increase in demand for seismic services, which management does not anticipate.

Overall, the earnings call highlighted significant financial struggles, ongoing strategic adjustments, and a pivotal merger that may provide a path forward amidst challenging market conditions.