Dawson Geophysical Company (ticker: DWSN) is a leading provider of U.S. onshore seismic data acquisition services in the lower 48 states of the United States. Founded in 1952, 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.
Rewarding Shareholders with a Quarterly Cash Dividend
Marking the first time a U.S. seismic company has implemented a quarterly cash dividend, DWSN’s Board of Directors approved a quarterly dividend of $0.08 per share, representing approximately $645,000 per quarter, to reward shareholders and increase shareholder value.
Dawson’s consistently large cash position has always been justified by the cyclicality of the seismic industry. In other words, just as exploration and production companies are beholden to commodity prices for certain levels of activity – Dawson Geophysical’s activity level and ability to generate revenue is beholden to exploration activity. That said, future dividends payments, including the possibility of additional payments, is subject to availability and will be determined by the Board if it is in the best interest of DWSN.
In a conference call following the release, Dawson’s management team said the company’s current cash flow was deemed to be sufficient for the dividend while maintaining the level of capital investment necessary to grow the business over the long term.
OAG360 notes shares of Dawson Geophysical have increased 15% over the last twelve months outperforming the OSX by 8%.
Fiscal Q1 Always a Challenge – DWSN Rebounding from Difficult Industry Conditions
During fiscal Q1’14, DWSN reported $68.2 million in revenue and $4.86 million in EBITDA for the period. Overall, DWSN posted a net loss of $2.9 million in the quarter.
The first quarter has historically been the most difficult quarter for DWSN due to decreased daylight hours, holidays and inclement weather. The extreme cold and excessive snowfall for the quarter impacted operators across the country, and Dawson was no exception. Business in Canada had a negative impact on financial numbers, and a similar result in Canada is expected in Q2’14. While the Canadian marketplace has been difficult, management maintains its commitment to Canada and believes in the long-term growth prospects in the Canadian seismic market.
Despite these challenges, the company returned to full deployment of 12 large shale data acquisition crews in mid-November 2013 (mid-way through fiscal Q1). The company’s order book has strengthened to a level consistent with commitments carried over the past twelve months despite the slowdown in bid activity during the summer of 2013 as reported in the Company’s year-end earnings release and is sufficient to maintain full utilization until the middle of calendar 2014.
Microseismic Interest Increasing
While the company did not conduct any operations related to microseismic during the December 31, 2013 quarter, the interest level for such projects continues to increase. The company anticipates securing contracts to complete several microseismic projects primarily utilizing the small crew during the remainder of fiscal 2014 and continues to pursue microseismic opportunities in both the United States and Canada.
Continued Investment in Technology
Dawson purchased approximately 9,000 GSX units during the quarter which were deployed on projects in North Dakota and Canada. DWSN’s capital budget for 2014 remains intact at $35 million with the unspent balance intended to be invested on equipment maintenance. Management said roughly $24 million was spent in Q1’14 due to increased deployment costs, but management does not anticipate that the $35 annual capital budget will change. At the time of the earnings release, DWSN held $66 million in working capital and $20 million in debt – $11 million of which is expected to be paid over the next twelve months. The company has $20 million in available funds from its revolving line of credit.
Outlook for the Remainder of 2014
A multi-component project was recently completed in West Texas and the company believes that work projects will remain steady throughout the year.
Increased interest levels are on par with commitments from 2013 with clients focusing on oil-weighted projects. With the heightened interest and future opportunities, the company believes it can keep all crews running for the remainder of fiscal 2014.
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