Current DWSN Stock Info

Dawson Geophysical Company (ticker: DWSN) is a leading provider of onshore seismic data acquisition and processing services in the lower 48 states as measured by the number of active data acquisition crews. The company was founded in 1952 by Chairman Decker Dawson who has spent more than 71 years in the seismic industry.

OAG360 notes that Dawson has made its first entrance into Canada this year. The company is continuing its expansion into Canada and expects to begin operations in Western Canada during the 2012-2013 winter seasons with one or two crews.

Steve Jumper, Dawson’s president and chief executive officer leads Dawson in its efforts to acquire and process 2-D, 3-D and multi-component seismic data for its oil and natural gas clients, ranging from majors to independent oil and gas operators, as well as providers of multi-client data libraries. Demand for Dawson’s services in oil and liquids rich basins has significantly ramped up over the last several quarters. As oil and natural gas companies continue to allocate capital to oil and liquids projects, demand for Dawson shoots in these areas will continue to increase. Management believes its current order book is sufficient to fully sustain all 14 data acquisition crews well into fiscal 2013.

Recent Financial Results

DWSN reported fiscal Q3’12 net income of $1,141,000, or $0.15 per share, representing an increase of 241% compared to net income of $334,000 or $0.04 per share during the same quarter last year. Revenues during fiscal Q3’12 totaled $68,348,000 compared to $98,033,000 for the same quarter in fiscal 2011. EBITDA generated during fiscal Q3’12 increased 18% to $10,437,000 compared to $8,821,000 in the comparable quarter last year.

For the nine months ended June 30, 2012, DWSN reported net income of $9,961,000, or $1.27 per share, compared to a net loss of $6,190,000, or $0.79 loss per share, for the comparable nine-month period of fiscal 2011. Revenues during the nine month period of 2012 totaled $246,276,000 compared to $249,023,000 for the period last year. EBITDA generated during the nine months of fiscal 2012 increased 161% to $38,985,000 compared to $14,939,000 for the nine-month period of fiscal 2011.

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OAG360 notes that the revenue decrease is directly reflective of the oil and gas exploration and production industry’s move to the Western United States where more open terrain exists. When companies require seismic shoots in these areas, they require fewer third-party services which benefits DWSN’s operating margins. Third-party charges, which include helicopters, dynamite and other specialized services, are included in DWSN’S revenues as the company is reimbursed for these charges. EBITDA margins for the quarter were 15.57% compared to 8.16% for 2011. The company noted that its order book levels are at their highest levels since 2008 as clients continue to search for hydrocarbons in predominantly oil and liquid-rich regions.

Although DWSN did experience lower utilizations rates during fiscal Q3’12 due to weather and permitting issues, the company expects to return to higher utilization rates during the current quarter.

Technology is Key in the Seismic Space

As technology evolves, exploration and production companies need clearer sub-surface images. DWSN focuses on projects that require higher channel counts per project to achieve increasing efficiencies and drive margin growth. For fiscal 2012, DWSN approved a $50 million CAPEX budget which $42.5 million has been spent on equipment and energy sources. DWSN bought nineteen vibrator energy source units, 10,500 additional GSR single-channel recording units, 3,000 stations of GSR three-channel units with three-component geophones and additional conventional geophones.

Pro forma these asset purchases, DWSN owns 36,350 GSR single-channel recording units, 4,000 GSR four-channel recording units, 3,000 GSR three-channel recording units and 7,000 three-component geophones. DWSN’s total cable-less channel count is in excess of 61,000 and overall channel count is approximately 167,000. The company owns 168 vibrator energy source units. As mentioned, DWSN believes its order book is at its highest levels since 2008.

Final Thoughts on Dawson Geophysical

The seismic sector is tightening; however, Dawson’s robust inventory should position the company to capture in increasing share of project activity during fiscal Q4’12 and well into fiscal 2013. Look for Dawson to continue to expand its position in key oil and liquid-rich plays like the Bakken, the Eagle Ford and the Niobrara. Expect the Company to maintain its focus on projects that require higher channel counts per project to achieve increasing efficiencies and drive margin growth. And, anticipate that management will maintain its bent toward conservative fiscal management with an exceptionally strong balance sheet.

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