DAWSON GEOPHYSICAL CO Q2 FY2020 earnings call

• Second quarter and 6-month results were positive, but oil and gas industry faces challenges like OPEC+ production cuts and COVID-19 impact on economic activity.
• Balance sheet remains strong with $36.8M cash and short-term investments, $1.6M debt, current ratio 6.2:1, and working capital ~$58.3M.
• Implemented COVID-19 protocols including social distancing, work from home flexibility, crew-level policies to reduce gatherings and increase vehicle utilization.
• Company has 60+ years of history navigating downturns, and seismic data is still valuable for E&P companies to optimize well locations.

For the second quarter ended June 30, 2020, Dawson Geophysical reported revenues of $29.5 million compared to $24.1 million in the same quarter of 2019. Net income was $1.5 million or $0.06 per common share compared to a net loss of $11.2 million or $0.49 loss per common share in 2019. EBITDA was $5.8 million compared to negative EBITDA of $6.1 million in 2019. For the 6 months ended June 30, 2020, revenues were $68.5 million vs $75.2 million in 2019. Net income was $2.5 million or $0.11 per common share vs a net loss of $11.4 million or $0.49 loss per common share in 2019. EBITDA was $11.6 million vs negative EBITDA of $111,000 in 2019. The second quarter results were positively impacted by continued operation of 2 large channel count crews in the US, offset by redeployment of a small crew and $1.4M in severance costs. Annual savings of ~$4.3M from staff reductions are anticipated.

The company will not provide any guidance during this call. Visibility beyond the fourth quarter is limited, with requests for proposals slow but some projects in late 2020 and 2021 being discussed.

• Oil and gas industry challenges including OPEC+ production cuts potentially lowering oil prices.
• COVID-19 impact leading to reduced economic activity and restricted travel, limiting client spending on seismic services.
• Uncertainty in client budgets for E&P companies, affecting demand for Dawson's services.

Q: Congratulations on the quarter and questions about clients' third and fourth quarter activity.

A: Communication with clients is more complex due to work from home and other factors. There are some proposals and conversations, but limited visibility beyond Q4. Some projects pushed back to 2021, and there's a slight increase in direct requests from E&Ps.

Q: Thoughts on industry consolidation and cash allocation.

A: No imminent meaningful consolidation. Board regularly discusses balance sheet and cash position, considering best interests of shareholders and company. Share repurchase program could be an option for flexibility.

Q: Understanding of CapEx vs depreciation and maintenance CapEx.

A: CapEx has been at maintenance level for 18 months. Equipment base is in good shape with maintenance CapEx covering wear and tear. No immediate concerns about equipment becoming obsolete as current technology repackages rather than drastically changes.