Q2 2021 Dawson Geophysical Co Earnings Call

August 12, 2021

[music].

Please standby we're about to begin.

Good morning, and welcome to the Dawson Geophysical second quarter 2021 Conference call Today's conference is being recorded as.

As a reminder, statements made by management during this call with respect to forecasts estimates or other expectations regarding future events or which provide any information other than historical facts may constitute as forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

These forward looking statements are based on management's current expectations.

Include known and unknown risks uncertainties and other factors many of which the company is unable to predict or control that may cause the company's actual future results or performance to materially differ from any future results or performance expressed or implied by those statements.

These risks and uncertainties include the risk factors.

Disclosed by the company from the time to time in its filings with the SEC, including the company's annual report on form 10-K filed with the SEC on March 16th 2021.

And any subsequent quarterly reports on form 10-Q filed with the SEC.

Furthermore, as we start this call. Please refer to the statements regarding forward looking statements incorporated in the company's press release issued this morning and please note that the contents of the company's conference call. This morning is covered by those statements.

During this conference call management will make references to EBITDA.

Which is a non-GAAP financial measure a reconciliation of the non-GAAP measure to the applicable GAAP measure can be found in the company's current earnings release.

A copy of which is located on the company's website at Www Dot das in three D Dot com.

The call is scheduled for 30 minutes and the company will not provide any guidance.

I would now like to turn the call over to Mr. Stephen Jumper, Chairman, President and CEO of Dawson Geophysical Company. Please go ahead Sir.

Well. Thank you Cody good morning, and welcome to Dawson Geophysical Company's second quarter 2021 earnings and operations update conference call. As Cody said My name is Steve jumper, Chairman, President and CEO of the company.

Joining me on the call is Jim <unk>, Executive Vice President and Chief Financial Officer.

Before we start the call just a few things to cover as Cody said, if you'd like to listen to a replay of today's call. It will be available via webcast by going to the Investor Relations section of the company's website at Www Dot Das in three D Dot Gov.

Information reported on this call speaks only of today Thursday August 12, 2021, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay listening.

Turning to our preliminary second quarter ended.

Our June 32021 on financial results for the second quarter ended June 30.

2021, the company reported revenues of 193000, a significant decrease compared to $29.5 million for the quarter ended June 30.

2020.

For the second quarter of 2021, the company reported a net loss of $9 million or <unk> 38 loss per share of common stock compared to net income of $1.5 million or six cents per share of common stock for the quarter ended June 32020.

The company reported negative EBITDA of $5.7 million for the quarter ended June 32021, compared to positive EBITDA of $5.8 million for the quarter ended June 32020.

Activity levels during the second quarter of 2021 and reached a low point as the company did not have the SEC.

<unk> data acquisition crews operating in either the United States or in Canada as the Canadian season concluded at the end of the first quarter. The near term outlook for seismic data acquisition activity in the U S remains challenging with the company currently operating one size one midsized channel count crew based on.

Currently available information the company anticipates operating one crew in the U S.

In the second half of 2021 with periods of low utilization and potentially one crew in Canada during the fourth quarter.

I will now turn control of the call over to Jim <unk>, who will.

Ill review the financial results, then I'll return for some final remarks, and our outlook into the third and fourth quarter of 'twenty one Jim.

Thank you, Steve and good morning.

Revenues for the second quarter of 2021 were 193000, a significant decrease compared to $29.5 million for the quarter ended June 30 of 2020.

As stated in our earnings release issued this morning during the second quarter of 2021. The company did not have a seismic data acquisition crews operating in either the U S or in Canada as well.

Canadian Susan concluded at the end of the first quarter.

The near term outlook for seismic data acquisition activity in the U S remains challenging with a company currently operating one midsized channel count crew.

On currently available information the company anticipates operating one crew in the U S. During the second half of 2021 with periods of low utilization and potentially one crew in Canada during the fourth quarter.

Cost of services in the second quarter of 2021 was $3.3 million.

The decrease of 83% compared to $19.7 million in the same quarter of 2020.

General and administrative expenses were $2.7 million in the second quarter of 2021.

A decrease of 36% compared to $4.3 million in the second quarter of 2020.

Depreciation and amortization expense in the second quarter of 2021 was $3.4 million.

A decrease of 22% compared to $4.4 million in the same quarter of 2020.

Net loss in the second quarter of 2021 was 9 million or <unk> 38 loss per common share.

<unk> to net income of $1.5 million.

Or six cents per common share in the second quarter of 2020.

EBITDA in the second quarter of 2021 was a negative $5.7 million compared to positive EBITDA of $5.8 million in the same period of 2020.

And EBITDA reconciliation was provided in our earnings release issued this morning.

Now I'll review some results for the six months ended June 32021.

Revenues for the six months ended June 32021 were $11.9 million a decrease of approximately 83% compared to $68.5 million for the six months ended June 32020.

Cost of services for the six months ended June 32020 was $14.3 million.

A decrease of 71% compared to $48.7 million in the same period of 2020.

General and administrative expenses were $5.6 million for the six months ended June 32021.

Decrease of 30% compared to seven 9 million in the same period a year ago.

Net loss for the six months ended June 32021 was $14.2 million or <unk> 61 loss per common share compared to net income of $2.5 million or <unk> 11 per common share for the six months ended June 32020.

EBITDA for the six months ended June 32021 was negative $7.5 million compared to positive EBITDA of $11.6 million in the same period of 2020.

And again, an EBITDA reconciliation was provided in our earnings release issued this morning.

Now I'll turn to some balance sheet items are.

Our balance sheet continues to remain strong.

As of June 32021, we had debt, including obligations under financing leases of 427000.

Cash and short term investments of $45.9 million.

Our current ratio was 10 six to one.

And working capital was approximately $44.4 million.

And with that I'll turn the call back to Steve for some comments on our operations well. Thank you Jan and then needless to say the second quarter of 2021 was extremely challenging.

As indicated in our first quarter earnings release, the second quarter and ended the third quarter will reflect a low point for dolphin in terms of activity levels.

We deployed a midsized channel count crew in the U S. In mid July and anticipate that crew operating through the second quarter due to the second half of 2021 with possible periods of prolonged standby as we continue our efforts to fill the seismic data acquisition project schedule.

Exploration and production companies are continuing on their path of capital discipline, focusing on shareholder returns and keeping spending levels below cash flow.

<unk> recent oil price improvement into the mid 70 range and natural gas prices in the upper $3 range capital spending levels increased only slightly as many E&P companies have portions of the production hedged well below spot prices.

According to IHS Markit U S oil hedging losses during the first half of 2021 totaled approximately $7.5 billion, adding further pressure on spending plans for companies that entered into such contracts. During the downturn that said despite the recent pullback in oil prices in response.

To OPEC announcement concerning increase production quotas as well as uncertainty around the effects of the Covid 19 Delta variant on the overall economy. There continues to be modest improvement in oil service activity.

The U S rig count, which typically proceed seismic data acquisition deployment is currently at $4.91, showing gains if in five out of the last six weeks and increase from $2.47, a year ago, but well below levels seen at this time of 2019 of 918.

The same is true for hydraulic fracturing fleets with the current count of 235 crews operating.

Above the 70 of a year ago, but well below the $3.66 crews. This time two years ago as we discussed in our first quarter 2021 earnings release demand for seismic data acquisition services continues to lag behind the recent modest increase in oil service activity.

Polluted in the bid activity our requests for carbon capture project carbon capture projects, while typically smaller in scope have certain levels of repeatability and could offer new opportunities for the company.

In our continuing response to these difficult times the company significantly limited capital budget spending reduced fixed and variable operating expenses and implemented a comprehensive equipment maintenance program in preparation for a response to an anticipated increased activity levels in.

In addition, the company maintains its commitments to its robust health safety environmental program ongoing client relationships and product quality.

The company made no capital expenditures during the first and second quarters of 2021.

As stated in our December 31, 2020 earnings release, the company's board of Directors has it has approved an initial capital budget of $1 million for 2021 as Jim stated earlier, the company's balance sheet remains strong with $45.9 million of cash restricted cash and short term.

And $44.4 million of working capital as of June 32021. The company is nearly debt free with notes payable and finance leases of $4.27 427000 as of June 32021.

While today's conditions in the seismic data acquisition market remained challenged and are likely to remain so in the coming months. We are encouraged by the overall improvement in both the economy and the oilfield service sector. The recent increase in drilling and completion activities combined with hedging contracts that will ultimately.

Unwind set the stage for success a recovery in the seismic data acquisition SEC <unk>.

Sector.

Thank our hard working employees valued customers interested shareholders as we work through these difficult conditions and towards better times ahead, and with that Cody I believe we are ready for questions.

Thank you if you'd like to ask a question. Please sooner by pressing star one on your telephone keypad.

Using a speaker phone. Please make sure that your mute function is turned off till your signal to reach our equipment.

Once again that is star one if you would like to ask a question.

Well pause for just a moment to allow everyone an opportunity to signal.

And once again Thats star one if you'd like to ask a question.

And we'll take our first question from Bruce Berger with turnaround capital. Please go ahead.

Hi, Steve.

Just wondering what the strategy is obviously you can't keep burning $500 million in cash at quarter. So as you see work over the next few quarters.

What are your anticipation for cash losses.

<unk>.

Bruce.

We're not going to drift into any type of guidance and forecast but.

I will say that I believe at this point that.

That.

Q2, as we said was the low point.

Just on what we're seeing right now.

We did not operate accrue during the entire quarter from.

2021, we do have a crew in the field. It is going to have some periods of low utilization, but we anticipate.

Keeping that crew busy through.

The end of the year in the U S and into the first quarter, we think that.

As I said, we're going to have periods, where it is going to be down and we're anticipating operating.

Hopefully, having an earlier season.

The start to the season in Canada this year so.

It is going to continue to be difficult through the back half of 'twenty. One we certainly are watching the balance sheet and the cash position closely.

And we will continue to make every effort and implement things to reduce the cash burn as much as possible.

What type of work are you doing in Canada.

Or would the units being utilized.

Of the type of work as a carbon or is it just pure exploration work.

Most of the work that we've done in Canada and has been well in recent years, it's been primarily in the heavy oil basins.

In the past, our Canadian entity and going back to.

The days of the Titans.

Prior to the Thailand merger has done some work off and on in the off season.

Regards to potash mining, but most of the work that is in Canada. These days is around the heavy oil sands.

Most of it will be three component in nature.

Of course, what we don't know is both in Canada and in the U S is one of the effects of <unk>.

Natural gas prices being in the upper threes and low low fours.

With that I'll open up some opportunity in both Canada and the U S for <unk>.

More activity in natural gas basins, we'll see but recent.

Recent history has been.

Heavy oil sands.

Thanks.

Thank you we'll take our next question from.

Thank you we'll take our next question from John Potratz with researched investments.

Hi, very well, thank you very much for a continuum.

What about the carbon.

Carbon capture you go to Europe.

You don't have revenue contracts, yet, but do you are you getting.

Yeah.

Many many interests in Europe.

And your geological area or is that outside of your general area.

And do you sort of a sense that this is really going to work into the carbon capture that there'll be.

Reasonable amount of business there.

Well good question Jay and.

Good to talk to you as always I'll always appreciate your support.

We executed some carbon capture projects in the past I believe.

We've done some in now.

And places like Wyoming and down into.

Louisiana in various places we are seeing more inquiries into.

U S land based carbon capture projects.

They tend to be relatively smaller in nature there'll be.

No.

2025 square miles as opposed to a couple of hundred today they are typically.

Fairly dance as are most of our <unk> surveys and <unk>.

And they typically will involve repeat ability.

And so what the intent is to one first of all to identify a is kind of opposite of what we normally do we normally try to identify a geologic structures that are conducive to the accumulation of hydrocarbons.

And then.

Wells drilled and extracted.

This is more looking for reservoirs or formations that could be conducive to.

Storage, which means that.

You know they have to have some level of seal ability and.

Escape proof and so phase one is to evaluate the geologic subsurface and see if the reservoir potential reservoir is conducive to injection and then many times there will be some follow up over time.

Our second survey repeated at some point in time to identify.

If they're in fact has been any movement of the fluid front, but.

We're seeing some activity level there I think.

Certainly the potential for carbon capture is greater than the offshore basin. Some of the places that people want to do carbon capture will have existing data and so that helped to generate some activity through the multi client databases, both onshore and offshore but we've done this in the past.

Our technology moves very easily over that but we'll just see how the economics of carbon capture develop and.

What the what this turns to in the next few years.

So if you do get some of that business. It is a profitable endeavor.

Don't get it.

The projects that you might have with your oil E&P exploration.

<unk> correct.

Correct, it's going to.

Typically there'll be smaller.

A smaller crew.

<unk>.

You know.

At this point in time, it is activity level, which is encouraging.

As times improve.

And our utilization increases.

We have the channel count capacity and the energy source capacity too.

<unk>.

Address carbon capture projects as they come up maybe by.

Pulling off some some equipment and some people from existing crews that.

That would certainly be more additive from a financial standpoint than just doing it stand alone. So I think it's a business that will continue to pursue and continue to be involved in and and.

Certainly something that I think will be a benefit to all involved.

Very good it sounds exciting.

There's another thing which is.

As I mentioned in the U S for.

Batteries need lithium and there's very little lithium.

The United States is there any exploration going on for looking for lithium.

And looking at the geological formations that would go there that might be potential service.

Oh, we have had some inquiries into using our technology for.

Identifying lithium.

<unk>.

It's a.

Little bit different type of use of.

<unk> physical tools, it's not it's a little more difficult and that are you know.

It's somewhat loosely similar to.

Looking for coal seams and that Youre not looking for a geologic formation that is conducive to accumulation you're actually trying to identify.

Some mineral types and so.

We've had some inquiries around that but I don't think we've had anything really.

Come to fruition from from.

The lithium aspect now.

We've done a little bit in the past and I'm sure, we'll where we will in the future around things like our helium.

Things around.

Geothermal those types of things, but I wouldn't think that lithium would be something at this point it would be a big factor for us.

Okay, well just wanted to see if as life changes.

Some parts of the business don't do well, but other parts of the business sort of take off from here.

Just your ability to take and do that.

Okay. The other thing that during this quarter you mentioned look at the cost.

My sense is you are spending a lot of money in the quarter was only in the quarter the maintenance of your equipment.

To be able to go out.

And be ready to move so that maybe during the quarter there was a little bit higher expenses on the maintenance than you might otherwise would have incurred.

Going forward would that be a fair way of looking at that you were under your system is in great shape.

I would characterize what we've done in the quarter.

With regards to maintenance expense has been too.

Keep keep a certain level of equipment maintained and ready for deployment. So as we further deploy in the future.

Energy sources and channel Count crew count and those types of things certainly the maintenance level is going to or the maintenance costs will go up accordingly, and so I think we have I wouldn't characterize our maintenance expenditures in the quarter.

There is being.

Materially large.

I think we are.

Continuing as we always have to maintain our equipment that's ready to go in and has limited downtime when it's deployed so.

As as we continue to increase deployment overtime I would anticipate some level of maintenance.

Expense to increase.

Okay.

Being ready to move when you get a chance for a contract.

Okay.

What is the competition like.

Are you finding competitors are also suffering and they are cutting prices so that it's harder to get.

Contracted that's profitable or.

Seeing any.

What are you seeing out in the marketplace.

Yes, the competitive landscape really hasn't changed much in the last year.

I think the <unk>.

Geophysical market has been difficult for everybody in the lower 48.

And Ah.

As well as worldwide I I don't think it's a stretch to say that the geophysical markets had its issues worldwide I think we're beginning to see some increase in activity.

Leading indicators in the international markets I think we're starting to see some leading indicators and maybe some of the marine.

Operations.

Marine seismic surveys around the world but.

We're not quite seeing that improvement yet to the level we are.

Or at least anticipated increases around the world. So I don't think the competitive landscape has changed all that much I think the market is difficult for everybody and really the issue here is just a.

You know as as we've addressed in Q1 and Q2, both it's one it's a restricted spending levels on behalf of our client base there.

Continuing to focus on shareholder returns and they're continuing to.

Stay keep their spending levels within cash flow.

Many of them have hedging contracts they entered into a year ago that will be rolling off that certainly have affected cash flow and.

And so we are seeing some increase in slight increase in bid activity, particularly amongst some of the private players and a few more conventional things that have been kind of showing up so.

I don't think there.

I think it's tough on everybody right now.

But you're positioning yourself to survive and do well and you are seeing the prospect of <unk>.

We are seeing prospect.

Out there.

Today that maybe you didn't see three or four months ago is that a fair representation.

I think Thats fair I, just want to continue to emphasize Jay that we are seeing an uptick.

The rig count and the.

Hydraulic fracturing fleet count numbers are both up from a year ago, but they are significantly down from where they were at this time in 2019 and so while.

The rig count certainly isn't a word.

Where it needs to be to well I'll just say it this way.

Okay, it's taking a while to work through the inventory of <unk> prospects and.

So having said that we certainly have seen a few projects that have come up for bid.

We've seen some things that have continued to slide a little bit on the schedule and happened to us in Q2 than it is in.

Could happen again to us in Q.

Q3, but yes, I think we're seeing a few more.

Inquiries and a little bit of activity level increase but.

That's not to say that there's going to continue to be a challenging market in the.

Next quarter or two.

Good I'm glad you're having to do this not myself. Thank you very much.

Thank God, they're moving ahead.

Thank you Jay.

Yeah.

Okay.

Actually something like this is quite often very good because what it does is.

Then get you to think about things a lot differently than I would.

Look forward to hearing from you in the next quarter, some innovative things that you've undertaken because it's.

Yes.

We're doing product to think about like very definitely looking forward to that thank you.

Thank you.

Thank you well take our next question from Jared Cohen with JM Cowen and company.

Hi, Yeah. My question was answered thank you very much.

Well that was easy.

Thank you that does conclude today's question and answer session I'd like to turn the conference back over to Mr. Jumper for any additional or closing remarks.

Well first of all I want to thank everybody for listening into our second quarter 2021 earnings and operations update call.

As always we're very appreciative of the support of our shareholders.

Certainly want to thank our hard working employees and our valued clients.

Just to sum it up.

Q2 was a low point in terms of activity we're encouraged by.

Some of the inquiries that we're beginning to see come out.

And it is going to continue to be difficult times for the physical market in the near future, but we are well positioned with our balance sheet and our equipment base and the people we have on staff to respond to this market when it turns and with that thank you once again and look forward to talking to you and.

At the end of Q3, thank you.

Yeah.

Thank you that does conclude today's conference. We do thank you all for your participation you may now disconnect.

[music].

Good morning, and welcome to the Dawson Geophysical second quarter 2021 Conference call Today's conference is being recorded.

A reminder, statements made by management during this call with respect to forecasts estimates or other expectations regarding future events or which provide any information other than historical facts may constitute as forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

These forward looking statements are based on management's current expectations.

These risks and uncertainties include the risk factors.

Disclosed by the company from the time to time in its filings with the SEC, including the company's annual report on form 10-K filed with the SEC on March 16th 2021.

Any subsequent quarterly reports on form 10-Q filed with the SEC.

More as we start this call. Please refer to the statements regarding forward looking statements incorporated in the company's press release issued this morning and please note that the contents of the company's conference call. This morning is covered by those statements.

During this conference call management will make references to EBITDA.

Which is a non-GAAP financial measure a reconciliation of the non-GAAP measure to the applicable GAAP measure can be found in the company's current earnings release.

A copy of which is located on the company's website at Www Dot Dawson <unk> Dot com.

The call is scheduled for 30 minutes and the company will not provide any guidance.

I would now like to turn the call over to Mr. Stephen Jumper, Chairman, President and CEO of Dawson Geophysical Company. Please go ahead Sir.

Joining me on the call is Jim Brown, our executive Vice President and Chief Financial Officer.

Information reported on this call speaks only of today Thursday August 12, 2021, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay listening.

Turning to our preliminary second quarter ended.

Our June 32021, and financial results for the second quarter ended June 30.

2021, the company reported revenues of 193000, a significant decrease compared to $29.5 million for the quarter ended June 32020.

The company reported negative EBITDA of $5.7 million for the quarter ended June 32021, compared to positive EBITDA of $5.8 million for the quarter ended June 32020.

Activity levels during the second quarter of 2021 and reached a low point as the company did not have the seismic data acquisition crews operating in either the United States or in Canada as the Canadian season concluded at the end of the first quarter. The near term outlook for seismic data acquisition activity in the U S remains challenging.

Would the company currently operating one side, one midsized channel Count crew based on currently available information the company anticipates operating one crew in the U S. During.

During the second half of 2021 with periods of low utilization and potentially one crew in Canada during the fourth quarter.

I will now turn control of the call over to Jim Brad.

Ill review the financial results, then I'll return for some final remarks, and our outlook into the third and fourth quarter of 'twenty one Jim. Thank.

Thank you, Steve and good morning.

Revenues for the second quarter of 2021 were 193000.

Significant decrease compared to $29.5 million for the quarter ended June 30 of 2020.

As stated in our earnings release issued this morning during the second quarter of 2021. The company did not average seismic data acquisition crews operating in either the U S or in Canada as the Canadian season concluded at the end of the first quarter.

Near term outlook for seismic data acquisition activity in the U S remains challenging with the company currently operating one midsized channel count crew.

Based on currently available information the company anticipates operating one crew in the U S. During the second half of 2021 with periods of low utilization and potentially one crew in Canada during the fourth quarter.

Cost of services in the second quarter of 2021 was $3.3 million.

Increase of 83% compared to $19.7 million in the same quarter of 2020.

General and administrative expenses were $2.7 million in the second quarter of 2021.

A decrease of 36% compared to $4.3 million in the second quarter of 2020.

Depreciation and amortization expense in the second quarter of 2021 was $3.4 million or <unk>.

Decrease of 22% compared to $4.4 million in the same quarter of 2020.

Net loss in the second quarter of 2021 was <unk> 9 million or <unk> 38 loss per common share compared to net income of $1.5 million.

Or six cents per common share in the second quarter of 2020.

EBIT for the second quarter of 2021 was a negative $5.7 million compared to positive EBITDA of $5.8 million in the same period of 2020.

An EBITDA reconciliation was provided in our earnings release issued this morning.

Now I'll review some results for the six months ended June 32021.

Revenues for the six months ended June 32021 were $11.9 million a decrease of approximately 83% compared to $68.5 million for the six months ended June 32020.

Cost of services for the six months ended June 32020 was $14.3 million.

A decrease of 71% compared to $48.7 million in the same period of 2020.

General and administrative expenses were $5.6 million for the six months ended June 32021.

Decrease of 30% compared to $7.9 million in the same period a year ago.

EBITDA for the six months ended June 32021 was negative $7.5 million compared to positive EBITDA of $11.6 million in the same period of 2020.

And again, an EBITDA reconciliation was provided in our earnings release issued this morning.

Now I'll turn to some balance sheet items.

Our balance sheet continues to remain strong.

As of June 32021, we had debt including obligations under financing leases.

427000.

Cash and short term investments of $45.9 million.

Our current ratio was 10 six to one.

Working capital was approximately $44.4 million.

And with that I'll turn the call back to Steve for some comments on our operations well. Thank you Jan.

Needless to say the second quarter of 2021 was extremely challenging.

As indicated in our first quarter earnings release, the second quarter and ended the third quarter will reflect the low point for dolphin in terms of activity levels.

Pricing and production companies are continuing on their path of capital discipline, focusing on shareholder returns and keeping spending levels below cash flow.

Despite recent oil price improvement into the mid 70 range and natural gas prices in the upper $3 range capital spending levels.

Increased only slightly as many E&P companies have portions of the production hedged well below spot prices.

Rig count, which typically precede seismic data acquisition deployment is currently at $4.91, showing gains in five of the last six weeks and increase from $2.47, a year ago, but well below levels seen at this time of 2019 of 918.

The same is true for hydraulic fracturing fleets with the current count of 235 crews operating above the 70, a year ago, but well below the $3.66 crews. This time two years ago as we discussed in our first quarter 2021 earnings release demand for seismic data acquisition <unk>.

<unk> continues to lag behind the recent modest increase in oil service activity.

Seismic data acquisition activity remains at low levels, we are beginning to experience a slight uptick in bid activity in the U S and are encouraged by recent inquiries in Canada for the upcoming season included in the bid activity I request for carbon capture project carbon capture projects, while typically smaller.

Scope have certain levels.

<unk> ability and could offer new opportunities for the company.

In addition, the company maintains its commitments to its robust health safety environmental program ongoing client relationships and product quality.

The company made no capital expenditures during the first and second quarters of 2021.

As stated in our December 31, 2020 earnings release, the company's board of Directors has it has approved an initial capital budget of $1 million for 2021 as Jim stated earlier, the company's balance sheet remained strong with $45.9 million of cash restricted cash and short term.

<unk> and $44.4 million of working capital as of June 32021. The company is nearly debt free with notes payable and finance leases of $4.27 427000 as of June 32021.

While today's conditions in the seismic data acquisition market remained challenged.

There are likely to remain so in the coming months, we are encouraged by the overall improvement in both.

<unk> in the oilfield service sector. The recent increase in drilling and completion activities combined with hedging contracts that will ultimately unwind set the stage for success a recovery in the seismic data acquisition SEC sector I, Thank our hard working employees valued customers and trusted.

Shareholders as we work through these difficult conditions and towards better times ahead, and with that Cody I believe we are ready for questions.

Thank you if you'd like to ask a question. Please send by pressing star one on your telephone keypad.

Using a speaker phone. Please make sure that your mute function is turned off till you signal to reach our equipment.

Once again that is star one if you would like to ask a question.

Well pause for just a moment to allow everyone an opportunity to signal.

And once again Thats star one if you'd like to ask a question.

We will take our first question from Bruce <unk> with turnaround capital. Please go ahead.

Hi, Steve.

Just wondering what the strategy is obviously you can't keep burning $500 million in cash a quarter or so as you see work over the next few quarters.

What are your anticipation for cash losses.

Okay.

Gross.

We're not going to drift into any type of guidance and forecasts, but.

I will say that I believe at this point.

That.

Q2, as we said was the low point.

Based on what we're seeing right now.

We did not operate accrue during the entire quarter from.

2021, we do have a crew in the field. It is going to have some periods of low utilization, but we anticipate.

Keeping that crew busy through.

At the end of the year in the U S and into the first quarter, we think that.

As I said, we're going to have periods, where it is going to be down and we're anticipating operating.

Hopefully, having an earlier season.

The start to the season in Canada this year so.

It is going to continue to be difficult through the back half of 'twenty. One we certainly are watching the balance sheet and the cash position closely and we'll continue to make every effort and implement things to reduces the cash burn as much as possible.

What type of work are you doing in Canada.

The units being utilized.

Of the type of work as a carbon or is it just pure exploration work.

Most of the work that we've done in Canada and has been well in recent years, it's been primarily in the heavy oil basins.

In the past.

Our Canadian entity and going back.

To the days of the Titans.

Prior to that Thailand's merger has done some work off and on in the off season.

Regards to potash mining, but most of the work that is in Canada. These days is around the heavy oil sands.

Most of it will be three component in nature.

Of course, what we don't know is both in Canada and in the U S and what are the effects of <unk>.

Natural gas prices being in the upper threes and low low fours.

With that I'll open up some opportunity in both Canada and in the U S for <unk>.

More activity in natural gas basins, we'll see but.

Recent history has been.

Heavy oil sands.

Thanks.

Thank you we'll take our next question from John Potratz with researched investments.

All right very well, thank you very much for continuing through there.

What about the.

Carbon capture.

<unk>.

You don't have any contracts yet, but do you are you getting.

Many many interests in Europe, and your geological area or is that outside of your general area going forward.

You sort of a sense that this is really going to work into the carbon capture that there'll be.

Reasonable amount of business there.

Well good question, Jay and the.

Good to talk to you as always I'll always appreciate your support.

We executed some carbon capture projects in the past I believe.

We've done some in now.

Places like Wyoming and down into <unk>.

Louisiana in various places we are seeing more inquiries into.

U S land based carbon capture projects they.

They tend to be relatively smaller in nature there'll be.

No.

2025 square miles as opposed to a couple of hundred today they are typically.

Fairly dance as are most of our <unk> surveys.

And they typically will involve repeat ability.

And so what the intent is to one first of all to <unk>.

<unk> is kind of opposite of what we normally do we normally try to identify geologic structures that are conducive to the accumulation of hydrocarbons and then.

Wells drilled and extracted.

This is more looking for reservoirs or formations that could be conducive to.

Storage, which means that.

They have to have some level of scalability.

Escape proof and so phase one is to evaluate the geologic subsurface and see if the reservoir potential reservoir is conducive to injection and then many times there will be some follow up over time.

Our second survey repeated at some point in time to identify.

If they're in fact has been any movement of the fluid front, but.

Yeah.

We're seeing some activity level there I think.

Our technology moves very easily over that but we'll just see how the economics of carbon capture develop in.

What the what this turns to in the next few years.

So if you do get some of that business. It is a profitable endeavor.

Got it.

Projects that you might have with your oil E&P exploration correct.

Correct it is going to.

Typically they will be smaller.

A smaller crew.

At this point in time, it is activity level, which is encouraging.

As times improve.

And our utilization increases.

We have the channel count capacity and the energy source capacity too.

Address carbon capture projects as they come up maybe by.

Pulling off some some equipment and some people from existing crews that.

That would certainly be more additive from a financial standpoint than just doing it stand alone. So I think it's a business that will continue to pursue and continue to be involved in and and.

Certainly something that I think will be a benefit to all involved.

Very good it sounds exciting.

There's one other thing which is.

As I mentioned in the U S for.

Batteries need lithium and there's very little lithium.

The United States is there any exploration going on for looking for lithium.

And looking at the geological formations that would go there that might be potential surface.

We have had some inquiries into using our technology for.

Identifying lithium.

<unk>.

It's a.

Little bit different type of use of <unk>.

<unk> physical tools, it's not it's a little more difficult than that.

It's somewhat loosely similar too.

Looking for coal seams and that Youre not looking for a geologic formation that is conducive.

The accumulation you're actually trying to identify.

Some mineral types and so we've had some inquiries around that but I don't think we've had anything really.

Come to fruition from from the.

The lithium aspect now.

We've done a little bit in the past and I'm sure. We will we will in the future around things like helium.

Things around.

Geothermal those types of things, but I wouldn't think that lithium would be something at this point it would be a big factor for us.

Okay, well just wanted to see if there's life changes.

Some parts of the business don't do well, but other parts of the business sort of takeoff in here and just your ability to take and do that.

Okay. The other thing that during this quarter you mentioned look at the cost.

My sense is you are spending a lot of money that in the quarter was only in the quarter the maintenance of your equipment.

To be able to go out.

And be ready to move so that maybe during the quarter there was a little bit higher expenses on the maintenance than you might otherwise would've incurred.

Going forward would that be a fair way of looking at that Europe.

Your system is in great shape.

I would characterize what we've done in the quarter.

With regards to maintenance expense has been too.

Keep keep a certain level of equipment maintained and ready for deployment. So as we further deploy in the future.

Energy sources and channel Count crew count and those types of things certainly the maintenance level is going to or the maintenance cost will go up accordingly.

So I think we have.

Isn't it characterize our maintenance expenditures in the quarter as being.

Materially large.

I think we are.

Continuing as we always have to maintain our equipment that's ready to go in and has limited downtime when it's deployed so.

As we continue to increase deployment over time, I would anticipate some level of maintenance expense to increase.

Okay.

Being ready to move when you get a chance for a contract.

Okay.

What is the competition like.

Are you finding competitors are also suffering and their cutting prices.

It's harder to get.

Contract that profitable or.

Seeing any.

What are you seeing out in the marketplace.

Yes, the competitive landscape really hasn't changed much in the last year.

I think the <unk>.

Geophysical market has been difficult for everybody in the lower 48.

And.

As well as worldwide.

I don't think it's a stretch to say that the geophysical markets had its issues.

Worldwide I think we are.

Turning to see some increase in activity.

Leading indicators in the international markets I think we're starting to see some leading indicators and maybe some of the marine.

Operations Marine seismic surveys around the world but.

We're not quite seeing that improvement yet to the level we are.

At least anticipated increases around the world. So I don't think the competitive landscape has changed all that much I think the market is difficult for everybody and really the issue here is just a.

You know as as we've addressed in Q1 and Q2, both it's wanted.

Restricted spending levels on behalf of our client base there.

Continuing to focus on shareholder returns and they're continuing to.

Stay keep their spending levels within cash flow.

Many of them have hedging contracts they entered into a year ago that will be rolling off that certainly have affected cash flow and.

And so we are seeing some increase in slight increase in bid activity, particularly amongst some of the private players and a few more conventional things that have been kind of showing up so.

I don't think they are.

I think it's tough on everybody right now.

But you're positioning yourself to survive and do well and you are seeing the prospective clients.

We're seeing prospect.

Out there.

Today that maybe you didn't see three or four months ago is that a fair representation.

I think Thats fair I, just want to continue to emphasize Jay that we are seeing an uptick.

The rig count and the.

Hydraulic fracturing fleet count numbers are both up from a year ago, but they are significantly down from where they were at this time in 2019 and so while.

The rig count certainly isn't.

Where it needs to be to well I'll just say it this way.

Okay, it's taking a while to work through the inventory of drilled both prospects and.

So having said that we certainly have seen a few projects that have come up for bid.

We've seen some things that have continued to slide a little bit on the schedule that happened to us in Q2.

Could happen again to us and.

Q3, but yes, I think we're seeing a few more.

Inquiries and a little bit of activity level increase but.

That's not to say that there is going to continue to be a challenging market in the.

Next quarter or two.

Good I'm glad you're having to do this not myself. Thank you very much.

Thinking out there moving ahead.

Thank you Jay.

Okay.

Actually it's something like this is quite often very good because what it does is.

Then get you to think about things a lot differently than I would look forward to hearing from you in the next quarter, some innovative things that you've undertaken because.

Yes.

Where do you and product to think about like very definitely looking forward to that thank you.

Thank you.

Thank you well take our next question from Jared Cohen with JM Cowen and company.

Hi, Yeah. My question was answered thank you very much.

Well that was easy.

[laughter].

Thank you that does conclude today's question and answer session I'd like to turn the conference back over to Mr. Jumper for any additional or closing remarks.

Well first of all I want to thank everybody for listening in to our second quarter 2021 earnings and operations update call.

As always we're very appreciative of the support of our shareholders.

Certainly want to thank our hard working employees and our valued clients.

Just to sum it up.

Q2 was a low point in terms of activity we're encouraged by.

Some of the inquiries that we're beginning to see come out.

At the end of Q3, thank you.

Thank you that does conclude today's conference. We do thank you all for your participation you may now disconnect.

Q2 2021 Dawson Geophysical Co Earnings Call

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