Oil Prices and Weather Weigh Down Dawson Geophysical's Q2 Results

By Matthew DiLalloMarketsFool.com

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Weak oil prices continue to affect demand for Dawson Geophysical's (NASDAQ: DWSN) seismic data services. Unfortunately, oil price volatility was not the only issue plaguing the company during the second quarter. The inclement weather, as well as several client delays, hurt utilization -- adding further pressure on revenue and profits.

Dawson Geophysical results: The raw numbers

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YOY = year over year. Data source: Dawson Geophysical.

What happened with Dawson Geophysical this quarter?

Conditions are brutal in the oil patch right now:

  • Dawson Geophysical operated four to six crews during most of the quarter. However, inclement weather conditions at the beginning and the end of the quarter affected the utilization of its crews.
  • The company also experienced a few client-driven project delays, which caused longer-than-expected crew moves.
  • On a more positive note, operating expenses fell alongside revenue, slumping 40.1% year over year. Meanwhile, general and administrative expenses declined 28.3%. These spending reductions keep its net loss relatively flat.
  • The company also improved its underlying profitability with EBITDA rising from a negative $5.7 million in the year-ago quarter to a negative $1.5 million in the second quarter. Even better, the company's EBITDA through the first half of the year was positive at slightly more than $1 million.

What management had to say

CEO Stephen Jumper commented on the company's results:

Volatile oil prices are making it tough for producers to get a handle on their cash flow, which in turn is making them reluctant to spend capital on things like seismic data. That is tamping down demand for the company's services. According to Jumper, "2016 will be a difficult year" for the company. In fact, he said that it would likely be the "most difficult in my thirty-plus years of experience with the Company and in the industry." That statement really says it all.

Looking forward

Because of the current conditions, Dawson Geophysical's outlook for the balance of the year is uncertain. Jumper stated:

In other words, investors can expect at least one more very tough quarter for the company.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Dawson Geophysical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.