DAWSON GEOPHYSICAL CO Q1 FY2021 earnings call

• Impact of COVID-19: Seismic data acquisition market challenged globally, especially in US and Canada. Current demand for seismic services low despite oil price improvement to over $60 per barrel. - Operational status: Operated one seismic crew in US with limited utilization and one crew in Canada. Near-term outlook for US seismic activity challenged. - Balance sheet: Strong with $47 million cash, ~$587k debt, current ratio 10.1:1, working capital ~$49.7 million. - Equipment and strategy: No capital expenditures in Q1 2021. Implemented equipment program, maintained health/safety/environmental program and key relationships. - Market trends: Seismic data demand lags drilling/completion recovery due to depth of downturn, slow capital budget increase, large drilling prospect inventory, and slow rig count recovery.

For the first quarter ended March 31, 2021, Dawson Geophysical reported revenues of $11.7 million, a decrease of approximately 70% compared to $39 million in Q1 2020. Net loss was $5.2 million or $0.22 per share compared to net income of $1 million or $0.04 per share in Q1 2020. EBITDA was negative $1.9 million in Q1 2021 vs. $5.8 million in Q1 2020. The company operated one seismic data acquisition crew in the US with limited utilization and one crew in Canada. Cost of services in Q1 2021 was $10.9 million, down 62% from Q1 2020. G&A expenses were $2.8 million, down 24% from Q1 2020. Depreciation and amortization expense was $3.4 million, down 30% from Q1 2020. Balance sheet was strong with $47 million in cash and short-term investments, debt of ~$587,000, current ratio 10.1:1, and working capital ~$49.7 million.

The company will not provide any guidance. It anticipates limited crew activity in Q2 with up to one crew operating in the US and low utilization in the back half of 2021.

• Market challenges: Seismic data acquisition market remains challenged with low activity levels. - COVID impact: Continued uncertainty from pandemic affecting oilfield services. - Timing issues: Delayed recovery in seismic demand due to depth of downturn, slow capital budget increases, and slow rig count recovery. - Oil price volatility: Fluctuations in oil prices can impact demand for seismic services.

Q: Why do oil companies want to reshoot for images despite rich seismic data already in place?

A: There's still large acreage in the US and Canada that hasn't had first or second round 3D exploration or newer techniques applied. Channel counts have increased, enhancing coverage and detail. Activity has concentrated in certain basins, and new data sets are starting to reach the market as activity improves.

Q: How much of a time lag is there between drilling rig activity increase and demand for shooting seismic data?

A: Difficult to put a timeline on it. Completion activity can move faster than drilling. Rig count recovery is slower than past cycles. Indicators to watch include continued rig count improvement and movement into new basins.

Q: Why did Dawson enact a poison pill for one year?

A: Dawson had a shareholders' Rights Plan in the past. They revisited it due to stock price changes and to protect shareholders. It's a standard plan with standard terms.

Q: Where does the current cycle rank compared to prior cycles?

A: By far the deepest. It had multiple factors like supply issues, COVID-related demand destruction, and energy investor apathy. Encouraging signs of improvement in international and marine seismic activity are seen but coming out of a deep hole.

Q: How is Dawson dealing with staff downsizing and being ready for recovery?

A: They've reduced cost structure, maintained resources. Recovery not like past years; need 2 large channel count crews. They've worked on efficiency, kept staff attitudes positive, and are managing cash burn while responding to customer needs.

Q: Are customers starting to reallocate money towards seismic?

A: Conversations are happening, but bid activity is slow. E&Ps are quiet on capital budgets; projects need to stand alone. Some talk and chatter, but concrete contracts not immediate yet.

Q: Thoughts on management taking salary reductions and shares?

A: Significant salary reductions have been done. Management is aligned with shareholders, and conversations about ownership continue.

Q: Conversations with multi-client customers about seismic acquisition?

A: Multi-client guys have projects talked about but need underwriting. They deal with external and internal funding, and projects are a cascaded effect; some are close to starting but need the right funding mix.