Dawson(DWSN) - 2020 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements for the quarter ended March 31, 2020, reporting revenues of $39.0 million, net income of $1.0 million, and total assets of $130.8 million, with accompanying notes detailing accounting policies, revenue disaggregation, debt obligations, and a repaid PPP loan Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Items (in thousands) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $72,526 | $65,618 | | Total Assets | $130,828 | $127,608 | | Total Current Liabilities | $21,782 | $18,257 | | Total Liabilities | $27,666 | $24,443 | | Total Stockholders' Equity | $103,162 | $103,165 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share) | Income Statement (in thousands, except per share) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Operating Revenues | $38,979 | $51,164 | | Income (loss) from operations | $1,385 | $(317) | | Net Income (Loss) | $993 | $(137) | | Diluted EPS | $0.04 | $(0.01) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Items (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(173) | $(1,567) | | Net cash used in investing activities | $(1,679) | $(1,851) | | Net cash used in financing activities | $(1,432) | $(2,052) | | Net decrease in cash | $(3,419) | $(5,324) | Notes to Condensed Consolidated Financial Statements - The company is a leading provider of North American onshore seismic data acquisition services, serving major and independent oil and gas companies in the U.S. and Canada[22] Operating Revenues by Geography (in thousands) | Operating Revenues by Geography (in thousands) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | United States | $27,188 | $37,636 | | Canada | $11,791 | $13,528 | | Total | $38,979 | $51,164 | - The company has a revolving credit facility with Dominion Bank for up to $15 million, secured by accounts receivable and a $5 million restricted cash deposit. As of March 31, 2020, no amounts were borrowed under this facility[54][55] - On April 15, 2020, the company received a $6.4 million loan under the Paycheck Protection Program (PPP). However, due to subsequent guidance creating uncertainty about qualification, the company decided to repay the loan in full by May 14, 2020[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the severe impact of the COVID-19 pandemic and oil supply surplus on the oil and gas industry, leading to a 23.8% decrease in Q1 2020 revenues to $39.0 million and prompting cost-saving measures, with liquidity supported by cash and credit facilities - The oil and gas industry has been severely impacted by a significant deterioration in oil demand from the COVID-19 pandemic and a surplus in oil supply from Saudi Arabia and Russia, causing prices to plummet and forcing exploration and production companies to cut capital budgets by 30% to 50%[82] - In response to market uncertainty, the company reduced non-field level support staff, expecting annual savings of approximately $4.3 million, and implemented senior executive base salary reductions of approximately 20%, expected to save an additional $0.9 million annually[83] Key Financial Metrics (in thousands) | Key Financial Metrics (in thousands) | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $38,979 | $51,164 | -23.8% | | Operating Expenses | $29,016 | $40,856 | -29.0% | | G&A Expenses | $3,674 | $4,544 | -19.1% | | Depreciation & Amortization | $4,904 | $6,081 | -19.4% | EBITDA (Non-GAAP) Reconciliation (in thousands) | EBITDA (Non-GAAP) Reconciliation (in thousands) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net income (loss) | $993 | $(137) | | Depreciation and amortization | $4,904 | $6,081 | | Interest (income) expense, net | $(65) | $16 | | Income tax benefit | $(1) | $— | | EBITDA | $5,831 | $5,960 | - The Board of Directors approved an initial 2020 capital budget of $5.0 million, primarily for maintenance. For the three months ended March 31, 2020, $2.34 million has been utilized[106] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks include commodity price fluctuations, significant credit risk concentration within the oil and gas industry, interest rate changes on variable-rate debt, and foreign currency exchange risk from Canadian operations, with no derivative hedging employed - The company's principal market risks include fluctuations in commodity prices, concentration of credit risk with clients in the oil and natural gas industry, interest rate risk on variable-rate debt, and foreign currency exchange risk from Canadian operations[124][126] - Due to all clients being in the oil and gas industry, the company has a significant concentration of credit risk. The allowance for doubtful accounts was $250,000 at March 31, 2020[126] - As of March 31, 2020, the company held a total of $30.202 million in cash, restricted cash, and short-term investments[129] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes in internal control over financial reporting during the first quarter - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[130] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[131] Part II. OTHER INFORMATION Item 1. Legal Proceedings The company is defending against a lawsuit by Weatherford International concerning alleged groundwater contamination, disputing the claims and not expecting a material adverse effect on its financial condition or operations - The company is a defendant in a lawsuit filed by Weatherford International, LLC, alleging contribution to groundwater contamination. The company disputes the allegations and does not expect the resolution to have a material adverse effect[67][133] Item 1A. Risk Factors Updated risk factors highlight potential material adverse effects from health epidemics like COVID-19 and the severe impact of current macroeconomic conditions, including the pandemic and oil supply surplus, on commodity prices and service demand - A new risk factor highlights that health epidemics, such as the COVID-19 pandemic, may have material adverse effects on the company's business, financial condition, results of operations, and cash flows[136][137] - Another new risk factor emphasizes that the combination of the COVID-19 pandemic and the oil supply surplus has caused a significant deterioration in oil demand and prices, which is expected to continue to negatively impact the business and demand for its services[138][139] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the company's organizational documents, a PPP loan Promissory Note, various letter agreements, and required CEO and CFO certifications - The report includes several exhibits, such as a Promissory Note for a PPP loan dated April 15, 2020, letter agreements with executives, and required certifications from the CEO and CFO[143]