Dawson(DWSN) - 2021 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements Presents the company's financial statements for Q2 and H1 2021, detailing a significant revenue decline, substantial net loss, and negative operating cash flow Condensed Consolidated Balance Sheets Details the company's balance sheet as of June 30, 2021, showing a decrease in total assets to $86.4 million and stockholders' equity to $77.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $86,379 | $103,377 | | Total Current Assets | $49,026 | $58,590 | | Property and equipment, net | $31,967 | $38,900 | | Total Liabilities | $9,115 | $12,403 | | Total Current Liabilities | $4,644 | $7,441 | | Total Stockholders' Equity | $77,264 | $90,974 | Condensed Consolidated Statements of Operations Reports a severe decline in Q2 2021 revenues to $193,000 and a $9.0 million net loss, contrasting sharply with prior-year income Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $193 | $29,499 | $11,941 | $68,478 | | (Loss) Income from Operations | $(9,283) | $1,123 | $(14,718) | $2,508 | | Net (Loss) Income | $(9,017) | $1,500 | $(14,245) | $2,493 | | Diluted (Loss) Income per Share | $(0.38) | $0.06 | $(0.61) | $0.11 | Condensed Consolidated Statements of Cash Flows Reports net cash used in operating activities of $1.3 million for H1 2021, a reversal from $9.0 million provided in H1 2020, driven by net loss Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,298) | $8,976 | | Net cash provided by (used in) investing activities | $335 | $(2,545) | | Net cash provided by (used in) financing activities | $211 | $(2,959) | | Net (decrease) increase in cash | $(621) | $3,207 | Notes to Condensed Consolidated Financial Statements Provides details on accounting policies, financial instruments, debt, leases, and contingencies, including a significant decline in geographic revenues and a waiver for a loan covenant - The company is a leading provider of North American onshore seismic data acquisition services, serving major and independent oil and gas companies[22] Operating Revenues by Geographic Region (in thousands) | Region | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | United States | $193 | $29,482 | $8,977 | $56,670 | | Canada | $0 | $17 | $2,964 | $11,808 | | Total | $193 | $29,499 | $11,941 | $68,478 | - The company has a revolving credit facility of up to $15 million with Dominion Bank, secured by accounts receivable and a $5 million restricted deposit. As of June 30, 2021, no amounts were borrowed under this facility[51] - The company is a defendant in a lawsuit filed by Weatherford alleging groundwater contamination. Management believes the resolution will not have a material adverse effect on the company's financial condition[61] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant revenue decline due to low crew utilization, outlines challenging near-term outlook, and details expense reductions and liquidity management, including negative EBITDA for Q2 2021 Overview Highlights the company's dependence on oil and gas prices, noting Q2 2021 as a low point with no crew operations, and a challenging H2 2021 outlook with potential new carbon capture opportunities - Activity levels hit a low point in Q2 2021, with no seismic data acquisition crews operating in the U.S. or Canada[75] - 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 in the fourth quarter[75] - The company is seeing a slight increase in bid activity, including requests for carbon capture projects, which could represent new opportunities[76] Results of Operations Analyzes the dramatic 99.3% decrease in Q2 2021 operating revenues to $193,000 due to low crew utilization, alongside significant reductions in operating and G&A expenses Year-over-Year Financial Performance Comparison | Metric | Q2 2021 | Q2 2020 | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $193,000 | $29,499,000 | -99.3% | | Operating Expenses | $3,330,000 | $19,732,000 | -83.1% | | G&A Expenses | $2,746,000 | $4,261,000 | -35.6% | - Depreciation and amortization expense decreased in 2021 compared to 2020 due to multiple years of reduced capital expenditures[84] Use of EBITDA (a Non-GAAP measure) Explains the use of EBITDA as a non-GAAP measure, reporting a $5.7 million loss for Q2 2021, a sharp reversal from a positive $5.8 million in Q2 2020 EBITDA Reconciliation (in thousands) | Period | Net (Loss) Income | EBITDA | | :--- | :--- | :--- | | Three Months Ended June 30, 2021 | $(9,017) | $(5,667) | | Three Months Ended June 30, 2020 | $1,500 | $5,799 | | Six Months Ended June 30, 2021 | $(14,245) | $(7,525) | | Six Months Ended June 30, 2020 | $2,493 | $11,630 | Liquidity and Capital Resources Discusses the company's liquidity, noting $1.3 million net cash used in operations for H1 2021, a minimal $1.0 million capital budget, and an undrawn $15 million credit facility with a covenant waiver - Net cash used in operating activities was $1,298,000 for the first six months of 2021, compared to net cash provided of $8,976,000 in the same period of 2020[93] - The 2021 capital budget is limited to $1,000,000 for necessary maintenance, with no capital expenditures made in the first six months of 2021[96] - The company received a limited waiver from Dominion Bank for non-compliance with the tangible net worth covenant of its loan agreement for the period ended June 30, 2021[101] Quantitative and Qualitative Disclosures about Market Risk Details the company's market risks, including credit risk concentration in the oil and gas industry, interest rate risk on its variable-rate credit facility, and foreign currency exchange risk - The company's principal market risks include fluctuations in commodity prices and credit risk concentration, as all clients are in the oil and natural gas industry[112] - The allowance for doubtful accounts was $250,000 at June 30, 2021[114] - The company is exposed to interest rate changes on its variable-rate Revolving Credit Facility and holds cash balances exceeding federally insured limits[116][117] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2021, the President and Chief Executive Officer and the Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[118] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[119] Part II. OTHER INFORMATION Provides information on legal proceedings, risk factors, and exhibits filed with the report Legal Proceedings Refers to Note 7 for details on legal proceedings, primarily a lawsuit by Weatherford regarding alleged groundwater contamination, not expected to have a material adverse effect - For a discussion of legal proceedings, the report refers to Note 7 – Operating Commitments and Contingencies in the financial statements[121] Risk Factors States no material changes to the company's risk factors from those disclosed in the 2020 Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the 2020 Annual Report on Form 10-K[122] Exhibits Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in Inline XBRL format - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (101, 104)[124]