The Sweet Smell of Seismic

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It's kind of amazing: Drillers and seismic companies servicing the Lower 48 share customers like Chesapeake Energy (NYSE: CHK) and Anadarko Petroleum (NYSE: APC). The companies operate in a more or less identical cyclical environment. And yet, the results from them are like night and day. Of course, customer demand is only half the story.

Unit Corp (NYSE: UNT) and Patterson-UTI (Nasdaq: PTEN) have been stacking rigs like chips at a Vegas poker table. In the rig game, however, a stacked rig is a bad thing, because it isn't out in the field making money.

In contrast, seismic crews, which collect and process data used to identify drilling targets, are in short supply. Motley Fool Hidden Gems pick Dawson Geophysical (Nasdaq: DWSN) added three new crews during its recently completed fiscal year. This is key to understanding how the firm boosted its bottom line in such a big way.

In the most recent quarter, Dawson pulled in more than $75 million in revenue -- a 47% increase over last year. The annual gain was even bigger. All told, the company set new records for the top line, EBITDA, and net profits.

It wasn't simply about putting more feet on the ground, either. The company noted increases in both pricing and productivity. These are really two sides of the same coin. As Dawson provides more efficient service, saving its customers time and money, it can charge more.

If you follow the cash, you'll see that Dawson reinvested just about all of its operating cash flow into the business last year. It's now announced a preliminary budget for next year, which is only a little more than half what the company spent last year.

Combine that guidance with a robust order book and you know what that means, Fool: Free cash flow will be raining down from the heavens in the upcoming fiscal year. Or, more fittingly, spouting out of the earth. This is a beautiful thing, especially when the credit markets are going kaput.

Related Foolishness:

• The seismic story provides a valuable investing lesson.
• Watch out, drillers -- the Canadians are invading.
• Perhaps you'd be interested in a driller that's more internationally inclined.