While the prices of crude oil and natural gas do their typical trampoline routine, seismic companies are sending a much clearer signal. If you're in the geophysics business today, the trend is your friend.
Let's start with the big magilla, CGGVeritas (NYSE: CGV). Paris-based CGG, which freaked out some investors last fall, has released a decidedly bullish quarterly report this time around. In dollar terms, revenue came in 14% higher, and earnings jumped 35%. When translated to euros, the sales figure actually declined compared to last year, but earnings remained higher.
Like Nabors Industries (NYSE: NBR) and Precision Drilling Trust (NYSE: PDS) in the drilling industry, CGG's active both on the service and the manufacturing sides of the geophysical business. Each segment is performing well, with demand for both data and equipment remaining high. Company backlog stands at $1.7 billion, well beyond that of capable competitor Petroleum Geo-Services.
As for the outlook, CGG echoed Noble's (NYSE: NE) recent comments about the lengthening of the current cycle. Along with my other favorite European player, Acergy SA (Nasdaq: ACGY), CGG is extremely well-positioned to profit from the unwavering deepwater exploration trend.
From land to sea, CGG has global oil and gas explorers pretty well covered. Dawson Geophysical (Nasdaq: DWSN), on the other hand, is a more tightly focused operation, dominating the U.S. onshore seismic acquisition market. When the weather cooperates, results are as explosive as the dynamite once commonly used to perform seismic acquisition.
This time around, Dawson got everyone charged up, with revenue up 23%, and earnings beating the average estimate by more than 10%. As usual, a higher crew count gave results a lift, but productivity on existing crews also rose. This strong execution should be no surprise by now, given Dawson's track record.
As with CGG, Dawson's outlook is very positive, thanks to incredibly active independents like Chesapeake Energy (NYSE: CHK). Whereas the deepwater is fueling offshore seismic, on shore, it's all about the shale plays. If you have no idea what I'm talking about, check out the recent coverage highlighted below. These plays are simply stealing the show.
Recent shale tales:
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