Many energy stocks have rebounded from their worst levels of 2016, but seismic services provider Dawson Geophysical (NASDAQ:DWSN) hasn't yet seen benefits from more extensive activity. Indeed, drilling companies have been cautious in their capital spending, and coming into Thursday's fourth-quarter financial report, Dawson investors understood that they had to anticipate even worse results than they suffered last year. Yet Dawson's results were even weaker than expected, and that is making some shareholders nervous about the company's longer-term prospects.

Let's take a closer look at Dawson Geophysical to see how it did and what the future could bring for the seismic services provider.

Seismic testing equipment on site.

Image source: Dawson Geophysical.

Dawson Geophysical looks less energetic

Dawson Geophysical's fourth-quarter results continued to show the impact of sluggish conditions in the energy market on the company's key fundamental performance.  Revenue for the quarter plunged 45% to $30.1 million, which was quite a bit worse than the consensus forecast for 30% declines in the company's top line. Dawson reported a net loss of $7.19 million, which was larger by almost half from the loss that it suffered a year ago. Per-share losses came in at $0.33, which was just about what investors had expected to see.

Taking a closer look at the report, it was hard to find many good things to say about Dawson's current condition. The company has worked very hard to keep its expenses under control, including a more than 40% drop in operating expenses and a roughly $1 million decline in overhead costs. Yet even the slashing of total expenses by a third wasn't enough to keep its operating loss from widening.

Dawson Geophysical has also found it impossible to restore the number of crews it has operating to anywhere near their levels before the drop in oil prices in 2015. The company said that it operated four to six crews in the U.S. and Canada during the fourth quarter, and it anticipates those conditions to continue in the first quarter of 2017 as well. The winter months are typically a slow time for exploration activity, especially in Canada, but the lack of enthusiasm about future prospects is somewhat troubling.

The problem Dawson faces is that exploration company clients aren't jumping back into the market despite much better oil prices. Even though oil prices averaged nearly $50 per barrel during the fourth quarter, industry players aren't certain about their own future or where the market is likely to go, and that's creating difficulty for Dawson in predicting its future prospects.

CEO Stephen Jumper gave more perspective on the conundrum that the company faces right now. "Demand for seismic data acquisition services in North America and worldwide continues to be soft in response to low and uncertain oil prices and reduced client expenditures," Jumper said. Moreover, in discussing the price increases recently, the CEO noted that "while encouraging, it remains to be determined if the recent strengthening in oil prices can be sustained, and the price increases have yet to result in a meaningful increase in demand for our services."

Can Dawson Geophysical do better in 2017?

Dawson also isn't predicting any immediate bounce in demand at this point. In Jumper's words, "Our client base continues to take a cautious approach to their capital spending." He also said that visibility beyond the first quarter "remains unclear," although he also said that he believed that oil companies will start to ease back into capital spending and increase their demand for seismic services.

Meanwhile, Dawson will keep on using its survival strategy of maintaining its balance sheet strength. Efforts to cut costs have been vital for Dawson to do as well as it has, and even though the situation is far from ideal, it's better than it would have been had the company not worked as hard as it did to stay lean during these tough times.

Dawson Geophysical stock didn't show any substantial trading activity in the pre-market session immediately following the announcement, but investors have generally remained optimistic about the seismic specialist's prospects throughout the downturn in the energy sector. It's unclear how much patience shareholders have left, but Dawson is doing everything it can to sustain its fundamental strength and fight against the industry's challenges.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.