Investors can't be too surprised at the difficulties that Dawson Geophysical (DWSN 0.84%) has faced in recent years. When oil prices plunged, it was no longer profitable for many drillers to develop new wells, and the costs of seismic exploration made it easy for cost-conscious exploration and production (E&P) company executives to take a knife to their capital budgets. Now that oil prices are recovering, the corresponding bullish argument suggests that Dawson should be able to benefit from greater interest in developing previously shuttered sites.

Coming into Thursday's first-quarter financial report, Dawson investors wanted to see big gains in revenue, although they didn't expect the company to return to profitability. Dawson's results were mixed, and that suggests that there's still work to do on a number of key fronts before the seismic services specialist can declare victory over the embattled energy markets.

Beige-colored equipment truck with Dawson logo on the side, driving through a prairie field, with slogan reading The New Dawson.

Image source: Dawson Geophysical.

Dawson narrows its losses

Dawson Geophysical's first-quarter results showed the progress the company continues to make. Revenue rose 18% to $49.9 million, but unfortunately, that was far short of the 47% top-line increase that investors had wanted to see. Dawson lost $1.7 million during the period, working out to $0.07 per share, but that figure was more than 80% narrower than the red ink from the previous year's first quarter, and it also outperformed the consensus forecast for $0.10 per share in losses.

Dawson continued to increase its operational footprint during the quarter, pointing to higher demand. After starting the quarter with 10 crews operating -- six in the U.S. and four in Canada -- Dawson ramped up over the period to finish with two more U.S. crews, making a total of 12 systemwide. The Canadian winter season lasted longer than normal, boosting utilization north of the border. As of right now, Canadian operations have ceased, and Dawson is running just six U.S. crews.

Where Dawson really looked good was in its cost containment. Operational expenses were actually down year over year by more than 5%, and although reduced depreciation costs were a big component of the decline, Dawson also successfully cut overhead expenses as well as basic operating costs.

CEO Stephen Jumper celebrated the performance. "The recent rise in oil prices," Jumper said, "combined with forecasted oil price increases through 2018, has resulted in increased demand for our services." The CEO also noted that internal restructuring efforts have paid off by boosting Dawson's bottom line.

What's ahead for Dawson Geophysical?

Dawson is optimistic that greater awareness of expense management within the energy industry will lead more drillers to use seismic services. As Jumper put it, "The oil and gas industry's renewed focus on profitability as well as production growth has further driven an increase in requests for proposals, as more E&P operations seek to lower drilling and completion costs as well as maximize production through the integrated use of seismic data into their development plans." Conditions won't rival the boom times of 2015 anytime soon, but they could still result in steady improvement over time.

Investors can continue to expect further potential ramping-up of activity. Dawson repeated its earlier projection that it expects to run as many as seven U.S. crews during the second and third quarters. Once Canadian weather cooperates later in the year, winter operations there should return toward the end of 2018.

Dawson Geophysical shareholders didn't have a big reaction to the news, and the stock was close to unchanged at midday following the announcement. For Dawson to grow, it might need to consider moves like expanding its geographical scope beyond the U.S. and Canada to provide services in other oil-producing parts of the world. Otherwise, the seismic specialist will remain largely dependent on energy prices to determine whether its core customers will engage its services.