The energy industry has undergone countless ups and downs in its history, and as exciting as the booms in oil and gas production are, the inevitable slowdowns can be painful. Shareholders in seismic data-acquisition services provider Dawson Geophysical (NASDAQ:DWSN)would rather forget its fiscal 2014, with the company's fiscal fourth-quarter results confirming a substantial reduction in revenue and large losses for the year. Nevertheless, Dawson hopes fiscal 2015 will bring new opportunities to regroup and renew its growth trajectory. Let's take a closer look at how Dawson Geophysical did last quarter and for fiscal 2014.
Dawson Geophysical comes up empty -- for now
Investors had braced for disappointing financials from Dawson Geophysical, but the reality was worse than they had anticipated. For the fourth quarter, revenue fell more than 10% to $62.6 million, and the company reported a net loss of $0.49 per share, a bigger hit than the $0.35 per-share loss the company reported in last year's fiscal fourth quarter. Operating earnings fell 44% from year-ago levels, and even adjusting for $950,000 in transaction costs connected to Dawson's acquisition of TGC Industries, Dawson fell well short of what shareholders were looking for from the company's bottom line.
Dawson's full-year results were similarly gloomy. Total sales sank more than 14%, and a 60% drop in operating earnings pushed Dawson to a net loss of $1.59 per share, reversing fiscal 2013 profit of $1.31 per share. As a result of the poor conditions, Dawson slashed its capital expenditure budget by roughly a third as it waits for better industry conditions to prevail.
Unfortunately, it's uncertain when the oil and gas industry might pick up enough to aid Dawson Geophysical's results. Weather continued to play a factor in the fourth quarter after dramatically affecting Dawson's Canadian business activity during the first half of the fiscal year, and the company didn't have any operations in Canada during the fourth quarter. Microseismic activity was limited, and reduced use of Dawson's seismic data-acquisition crews weighed on the company's ability to generate revenue.
Will fiscal 2015 be better for Dawson Geophysical?
Dawson CEO Stephen Jumper acknowledged the tough conditions in the earnings release, noting that "fiscal 2014 was a difficult year for the worldwide geophysical industry and our company." Yet he did his best to put a positive spin on the future, with expectations that the company will sustain its nine-to-10-crew complement over the next three to six months. Moreover, Jumper pointed to "a slight improvement in utilization rates in the fourth quarter of calendar 2014 compared to the third quarter" as possibly creating at least a bottom in industry conditions.
Dawson Geophysical also continues to enjoy a solid balance sheet with plenty of cash on hand. Partially because of that balance-sheet strength, Dawson remained able to pay its $0.08 per share quarterly dividend despite its recent losses. The company's nearly 2% yield doesn't put it among the top dividend stocks in energy, but it nevertheless shows Dawson's long-term optimism about its ability to return to profitability.
Yet Dawson's future increasingly relies on doing its best to take full command of the geophysical services industry. The company's proposed acquisition of TGC is potentially a huge step in that direction, with Dawson expecting better service levels for its most important clients. The integration of employee resources and physical assets across a larger base should combine with more efficient and time-sensitive provision of higher-resolution imaging to help customers get the value they need from the combined Dawson-TGC entity going forward.
Dawson Geophysical will inevitably need help from broader conditions in the energy industry in order to encourage its exploration and production clients to spend more to locate lucrative sources of energy products. For now, though, Dawson is doing all it can to put itself in the best position possible to benefit once industry conditions turn more favorable.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Dawson Geophysical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.