Image source: Dawson Geophysical.

Seismic services specialist Dawson Geophysical (NASDAQ:DWSN) relies on the energy industry for its livelihood, and lately, oil prices haven't cooperated, having failed to rebound from their steep plunge over the past year. Just as National Oilwell Varco (NYSE:NOV) and other suppliers of essential parts and components used in drilling have seen their share prices driven downward, so too has Dawson Geophysical had to weather reduced demand for its seismic crews. Coming into the company's third-quarter financial report, Dawson investors saw little relief in sight for the seismic industry, but Dawson's results actually showed unexpected resiliency in the face of tough conditions. Let's look more closely at Dawson Geophysical and whether it can keep fighting against low oil prices.

Dawson Geophysical keeps seeing red
Dawson Geophysical's third-quarter results were far from perfect, but they were still less discouraging than they've been in past quarters. Operating revenues were flat at $62.5 million, thanks to the now-included figures that include sales from the now-acquired TGC Industries, and that was almost $5 million better than the consensus forecast among investors. Yet net losses narrowed by more than 25% to $2.87 million, and that translated to a diluted loss of $0.13 per share, far better than the $0.42 per share loss that investors had feared.

Looking more closely at Dawson's results, pro forma numbers that include past results from TGC show both the true extent of the decline in sales and the company's success in protecting its bottom line. On a pro forma basis, revenue was down nearly 30% from what Dawson and TGC combined brought in during the third quarter of 2014. However, given TGC's losses from the previous year, combined figures make the improvement on the bottom line even more substantial, with losses getting cut by more than half compared to $6.56 million in the year-ago quarter.

Operationally, though, there were some signs of life in Dawson's results. The company ran 10 crews in the U.S. market during the quarter, up substantially from the seven that it had working during much of the second quarter. Moreover, although flooding in Texas during the spring quarter led to expenses of almost $600,000 in lost and damaged equipment, the company expects that most of those expenses will get paid back through insurance claims on which Dawson expects to collect during the fourth quarter.

CEO Stephen Jumper was cautiously optimistic about Dawson's recent experience. "Improved weather conditions, operational discipline, and strong financial management in the Company's areas of operations led to increased crew utilization in the third quarter," Jumper said, but "despite the year-over-year improvement in EBITDA, demand for services is at reduced levels from recent years."

What's ahead for Dawson Geophysical?
Dawson Geophysical isn't counting on a near-term rebound to come for the oil and gas industry. As Jumper said, "[Demand] is anticipated to remain [at reduced levels] into 2016 in response to decreased and uncertain commodity prices and reduced client expenditures." Dawson expects that it will work between eight and 10 crews in its U.S. operations and that Canada will keep seeing only limited activity levels for the foreseeable future.

Still, Dawson hasn't seen activity dry up entirely. The company is working with its customers on potential projects for 2016, as even depressed oil and gas prices don't make every opportunity disappear. Moreover, if and when energy prices rebound, the seismic specialist stands ready to ride the wave of interest higher.

The big question Dawson faces is whether it can survive an extended downturn. For National Oilwell Varco, customers are able to defer buying replacement components and supplies for a short period, but ongoing consumption eventually will force clients to return to Varco and satisfy pent-up demand. Dawson doesn't have quite the same advantage that National Oilwell Varco does, as its services don't decay in the way that drilling pipe and rig equipment do. Nevertheless, exploration and production companies will eventually need to explore areas that they've left fallow for now, and that should produce more business for Dawson as soon as it's economically viable for E&P companies to spend.

Dawson Geophysical's narrower loss was good news for investors, but the seismic company isn't out of the woods yet. What Dawson really needs is a bounce in oil prices, and so far, that good news has remained far out of reach for the industry.

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.