Please ensure Javascript is enabled for purposes of website accessibility

Geospace Technologies' Losses Continued This Quarter as Oil Keeps Sliding

By Tyler Crowe - Feb 9, 2016 at 1:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Another quarter of low oil prices, and a lack of oil and gas exploration, has Gesopace Technologies quarterly results in the red again.

Investors in Geospace Technologies (GEOS 0.21%) must feel like they're trapped in a loop -- like Bill Murray in Groundhog Day -- whenever they see Geospace report earnings. For close to two years now, the company has been reporting losses as the demand for its seismic equipment dwindles from a lack of investment in oil and gas exploration.

At the same time, the company continues to batten down the hatches to preserve its precious amount of cash. Let's take a quick look at the company's results for the most-recent quarter, and what investors can expect in the coming quarters. 

Geospace Technologies' quarter: The raw numbers

Results FYQ1 2016 FYQ1 2015 % Change
Revenue (in millions) $13.1 $21.2 (38%)
EBITDA (in millions) ($9.9) ($6.0) (65%)
Net income (in millions) ($11.04) ($5.44) (103%)
EPS ($0.85) ($0.41) (107%)

Source: Geospace Technologies earnings release.

Several quarters in the red shouldn't be that shocking for Geospace's investors by now. The company's customers simply aren't buying or renting equipment for exploration right now. That leaves Geospace with one option: to keep cutting costs to preserve cash and balance sheet strength until customers call again. On that front, the company did a decent job.

Even after a full year of losses, the company's cash and short-term investments have only declined by $3.4 million, and the company remains debt free. After seven straight quarters of losses, it seems like a small victory that it can keep its cash position in tact, and no debt dragging it down.

What happened with Geospace Technologies this past quarter

  • Many of Geospace's clients aren't currently deploying all of their existing equipment from Geospace as exploration activity dries up. This is keeping sales of new equipment back considerably.
  • One good piece of news was that a rental contract for 5,000 stations from its OBX marine nodal system remains on track, and should lead to $17 million in revenue during the next nine months.
  • The company took a $1.9 million asset writedown on the value of its Canadian subsidiary's deffered tax assets, which is baked into the company's current earnings. 
  • Geospace's one segment that keeps the lights on, non-seismic rentals and equipment, saw sales remain flat compared to the same time last year. 
  • The company implemented another round of reduction programs that is expected to reduce cash costs by $7 million annually. It's not much, but with $13 million in quarterly revenue right now, a $7 million improvement in cash costs could go a long way.

What management had to say
Geospace's management isn't trying to hide the fact that results right now don't look good, but as CEO Rick Wheeler points out, the company has been able to preserve itself through this long slog of an oil and gas downturn. 

With capital budgets being continually revised downward by oil and gas companies, planned seismic exploration activity has been reduced significantly. In conjunction, available funding to enhance existing fields and to develop new production has also dropped amid these capital spending cuts... Despite the consequential effects on our financial results, we reiterate our strong persistent belief that the current circumstances cannot be sustained indefinitely, and that the requirement to explore for new resources and enhance the production of existing reservoirs through seismic monitoring is absolute and inescapable in the long term.

We recognize the cyclical nature of the oil and gas industry we serve, and we believe that improved seismic technology will remain a core component in an inevitably corrected market. With no debt, $37.0 million of cash and short-term investments, and $30 million of untapped credit with our bank, the strength of our balance sheet demonstrates our commitment to manage the business to withstand these cycles.

Looking forward
There isn't much more that the market can throw at Geospace Technologies. We're coming up on close to two years since things really started to go south for the company, and yet it has been able to stay the course by cutting to a skeleton operation.

There's not a whole lot of indications that oil prices are set to rebound very soon, but one thing to keep in mind is that any uptick in exploration spending will lag a recovery in oil prices as producers look to clean up their balance sheets again. It may take a while before Geospace makes a recovery, but it looks like the company will be around for it.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Geospace Technologies Corporation Stock Quote
Geospace Technologies Corporation
GEOS
$4.74 (0.21%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.