ION Geophysical CEO Discusses Q3 2011 Results - Earnings Call Transcript

ION Geophysical Corporation ( IO)

Q3 2011 Earnings Conference Call

November 3, 2011 10:00 AM ET

Executives

Jack Lascar – IR

Bob Peebler – CEO

Brian Hanson – President, CFO and COO

Analysts

Daniel Burke – Johnson Rice

Presentation

Operator

Ladies and gentlemen thank you for standing by. Welcome to the ION Geophysical third quarter earnings conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. Today’s conference is being recorded, November 3rd, 2011.

I would now like to turn the conference over to Jack Lascar. Please go ahead.

Jack Lascar

Thank you, Alicia. Good morning and welcome to the ION Geophysical Corporation’s third quarter earnings conference call. We appreciate you joining us today. Your hosts are Bob Peebler, Chief Executive Officer and Brian Hanson President, Chief Operating Officer and Chief Financial Officer.

Before I turn the call over to management, I have a few items to cover. If you would like to be on an e-mail distribution list to receive future news releases or experience a technical problem and didn’t receive your news release yesterday. Please call DRG&L at 713-529-6600 and let us know.

If you would like to listen to a replay of today’s call, it is available via webcast by going to the Investor Relations’ section of the company’s website at www.iongeo.com or via recorded instant replay until November 17. That information was provided in yesterday’s earnings release.

I should also point out that we will be using some Power Point slides to accompany today’s call. They are accessible via a link on the Investor Relations page of ION’s website. Information reported on this call speaks only as of today, November 3, 2011 and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control, that may cause the company’s actual results or performance, to differ materially from any future results or performance expressed or implied by those statements.

These risks and uncertainties includes the risk factors, disclosed by the Company from time to time in its filings with the SEC including in its Annual Report on Form 10-K and its quarterly reports on 10-Q. Furthermore, as we start this call please refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday and please note that the contents of our conference call this morning are covered by these statements.

I will now turn the call over to Bob Peebler.

Bob Peebler

Thanks Jack and good morning to everyone. As you know this is my last earnings conference call as CEO of ION. I’m pleased that the transition is going very smoothly and I’m looking forward to Brian taking over the reign on January the 1 st as I become Executive Chairman. I’m also pleased that we had a solid quarter as expected we are seeing the business build as we close out the year.

As mentioned last quarter, the two main business issues for 2011 have been the significant impact the Macondo oil spill has had on our Gulf of Mexico daily processing business and the slower than expected land equipment business from our joint venture INOVA. As previously stated, we are still seeing a slow but steady recovery of our GXT data processing business. At the same time, we are taking steps to more rapidly expand our business in other regions around the world and we still expect that we should be at or near capacity going into 2012.

Our INOVA joint venture has experienced a tough year financially, but a successful year for the R&D product development. When we formed a joint venture we looked forward to increasing the BGP equipment business in the short-term and also BGP’s involvement with defining specifications and helping test new equipment, so our land equipment could be more competitive in strategically important areas such as the Middle East. We have seen an improvement in sales year-over-year mainly due to increased BGP purchases, which have represented approximately 50% of 2011 INOVA sales year-to-date.

What is more important for the future of INOVA is the fact that is the result of a significant and continued R&D program, they are now in the process of field testing with the plan of commercially introducing a whole new suite of products during 2012. The new products include FireFly version 3, a new product line called Hawk, which is our version of land nodes and a new land cable system, which has been specifically designed to meet BGP’s need in the Middle East and Africa and other potential customers as well.

Our expectations are that the combination of new products, continued improvement in the land seismic acquisition business and increasing BGP market share should have a significant and growing positive impact on INOVA’s business. The combination of a weaker than expected data processing business and a slower than expected recovery in the land seismic acquisition business and related equipment sales for INVOA have impacted our 2011 business by approximately $0.20 per share, compared to our original digits plan.

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