ION Geophysical's CEO Discusses Q1 2012 Results - Earnings Call Transcript

ION Geophysical Corporation (IO)

Q1 2012 Earnings Conference Call

May 3, 2012 11:00 ET

Executives

Karen Abercrombie – Director

Brian Hanson – President and Chief Executive Officer

Greg Heinlein – Senior Vice President and Chief Financial Officer

Analysts

James West – Barclays

George Venturatos – Johnson Rice & Company

Novid Rassouli – Sidoti & Company

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to ION Geophysical First 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. This conference is being recorded today, Thursday, May 3, 2012.

I would now like to turn the conference over to Ms. Karen Abercrombie, Director of Corporate Communications for ION. Please go ahead ma'am.

Karen Abercrombie – Director

Thank you, (Camille). Good morning and welcome to ION Geophysical Corporation’s first quarter earnings conference call. We appreciate you joining us today.

As indicated on slide two, our hosts today are Brian Hanson, President and Chief Executive Officer and Greg Heinlein, Senior Vice President and Chief Financial Officer. Before I turn the call over to management, I have a few items to cover. 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.iongo.com or via a recorded instant replay until March 12, 2012. The information was provided in yesterday's earnings release. I should also point out that we will be using some PowerPoint slides to accompany today's call. They are accessible via a link on the Investor Relations page of ION's website.

Moving on to slide three, information reported on this call speaks only as of today, May 3, 2012, 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 expectation can 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 include the risk factors disclosed by the company from time-to-time in its filing with the SEC, including in its Annual Report on Form 10-K and in its quarterly reports on Form 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 those statements.

I'll now turn the call over to Brian Hanson who will begin on slide four.

Brian Hanson – President and Chief Executive Officer

Thanks, Karen and good morning everyone. I am pleased to report we are off to a very solid start to the year. Yesterday, we reported first quarter revenues of $112 million, up 23% from the first quarter of 2011 and diluted EPS of $0.05 and net income of $8 million. This represents one of our strongest first quarters in the ION’s history in terms of revenue, operating income, and net income. From our viewpoint, oil companies are increasing exploration spending as expected and we are seeing the results of this being reflected with significant increases in marine activity and widespread interest in our new venture projects around the world.

We saw growth in our all of our business, especially in the marine equipment, data processing, and multi-client. On our two most recent investor calls, we shared our business expectations for 2012. Among them, we said we expect year-over-year growth across all of our businesses and as we've broadened our multi-client portfolio to include land programs, we expect it to more evenly distribute our financial results throughout the year with approximately 25% of our earnings full year in the first half. Our first quarter results demonstrate solid progress against these goals.

In the marine seismic market, we are seeing continued growth in both the towed streamer and seabed segments. On the towed streamer side, there is a tightening of capacity with contractor tender activity, vessel utilization, and backlog picking up, especially in the high-end 3D and 4D segments. Marine contractors have been operating on tight CapEx budgets, but as day rates continued to improve we would expect to see an increase in repair and replacement business towards the latter part of 2012.

Given no new vessel introductions in Q2 this year and the expected pickup in purchase activity in the back half, we would expect the second quarter to be the softest quarter of the year for our marine business with the fourth quarter being the strongest. We are also seeing a rebound in the seabed market. Tender activity is strong with over $300 million of work awarded in the first quarter, driving our backlog to the highest level team in several years.

Fleet utilization of high with most operators booked through 2012 season. Additional capacity in the form of expanded crews has been brought on to meet the increased demand. This bodes well for our OBC business as we enjoyed spare and replacement business in the first quarter as one customer began shooting a large project in Brazil.

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