Ion Geophysical's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Ion Geophysical Corporation (IO)

Q2 2012 Earnings Conference Call

August 08, 2012 10:00 AM ET

Executives

Karen Abercrombie – Director, Corporate Communications.

Brian Hanson – President and Chief Executive Officer

Greg Heinlein – Senior Vice President and Chief Financial Officer

Analysts

George Venturatos – Johnson Rice & Company

Nathaniel Pulsifer - Pulsifer & Associates

Presentation

Operator

Good day, Ladies and Gentlemen. Thank you for standing by. Welcome to the Ion Geophysical Quarter 2 Earnings Conference Call. During today’s presentation all parties will be in a listen-only-mode. Following our presentation the conference will be opened for questions and instructions will follow at that time. This conference is being recorded today, Wednesday August 8 th, 2012.

I would now like to turn the conference over to Karen Abercrombie, Director of Ion Communication, please go ahead Ma’am.

Karen Abercrombie

Thank you Alicia. Good morning and welcome to Ion Geophysical Corporation’s Quarter 2 Earnings Conference Call. We appreciate you joining us today. As indicated on slide 2, 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 them I have a few items to cover. If you’d like to listen to a replay of today’s call it is available via webcast by going to the investor relations section of our website at www.iongeo.com or via a recorded instant replay for the next couple of weeks. The information was provided in yesterday’s earnings release. I should also point out that we’ll be using some PowerPoint slides to accompany today’s call. They’re accessible by a link on the investor relations page of our website.

Moving on to slide 3. Information reported on this call speaks only as of today August 8 th, 2012 and therefore you are advised that the time sensitive information may no longer be accurate at the time of any replay. Before we begin, let me remind you that certain statements made by Ion 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 our current expectations, and include known and unknown risks, uncertainties and other facts, many of which we are unable to control that may cause the 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 Ion from time to time in our filing with the SEC, including in our annual report on form 10-K and in our quarterly reports on form 10-Q. Furthermore as we start this call, please refer to the disclosure regarding forward looking statements incorporated into 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 4.

Brian Hanson

Thanks, Karen and good morning everyone. We’re certainly pleased with our Quarter 2 results, with first half revenues up 21% over 2011 and year to date earnings at $0.13, an improvement of $0.11 over last year. As we indicated in our call last December, we expected to shift more profitability into the first half of the year as we diversified our business and so far are more than pleased with the results.

Our data processing business delivered a fifth sequential quarterly revenue improvement as we continued to push into the international market, particularly in Europe, Africa and the Middle East, an area in which we’ve historically not had as large a presence. Pre-Macondo, we had almost two thirds of our business in the Gulf of Mexico. Over the last few years we have had a deliberate strategy to expand this business internationally and reduce our exposure to the Gulf. By the end of the year we would expect the Gulf of Mexico portion to be approximately 25% of the total portfolio. In addition to continued sequential improvement and a better geographic distribution of revenues, we ended the quarter with record backlog which positions the business nicely for continued sequential improvement for the back half of the year.

One of the more significant trends this year in Marine Geophysics has been the introduction and uptake of new broadband technologies for acquisition and processing of seismic data to tackle the problem of ghost notches that have traditionally limited resolution in the marine market. Ghost notches are produced when an upcoming seismic event reflects down from the water surface and interferes with the upcoming signal measured at the hydrophone on the streamer. The effect of the notches is to significantly degrade the sharpness and quality of the sub surface images. Other companies have produced broadband solutions that rely on specialized marine acquisition and processing, such as with the dual hydrophone, geophone sensor and the PGS Geostreamer and a Phalanded  streamer type of acquisition for CGGV's BroadSeis and WesternGeco's ObliQ. These solutions today have not been applicable to conventional flat streamer data despite the fact that the vast majority of data was and still is required with this flat streamer configuration.

To address this challenge, in June, at the European Association of Geoscientists and Engineers show, the EAGE in Copenhagen, we introduced the new data processing technique we call WiBand. WiBand delivers better images, broadband results when processing new data or reprocessing existing data acquired using conventional flat streamers and eliminates the effects of the ghost notch. We believe this new technology has tremendous potential to fulfill an unmet need and is being received very well. In fact we already have more than 20 2D and 3D WiBand projects completed or in progress from 8 clients in 15 different basins around the world.

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