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GeoKinetics Inc.

Thu, 11 Dec 2008|



Slide you know enough fingers for ten -- -- you normally forward looking statement Leo attention to the back which mrs. Hillary Clinton's business development and -- -- -- -- disease big opportunities sometimes. Answerable. And no evidence processing room was only 2% of -- are leading provider of seismic I'd recommend it -- processing and interpretations worldwide if we're getting -- market site and obviously times -- Com originally from -- -- -- this was as of lousy general probably about 20% of his battle right now. Matches not a good day for the battlefields of his books the industry or outright nominal normal -- -- on the WiMax which is what was -- Americans of resiliency. And keeping them on this reminds that you can write. 29 that's when you stream. And we've got lodged in North American footprint on Memorial Day that we -- -- and the US is old. Going forward profitable business for hours more more country. What -- rebounds filler and obviously we're still seeing them props it's coming in the right they've been with and I and I -- revolution is -- -- -- haven't actually seen any slowdown yet. Recent. Industry convention. And check in with some of my competitors. There's this process goes wrong policy 030 conference -- say things and not -- And seen -- at this point in time we're getting bits and as we normally do -- -- action mind respective. Technology leader in Canada. Recruitment system -- PNC. We have significant industry internationally experienced and god bless him. Particularly in south and Latin America where we via various. 25% of the market. Latin America and we're an industry leader Sheila awarded transitions -- -- more about so. And -- recent investment in new multi identical system devised plans -- shallow world it's as the last couple years we have an investment since. A lot of money riches. Who is leaving -- We've recently established themselves in ways that just looking and -- -- years. Concede receive a lot of things you're devices that are important activity in the US show plays that Leo and it's night and we're seeing an increase in -- -- -- does seem -- -- -- -- here friends' houses in the mountains about a month. It was company's presentation is all sides from people. Different employees -- doing man seismic. People rules apply anywhere an example -- And he's been the theme of the meeting was really about it's -- of -- -- problems these days you get much better results. -- I don't know one of the guys you'll -- him from being pretty. How's the questions why it was great shooting -- anymore if you -- last month sort of resolve. The obvious bouncers results violence in order and order -- which brings -- From army I was that matters it's definitely attract some seasonality our original question and we see more. First corner -- more oil companies willing to spinning back to changes in this the price of oil coming down. The last couple years -- it's things long long -- it's about fifty euros for hours no quality and effectiveness. And -- you know sort of thing points. We're still seeing you respect list dolce and -- more opportunities internationally. Our analysts are strong in the US might put. Countdown to change. In the -- -- companies using exciting going to go to 99. It similar format it was -- to Canadians mostly for exploration it just since it's getting right here except these 3-D and you know the united -- -- it's moved in development sizes colors and now I -- along with the shale plays. And Leo companies have I was on -- here. It's now enthusiast flirtation advisers lines so a lot of work to -- question from justice correspondent for people who have to do horizontal drilling and one of the shale play was domestic demand -- known around it sees and we haven't really touched -- We'll see hopeful I'm mentioning it in time. Even that I couldn't very well now for a long time and operate being here. That would -- you know back in 2000. And the Nazis there really hasn't. And the ocean bottom cable market first well I see a lot of -- And citing an event rumpled -- going forward here it's. -- -- -- extremists. Reaction like iTunes. And you know homeland where they didn't give me that history. -- -- excuse. Seismic you know instantly and -- an -- agreement this question a lot of coming up front these states. And -- decision makers and terrorism west and he said he didn't think it will be that much additional and does it cost ten times as much -- to do -- national naval it doesn't. It straight entering tonight you know if you look at the exiled. Groups up on the scoring that was and after you you know with the -- -- I'm kind and I see. Him when you get -- problems that us actions alone policy turnovers justice -- on the -- and this was a joke we've just completed in Australia it 2008. Street pavement -- you know certainly -- an accident and customers across. The last was 21 billion dollars. It's about three earned on and the O'Connor's it particularly to me that. And I think we'll see more I think the oil companies are willing to spend. More dollars technology. First most of -- -- just fine a lot of citizens. Existing fields they're willing to spend more money to events. It. I think every position -- well protected. Actually -- if you look at the line that is international. We've -- worldwide -- now growth especially in functional seismic US there was about 20% of the -- it. And maintenance of it for us tonight and outside north of Iraq right and six story really reasoning and it's just you Rhode Island re -- it -- operating leases to going forward audience. The significant number of internationally. This consistent him. -- -- -- -- US operatives -- out -- shooting seismic strong and more entrepreneurial. Ones returning them right is showing no shootings more seismic. Regions in international union I honestly and has actually used it well and they learn more and more work coming to mention he's in the president's. Company through Canada there's pollution -- -- honorable and really change much and look at the US. Price of oil and the -- -- as much time again is the we still seismic -- definitely matters much. Landing with predicting based. All of them from my weakness. USC appears and he probably the climate relative to -- assignment. We don't know how much of that device decides advertisements I am I -- and -- we we need focusing on oh in the US. To stay ahead of getting permits him -- miners. And right now we've got about I it's so -- so. Confident can now right there's -- first actually this slide is really just do. Highlight the differences. Between us and some of we do everything except marine -- -- and we're not in the -- -- title library business and we don't sell equipment. But we're fully operational internationally. We see -- competitive advantages as. Strong base in the US which fights could cash flow for us. We've got significant international exposure -- specialize in the transitions -- nation. Where you -- right well in. Difficult environments. Where you've been in Columbia continuously. For twenty is. -- you go anywhere the last five years from forty to 60% of that market depending on who the customers. And -- 100% Colombian all of our employees -- Colombian. To go to Brazil we've operated for the last forty is continuously since 2001. Panel 360. About employees in Brazil -- -- that gives us a huge advantage. -- -- -- -- -- -- -- -- -- -- -- -- That have additional costs and -- knowledge of the region's. We do well particularly in Columbia rip them majors BP in the -- -- depends like topsy. We always when their work you know we're not necessarily in the the lowest priced. This is sampling of back customers which again is burying -- very strong as a lot of national oil companies to my -- the super manages. Large independents. Multi client companies in the US such as seismic exchange. We've got to really probe by it's not one of these customers is more than 50% of 15% of that business in year. Someone -- might get to 15% of our business next year if they keep awarding -- large contracts. Which we plan to continue to grow. We've invested a lot of money in new equipment and even. -- credit -- -- we still got cash in the bank. We've hello lot of opportunities going forward. We taking the prudent approach through the first half of next year of them holding on -- -- -- and see what happens of the market in general. But we've spent. Over the last couple it is. 95 million last year ninety million this year -- all of this year really on revenue generating equipment. So that will serve us well into 2009. We're currently in twenty countries out of a 194. There's tremendous opportunity in the areas -- working in the high mountainous regions in the shallow water areas. Full of West Africa or -- opportunity for growth -- nicely. The ocean bottom cable business that we -- into last end of last year. Was really an outgrowth of that transitions and that have a limit -- -- 150 foot water depth. We can now go out to about 15100 feet of war -- that. And like cables on the bottom we've drawn a line there because it gets increasingly expensive to -- beyond that -- So I have plan really is to. Is to take the cash that we and in North America -- and reinvested internationally. If you look at the job internationally and has been -- revenue better margin. And by the time you get the end of the year of both international and US -- similar. Because the into the US -- -- twelve months I was twelve so we've got a 100% utilization. Internationally we've last year we have about 65%. Utilize -- nation. The size of the jobs we're getting internationally getting bigger and bigger. And the number of jobs are getting more so. It's going to be a lot easier to keep those crews busy -- -- time next year than it was -- issue. So we would expect to see improved margins mixture. This -- -- -- growth from 2004. That's when we were to company to -- company with a little process and -- 2005. We added we acquired Trace which gave us a lot more channels 2006. We acquired -- physical. 2007. That was purely organic growth so you get to the end of the third quarter in 2000 night we've got. 122000. Channels. Which is not a direct correlation to revenue but it's a good indicator. And you can see revenue and of the third course 357. Million which is almost as much as we did. In 2007. And with that increased. Capital spend that we had -- -- you would expect to see. Similar growth through 2009. If you look at that back you -- or you can see the the change in mix from. And from North America to international this year it's about 58% international office is 42%. North America North America hasn't diminished and he is just growth in international. And right now we're sitting probably about 80% back this is international. And know that 80% international. 80% of that is with national companies. And I have a 70% of it is and they -- in transition and show award. This just shows where were operating. When. -- test my -- -- scales but really in that. In West Africa we moved into West Africa because we're so tremendous opportunity for -- -- -- operations. Most of the West African -- has been ignored. As well as the east African -- that matter we just finished -- transitions on job. In Tanzania. And the way we've designed equipment what sets us for Mac competitors is their ability to move that equipment. From -- connection to -- attention very quickly. That this bill designed vessels. The biggest one is 65 feet. Comes it's wonderful food for complains we moved -- from Tanzania. On the East Coast of Africa -- Cameron's on the West Coast of Africa. It took one it was it was to set to flights but we put everything to be planes. And flew them across Africa. Than normal way to do that is to go down -- southern tip of Africa and the coast which is at least two months after it to do that so. We offer very quick service and that of value to customers in the US we typically work in. In Texas. Texas Louisiana those a lot of won't -- we -- there -- -- in North Dakota and Colorado we -- one room -- -- -- The green belts -- -- partners. Ourselves. Where -- -- -- to to use words Obama worked in Texas. Colorado -- why I'm in California. And again in the northeast -- in the months those like. Just go through this quickly there's no such thing as an average job. In the US we have a sort of an average crew they have 6000 channels tend vibrates as about ninety people. Unless we're doing Donna my work when you're gonna get a drill -- to -- in front of your internationally. Every job is custom fit took the job. So it's very difficult to figure out. The value of one furnace fest is next. It's reasonable decided that that transitions and Cruz looked like three US features they just generate more revenue and kind of -- -- -- -- and said. Have focus is really being towards. Transition zone where we see a lot of opportunity and it's been pretty much completely ignored. Around the world -- oil companies because it's the most expensive seismic even though it's not expensive for them to -- Really expensive it's slow going compared to a strip ten streamer vessel that. She's 24000. This is where we we've invested a lot of money -- C -- equipment we see. Big opportunities for that going forward. Not to forget processing it's only 2% of that business. On -- revenue basis but it's very important 2%. If we're getting oil companies to -- -- three times as much as they would for a stream crew in the same area. We need to be sure that the data that we delivered to the -- company matches that better expectation. The industry as a whole does not process multi component I do very well which is what you get when you light streams on the sea bed because you can happen. Three component GF funds -- as a -- -- -- When you've got a stream crew ordeal getting his -- foundations. You've got a lot more night that we haven't learned how to process -- old debts. Going forward there's. More and more effort more. More investment required and -- indeed for for process and and with that I'm from China that was Scott McCarron yes -- if. Just to start off with some balance sheet data. If you look at our balance sheet as of September 30 we had about seventeen million of cash. 94 million of that which finesse and -- debt to cap of about 29%. -- dead is really two components we have a seventy million dollar revolver. With PNC bank which is the 41 million -- there and the rest is just capital leases and equipment financing that we have. With various parties. Where. In compliance with over -- we've got a lot of you know we've got a lot of gap between where we're -- in the covenants that -- feel very comfortable with four -- -- On the debt side. We did do an issuance in July and additional shares of our preferred stock which you see -- jump of about 35 million since the -- the year. And even so a total capitalizations about 320 million. Just looking at our growth over the last few years. You can see 2008 -- today -- -- basically. In line with where we world last year. And you can see the -- growth on the revenue side. And -- -- downside we've grown as well last year was kind of a year of transition for us. We bought two companies. And basically multiplies the size of the company by about eight or nine times. Well between -- five and the in the -- six and -- of seven we really had to do a lot of integration and was -- sarbanes Oxley a year for the first time and so we had a little bit of a setback which you can see all of that position us well to grow this year. Our party of 49 million through nine months and on. On track obviously to significantly -- last year. Our results are highly variable quarter to quarter you can see from these charts going back a couple years we have some. To -- some seasonality in our business. Canada is very busy in the first quarter. Drops off -- basically nothing -- to drain generally in the second quarter and then third and fourth quarter stabilize of this. We also have Columbia and other countries that were they in the statements in the first quarter of the busiest season there and then you can into the rainy season in the middle of the year. This year we've been much much more consistent if you look at revenues we haven't seen the sharp drops first -- second quarter. We've seen it -- more uneven -- and -- on revenues but. We think going forward things will smooth out a bit with a larger contracts were seeing internationally. And the you know just us getting bigger toward Canada and Colombia are just not as big a percentage of the total company. We are seeing that level out would expect that to continue into next year. -- -- our -- you can see here backlog as of September 30 was 509 million. That's up significantly from just a quarter ago when it was 412. And a year ago when -- 381. The North America of that club has dropped off a bit but you can see this substantial growth in our international backlog. One thing that's important to note our crews are very mobile. And so the crews that operate in North America the majority of those can be moved in and actually. -- -- -- -- and so. You know the international -- while growing is definitely -- strength that we think we. Verses you know some or North America only competitors. And -- -- club covers all of the rest of this year really gets -- deep in the 2009. With some pretty substantial growth. Growth built them. Looking at our growth and where it's gonna come from and what we think we've done two allowed to continue next year. Dick mentioned we grew initially due to acquisitions. Done back in 2005 and 2006. And in the last two years have really been taking advantage of the platforms -- those acquisitions gave us to grow the company organically. You can see from this chart. We spent. -- -- -- -- We spent 95 million in 2007. Most of that was upgrading our US crews to get -- the top line. Cruise that to compete for the larger more profitable projects. We also -- deal BC market and just generally expanded our recording capacity. Looking at 2008. Our capex budget is eighty million -- spent seven the of that through September. The last hands pretty much already committed. Looking forward. We haven't set our capex budget for 2009. We give a covenant in our bank agreement that limits -- the fifty million. And we think that'll be more than enough in fact our plan is to. Keep it as low as possible in the first half of the year wait to see what happens with the financial markets and that way -- our growth Catholics for next year. That said. The seventy million we've spent this year. There's a lag between when you actually receive the equipment and get -- on line producing income so. We've got pretty substantial growth especially in and actually built into next year already with the investments we've made this year. Maintenance capex for us tends to run about three to 4% revenue and historically we've made our capital investment decisions looking for a three year payback on -- -- -- basis. Going forward given both. The significant number of opportunities as well as. You know the potential that. Cash is going to be a little bit harder to come by in the external markets. Will -- tightening that up to a forest a stronger payback to -- -- Growth Catholics in the short term. So in summary. Looking at to you kinetics you know we think the backlog is a big strength for us. Dick mentioned 80% of that's -- the national oil companies 70% and that's in the shallow water on the international side. Which are are historically most profitable product lines most. More stable customers. We still have a strong presence in -- and North America. We think that's still going to be good good operation for as if it does slow down though. We've got a great infrastructure overseas -- allow us to keep that equipment working. Where the demand is still increasing. Leader in the transition zone we've we've been improving our operating margins. We've recently invested the a 165 million new equipment over the last few years. And that's given us a lot of additional revenue generating capacity. Especially in the shallow water and ocean -- cable violence. Thank you very much.

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