Dawson Geophysical Company (DWSN) Q3 2009 Earnings Report, Transcript and Summary

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Dawson Geophysical third quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator instructions). I would now like to turn the conference over to Steve Jumper, President and CEO of Dawson Geophysical. Mr. Jumper, you may begin your conference.

Thank you, Stephanie. Well, good morning and welcome to Dawson Geophysical Company's third quarter 2009 earnings and operations conference call. As Stephanie said, my name is Steve Jumper, President and Chief Executive Officer of the company. Joining me on the call are Christina Hagan, Executive Vice President and Chief Financial Officer; Ray Tobias, Executive Vice President and Chief Operating Officer; and Decker Dawson, Chairman. As we have done in the past, today's call will be presented in three segments. In a very brief opening remarks Chris will discuss our financial results. I will then return for an operations update, then open the call for questions. The call is scheduled for 30 minutes and we will not provide any guidance. At this point, I will turn control of the call over to Chris Hagan, our CFO.

Thanks, Steve. First, let me share our Safe Harbor provisions. In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, Dawson Geophysical Company cautions that statements made today in this conference call, which are forward-looking and which provide other than historical information, involve risks and uncertainties that may materially affect the company's actual results of operations. These risks include, but are not limited to, the volatility of oil and natural gas prices, disruptions in the global economy, dependence upon energy industry spending, limited numbers of customers, credit risk related to our customers, cancellations of service contracts, high fixed costs of operations, weather interruptions, inability to obtain land access rights of way, industry competition, the availability of capital resources and operational disruptions. A discussion of these and other factors including risks and uncertainties is set forth in our Form 10-K for the fiscal year ending September 30, 2008. Dawson Geophysical Company disclaims any intention or obligations to revise any forward-looking statements, whether as a result of new information, future events or otherwise. During this conference call, Dawson will make references to EBITDA, which is a non-GAAP financial measure. A reconciliation of this non-GAAP measure to the applicable GAAP measure can be found in our current earnings release, a copy of which is located on our website, www.dawson3d.com. Turning to our earnings release, today, we reported revenues of $52,319,000 for the quarter ending June 30, 2009, our third quarter of fiscal 2009 compared to $84,568,000 for the same quarter in fiscal 2008, a decrease of 38%. We are reporting a net loss for the third quarter of fiscal 2009 of $1,626,000 compared to net income of $9,707,000 in the same quarter of fiscal 2008. Losses per share for the third quarter of fiscal 2009 were $0.21 per share, compared to earnings of $1.27 per share in the same quarter of fiscal 2008. EBITDA for the third quarter of fiscal 2009 was $4,245,000 compared to $22,397,000 in the same quarter of fiscal 2008, a decrease of 81%. Revenues in the third quarter of fiscal 2009 continue to include relatively high third-party charges related to the use of helicopter support services, specialized survey technologies and dynamite energy sources. The sustained level of these charges is driven by our continued operations in areas with limited access in the Appalachian Basin, Arkansas, and Louisiana. We are reimbursed for these expenses by our clients. For the nine months ended June 30, 2009, revenues were $197,160,000 compared to $240,530,000 for the same period 2008, a decrease of 18%. Net income for the first nine months of fiscal 2009 decreased 52% to $12,278,000 compared to $25,703,000 for the first nine months of fiscal 2008. Earnings per share for the first nine months of fiscal 2009 were $1.57 as compared to $3.35 for the first nine months of fiscal 2008, a decrease of 53%. EBITDA was $40, 221,000 in the first nine months of fiscal 2009 as compared to $59,595,000 during the same period of fiscal 2008, a decrease of 33%. Due to the current market conditions, we have planned to continue to limit our approved $20 million capital expenditures budget in the near term. Steve?

Thank you, Chris. During the second quarter conference call, I've said as we work our way through the spring and summer months, there would be no denying that these are challenging times. Demand for our services soften as a result of reduced capital spending on behalf of our client [DNP] companies. In response to weakened demand we've reduced our overall crew count by four crews in the second quarter and two more crews in the third quarter, leaving a total of ten crews currently operating in South Texas, West Texas, Louisiana, Montana, and the Appalachian Basin. Our level of ten crews maintained our position as the leading provider of onshore seismic data acquisition services in the lower 48. In addition to reduced crew count, we experienced low short term utilization rates on the remaining crew as a result of weak demand and a more competitive pricing environment in the market for seismic data acquisition services. Despite today's challenging environment, we remain optimistic regarding the industry's long term fundamentals. As a general principal, in order to effectively identify and develop hydrocarbon reservoirs and limit dry-hole risk, exploration and production companies require to use some advanced seismic services. While these services are subject to the same ups and down that all service companies face in the oil and gas industry, seismic tools are a key component in the exploration production process. The key to long term success in a highly cyclical industry, however, is to maintain a solid financial structure with little or no debt maintained [of us] most qualified personnel of the industry and continue to deploy capital in a prudent manner. Even through challenging times we have maintained our commitment to each of these underlying principles. We continue to have a strong balance sheet with no long term debt. We maintain and have maintained the most qualified and capable staff in the industry and we continue to deploy capital in a manner that we believe will build value and generate strong returns over the long-term. In recent months we have seen an increase in demand for our services in many of the oil producing basin, as well as continued demand in the large natural gas shale basins. Today, approximately 30% of our active crews are working in oil producing regions. Although our clients may cancel their service contracts on short notice, our current order book reflects commitment level sufficient to maintain operation of our ten crews into fiscal 2010. While we have reduced crew count in both the second and third quarters, the average data collection channel count per crew remains strong. Exploration production companies are continuing to demand greater sub-surface resolution in their search for hydrocarbon reservoirs, and as a result, continue to rely on an increased number of channels to achieve this objective. Our investments in recording capacity and equipment in recent years give us the ability to provide this service while simultaneously helping to lower finding and development costs through increased crew efficiencies and positions us as a valuable component in our clients' ongoing initiatives. In light of the reduced demand as Chris mentioned earlier, we lowered our capital expenditures during the first nine months of fiscal 2009 to a $4,318,000. We will continue to monitor and potentially limit our capital expenditures in the near term towards necessary maintenance requirement. It is important to note that the deployment of capital in previous years, specifically capital that was invested in increased channel count, technology enhancements, and other value driven endeavors geared towards increased sub-surface resolution continue to provide us with a competitive advantage in today's marketplace, and our clients continue to demand greater sub-surface resolution in their search for hydrocarbons. We anticipate improvement in our industry fundamentals in a stronger economy. We are positioned to react quickly to capture the upside of the business cycle. Our financial strength and disciplined investment strategy allows us to respond quickly to market dynamic. We believe our strong balance sheet, the flexibility to deploy capital as needed to maintain competitive technology, our quality personnel and broad range of services provide us with the opportunity to build upon our position as a leading provider of seismic data acquisition services in the lower 48. Our commitment to helping our clients, limit dry-hole risk, lower finding and development costs and evaluate basins most conducive to hydrocarbon accumulation is as strong today as it was 57 years ago. We have and will stay committed to our business strategy. We retain and employ the best people in the industry. We operate with a conservative financial structure as evidenced by our debt-free balance sheet. We provide a wide range of services necessary to compete at the highest level. We stay focused on our core business, helping our clients find oil and gas in the lower 48. We operate the most technologically advanced equipment and processes available to the industry. We supply our services in response to our clients' demands and needs while maintaining strong relationships with operators of all sizes. Today's challenges cannot be ignored, they also bring with them great opportunity. 30% of our crews are now operating in oil producing basin. All across the industry we've seen an overall reduction in crew count, all across the lower 48 which is as we have done, which is giving us an opportunity to maintain and potentially increase our market share going forward. Our solid financial structure with no long term debt allows us to quickly adapt to market changes and capture the upside of the business cycle. With that operator, we are ready for questions.

(Operator Instructions). Your first question comes from the line of Marshall Adkins with Raymond James.

Obviously the story here is the margin deterioration, can you give me some more color more specifically what happened in the quarter on the margins? You mentioned that your reimbursables were pretty high last quarter, they were exceptionally well, that's probably pretty good part of it. I assume whether it's in pretty good, at least in Texas it has, maybe that's affected other areas. I know this bad debt expense bounced up, try to break down for me how much of the margin deterioration was associated with different categories?

Marshall, it's going to be difficult to put in categories but I would tell you this, we've reduced from 16 to 12 in Q2, we've reduced from 12 to 10 in early part of Q3. Couple of things to comment on there. We talked about in the past, even last conference call that the demand equation is too slow. You've got long term demand, order book drawing, can you see some visibility? And then you have a short term demand issue. The largest junk of our issues in the third quarter were related to short term utilization rates. We have a competitive pricing environment, there is no debt the market is very, very competitive. During the quarter we would have a crew that the order book was not sufficient enough to maintain a very high utilization rate week-to-week, month-to-month. So we would have periods where crews would be down a week to two weeks, waiting on a permit, in the middle of the move, having to make a long move because that's where the next job was available. Lot of times these were things that are outside of our control. We also are incurring some expenses related to bringing down two more crews in the early part of the quarter and working those costs back out. Back several years ago, when we were growing and expanding crews, it was very difficult and we made comment about this to stay up with the expense side, there is a lead time on expenses when you are expanding, where there is a lag time on expenses when you are coming down. We've talked in the last quarter that short term utilization was every bid is important as the long term outlook. So at the very last half maybe two-thirds, particularly May and June, we had some real issues with maintaining this short term utilization rate. So where are we now? The market is very competitive, there is no doubt about it. We feel very confident that our order book is sufficient to get us into fiscal 2010 and we believe that we are generating enough backlog so to speak to go forward. We think we have increased our potential, certainly in the oil producing basins, we are seeing some continued demand in the Appalachian, the [Marsalis Play], the Haynesville, we're seeing some stuff coming alive in the Bayville Barnett, it's got a little bit of activity in it. So the large shale basins are obviously in play and sustain somewhat steady but we've been able to build a little bit of cushion in our order book with jobs of various sizes. So while we are still in somewhat of a difficult situation short term, I can tell you that July has been better in terms of short term utilization rates. I think we have got an order book that we believe will allow us to mitigate those risks better than we had late in Q3. So long when it entered to tell you that the biggest problem was getting jobs ready. At some point we would have three or four crews down for a short period of time then to go back up another would come down. So, the biggest problem has been the short term utilization issue, particularly last half to two-thirds of the quarter.

I'm going to stay on that theme to drill down because I'm trying to figure out what is going to change going forward. So it sounds like, clearly, that the biggest issue was the fact that there was utilization gaps and the schedule and obviously, you incur the expenses even if crews aren't working for a day or two or a week, as you get ready for the job. So, that went happening before?

No. We had a very nice strong run even during the expansion years of being able to maintain that high short term utilization rate as we were adding crew counts. I know you are about to ask a question but we are watching this very, very closely to see how this is going to impact as particularly as you get into the late fall where you start to get in place things like [hunting] issues. So we're going to continue to monitor. We believe ten crews or the number, we believe the utilization rate will be better, what they are going to be I don't know but we're going to continue to have to monitor this very, very closely to balance this ten crew count number.

You mentioned there was this lag on expenses, that's not associated with severance cost so much, is it?

No.

So we can pull that out the mix. Pricing is obviously part of the mix, pricing I assumes come down?

Pricing is coming down, yes.

Can you give me any sense of magnitude, I mean, prices are down 10% or is it just a couple of percent or is it 30%?

It's difficult to quantify that Marshall.

Just a ballpark I guess.

I don't know, Marshall. 20.5% maybe in some areas, some place that is holding better than that.

So behind the utilization issue I would assume pricing would be probably the next biggest issue in terms of the margin degradation, and prices probably stay down for a while. I am not seeing anticipating any major spike in activity but if you stay where you are, price probably hold more or less where they are, fair?

Yes Marshall, I believe so. I want to just interject something right there. Our contract mix is changing too. We've talked about the last quarter, we are moving more towards the turnkey contract. We are still operating in day rate stuff in certain areas but they are softening in the pricing of our product. As we move more towards the turnkey operation, we believe there are some things that we can do in efficiencies and things like moves and just overall efficiency during the day with increased channel count as we move some of these resources on to other crews. We believe we can have a chance to close some of that pricing gap. The key is going to be, are we going to be able to maintain steady operations day-to-day and not just be efficient during the day but move efficiently. The other component to that is, as we've talked in the past, when the market softens utilization goes down, pricing comes down, but some of the contract terms that we've had in the last few years begin to change a little bit. We have not lost weather protection but it is certainly softer than it was year ago or so. All these things are going fit into this deal that just really hard to identify any one thing as the issue going forward. I still believe that short term utilization rates will be the largest issue going forward.

Chris, it appeared that your bad debt expense bounced up certainly from the September fiscal year-end. Can you give me a sense of how that changed quarter-to-quarter on the bad debt side?

We've looked at the bad debt in quarter two and did some work there. We didn't do early but we do a whole lot in quarter three. We're looking at these different things, the same mix that we always do in our bad debt expense and continue to monitor credit and feel like that we are doing a good job of that. And…

So the big jump in the bad debt was last quarter, not so much this quarter?

Correct, in quarter two.

All right. And that [bashing] to right, now that didn't get changed a lot going forward?

We sure hope not.

So bottom line just to wrap this question and I'll turn it over to somebody else. Given the issues that affected margins negatively, if you can get little better utilization maybe you get some modest mix change that helps pricing. When I look at margin standard to model now going forward, our crew count holds more or less where it is, this is best we can tell. I mean, we don't know for sure, none of us do but the best we can tell that crew count holds the same, maybe we get some modest margin improvement next quarter due to better efficiencies, due to modestly higher pricing and that's probably bad hit, is that fair?

Yes, yes. I think that's fair Marshall. I would say that as we have said in the past and as we have in all the years that you have been following with others, we don't make decisions around our company on a quarter-to-quarter basis. So this margin issue is going to be a difficult issue in the near term, there is no question about it and we have all these issues to deal with. Long term, I think we are doing some things that give us the chance to come out of this cycle stronger, and we believe in better shape. We've got this strong balance sheet, we've got equipment that is ready to go and in good shape, and so we are not having to look at a huge CapEx program right now. We are investing in people. You talked earlier about severance cost and some of these costs we are maintaining. We want to be in a position as we have in the past that when things recover and we believe they will, I don't know what the timing is going to be, but when they recover we are going to be in a position to capture the upside in a manner similar to what we did in 2003, 2004, 2005. So, we've got pricing, we've got utilization, we've got all those things we've talked about. Do keep in mind that we are continuing to monitor this thing very closely, but we are making decisions around here that are long term, that we believe we are in the best interest of not just a company but our shareholder certainly.

That's what you've always done. I am going to turn it over someone else. I've monopolized your time here, and I'll re-queue for later questions.

Your next question comes from the line of Neal Dingmann with Wunderlich Securities.

I will try to stay away from the backlog question, Steve. You mentioned about 30% of the business now is oil related, the size of these types of jobs versus sort of the other prior conventional versus more and more of the shale plays, I don't know from the channel count or just from a general size, trying to get an idea of the difference between these jobs.

I think the mix is very similar to what we see in the shale basin natural gas stuff. We've got some projects that are very large in scope, things that can be couple of hundred square miles, that are going to require a very high channel count not just for imaging purposes but for efficiency purposes. Then we've got some projects, particularly in West Texas that are much smaller in size, where they don't require the channel count necessarily for imaging purposes but the channel count is certainly helping on the efficiency side. In the West Texas area we've got some projects of all different sizes, we've always had that mix in there Neal, and that's very positive. That's something that we had missed, particularly in Q3 where the ability to move a crew that is between very large jobs to have a job that's two weeks in length to fill that gap, for example. We've had that for many, many years, we lost it; we are getting some of that back. We don't get to talk about the high channel count issue as much when you had the small West Texas jobs but what we do get to have is the ability to mitigate that short term downtime issue. Small downs tend to get ready quicker. I think you can move on and move up and they are almost, as we would call them gap builders. The encouraging thing about the oil side is, we are seeing jobs of all sizes in all ranges and spread out in the area that maybe we can mitigate some of that later.

Sure, great answer. You said you've gone down ten crews but it sounds like you're confident enough that you can keep these busy well into 2010. What would you have to see if these are going to be busy and you see that not backlog but just orders that are out there? What would you have to see to basically re-bring one or two of these crews that you would let go?

Neal, that is a tough, tough call. I mean the thing that when we looked at on crew expansion, in the past with a long term visibility was there just a feel in the market that you had market strength going forward. Coupled that with the fact that can you put the crew out and maintain its operation day-to-day where the addition of the crew does not impact the utilization rates of the existing crews. So, we had to monitor that equation very closely going up and coming back down. So we had to be in a position that it's really a very fluid dynamic year. Now a couple of things I'm going to add in here. We never have lost sight around here of our clients needs and we're not going to. There maybe situation where you may have to put the crew back to work to help our client meet the need that they have, a commitment that we've made, that could be a timing issue. So a lot of times it's the need of our clients that will dictate what the crew count number may adjust, short term. We are in a position that expanding to an 11-crew, 12-crew, and I hope we're having this conversation soon but we are in a position where it does not require a capital expenditure. So it's something that can move very, very quickly in terms of assets and in terms of personnel because we are maintaining personnel right now, particularly key personnel that allows us to put out adjusted crew count as needed with high quality people and good technology. The cost issue, the capital issue is not there, the decision is little bit easier to make now because I haven't looked at a long term capital expenditure. We are going to do everything we can do and watch the market very closely to put the assets back to work in a very prudent manner.

So, as far as when you went from 16 to 10 crews on a personnel side, if for some reason your demand just took off overnight and you wanted to go back to 14, 15 crews, is most of that personnel still around or would you have to bring them back? What [order] has the employee count gone to today versus couple of quarters ago?

Last quarter we were right around a 1,000 people or something like that, we were at a high of 1,575. We always have a high turnover rate at the labor level. I would tell you that when demand picks up and this cycle turns, we're going to be in a position to react very, very quickly. The labor is available but on the trained high-end, crew management, operational staff, we have maintained those people. Everybody that ran a crew when were at 16 are still aboard, everybody operated according to that are still aboard, the high-end troubleshooters, those kinds of guys are still available too. So we are making an investment. And while we think it's our greatest asset and that's our people and our ability to move very quickly, not if but when this cycle turns.

Versus the volatility we always see, continuing to see domestically, international or at least certain region seem to be a bit more stable, would you consider at some point international in these days?

Neal, we look at all opportunities. We still believe that over the long haul in terms of crew count, the US market is still a very large market for size of services. So we believe this market long term will be around. It has been highly volatile, certainly as late and going back ten years ago. The international world is not as easy to just say, I'm going to go international as it sounds. You talk about stability in the international world, you've got safety issues, you've got political stability issues, working for NOCs is obviously a very positive for a lot of people, there is connections that have to made, so its not an easy thing to just enter the international market. The other thing is; we've had some international opportunities although they haven't been real strong; we've had people talk to us about it but I've never really gotten the feeling that we were invited into a country for anything other than to promote competition. So the answer of the question is, we look at all opportunities and we examine them closely but the international world is something that it would have to be the right situation with the right set of circumstances for us to move. If that opportunity would become available, we would certainly be interested further in those conversations. As of right now, we don't have any plans. Desires and plans are two different things, we're making plans to go to the international market.

Your next question comes from the line of Pierre Conner with Capital One.

Going to this effective utilization question and now that impacted the margins, what I was looking for some kind of metric on utilization. Can you even give us a range of days working as a percentage of days you had available? Just give us a feel for that magnitude of that impact.

May was really difficult. We had probably 5 or 6 crews in May that were impacted in a span of ten days to two weeks. In June, that number was probably four or five crews again but it was on different crews. I know you get tired of hearing this but it's hard to quantify because you expect some level of down time between a move. So how efficiently you can get that move? You get equipment laid out and move the crew where you generate revenue, particularly on turnkey contracts. I think we have talked about the change between a turnkey and day rate contracts. With turnkey contracts you have quite a bit higher margin potential, but you are wearing with it a little more risk and some of the risk is in effect and some of the timing of a crew move where you maybe laying out and not generating revenue until you actually started acquiring data; whereas on a day rate contract, you are getting paid for that time. May and June were significantly impacted with four to five crews, sometimes as many as six crews down for ten days to two weeks or so.

I appreciate that kind of numbers on it, Steve. There was a thought, I'd believe we discussed that additional people and equipment on some of your crews, particularly turnkey, could drive efficiency such that it would complete the shoot faster. Obviously, that was offset in this quarter. Is that building to the extent that if you have some short term, perhaps, I don't think you garnered any benefit from that available efficiency that came through?

That is an interesting comment, Pierre. When you are in a short term utilization issue, sometimes crew efficiency works against you because you finish the job quicker and don't have anywhere to go. So you generate the revenue quicker but you're down a couple of days and it really becomes an offset. We're going to build efficiencies, we're going to do something on the operation side that we believe are going to help us but it's a matter of having enough projects in the queue that are permitted, surveyed and ready to go. We feel more confident now in our ability to maintain that utilization rate than we did a month or two ago. It feels treacherous. You can have some thing to change, you can have the land owner that pops up or mineral interest owner or your client may have a delay on with a partner or something, there is a lot of moving parts to that but we feel better about it. We're really encouraged that some of the oil producing stuff that we've talked about for almost a year now appears to be coming to a lot to little bit. We're really encouraged that the large shale basins they are holding in there, fairly solidly with jobs of all sizes. So, it's going to be not just a mix of contract size but a mix of job size and location, where they are going to be and what kind of move do you have to get. For example, in the quarter, we had to move a crew from Texas to Oregon and back, that's not the kind of crew move you want to make, given that time and you'd rather move somebody from the western part of the US over there but due to utilization issues we had and to get the job done we had to make a long move. So as you get jobs spread out in various areas, you normally affect the short term utilization rate but you affect the ability to move a crew. Your moving efficiency is much better.

Steve, on the third-party charges, and I think we got to need to say previously, second quarter was at the low-end.

Yes, that job as a percentage of revenue to a much higher rate than it had been in the prior quarter. I felt like in Q2 that we were probably at the low-end of that, but that percentage can change. I don't think the actual level of dollar was increased all that much, it was probably the drop in revenue on the others. We did have an increase in Q3. So have a little bit of increase in some projects that we recently got or picked up late in the quarter in the Appalachian Basin that dropped with some third-party charges and offset with the utilization issue made the percentage go up, and I was surprised.

So you are above historical, you'd bragged it onetime sort of 25% to 35%, I am not trying to put words in your mouth.

We are in a high, we are up.

Above that, all right. I want to clarify to this question about pricing, there was some comment about pricing stabilized, and then maybe Marshall was talking about decline about pricing. I wanted to get some clarity, are you seeing pricing in this as I know it's maybe not the biggest factor but are you seeing pricing crew, is that what you were implying or basically just stabilized?

I am not seeing the drop that we probably saw over the last quarter or so. Pricing is very, very competitive, we recognized that and we are going to have to do whatever we can do around here to offset that pricing issue with efficiency gains on currency contract until we get some recovery in the market lower 48. We are not out of the words yet.

Let me try this too, I'm piecing together all that you are saying. My assumption is that the increase in the shorter terms jobs that come up and allow you to get a little better continuity efficiency, those are oil based. And then I was going to ask geographically, besides for the (inaudible), we are going back into West Texas or this might be easier and shorter to get to?

Yes. What's interesting about West Texas, we've had one of the wettest July, we've had it I don't know how many years ever I think. It hadn't rained anywhere in Texas but right here in West Texas, so that is just where our luck is these days.

All right. I'm sorry to keep this going but I've just, I got some others on my mind and I need to check with you on. One is the FireFly Deployment, recently on our press release and you all were working with them on that. Tell us about the impact? What is that positive, neutral? How is that changing?

I think from a revenue standpoint, from a financial standpoint I think it's probably a neutral move for us. On the technology standpoint, being able to work with the technology and get our hands on it and actually, how to experience with it. Our relationship with the client that's deploying the equipment, those are extremely positives for us. I think the first test job went pretty well and we're excited to see how the next project goes with it.

This one is for Christina. Based on the numbers you gave us on total CapEx to date, the fiscal total in the quarter was something in the neighborhood of $200,000?

For the quarter it was less. It was more in the neighborhood of just fairly anything, really.

(Operator Instructions). Your next question comes from the line of Veny Aleksandrov with Pritchard Capital Partners.

Most of my questions got answered but I have one left on the third-party charges reimbursable. Steve, you are working in areas with limited taxes and you had more than 35% this quarter. If you're moving back towards taxes and away from those areas, can we expect the reimbursables to go down from the 35% next quarter?

Veny, I made the comment in the last quarter conference call but I thought that was a true statement and they went up on us. So, I'm going to have to say that I think we'll stay in the ranges that we've been in historically.

Do you mean from dollar-wise?

Yes, from a dollar amount. We've still got quite a bit of activity in Louisiana and the Appalachian. When we move back into East Texas, there will be some third-party charges here in Arkansas. So I think that that the reimburse will be as they always have been and always will be, they will be a factor in the margin. What the numbers are going to be, I just can't make that prediction because it can be a timing issue, it can be preferred a job in the Appalachian Basin that carries with it lot of third-party charges but the crew doesn't get there till the following quarter where you are generating revenue of it and that can change the mix. So that's something we've always lived with and I think we'll continue to live with that issue. The good thing about the high reimbursable level is, it tells us that we are still active in these large shale basins where the reimbursables are half and that's a positive if there is still quite a bit of interest in these areas.

Can we see some offset next quarter on the margins from looking at what you have done this quarter on the reimbursable? Will the revenues come next quarter?

We said in the last conference call that we don't know where the margin issue is going to go. I think it's going to be very difficult for us to predict. It goes back to this utilization rate, crew efficiencies, and all these things we've talked about, and we will just have to wait and see. I know that's not the right answer but that's the best answer I can give right now.

(Operator Instructions). At this time there are no questions in queue.

Okay. Stephanie, I appreciate your help with the call. I certainly want to thank everybody for listening in particularly, our employees for their continued effort, our clients for their continued trust, and our shareholders for their continued support. We will be presenting at the Intercom conference in Denver on August 10th. I believe that information is available on our website. I am going to close with some comments. I'm just saying that we have been here before, we have a time tested strategy, and a very long term thinking approach in our company. We are in some difficult times. We're going to monitor the crew count very, very closely. We're going to continue to make investments in our core assets. We are going to be in a position that we will be able to respond to the market turn very, very quickly. We have a balance sheet that allows us to do that, and we're going to do everything we can do to maintain the strength and protect that balance sheet, continue to look at opportunities. We are not excited about where we are today. We were very excited about the future and where we're going. We're very encouraged with the continued demand in the shale basins and we're even more encouraged with the outlook in some of the oil producing basins. We will be here next quarter to talk to you again and be here at many quarters to go. Management has a commitment to the shareholders of our company, and our clients, and our employees to make decisions day-to-day that we believe will be in the best interest of all parties concerned over the long term. Thank you very much for listening in. And with that operator, we are going to close.

Thank you. This concludes today's conference call. You may now disconnect.