Mitcham Industries Q3 2009 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Terese Fabian - Sidoti & Co - Analyst : Good morning. I have a question on the lease revenue part in the third quarter. Can you talk a little bit about the mix? How much came from Russia? Then again what your expectations would be for the fourth quarter in terms of leasing into Canada and Russia.

Question: Terese Fabian - Sidoti & Co - Analyst : Do you have a sense, when you talk with your customers, whether they would be leasing or buying, if they had access to credit, or is it that they -- that they think that the markets just aren't there for using the equipment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Terese Fabian - Sidoti & Co - Analyst : Another question on your system sales of GunLink that was delayed to the fourth quarter. How much would that have added to EPS?

Question: Terese Fabian - Sidoti & Co - Analyst : Okay. Thank you.

Question: Ross DeMont - Midwood Capital - Analyst : Question about CapEx going forward. Obviously you have been spending at a pretty good clip here. Do you see over the next quarter and the next fiscal year slowing that dramatically, and just kind of beginning to generate cash?

Question: Ross DeMont - Midwood Capital - Analyst : Great. Then I just want to make sure I heard you correctly. It sounded like even though there's some weakness and uncertainty in the leasing business, the capital needs spent over the last year is sufficient that that will continue to grow and comp up quarter over quarter, then Seamap is kind of the X factor, a little more unknown. Is that a fair statement?

Question: Ross DeMont - Midwood Capital - Analyst : Thanks for taking my questions.

Question: Tamara Manuchian - Greenwood Investments - Analyst : Hi, Bill and Rob.

Question: Tamara Manuchian - Greenwood Investments - Analyst : I have a follow-up question here. In terms of sales in Russia, what percentage of your total sales year to date were from Russia, or if you can give us the number in dollars or percentage?

Question: Tamara Manuchian - Greenwood Investments - Analyst : Less than 10%. Last nine months, I guess. Okay. Now, how many channels do you plan to allocate to Russia this winter season?

Question: Tamara Manuchian - Greenwood Investments - Analyst : Do you feel like the 17 to 18,000 channels will be well utilized during the winter? Or if you see more slowness over there, would you move this equipment somewhere else? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Tamara Manuchian - Greenwood Investments - Analyst : Okay. And what about Canada? How many channels do you have in Canada last winter and what do you think you are going to use this winter?

Question: Tamara Manuchian - Greenwood Investments - Analyst : 20,000? Okay. Is that less than last year?

Question: Tamara Manuchian - Greenwood Investments - Analyst : Okay. So when you were talking about slowness in Canada, you haven't seen any in terms of your backlog over there, or what were you referring to?

Question: Terese Fabian - Sidoti & Co - Analyst : Yes, I have a question on the seismic borehole equipment. Can you tell us how many units you have and what the utilization is on that and what the prospects are for continued use? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Terese Fabian - Sidoti & Co - Analyst : Okay. And another question on the Polarcus on the delivery of Seamap equipment for those units. Was there active bidding going on? I mean, I think your price is 11 million for six vessels. Is that for both GunLink and the BuoyLink product?

Question: Terese Fabian - Sidoti & Co - Analyst : So a little under $2 million per vessel, in terms of cost?

Question: Terese Fabian - Sidoti & Co - Analyst : And that's -- I'm looking at price competition is what I'm looking at. Was that delivered at full price, or is there a lot of competitive pricing pressure now?

Question: Terese Fabian - Sidoti & Co - Analyst : Okay. And the timing of that is throughout 2009, or towards the end of it? Because I think some of the Polarcus vessels are actually being delivered in 2010.

Question: Terese Fabian - Sidoti & Co - Analyst : All right, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Good morning, gentlemen. Just one thing about definitions. By the way is borehole the same thing as vertical seismic profiling?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : And exactly what is that?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Is that used for exploration, or is that used in production?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : So basically the people are just discovering new applications. It's an emerging technology.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Okay. So this could be like a wildcard for you in the future, this particular product? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Okay. Good. And then just one other new thing. The ultralight submersibles, what was that? You mentioned in your press release.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Thanks. Then just two final points. One thing, does the weather ever impact your rental activity? I think it's supposed to be like a cold winter in the northern latitudes, and that would, I take it, be better for drilling?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : And then finally, the whole area of oil price prediction, do you use like a service to predict oil prices, and does that kind of go into your strategic planning, and do you try to do that, or, I mean --

Question: Greg Hillman - First Wilshires Securities Management - Analyst : In your earnings projections, does that assume any particular oil price?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Okay. And then is it still generally -- I think comments you made in the past that basically they will be continuing strong drilling activity, the price of oil remains like $40 to $50 a barrel. Is that still like your rule of thumb?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : But right now, obviously we reach a level where oil price is low enough to slow down activity. Is that correct?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Okay. Well, then, in your mind, is there any price that when it starts to predict reduced exploration activity?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : Okay. Fine. Thank you.

Question: Tamara Manuchian - Greenwood Investments - Analyst : Rob mentioned some of the weakness in Russia was offset -- in North America was offset by entering new geographic markets. I was wondering what markets were you referring to?

Question: Tamara Manuchian - Greenwood Investments - Analyst : Okay. And in terms of your cost structure, I was wondering, if you see more deterioration on the top line, do you anticipate to take some cuts on your G&A, and if so, how much? Have you thought about it?

Question: Tamara Manuchian - Greenwood Investments - Analyst : In terms of, I think your equipment leasing costs almost doubled sequentially and year-over-year. I realize that it's a small number, but I was curious if we had some one-time items or if this is a new level. Can you comment on that?

Question: Tamara Manuchian - Greenwood Investments - Analyst : And the last question is about Seamap. Do you anticipate an uptick sequentially in the fourth quarter for Seamap given that we had delays from October to November?

Question: Tamara Manuchian - Greenwood Investments - Analyst : From Q3 to Q4.

Question: Tamara Manuchian - Greenwood Investments - Analyst : Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Scott Lewis - Lewis Capital Management - Analyst : Good morning, guys.

Question: Scott Lewis - Lewis Capital Management - Analyst : I just wanted to know, is there anything that with prevent you guys from doing a significant share repurchase, given your generally optimistic outlook and your strong cash flow, given your per-share metrics?

Question: Scott Lewis - Lewis Capital Management - Analyst : Do you have an opportunity to do kind of the opposite of what Halliburton and those guys have done, which were buy a lot of shares when they were expensive and stop buying when they were cheap? You guys weren't buying any before? Is now a pretty good opportunity?

Question: Scott Lewis - Lewis Capital Management - Analyst : Okay, thank you.

Question: Joe Hayne - GR&R Fund - Analyst : In terms of order pushouts and delays and cancellations that you guys were talking about during third quarter were there any breakup fees associated with any of those that you mentioned?

Question: Joe Hayne - GR&R Fund - Analyst : And do you typically ever have breakup fees on contracts with customers that lease your equipment?

Question: Joe Hayne - GR&R Fund - Analyst : Well, typically, you guys increase your lease pool based upon demand that you receive from your customers, is that correct?

Question: Joe Hayne - GR&R Fund - Analyst : And when you receive this demand and you have the appropriate product for the customer, do you enter into a leasing agreement with them at that time, or does it happen upon delivery? What's the process there?

Question: Joe Hayne - GR&R Fund - Analyst : Yes.

Question: Joe Hayne - GR&R Fund - Analyst : Just a little historical data. What did the company pay for Seamap originally?

Question: Joe Hayne - GR&R Fund - Analyst : And when was it purchased?

Question: Joe Hayne - GR&R Fund - Analyst : And has that been completely paid off already?

Question: Joe Hayne - GR&R Fund - Analyst : I mean the $2 million earnout.

Question: Joe Hayne - GR&R Fund - Analyst : Okay, great, thanks so much.

Question: Terese Fabian - Sidoti & Co - Analyst : One last question on visibility into the marine seismic market. I know you said the sales of new equipment are slow, but what about the rental part of it? Are you seeing pretty good utilization there?

Question: Terese Fabian - Sidoti & Co - Analyst : are you seeing any work on offshore US, on the Continental shelf on the new areas that are being opened up?

Question: Terese Fabian - Sidoti & Co - Analyst : Oh, thank you.

Question: Terese Fabian - Sidoti & Co - Analyst : Thanks.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : I had another question on the manufacturing side, from the manufacturers. What's the delivery? Number one, is there more capacity coming on line for manufacturing seismic equipment that's being absorbed? Are there any new players other than Sercel? And how long does it take to get delivery from them at this point as opposed to this same point last year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Greg Hillman - First Wilshires Securities Management - Analyst : And, Bill, earlier when you mentioned cash is king and there's a number of opportunities for us, were you referring to acquisitions, or what were you referring to when you said a number of opportunities for us?

Question: Greg Hillman - First Wilshires Securities Management - Analyst : That's fair enough. Okay. Thanks very much.