Geospace Technologies Corporation (GEOS) Q4 2014 Earnings Report, Transcript and Summary

Welcome to the Geospace Technologies Fourth Quarter and Full Year 2014 Earnings Conference Call. Hosting the call today from Geospace is Mr. Rick Wheeler, President and Chief Executive Officer. He is joined by Tom McEntire, the company's Vice President and Chief Financial Officer. Today's call is being recorded and will be available on the Geospace Technologies Investor Relations website following the call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your question following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Rick Wheeler. Sir, you may begin.

Good morning. Welcome to Geospace Technologies conference call for the fourth quarter and year end the fiscal year 2014 and thank you for listening today. I am Rick Wheeler, the company's President and Chief Executive Officer, and I'm here with Tom McEntire, the company's Vice President and Chief Financial Officer. I'll start off the prepared portion of the call with an overview of the quarter and the year, and Tom will follow that with an in-depth review and commentary of our financial performance. I'll then close out the prepared portion of the call with some final remarks, and we will open up the line for questions. Also, as a matter of convenience, we will make a replay of this conference call available in the Investor Relations section of our website at geospace.com. Let me first caution that the information we will discuss this morning is time-sensitive, and therefore may not be accurate on the date when one listens to the replay. And secondly, many of the statements we will make today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. By example, this includes statements about the market for our products, revenue recognition, planned operations and capital expenditures. These statements are based on management's current perceptions, expectations and knowledge. Actual outcomes are influenced by uncertainties and other factors that we are unable to predict or control. These and other risks, both known and unknown, may create undesirable results or cause our performance to differ materially from what we may express or imply. These risks and uncertainties include those discussed in our SEC Form 10-K and Form 10-Q filings. Yesterday after the market closed, the company released its financial results for the fourth quarter and year end of fiscal year 2014. For the full fiscal year revenues totaled $236.9 million with net income of $36.9 million or $2.81 per diluted share. These annual results are second only to those achieved in fiscal year 2013. And at the close of fiscal year 2014, we had increased stockholder equity by $40.2 million or 13.9%. Fiscal year 2014 has also fully demonstrated the lumpiness our business is prone to endure. Revenues and income for our first quarter were at their highest levels ever, while the fourth quarter approached record lows. For the fourth quarter, the company recorded revenues of $26.3 million and a net loss of $1.8 million or $0.14 per diluted share. For the comparable quarter last year, the company recorded revenues of $68.3 million, a net income of $13.7 million or $1.05 per diluted share. Reduced revenue for both the fourth quarter and the fiscal year was a direct consequence of the completion back in April of the Statoil order for a permanent reservoir monitoring or PRM system. In fiscal year 2013, work on this project contributed to revenues throughout the full fiscal year and particularly recognized $38.1 million of revenues from the Statoil order in last year's fourth quarter, while none was recognized in the fourth quarter of 2014 since the project had fully completed. To this end, fourth quarter revenues from our reservoir products declined by $38.7 million or 91% from last year. We are very satisfied and proud of the work which our employees achieved during the Statoil contract, finishing the project in record time and with quality workmanship. We are confident that Statoil is pleased with the systems data quality and the work we performed, and we expect a positive on-going relationship between our companies. While we currently have no PRM contracts in hand at this time, we remain optimistic that our PRM products will contribute significantly to our results of operations in the future. We are aware of a number of operators around the world that are considering PRM systems for their fields and we believe we are the world leader in the design and construction of such systems. In conjunction with lower reservoir product revenues, the fourth quarter also reflected lower product demand across all of our seismic and non-seismic product segments compared to last year's fourth quarter. Fourth quarter revenues for our traditional and wireless seismic products were down $2.3 million or 21% and $0.5 million or 5% respectively from last year. Demand for product sales has fallen in direct association with reduced capital spending by our customers, which is itself a result of diminished seismic exploration activities across most sectors of the industry. To the extent that oil and gas companies continue to hold back spending on exploration to find new energy, demand for these products is expected to remain soft. We anticipate that during this time our overall traditional and wireless product revenues will continue to decrease and we anticipate some shifting of revenues from sales to rentals. Despite market softness, we believe our wireless products represent the best and most cost efficient alternatives for seismic industry contractors in lieu of legacy cabled equipment, which enhances our position in future sales and rental opportunities. During fiscal year 2014, we sold 86,000 channels of our GSX land wireless products and we had 134,000 channels in our worldwide rental fleet. Amidst the softness experienced by most of the seismic industry, the ocean-bottom seismic market remains active. We are seeing growing customer interest, quote inquiries, and rental contracts for use of our cableless OBX ocean bottom systems. We recently announced an agreement with a major international seismic contractor to rent 4,000 stations of our cableless OBX ocean bottom nodal system for 180 days. We expect to deliver this OBX system to the customer in the first calendar quarter of 2015. In relation to the matter that we have previously reported on, Seafloor Geophysical Solutions continues to move slowly forward in their effort to secure capital funding. We understand that SGS received a small amount of working capital funding from a potential investor. This has extended the timing of their efforts to secure the long-term financing needed to proceed with their business plans, which currently includes the purchase of our deep-water OBX system. We cautiously interpret this as a positive indicator in their pursuit toward a successful outcome and we understand that this funding helps SGS operate through the end of calendar year 2014. However, we must again point out that we have no specific knowledge about when or if a successful completion might occur.Sales of our non-seismic products decreased $0.5 million or 8% from last year's fourth quarter primarily the result of a decline in offshore cable shipments. During the Statoil contract, we were unable to accept certain orders for offshore cable products due to a lack of ample manufacturing capacity. We are aggressively pursuing new orders and new customers for our offshore cable products, however. The architectural plans for the construction of a new building at our Pinemont facilities are now in the hands of local officials for approval and permitting. It is estimated that the conclusion of this process should occur sometime before mid-December. This further pushes back any significant effort towards the construction of the new facilities to the second quarter of fiscal year 2015, at the earliest. However, our remodeling effort, the smaller building on the property was completed on schedule, and we have successfully moved all our operations from a previously rented satellite facility into this building. Present circumstances indicate that much of the seismic exploration industry is in the midst of curtailed activities that are typical of the cyclical lows that the industry has seen before. However, we maintain that future opportunities for us to provide permanent reservoir monitoring systems and other innovative products to the industry are primary drivers in a long-term strategy that calls for us to enhance and expand our facilities and capacity. I'll now turn over the call to Tom to provide you with further detail and insightful commentary on the company's fourth quarter financial performance.

Thanks, Rick, and good morning, everyone. Before I begin, I would like to remind everyone that while our discussions today may include estimates of future cash flows and other events, we will not provide any specific revenue or earnings guidance during this call. As Rick just mentioned, we reported revenues for our fourth quarter of $26.3 million compared to revenues of $68.3 million last year. Our net loss for the fourth quarter was $1.8 million or $0.14 per diluted share compared to last year's net income of $13.7 million or $1.05 per diluted share. The decrease in revenues and earnings was a direct consequence of the completion of the Statoil order back in April 2014, where we recognized $38.1 million of Statoil contract revenue on last year's fourth quarter. In addition, the current year fourth quarter reflected low product demand across our seismic and non-seismic product segments. In particular, demand for our traditional and wireless products has fallen in direct association with reduced capital spending by our customers due to the diminished exploration activities across most sectors of the seismic industry. To the extent that oil and gas companies continue to reduce exploration spending, we expect demand for these products to remain soft into the future. In this regard, we expect our traditional and wireless product revenues could decrease further, although we anticipate some shifting of revenues from sales to rentals. For the full fiscal year 2014, sales and rental revenues from our traditional seismic products were $52 million, an increase of 5% compared to revenues of $50 million last year. This increase reflects higher demand for our geophone products, primarily in connection with the sale of two large GSX wireless systems in our first quarter. Due to the soft market conditions discussed earlier, we are expecting sales of our traditional products to decline in fiscal year 2015. Sales and rental revenues from our OBX and GSX wireless seismic products were $79 million, a decrease of 10% compared to revenues of $87 million last year. The decrease in revenue was primarily due to continued industry softness resulting in lower capital investments by our customers. However, we also see increasing competition for sales of wireless systems. The lower product revenue was partially offset by significantly higher GSX and OBX rental revenues. During fiscal year 2014, we sold 86,000 GSX channels compared to 81,000 in the prior fiscal year, with a significant portion of the fiscal year 2014 sales comprised of three channel stations yielding a much lower average sales price per channel. Due to soft market conditions in the seismic industry, we expect fiscal year 2015 sales of our wireless products to be lower than fiscal year 2014 levels. Since its inception, and through September 30, 2014, we have sold 325,000 GSX channels and we had 134,000 GSX channels in our worldwide rental fleet. Sales and revenues from our reservoir seismic products were $84 million, a decrease of 39% compared to revenues of $138 million last year. The decrease in revenues primarily due to the completion of the manufacturing portion of the Statoil order back in April 2014, resulting in a substantial decline in revenues from our PRM systems. During fiscal year 2014, we recognized revenues of $62 million from the Statoil PRM system and last year we recognized revenues of $110 million from the Statoil PRM system and another $18 million from the shale PRM system. We expect fiscal year 2015 revenues from our reservoir seismic products to decline significantly from fiscal year 2014 levels, due to the absence of any large scale PRM systems being requested by major oil and gas producers for delivery in fiscal year 2015. Revenues from our non-seismic products were $21 million, a decrease of 13% compared to revenues of $24 million. This decrease in revenues primarily resulted from the lower sales of our offshore cable products. During the first half of fiscal year 2014, we were unable to accept certain orders for offshore cable products, due to a lack of manufacturing capacity caused by the Statoil order. We are aggressively pursuing new orders and new customer for these products. As expected, the lower level of revenues negatively impacted our gross profit margins which declined from 46% last year to 41% this year. The high fix cost associated with our manufacturing and rental fleet operations will likely continue to negatively impact our gross profit margins in periods of future lower revenues. Our operating expenses were $43 million, an increase of 11% compared to operating expenses of $39 million last year. This increase reflects higher stock price compensation expenses and cost associated with increase staffing of our administrative and research and development departments. Our effective tax rate was 31% for fiscal year 2014, and we expect our 2015 effective tax rate to also be in this range. 2014 investments and rental equipment were $27 million and were partially offset by $16 million of proceeds from the sale of rental equipment. While we do not expect any significant growth in our GSX land rental channels in 2015, we do expect customer demand for rentals of our OBX ocean bottom nodal products to increase in fiscal 2015. With estimated OBX cash rental equipment investments expected to be $7 million and potential non-cash transfers from our inventory account of upto $27 million, pending customer demand. Investments and property, plant and equipment in 2014 was $7 million. And we estimate that our 2015 investments in new machinery equipment will be $11 million. In addition, capital investments related to the expansion of our Houston manufacturing and engineering facilities are currently estimated to be $15 million. We ended the fiscal year 2014 with $221 million of working capital, $53 million of cash and short term investments and no long term debt on our balance sheet. Our $50 million credit facility remains untapped at this time resulting in total liquidity of $120 million. That concludes my prepared remarks. Now I'll turn the call back over to Rick.

Thanks, Tom. Undoubtedly much of the seismic exploration industry has additional challenges ahead as oil and gas companies continue to be less focused on exploration. Nonetheless, many oil companies were facing decline in production and oil equivalent output and without follow-up of seismic enhanced recovery and new reserves for replenishment, such as condition is unsustainable. Our goal is to continue to create value for our customers with the technology products we provide as the market goes through these challenging times. While we are clearly in a period of pressure on our operations, our balance sheet is very strong and we believe we are in a good position to work through the correction in oil and gas exploration and production activities. This concludes our prepared remarks, so, I'll now turn the call back over to the Erica, for questions.

[Operator Instructions] And our first question comes from Joe Maxa from Dougherty & Company. Please go ahead.

Thank you, good morning. Obviously a tough environment, suggests that traditional and seismic revenues are going to be soft this year. Are you indicating you see the decline obviously year over year, but also from your Q4 levels? Or is that a pretty good number we should think about, in that ballpark?

Well it's really hard to say Joe, but as it is right now, we definitely see a soft market, the extent to which it will last is really not clear. But yes, we do expect the next quarter to certainly face challenges.

And along with that, how are you positioning your operating expenses? Are you going to be able to reduce these levels given the, perhaps, long, drawn-out downturn?

Well, at this point you know, we clearly review all of those expenses on an ongoing basis but quite honestly, we don't want to dismantle much of what we have put together that would require us to try to reassemble all of that, when things get better. So we won't be prudent about those efforts as we go forward but R&D is fundamental aspect of our business and what we do and it has been our culture since we’ve been in existence. So much of that will remain.

But how about on the SG&A side? I think, compared to where your revenues were last time equal levels, SG&A was down, was significantly lower.

Yes but even there, we've had to raise our self to a different level with respect to our safety cultures, with respect to our quality endeavors, we are pursuing some ISO certification for quality levels which require certain infrastructures to be in place. So we'll take a look at that. But again, I don't know that you’re going to see us go backwards.

Yes, Joe, this is Tom. Something that's going to go down is obviously the incentive compensation related to the SG&A line, that's going to be reduced significantly and that was probably in the $3 million range in fiscal year 2014. So incentive compensation – we're doing what we can to trim things, but a big part of what we do is we sell technical equipment and we need our sales people, we don’t want to lose them during this time. And we're not going to be trimming R&D. So I wouldn’t look for any major cuts, but in certain areas we will have cuts.

I see. Okay. And so, given the softness in the business, margins will be under pressure, OpEx, you could have a difficult time being profitable for this year unless you do see that revenue pick up meaningfully. Fair?

Sure. It's always a challenge.

Okay. And then I'll just ask one more on - you mentioned increasing competition on the wireless side. Can you give us a little more color on what you're seeing out there? And is that pressuring your pricing?

Well there's a lot out there trying to jump into the markets. It certainly dilutes activities with respect to one’s endeavors, whether or not many of these products pan out on the new fronts, it's not necessarily the best time to try to come in with a me too sort of product. But nonetheless it does draw attention to our customers and does put pressure on pricing and it makes us have to be very conservative about what we do. So those pressures are something that we anticipate. There is no way you can put out a product of the caliber that we have out in the market, and not see that sort of competitive pressure. But there are still many, many attributes about our system that make it unique and better than the alternatives even within the wireless space. So we're just going to attack those problems the way one would always do in a business environment.

All right, great. Thanks a lot.

And our next question comes from Veny Aleksandrov from FIG Partners. Please go ahead.

Good morning. A little bit more detail, if I can ask, on the wireless side. Yes, revenues went down. Margins went down, as well, in total. But how much was these - and Tom talked about three components. How much was it because of the sale of three components versus single components, how much was it pricing pressure? Can you give us a little bit more details on the margins?

Veny, the gross profit margins are really down not because of the type of wireless product we sold, but it's because of volume. We need sales volume to cover our fixed manufacturing costs and so that's just kind of a natural trend that’s going to happen when you have reduced sales. So I am not sure I, totally understand your question.

Okay. If we talk about inventory, how much of the $145 million of inventory right now is wireless and how much is OBX, if I can approach it that way.

Yeah. We don't give that information out, but it's a fairly substantial amount of wireless inventory in the mix. So, we have plenty of wireless inventory in our stock room right now ready to go to work.

Okay. And in terms of OBX, when in your prepared remarks you said that there is interest and there are people who can get OBX systems, are you getting any closer in terms of your talks to clients? I know that you've been talking about this for a while and you are in negotiations and you are following some potential contracts. Are we getting quotes?

Well, yes, we're getting quotes. We announced the one for the 4,000, that particular contract. The discussions are really ongoing with various contractors and there seems to be a plethora of jobs out there that the oil companies are wanting this technology to be applied to. It's just one of those things we've been seeing this increase and reporting it to you for a long time, and you see the fruition on these events in a patiently exercised manner such as what we just did with these 4,000. We're moving along with contractors. I can't tell you that we have contracts that we’re going to sign tomorrow. But we’re in discussions with contracts that could be signed soon.

Okay. Thank you. And last question on the OBX rental that you just announced, can it turn into a sales order like you used to do with the GSX or can it be extended?

No, that rental certainly can turn into a sale. It's a long term rental and there is every opportunity for that to turn into a sale, and we have discussed that with the customer.

Thank you so much.

Our next question comes from Bill Dezellem from Tieton Capital. Please go ahead.

Thank you. Relative to the permanent reservoir, historically the company has had, it seems, a lot of interest in the permanent reservoir product. But the press release today seemed to indicate that maybe there's something different now with that level of interest. Would you provide a bit more historical backdrop relative to what you're seeing today also, please?

Actually I don't think we see a change in interest, to be quite honest. The actual word of these tenders to which have been few and far between in the last decade, have mostly fallen on us to provide equipment for. And there are spans of time that historically if you're looking in that perspective, have occurred between these. But activity with respect to those oil companies that are talking to us, is actually the highest it's ever been.

And to what degree did your success with Statoil increase the interest level that you're seeing from these other oil companies? And can you shed a little bit more light on that record level of interest you're currently experiencing?

Well, definitely the success of the Statoil project has peaked additional interest. With each success that we have in that regard, that interest focuses more attention on our technology which we welcome. We pointed out that within the industry there are half of dozen or so and actually we've learned of some new fields that are potentially being considered for PRM systems. Those discussions take a while, it's an investment the oil companies have to plan for. There maybe some tenders that might come out in 2015, but we certainly don't expect any systems to be delivered within that timeframe.

And if there were tenders that came about in 2015, would those be from customers that you have already supplied PRM to? Or would you anticipate that they would be new and in addition to that? To what degree is your new facility a swing factor in the decision metrics of your customer?

I don't know if I can answer the last part of that question, I mean clearly, having additional capacity is going to vote in our favor. With respect to whether it’s new customers or old, it can be both. We are in discussions with both old and new customers.

Thank you.

[Operator Instructions] We'll go next to Mark Brown from Global Hunters. Please go ahead.

Hi guys, good morning. I was wondering just on the GSX rental numbers approximately what utilization did you see for the rental fleet in the quarter? Or perhaps just what was the trend in terms of activity?

Yeah Mark, Tom. We don't give out the utilization number, but it's low. This is historically a slow time of the year for us and we are beginning to get into our more active part of the year with Canadian winter kind of starting up, and so that's a generally when we have the highest utilization is in - our second fiscal quarter which ends in March, but the September quarter is traditionally low.

Okay. Got it. And just curious, the consolidation that we're seeing continue to take place in amongst the contractors, what kind of effect does that have on your business?

Well it's certainly symptomatic of shrinking market with respect to our product, so that consolidation provides equipment pooling. The thing is, is that all of this equipment particularly legacy cable systems eventually have to be replaced or dealt with. And in most respects we believe we're very well positioned in that situation where someone has to make a choice, do I buy more of this stuff or do I buy wireless equipment? So that consolidation clearly has an impact, very readily observant but it's a type of thing you expect during this type of market cycle.

Okay. Understood. And then on the Seafloor Geophysical Solutions status, it sounded encouraging, but do you have a sense of when you would expect a go or no-go decision on that from them?

No. As we said, we really don't have a direct knowledge of when - and even if this will succeed. The fact that they have as reported to us receive some additional funding to extend their endeavors, we certainly find that as an encouragement, that things are on the right track. But we really don't have direct knowledge.

Okay. And then just one more question, just more macro on the seismic market in general. You mentioned that customer appetite is typical of cyclical lows. What leading-edge indicators do you look for in terms of when we might start to see an uptick in orders? Clearly - what, with regard to oil price, would make you feel comfortable? Do we need see it stabilized? Do we need see it start to improve? How do you think of these leading-edge indicators?

That's a very good question but it's one that's very difficult to answer. Oil prices definitely have an impact and if prices go up, that clearly is somewhat of a leading indicator. But the fact is that seismic exploration has to go on whether oil prices are up or down. In the end, again we talked about unsustainable conditions where output productions are continuing to decline. Fundamentally, I think that leading indicators are really hard to just completely pinpoint, but certainly oil prices would be one. Seismic acquisition is the easiest thing to curtail and the easiest thing to start back-up. So it can start very quickly. What you will probably expect to see though is our customers are the ones that will first benefit from those upticks. And so more backlog as the contractors see that uptick, we'll then through a delayed mannerism affect us and increase our backlog.

Well, that's very helpful. And thank you very much.

Our next question comes from Joel Luton from Westlake Securities. Please go ahead.

Hey, guys. Just a real quick question, what was your EBITDA for the quarter?

Yeah Joe, that was $3 million for the quarter and $76 million for the year.

Okay. Thank you.

Our next question comes from the side of Hamed Khorsand from BWS Financial. Please go ahead.

Hi, good morning. The first question I had is regarding inventory. Is it possible to actually shut down manufacturing and just run inventory down to levels of two years ago? Or why are you keeping inventory so high?

Well, part of the inventory is near finished goods. We would never shut our manufacturing down because we would lose a lot of expertise with respect to how we go about building our components.

If we shut it down we would be letting go with a lot of very valuable people that have a lot of knowledge of the processes of how to build the products. But the high inventory level isn't really the result that we're just producing tons of inventory everyday. Our manufacturing lines are down to very slim production just to keep the - know how going and keep the process going for the people that are involved in it. So there is a very limited amount of inventory being manufactured.

Okay. What's the risk that you would have to take impairment charge any time soon?

I don't think it'd be real high. The products that we have in the OBX are ones that have significant interest at this point and certainly a large part of that inventory. So, those can - those are not specific to anyone customer, specialized, PRM systems, our very custom designed within each field. That's not really the case with the components in our inventory at this point in time.

We review the obsolescence of our inventory regularly every quarter. And so we try to stay on top of that, we take provisions for products that we think are losing value or not able to sale. And so, we’re always doing that. It’s not something we’re waiting for some future large charge to take care of.

Okay. And then last topic was, can you characterize this quarter comparing it to the September quarter for us? Usually the winter season is strong, like you said previously, so how does it compare given the current climate? Are you seeing some uptick in business or is it really the same thing as you guys experienced in the September quarter?

Well, I mean, there will be some additional uptick through the winter, but, again we still expect demand for our products to be softer than normal even through that uptick in the winter.

Our visibility is still very limited right now. We can't see very far ahead and our backlog is down at pretty low levels right now.

Okay. Thank you.

[Operator Instructions] We'll take a follow up question from Bill Dezellem. Please go ahead.

Thank you. I wanted to continue down the permanent reservoir path. And you'd mentioned that you have, I think you may have said, a record number of customers that are prospective customers discussing fields with you. I guess that would imply you have a record number of fields that are being discussed also. Is that correct?

Well, some of these are discussing more than one field but it's typically a one-to-one ratio, and in many cases - certainly with previous customers they maybe sharing discussions on more than one field. So, if you're asking about the number of fields versus the number of customers, the numbers of fields is higher than the number of customers simply because of that.

And let's shift to the size. Are you finding that, given the successes that you have had, that the size of the fields that are being discussed are different than the size in the past?

They still vary in size but there is an attribute of growth in the field size in many of the discussions. But really it's sort of an inherent thing you should expect, as this technology was developed and put in place going back a decade, there are certain proof of concepts and trials and certainly those things have panned out. So the larger fields were in low production rates and declines represent the biggest games that one could have certainly become more in focus with some of these projects. But there are also smaller projects that come into focus as well.

Rick, let's shift to actual dollars. What would you say the range is in terms of size of revenues relative to cabling fields that you're looking at?

Probably the best way to analyze that is just to look at our history with the fields that we've installed. Those are numbers that are readily out there and representative of how that goes with respect to field sizes and that sort of thing.

And, so, today you would be discussing fields that go up to the size of the Statoil order then?

Sure. Remember, that was two fields. But, and there are other factors, the station spacing of the sensors has a big impact on the fields equipment costs and all, but the sizes certainly get to that level as well.

Rick, I'll take the bait. Are customers looking to increase spacing or decrease spacing? And presumably a decreased spacing would mean higher revenue to Geospace?

Yes. I mean that's obviously more equipment in that regard, more sensors are involved. Historically customers have wanted tighter spacing because it gives them higher resolution, it's like pixels in a camera, in a picture. There are methodologies to increase that pixelization imaging through sources as well and so you see a combination of both of those activities.

So, then, to make sure I'm clear, the implication of that is, even if the field sizes in terms of square miles were identical over time, it seems to you as though your revenue per field would be going up because the spacing between sensors would be increasing and more equipment that you would be providing.

If that were the case, I can't guarantee you that the trends will always be to increase station spacing because there are methodologies of approach in the Geophysical surveys that can - and in particular circumstances not in all but in particular circumstances, can give you similar image quality through additional source efforts. But I really wouldn't want to say specifically that that's going to be a trend. But I think you’ll see both, you’ll see some in both directions.

And then one additional question in this arena. Commodity prices - is there any reason for lower oil prices to either increase or decrease the size of the fields that your customers might be interested in cabling?

There certainly could be a relationship to that, but that would be within the period of the oil companies to decide whether capital is best placed.

Great. Thank you.

And we'll take our next question from Scott Bundy with Moors & Cabot. Please go ahead.

Rick, regarding OBX how important is battery life to that product?

In many cases it's extremely important. Particularly in the deepwater surveys, in that case, the deployment efforts require precision and it can take a longer amount of time to get the equipment deployed. So, battery life throughout that process and the retrieval process can be very important.

And if we extended battery life of the product for those people?

We have a product that will last 100 days. That's approaching one-third of a year, recording full time continuously at the ocean bottom.

And as a result of having that product, have you seen more inquiries for OBX?

Yes.

Thanks.

And at this time, there are no further questions. And I would like to turn the call back over to Mr. Rick Wheeler, for any additional or closing comments.

All right. Well, thank you Erica. And I would certainly like to thank everyone for joining our call today. We hope you'll join us for our next conference call which we expect to be on February 5, 2015. Thanks a lot, and goodbye.

We would like to thank everybody for their participation in today's conference call. Please feel free to disconnect at any time.