Pure Seismic Play ION Geophysical Extends Rally Ahead of Potential Earnings Catalyst

Michael Teague  |

Things have been looking up for seismic imaging firm ION Geophysical Corpation (IO) ever since the company surprised markets with its fourth quarter 2013 earnings statement. Released in February, the statement showed, among other things, a huge 26 percent year-over-year increase in revenue. That good news had shares up nearly 30 percent on Feb 13 alone, and marked the beginning of a sharp about-face for a stock that had been sinking under the weight of prior lackluster quarterly earnings statements.

For the two months since mid-February, the stock had been range-bound between about $4 and $4.40 per share, but on Tuesday managed to bust right through top-line resistance, carrying the momentum into Wednesday’s trading session, hitting $4.73 per share by midday on robust volume, about 50 percent greater than the three-month average of 885,000 shares per day.

In the ever-expanding and fragmented oil and gas services industry, more efficient geophysical and seismic imaging capabilities are only going to become more central, as the relatively shorter production life span of unconventional reserves makes these plays more costly. At the very least, ION is well-placed to take profits from drilling and exploration firms who are looking to cut down on operating expenses through the use of more precise 2D, 3D, and 4D seismic imaging data that can tell them more about where to drill, whether onshore or off.

Earlier this month, the company also announced that it would commence a 3D seismic survey off the Southern coast of Ireland, in the under-explored Southern Porcupine Basin where preliminary drilling has indicated the existence of potentially substantial petroleum reserves. Furthermore, the company’s expertise covers some of the most challenging offshore environments, up to and including the arctic circle, where oil and gas giants ExxonMobil (XOM) and Russia’s Rosneft are currently engaged in a joint exploration project.

Heading into the second half of Wednesday’s session, shares for ION were up about 5.6 percent to $4.67, higher than they’ve been since last November. The company reports earnings for Q1 2014 on April 28, and more good news could mean that this relatively undervalued stock could been in for more gains.

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