Global Geophysical: 3-D drilling

Global Geophysical (GGS) provides high-resolution, three-dimensional subsurface images that help energy companies locate the most attractive spots to dig.

The company may not be a household name; but its deep-pocketed customers, which include Chevron and ExxonMobil, certainly are.

Its patented technology and fleet of high-tech ION Geophysical vibrators have been instrumental in the discovery of more than two billion barrels of oil, which is more than Mexico, the U.K. and Australia combined go through in a year.

Oil and gas producers are in a spending mood right now, and much of that cash is being spent on seismic data acquisition.

This is particularly true in booming unconventional reservoirs like the Marcellus Shale in the Appalachian Basin and the Eagle Ford Shale in south Texas -- where up to 90% of the acreage is "unshot," meaning that it hasn't yet had its picture taken.

When I added GGS to my portfolio back in July, client orders were picking up rapidly, yet the stock was trading at just three times cash flow (a valuation seldom seen for an emerging leader in a growing industry).
Today Global Geo's customers are hungrier than ever for its services. But with the broad pullback in the market, GGS shares are about 30% cheaper than they were just a few months ago.

Revenues more than doubled last quarter to $85 million, up from $40 million a year ago. Half that total came from international markets (most notably Colombia and Brazil), where new project activity is on the rise -- feeding a 183% increase in data acquisition services.

And the sharp improvements on the top-line have had a dramatic reversal on the bottom line.

Through the first six months of 2010, operating losses came to $17.2 million. At the halfway point this year, the company has banked $18.8 million in profits.

Net earnings have swung from a loss of $1.02 per share to a $0.09 per-share gain. That's an impressive turnaround.

But the company isn't resting here. Global Geo continues to expand its data library, which means a broader menu for prospective customers.

And the firm already has plenty of business on its plate -- as evidenced by a $260 million backlog.

Global Geophysical is a clear beneficiary of elevated oil prices (they fatten customers' wallets). But even if today's $90-per-barrel crude prices slide back below $80, E&P companies around the globe will still be searching for the next big discovery.

Many will turn to Global Geophysical to help pinpoint the sweetest spots in the largest basins.

As it stands, seismic data gathering equipment and crews are almost fully deployed at the moment (industry utilization is nearly 100% in North America).

That lack of excess capacity is pushing prices higher -- and the shares should follow suit.

Action to Take --> The latest earnings picture is a reinforcing shot of bullish news. Global Geophysical remains one of my top growth picks and could easily deliver a 50% or better gain over the next 12 months.