Energy Prospectus

Mitcham Industries (MIND) is hosting our luncheon at The Hess Club on Friday, September 28.

The company's preferred stock is in our High Yield Income Portfolio. It trades at about a dollar discount to par ($25), so the annual yield is ~9.4%.

Mitcham Industries is based in Huntsville, Texas. Actually, the office is in the woods south of Huntsville. I've known Rob Capps, the Co-CEO for decades.

The company is still the leading provider of seismic rental equipment, but they are transitioning away from that business. Today, Mitcham is a global provider of some high-tech equipment, primarily sonar and sub-sea sensors.

Mitcham Industries, Inc. provides technology to the oceanographic, hydrographic, defense, seismic and security industries. Headquartered in Huntsville, Texas, Mitcham has a global presence with operating locations in the United States, Canada, Australia, Singapore, Russia, Hungary, Colombia and the United Kingdom.

Mitcham’s worldwide Marine Technology Products segment, which includes its Seamap and Klein Marine Systems units, designs, manufactures and sells specialized, high performance, marine sonar and seismic equipment. Seamap’s products include the industry-leading GunLink seismic source acquisition and control systems, SeaLink acoustic sensor and towed streamer systems, and BuoyLink RGPS tracking systems. Klein is widely recognized as the world’s leading supplier of side scan sonar equipment.

Through its Equipment Leasing segment, Mitcham believes it is the largest independent provider of exploration equipment to the seismic industry.
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Please register if you wish to attend the luncheon. Rob Capps is speaking.

From Mitcham's Sept. 5th press release. Note what I have highlighted in the last paragraph.

Rob Capps, Mitcham's Co-Chief Executive Officer, stated, "Our second quarter results essentially unfolded as anticipated, producing slightly improved results compared to the second quarter last year and the first quarter of this fiscal year. As we mentioned previously, our Marine Technology Products segment has been experiencing an increase in both inquiries and order activity that is expected to materially benefit the second half of fiscal 2019. In addition, we expect to begin generating meaningful revenue from our recently introduced SeaLink™ product line during the third quarter. As a result, we currently anticipate a more robust second half of fiscal 2019 led by orders for Seamap and Klein booked during the first half of this year. Project inquiries remain strong, as we see several opportunities with NATO navies as well as with hydrographic and oceanographic companies. We are also experiencing an uptick in repairs and aftermarket sales as some of our customers build backlog and find themselves in need of additional capacity.

"In the first six months of this fiscal year we have been focused on establishing the production facilities that will handle the SeaLink product line of marine data acquisition systems. The production and repair of these products will be conducted in our existing facility in Singapore and in a newly established facility in Malaysia. This new facility is in close proximity to our Singapore operations. We have incurred approximately $840,000 of incremental costs during this start-up period without any significant offsetting revenue, a trend that we anticipate will begin to change in the third quarter. This line of solid towed streamer systems is designed to meet a variety of marine seismic data acquisition needs from customers including survey companies and research institutes conducting 3-dimensional, high-resolution seismic surveys.

"On the Equipment Leasing front, we have taken additional steps over the past few quarters to lessen our exposure to the oil and gas industry by reducing our cost structure in certain geographic markets. We expect annualized cost savings of approximately $2 million from these efforts and will begin to see some of the benefit in the third quarter.

"We are pleased to start experiencing the positive impact of our strategic re-positioning that Mitcham began nearly two years ago. We believe that our strong position in the marine technology marketplace will allow us to start growing again, as we see many new opportunities in various markets. On the financial front, our capital structure remains strong, with no debt on our balance sheet and ample liquidity, including cash and cash equivalents of $6.9 million as of July 31, 2018. We look forward to a much improved second half of fiscal 2019."