MIDLAND, Texas, Oct. 25, 2021 /PRNewswire/ -- Dawson
Geophysical Company (NASDAQ: DWSN) ("Dawson" or the "Company") and
Wilks Brothers, LLC ("Wilks") today announced that they have
entered into a definitive merger agreement (the "Merger Agreement")
pursuant to which a subsidiary of Wilks will commence on or before
November 1, 2021 a tender offer to
acquire all of the Company's outstanding common shares for
$2.34 per share in cash (the
"Offer"). Subject to the closing of the Offer, the merger agreement
also contemplates that Wilks will acquire any Dawson shares that
are not tendered into the Offer at the same price per share through
a second-step merger, which will be completed as soon as
practicable following the closing of the Offer, subject to the
approval of at least 80% of the outstanding Dawson
shares.
Dawson Board of Directors
Recommendation
The Board of Directors of the Company is recommending that the
Company's shareholders tender their shares in the Offer.
The Company's Board of Directors, with the assistance of the
Company's financial advisor, Moelis & Company LLC, commenced an
on-going review and analysis of the Company's potential strategic
alternatives in mid-2019. During this same period, Company
management commenced efforts to scale the Company to match the
declining demand for its seismic services. In reaching its decision
to enter into the transaction with Wilks, the board has thoroughly
considered the potential strategic options available to Dawson, the
current and long term prospects for the Company and the sector in
which it operates, including the lack of meaningful and sustainable
demand for seismic services, as well as an ongoing skilled labor
shortage required to meet any potential increase in demand.
Management believes that the Company's cash and other current
assets will continue to decline even if the Company undertakes
further right-sizing efforts relative to demand for the Company's
services. The board believes that this transaction presents
all Dawson shareholders with an opportunity to achieve liquidity
for their shares at the Offer price, is the most optimal path
forward and is in the best interest of the shareholders.
The Company's President and Chief Executive Officer,
Stephen C. Jumper, said, "Given the
limited trading liquidity in our stock, this transaction offers our
shareholders compelling value for their shares and the ability to
most efficiently realize that value. It also provides Dawson with
financial flexibility otherwise not available in the challenging
environment in which the Company is currently operating. Our
ability to withstand the continued volatile markets is enhanced
with this partnership. The Wilks' entities have demonstrated a
highly successful track-record and we believe they will be a
strong, long-term partner for our employees and customers."
Additional information concerning the foregoing matters will be
set forth in the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 to be filed with the Securities and Exchange
Commission following the commencement of the Offer by Wilks.
Tender Offer and Merger
The transaction is not subject to a financing condition. The
tender offer will be subject to customary conditions, including the
tender of at least 80% of the outstanding shares of the Company
pursuant to the Offer, which will be open for at least 20 business
days following commencement (subject to mandatory extensions in
certain circumstances). The Company and Wilks may mutually agree to
permit closing of the Offer if less than 80% of the outstanding
shares of the Company are tendered. Subject to the closing of
the Offer, the Merger Agreement also contemplates that Wilks will
acquire any shares of Dawson that are not tendered into the Offer
through a second-step merger, which will be completed as soon as
practicable following the closing of the Offer and will require
approval of at least 80% of the outstanding shares of the Company.
Subject to the closing of the Offer, the parties expect to complete
the merger in the fourth quarter of 2021.
Moelis & Company LLC is serving as financial advisor to the
Company and Baker Botts L.L.P. is serving as the Company's legal
advisor.
Preliminary Guidance on Third Quarter 2021 Results
In conjunction with the transaction announcement today, the
Company is providing estimated guidance related to certain of its
preliminary and unaudited financial results for its third quarter
ended September 30, 2021. Dawson
expects to issue its actual unaudited third quarter financial
results on or about November 4,
2021.
For the quarter ended September 30,
2021, the Company estimates that it will report unaudited
revenues of approximately $1.9
million and negative EBITDA in the range of approximately
$4.4 million to $4.8 million, as compared to actually reported
unaudited revenues of $193,000 and
negative EBITDA of $5,667,000 for the
quarter ended June 30, 2021. As of
September 30, 2021, the Company
estimates that it will report unaudited cash and cash equivalents,
plus restricted cash and short term investments, of approximately
$41.6 million, as compared to
$45,917,000 of unaudited cash
equivalents, restricted cash and short term investments actually
reported as of June 30, 2021. For the
nine months ended September 30, 2021,
the Company estimates that it will report unaudited revenues of
approximately $13.8 million and
negative EBITDA in the range of approximately $12.0 million to $12.5
million as compared to actually reported unaudited revenues
of $77,216,000 and EBITDA of
$7,834,000 for the nine month period
ended September 30, 2020.
Jumper continued, "Activity levels during the third quarter of
2021 remained depressed, as the Company had one seismic data
acquisition crew operating in the lower 48 with extended periods of
low utilization. The Company's one active crew was idle from early
September to mid-October. The near-term outlook for seismic data
acquisition activity in the U.S. remains challenged notwithstanding
the currently elevated prices for oil and natural gas. Based on
currently available information, the Company's one active lower 48
crew resumed operation in mid-October on a small, few thousand
channel count project with a duration of approximately seven days
and is further scheduled through early February of 2022 with
current projects of various sizes and channel count requirements,
the largest of which is 65,000 channels with a duration of
approximately 45 days. The Canadian season should begin earlier
than in recent years. The Company expects to operate two crews in
Canada in the back half of the
fourth quarter of 2021 through the end of the winter season which
concludes at the end of the first quarter of 2022. The Company has
or anticipates to be awarded several additional mid-sized projects
in the lower 48, each of which will be pushed into late 2022
primarily due to land access issues. Bid activity remains at
historically low levels and visibility into 2022 is limited in the
lower 48. Due to a lack of demand for seismic data acquisition
projects in both Canada and the
lower 48, prices for our services softened in the last
quarter."
About Dawson
Dawson Geophysical Company is a leading provider of North
American onshore seismic data acquisition services with operations
throughout the continental United
States and Canada. Dawson
acquires and processes 2-D, 3-D and multi-component seismic data
solely for its clients, ranging from major oil and gas companies to
independent oil and gas operators, as well as providers of
multi-client data libraries.
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding the Company's preliminary and unaudited results as
determined by generally accepted accounting principles ("GAAP"),
the Company has included in this press release preliminary
estimated information (unaudited) for the third quarter ended
September 30, 2021 about the
Company's EBITDA, a non-GAAP financial measure as defined by
Regulation G promulgated by the U.S. Securities and Exchange
Commission. The Company defines EBITDA as net income (loss) plus
interest expense, interest income, income taxes, and depreciation
and amortization expense. The Company uses EBITDA as a supplemental
financial measure to assess:
- the financial performance of its assets without regard to
financing methods, capital structures, taxes or historical cost
basis;
- its liquidity and operating performance over time in relation
to other companies that own similar assets and that the Company
believes calculate EBITDA in a similar manner; and
- the ability of the Company's assets to generate cash sufficient
for the Company to pay potential interest costs.
The Company also understands that such data are used by
investors to assess the Company's performance. However, the term
EBITDA is not defined under GAAP, and EBITDA is not a measure of
operating income, operating performance or liquidity presented in
accordance with GAAP. When assessing the Company's operating
performance or liquidity, investors and others should not consider
this data in isolation or as a substitute for net income (loss),
cash flow from operating activities or other cash flow data
calculated in accordance with GAAP. In addition, the Company's
EBITDA may not be comparable to EBITDA or similar titled measures
utilized by other companies since such other companies may not
calculate EBITDA in the same manner as the Company. Further, the
results presented by EBITDA cannot be achieved without incurring
the costs that the measure excludes: interest, taxes, and
depreciation and amortization. A reconciliation of the Company's
actual unaudited EBITDA to its actual unaudited net (loss) income,
as published in the Company's earnings release for the third
quarter ended September 30, 2021,
expected to be issued on or about November
4, 2021, will be presented in a table to be included in such
release.
Forward-Looking Statements
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions that
statements in this press release which are forward-looking and
which provide other than historical information involve risks and
uncertainties that may materially affect the Company's actual
results of operations. Such forward-looking statements are based on
the beliefs of management as well as assumptions made by and
information currently available to management. Actual results could
differ materially from those contemplated by the forward-looking
statements as a result of certain factors. These risks include, but
are not limited to, statements regarding the expected consummation
of the acquisition, which involve a number of risks and
uncertainties, including the satisfaction of closing conditions for
the acquisition (such as the tender of at least 80% of the
outstanding shares of capital stock of the Company in order to
close the tender offer, and approval of at least 80% of the
outstanding shares of the capital stock of the Company in order to
consummate the second step merger); the possibility that the
transaction will not be completed; the impact of general economic,
industry, market or political conditions; dependence upon energy
industry spending; changes in exploration and production spending
by our customers and changes in the level of oil and natural gas
exploration and development; the results of operations and
financial condition of our customers, particularly during extended
periods of low prices for crude oil and natural gas; the volatility
of oil and natural gas prices; changes in economic conditions; the
severity and duration of the COVID-19 pandemic, related economic
repercussions and the resulting negative impact on demand for oil
and gas; surpluses in the supply of oil and the ability of OPEC+ to
agree on and comply with supply limitations; the duration and
magnitude of the unprecedented disruption in the oil and gas
industry currently resulting from the impact of the foregoing
factors, which is negatively impacting our business; the
potential for contract delays; reductions or cancellations of
service contracts; limited number of customers; credit risk related
to our customers; reduced utilization; high fixed costs of
operations and high capital requirements; operational challenges
relating to the COVID-19 pandemic and efforts to mitigate the
spread of the virus, including logistical challenges, protecting
the health and well-being of our employees and remote work
arrangements; industry competition; external factors affecting the
Company's crews such as weather interruptions and inability to
obtain land access rights of way; whether the Company enters into
turnkey or day rate contracts; crew productivity; the availability
of capital resources; and disruptions in the global economy; and
other risks and uncertainties. A discussion of these and other
factors, including risks and uncertainties, is set forth in the
Company's Annual Report on Form 10-K that was filed with the
U.S. Securities and Exchange Commission (the "SEC") on
March 16, 2021 and any subsequent Quarterly Reports on Form
10-Q filed with the SEC. The Company disclaims any intention or
obligation to revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Additional Information and Where To Find It
The tender offer referenced in this communication has not yet
commenced. This announcement is for informational purposes
only and is neither an offer to purchase nor a solicitation of an
offer to sell securities, nor is it a substitute for the tender
offer materials that will be filed with the SEC. The
solicitation and offer to buy the Company's stock will only be made
pursuant to an Offer to Purchase and related tender offer
materials. At the time the tender offer is commenced, Wilks
and its acquisition subsidiary will file a tender offer statement
on Schedule TO and thereafter the Company will file a
Solicitation/Recommendation Statement on Schedule 14D-9 with the
SEC with respect to the tender offer. THE TENDER OFFER
MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF
TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WILL
CONTAIN IMPORTANT INFORMATION. THE COMPANY'S STOCKHOLDERS ARE
URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF THE
COMPANY'S SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION
REGARDING TENDERING THEIR SECURITIES. The Offer to Purchase,
the related Letter of Transmittal and certain other tender offer
documents, as well as the Solicitation/Recommendation Statement,
will be made available to all holders of the Company's stock at no
expense to them. The tender offer materials and the
Solicitation/Recommendation Statement will be made available for
free at the SEC's website at www.sec.gov. Copies of the
documents filed with the SEC by the Company will be available free
of charge on the Company's internet website at
http://www.dawson3d.com or by contacting the Company's Investor
Relations Department at (432) 684-3000 or by email at
info@dawson3d.com.
In addition to the Offer to Purchase, the related Letter of
Transmittal and certain other tender offer documents, as well as
the Solicitation/Recommendation Statement, the Company files
annual, quarterly and current reports and other information with
the SEC. You may read and copy any reports or other
information filed by the Company at the SEC public reference room
at 100 F Street, N.E., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. The
Company's filings with the SEC are also available to the public
from commercial document-retrieval services and at the website
maintained by the SEC at http://www.sec.gov.
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SOURCE Dawson Geophysical Company