MIDLAND, Texas, Nov. 16, 2021 /PRNewswire/ -- Dawson Geophysical
Company (NASDAQ: DWSN) ("Dawson"
or the "Company") today released the following letter to
shareholders concerning the pending tender offer by Wilks Brothers,
LLC issued by Stephen C. Jumper,
President and Chief Executive Officer on behalf of the Dawson Board of Directors.
November 16, 2021
Fellow Dawson Shareholders:
As previously disclosed, the Company announced a transaction
with Wilks Brothers, LLC ("Wilks") on October 25, 2021. The transaction involves
a tender offer by a Wilks subsidiary to purchase outstanding
Dawson common shares at
$2.34 per share and a follow-on
merger. The tender offer commenced on November 1, 2021 and is open until November 30, 2021 (subject to extensions under
certain circumstances). The transaction is well described and
documented in the Schedule 14D-9 and Schedule TO-T filed with the
SEC by Dawson Geophysical Company ("Dawson" or the "Company") and WB Acquisitions
Inc., respectively, on November 1,
2021, which can be obtained at the website maintained by the
SEC at www.sec.gov.
Beginning in September of 2019, Dawson and its Board of Directors, with the
assistance of financial advisor Moelis & Company LLC, commenced
an on-going review and analysis of the Company's potential
strategic alternatives, transactions or actions in an effort to
preserve and enhance shareholder value. From July 9, 2018, to September
2, 2019, the Company's share price declined from
$8.09 to $2.11. The PHLX Oil Service Index also
declined materially over the same time frame as the energy sector
fell out of favor in the public equity markets; however, the
decline in the Dawson share price
exceeded the decline in the index. In response to shifting
public investor sentiment, publicly traded North American based
Exploration and Production (E&P) companies began to alter their
capital spending plans with a focus on generating free cash flow
and returning capital to shareholders. This change in capital
allocation priorities by E&P companies, which accelerated
further in 2020 and 2021, has resulted in less demand for North
American onshore seismic data acquisition services, thus
significantly affecting Dawson's
revenue stream.
In parallel to evaluating potential strategic alternatives, we
began a process to resize the Company as our model shifted to
fewer, larger channel count crews, and to reduce capital
expenditures to protect the balance sheet and cash balances. This
was done with the goal of maintaining our ability to compete and
execute large scale projects as they materialized. Since
early 2020, we have undergone further efforts to right-size, reduce
salaries for most employees, including all of management, and
reduce fixed costs in an effort to protect the balance sheet and
cash balances.
During this time frame, we remained optimistic about a recovery
in the onshore U.S. seismic market and experienced intermittent
quarters of success with reasonable utilization of our
equipment. When projects have been available, the Company has
executed very efficiently and continues to do so. Despite our
optimism, improved oil and gas prices and a slight uptick in bid
activity in the middle of this year, sufficient revenue producing
opportunities have yet to materialize in any meaningful way.
Recent earnings reports by the E&P companies continue to
project flat production levels in 2022, only slight increases in
spending and continued focus on returning capital to shareholders,
debt reduction and capital discipline. Our conversations with
our customers and ongoing marketing efforts confirm this
sentiment.
In 2021, our cash burn has accelerated despite our efforts to
right-size and curtail expenses. Our accounts receivable balance
became depleted as we collected cash. This action resulted in a
negative net working capital (defined as current assets less
current liabilities excluding the impact of cash, restricted cash
and short-term investments and current maturities of notes payable
and finance leases and operating lease liabilities) position at
September 30, 2021, and opportunities
to further reduce costs or cut capital expenditures are
minimal. Activity levels in 2022 are expected to be well
below levels we anticipated a few quarters ago. While other
sub-sectors in the oil & gas and oilfield services sectors are
beginning to experience modest activity level improvements, those
improvements are focused around completion and production related
services opportunities, not exploration or seismic data related
exploration-focused activities which impact Dawson. Even so,
overall activity levels will likely be well below 2019 levels
across the vast majority of the sub-sectors mentioned.
We expect that our activity levels from February to mid-fall of
2022 will be similar to levels experienced in the second and third
quarters of 2021, and then expected to only slightly improve in
late 2022. Visibility beyond 2022 is unclear, but given the
expected state of capital spending on oilfield services, we do not
anticipate meaningful increases. Therefore, with reduced
activity levels, we expect our cash balances to continue to decline
during this period. Additionally, our ability to fund future
maintenance capital requirements will be challenging and further
impact cash flow. As of November 12,
2021, our cash, restricted cash and short term investments
were approximately $36,500,000,
representing an expected further decline from our previously
announced September 30, 2021 balance
while our accounts receivable balance increased related to the
previously disclosed recent redeployment of a small crew.
We always strive to communicate as accurately as possible with
our shareholders based on the best available information at any
given time, and to act in the best interest of all of our
shareholders. We believe we have done so to-date and are
continuing to do so today with the recent unanimous decision by the
Board to enter into the transaction with Wilks. This has been
a well thought out decision following an expansive strategic review
and evaluation process over the last two years that was focused on
maximizing value for all shareholders.
We believe there is an ongoing fundamental shift in how E&P
companies allocate capital which, unlike previous cycles, will
result in further delays in any potential recovery in the North
American onshore seismic data acquisition market, thus impacting
Dawson's opportunities to
materially increase revenue streams and maintain a cash neutral
position.
It is a privilege to serve and work on the behalf of all of our
shareholders. There is always the possibility we are not
correct in our assumptions on timing of a recovery. However,
we see no evidence to suggest any meaningful improvement in
Dawson's activity levels for some
time to come.
While the Company's Board and management continue to diligently
serve the interest of the shareholders, we reiterate our
recommendation for Dawson
shareholders to tender their shares. We believe this
transaction provides shareholders a liquidity event and compelling
value for their shares in a very difficult and challenging
market.
We are grateful for our loyal shareholders, valued customers and
dedicated employees. We wish all a healthy and prosperous
Holiday Season.
On behalf of the Dawson Board
of Directors,
Stephen C. Jumper
Chairman, Chief Executive Officer and President
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.
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; disruptions in the global economy; and
whether or not the pending transaction with Wilks will be
completed. 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 commenced on
November 1, 2021 pursuant to an Offer
to Purchase and related tender offer materials filed on Schedule TO
by Wilks and its acquisition subsidiary. 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 were filed with the
SEC. The solicitation and offer to buy the Company's stock is
only being made pursuant to the Offer to Purchase and related
tender offer materials. Also on November 1,
2021, the Company filed a Solicitation/Recommendation
Statement on Schedule 14D-9 with the SEC with respect to the tender
offer. THE TENDER OFFER MATERIALS (INCLUDING THE OFFER TO
PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER
TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9 CONTAIN IMPORTANT INFORMATION.
THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THESE DOCUMENTS
CAREFULLY BECAUSE THEY 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 are available for free at
the SEC's website at www.sec.gov. Copies of the documents
filed with the SEC by the Company are 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