Dawson Geophysical Announces Letter To Shareholders Regarding Tender Offer
Fellow Dawson Shareholders:
As previously disclosed, the Company announced a transaction with
Beginning in September of 2019, Dawson and its Board of Directors, with the assistance of financial advisor
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
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
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
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,
Chairman, Chief Executive Officer and President
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
Additional Information and Where To Find It
The tender offer referenced in this communication commenced on
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
Stephen C. Jumper, CEO and President, James K. Brata, Chief Financial Officer, (800) 332-9766