SEC Filing | Dawson Geophysical

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Filed Pursuant to Rule 424(b)(4)
Registration Nos. 333-38393 and 333-40409

1,650,000 SHARES

(DAWSON LOGO)

COMMON STOCK

------------------------

Of the 1,650,000 shares of Common Stock offered hereby, 1,150,000 shares
are being issued and sold by Dawson Geophysical Company and 500,000 shares are
being sold by the Selling Shareholder. The Company will not receive any proceeds
from the sale of Common Stock by the Selling Shareholder. The Common Stock is
traded on the Nasdaq National Market under the symbol "DWSN." On November 17,
1997, the closing price of the Common Stock on the Nasdaq National Market was
$20.13 per share.

------------------------

SEE "RISK FACTORS" ON PAGES 6 THROUGH 8 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

==========================================================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2) SELLING SHAREHOLDER
- --------------------------------------------------------------------------------------------------------------------------

Per Share.................. $20.00 $1.10 $18.90 $18.90
- --------------------------------------------------------------------------------------------------------------------------
Total(3)................... $33,000,000 $1,815,000 $21,735,000 $9,450,000
==========================================================================================================================

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting estimated expenses of $400,000 payable by the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 247,500 additional shares of Common Stock on the same terms and
conditions as the securities offered hereby solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$37,950,000, $2,087,250 and $26,412,750, respectively. See "Underwriting."

------------------------

The shares of Common Stock are offered by the several Underwriters named
herein subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to certain other conditions including the right of the
Underwriters to withdraw, cancel, modify or reject any order in whole or in
part. It is expected that delivery of the Common Stock will be made on or about
November 21, 1997 at the offices of Raymond James & Associates, Inc., St.
Petersburg, Florida.

RAYMOND JAMES & ASSOCIATES, INC.

PRINCIPAL FINANCIAL SECURITIES, INC.

The date of this Prospectus is November 17, 1997.

[Graphic 1] [Graphic 2]
The Company's I/O System Two RSR central control unit and Technician collecting data from a
transmitting tower. remote seismic recorder.
[Graphic 3]
Vibrator energy source units
operating in north Texas.
[Graphic 4]
Company geophysicist performing
quality control of data volume
from a 3-D seismic survey.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more
detailed information and the financial statements and related notes appearing
elsewhere in this Prospectus. As used herein, the "Company" means Dawson
Geophysical Company, the "Selling Shareholder" means L. Decker Dawson, President
of the Company, and "Common Stock" means the Company's Common Stock, $.33 1/3
par value per share, unless the context otherwise requires. Unless otherwise
indicated, all financial information and share data in this Prospectus assume no
exercise of the Underwriters' over-allotment option. Investors should carefully
consider the information set forth under "Risk Factors."

THE COMPANY

Founded in 1952, Dawson Geophysical Company acquires and processes
three-dimensional ("3-D") seismic data used in the exploration, development and
field management of oil and natural gas reserves. The Company's operations
consist of six 3-D seismic data acquisition crews and a seismic data processing
center located in Midland, Texas. As a result of an increase in industry-wide
demand for 3-D seismic surveys and the Company's competitive position, the
Company has experienced increasing demand for its 3-D seismic services. The
Company acquires and processes seismic data for its clients, ranging from major
oil and gas companies to independent oil and gas operators, who retain exclusive
rights to the information obtained.

The Company's land-based data acquisition crews operate primarily in the
southwestern United States, but have responded to demand from south Texas to
North Dakota. As a result of the addition of a sixth crew equipped with the
versatile I/O System Two(R)* Remote Seismic Recorder ("RSR"), the Company has
expanded its capabilities to accommodate more difficult and remote terrains such
as east Texas and the Rocky Mountains.

The Company operates five I/O System Two recording systems, one with RSR
capability, and one MDS-18X(R)* recording system. The Company's six seismic
crews are equipped with an aggregate capacity of 14,200 recording channels and
45 vibrator energy source units, which are configured to meet the demands of
specific survey designs. Each crew consists of approximately 40 technicians, 25
associated vehicles with off-road capabilities, 31,000 geophones, a recording
system, energy sources, electronic cables and a variety of other equipment.

3-D seismic surveys provide an immense volume of concentrated subsurface
information to the oil and gas industry. Detailed subsurface resolution from 3-D
seismic data enhances the exploration for new reserves and enables oil and gas
companies to better delineate existing fields and to augment reservoir
management techniques. Benefits of incorporating 3-D seismic technology into
exploration and development programs include reducing drilling risk, decreasing
oil and gas finding costs, lowering field development expenditures and
recovering a greater portion of reserves in place.

The Company believes that it maintains a competitive advantage in the
industry by (i) acquiring equipment to expand capacity in response to client
demand, (ii) updating its equipment to take advantage of advances in geophysical
technology, (iii) maintaining skilled and experienced personnel for its data
acquisition and processing operations, (iv) focusing its operations on the
domestic onshore seismic industry, and (v) providing integrated in-house
operations necessary to complete all phases of 3-D seismic data acquisition and
processing, including project design, permitting and surveying.

Since fiscal 1990, the Company has spent approximately $57 million to
acquire new 3-D telemetry recording systems and associated equipment, including
approximately $26 million since fiscal 1995. Consistent with the Company's
strategy of maintaining technologically advanced equipment and the financial
flexibility to expand its 3-D capacity, the Company intends to use, of the net
proceeds it receives from this offering, (i) approximately $10 million to reduce
bank debt of the Company, (ii) approximately $8 million to acquire

- ---------------

* I/O System Two(R) is a registered trademark of Input/Output, Inc. and
MDS-18X(R) is a registered trademark of I/O Exploration Products.
3
4

new equipment and to upgrade existing equipment for the six 3-D seismic crews
now operated by the Company, and (iii) the balance to increase working capital
of the Company and for general corporate purposes. The Company intends to
continue its program of acquiring new seismic equipment and upgrading its
existing equipment.

The headquarters of the Company, a Texas corporation, are located at 208
South Marienfeld, Midland, Texas 79701, and its telephone number is (915)
682-7356.

THE OFFERING

Common Stock offered by the
Company............................. 1,150,000 shares(1)

Common Stock offered by the Selling
Shareholder......................... 500,000 shares

Common Stock to be outstanding after
this offering....................... 5,350,000 shares(1)

Use of proceeds..................... Approximately $10 million to reduce
bank debt, approximately $8 million to
acquire new equipment and to upgrade
existing equipment for the Company's
six 3-D seismic crews, and the balance
to be added to working capital and for
general corporate purposes. See "Use of
Proceeds."

Nasdaq National Market symbol....... "DWSN"
- ---------------

(1) Excludes 89,000 shares of Common Stock issuable upon exercise of outstanding
employee stock options. See "Management -- Compensation Plans."
4
5

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following summary financial information for the five fiscal years ended
September 30, 1997 was derived from the audited financial statements of the
Company. The following information should be read in conjunction with "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's financial statements and notes thereto
and the other financial data included elsewhere in this Prospectus.

YEARS ENDED SEPTEMBER 30,
------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------

STATEMENT OF OPERATIONS DATA:
Operating revenues........................ $17,016 $23,027 $28,188 $33,518 $48,227
Operating costs:
Operating expenses..................... 12,497 15,478 20,067 23,763 32,293
General and administrative............. 842 887 975 1,299 1,477
Depreciation........................... 1,830 3,016 4,150 5,818 7,321
------- ------- ------- ------- -------
15,169 19,381 25,192 30,880 41,091
------- ------- ------- ------- -------
Income from operations.................... 1,847 3,646 2,996 2,638 7,136
Other income (expense).................... 950 (129) 444 122 (20)
Income before extraordinary item.......... $ 1,862 $ 2,266 $ 2,174 $ 1,888 $ 4,570
Net income................................ $ 2,739(1) $ 2,266 $ 2,174 $ 1,888 $ 4,570
PER SHARE DATA:
Income per share before extraordinary
item................................... $ .62 $ .74 $ .54 $ .45 $ 1.09
Net income per share...................... $ .91 $ .74 $ .54 $ .45 $ 1.09
Weighted average equivalent common shares
outstanding............................ 3,008 3,045 3,990 4,183 4,202

SEPTEMBER 30, 1997
---------------------------
HISTORICAL AS ADJUSTED(2)
---------- --------------

BALANCE SHEET DATA (AT PERIOD END):
Working capital........................................... $11,048 $24,490
Net property, plant and equipment......................... 35,807 35,807
Total assets.............................................. 53,561 65,313
Long-term debt, less current maturities................... 7,893 --
Stockholders' equity...................................... 37,545 58,880

- ---------------

(1) During 1993, the Company fully utilized its remaining net operating loss
carryforwards for federal income tax purposes resulting in an extraordinary
benefit of $877,000.

(2) As adjusted to reflect the sale by the Company in this offering of 1,150,000
shares of Common Stock and the application of the estimated net proceeds it
receives therefrom as described under "Use of Proceeds."

5
6

RISK FACTORS

Prospective investors should carefully consider the following factors, as
well as the other information contained in this Prospectus, in evaluating the
Company and its business before purchasing the Common Stock offered hereby.

INDUSTRY CONDITIONS

Demand for the Company's services depends upon the level of spending by oil
and gas companies for exploration, production, development and field management
activities, which activities depend in part on oil and gas prices. Beginning in
1982, a sharp decline in oil and gas prices led to a worldwide reduction in oil
and gas activities. This decline resulted in a significant reduction in the
overall demand for seismic services. Since reaching a high in 1981, the number
of land-based seismic crews operating worldwide and the number of companies
providing seismic services declined dramatically. Although demand for 3-D
seismic data acquisition services has continually increased over the past seven
years, no assurance can be given that current levels of oil and gas activities
will be maintained or that demand for the Company's services will reflect the
level of such activities. Decreases in oil and gas activities could adversely
affect the demand for the Company's services and the Company's results of
operations. In addition, a decrease in oil and gas expenditures in the United
States could result from such factors as unfavorable tax and other legislation
or uncertainty concerning national energy policy. Any significant decline in oil
and gas prices such as that which occurred in the 1980's could cause the Company
to alter its capital spending plans.

WEATHER

The Company's seismic data acquisition operations could be adversely
affected by inclement weather conditions. Delays associated with weather
conditions could negatively affect the Company's results of operations.

PERMITS

The Company's seismic data acquisition operations could be adversely
affected by the inability of the Company to obtain right of way usage from land
or mineral owners. Delays associated with permitting could negatively affect the
Company's results of operations.

OPERATING RISKS

The Company's activities are subject to general risks inherent in
land-based seismic data acquisition activities. To date, the Company has not
suffered any material losses of equipment, but there can be no assurance that it
will not experience such losses in the future. Because of the high fixed costs
associated with the Company's 3-D equipment, any significant downtime or low
productivity caused by reduced demand, weather interruptions, equipment
failures, permit delays or other causes could adversely affect its results of
operations. See "Business -- Operating Hazards and Insurance" for a description
of such risks and the insurance therefor carried by the Company.

LIQUIDITY AND WORKING CAPITAL REQUIREMENTS

The Company's sources of working capital are limited. The Company has
funded its working capital requirements with cash generated from operations,
cash reserves and borrowings from commercial banks. The Company's working
capital requirements increased significantly during the last seven years,
primarily due to the development of its 3-D land seismic data acquisition
infrastructure. If the Company were to expand its operations at a rate exceeding
operating cash flow, or if the current demand for and pricing of geophysical
services were to decrease substantially, additional financing could be required.
There is no assurance that additional financing could or would occur. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

6
7

RELIANCE ON KEY SUPPLIER

The Company's primary supplier for seismic data acquisition systems is
Input/Output, Inc. Although the Company believes it will be able to obtain data
acquisition systems and/or replacement parts from Input/Output, Inc. or another
source for such systems or parts in the future, should it be unable to do so,
the Company's anticipated revenues could be reduced and the amount of cash
needed for capital expenditures could be increased. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Capital Expenditures" and "Business -- Equipment
Acquisition."

LITIGATION

The Company is a defendant in two lawsuits relating to a July 1995 accident
involving a van owned by the Company in which four Company employees died. The
Company believes that it has meritorious defenses to the claims asserted against
it in such suits. Further, while the plaintiffs seek damages in excess of the
Company's liability insurance policies, the Company believes that its liability
insurance should provide adequate coverage of the damages, if any, which may be
assessed against the Company in such litigation. Due to the uncertainties
inherent in litigation, no assurance can be given as to the ultimate outcome of
such suits or the adequacy or availability of the Company's liability insurance
to cover any such damages. A judgment awarding plaintiffs an amount
significantly exceeding the Company's available insurance coverage could have a
material adverse effect on the Company's financial condition, results of
operations and liquidity. See "Business -- Legal Proceedings."

DEPENDENCE ON KEY PERSONNEL

The Company's success may be dependent upon, among other things, the
services of certain key personnel. The loss of services of any one or more of
the executive officers of the Company could have a material adverse effect on or
result in a disruption of normal business operations. See "Management."

COMPETITION

The acquisition and processing of 3-D geophysical data for the oil and gas
industry is a highly competitive business in the United States. The Company's
competitors include companies with financial resources that are significantly
greater than those of the Company as well as companies of comparable and smaller
size.

TECHNICAL OBSOLESCENCE

Seismic data acquisition and data processing technology have progressed
rapidly over the past several years, and the Company expects this progression to
continue. The Company's strategy is to regularly upgrade its data acquisition
and processing equipment to maintain its competitive position. However, due to
the rapid advances in technology and the related costs associated with such
technological advances, no assurance can be given that the Company will be able
to fulfill its strategy, thus possibly affecting the Company's ability to
compete.

GOVERNMENTAL REGULATIONS

The Company's operations are subject to a variety of federal, state and
local laws and regulations, including laws and regulations relating to the
protection of the environment and archeological sites. The Company is required
to expend financial and managerial resources to comply with such laws and
related permit requirements in its operations, and anticipates that it will
continue to be required to do so in the future. Although such expenditures
historically have not been material to the Company, the fact that such laws or
regulations change frequently make it impossible for the Company to predict the
cost or impact of such laws and regulations on its future operations. The
adoption of laws and regulations that have the effect of reducing or curtailing
exploration and production activities by energy companies could also adversely
affect the Company's operations by reducing the demand for its services.

7
8

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock in the open market
after this offering could adversely affect the trading price of the Common
Stock. Immediately after this offering, the Selling Shareholder will hold
507,272 shares, representing approximately 9.48% of the outstanding shares of
Common Stock. A decision by the Selling Shareholder to sell shares of Common
Stock could adversely affect the trading price of the Common Stock. Upon the
consummation of this offering, the Company will have 5,350,000 shares of Common
Stock outstanding (excluding 89,000 shares of Common Stock issuable upon
exercise of outstanding employee stock options). Of such outstanding shares, the
Company estimates that approximately 4,560,000 shares will be freely tradeable
unless purchased by an "affiliate" of the Company, as that term is defined in
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
See "Description of Capital Stock -- Shares Eligible for Future Sale."

NO DIVIDENDS

The Company has never paid cash dividends on its Common Stock and has no
plans to do so in the foreseeable future. The Company intends to retain earnings
for use in its operations and to finance its business. See "Dividend Policy."

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this
Prospectus, including without limitation statements under "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" regarding technological advancements, use
of proceeds and the Company's financial position, business strategy and plans
and objectives of management of the Company for future operations, are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). When used in this Prospectus, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to the Company or its management, identify forward-looking statements.
Such forward-looking statements are based on the beliefs of the Company's
management as well as assumptions made by and information currently available to
the Company's management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to dependence upon energy industry spending, weather
problems, inability to obtain land use permits, the volatility of oil and gas
prices, the availability of capital resources and the other factors set forth in
"Risk Factors." Such statements reflect the current views of the Company with
respect to future events and are subject to these and other risks, uncertainties
and assumptions relating to the operations, results of operations, growth
strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph. The Company
assumes no obligation to update any such forward-looking statements.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
by it are estimated to be approximately $21,335,000 after deducting underwriting
discounts and commissions and offering expenses payable by the Company. Of the
net proceeds it receives from this offering, the Company intends to use (i)
approximately $10 million to reduce bank debt, (ii) approximately $8 million to
acquire new equipment and to upgrade existing equipment for the Company's six
3-D seismic crews in early 1998, and (iii) the balance for working capital and
general corporate purposes. Pending its use of the net proceeds it receives from
this offering, the Company may invest such proceeds in short-term investments.

The Company's bank debt has been used to finance operating cash
requirements and capital expenditures for equipment purchases. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Loan Agreement" for additional
information concerning the Company's bank debt.

8
9

The Company will not receive any proceeds from the sale of the shares of
Common Stock offered by the Selling Shareholder. See "Principal and Selling
Shareholders."

PRICE RANGE OF COMMON STOCK

The Common Stock is quoted on the Nasdaq National Market under the symbol
"DWSN." The following table sets forth the high and low sales prices, as
reported on the Nasdaq National Market, for the periods indicated.

HIGH LOW
------ ------

FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter............................................. $12.25 $ 8.50
Second Quarter............................................ 9.75 7.75
Third Quarter............................................. 12.00 9.13
Fourth Quarter............................................ 11.25 8.31

FISCAL YEAR ENDED SEPTEMBER 30, 1997
First Quarter............................................. $11.25 $ 8.13
Second Quarter............................................ 13.75 10.38
Third Quarter............................................. 14.50 9.13
Fourth Quarter............................................ 25.75 13.50

FISCAL YEAR ENDED SEPTEMBER 30, 1998
First Quarter (through November 17, 1997)................. $27.38 $17.50

The last reported sale price for the Common Stock on November 17, 1997 on
the Nasdaq National Market was $20.13 per share. As of September 30, 1997, there
were approximately 296 record holders of the Common Stock.

9
10

DIVIDEND POLICY

Since its initial public offering in 1981, the Company has not declared or
paid any dividends on its Common Stock. The Company presently intends to retain
earnings for use in its operations and to finance its business. Any change in
the Company's dividend policy is within the discretion of its Board of Directors
and will depend, among other things, on the Company's earnings, debt service and
capital requirements, restrictions in financing agreements, business conditions
and other factors that the Board of Directors deems relevant.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to give effect to the sale of 1,150,000
shares of Common Stock offered hereby by the Company and the application of the
estimated net proceeds to the Company therefrom. See "Use of Proceeds" and the
Company's financial statements and notes thereto included elsewhere herein.

SEPTEMBER 30, 1997
----------------------
AS
HISTORICAL ADJUSTED
---------- --------
(IN THOUSANDS, EXCEPT
SHARE DATA)

Long-term debt, less current maturities(1).................. $ 7,893 $ --
Stockholders' equity:
Preferred Stock, par value $1.00 per share:
5,000,000 shares authorized, none issued or
outstanding......................................... -- --
Common Stock, par value $.33 1/3 per share:
10,000,000 shares authorized, 4,199,250 shares issued
and outstanding;
5,349,250 shares issued and outstanding as
adjusted(2)................................................. 1,400 1,783
Additional paid-in capital................................ 17,174 38,126
Retained earnings......................................... 18,971 18,971
------- -------
Total stockholders' equity........................ 37,545 58,880
------- -------
Total capitalization......................... $45,438 $58,880
======= =======

- ---------------

(1) See the Company's financial statements and notes thereto included elsewhere
herein for additional information relating to the Company's long-term debt.

(2) Excludes 89,750 shares reserved for issuance upon exercise of employee stock
options at September 30, 1997. See "Management -- Compensation Plans."

10
11

SELECTED FINANCIAL DATA

The following selected financial data as of and for the five fiscal years
ended September 30, 1997 were derived from the historical financial statements
of the Company, which have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected financial data presented herein is
qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's financial statements and notes thereto and the other
financial information included elsewhere herein.

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------

STATEMENT OF OPERATIONS DATA:
Operating revenues........................................ $17,016 $23,027 $28,188 $33,518 $48,227
Operating costs:
Operating expenses...................................... 12,497 15,478 20,067 23,763 32,293
General and administrative.............................. 842 887 975 1,299 1,477
Depreciation............................................ 1,830 3,016 4,150 5,818 7,321
------- ------- ------- ------- -------
15,169 19,381 25,192 30,880 41,091
------- ------- ------- ------- -------
Income from operations.................................... 1,847 3,646 2,996 2,638 7,136
Other income (expense):
Interest and dividend income............................ 367 209 399 253 260
Interest expense........................................ (160) (376) (170) (144) (486)
Gain on disposal of assets.............................. 67 68 76 11 196
Other................................................... 1 (30) 8 2 10
Proceeds from litigation settlement..................... 669 -- 131 -- --
Realized gain on marketable securities.................. 6 -- -- -- --
------- ------- ------- ------- -------
Income before income tax expense and extraordinary item... 2,797 3,517 3,440 2,760 7,116
Income tax expense:
Current................................................. 58 1,212 970 599 1,738
Deferred................................................ 877 39 296 273 808
------- ------- ------- ------- -------
935 1,251 1,266 872 2,546
------- ------- ------- ------- -------
Income before extraordinary item.......................... 1,862 2,266 2,174 1,888 4,570
Tax benefit from utilization of loss carryforward....... 877 -- -- -- --
------- ------- ------- ------- -------
Net income................................................ $ 2,739 $ 2,266 $ 2,174 $ 1,888 $ 4,570
======= ======= ======= ======= =======
Income per common share:
Income before extraordinary item........................ $ .62 $ .74 $ .54 $ .45 $ 1.09
Extraordinary item...................................... .29 -- -- -- --
------- ------- ------- ------- -------
Net income.............................................. $ .91 $ .74 $ .54 $ .45 $ 1.09
======= ======= ======= ======= =======
Weighted average equivalent common shares outstanding..... 3,008 3,045 3,990 4,183 4,202
======= ======= ======= ======= =======
BALANCE SHEET DATA (AT PERIOD END):
Working capital........................................... $ 3,646 $ 2,789 $ 9,641 $ 5,343 $11,048
Net property, plant and equipment......................... 11,836 14,936 21,550 32,926 35,807
Total assets.............................................. 21,908 24,942 32,342 41,909 53,561
Long-term debt, less current maturities................... 3,500 2,250 -- 4,857 7,893
Stockholders' equity...................................... 15,482 17,686 30,856 32,804 37,545

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12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Prospectus. In
addition, in reviewing the Company's financial statements it should be noted
that quarterly fluctuations in the Company's results of operations can occur due
to weather, land use permitting and other factors. See "Risk Factors."

FISCAL YEAR ENDED SEPTEMBER 30, 1997 VERSUS FISCAL YEAR ENDED SEPTEMBER 30, 1996

The Company's operating revenues increased 43.9% from $33,518,000 for
fiscal 1996 to $48,227,000 for fiscal 1997. The increase in revenues is
primarily due to increased capacity and improved efficiency resulting from
fiscal 1996 capital expenditures. The fiscal 1996 capital expenditures consisted
of the addition of a fifth crew in the third quarter combined with additional
channel capacity of the existing crews and additional vibrator energy source
units. During the fourth quarter of fiscal 1997 the Company placed a sixth crew
into service.

Operating expenses increased 35.9% in 1997 as compared to 1996 as a result
of adding a fifth 3-D seismic crew in fiscal 1996, as well as increased
personnel and other expenses associated with equipment additions and
technological upgrades made primarily during the third quarter of fiscal 1996.

General and administrative expenses for fiscal 1997 totaled $1,477,000, an
increase of $178,000 from fiscal 1996. The increase for fiscal year 1997 was
primarily due to timing adjustments of certain expenses. General and
administrative expenses totaled 3.1% of operating revenues for fiscal 1997
versus 3.9% for fiscal 1996.

Depreciation for fiscal 1997 totaled $7,321,000, an increase of 25.8% from
fiscal 1996. Depreciation continues to increase as a result of the capital
expansion discussed below in "Liquidity and Capital Resources."

Total operating costs for fiscal 1997 totaled $41,091,000, an increase of
33.1% over fiscal 1996 due to the factors described above. Income from
operations in fiscal 1997 increased to $7,136,000, 14.8% of revenues, from
$2,638,000, 7.9% of revenues, in fiscal 1996. This increase is the direct result
of the Company's operating expenses being relatively fixed as compared to
revenue trends. Because of the high proportion of relatively fixed total
operating costs (including personnel costs for active crews and depreciation
costs), income from operations in fiscal 1997 reflects the benefit of efficient
production with steady demand.

Interest is paid monthly at prime rates on the principal of the term notes
described below in "Liquidity and Capital Resources -- Loan Agreement."

The Company's effective tax rate for 1997 is 35.8% as compared to 32.0% for
1996. These rates reflect the effects of federal and state income taxes over the
periods reported.

FISCAL YEAR ENDED SEPTEMBER 30, 1996 VERSUS FISCAL YEAR ENDED SEPTEMBER 30, 1995

The Company's operating revenues increased 18.9% from $28,188,000 for
fiscal 1995 to $33,518,000 for fiscal 1996. In June 1996, the Company placed
into service its fifth telemetry recording system after combining two
1,000-channel crews in the quarter ended March 31, 1996. The Company further
increased production capacity during 1996 with the purchase of additional
equipment. Demand for larger surveys translates to an increased number of
channels and improved efficiency which has been gained with additional energy
source units to complement recording systems already in service.

Operating expenses increased 18.4% in 1996 as compared to 1995 as a result
of adding a new 3-D seismic crew as well as increased personnel and other
expenses associated with the equipment additions and technological upgrades.

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General and administrative costs have increased with additional support
services for the Company's expanding operations. As a percentage of operating
revenues, general and administrative costs increased to 3.9% from 3.5% in 1995.

Depreciation increased dramatically due to the Company's capital expansion.
In 1996, the cost to field the new telemetry crew represents approximately
$10,000,000 of the total $15,597,000 in capital expenditures. The increase from
the total capital expenditures in 1995 of $10,961,000 is comprised of the
upgrades to data acquisition capacity of the existing crews and further
expansion of energy source units.

The decrease in income from operations for 1996 as compared to 1995 and for
1995 as compared to 1994 is attributable to the significant increase in
depreciation. In addition, the impact of the permit delays in the first quarter
and unfavorable weather during the first and fourth quarters of 1996 affected
revenue directly without a significant corresponding reduction in the relatively
fixed operating expenses.

The significant changes in the Company's other income and expenses are a
result of a final litigation settlement of $131,000 in 1995 resulting from the
suit filed against First Republic Bank in 1988 and the increase of interest
income in 1995 due to the investment of public offering proceeds until capital
expenditures were made.

The Company's effective tax rate for 1996 is 32.0% as compared to 36.8% for
1995. These rates reflect the effects of federal and state income taxes over the
periods reported. As of September 30, 1995, the Company had no tax loss
carryforwards to offset future tax expense.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Net cash provided by operating activities increased to $10,335,000 in
fiscal 1997 from $6,732,000 in fiscal 1996 primarily due to a 142% increase in
net income to $4,570,000 in fiscal 1997 from $1,888,000 in fiscal 1996. In
addition, accounts receivable increased as a result of increased revenues in
1997. The increase in depreciation to $7,321,000 in 1997 from $5,818,000 in 1996
reflects the Company's continued capital expansion as discussed in "Capital
Expenditures" below.

Net cash used in investing activities decreased to $11,079,000 in 1997 from
$12,676,000 in 1996 as a result of the decrease in capital expenditures in 1997
as compared to 1996. In addition, during fiscal 1997 the Company invested cash
generated from operations in U.S. Treasury instruments. As discussed below in
"Capital Expenditures," the Company is positioning for possible future
expansion.

Net cash provided by financing activities primarily reflects proceeds from
a fourth quarter borrowing under the Company's loan agreement referenced below
and principal payments thereunder. During 1997, the Company made monthly
principal payments of approximately $71,400 under a $6,000,000 term note, and in
September 1997, the Company made a $69,400 principal payment under a $5,000,000
term note. See "Loan Agreement" below.

Capital Expenditures

As a result of capital expenditures of approximately $57,000,000 since
fiscal 1990, including approximately $26,000,000 since fiscal 1995, the Company
has positioned itself to meet market demand with technologically advanced 3-D
data acquisition recording systems and leading edge data processing
capabilities. Depreciation has increased as a new crew has been placed into
service each year for the past several years.

The Company placed a sixth crew into service in August of 1997. The cost of
the new crew equipped with a 2,000 channel I/O System Two RSR was approximately
$6,000,000. Expenditures of approximately $2,500,000 with additional commitments
of approximately $2,000,000 during fiscal 1997 were made for additions and
replacements to the myriad of cables and geophones, enhancements to the
surveying operation, and additions in support of quality control and operational
safety efforts.

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Loan Agreement

The Company is a party to a loan agreement, as amended (the "Loan
Agreement"), with Norwest Bank Texas, N.A. ("Norwest"). The Loan Agreement
consists of (1) a revolving line of credit of $6,000,000 which matures on April
15, 1999, (2) a term note in the aggregate principal amount of $6,000,000
bearing interest at Norwest's prime rate and which matures on March 15, 2003 and
(3) a term note in the aggregate principal amount of $5,000,000 bearing interest
at the prime rate as published in The Wall Street Journal and which matures on
April 15, 2003. The $5,000,000 term note, together with working capital, was
utilized to finance the purchase of equipment placed into service in August
1997. The term notes are secured by eligible accounts receivable and equipment
purchased from loan proceeds. At September 30, 1997, approximately $9.5 million
was outstanding under the term notes all of which was bearing interest at 8.5%
per annum.

Capital Resources

The Company believes that its capital resources, including the availability
of bank borrowings, and cash flow from operations are adequate to meet its
current operational needs and will allow the Company to continue its practice of
acquiring new technologically advanced equipment and upgrading its existing
equipment. However, the Company's expansion plans, including its capital budget
for fiscal 1998, may be affected by its ability to raise capital from additional
sources.

Litigation

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("FAS") No. 123, "Accounting for Stock-Based
Compensation." FAS 123 provides for alternative methods of recording stock-based
compensation and requires additional disclosure regardless of which method is
utilized to record stock-based compensation. The Company accounts for employee
stock-based compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25"). Effective October 1, 1996, the Company adopted the
disclosure provisions of FAS 123.

In February 1997, the Financial Accounting Standards Board issued FAS No.
128, "Earnings per Share." FAS No. 128 establishes standards for computing and
presenting earnings per share and is effective for periods ending after December
15, 1997. The impact of the adoption of FAS No. 128 on the Company's earnings
per share is expected to be immaterial.

In June 1997, the Financial Accounting Standards Board issued FAS No. 130,
"Reporting Comprehensive Income." FAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. FAS No. 130 is effective for interim
and annual periods beginning after December 15, 1997. The Company plans to adopt
FAS No. 130 for the period ended December 31, 1999.

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BUSINESS

GENERAL

Founded in 1952, Dawson Geophysical Company acquires and processes seismic
data used in the exploration, development and field management of oil and
natural gas reserves. Since fiscal 1990, the Company has spent approximately $57
million to acquire new 3-D telemetry recording systems and associated equipment,
including approximately $26 million since fiscal 1995. The Company's operations
consist of six 3-D seismic data acquisition crews and a seismic data processing
center. As a result of an increase in industry-wide demand for 3-D seismic
surveys and the Company's competitive position, the Company has experienced
increasing demand for its 3-D seismic services. During fiscal 1997,
substantially all of the Company's revenues were derived from 3-D seismic
operations.

The Company's land-based data acquisition crews operate primarily in the
southwestern United States, but have responded to demand from south Texas to
North Dakota. As a result of the addition of a sixth crew equipped with the
versatile I/O System Two RSR, the Company has expanded its capabilities to
accommodate more difficult and remote terrains such as east Texas and the Rocky
Mountains.

Data processing is performed by Company geophysicists at the Company's
computer center located in Midland, Texas. The Company acquires and processes
data for its clients, ranging from major oil and gas companies to independent
oil and gas operators, who retain exclusive rights to the information obtained.

The Company believes that it maintains a competitive advantage in the
industry by (i) acquiring equipment to expand capacity in response to client
demand, (ii) updating its equipment base to take advantage of advances in
geophysical technology, (iii) maintaining skilled and experienced personnel for
its data acquisition and processing operations, (iv) focusing its operations on
the domestic onshore seismic industry, and (v) providing integrated in-house
operations necessary to complete all phases of 3-D seismic data acquisition and
processing, including project design, permitting and surveying.

GEOPHYSICAL SERVICES

General. Technological advances in equipment and computers have allowed the
seismic industry to economically acquire and process immense volumes of seismic
data which produce more precise images of the earth's subsurface. The industry
refers to this process of data acquisition, processing and subsequent
interpretation of the processed data as the 3-D seismic method. Geophysicists
use computer workstations to interpret 3-D data volumes, identify subsurface
anomalies and generate a geologic model of subsurface features.

3-D seismic data are used in the exploration for new reserves and enable
oil and gas companies to better delineate existing fields and to augment their
reservoir management techniques. Benefits of incorporating 3-D seismic
technology into exploration and development programs include reducing drilling
risk, decreasing oil and gas finding costs and increasing the efficiencies of
reservoir location, delineation and management.

The Company is exploring the opportunities presented by the
four-dimensional seismic method, which adds the element of time to 3-D surveys.
By surveying the same site at successive times, geophysicists compare data
volumes and may be able to determine the progress of enhanced recovery programs
in existing petroleum reservoirs, and thereby aid in extracting remaining
reserves. Such projects could, over time, benefit reservoir management thereby
providing future opportunities for the Company.

The industry as a whole is investigating even more sophisticated
technologies. Researchers at the Colorado School of Mines, underwritten in part
by the Company, are exploring the use of three-component ("3-C") surveys
utilizing shear wave information in the effort to identify and exploit
recoverable oil and gas reserves. The Company's equipment currently includes
vibrators and geophones capable of generating and recording shear waves.

Data Acquisition. The seismic survey begins at the time a client requests
the Company to formulate a proposal to acquire seismic data on its behalf. The
Company's geophysicists then assist the client in designing

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the specifications of the proposed 3-D survey. If the client accepts the
Company's proposal, in most cases, a Company permit agent then obtains access
from the landowner to the site where the survey is to be conducted.

Utilizing electronic surveying equipment, the Company's survey personnel
precisely locate the energy source and receiver positions from which the seismic
data are collected. The Company utilizes the satellite global positioning
system, known as GPS, to properly locate the seismic survey grid.

The Company operates six land based crews gathering 3-D seismic data. The
Company primarily uses vibrator energy sources, each of which weighs 50,000 to
62,000 pounds, but on occasion detonates dynamite charges placed in drill holes
below the earth's surface to generate seismic energy. The Company has 45
vibrator energy source units and a capacity of 14,200 recording channels, any of
which are configured to meet the demands of specific survey designs. Each crew
consists of approximately 40 technicians, 25 associated vehicles with off-road
capabilities, 31,000 geophones, a seismic recording system, energy sources,
electronic cables and a variety of other equipment. The Company operates five
I/O System Two recording systems, one with RSR capability, and one MDS-18X
recording system.

Since 1994 the Company has grown from four seismic data acquisition crews
with an aggregate recording capacity of 4,532 channels and 22 vibrator energy
source units. Demand for more recording channels continues to increase from
client companies as the industry strives for improved data quality. The
Company's current average of 2,367 channels per crew is well above the industry
average. The comparatively large number of recording channels gives the Company
a competitive edge with the versatility and productivity to improve data quality
at a lower cost per unit of data to the client.

Data Processing. The Company currently operates a computer center located
in Midland, Texas to process seismic data. Such processing primarily involves
the enhancement of the data by improving reflected signal resolution, removing
ambient noise and establishing proper spatial relationships of geological
features. The data are then arranged in such a manner that computer graphic
technology may be employed for examination and interpretation of the data by the
user.

The processing center operates 24 hours daily utilizing two parallel
high-speed computers. The Company continues to improve data processing
efficiency by further integrating workstation-based computer technology into the
mainframe operation at the computer center and remote sites such as the client's
office. The Company purchases, develops or leases, under non-exclusive licensing
arrangements, seismic data processing software.

The Company's computer center processes seismic data collected by its
crews, as well as by other geophysical contractors. In addition, the Company
reprocesses previously recorded seismic data using current technology to enhance
the data quality. The Company's processing contracts may be awarded jointly with
or independently from data acquisition services.

Integrated Services. The Company maintains integrated in-house operations
necessary to the development and completion of 3-D seismic surveys. Experienced
Company personnel conduct and supervise the 3-D seismic survey design,
permitting, surveying and data acquisition and processing functions for each
seismic program. In-house support operations include facilities for automotive
repair, automotive paint, electronics repair, electrical engineering and
software development, thereby enabling better quality control and improved
efficiency. The Company's clients generally undertake to provide their own
interpretation of the seismic data provided by the Company, although from time
to time the Company's geophysicists may assist its clients in this process.

EQUIPMENT ACQUISITION

The Company believes it is essential to monitor and evaluate advances in
geophysical technology and to commit capital funds to purchase equipment it
deems most promising. Purchasing new assets and continually upgrading capital
assets involves a continuing commitment to capital spending. The Company's
capital expenditures for the three fiscal years ended September 30, 1997 were
$10,961,000, $15,597,000 and $8,528,000 respectively. Projected capital
expenditures for fiscal 1998 are at least $8 million which will be used to
purchase new equipment and upgrade existing equipment for its six 3-D seismic
crews by early 1998. See "Risk Factors -- Liquidity and Working Capital
Requirements" and "Use of Proceeds."

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CLIENTS

The Company's services are marketed by supervisory and executive personnel
who contact clients to determine geophysical needs and respond to client
inquiries regarding the availability of crews or processing schedules. These
contacts are based principally upon professional relationships developed over a
number of years.

The Company's clients range from major oil companies to small independent
oil and gas operators. The services provided by the Company vary according to
the size and needs of the client. During the year ended September 30, 1997, the
three most significant clients for the Company's services accounted for
approximately 9.1%, 7.3% and 6.2% of the Company's revenues. None of such
clients were included in the three largest clients during fiscal 1996. Because
of the limited number of data acquisition crews and the length of contracts
under which these crews have performed duties in the past, the Company
anticipates that a large portion of future revenues will continue to be
attributable to a few clients, who may change from period to period. The Company
presently believes that the loss of any one of its clients would not have a
material impact on its business.

CONTRACTS

For the past seven years, demand for the Company's services has
substantially exceeded its ability to meet such demand. Based on current market
conditions, current indications of interest and work in progress, the Company
believes that there will be a significant demand for its services well into the
Company's 1998 fiscal year.

The Company's seismic services are conducted under master contracts with
clients. Contracts are either "turnkey" contracts that provide for a fixed fee
to be paid to the Company for each unit of data acquired, or "term" contracts
that provide for a fixed hourly, daily, or monthly fee during the term of the
project. Turnkey contracts generally provide more profit potential for the
Company, but involve more risks because of the potential downtime for weather
and other types of delays. Substantially all of the Company's contracts with its
clients are turnkey. A supplemental agreement setting forth the terms of a
specific project, which may be cancelled by either party, is entered into for
every project.

The results of the Company's services belong to the contracting party. To
avoid conflicts of interest, the Company does not acquire any data for its own
account. All of the client's information is maintained in strictest confidence.
Company policy prohibits any officer, director or employee from participating in
oil and gas ventures.

COMPETITION AND MARKETS

The acquisition and processing of 3-D seismic data for the oil and gas
industry is a highly competitive business in the United States. Contracts for
such services generally are awarded on the basis of price quotations, crew
experience and availability of crews to perform in a timely manner, although
factors other than price, such as technological expertise and reputation, are
sometimes determinative. The Company's competitors include companies with
financial resources that are significantly greater than those of the Company as
well as companies of comparable and smaller size.

Historically, the demand for geophysical services has been directly related
to the level of spending by oil and gas companies for exploration, production,
development and field management activities, which activities depend in part on
the level of oil and gas prices. Because geophysical services are among the
first operations involved in the exploration for oil and gas, the level of such
services, in the past, has declined prior to a decline in oil and gas
exploration activities. In recent years, however, the improved subsurface
resolution obtainable from 3-D seismic data have enhanced the exploration for
new reserves and enabled oil and gas companies to utilize 3-D surveys to better
delineate existing fields and to augment their reservoir management techniques.
See "Risk Factors -- Industry Conditions."

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EMPLOYEES

The Company employs approximately 350 persons, of which 293 are engaged in
providing energy sources and acquiring data, 12 are engaged in data processing,
seven are administrative personnel, 30 are engaged in equipment maintenance and
eight are executive officers. Of the employees listed above, 16 are
geophysicists. The Company's employees are not represented by a labor union. The
Company believes it has good relations with its employees.

The current level of demand for geophysical services has increased the
difficulty of obtaining qualified personnel. Although the Company thus far has
not experienced unusual difficulty in this regard, a continued acceleration in
demand for geophysical services may create a shortage of such personnel. The
Company maintains an active training program and attempts to promote from within
the Company.

PROPERTIES

The Company's principal properties are energy sources and data acquisition
and processing equipment. At September 30, 1997 the average age of the Company's
data acquisition equipment was approximately three years. In general, the
Company believes that this equipment is well maintained and suitable for its
intended uses. See "Business -- Equipment Acquisition" for information regarding
capital expenditures by the Company.

The location and description of the Company's principal real properties are
set forth in the following table:

FEE OR BUILDING AREA
LOCATION LEASED PURPOSE SQUARE FEET
-------- ------ ------- -------------

Midland, Texas.................. Fee Executive offices and data processing 10,400
Midland, Texas.................. Fee Field office 53,000
Equipment fabrication
Maintenance and repairs

OPERATING HAZARDS AND INSURANCE

The Company's activities are often conducted in remote areas under extreme
weather and other dangerous conditions. These operations are subject to risks of
injury to personnel and equipment. The Company's crews are mobile and the
equipment and personnel are subject to vehicular accidents. The Company uses
diesel fuel which is classified by the U.S. Department of Transportation as a
hazardous material. See "Risk Factors -- Litigation and -- Governmental
Regulations."

The Company carries insurance in amounts which it considers adequate on the
principal items of its equipment. The Company does not carry insurance against
certain risks, including business interruption resulting from equipment losses
or weather delays. The Company obtains insurance against certain property and
personal casualty risks, when such insurance is available and when management
considers it advisable to do so. Such coverage is not always available, however,
and, when available, is subject to unilateral cancellation by the insuring
companies on very short notice. The Company insures seismic data for amounts
considered acceptable by management. Accordingly, damage to such data should not
have a material adverse effect upon the Company.

LEGAL PROCEEDINGS

The Company is a defendant in two lawsuits pending in the 112th and 83rd
District Courts of Pecos County, Texas (respectively, Cause No. 8812, Ernestine
Bernal, et al. vs. Javier Antonio Orona, et al.; and Cause No. P5565-83-CV,
Carla Jaquez, et al. vs. Javier Antonio Orona, et al.) relating to a July 1995
accident involving a van owned by the Company which was used to transport
employees to various job sites and a non-Company owned vehicle. The accident
resulted in the deaths of four Company employees who were passengers in such
van. The Company is one of several named defendants in such suits. Other named

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defendants include the estate of the deceased driver of such van, who was an
employee of the Company, the driver of such non-Company owned vehicle, who was
then an employee of the Company, the owner of such vehicle, and Ford Motor
Company, the manufacturer of the Company van involved in such accident. In
general, the claims against the Company include allegations of negligence, gross
negligence and/or intentional tort as a result of, among other things, the
Company's alleged failure to provide safe transportation for its employees and
to properly select, train and supervise the deceased driver of such van. The
plaintiffs in such suits are seeking actual damages from the defendants of $15.5
million, additional unspecified actual damages, pre-judgment and post-judgment
interest and costs of suit as well as exemplary and punitive damages in an
amount not to exceed four times the amount of actual damages. The Company
believes that it has meritorious defenses to the claims asserted against it in
such suits and it intends to continue to vigorously defend itself against such
claims. In addition, the Company believes that it has approximately $11 million
of liability insurance coverage to provide against an unfavorable outcome. Such
suits are currently in the discovery stage and the Company currently has pending
before the court a motion for summary judgment in Cause No. 8812 requesting that
the Company be dismissed from such suit based upon various legal theories. A
trial date of July 20, 1998 has been set in Cause No. 8812. No trial date has
yet been set for Cause No. P5565-83-CV. A motion to consolidate such suits into
a single proceeding is currently pending before the courts. Due to the
uncertainties inherent in litigation, no assurance can be given as to the
ultimate outcome of such suits or the adequacy or availability of the Company's
liability insurance to cover the damages, if any, which may be assessed against
the Company in such suits. A judgment awarding plaintiffs an amount
significantly exceeding the Company's available insurance coverage could have a
material adverse effect on the Company's financial condition, results of
operations and liquidity. See "Risk Factors -- Litigation" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

In addition to the foregoing, from time to time the Company is a party to
various legal proceedings arising in the ordinary course of business. Although
the Company cannot predict the outcomes of any such legal proceedings, the
Company's management believes that the resolution of pending legal actions will
not have a material adverse effect on the Company's financial condition, results
of operations or liquidity.

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MANAGEMENT

The Board of Directors currently consists of three persons who are
employees of the Company and three persons who are not employees of the Company
(i.e., outside directors). Set forth below are the names, ages, and positions of
the Company's Directors and executive officers.

NAME AGE POSITION
---- --- --------

L. Decker Dawson.............................. 77 President, Director
Floyd B. Graham............................... 69 Executive Vice President, Director
Howell W. Pardue.............................. 61 Executive Vice President, Director
Christina W. Hagan............................ 42 Vice President, Chief Financial Officer
Edward L. Huff................................ 60 Vice President
C. Ray Tobias................................. 40 Vice President
Stephen C. Jumper............................. 36 Vice President
Paula W. Henry................................ 40 Secretary
Calvin J. Clements............................ 76 Director
Matthew P. Murphy............................. 67 Director
Tim C. Thompson............................... 63 Director

L. Decker Dawson. Mr. Dawson founded the Company in 1952 and has served in
his present positions since that time. Prior thereto, Mr. Dawson was a
geophysicist with Republic Exploration Company, a geophysical company. Mr.
Dawson served as President of the Society of Exploration Geophysicists (1989-
1990) and received its Enterprise Award in 1997. He was Chairman of the Board of
Directors of the International Association of Geophysical Contractors (1981). He
currently serves as a director and honorary life member of such association. He
was inducted into the Permian Basin Petroleum Museum's Hall of Fame in 1997.

Floyd B. Graham. Mr. Graham joined the Company in 1974 and has served in
his present positions since that time. Prior thereto, Mr. Graham was an
independent geophysical consultant for 14 years, and prior thereto was a
geophysicist for the predecessor of Exxon Company, U.S.A. for 10 years.

Howell W. Pardue. Mr. Pardue joined the Company in 1976 and has served in
his present positions since that time. Prior thereto, Mr. Pardue was employed in
data processing for 17 years by Geosource, Inc. and its predecessor geophysical
company.

Christina W. Hagan. Ms. Hagan joined the Company in 1988, and was elected
Chief Financial Officer in January 1997 and Vice President in September 1997.
Prior thereto, Ms. Hagan served the Company as Controller and Treasurer. Ms.
Hagan is a certified public accountant.

Edward L. Huff. Mr. Huff joined the Company in 1956, and was elected Vice
President in September 1997. Prior thereto, Mr. Huff served as instrument
operator, crew manager and field supervisor. He has managed the Company's field
operations since 1987.

C. Ray Tobias. Mr. Tobias joined the Company in 1990, and was elected Vice
President in September 1997. Mr. Tobias is responsible for maintaining client
relationships and submitting survey cost quotations to client companies. He is
presently the chairman of the International Association of Geophysical
Contractors West Texas -- Eastern New Mexico Operations Committee and is Past
President of the Permian Basin Geophysical Society. Prior to joining the
Company, Mr. Tobias was employed by Geo-Search Corporation where he was
responsible for pricing and bidding geophysical work to major oil companies.

Stephen C. Jumper. Mr. Jumper, a geophysicist, joined the Company in 1985,
and was elected Vice President in September 1997. Mr. Jumper also serves as
manager of technical services with an emphasis on 3-D processing. Mr. Jumper has
served the Permian Basin Geophysical Society as Second Vice President (1991),
First Vice President (1992), and as President (1993).

Paula W. Henry. Ms. Henry joined the Company in 1981 and has served in her
present position since 1989. Ms. Henry supervises administrative operations of
the Company.

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Calvin J. Clements. Mr. Clements has served the Company as a director since
1972. Prior thereto and until his retirement in 1987, Mr. Clements was employed
by the Company as vice president of the data acquisition operations.

Matthew P. Murphy. Mr. Murphy has served the Company as a director since
1993. Until his retirement in 1991, Mr. Murphy served as an executive of NCNB
Texas, now known as Nations Bank of Texas, N.A. (and predecessor banks), and
from 1986 to 1991, Mr. Murphy served the bank as District Director-West Texas.

Tim C. Thompson. Mr. Thompson has served the Company as director since
1995. Mr. Thompson, a management consultant since May 1993, was President and
Chief Executive Officer of Production Technologies International, Inc. from
November 1989 to May 1993.

All directors and officers of the Company are elected annually and hold
office from the date of their election until their successors have been duly
elected and qualified, or until their earlier death, resignation or removal from
office. The Board of Directors has standing audit and compensation committees,
each consisting of Messrs. Clements, Murphy, and Thompson, all of whom are
non-employee directors.

EXECUTIVE COMPENSATION

The following table sets forth summary information regarding the
compensation paid by the Company to L. Decker Dawson, the President of the
Company, and to Floyd B. Graham, Howell W. Pardue, Edward L. Huff and Stephen C.
Jumper (collectively, the "named executive officers").

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ---------------
SECURITIES
UNDERLYING
FISCAL OTHER ANNUAL OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION (NO. OF SHARES)
- --------------------------- ------ -------- -------- ------------ ---------------

L. Decker Dawson..................... 1997 $119,892 $ -- $-- --
President 1996 90,301 -- -- --
1995 84,923 -- -- --
Floyd B. Graham...................... 1997 121,538 5,840 -- 5,000
Executive Vice President 1996 120,000 7,588 -- --
1995 120,000 9,138 -- --
Howell W. Pardue..................... 1997 121,538 5,531 -- 5,000
Executive Vice President 1996 120,000 7,168 -- --
1995 120,000 8,607 -- --
Edward L. Huff(2).................... 1997 102,302 4,603 -- 5,000
Vice President
Stephen C. Jumper(2)................. 1997 102,302 3,337 -- 5,000
Vice President

- ---------------

(1) Bonus amounts reflect discretionary amounts paid during the indicated fiscal
year based on prior fiscal year results.

(2) Messrs. Huff and Jumper were each elected Vice President in September 1997.

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The following table sets forth certain information with respect to options
to purchase Common Stock granted during the fiscal year ended September 30, 1997
to each of the named executive officers.

OPTION GRANTS IN FISCAL YEAR 1997

INDIVIDUAL GRANTS
------------------------------------------------
NUMBER OF
SECURITIES GRANT DATE
UNDERLYING % OF TOTAL VALUE(1)
OPTIONS OPTIONS GRANTED ----------------
GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME (NO. OF SHARES) FISCAL YEAR PRICE ($/SH) DATE PRESENT VALUE($)
- --------------------------- --------------- --------------- ------------ ---------- ----------------

Floyd B. Graham............ 5,000 16.67% 24.125 9/30/2002 55,926
Howell W. Pardue........... 5,000 16.67% 24.125 9/30/2002 55,926
Edward L. Huff............. 5,000 16.67% 24.125 9/30/2002 55,926
Stephen C. Jumper.......... 5,000 16.67% 24.125 9/30/2002 55,926

- ---------------

(1) The "grant date present value" shown is a hypothetical value based upon
application of the Black-Scholes model which often is used to estimate the
market value of transferable options by calculating the probability, based
on the volatility of the stock subject to the options, that the stock price
will exceed the option exercise price at the end of the option term. The
Company's stock options are not transferable and, the Black-Scholes estimate
notwithstanding, an option will have value to the optionee only if and to
the extent the market price of the Company's stock rises above the market
price on the date the option was granted.

The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the fiscal year ended
September 30, 1997, and unexercised options held at September 30, 1997, by each
of the named executive officers.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES

NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
9/30/97 OPTIONS AT
--------------- 9/30/97(1)
EXERCISABLE/ -------------
SHARES ACQUIRED VALUE UNEXERCISABLE EXERCISABLE/
NAME ON EXERCISE REALIZED (NO. OF SHARES) UNEXERCISABLE
- ---------------------------------------- --------------- -------- --------------- -------------

Floyd B. Graham......................... -- $ -- --/5,000 $--/$--
Howell W. Pardue........................ -- -- --/5,000 --/ --
Edward L. Huff.......................... 2,500 17,188 --/5,000 --/ --
Stephen C. Jumper....................... 3,750 23,906 --/5,000 --/ --

- ---------------

(1) The closing price per share on September 30, 1997 was $24.125 as reported by
the Nasdaq National Market.

Defined Benefit Plans and Other Arrangements. Long-term incentive
compensation for senior executive officers is not a policy of the Company.
Accordingly, no awards or payouts have been made. The Company has no retirement
or pension plan except for its Employee Stock Purchase Plan and its 1991
Incentive Stock Option Plan, both of which are described below.

COMPENSATION OF DIRECTORS

Directors who are not also employees of the Company receive $1,000 per
month and 500 shares of Common Stock per year for serving as directors.

22
23

COMPENSATION PLANS

Stock Option Plan. The Dawson Geophysical Company 1991 Incentive Stock
Option Plan (the "1991 Plan") provides that 150,000 shares of the Company's
authorized but unissued Common Stock are reserved for issuance pursuant to the
1991 Plan and are subject to options granted to key employees during the
ten-year period ending January 8, 2001.

Options under the 1991 Plan will be granted at an exercise price equal to
the market price of the Common Stock on the date of grant. Each option that is
granted will be exercisable after the period or periods specified in the option
agreement, but prior to the expiration of five years after the date of grant.
Commencing one year after date of grant, optionees may purchase up to one-fourth
of the shares covered by a particular grant, and each option becomes exercisable
with respect to an additional one-fourth of the shares covered in each of the
next three years.

During fiscal 1997, options to purchase an aggregate of 30,000 shares of
Common Stock were granted to certain key employees of the Company under the 1991
Plan. The per share exercise price of all options granted in fiscal 1997 is
$24.125, being the fair market value of a share of the Common Stock on the date
of grant. During fiscal 1997, 36,500 shares of the Common Stock were issued
pursuant to the exercise of options granted under the 1991 Plan. As of November
10, 1997, the total number of shares covered by outstanding options was 89,000.

Stock Purchase Plan. On November 1, 1982, the Board of Directors of the
Company adopted an Employee Stock Purchase Plan (the "Purchase Plan") effective
January 1, 1983, in which eligible employees may elect to purchase, through
payroll deductions, shares of the Company's Common Stock and thereby increase
their proprietary interest in the Company. Pursuant to the Purchase Plan, the
Company contributes one dollar (before Social Security and withholding taxes)
for each dollar contributed by an eligible employee to purchase Common Stock for
the employee's account up to 5% of the employee's annual salary. As of September
30, 1997, two named executive officers participated in the Purchase Plan. On a
bi-weekly basis, the Company matches the participants' contributions and directs
the purchase of shares of the Company's Common Stock. There are no vesting
requirements for the participants. The Company contributed $164,530, $198,863
and $217,723 to the Purchase Plan during the fiscal years 1995, 1996 and 1997,
respectively.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee makes recommendations regarding
compensation subject to approval of the entire Board of Directors.

23
24

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information, as adjusted to reflect
the sale of the Common Stock offered by this Prospectus, with respect to the
beneficial ownership of the Company's outstanding Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (ii) each of the directors and executive officers of the Company,
(iii) all directors and executive officers of the Company as a group and (iv) L.
Decker Dawson, the President of the Company and the Selling Shareholder.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THIS SHARES TO BE OWNED AFTER THIS
OFFERING(1) SOLD IN OFFERING(1)
------------------- THIS -------------------
NAME AND ADDRESS OF SHAREHOLDER NUMBER PERCENT OFFERING NUMBER PERCENT
------------------------------- --------- ------- ------------ -------- --------

L. Decker Dawson.............................. 1,007,272 23.98% 500,000 507,272 9.48%
208 South Marienfeld
Midland, Texas 79701
Wellington Management Company(2).............. 410,000 9.76% -- 410,000 7.66%
75 State Street
Boston Massachusetts 02109
Dimensional Fund Advisors Inc.(3)............. 232,000 5.52% -- 232,000 4.34%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Howell W. Pardue.............................. 77,000 1.83% -- 77,000 1.44%
Calvin J. Clements............................ 71,126 1.69% -- 71,126 1.33%
Floyd B. Graham............................... 60,425 1.44% -- 60,425 1.13%
Stephen C. Jumper............................. 21,928 * -- 21,928 *
Christina W. Hagan............................ 16,420 * -- 16,420 *
Edward L. Huff................................ 15,537 * -- 15,537 *
C. Ray Tobias................................. 15,146 * -- 15,146 *
Tim C. Thompson............................... 1,500 * -- 1,500 *
Paula W. Henry................................ 1,152 * -- 1,152 *
Matthew P. Murphy............................. 200 * -- 200 *
Share ownership of directors and executive
officers as a group (11 persons)............ 1,287,706 30.66% 787,706 14.72%

- ---------------

* Indicates less than 1% of the outstanding shares of Common Stock.

(1) Except as otherwise indicated, each shareholder shown in the table has sole
voting and investment power with respect to all shares listed as
beneficially owned by such shareholder.

(2) Wellington Management Company, LLP ("WMC") is an investment adviser
registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended. WMC, in its capacity as investment
adviser, may be deemed to have beneficial ownership of 410,000 shares of
Common Stock that are owned by numerous investment advisory clients, none of
which is known to have such interest with respect to more than five percent
of the class.

(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 232,000 shares of Common
Stock, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund Advisors
Inc. serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.

24
25

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$1.00 par value per share, and 10,000,000 shares of Common Stock, $.33 1/3 par
value per share. As of the date of this Prospectus, there were 4,200,000 shares
of Common Stock issued and outstanding, and no shares of Preferred Stock have
been issued. The outstanding shares of Common Stock are, and the shares of
Common Stock to be sold by the Company as described herein will be when issued,
fully paid and nonassessable.

PREFERRED STOCK

The Preferred Stock may be issued in series, and shares of each series
shall have such rights and preferences as shall be fixed by the Board of
Directors in the resolution or resolutions authorizing the issuance of that
particular series. In designating any series of Preferred Stock the Board of
Directors has authority without further action by the holders of Common Stock,
to fix the number of shares constituting that series and to fix the dividend
rights, dividend rate, conversion rights, rights and terms of redemption
(including any sinking fund provisions), and the liquidation preferences of that
series of Preferred Stock. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.

COMMON STOCK

Each share of Common Stock has one vote on all matters presented to the
shareholders. Since the Common Stock does not have cumulative voting rights, the
holders of more than 50% of the shares may, if they choose to do so, elect all
of the directors and, in that event, the holders of the remaining shares will
not be able to elect any directors. Subject to the rights and preferences of any
Preferred Stock which may be designated and issued, the holders of Common Stock
are entitled to dividends when and as declared by the Board of Directors and are
entitled on liquidation to all assets remaining after payment of liabilities,
subject to the liquidation preferences of any shares of Preferred Stock. The
Common Stock has no preemptive or other subscription rights. There are no
conversion rights or redemption or sinking fund provisions with respect to the
Common Stock.

LIMITATION OF DIRECTOR LIABILITY

The Company's Restated Articles of Incorporation provide that the Company's
directors will have no personal liability to the Company or its shareholders for
monetary damages for breach or alleged breach of the directors' duty of care.
This provision in the Restated Articles of Incorporation does not eliminate the
directors' fiduciary duty of care, and in appropriate circumstances, equitable
remedies such as an injunction or other forms of non-monetary relief should
remain available under Texas law. Furthermore, each director will continue to be
subject to liability for (i) a breach of the directors' duty of loyalty, (ii)
acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law, (iii) any transaction from which a director derives
an improper personal benefit, or (iv) an act or omission for which the liability
of a director is expressly provided by an applicable statute. This provision
does not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock in the open market
after this offering could adversely affect the trading price of the Common
Stock. Immediately after this offering, the Selling Shareholder will hold
507,272 shares representing approximately 9.48% of the outstanding shares of
Common Stock. A decision by the Selling Shareholder to sell shares of Common
Stock could adversely affect the trading price of the Common Stock. Upon
consummation of this offering, the Company will have 5,350,000 shares of Common
Stock outstanding excluding 89,000 shares of Common Stock issuable upon exercise
of outstanding employee stock options. Of such outstanding shares, the Company
estimates that approximately

25
26

4,560,000 shares will be freely tradeable without restriction or further
registration under the Securities Act unless purchased by an "affiliate" of the
Company, as that term is defined in Rule 144 under the Securities Act. The
remaining shares were acquired in transactions exempt from registration under
the Securities Act and are or formerly were "restricted securities" within the
meaning of Rule 144 and may not be resold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year from the later of the date the shares were acquired from the Company or
from an "affiliate" of the Company, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of one percent of
the then outstanding shares of Common Stock or the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to the availability of certain public
information about the Company, restrictions on the manner of sale and notice
requirements. A person who is not deemed an affiliate of the Company under the
Securities Act, has not been an affiliate during the preceding 90 days and has
beneficially owned shares for at least two years from the later of the date the
shares were acquired from the Company or from an "affiliate" of the Company is
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations and other restrictions described above.

See "Underwriting" for a description of certain agreements prohibiting the
Company, the directors and officers thereof and the Selling Shareholder from
selling shares of Common Stock (other than the shares sold pursuant to this
Prospectus) for a period of 120 days from the date of this Prospectus.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C., Dallas, Texas.

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, the
Underwriters named below, through their representatives, Raymond James &
Associates, Inc. and Principal Financial Securities, Inc. (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Shareholder the following respective numbers of shares of Common Stock
at the initial price to public less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:

NUMBER OF
NAME SHARES
---- ---------

Raymond James & Associates, Inc............................. 676,500
Principal Financial Securities, Inc......................... 676,500
Corinthian Partners......................................... 33,000
Hanifen, Imhoff Inc. ....................................... 33,000
Huntleigh Securities Corporation............................ 33,000
Jefferies & Company......................................... 33,000
Morgan Keegan & Company, Inc. .............................. 33,000
Petrie Parkman & Co. ....................................... 33,000
Rauscher Pierce Refsnes, Inc. .............................. 33,000
Simmons & Company International............................. 33,000
Southwest Securities, Inc. ................................. 33,000
---------
Total............................................. 1,650,000
=========

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to certain conditions. The

26
27

Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are to be purchased.

The Underwriters, through the Representatives, propose to offer part of the
shares of Common Stock directly to the public at the offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $0.63 per share under the
initial price to public. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $0.10 per share to certain other
dealers. After the initial offering of the shares to the public, the offering
price and other selling terms may be changed by the Representatives. The
Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 247,500 additional shares of Common Stock, at the initial price to public,
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus. To the extent that the Underwriters exercise such option, each
of the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to the total shown, and the
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise their option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby. If purchased, the Underwriters will sell such additional shares
on the same terms as those on which the shares that the Underwriters have agreed
to purchase from the Company and the Selling Shareholder are being offered.

This offering of Common Stock is made for delivery when, as and if accepted
by the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of this offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

Until the distribution of Common Stock in this offering is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, the Representatives are permitted
to engage in certain transactions that stabilize the price of the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock. If the Underwriters create
a short position in the Common Stock in connection with this offering, i.e., if
they sell more shares of Common Stock than are set forth on the cover page of
this Prospectus, the Representatives may reduce the short position by purchasing
Common Stock in the open market. The Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above. The Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representatives
purchase shares of Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of this offering. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases. The imposition of a penalty bid might also have an effect on the
price of a security to the extent that it discouraged resales of any security.
Neither the Company, the Selling Shareholder nor any of the Underwriters makes
any representation or predictions as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Common Stock.
In addition, neither the Company, the Selling Shareholder nor any of the
Underwriters makes any representation that the Representatives will engage in
such transactions or the such transactions, once commenced, will not be
discontinued without notice.

The Company, the Selling Shareholder and officers and directors of the
Company, which upon consummation of this offering will own or have the right to
acquire in the aggregate 817,706 shares of Common Stock, have agreed that they
will not, without the prior written consent of Raymond James & Associates, Inc.,
sell, offer to sell, contract to sell or otherwise transfer or dispose of any
shares of Common Stock (other than the shares offered by the Selling Shareholder
in this offering), options, rights or warrants to

27
28

acquire shares of Common Stock, or securities exchangeable for or convertible
into shares of Common Stock, during the 120-day period commencing on the date of
this Prospectus, except that the Company may issue shares of Common Stock upon
exercise of options outstanding under the 1991 Plan and may grant additional
options under the 1991 Plan, provided that without the prior written consent of
Raymond James & Associates, Inc., such additional options shall not be
exercisable during such period.

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against, and to contribute to losses arising out of, certain civil
liabilities, including liabilities under the Securities Act.

Prior to the filing of the Registration Statement of which this Prospectus
is a part, the Company paid the Representatives of the Underwriters a due
diligence and advisory fee in the aggregate amount of $25,000.

The foregoing includes a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the form of
Underwriting Agreement that is on file as an exhibit to the Registration
Statement of which this Prospectus is a part.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Midland, Texas.
Certain matters relating to this offering will be passed upon for the
Underwriters by Thompson & Knight, P.C., Dallas, Texas.

EXPERTS

The financial statements of the Company as of September 30, 1996 and 1997
and for each of the years in the three-year period ended September 30, 1997 have
been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on Form
S-1 (as amended and together with all exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the shares of Common Stock
offered by this Prospectus. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth in
the Registration Statement. For further information with respect to the Company
and the Common Stock offered, reference is made to the Registration Statement.
Statements contained in this Prospectus concerning the provisions of any
contract, agreement or other document are not necessarily complete. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for the complete
contents of the exhibit, and each statement concerning its provisions is
qualified in its entirety by such reference.

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission, which can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: Chicago Regional Office, 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661, and New York Regional Office, 7
World Trade Center, New York, New York 10048. Copies of such material may also
be obtained by mail at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Commission maintains an Internet world wide web site that contains reports,
proxy and information reports and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval System. The site
can be accessed at http://www.sec.gov.

28
29

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Report................................ F-2
Balance Sheets as of September 30, 1996 and 1997............ F-3
Statements of Operations for the Years Ended September 30,
1995, 1996 and 1997....................................... F-4
Statements of Cash Flows for the Years Ended September 30,
1995, 1996 and 1997....................................... F-5
Statements of Stockholders' Equity for the Years Ended
September 30, 1995, 1996 and 1997......................... F-6
Notes to Financial Statements............................... F-7

F-1
30

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Dawson Geophysical Company:

We have audited the accompanying balance sheets of Dawson Geophysical
Company as of September 30, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dawson Geophysical Company
as of September 30, 1996 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended September 30,
1997, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Midland, Texas
October 30, 1997

F-2
31

DAWSON GEOPHYSICAL COMPANY

BALANCE SHEETS

ASSETS
SEPTEMBER 30,
---------------------------
1996 1997
------------ ------------

Current assets:
Cash and cash equivalents................................. $ 1,493,000 $ 4,774,000
Marketable securities..................................... 988,000 3,968,000
Accounts receivable....................................... 6,161,000 8,724,000
Income taxes receivable................................... 193,000 --
Prepaid expenses.......................................... 148,000 288,000
------------ ------------
Total current assets.............................. 8,983,000 17,754,000
------------ ------------
Property, plant and equipment............................... 56,368,000 63,267,000
Less accumulated depreciation............................... (23,442,000) (27,460,000)
------------ ------------
Net property, plant and equipment................. 32,926,000 35,807,000
------------ ------------
$ 41,909,000 $ 53,561,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 857,000 $ 1,690,000
Accounts payable.......................................... 2,079,000 3,956,000
Accrued liabilities:
Payroll costs and other taxes.......................... 560,000 566,000
Other.................................................. 144,000 494,000
------------ ------------
Total current liabilities......................... 3,640,000 6,706,000
------------ ------------
Long-term debt, less current maturities..................... 4,857,000 7,893,000
Deferred income taxes....................................... 608,000 1,417,000
Stockholders' equity:
Preferred stock -- par value $1.00 per share; 5,000,000
shares authorized, none outstanding.................... -- --
Common stock -- par value $.33 1/3 per share; 10,000,000
shares authorized, 4,161,550 and 4,199,250 shares
issued and outstanding as of September 30, 1996 and
1997................................................... 1,387,000 1,400,000
Additional paid-in capital................................ 17,021,000 17,174,000
Net unrealized loss on marketable securities.............. (5,000) --
Retained earnings......................................... 14,401,000 18,971,000
------------ ------------
Total stockholders' equity........................ 32,804,000 37,545,000
------------ ------------
Contingencies (See note 11)
$ 41,909,000 $ 53,561,000
============ ============

See accompanying notes to the financial statements.

F-3
32

DAWSON GEOPHYSICAL COMPANY

STATEMENTS OF OPERATIONS

YEARS ENDED SEPTEMBER 30,
---------------------------------------
1995 1996 1997
----------- ----------- -----------

Operating revenues..................................... $28,188,000 $33,518,000 $48,227,000
Operating costs:
Operating expenses................................... 20,067,000 23,763,000 32,293,000
General and administrative........................... 975,000 1,299,000 1,477,000
Depreciation......................................... 4,150,000 5,818,000 7,321,000
----------- ----------- -----------
25,192,000 30,880,000 41,091,000
----------- ----------- -----------
Income from operations................................. 2,996,000 2,638,000 7,136,000
Other income (expense):
Interest income...................................... 399,000 253,000 260,000
Interest expense..................................... (170,000) (144,000) (486,000)
Gain on disposal of assets........................... 76,000 11,000 196,000
Other................................................ 8,000 2,000 10,000
Proceeds from litigation settlement.................. 131,000 -- --
----------- ----------- -----------
Income before income tax expense....................... 3,440,000 2,760,000 7,116,000
Income tax expense:
Current.............................................. 970,000 599,000 1,738,000
Deferred............................................. 296,000 273,000 808,000
----------- ----------- -----------
1,266,000 872,000 2,546,000
----------- ----------- -----------
Net income............................................. $ 2,174,000 $ 1,888,000 $ 4,570,000
=========== =========== ===========
Income per common share................................ $ .54 $ .45 $ 1.09
=========== =========== ===========
Weighted average equivalent common shares
outstanding.......................................... 3,989,949 4,182,891 4,201,611
=========== =========== ===========

See accompanying notes to the financial statements.

F-4
33

DAWSON GEOPHYSICAL COMPANY

STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 30,
------------------------------------------
1995 1996 1997
------------ ------------ ------------

Cash flows from operating activities:
Net income.................................................. $ 2,174,000 $ 1,888,000 $ 4,570,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.......................................... 4,150,000 5,818,000 7,321,000
Gain on disposal of assets............................ (76,000) (11,000) (196,000)
Non-cash interest income.............................. (229,000) (101,000) (63,000)
Deferred income taxes................................. 296,000 273,000 808,000
Other................................................. -- -- 91,000
Change in current assets and liabilities:
Increase in accounts receivable....................... (704,000) (1,153,000) (2,563,000)
Decrease (increase) in prepaid expenses............... (21,000) 72,000 (140,000)
Decrease (increase) in income taxes receivable........ (126,000) (67,000) 193,000
Increase (decrease) in accounts payable............... 548,000 (222,000) (42,000)
Increase (decrease) in accrued liabilities............ (118,000) 235,000 267,000
Increase (decrease) in income taxes payable........... (121,000) -- 89,000
------------ ------------ ------------
Net cash provided by operating activities................... 5,773,000 6,732,000 10,335,000
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from disposal of assets...................... 273,000 33,000 340,000
Capital expenditures.................................. (10,961,000) (15,597,000) (8,528,000)
Proceeds from sale of marketable securities........... -- 2,884,000 742,000
Proceeds from maturity of marketable securities....... 7,827,000 2,100,000 750,000
Investment in marketable securities................... (5,935,000) (2,096,000) (4,383,000)
------------ ------------ ------------
Net cash used in investing activities....................... (8,796,000) (12,676,000) (11,079,000)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on debt............................ (7,875,000) (286,000) (927,000)
Proceeds from debt.................................... 1,500,000 6,000,000 4,795,000
Issuance of common stock.............................. 10,776,000 -- --
Proceeds from exercise of stock options............... 142,000 52,000 157,000
------------ ------------ ------------
Net cash provided by financing activities................... 4,543,000 5,766,000 4,025,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents........ 1,520,000 (178,000) 3,281,000
Cash and cash equivalents at beginning of year.............. 151,000 1,671,000 1,493,000
------------ ------------ ------------
Cash and cash equivalents at end of year.................... $ 1,671,000 $ 1,493,000 $ 4,774,000
============ ============ ============

See accompanying notes to the financial statements.

F-5
34

DAWSON GEOPHYSICAL COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

NET
COMMON STOCK UNREALIZED
----------------------- ADDITIONAL LOSS ON
NUMBER PAID-IN MARKETABLE RETAINED
OF SHARES AMOUNT CAPITAL SECURITIES EARNINGS TOTAL
---------- ---------- ----------- ---------- ----------- -----------

Balance, September 30, 1994......... 3,002,800 $1,001,000 $ 6,437,000 $(91,000) $10,339,000 $17,686,000
Issuance of common stock............ 1,114,000 371,000 10,405,000 -- -- 10,776,000
Exercise of stock options........... 32,250 11,000 131,000 -- -- 142,000
Net unrealized gain on marketable
securities........................ -- -- -- 78,000 -- 78,000
Net income.......................... -- -- -- -- 2,174,000 2,174,000
---------- ---------- ----------- -------- ----------- -----------
Balance, September 30, 1995......... 4,149,050 1,383,000 16,973,000 (13,000) 12,513,000 30,856,000
Exercise of stock options........... 12,500 4,000 48,000 -- -- 52,000
Net unrealized gain on marketable
securities........................ -- -- -- 8,000 -- 8,000
Net income.......................... -- -- -- -- 1,888,000 1,888,000
---------- ---------- ----------- -------- ----------- -----------
Balance, September 30, 1996......... 4,161,550 1,387,000 17,021,000 (5,000) 14,401,000 32,804,000
Issuance of common stock............ 1,200 1,000 8,000 -- -- 9,000
Exercise of stock options........... 36,500 12,000 145,000 -- -- 157,000
Net unrealized gain on marketable
securities........................ -- -- -- 5,000 -- 5,000
Net income.......................... -- -- -- -- 4,570,000 4,570,000
---------- ---------- ----------- -------- ----------- -----------
Balance September 30, 1997.......... 4,199,250 $1,400,000 $17,174,000 $ -- $18,971,000 $37,545,000
========== ========== =========== ======== =========== ===========

See accompanying notes to the financial statements.

F-6
35

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Dawson Geophysical Company (the "Company"), which was incorporated in Texas
in 1952, has been listed and traded on the Nasdaq National Market under the
symbol "DWSN" since 1981.

The Company acquires and processes 3-D seismic data for major and
intermediate-sized oil and gas companies and independent oil operators who
retain exclusive rights to the information obtained. The Company's land-based
acquisition crews operate primarily in the southwestern United States, and data
processing is performed by geophysicists at the Company's computer center in
Midland, Texas.

Cash Equivalents

For purposes of the statements of cash flows, the Company considers demand
deposits, certificates of deposit and all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.

Marketable Securities

The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (Statement 115). In
accordance with Statement 115, the Company has classified its investment
portfolio consisting of U.S. Treasury securities as "available-for-sale" and
records the net unrealized holding gains and losses as a separate component of
stockholders' equity. The cost of marketable securities sold is based on the
specific identification method.

Concentrations of Credit Risk

Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards No. 105, consist primarily of trade accounts receivable and marketable
securities. The Company's sales are to customers whose activities relate to oil
and gas exploration and production. However, accounts receivable are well
diversified among many customers, and a significant portion of the receivables
are from major oil companies, which management believes minimizes potential
credit risk. The Company generally extends unsecured credit to these customers;
therefore, collection of receivables may be affected by the economy surrounding
the oil and gas industry. However, the Company closely monitors extensions of
credit and has not experienced significant credit losses in recent years. The
Company invests primarily in U.S. Treasury securities which are a low risk
investment.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method. When assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is reflected in the results of operations for the
period.

Impairment of Long-Lived Assets

In March, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121)
which requires companies to assess their long-lived assets for impairment.
Statement 121 requires companies to review for impairment whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset
may not be recoverable. The Company adopted

F-7
36

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Statement 121 as of October 1, 1995. The effect of the adoption of Statement 121
was not material to the Company and, accordingly, no provision was recorded in
the Statement of Operations for the years ended September 30, 1996 and 1997.

Income Taxes

The Company accounts for state and federal income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (Statement 109). Under the asset and liability method of Statement 109,
deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company's deferred tax liability results primarily from
differences in depreciation for financial reporting and income tax purposes.

Income per Common Share

Income per common share is computed based on the weighted average common
shares and common share equivalents outstanding during each year. The dilutive
effect of stock options granted is included in the computation of income per
common share. The fully dilutive effect of common share equivalents was less
than 3% for 1995, 1996 and 1997.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (Statement 128), "Earnings per Share."
Statement 128 establishes standards for computing and presenting earnings per
share and is effective for periods ending after December 15, 1997. The impact of
the adoption of Statement 128 on the Company's earnings per share is expected to
be immaterial.

Use of Estimates in the Preparation of Financial Statements

Preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Stock-Based Compensation

Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting For Stock-Based Compensation"
(Statement 123). Statement 123 allows a company to adopt a fair value based
method of accounting for a stock-based employee compensation plan or to continue
to use the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting For Stock Issued To Employees" (APB
No. 25). The Company has chosen to continue to account for stock-based
compensation under APB No. 25 using the intrinsic value method. Under this
method, the Company has not recorded any compensation expense related to stock
options granted. The disclosures required by Statement 123, however, have been
included in Note 5.

2. MARKETABLE SECURITIES

Marketable securities, consisting entirely of U.S. Treasury securities, had
a cost and market value of approximately $993,000 and $988,000, respectively, at
September 30, 1996. At September 30, 1997, market value approximated the cost of
$3,968,000.

F-8
37

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Marketable securities held at September 30, 1997, consisting of U.S.
Treasury securities, have contractual maturities from December 1997 through June
1998.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, together with annual depreciation rates,
consist of the following:

SEPTEMBER 30
--------------------------
1996 1997 RATES
----------- ----------- -----------------

Land................................... $ 836,000 $ 836,000 --
Buildings and improvements............. 1,214,000 1,219,000 3 to 12.5 percent
Machinery and equipment................ 52,150,000 58,811,000 10 to 20 percent
Equipment in process(a)................ 2,168,000 2,400,000 --
----------- -----------
$56,368,000 $63,266,000
=========== ===========

- ---------------

(a) Equipment in process has not been placed into service and accordingly has
not been subject to depreciation.

4. SHORT-TERM AND LONG-TERM DEBT

In April 1997, the Company entered into a loan agreement, as amended (the
"Loan Agreement"), with Norwest Bank Texas, N.A. ("Norwest"). The Loan Agreement
consists of (1) a revolving line of credit of $6,000,000 which matures on April
15, 1999, (2) a term note in the aggregate principal amount of $6,000,000
bearing interest at Norwest's prime rate and which matures on March 15, 2003 and
(3) a term note in the aggregate principal amount of $5,000,000 bearing interest
at the prime rate as published in The Wall Street Journal and which matures on
April 15, 2003. The $5,000,000 term note, together with working capital, were
utilized to finance the purchase of equipment placed into service in August
1997. The term notes are secured by eligible accounts receivable and equipment
purchased from loan proceeds. At September 30, 1997, approximately $9.5 million
was outstanding under the term notes all of which were bearing interest at 8.5%
per annum.

At September 30, 1997, the current maturity of the long-term debt is
$1,690,000. For fiscal years 1998 through 2002, the annual maturity is
$1,690,000, and for fiscal year 2003, the annual maturity will be the balance.
As of September 30, 1997, the Company has not utilized the revolving line of
credit.

F-9
38

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. STOCK OPTIONS

The Company's 1991 Incentive Stock Option Plan, which extends the 1981
Plan, provides options to purchase 150,000 shares of authorized but unissued
common stock of the Company. The option price is the market value of the
Company's common stock at date of grant. Options are exercisable 25% annually
from the date of the grant and the options expire five years from date of grant.

The transactions under the 1991 Plan are summarized as follows:

OPTION NUMBER OF
PRICE PER SHARE OPTIONED SHARES
------------------ ---------------

Balance as of September 30, 1994................... $3.625 to $8.875 135,000
Granted.......................................... $11.25 17,000
Exercised........................................ $3.625 to $4.75 (32,250)
Cancelled or expired............................. $4.75 to $8.875 (7,000)
------------------ ---------------
Balance as of September 30, 1995................... $4.25 to $11.25 112,750
Exercised........................................ $4.25 (12,500)
------------------ ---------------
Balance as of September 30, 1996................... $4.25 to $11.25 100,250
Granted.......................................... $24.125 30,000
Exercised........................................ $4.25 to $8.875 (36,500)
Cancelled or expired............................. $4.25 (4,000)
------------------ ---------------
Balance as of September 30, 1997................... $7.25 to $24.125 89,750
================== ===============

Options for 54,250, 73,000 and 47,500 shares were exercisable as of
September 30, 1995, 1996 and 1997, respectively.

Options for 30,000 shares were granted in fiscal year 1997 and none were
granted in 1996. The expected life of the options granted is 5 years. The
weighted average fair value of options granted during 1997 is $10.64. The fair
value of each option grant is estimated on the date of grant, using the
Black-Scholes options-pricing model. The model assumed expected volatility of
42% and risk-free interest rate of 6.4% for grants in 1997. As the Company has
not declared dividends since it became a public entity, no dividend yield was
used. Actual value realized, if any, is dependent on the future performance of
the Company's common stock and overall stock market conditions. There is no
assurance the value realized by an optionee will be at or near the value
estimated by the Black-Scholes model.

Outstanding options at September 30, 1997 expire between September 1998 and
September 2002.

As discussed in Note 1, no compensation expense has been recorded in 1997
for the Company's stock options under the intrinsic value method. Had
compensation cost for the 1991 Plan been determined based on the fair value at
the grant dates for awards made after September 30, 1995 under the 1991 Plan,
the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:

YEAR ENDED
SEPTEMBER 30,
1997
-------------

Net income As reported $4,570,000
Pro forma $4,352,000
Earnings per share As reported $ 1.09
Pro forma $ 1.04

Under the provisions of Statement No. 123, the pro forma disclosures above
indicate only the effects of stock options granted by the Company subsequent to
September 30, 1995. During this initial phase-in period,

F-10
39

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the pro forma disclosures as required by Statement No. 123 are not
representative of the effects on reported net income for future years as options
vest over several years and additional awards are generally made each year.

6. EMPLOYEE STOCK PURCHASE PLAN

The Company has an employee stock purchase plan to invest in the Company's
common stock for the benefit of eligible employees. Participants were entitled
to contribute a percentage, not to exceed 5%, of their biweekly salary to the
plan. On a bi-weekly basis, the Company matches the participants' contributions
and directs the purchase of shares of the Company's common stock. There are no
vesting requirements for the participants. The Company contributed $164,530,
$198,863 and $217,723 to the plan during 1995, 1996 and 1997, respectively.

7. INCOME TAXES

Income tax expense attributable to income before extraordinary item
consists of:

YEAR ENDED SEPTEMBER 30,
--------------------------------------
1995 1996 1997
---------- ---------- ----------

Current:
U.S. federal................................. $ 859,000 $ 596,000 $1,585,000
State........................................ 111,000 3,000 153,000
---------- ---------- ----------
970,000 599,000 1,738,000
Deferred -- U.S. federal....................... 296,000 273,000 808,000
---------- ---------- ----------
Total................................ $1,266,000 $ 872,000 $2,546,000
========== ========== ==========

Income tax expense varies from the amount computed by multiplying income
before taxes by the statutory income tax rate. The reason for these differences
and the related tax effects are as follows:

YEAR ENDED SEPTEMBER 30,
--------------------------------------
1995 1996 1997
---------- ---------- ----------

Expense computed at statutory rates............ $1,169,000 $ 938,000 $2,420,000
Effect of:
State income taxes, net of federal income tax
benefit................................... 73,000 10,000 101,000
Other........................................ 24,000 (76,000) 25,000
---------- ---------- ----------
Income tax expense............................. $1,266,000 $ 872,000 $2,546,000
========== ========== ==========

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized.

8. STATEMENT OF CASH FLOWS

The Company paid current and estimated tax payments of $1,019,000, $619,000
and $1,553,000 in 1995, 1996 and 1997, respectively. Payments of interest were
$170,000, $144,000 and $486,000 in 1995, 1996 and 1997, respectively. During
1995, the Company exchanged certain land and buildings plus cash of $425,000 for
buildings and land held by a third party.

F-11
40

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. MAJOR CUSTOMERS

The Company operates in only one business segment, contract seismic data
acquisition and processing services. The major customers in 1995 and 1996 varied
and sales to these customers, as a percentage of operating revenues, for periods
in which sales to these customers exceeded 10%, were as follows:

1995 1996
---- ----

Customer A.................................................. -- 11%
Customer B.................................................. 20% --
Customer C.................................................. 16% --

During 1997, sales to no customers exceeded 10% of operating revenue.

10. EQUITY OFFERING

During the first quarter of fiscal 1995, the Company completed a public
offering of 1,114,000 shares with net proceeds of approximately $10,776,000 used
to acquire seismic equipment and retire debt.

11. CONTINGENCIES

The Company is a defendant in two lawsuits pending in the 112th and 83rd
District Courts of Pecos County, Texas relating to a July 1995 accident
involving a van owned by the Company which was used to transport employees to
various job sites and a non-Company owned vehicle. The accident resulted in the
deaths of four Company employees who were passengers in such van. The Company is
one of several named defendants in such suits. Other named defendants include
the estate of the deceased driver of such van, who was an employee of the
Company, the driver of such non-Company owned vehicle, who was then an employee
of the Company, the owner of such vehicle, and Ford Motor Company, the
manufacturer of the Company van involved in such accident. In general, the
claims against the Company include allegations of negligence, gross negligence
and/or intentional tort as a result of, among other things, the Company's
alleged failure to provide safe transportation for its employees and to properly
select, train and supervise the deceased driver of such van. The plaintiffs in
such suits are seeking actual damages from the defendants of $15.5 million,
additional unspecified actual damages, pre-judgment and post-judgment interest
and costs of suit as well as exemplary and punitive damages in an amount not to
exceed four times the amount of actual damages. The Company believes that it has
meritorious defenses to the claims asserted against it in such suits and it
intends to continue to vigorously defend itself against such claims. In
addition, the Company believes that it has approximately $11 million of
liability insurance coverage to provide against an unfavorable outcome. Due to
the uncertainties inherent in litigation, no assurance can be given as to the
ultimate outcome of such suits or the adequacy or availability of the Company's
liability insurance to cover the damages, if any, which may be assessed against
the Company in such suits. A judgment awarding plaintiffs an amount
significantly exceeding the Company's available insurance coverage could have a
material adverse effect on the Company's financial condition, results of
operations and liquidity.

The Company is party to other legal actions arising in the ordinary course
of its business, none of which management believes will result in a material
adverse effect on the Company's financial position or results of operation, as
the Company believes it is adequately insured.

F-12
41

DAWSON GEOPHYSICAL COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

QUARTER ENDED
-----------------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
------------ ----------- ----------- -------------

1996:
Operating revenues................ $ 7,358,000 $ 8,572,000 $ 8,555,000 $ 9,033,000
Income from operations............ $ 56,000 $ 931,000 $ 750,000 $ 901,000
Net income........................ $ 77,000 $ 630,000 $ 514,000 $ 667,000
Net Income per common share....... $ .02 $ .15 $ .12 $ .16
1997:
Operating revenues................ $10,063,000 $11,721,000 $12,520,000 $13,923,000
Income from operations............ $ 1,078,000 $ 1,566,000 $ 2,322,000 $ 2,180,000
Net income........................ $ 657,000 $ 1,090,000 $ 1,501,000 $ 1,322,000
Net Income per common share....... $ .16 $ .26 $ .36 $ .31

F-13
42

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.................... 3
Risk Factors.......................... 6
Disclosure Regarding Forward-Looking
Statements.......................... 8
Use of Proceeds....................... 8
Price Range of Common Stock........... 9
Dividend Policy....................... 10
Capitalization........................ 10
Selected Financial Data............... 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 15
Management............................ 20
Principal and Selling Shareholders.... 24
Description of Capital Stock.......... 25
Underwriting.......................... 26
Legal Matters......................... 28
Experts............................... 28
Available Information................. 28
Index to Financial Statements......... F-1

======================================================
======================================================

1,650,000 SHARES

[DAWSON LOGO]

DAWSON
GEOPHYSICAL
COMPANY

COMMON STOCK
------------------------
PROSPECTUS
------------------------

RAYMOND JAMES & ASSOCIATES, INC.

PRINCIPAL FINANCIAL SECURITIES, INC.

NOVEMBER 17, 1997

======================================================