Dawson Geophysical Co. agreed to sell itself to Wilks Brothers LLC on Oct. 25 citing waning demand for its services.

“Given the limited trading liquidity in our stock, this transaction offers our shareholders compelling value for their shares and the ability to most efficiently realize that value,” Stephen C. Jumper, Dawson’s president and CEO, commented in a release from the Midland, Texas-based company.

“It also provides Dawson with financial flexibility otherwise not available in the challenging environment in which the company is currently operating,” he added.

For over six decades, Dawson Geophysical has served as a leading provider of North American onshore seismic data acquisition services with operations throughout the continental U.S. and Canada. However, due to a lack of demand for seismic data acquisition projects in both Canada and the Lower 48, Jumper noted prices for the company’s services have softened.

Activity levels during the third quarter remained depressed, according to Jumper who said Dawson had one seismic data acquisition crew operating in the Lower 48 with extended periods of low utilization.

Dawson expects to operate two crews in Canada in the back half of the fourth quarter through the end of the winter season which concludes at the end of first-quarter 2022. Jumper said the company also has or anticipates to be awarded several additional mid-sized projects in the Lower 48, each of which will be pushed into late 2022 primarily due to land access issues.

The sale to Wilks Brothers, a privately held firm controlled by oil billionaires Dan and Farris Wilks, is the result of an ongoing review and analysis of the company’s potential strategic alternatives by the Dawson board of directors and its financial adviser, Moelis & Co. LLC, that commenced in mid-2019.

“In reaching its decision to enter into the transaction with Wilks, the board has thoroughly considered the potential strategic options available to Dawson, the current and long term prospects for the company and the sector in which it operates, including the lack of meaningful and sustainable demand for seismic services, as well as an ongoing skilled labor shortage required to meet any potential increase in demand,” the company said in the release.

The Wilks have been scooping up shares in hard-hit oilfield services firms in recent years including the all-cash acquisition of Fort Worth, Texas-based FTS International Inc. by the brothers’ pressure pumping firm, ProFrac, announced on Oct. 22.

In its latest transaction, Wilks Brothers entered a definitive merger agreement with Dawson pursuant to which a subsidiary of Wilks will commence on or before Nov. 1 a tender offer to acquire all of the company’s outstanding common shares for $2.34 per share in cash. The merger agreement also contemplates that Wilks will acquire any Dawson shares that are not tendered into the offer at the same price per share through a second-step merger, which will be completed as soon as practicable following the closing of the offer, subject to the approval of at least 80% of the outstanding Dawson shares.

The Dawson board believes, according to the company release, that the Wilks transaction presents all Dawson shareholders with an opportunity to achieve liquidity for their shares at the offer price, is the most optimal path forward and is in the best interest of the shareholders.

“Our ability to withstand the continued volatile markets is enhanced with this partnership,” Jumper continued. “The Wilks’ entities have demonstrated a highly successful track-record and we believe they will be a strong, long-term partner for our employees and customers.”

The companies expect to complete the merger in the fourth quarter. Moelis & Co. is Dawson’s financial adviser and Baker Botts LLP is serving as its legal adviser. Vinson & Elkins advised Wilks Brothers in its entry into a definitive merger agreement with Dawson Geophysical led by partners Mike Telle and Chris Collins.

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