Seismic operators Dawson Geophysical Co. and TGC Industries Inc. are shaking up the market after attempting once again a strategic combination to expand their onshore reach in North America.
The companies had attempted to combine in 2011, but the merger fell through on lack of TGC shareholder support.
The new transaction is a stock-for-stock deal. Dawson, based in Midland, TX, in the heart of the Permian Basin, would become a subsidiary of Plano, TX-based TGC. Dawson shareholders would own 66% of the merged enterprise, and the combined company would keep the Dawson brand.
Founded in 1952, Dawson acquires and processes 2-D, 3-D and multi-component seismic data for U.S. exploration and production (E&P) companies. TGC, with the bigger market, provides seismic data acquisition services throughout North America. The transaction is expected to be completed in early 2015.
Dawson Chairman Stephen Jumper, who also serves as CEO and president, would serve in the same capacities for the merged company.
"This is an exciting time for our companies as we work together to combine our complementary resources and create a best-of-breed company," he said. "The demand on our technology has been to produce cost-effective, high-resolution images in a shorter cycle time. The combination of Dawson and TGC improves our ability to meet that demand with an expanded equipment base, logistics advantages, and improved services and expertise.
"Collectively, our resources are further positioned to increase utilization rates, reduce costs and provide multiple avenues of growth for the combined company."
TGC President and CEO Wayne Whitener would serve as vice chairman and as an officer. The board would include four members of the current Dawson board, Craig Cooper, Gary Hoover, Ted North and Mark Vander Ploeg, and two members of the current TGC board, William Barrett and Allen McInnes.
Wunderlich Securities Inc. analyst Jason Wangler noted that Dawson and TGC had attempted a combination once before in 2011 but a "tough" oilfield service and seismic market at the time and a lack of approval by TGC shareholders quashed the deal.
"This one looks different, in our view, given the fact it is essentially a merger and, as it did back in 2011, the deal makes so much sense. In order for this deal to go through, there needs to be approvals from 66.67% of the outstanding shares of both companies (last time Dawson needed 80% of TGC shareholders and fell just short at 76%)."
Based on current stock prices, Wangler estimated that TGC was paying around $17.62/share for Dawson, which now is trading for about $17.57, "truly making this a combination of two of the only players left in the public markets that work in the onshore North American seismic industry."
In his view, the new Dawson will be "a bigger, better seismic company..." The merger could create a "bigger force" in the North American seismic industry with a strong balance sheet and a book of business.