What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-04-01 compared with 2023-03-13 · 36 added, 46 removed, 251 unchanged (25% of the section changed)

1 unchanged sentence

You should carefully consider these discussions of risk and the other information included in this Form 10-K.

These risk factors could affect our actual results and should be considered carefully when evaluating us.

These risk factors could affect our actual results and should be considered carefully when evaluating us and an investment in our common stock.

Although the risks described below are the risks that we believe are material, they are not the only risks relating to our business, our industry and our common stock.

2 unchanged sentences

Current macroeconomic conditions, including inflationary pressures in the broader U.S.

economy, military conflicts between Russia and Ukraine and the COVID-19 pandemic, have had, and are expected to continue to have, an impact on oil and gas commodity prices and, therefore, demand for our services and, depending on the duration and severity, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Oil demand has deteriorated as a result of multiple global events, including inflationary pressures in the broader U.S.

economy relating to the continued economic recovery from the COVID-19 pandemic and corresponding preventative measures taken around the world to contain its spread and mitigate its public health effects, and the ongoing military conflict between Russia and Ukraine.

Factors which are likely to affect commodity prices in future periods include, but are not limited to, the effect of U.S.

economy and military conflicts between Russia and Ukraine and in the Middle East have had, and are expected to continue to have, an impact on oil and gas commodity prices and, therefore, demand for our services and, depending on the duration and severity, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future.

We are monitoring the military conflict between Russia and Ukraine as well as the related export controls and financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., the U.K., the European Union and others.

We are also monitoring the impact of attacks on shipping in the Red Sea as a result of the unrest in the Middle East.

The broader consequences of the Russian-Ukrainian conflict and unrest in the Middle East, which may include further sanctions, embargoes, supply chain disruptions, regional instability and geopolitical shifts, may have adverse effects on global macroeconomic conditions, increase volatility in the price and

demand for oil and natural gas, increase exposure to cyberattacks, cause disruptions in global supply chains, increase foreign currency fluctuations, cause constraints or disruption in the capital markets and limit sources of liquidity.

We cannot predict the extent of the conflict’s effect on our business and results of operations as well as on the global economy and energy markets.

Additional factors which may affect oil and natural gas prices include, but are not limited to, the effect of U.S.

energy, monetary and trade policies;

and global economic and political conditions and developments;

energy and environmental policies;

operating curtailment of the U.S.

and international energy and environmental policies;

and any operating curtailment of the U.S.

oil and gas industry.

and the severity and duration of the COVID-19 outbreaks, which together have created future uncertainty for the demand and pricing for services, equipment, and raw materials in the petroleum industry.

The broader consequences of the Russian-Ukrainian conflict, which may include further sanctions, embargoes, supply chain disruptions, regional instability and geopolitical shifts, may have adverse effects on global macroeconomic conditions, increase volatility in the price and demand for oil and natural gas, increase exposure to cyberattacks, cause disruptions in global supply chains, increase foreign currency fluctuations, cause constraints or disruption in the capital markets and limit sources of liquidity.

We cannot predict the extent of the conflict’s effect on our business and results of operations as well as on the global economy and energy markets.

We face various risks related to the COVID-19 pandemic and any future health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial condition, results of operations and cash flows.

Our business and financial results may be negatively impacted by health epidemics, pandemics and similar outbreaks.

The COVID-19 pandemic and the measures and mandates to try to contain its spread and mitigate its public health effects, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, have impacted our workforce and operations, the operations of our customers, and those of our vendors and suppliers.

The COVID-19 pandemic continues to evolve, and the extent to which the pandemic may impact our business, financial condition, results of operations and cash flows will depend highly on future developments, which are very uncertain and cannot be predicted.

And any future health epidemics, pandemics or similar outbreaks could also have a material adverse effect on our business, financial condition, results of operations or cash flows.

Together, these factors have created uncertainty for the demand and pricing for services, equipment, and raw materials in the petroleum industry, and may continue to do so in the future.

We derive substantially all of our revenues from providers of multi-client data libraries and companies in the oil and natural gas exploration and development industry.

9 unchanged sentences

● our ability to attract and retain skilled personnel whom we would need in the event of an upturn in the demand for our services.

Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future.

Depending on the market prices of oil and natural gas, oil and natural gas exploration and development companies may cancel or curtail their capital expenditure and drilling programs, thereby reducing demand for our services, or may become unable to pay, or have to delay payment of, amounts owed to us for our services.

17 unchanged sentences

● the overall supply and demand for oil and natural gas.

We are a "controlled company", controlled by Wilks, and as a result, are exempt from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not controlled companies.

As of March 9,2023, Wilks Brothers, LLC (“Wilks”) and its affiliates control approximately 74.46% of our combined voting power and is able to elect all of the Company’s board of directors.

We are a "controlled company", which exempts us from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not controlled companies.

As of December 31, 2023, Wilks Brothers, LLC (“Wilks”) and its affiliates control over 80% of our combined voting power and can elect all of the members of our board of directors.

As a result, we are considered a “controlled company” for the purposes of the Nasdaq listing requirements.

1 unchanged sentence

The Nasdaq listing requirements are intended to ensure that directors who meet the independence standards are free of any conflicting interest that could influence their actions as directors.

Our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the applicable Nasdaq listing requirements.

Our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the applicable Nasdaq listing requirements.

It is also possible that the interests of Wilks may in some circumstances conflict with our interests and the interests of the holders of our common stock.

1 unchanged sentence

We derive a significant amount of our revenues from a relatively small number of oil and gas exploration and development companies and providers of multi-client data libraries.

During the twelve months ended December 31, 2022, our three largest clients accounted for approximately 35% of our revenues.

During the twelve months ended December 31, 2023, our four largest clients accounted for approximately 73% of our revenues.

If these clients, or any of our other significant clients, were to terminate their contracts or fail to contract for our services in the future because they are acquired, alter their exploration or development strategy, experience financial difficulties or for any other reason, our results of operations could be adversely affected.

2 unchanged sentences

However, our clients can delay, reduce or cancel their service contracts with us on short notice.

If the oil and natural gas industry incurs a downturn, it may result in an increase in delays, reductions or cancellations by our clients.

If the oil and natural gas industry experiences a downturn, it may result in an increase in delays, reductions or cancellations by our clients.

In addition, the timing of the origination and completion of projects and when projects are awarded and contracted for is also uncertain.

3 unchanged sentences

These fluctuations are attributable to the level of new business in a particular period, the timing of the initiation, progress or cancellation of significant projects, higher revenues and expenses on our dynamite contracts, and costs we incur to train new crews we may add in the future to meet increased client demand.

Fluctuations in our operating results may also be affected by other factors that are outside of our control such as permit delays, weather delays and crew productivity.

Fluctuations in our operating results may also be affected by other

factors that are outside of our control such as permit delays, weather delays and crew productivity.

Oil and natural gas prices have continued to be volatile and have resulted in significant demand fluctuations for our services.

10 unchanged sentences

A default in payment from one of our large clients could have a material adverse effect on our operating results for the period involved.

We incur losses.

We incurred net losses of $20,451,000 for the twelve months ended December 31, 2022 and $29,091,000 for the twelve months ended December 31, 2021.

We have historically incurred net losses.

We incurred net losses of $12.1 million for the year ended December 31, 2023, and $18.6 million for the year ended December 31, 2022.

Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the level of demand for land-based seismic data acquisition services by oil and natural gas exploration and development companies.

1 unchanged sentence

The high fixed costs of our operations could result in continuing or increasing operating losses.

Companies within our industry are typically subject to high fixed costs which consist primarily of depreciation (a non-cash item) and maintenance expenses associated with seismic data acquisition and equipment and crew costs.

Companies within our industry are typically subject to high fixed costs, consisting primarily of depreciation (a non-cash expense) and maintenance expenses associated with seismic data acquisition and equipment and crew costs.

In addition, ongoing maintenance capital expenditures, as well as new equipment investment, can be significant.

9 unchanged sentences

We periodically review our portfolio of equipment and our intangible assets for impairment.

Future events, including our financial performance, sustained decreases in oil and natural gas prices, reduced demand for our services, our market valuation or the market valuation of comparable companies, loss of a significant client’s business, or strategic decisions, could cause us to conclude that impairment indicators exist and ultimately that the asset values associated with our equipment or our intangibles were to be impaired.

If we were to impair our equipment or intangibles, these non-cash asset impairments could negatively affect our financial results in a material manner in the period in which they are recorded, and the larger the amount of any impairment that may be taken, the greater the impact such impairment may have on our financial results.

decisions, could cause us to conclude that impairment indicators exist and ultimately that the values associated with our equipment or intangible assets should be impaired.

If we impair our equipment or intangible assets, these non-cash asset impairments could negatively affect our financial results in a material manner in the period in which the impairments are recorded, and the larger the amount of any impairment that may be taken, the greater the impact such impairment may have on our financial results.

Our profitability is determined, in part, by the utilization level and productivity of our crews and is affected by numerous external factors that are beyond our control.

23 unchanged sentences

Additionally, while landowners generally are cooperative in granting access rights, some have become more resistant to seismic and drilling activities occurring on their property.

governmental entities do not always grant permits within the time periods expected.

In addition, governmental entities do not always grant permits within the time periods expected.

Delays associated with obtaining such rights of way could negatively affect our results of operations.

30 unchanged sentences

We conduct business in Canada which subjects us to foreign currency exchange rate risk.

Currently, we do not hold or issue foreign currency forward contracts, option contracts or other derivative financial instruments to mitigate the currency exchange rate risk.

Currently, we do not hold or issue foreign currency forward contracts, option contracts or other derivative financial instruments to mitigate the

currency exchange rate risk.

Our results of operations and our cash flows could be impacted by changes in foreign currency exchange rates.

5 unchanged sentences

Our common stock is listed on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “DWSN.” However, daily trading volumes for our common stock are, and may continue to be, relatively small compared to many other publicly traded securities.

In addition, as of March 9, 2023, Wilks and its affiliates own approximately 74.46% of our common stock so the public market for our common stock is more limited, which can lead to increased volatility and low trading volumes.

In addition, as of December 31, 2023, Wilks and its affiliates own over 80 % of our common stock so the public market for our common stock is more limited, which can lead to increased volatility and low trading volumes.

For example, during 2023 our daily trading volume was as low as 0 shares.

6 unchanged sentences

Our common stock traded below a price of $5.00 per share for the duration of 2023 and we cannot guarantee that our common stock will trade at a price greater than $5.00 per share.

We do not expect to pay cash dividends on our common stock for the foreseeable future, and, therefore, only appreciation of the price of our common stock may provide a return to shareholders.

While there are currently no restrictions prohibiting us from paying cash dividends to our shareholders, our Board of Directors, after consideration of economic and market conditions affecting the energy industry in general, and the oilfield services business in particular, determined that we would not pay a cash dividend in respect of our common stock for the foreseeable future.

Payment of any cash dividends in the future will be at the discretion of our board and will depend on our financial condition, results of operations, capital and legal requirements, and other factors deemed relevant by the board.

Certain provisions of our amended and restated certificate of formation, or other governing documents and agreements that currently exist or could exist in the future, may make it difficult for a third party to acquire us in the future or may adversely impact your ability to obtain a premium in connection with a future change of control transaction.

Our amended and restated certificate of formation contains provisions that require the approval of holders of 80% of our issued and outstanding shares before we may merge or consolidate with or into another corporation or entity or sell all, or substantially all, of our assets to another corporation or entity.

Additionally, if we increase the size of our board to

nine directors, we could, by resolution of the Board of Directors, stagger the directors’ terms, and our directors could not be removed without approval of holders of 80% of our issued and outstanding shares.

These provisions could discourage or impede a tender offer, proxy contest or other similar transaction involving control of us.

In addition, our Board of Directors has the right to issue preferred stock upon such terms and conditions as it deems to be in our best interest.

The terms of such preferred stock may adversely impact the dividend and liquidation rights of our common shareholders without the approval of our common shareholders.

We may be subject to liability claims that are not covered by our insurance.

12 unchanged sentences

We often work as the general contractor on seismic data acquisition surveys and, consequently, engage a number of subcontractors to perform services and provide products.

While we obtain contractual indemnification and insurance covering the acts of these subcontractors and require the subcontractors to obtain insurance for our benefit, we could be held liable for the actions of these subcontractors.

While we obtain contractual indemnification and insurance

covering the acts of these subcontractors and require the subcontractors to obtain insurance for our benefit, we could be held liable for the actions of these subcontractors.

In addition, subcontractors may cause injury to our personnel or damage to our property that is not fully covered by insurance.

26 unchanged sentences

Current and future legislation or regulation relating to climate change could negatively affect the exploration and production of oil and gas and adversely affect demand for our services.

In response to concerns suggesting that emissions of certain gases, commonly referred to as “greenhouse gases” (“GHG”) (including carbon dioxide and methane), may be contributing to global climate change, legislative and regulatory measures to address the concerns are in various phases of discussion or implementation at the national and state levels.

measures to address the concerns are in various phases of discussion or implementation at the national and state levels.

Many states, either individually or through multi-state regional initiatives, have already taken legal measures intended to reduce GHG emissions, primarily through the planned development of GHG emission inventories and/or GHG cap and trade programs.

19 unchanged sentences

As part of rejoining the Paris Agreement, President Biden announced that the U.S.

to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG emissions by 2050.

would commit to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG emissions by 2050.

In addition, shortly after taking office in January 2021, President Biden issued a series of executive orders designed to address climate change.

11 unchanged sentences

Hydraulic fracturing is an important and commonly used process in the completion of oil and gas wells.

Hydraulic fracturing involves the injection of water, sand and chemical additives under pressure into rock formations to stimulate gas production.

Hydraulic fracturing involves the injection of water, sand and chemical additives under pressure into rock formations to stimulate

gas production.

Several political and regulatory authorities and governmental bodies have studied hydraulic fracturing and considered potential regulations, and certain environmental and other groups have devoted resources to campaigns aimed at restricting or eradicating hydraulic fracturing.

21 unchanged sentences

In the event such legislation is enacted, demand for our seismic acquisition services may be adversely affected.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors