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Capital Drilling Plc

Capital Drilling another strong half yearly result

Commenting on the results, Jamie Boyton, Executive Chairman of Capital Drilling, said:

“We are pleased to report another strong half yearly result, both in terms of the Group’s financial performance and strategy execution. With a supportive demand cycle and robust discipline from the management team on costs and CAPEX, the Group has continued to deliver on its financial goals, with solid free cash flow and a strong balance sheet. Particularly pleasing was the increase in key profitability measures and margins, despite the reduced fleet utilisation and revenue, driven by the strategic redeployment of assets to the key West African markets. As a result of the performance, we have today announced an interim dividend to shareholders of 0.6 cents per share, representing a 20% increase on the prior half year period.

The building of our business in West Africa has been the major focus of our growth strategy over the past 6 months. The Group has developed new operational centres in Côte d’Ivoire and Mali over the period, complementing our long established operations in Mauritania, all of which provide the infrastructure to deploy further production and exploration rigs into what is regarded as one of the fastest growing drilling markets in the industry. We ended the half year period with 26 rigs across these countries, almost doubling our capacity in the six month period, with further rigs and assets due to arrive in the third quarter.

Our increased footprint and presence in West Africa has yielded early results, with the Group announcing three new contracts in the region, with Kinross Gold (Tasiast), Resolute Mining (Syama) and Hummingbird Resources (Yanfolila). As a result of these contract wins, along with exploration contract wins in Botswana, Egypt and Tanzania, the Group expects to see an increase in utilisation rates over the second half, which fully underpins the investment we have made to target the West African market.

Outside of West Africa our core long term contracts in Tanzania and Egypt have continued to perform strongly, which was reflected in a further improvement in Average Revenue per Operating Rig for the period. We are encouraged to see early signs of improvement in the Tanzanian market, including the formation of the Mining Commission and increasingly positive feedback on Government engagement from companies operating in the country. The awarding of our first exploration contract in Tanzania in two years is particularly encouraging, as we continue to seek to utilise our substantial latent capacity in our exploration fleet.

We are pleased to have had another exceptional quarter in terms of our safety record, which remains at the heart of our strategy, with a number of new safety records at Syama, North Mara and Geita sites.

We enter the second half of 2018 in a strong position, with our traditional markets in East Africa now complemented with a substantial presence in the key West African region. Tendering & enquiry levels remain robust and we are confident of future contract wins in the period ahead.”

Capital Drilling (LON:CAPD) , a leading drilling solutions company focused on the African markets, today announced half year results for the period ended 30 June 2018.

HALF YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 2018*

 

H1 2018

H1 2017

Average Fleet Size (No. of drill rigs)

94

93

Fleet Utilisation (%)

46

56

ARPOR ($)

200,000

191,000

Capex ($ m)

4.7

4.2

Revenue ($ m)

54.5

62.3

EBITDA1 ($ m)

12.5

11.6

EBIT1 ($ m)

5.8

5.2

Net Profit After Tax ($ m)

2.8

2.6

Cash From Operations ($ m)

7.2

13.1

Earnings per Share

Basic (cents)

2.0

1.9

Diluted (cents)

2.0

1.9

Interim Dividend per Share (cents)

0.6

0.5

Net Asset Value per Share1 (cents)

52.2

50.3

Return on Capital Employed (%)**

17.7

5.1

Return on Total Assets (%)**

11.8

3.6

Net Cash1 ($ m)

3.4

3.3

Net Cash/Equity (%)

4.7

4.9

 

*All amounts are in USD unless otherwise stated

** Twelve months rolling average

(1) EBITDA, EBIT, Net Asset Value per share and Net Cash are non-IFRS financial measures and should not be used in isolation or as a substitute for Capital Drilling Limited financial results presented in accordance with IFRS. For definitions and reconciliations of these measurements to the most directly comparable financial calculations presented in accordance with IFRS, please refer ‘APPENDIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES’

Financial Overview

· First half revenue of $54.5 million, 4.6% lower than H2 2017 at $57.1 million (H1 2017: $62.3 million)

· Lower revenue driven by reduced fleet utilisation as the Group continues to redeploy assets to West Africa

· EBITDA increased by 7.8% to $12.5 million (H1 2017: $11.6 million), with EBITDA margins expanding to 22.9% (H1 2017: 18.7%), reflecting the benefits of improved cost management

· Net profit after tax of $2.8 million, 7.7% increase on H1 2017 (H1 2017: $2.6 million)

· Capex increased by 11% to $4.7 million (H1 2017: $4.2 million), primarily directed to the purchase of replacement production rigs and asset improvements

· Net cash of $3.4 million, maintaining the Group’s strong balance sheet

· Earnings per share improved by 5.3% to 2.0 cents (H1 2017: 1.9 cents)

· Final dividend in relation to the 2017 financial year of 1.2 cents per share, paid in May 2018 (FY 2016: 1.0 cent)

· Interim dividend of 0.6 cent per share, up 20%, to be paid 05 October 2018 (2017: Interim dividend of 0.5 cents per share)

Operational and Strategic Review

· Contracts awarded in H1 2018 include:

– Aton Resources (Egypt): one rig, commenced drilling in Q3

– De Beers (Botswana): three rigs, commenced drilling in Q3

– Graphex Mining (Tanzania): one rig, commenced drilling in Q3

– Hummingbird (Mali): four rigs, commenced drilling in July

– Kinross (Mauritania): Two-year drill rig maintenance contract for two blast hole rigs, commenced in Q2

– OreCorp (Mauritania): one rig, program completed in Q1

– Resolute (Mali): Awarded a three-year surface exploration drilling contract, currently drilling with three rigs

· Contract wins reflecting the continued improvement in the exploration drilling market

· Long term contract wins (Resolute and Kinross) building the Group’s portfolio of multi-year mine-site based contracts

· Made significant progress expanding the Group’s presence in the West Africa region, including asset mobilisations which increased our rig number to 26 rigs, with further rigs scheduled for Q3 arrival

· Established infrastructure with offices, warehouses, workshops and accommodation in Bamako, Mali, and Yamoussoukro, Côte d’Ivoire, adding to the existing presence in Mauritania

· Appointed a Business Development Manager, Julian Blake, initially based in Ghana

· H1 utilisation of 46%, down from 56% in H1 2017, on an average fleet size of 94 rigs, with substantial assets redeployment to West Africa

· H1 Average Revenue per Operating Rig (ARPOR) increased to $200,000 (H1 2017: $191,000)

· Continued strength in ARPOR reflecting strong contract performance at major mine site contracts

Health & Safety

· Previously announced world class achievements:

– Mali (Syama Project) achieved two years LTI free in June 2018

– Tanzania (North Mara Project) achieved two years LTI free in March 2018

– Tanzania (Geita Project) achieved one year LTI free in March 2018

Outlook

· Trading conditions continue to be supportive, with elevated levels of enquires and tendering requests

· Capital markets activity continues to support future demand, albeit recent weakness in metal prices and economic uncertainty has lead to an easing in market sentiment since the last update

· Cash generation from miners remain at healthy levels which is driving increased budgets and demand from the producers

· Recent contract awards add to the Group’s portfolio of long term production and mine-site based contracts

· While activity levels in Tanzania remain subdued, recent feedback suggest constructive dialogue with the Government and progress with the newly formed Mining Commission

· Asset deployment and infrastructure development in the key West African market has provided Capital Drilling with a solid platform to grow operations in this high growth market

· The Group maintains a strong balance sheet and unutilised assets to capture future growth opportunities

Following a number of contract wins across existing countries of operation, including the key focus market of West Africa, the Group maintains its upgraded revenue guidance range of $105 to $115 million for 2018.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.