TIDMCAPD
RNS Number : 0805W
Capital Drilling Limited
06 February 2017
Capital Drilling Limited
("Capital Drilling", the "Group" or the "Company")
Preliminary Results
and
Trading Update
Capital Drilling Limited (CAPD:LN), a leading drilling solutions
company focused on emerging and developing markets, today provides
its unaudited results for the financial year ended 31 December
2016. The Company also provides an update of activity for the
second half (H2 2016), ahead of announcing its audited full year
results on 16 March 2017.
Commenting on the 2016 financial year, Mark Parsons, CEO,
said:
"The improvement of rig utilisation from 34% in January to 59%
in December 2016 underpinned what was a very strong year of growth
for Capital Drilling. The financial metrics of the business have
significantly strengthened in line with the improvement in the
mining sector, particular in our key emerging markets, with Capital
Drilling entering four new key markets during the period. Though
this expansion by geography as well as winning of a number of
significant contracts has increased our capex and temporarily
impacted margins through mobilisation costs, we look forward to
reaping the benefits of this investment through further growth in
not only our profitability but also in our free cash flow
generation."
2016 Key Metrics (Unaudited)
2016(1) 2015 Change
US$m US$m %
Average Fleet Size 94 97 (3)
Fleet Utilisation (%) 45 34 32
ARPOR ($) (Average Revenue
per Operating Rig) 177,000 188,000 (6)
Capex 12.8 6.1 110
Revenue 93.4 78.7 19
EBITDA 13.1 9.9 32
EBIT (1.3) (4.7) 72
Net Profit (Loss) After
Tax (4.8) (10.2) 53
Cash generated from
operating activities 9.4 22.0 (57)
Earnings per share
Basic (cents) (3.6) (7.6) 53
Diluted (cents) (3.6) (7.6) 53
Net Asset Value per
share (cents) 49.5 56.9 (13)
Return On Capital Employed
(%) (1.4) (4.6) 70
Return On Total Assets
(%) (4.9) (10.8) 55
Net Cash / (Debt) 0.6 8.3 (93)
Net Cash / (Debt) to
Equity (%) 0.9 10.8 (92)
(1) Unaudited results
2016 Full Year Results and H2 2016 Review (Unaudited)
The minerals market has experienced improving conditions
throughout 2016. The gold exploration segment in Capital Drilling's
markets in particular has seen increasing capital and equity
raisings by the Junior mining companies, together with increasing
brownfield exploration at existing operations.
Capital Drilling's preliminary revenue result for the full year
was $93.4 million (2015: $78.7 million), representing a 19%
increase on the previous year. The North Mara production contract,
which commenced in December 2015, delivered the greatest
contribution to the increase while revenue from exploration
operations increased 16%.
Encouragingly, fourth quarter revenue was the highest for 24
months, with the Group continuing to achieve quarterly revenue
growth throughout most of that period, with the exception of Q4
2015.
The revenue result for H2 2016 was $51.7 million (H2 2015: $39.7
million), a 30% increase on the previous corresponding period. The
result includes Q4 2016 revenue of $27.8 million (Q4 2015: $18.9
million).
Rig utilisation for H2 2016 was 49% (H2 2015: 35%) and the
average revenue per operating rig (ARPOR) was $178,000 (H2 2015:
$188,000), on an average fleet size of 94 (H2 2015: 97).
Utilisation for Q4 2016 was 55% (Q4 2015: 35%) and the ARPOR was
$168,000 (Q4 2015: $185,000), on an average fleet size of 94 (Q4
2015: 97).
The Company's full year ARPOR result was $177,000 (2015:
$188,000). This reduction is attributed to the more intermittent
nature of exploration projects compared to Capital's long term
production drilling contracts, as exploration related revenues
increase.
EBITDA of $13.1 million in 2016 (2015: $9.9 million) represents
a 32% increase on the previous corresponding period. This result
was impacted by lower Gross Profit margins (28%) due to
mobilisation costs associated with the commencement of exploration
contracts in four new countries, [a non-cash charge of
approximately $1 million associated with the] decommissioning of 9
rigs and historical tax expenses in Tanzania ($2 million).
Capital Expenditure / Group Cash Flow
Total Capital Expenditure for the year was $12.8 million. To
support the RAKITA exploration contract in Serbia and increase the
Company's deep hole directional drilling capacity, a further
exploration rig (in addition to the two previously announced) was
purchased in H2 2016. Rods for the project were purchased for a
further $1.9 million.
Additionally, three replacement production rigs were acquired
for the long-term Geita & Sukari contracts during the last
quarter. The rigs will commence operations during Q1 2017, with
expenditure on the purchase of rigs attributed to FY16 CAPEX.
To maintain the Group's young fleet, six exploration rigs and
one production rig were decommissioned in Q4, while a further two
exploration rigs were decommissioned earlier in the year. The net
result of these changes brings the fleet total to 92 at year end
(2015: 94).
As opportunities within the exploration market grew throughout
FY16, rebuilds were completed on 31 rigs to ensure operational
readiness ($3.0 million expenditure), while four production rigs
also underwent rebuilds ($1.2 million expenditure).
Net cash at 31 December 2016 was $633,000. The Company's strong
cash generation in previous periods has enabled it to rapidly
respond to opportunities presented by improving market conditions.
The reduced net cash result can be attributed to costs associated
with: rig rebuilds for operational readiness ($4.2 million as
outlined above); the mobilisation of 14 rigs into four new
countries ($1.7 million); together with further extension of
operations in West Africa. This expenditure is in line with the
Company's growth strategy of increasing utilisation via geographic
expansion and maintaining fleet operational readiness, and will
deliver long term growth benefits.
H2 2016 Operational Summary
-- Q3 contract awards:
- RAKITA Exploration (Nevsun Resources), Serbia: 4 deep hole
exploration directional drilling rigs, initial 2 rigs commenced
early August
- Ascom Mining, Ethiopia: 2 diamond rigs, commenced August
- Resolute, Mali: 1 diamond rig, commenced August
- Acacia Exploration Kenya Ltd (a subsidiary of Acacia Mining
plc), Kenya: 3 diamond rigs, commenced September. Contract
extension recently awarded to July 2017
-- Q4 contract awards:
- Mining Resources, Mauritania: 1 reverse circulation rig, commenced September
- Thani Stratex, Egypt: 1 diamond rig, commenced October
- Tilva (BVI) Inc. (a Rio Tinto/Nevsun Resources JV), Serbia: 2 diamond rigs, commenced October
- Acacia Bulyanhulu, Tanzania: 1 diamond and 1 reverse circulation rig commenced December
- Anglo Gold Ashanti, Geita, Tanzania: 1 diamond underground rig commencing January 2017
-- Q4 2016 rig utilisation of 55% on an average rig fleet size
of 92 rigs (H1 2016 44% on an average rig fleet of 94 rigs)
-- Long-term production contracts at Sukari and Geita performing
well. North Mara Production contract (commenced December 2015)
exceeding stakeholder expectations
-- Mobilised 14 rigs into four new countries of operation (Mali, Kenya, Ethiopia and Serbia)
-- Increased rig utilisation from 34% (January 2016) to 59% (December 2016)
-- Increased costs associated with entry into new countries
including mobilisation, customs, and rig preparation, together with
some margin erosion during project commencement while drilling
performance stabilised
-- Full year benefits of new exploration contracts expected during 2017.
Management & Organisational Changes
As previously announced, Dewald van Tonder commenced in the role
of Chief Financial Officer on 1 November, 2016 and joined the
Executive Leadership Team. Mr Van Tonder brings significant
financial leadership experience to the position and has had
exposure across the African markets.
Additionally, Nataly Marchbank commenced as Group Tax Manager in
November bringing extensive knowledge of the complex African tax
environment.
As communicated in the Q3 2016 Trading Update, a realignment of
the Executive Leadership Team and organisational structure was
completed to capitalise on current contracts and future growth
opportunities. Business units now focus on either exploration or
production activities and are more closely aligned with clients'
operational structures. This is expected to improve the Group's
capability to deliver on the diverse requirements of clients in
each phase.
2017 Outlook
The improving market conditions are expected to continue, as
evidenced by new contract activity across the sector. Improvements
in the gold segment are also driving additional tendering
opportunities with Capital Drilling's existing clients in its core
markets.
Positive market sentiment is evident as Junior mining companies
continue to secure capital and raise equity, while existing
brownfields projects are expanding exploration activity and moving
open pit operations to underground mining.
Capital Drilling is in a strong position to capitalise on
opportunities as the market continues its upswing. Investments
completed during H2 2016 as outlined above both in terms of direct
apex and new contract mobilisations have provided a foothold into
the West African and Serbian markets. The Company's revenue will
continue to be underpinned by its long-term production contracts,
including the high performing North Mara contract.
As the 2017 year commences, the Company has 8 exploration
contracts secured compared to 3 in the first quarter of 2016,
together with its ongoing long term production contracts. As a
result, the Group expects significant revenue improvement in 2017
and provides guidance for revenues of $105 million to $112 million
for the year.
The Group's full year audited results, together with any
dividend declarations, will be announced 16 March 2017.
For further information, please visit Capital Drilling's website
www.capdrill.com or contact:
Capital Drilling Limited +230 464 3250
Jamie Boyton, Chairman investor@capdrill.com
Mark Parsons, Chief Executive Officer
finnCap Ltd +44 20 7220 0500
Christopher Raggett, Corporate Finance
Emily Morris/Simon Johnson, Corporate Broking
Tamesis Partners LLP +44 20 3882 0712
Charlie Bendon
Richard Greenfield
Buchanan +44 20 7466 5000
Bobby Morse capitaldrilling@buchanan.uk.com
Gemma Mostyn-Owen
About Capital Drilling
Capital Drilling provides specialised drilling services to
mineral exploration and mining companies in emerging and developing
markets, for exploration, development and production stage
projects. The Company currently owns and operates a fleet of 91
drilling rigs with established operations in Botswana, Chile,
Egypt, Ethiopia, Kenya, Mali, Mauritania, Serbia and Tanzania. The
Group's corporate headquarters is in Mauritius.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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