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Capital Drilling expands West African presence in first quarter of 2018

Published: 07:53 26 Apr 2018 BST

Mining Drill
Capital said it had seen an increase in tendering activity levels in the first quarter

Capital Drilling Ltd (LON:CAPD) said it has expanded its presence in the West Africa region as an additional 12 rigs arrived in the first quarter.

The drilling solutions provider said the 12 new rigs would join 13 already located in Mali and Mauritania, with further rigs scheduled to arrive in the second quarter of the year.

READ: Capital Drilling reveals better than expected financial results

Financially, the group reported an increase in average monthly revenue per operating rig (ARPOR) in the quarter to US$205,000, up 4.6% from the same period last year.

Meanwhile, revenue in the quarter declined 15.8% to US$26.6mln compared to the same period a year ago, which the company said was in line with guidance and reflect efforts to redeploy idle rigs to the high growth West African region.

In its outlook, Capital said it had seen an increase in tendering activity levels in the first quarter, reflecting stronger market conditions and its increased presence in West Africa.

The firm added that it expected more contract wins in the second quarter due to the optimistic conditions, following a three year contract award with Resolute Mining Ltd (ASX:RSG) in Mali on April 11 to operate five rigs at its Syama gold mine.

WATCH: Capital Drilling expanding in West Africa and targeting longer-term contracts

Jamie Boyton, executive chairman of Capital Drilling, said: "Capital Drilling executed its strategy of building its next platform of growth by targeting the fast growing West African market during the last two quarters.  As a result of asset mobilisations, the Company now has over a quarter of its young fleet located in this exciting growth region.

He added: “This transition has been implemented in line with our expectations and we are pleased to see an increase in tendering activity, as well as the award of a three year drilling contract with Resolute in Mali.”

In a note to clients, analysts at FinnCap said: "The temporary dip in quarterly revenues was previously flagged and related to the movement of idle rigs to West Africa, where market conditions and growth opportunities are much stronger. The group expects to win further contracts as the year progresses, which should enable rig utilisation to improve.

They added: "The shares remain significantly under rated due to the Tanzanian regulatory situation and do not reflect the significant operational improvements achieved."

In early trading Thursday, Capital Drilling shares were down 0.5% at 38.8p.

--Adds broker comment and share price--

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