Capital Drilling Ltd’s (LON:CAPD) share price spiked 12% - its best performance in almost two years - after it told investors trading conditions had showed signs of improvement.
The resources drilling group said it was monitoring the price after the recent surge, according to an update released Thursday morning.
In a trading update for the first half of the year, the company said the strengthening gold price and increasing interest in the sector had brought in new business, while a flurry of exploration activity has resulted in increased opportunities for the group.
In the first half, it generated revenue of US$41mln, up 6% on the previous period.
Fleet utilisation was up 40% in the six months to June. Second quarter trading saw a 16% increase in revenue to US$22mln due to a 21% rise in the number of rigs utilised to 42 units.
The period benefitted from a surge in exploration activity, which resulted in additional revenues as well as good performance from the new Acacia North Mara Blast Hole and grade control contract.
The group has also announced that it has been awarded a four-rig deep-hole exploration directional drilling contract by RAKITA Exploration, a subsidiary of Nevsun Resources.
Mobilisation has already commenced and drilling is expected to start before the end of this month, said the group.
As a result of an upbeat performance and the RAKITA award, the group sees revenues increasing to US$87.7mln for 2016, compared to analyst expectations of US$85.9mln.
“This announcement should be taken well by the shares, which remain excellent value,” said analysts at finnCap.
“We continue to see on going operational improvements. New contracts are supported by a lean operating model and strong balance sheet. The management considers the improvement activity to be part of a sustainable upswing. We remain strong supporters of the shares,” said the broker.
Shares stood at 39p.
-UPDATE SHARE PRICE, BROKER COMMENT-