A resurgence in mining activity has meant the best quarter for Capital Drilling PLC (LON:CAPD) since 2013, sending its shares sharply higher. Revenue in the quarter to March rose by almost 14% on the previous three months to US$31.6 mln and by 65% on a year earlier. As a result, guidance for the full year has been raised to revenues of between US$120-130mln, from US$105-112mln. In late morning trading, Capital drilling shares were 17.5%, or 8.75p higher at 58.75p. In a note in reaction to today's update, 'house' broker finnCap raised its target price for Capital Drilling shares by 15%, to 109p from 95p after upgrading its earnings per share estimates by 30% for 2017 and by 15% for 2018.
WATCH: Capital Drilling' chairman 'very pleased' with Q1 performance
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Jamie Boyton, executive chairman, said it was strongest start to the new financial year in terms of revenue growth for a number of years with the increase in exploration activity evident in 2016 continuing. Operations at AngloGold Ashanti's Geita Gold Mine expanded during the quarter while three new rigs for the Sukari and North Mara contracts also began operating in February. Additionally, Capital was awarded a Phase 1 production contract for two blast hole rigs at Alecto Mineral's Mowana Copper project in Botswana that got underway in March. “The company has been awarded new and repeat exploration contracts throughout the quarter, and we anticipate further expansion opportunities throughout Q2,” added Boyton, who said the aim is to maximise opportunities in the recent market upturn, while maintaining a prudent approach to working capital and the balance sheet.
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