Capital Drilling Ltd (LON:CAPD) today reported what it described as “another strong" half yearly results, with the company pleased with both its financial performance and the execution of its strategy.
The Africa-focussed drilling contractor to the mining sector, delivered US$54.5mln of revenue, down 4.6% against the 2017 comparative, as a result of lower fleet utilisation amid a relocation of assets to West Africa.
Earnings (EBITDA), meanwhile, improved 7.8% to US$12.5mln as margins increased to 22.9% due to better cost management. Similarly, net profit rose 7.7% to US$2.8mln.
READ: Capital Drilling boosted by mining exploration upswing in West Africa
Per share earnings increased 5% to 2 US cents, and the company is increasing its half year dividend by 20% to 0.6 US cent per share (to be paid on 5 October).
The company said that capital spending had increased 11% to US$4.7mln in the first half as it bought replacement rigs and invested in asset improvements. It ended the period with US$3.4mln of net cash.
Capital Drilling landed seven contracts in the first half, securing work for 15 rigs. First half, rig utilisation reduced to 46% from 56%, on an average fleet size of 94, albeit that was due to the ‘substantial asset redeployment’ during the period.
Building business in West Africa
“The building of our business in West Africa has been the major focus of our growth strategy over the past 6 months,” said Jamie Boyton, Capital Drilling executive chairman.
“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.”
Boyton added: “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.”
Looking ahead, Capital Drilling highlighted supportive forward trading conditions with elevated numbers of enquires and tendering requests.
Signs of improvement in Tanzania
It noted that activity levels in Tanzania, which has seen political disruption in the mining sector, have remained subdued although Capital Drilling noted that recent feedback suggests constructive dialogue with the Government and progress with a newly-formed Mining Commission.
“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,” Boyton said.
“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.”