Thursday, May 26, 2016

Another Drilling Company Reports Signs Of Recovery

Today Energold Drilling released its 1Q 2016 report (at last). The company has three business lines:

  • mineral drilling
  • energy drilling
  • manufacturing

Energy drilling is currently a laggard. Manufacturing also faces some serious problems. Fortunately, mineral drilling shows signs of recovery. Let me discuss this issue a little bit deeper.

The chart below shows two main metrics, reported by Energold's mineral drilling segment:


Contrary to other drillers (for example, Geodrill) the company has less work to do but, since the end of 2013, drilling prices have been going up. Well, Energold operates mainly in Mexico and Central and South America (83% of revenue, reported by the Mineral Division, is earned in these regions). It looks like the business model in Americas is different than in Africa:

  • in Americas most drilling is ordered by mining majors (brownfield exploration and definition drilling)
  • in Africa, especially in West Africa, there is high demand reported by junior miners; hence, a different business model. 

Another chart - this time it shows margins reported by Energold's Mineral Division:



As the chart shows, margins are still low, much lower than during good times. Fortunately, 1Q 2016 margins are a little bit higher than in 2015 and much higher than in 1Q 2015 (minus 5.6%).

Summarizing - another drilling company, this time the one operating in Americas, is showing some signs of recovery. 


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