|May 29, 2009|
Energold Announces First Quarter Earnings
|Energold Drilling Corp. ("Energold") is pleased to announce in spite of difficult economic conditions net income for the first quarter was $402,500. Energold ended the quarter with an industry leading balance sheet including a working capital position of $50.3 million, cash and cash equivalents of $22.9 million and no debt.|
Revenues decreased to $3.85 million in the first quarter, down 55% from $8.62 million in the first quarter of 2008. Average revenue per meter increased to $188 in the first quarter as compared to $152 in the first quarter of 2008. With the majority of contracts denominated in U.S. dollars, the increase is a result of the weaker Canadian dollar in the first quarter of 2009 as compared to the first quarter of 2008. In U.S. dollar terms average revenue per meter was unchanged.
Summary of Quarterly Results
As expected, the first quarter proved difficult as the current economic environment impacted drilling worldwide, particularly on base metal projects. Many of Energold's largest customers cut their exploration programs significantly to conserve cash. While the challenges posed by the current economic environment serve to limit visibility in the short-term, it is clear that as and when drilling activities rebound, Energold will be poised for growth once again. Revenue in the second quarter has already shown considerable improvement over that from the first quarter; however it will be below revenue recorded in the second quarter of 2008. Lower levels of demand have increased competitive pressures and thus pricing and margins will be lower than in 2008. Energold employs a variable cost structure and thus when revenues decrease so do the majority of the costs. A strategic decision was made not to reduce certain semi variable operating costs that would affect quality of service.
Despite the difficult environment, Energold expects to continue generating positive cash flow and improve its working capital in 2009. Energold's strategic goal is to continue to enhance cash reserves to fuel further growth when market conditions improve. While it remains open to exploring suitable acquisitions, Energold's primary focus continues to be on organic growth through new rig development and expansion into new markets.
With a modern fleet of drilling rigs and the continued opening up of new operating regions, the seeds have been planted for future growth in five continents. The expansion of value-added services continued during the quarter and included developing additional technical ability in underground drilling. This was undertaken in response to customer demand for full service drilling solutions. Energold took delivery of two new underground drill rigs in the first quarter bringing the total number of rigs to 78. One additional underground rig has been ordered with expected delivery in the second quarter. The two underground rigs are similar to the existing surface rigs employing approximately 90% of the same equipment and supplies as the surface rigs. This substantially reduces crew training times and inventory requirements.
Energold will be discussing its 2009 First Quarter Earnings and hosting a question-and-answer period via a conference call on June 3rd, at 1:00pm (PT), 4:00pm (ET). The dial-in numbers are 416 340 8018 and 866 223 7781. The webcast (audio only) can be accessed at:
Energold Drilling Corp. is an environmentally and socially sensitive diamond drilling company that services the mining industry.
On behalf of the Directors of Energold Drilling Corp.,
"Frederick W. Davidson"
For further information, please contact:
Darrell Rader - Corporate Development
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.
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