|April 04, 2017|
Energold Drilling Group Announces Fourth Quarter & Fiscal 2016 Financial Results
|Energold Drilling Corp. ("Energold" or "the Company") announces annual revenue in 2016 of $65.4 million across all business divisions, compared to 2015 revenue of $82.0 million. The slow start to 2016 in the mineral as well as oil and gas sectors led to the year over year decrease in revenue, however the mineral division began to strengthen considerably in the second half of the year while the oil and gas drilling market began to strengthen in late 2016. Specifically, mineral drilling revenue improved to $37.1 million in 2016 from $32.5 million in 2015, while energy drilling revenue decreased to $18.2 million in 2015 from $28.5 million in 2015.|
There are substantial signs of improvement in the mineral drilling market as exploration budgets expand from multi-year lows, capacity utilization improves and rates increase. The Company's drill rigs in select geographical markets are fully committed for the busier summer months. Elsewhere, the energy drilling market has started to improve as oil prices stabilized in the latter half of 2016, leading to greater cost certainty among the Company's key customers in Western Canada. Meanwhile, the Company has increased its capacity utilization levels in the infrastructure, geothermal and geotechnical markets worldwide as it sought to make use of excess rig capacity in the energy sector.
In 2016, the Company's overall gross margin declined to 14.1% from 16.4% in 2015, mostly due to overhead costs in the oil and gas division, which was partially offset by improving profitability in the mineral drilling segment. Efforts to reduce costs, reflected in a significantly improved EBITDA, were balanced in 2016 to levels that will support each division going forward but also allow for expansion amidst the continued recovery.
Energold's balance sheet at the end of 2016 remained well capitalized with $13.7 million in cash and $46.9 million in working capital.
2016 Annual Results Comparison ($CAD '000s except per-share amounts and meters drilled)
MINERAL DRILLING DIVISION
Revenues increased to $37.1 million in 2016 from $32.5 million in 2015 as a result of a 15% increase in meters drilled. The average revenue per meter in 2016 was $159 compared to $160 in 2015. Although the market is recovering slightly, there is still excess rig capacity in the industry. As capacity utilization rises, pricing and margins are expected to expand as the mineral division strives to maintain low operating costs. Due to improved productivity and monitoring costs, the margin for the year ended December 31, 2016 was $4.9 million or 13%, an improvement over the comparable period of $2.2 million or 7%. Management continues to try and improve its margin by evaluating a number of ways to increase productivity.
ENERGY & INFRASTRUCTURE DRILLING DIVISION
Revenues for the year ended December 31, 2016 were $18.2 million compared to $28.5 million in 2015. The majority of the decrease is due to major operators delaying projects due to the continued low price of oil which affected performance in Q1-2016, when the majority of drilling activity in western Canada takes place. The wild fires in Northern Alberta in Q2-2016 also impacted revenues further by delaying significant projects planned for that period. Gross margin was $3.3 million or 18% in 2016 compared to $7.7 million or 27% in 2015. The decrease in revenue from the oil sands resulted in a lower gross margin as the division maintains certain fixed cost levels in its operations although significant measures have been taken over the last two quarters to materially lower costs associated with the ongoing functioning of the business.
On March 4, 2016, the Company acquired all the outstanding shares of Cros-man. Cros-man has been fully consolidated in the group's results from March 4, 2016 and had revenues of $3.1 million which is included in the Energy revenue segment.
Revenues for Dando for the year ended December 31, 2016 were $10.1 million with a margin of 11% compared to revenues of $20.9 million with a gross margin of 17% in the comparable period in 2015. The combination of depressed minerals and oil and gas industry in addition to the inability for some of Dando's clients to finance their projects impacted Dando's revenues. However, we have taken a number of initiatives to deal with this situation including appointing Wolf Raymer as the Executive Chairman, and reorganizing engineering, sales and plant activities to improve operational efficiencies. Dando will continue to explore further changes to increase profitability.
Management expects the recovery in the mineral drilling segment to continue through 2017 and into 2018. As exploration budgets expand from multi-year lows, customers in this division are planning larger programs which should continue to take on excess industry capacity. Profit margins in certain markets are expected to expand as larger programs combined with higher rates will improve economies of scale.
The oil and gas market is expected to remain soft, although a recovery in spending has started to occur as oil prices continue to stabilize, providing some cost certainty for producers. Meanwhile, exploration plans remain behind schedule and as a result, spring and summer drilling levels are expected to improve in 2017. The infrastructure division continues to grow across its key markets in Central and Western Canada and management is in the process of expanding this division as it wins greater market share.
UPDATE ON FINANCING
On February 14, 2017, the Company announced that it had entered into a binding term sheet with a syndicate of investors led by Extract Advisors LLC, to raise $20 million as a convertible note to repay existing term debt, including the $13.5 million debenture due July 2017 and for working capital purposes. Extract Advisors LLC has agreed to finance up to $15 million of the Loan. The Company expects the transaction to close in Q2- 2017.
A conference call is planned for April 5, 2017 at 4:30pm Eastern. Dial-in numbers are 416-640-5946 or 866-233-4585.
Energold Drilling Corp. is a leading global specialty drilling company that services the mining, energy, water, infrastructure and manufacturing sectors in approximately 25 countries. Specializing in a socially and environmentally sensitive approach to drilling, Energold provides a comprehensive range of drilling services from early stage exploration to mine site operations for all commodity sectors and has an established drill rig manufacturer, Dando Drilling International, based in the United Kingdom.
On behalf of the Directors of Energold Drilling Corp.,
"Frederick W. Davidson"
For further information, please contact:
Steven Gold - Chief Financial Officer
(416) 275-4070 or via email at email@example.com
Jerry Huang - Investor Relations Manager
(604) 681-9501 or via email at firstname.lastname@example.org
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements: Some statements in this news release contain forward-looking information. These statements include, but are not limited to, statements with respect to proposed activities, work programs and future expenditures. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include, among others, the effects of general economic conditions, a reduction in the demand for the Company's drilling services, the price of commodities, changing foreign exchange rates, actions by government authorities, the failure to find economically viable acquisition targets, title matters, environmental matters, reliance on key personnel, the ability for operational and other reasons to complete proposed activities and work programs, the need for additional financing and the timing and amount of expenditures. Energold Drilling Corp. does not assume the obligation to update any forward-looking statement.
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