Dear Shareholders and Stakeholders of Energold,
We have come through the past year with mixed results and a clearer perspective on changes and new challenges in our markets. While there are indications for optimism looking ahead, these are indeed difficult times for the drilling business and for our company.
Industry revenues continue to fall, particularly in the mineral and manufacturing sectors, and lower oil prices will impact us going forward. Thanks to the diversification strategy we implemented four years ago, however, we are positioned to
withstand this downturn.
Conditions like these test the "true measure" of a company's vision, policies and management. We can't change market conditions, but we can surely take decisive and creative action to maximize revenues, cut costs and find new opportunities.
Revenues for Energold totaled $101.3M in 2014, down 17.5% from 2013. Our energy drilling division, posted a revenue gain of 6.7% over 2013 while mineral drilling reported revenues 29.0% lower in the same period.
These results underscore the value of diversification. Just five years ago, we were entirely dependent on mineral drilling. In that time, we've encountered headwinds from declining mineral activities with a significant fall-off in mineral sector revenue.
Understanding that market conditions are unlikely to improve in 2015, the key question for shareholders is: what is Energold's strategy for not only surviving, but
thriving in the coming months and years?
We have boiled that strategy down to three components: 1) reduce costs and become even more efficient, 2) focus on growing the company's active markets, and 3)
selectively open new markets where we see opportunity for growth.
As margins tighten in all divisions, we continue to make this company leaner and more responsive. We are consolidating operations where we can and trimming labour costs--- particularly in the energy division, where costs are significantly higher as a percentage of revenue compared with the mineral division.
We are also reducing inventory levels. With declining oil prices, revenues are falling off in Energold's energy division. Although customers in the oil sands region operate from a fairly patient and long-term view of oil prices and industry trends, there's no question that a sustained decline in oil will continue to impact our energy drilling results.
We are pursuing growth in related, more vibrant energy opportunities such as geothermal, geophysical and geotechnical drilling in and outside of Alberta. Some of our rigs are also ideally suited for water discovery in drought-stricken regions, including the western United States. We believe we can tap significant new revenue in this sector while providing crucially needed water.
Our other bright spot for 2015 is manufacturing, where Dando continues to enjoy strong interest in its products. Although revenues declined significantly in 2014, we are participating in multiple tender processes which are expected to improve our performance in 2015. While this division is certainly impacted by the distressed mineral market, expected growth in water and other drilling will provide much needed
Manufacturing also gives us access to industry-leading engineering expertise. We are leveraging that asset to develop saleable technology and equipment that can allow us to penetrate new, more lucrative markets.
Energold has remained resilient only because of its people. I'm grateful to everyone on the Energold team for forging ahead with innovation, optimism and plain old hard work. Because of you, I am confident and truly excited about what lies ahead.
Thank you for your commitment to Energold.
Frederick W. Davidson
President & CEO. Energold Group.