Message from the President
Dear Shareholders,
Determined in our vision to become one of the major global contract drilling companies, Energold Drilling Corp. enjoyed a transformative year. Through prudent capital management and continuous investment into people, the Company was able to capitalize on recoveries in the world economies and generate record revenues and profits. Its financial position allowed it to expand aggressively into new market segments including equipment manufacturing and energy exploration.
A Transformative Year for Energold
The industry has taken notice and Energold received several accolades as a result of its record-breaking growth, profits and adherence to the strict upmost respect for the social and environmental aspects in exploration. Energold was widely recognized in 2011 and received awards from Profits 200, BC Magazine's Fastest Growing Companies, Business in Vancouver's Fastest Growing Companies, TSX Venture Top 50 Companies, TSX Pick of the Street Award, and our most valuable achievement, the continual commitment from our shareholders.
2011 will be remembered as a year when Energold built the foundations to become a major international drilling provider. With a clean balance sheet, strong cash position and significant demand for its services, the Company is poised to generate significant growth and shareholder value.
Looking forward to the 2012 and beyond, with new rigs and additional contracts worldwide, the Company has strategically positioned itself for future growth globally into one of the larger drilling companies in the world.
Outstanding Growth in 2011 -- Demand Outpacing Supply
Fiscal 2011 marked a period of significant growth for Energold and additional improvement over 2010 on a number of levels. We expanded our international presence; entered the energy and manufacturing sectors; increased our fleet and breadth of drilling rigs; and grew our client base to include development projects and mine site drilling. The Company enters 2012 in excellent financial position with a strong balance sheet and a working capital position of $69.3 million and cash equivalents of $22.8 million.
Financial Results: Record Breaking Growth
Revenues were a Company record of $133.5 million on a record annual high of 585,900 meters of mineral drilling, up 145% from revenues of $54.6 million, 69% on 346,300 meters of drilling in 2010. Revenues totalled $35.3 million in the fourth quarter, historically the slowest quarter, up 105% from $17.3 million in the last quarter of 2010, and meters drilled in minerals increased 30% to 134,500 meters in the fourth quarter from 103,400 meters in the comparative quarter of 2010. Overall, meters drilled for the mineral industry in 2011 increased significantly by 69% over the annual 2010 figures. The Energy Division drilled a further 444,400 meters in 2011, while there were no comparative meters drilled for energy in 2010. Overall, demand for drilling activity increased significantly in 2011 and based on macro-economic trends, will continue beyond 2012.
Net earnings were a record $26.4 million compared to the 2010 net earnings figures of $1.6 million as a result of a very successful year of operations and the net impact of accounting for the Bertram Drilling Corp. transaction.
The Company ended 2011 with a strong balance sheet and working capital position of $69.3 million and cash equivalents of $22.8 million. Subsequent to the year end to help fund its expansion the Company completed a $20.3 million bought deal with a syndicate led by the Toronto-Dominion Bank.
Diversifying Service Offerings including Energy and Manufacturing
The establishment of Energold Energy Drilling Services Ltd., subsequent to the acquisition of Bertram Drilling Corp., provided Energold with a significant foothold in the prominent and profitable Alberta Oil Sands Sector. Energy companies contribute to exploration budgets that are multiples larger than mineral exploration. As part of the Company's long term strategy, the Energy Sector offers a profitable diversification and revenue smoothing business exposure. Bertram brings with it an established name in oil sands coring and seismic and geothermal exploration and development. With the Bertram technology and Energold's global span there are obvious synergies going forward.
Our Manufacturing Division, born from the acquisition of Dando Drilling International Ltd. based in the United Kingdom designs, builds and sells large custom drill rigs to a number of the industry leaders in minerals and water exploration. It also provides in-house capability to design and engineer larger multi-purpose rigs for Energold as its client's projects mature and require larger more conventional rigs.
Over the past year, senior and intermediate mining companies have gradually increased their exploration spending. The Company has responded by increasing its number of rigs and their capabilities as well offering more diversified drilling services. These include underground drilling, sonic rigs and more traditional offerings such as reverse circulation drilling.
Continue Drill Fleet Expansions
At December 31, 2011, Energold held a total of 245 rigs, of which 90 are the S-Style frontier portable rigs, with the remaining consisting of 35 conventional mineral rigs and 115 rigs involved in the Energy Division. In 2012, our focus will be to improve rig utilization in Energold Energy's drilling segment, and add organically more surface rigs including our S-Style rigs, reverse circulation and multi purposes rigs for mineral exploration. The Company will continue to look at possible acquisitions for accelerating growth, particularly in new markets.
Prepared to Capitalize on Market Trends
Metals Economics Group forecasted continued growth for the mineral exploration industry. Major and mid-tier mining clients are ramping up frontier exploration programs in an effort to replenish their dwindling reserves. The Company is strategically positioned to benefit from the increased mineral exploration in general and especially frontier exploration work forecasted in the coming years.
Growing pressure for the development of the oil sands in Canada and shale oils and gas in United States has created the opportunity to grow the newly acquired energy side of the Company in the next few years.
As a market leader in frontier drilling plus conventional mineral and energy operations in 23 countries across five continents, we believe we have brought Energold to a position where we can capitalize on these profitable macro-economic trends and achieve our primary goals of building for the future.
Additional Growth Capital from Major Bank
Drilling is a capital-intensive business with long payback periods from initial capital outlay. In March 2012, Energold completed a $20.28 million "Bought Deal" financing with TD Securities, one of the big four tier-one banks in Canada, securing the Company's increasing prominence in the mining capital markets and bringing on long-term additional institutional investors for the next phase of growth. The proceeds will be used for the construction and development of new rigs, working capital purposes, and potentially securing acquisitions into new markets. The financing had no warrants and was done at close to the historic high for Energold stock price affirming Management's focus on shareholders' interests and minimizing dilution.
We want to sincerely thank everyone for their continued dedication, resourcefulness and energy in making the past year a remarkable success. The market has certainly been taking notice. Energold has received numerous accolades that belong to each and every Energold employee, from Field Operations in remote regions of the world to our Office Staff in Canada.
Finally, on behalf of the Board of Directors, I would like to thank each of you, our long-standing shareholders, for your ongoing support.
Frederick W. Davidson
President, CEO
