15th May 2015 07:55
LONDON (Alliance News) - Capital Drilling Ltd Friday said revenue tumbled as market conditions remained subdued and challenging in the first quarter of 2015, and said it remains focused on "strict cost management" to maintain positive cashflows.
The mineral drilling services company said revenue totalled USD19.1 million in the first quarter of 2015, which is down 1.4% quarter on quarter and considerably down from the USD26.1 million it generated in the same period a year earlier.
"Positive cash flow from operational activities maintained. Capital Drilling remains focussed on strict cost management and ongoing capital discipline, generating solid cash flows and a strong balance sheet," said the company.
Capital Drilling said revenue per operating rig rose 2.1% quarter on quarter to USD191,000 per rig, which is also up from USD187,000 per rig a year earlier. Rig utilisation was 33% in the period, down from 38% in the previous quarter and from 44% a year earlier.
Rig utilisation has fallen due to the company's decision to cease operations in Papua New Guinea and the Soloman Islands in the fourth quarter of 2014 and due to ongoing lack of demand in Zambia, arising from the uncertainty around the Zambian government's position on royalties in the copper industry.
"Revenue has since shown a modest increase into the second quarter as seasonal activity levels have increased," it said.
"Market conditions remain subdued and challenging, however the company has been successful in winning a number of exploration and delineation contracts which will see utilisation increase to 36% in May," said Capital Drilling.
In the quarter, the company began work on three new contracts. The first contract was secured with Cupric Canyon Capital in Botswana for two diamond rigs to complete resource definition drilling which began in April. The second contract is with IMX Resources in Tanzania for two diamond rigs which began in May, and the third contract is with FTSE 250 Acacia Mining PLC in Tanzania for 1 reverse circulation rig for geo-technical drilling which began in May.
"The early initiatives taken by the management team over 2013 and 2014 to reduce the company's cost base and debt profile continue to serve the company well, with Capital Drilling again generating solid cash flows over the first quarter despite weak utilisation figures," said the company.
Capital Drilling said it finished 2014 in a net debt position but is aiming to move into a net cash position over the course of 2015.
"On current demand forecasts the group has no further requirement for rig purchases in 2015, and we expect to generate strong cash flows over the year allowing further balance sheet management initiatives for shareholders," said Chief Executive Mark Parsons.
Capital Drilling shares were flat at 26.25 pence per share Friday.
By Joshua Warner; [email protected]; @JoshAlliance
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