Nov 26, 2012
Energold Drilling Announces Third Quarter 2012 Financial and Production Results
Energold Drilling Corp. ("Energold" or "the Company") announces year-to-date revenues of $115.8 million, an 18% increase from $98.2 million for the nine months ended September 30, 2012.
During the third quarter, the Mineral division drilled 92,300 meters, a decrease of 46% compared to Q3 2011, due to the continued weakness in the overall capital markets. The division remains profitable, generating $17.3 million in revenue this quarter and a net earnings of $0.6 million. The Energy division drilled 61,700 meters during the third quarter, generating $9.0 million in revenues, while the division's year-to-date revenues increased 302% to $38.9 million compared to the same period in 2011. The Manufacturing division's revenue for the first nine months in 2012 was $11.4 million, a 16% increase from $9.8 million in the comparable period in 2011.
Excluding non-cash and extraordinary items such as bonus acquisition expense for Energold Energy Drilling Services ("EEDS"), foreign exchange, and share-based payments, Energold generated $2.1 million in adjusted EBITDA on combined gross margins of 21%. Without the adjustments, the Company recorded a net loss of $2.5 million in Q3 2012. Fred Davidson, President and CEO, states, "Our results this quarter reflect the uncertain business environment, the decline in activity in some markets due to ongoing external factors including politics, weather issues, and difficulty in accessing capital for junior exploration companies. The Company's revenue remains robust in several diversified markets, with a strong senior and intermediate clientele who are committed to their projects."
Energold's growth has been significant over the past three years, and has broadened its revenue base to diversify the risk exposure of a purely mineral based business. EEDS in Alberta and the Manufacturing division, operating as Dando in the U.K., continue to perform above management's expectations. In the current period of softer demand for mineral exploration, the Company is leveraging relationships from its market leading position in frontier drilling and expand complementary service offerings to existing clients. Energold is focused on identifying new growth opportunities, increasing productivity, and capitalizing on synergies for growth within the Energy and Manufacturing divisions. With $27.8 million in the treasury, and over $96.0 million in working capital, management believes the Company remains in an enviable position to weather the current market environment and capitalize on acquisition opportunities.
Third Quarter Results Comparison ($CAD '000s except per-share amounts and meters drilled)
| |
For Three Months Ended September 30 |
For Nine Months Ended September 30 |
| |
2012 |
2011 |
2012 |
2011 |
| Revenue |
|
|
|
|
| |
Mineral |
17,251 |
31,244 |
65,468 |
78,684 |
| |
Manufacturing |
3,603 |
6,113 |
11,414 |
9,821 |
| |
Energy |
9,036 |
9,676 |
38,928 |
9,676 |
| Total Revenue |
$29,890 |
$47,033 |
$115,810 |
$98,181 |
| Earnings (Loss) |
|
|
|
|
| |
Mineral |
628 |
7,910 |
4,102 |
14,198 |
| |
Manufacturing |
(288) |
571 |
(294) |
(204) |
| |
Energy |
(2,848) |
(291) |
(7,463) |
(291) |
| Total Earnings |
$(2,508) |
$8,190 |
$(3,655) |
$13,703 |
| Earnings Per Share |
- Basic |
(0.05) |
0.20 |
(0.08) |
(0.34) |
| |
-Diluted |
(0.05) |
0.20 |
(0.08) |
(0.33) | * EBITDA - Earnings before interest, taxes, depreciation and amortization (see non-GAAP (generally accepted accounting principles) financial measures).
** Adjusted Earnings -- Extraordinary and non-cash items include bonus expense to Energold Energy, accretion expense on debenture, share-based payments, foreign exchange, dilution and equity gain/loss on IMPACT, impairment/write-down of assets.
MINERAL DRILLING DIVISION
Meters drilled during the third quarter decreased over the comparable quarter in 2011 as a result of the challenging capital markets, particularly in the junior mining sector. The Mineral division drilled 92,300 meters in the quarter, a 46% decrease from the comparable quarter in 2011 generating revenues of $17.3 million, a 45% dip from the comparable period in 2011. Average revenue per meter was $192 in the first nine months of 2012 compared to $174 in 2011. Management anticipates this to trend lower as excess rig capacity in the markets may lead to lower competitive bids. Gross margin percentage is historically tied to the business mix of frontier-style drilling and established brownfield drill programs, with the latter moving the average revenue per meter lower. With a higher percentage of programs dedicated to majors' brownfields projects during the third quarter, gross margin was 28%, compared to 31% in the comparable period 2011.
Meters Drilled During the Quarter
| |
Q3 2012 |
Q3 2011 |
9 Months 2012 |
9 Months 2011 |
| Meters Drilled |
92,300 |
170,300 |
341,700 |
451,400 |
| Drill Rigs |
130 |
122 |
N/A |
N/A |
As of September 30, 2012, Energold had a total of 130 mineral exploration rigs, with two track mounted rigs on order from the Manufacturing division, Dando. Mexico, the Caribbean, and Central America and accounted for over 52% of the meters drilled for the third quarter of 2012 with 45 rigs in the region. With local offices in Mexico City and a depot in Chihuahua to service field operations, the Company has expectations of further growth in Central America. South America currently has 42 drill rigs across Brazil, Colombia, Peru, Chile, and Argentina, contributing 21% of the total meters drilled for the quarter. During the quarter, demand stabilized in Brazil after declines in the second quarter; however costs remain elevated to retain key personnel. The market, in general, saw rapid growth in 2010 and 2011, but has recently experienced a decline in activity and utilization and increasing political risk. Colombia's growth remained positive, with several ongoing programs and commitments from existing clients in the area. The modular S rigs continue to be well suited for challenging and remote projects within this region and the Company expects the area to pick up as macro-economic issues continue to resolve. Energold currently has 40 rigs in Africa, and meters drilled here accounted for 27% of total meters drilled in the mineral division, a 7% increase from the comparable quarter in 2011. Additionally, there are currently two rigs in Asia, with efforts continuing to penetrate the Asian market where the Company's S rigs are ideal for the combination of challenging infrastructure and low labour costs.
ENERGY DRILLING DIVISION
EEDS generates the majority of its revenue during the winter months due to favorable ground conditions. As expected, the historically lower levels of activity during the third quarter resulted in a slight decrease in revenue of $9.0 million during the third quarter compared to $9.7 million in the third quarter of 2011. There were no seismic contracts worked on during the quarter; however, there are several outstanding tenders.
Oil sands operations account for $7.0 million revenues for the third quarter and $23.9 million of year-to-date revenue, approximately 61% of total revenues in EEDS. The Company drilled for oil sands clients despite the warmer months, a sign of the backlog of work available in the industry. As a testament to the robustness of the industry, in August 2012, EEDS was awarded multi-year energy drilling contracts valued at $45 million annually, scheduled to commence in 2013 (see News Release dated August 21, 2012). Currently, all of EEDS's oil sands rigs are committed for the 2012 to 2013 winter season, and management's growth target for 2013 is 25% to 50% above the 2012 figures.
Meters Drilled During the Quarter
| |
Q3 2012 |
9 Months 2012 |
| Oil Sands coring |
14,000 |
50,200 |
|
47,700 |
205,500 |
| Seismic (Track and Heli portable) |
- |
335,500 |
| TOTAL |
61,700 |
591,200 |
MANUFACTURING DIVISION
Energold Manufacturing, operating as Dando, continued to expand its business clientele and marketing globally, generating $3.6 million in revenue accounted for using the percentage-of-completion method during the quarter, while incurring a net loss of $0.3 million this quarter as the group continues to work through lower margin legacy contracts. Year-to-date, the division is growing with revenues of $11.4 million and gross margins of 23% compared to $9.8 million and margin of 18% in 2011. The Company expects a strong Q4 to close out 2012 with contracts being completed before year end. With a sizable order book globally resulting from the implementation of a structured approach to procurement, increased sales and marketing efforts and synergies, Dando manufactured and shipped a variety of mining and water rigs to Uganda, Kurdistan, Nigeria, Ghana, and Indonesia during the quarter.
As part of the efforts to strengthen internal competencies and efficiencies, Industrial Processes Chihuahua, S.A.C. ("IPC"), a manufacturing facility in Chihuahua, Mexico, acquired by Energold in 2011, is now supplying the group globally. Previously, IPC was producing specific parts for the Company's Mexican operations and provided ongoing support for rig fleets in the area only.
Energold Drilling Corp. is a leading global specialty drilling company that services the mining, energy, and manufacturing sectors in over 22 countries globally. 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 both metals and energy sectors and has an established drill rig manufacturer, Dando. Energold also holds 6.98 million shares of IMPACT Silver Corp., a profitable silver producer in Mexico.
On behalf of the Directors of Energold Drilling Corp.,
"Frederick W. Davidson"
President, CEO
For further information, please contact:
Jerry Huang - Investor Relations Manager
(604) 681-9501 or via email at jhuang@energold.com
Or
Steven Gold -- Chief Financial Officer
(416) 648-4065 or via email at sgold@energold.com
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 news 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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