Australian drilling contractor Mitchell Services has affirmed FY22 guidance for A$40-44 million EBITDA on $200-220m of revenue after a strong December quarter took its half-year revenue to nearly $103m and boosted EBITDA more than 40% year-on-year.
The company, which is in the process of buying 12 new surface drill rigs to add to its fleet, says further expansionary capital spend will depend on market conditions mid-year. However, the “broader industry outlook for drilling services demand remains the strongest that we have seen since 2008”.
“Once our capital commitments for these new rigs have been met in June 2022, the business will limit further significant growth capital expenditure – to the extent it makes sense to do so – and focus on generating strong cash flows with the world class fleet that the company has invested in,” Mitchell said.
The company expects to have 85 of its fleet of 103 rigs operating by the middle of this year. CEO Andrew Elf said at that point “the business will have the capacity to generate EBITDA of between $50m and $60m and to deliver material EPS growth to its shareholders”.
Mitchell had an average 71 rigs operating in the second half of 2021 (first half of FY22) versus an average 75 in H1 FY21. Annualised revenue per rig was up more than 8% yoy, though, at $2.885m per rig in the first half of this year.
Mitchell had net debt of $22.23m at the end of December 2021, 4.9% lower than a year earlier.
Elf said the combined EBITDA impact of COVID-19 and the excessive wet weather in eastern Australia was about $1m in the December quarter.
Mitchell’s share price was down about 5% in January, capitalising the company at $83m at the end of the month.
