Australian drilling contractor Mitchell Services continues to track towards record FY22 operating results with a 20.8% year-on-year increase in third-quarter revenue to A$54.5 million and effective deployment of newly added rigs in its fleet.
The company says capital market backing for new project and exploration program funding, and expanded producer drilling budgets, are fuelling high demand for available rigs.
Mitchell plans to have 85 rigs active by June.
“The average operating rig count in FY22 Q3 was 75 compared [with] 68.7 in FY21 Q3 with the increase largely attributable to multiple contract wins and re-wins,” CEO Andrew Elf said.
“The cumulative impact of these wins is extremely positive and the business is well positioned to benefit from them post the usual mobilisation and ramp-up costs which traditionally result in a short-term delay between contract win and when the company benefits from the full expected financial and operational performance.”
Fleet “ramp-up”, some COVID-related operational measures, and excessive rain in parts of eastern Australia, meant March-quarter EBITDA and cash conversion percentages were below “expected longer-term levels”.
“The decrease in operating cash flows [of 15.5%] is driven largely from the increase in working capital requirements associated with the significantly increased revenue,” Elf said.
“To mitigate against supply chain impacts from COVID-19 and the material increases in demand for drilling services, inventory levels were proactively increased across the business. The company is beginning to see evidence of supply chain normalisation and if this materialises, it is likely that inventory levels will be run down to more normal levels in the future notwithstanding the increase in operating rig count.”
Mitchell’s revenue for the first nine months of FY22 was $157.42m, compared with $145.14m the previous year. EBITDA in the latest period was $26.14m ($18.25m), and annualised revenue per rig was $2.89m ($2.65m).
The company’s net debt at the end of March was $29.23m.
Its share price is up marginally since the start of 2022, capitalising the company at nearly $89m.