Oz drilling contractor hit by rain, safety incident


Australian drilling contractor Mitchell Services blamed rain, contract changes and a safety incident for denting its earnings in the December quarter, when it lifted revenue 17.7% year-on-year to A$59.13 million.

EBITDA dipped 30.5% compared with the same time a year ago, to $6.55m in Q2.

Revenue was up 16.9% yoy in the first half of FY23 to $120.23m, but EBITDA fell 5.3% to $16.6m.

Mitchell has invested heavily in recent times to expand its drill rig fleet and says demand remains robust. However, “significant wet weather events have impacted operations throughout FY23 Q2 and led to longer than anticipated seasonal shutdowns in some locations”, the company said.

It said a “number of contracts” were also affected by unplanned variations due to changes in client requirements.

“While demand remains strong and the majority of these rigs have been assigned to new or expanding contracts, utilisation was lower than expected in December,” Mitchell said.

“Budgeted demobilisation and ramp-up costs associated with re-locating rigs were brought forward after the unplanned contract changes, negatively impacting EBITDA in the short term.”

A serious hand injury sustained by an employee which led to a safety investigation ultimately saw five rigs idled for about a month. Mitchell said the employee was expected to make a full recovery.

“Whilst [Q2] EBITDA performance was affected by events largely beyond the company’s control, the outlook to the end of the financial year remains positive with demand for specialist drilling services remaining strong.

“For the first time in eight years, the company’s three large-diameter rigs, which generate the highest margins of the fleet, are fully utilised at present and are expected to remain fully utilised until at least the end of this financial year.

“Notwithstanding the significant impact of January rain events, mobilisations for new contracts were largely completed by the end of January 2023 and are expected to be EBITDA accretive for the balance of the financial year.”

Mitchell cut its gross debt by 13.3% to $37.2m in the first six months of FY23 and says it aims to cut it to $15m by the end of next calendar year.

The company’s share price is down more than 8.5% since start of the year to A38c, capitalising Mitchell at $83m.


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