Mitchell Services is capitalising on the increased drilling demand in the mining sector, posting record revenue for the fourth quarter (Q4) of the 2021–22 financial year (FY22).
The company generated $55.9 million of revenue in Q4 FY22, representing a 21 per cent increase from the $46.2 million generated in Q4 FY21.
“The significant revenue increase was driven by a combination of increased utilisation and pricing,” Mitchell Services chief executive officer Andrew Elf said.
“The average operating rig count in Q4 FY22 was 81.7, compared to 67.7 in Q4 FY21, with the increase largely attributable to new or expanding contracts (predominantly with Tier 1 global mining majors).”
Mitchell Services said that while it was able to deploy a significant number of drill rigs across the three months, its clients were affected by high unseasonal rainfall and COVID-related absenteeism, leading to a reduced number of shifts worked.
“The difference between the expected number of shifts for 81.7 rigs (using historical levels of shifts per rigs) and the actual number of worked shifts in Q4 FY22 represents the approximate combined impact of these interruptions that temporarily restricted further revenue growth and operating margins,” Mr Elf said.
“These interruptions, together with normal levels of ramp up costs associated with the significant rig deployment, saw a temporary reduction in the operating margin percentage with the business generating EBITDA (earnings before interest, taxes, depreciation and amortisation) in Q4 FY22 of $6 million.”
Elf said these factors contributed to the company’s quarterly cash conversion ratio being lower than the expected longer-term level.
Having successfully delivered on its organic growth strategy, Mitchell Services is strongly placed for the future.
The company pre-ordered 12 new drill rigs ahead of the current supply-chain constraints, which enabled it to capitalise on increased demand for specialised drilling services across a range of different commodities.
“We foresaw the current resources upcycle and invested to expand our rig fleet before it impacted supply costs, lead times and funding costs,” Elf said.
“Clients have seen the benefits of this investment in our ability to deploy state-of-the-art equipment on their projects and, as such, all LF160 rigs are now assigned to client projects pursuant to new or expanding contracts and all 12 of these rigs will be operating in the near future.”
As of July 28, Mitchell Services had purchased back 389,733 shares at a combined cost of $148,533 ($0.381 per share) as part of its on-market share buyback, which it said was in its early stages.