Energold Drilling Group Announces Third Quarter 2016 Financial Results

Trading Symbol: "EGD: TSX.V"

VANCOUVER, Nov. 21, 2016 /CNW/ - Energold Drilling Corp. ("Energold" or "the Company") announces third quarter revenue in 2016 of $18.9 million compared to $15.6 million in the second quarter of 2016 and $22.8 million in the third quarter of 2015. While the mineral segment continues to improve amidst a global recovery, the decrease in revenue year-over-year is due to softer conditions during the period in the energy and manufacturing segments.

The Company's gross margin in the third quarter of 2016 was 16.5% compared to 16.8% in the third quarter of 2015. EBITDA* in the third quarter improved to $0.3 million, representing the first EBITDA positive quarter this year and while modest, it further underscores management's belief that the recovery in the mineral segment has firmly taken hold. Management's focus on cost control has also played a role in the return to EBITDA profitability and continued improvements are expected going forward. The net loss per share for the period was $0.06 compared to a net loss per share of $0.08 in the same period in 2015.

Energold continues to maintain a strong and healthy balance sheet with $12.3 million in cash and $53.1 million in working capital, which includes the effect of reclassifying the Company's convertible debenture as a short-term liability. Management is currently considering several options to replace the convertible debenture which may include paying down a significant portion of the debt or refinancing the debenture in its entirety.

Quarter-to-date and year-to-date results comparison





For three months ended September 30

For the year ended September 30

CAD$ (000) except per share amounts

2016

2015

2016

2015

Revenue

$

$

$

$


Mineral

10,729

10,371

28,218

22,562


Energy

4,353

6,562

14,195

23,951


Manufacturing

3,806

5,881

8,648

16,163

Total Revenue

18,888

22,814

51,061

62,676

Net Loss






Mineral

(740)

(885)

(3,316)

(5,082)


Energy

(1,998)

(2,450)

(6,592)

(4,276)


Manufacturing

(451)

(368)

(3,368)

(1,346)


Corporate

(147)

(174)

(1,374)

(1,338)

Total Net Loss

(3,336)

(3,877)

(14,650)

(12,042)

Loss Per
Share

Basic and diluted

(0.06)

(0.08)

(0.29)

(0.25)

EBITDA*

278

182

(4,463)

(1,581)





As of September 30, 2016

As of December 31, 2015

Cash

12,303

13,561

Working Capital

53,077

72,568


*      EBITDA - Earnings before interest, taxes, depreciation and amortization (see non-IFRS (international financial reporting standards) financial measures in Energold's MD&A).

 

MINERAL DRILLING DIVISION

Revenues increased to $10.7 million in the third quarter of 2016 compared to $10.4 million in the comparable period of 2015.  Average revenue per meter in the period was $162 compared to $160 in the same period of 2015. On a year-to-date basis, revenues increased to $28.2 million in the first nine months of 2016 from $22.6 million in the comparable period of 2015 as a result of a 19% increase in meters drilled.  Average revenue per meter for the first nine months of 2016 was $163 compared to $155 in the comparable period. Management sees a considerable improvement for mineral drilling services especially in Central America. As capacity utilization rises, pricing will continue to strengthen and margins will expand as the mineral division strives to maintain low operating costs and improve productivity. The gross margin for the third quarter of 2016 was $1.8 million or 16.9% compared to $1.2 million or 11.4% in the comparable period in 2015.  The margin for the nine months ended September 30, 2016 was 12.8%, an improvement over the comparable period of 5.3%.  Drilling programs have started to grow in size as the recovery continues and margin expansion is expected to continue as costs remain low and pricing becomes more firm in several key markets.

Meters Drilled







Q3 2016

Q3 2015

2016 Annual

2015 Annual

Meters Drilled

66,300

65,000

173,200

145,400

Drill Rigs

N/A

N/A

139

138

 

ENERGY DRILLING AND INFRASTRUCTURE DIVISION

Revenue for the third quarter of 2016 was $4.4 million compared to $6.6 million in the same period for 2015.  The majority of the decrease is due to major operators delaying projects due to the continued low price of oil. Gross margin was $0.7 million or 15.0% in 2016 compared to a $1.6 million or 24.9% in the comparable period of 2015.  The decrease in revenue from the oil sands resulted in a lower gross margin as the division still has certain fixed costs in its operations, although significant efforts have been made to reduce costs over the last six months. 

Meters Drilled







Q3 2016

Q3 2015

2016 Annual

2015 Annual

Infrastructure

11,100

-

18,800

-

Oil sands coring

300

1,800

4,900

17,900

Seismic (Track and Heli portable)

-

-

-

66,300

Water wells

200

400

1,000

400

Geothermal & geotechnical

29,800

64,000

102,300

238,00

TOTAL

41,400

66,200

127,000

322,600

 

On a year-to-date basis, Bertram drilled 9,300 meters in Canada and approximately 98,900 in the U.S. compared to 88,800 meters in Canada and approximately 233,800 in the U.S. in 2015. Since its acquisition on March 4, 2016, Cros-man drilled 18,800 meters and 11,100 meters in Q3-2016 in the infrastructure in Central Canada.

Larger oil sands customers have started to refocus budgets on resource delineation as they seek to expand their resources and meet certain obligations made to continue development of the oil sands region. The majority of this budget expansion is ideal for the energy fleet core drilling fleet. Pricing however remains depressed and recovery remains uncertain.

MANUFACTURING & WATER DRILLING – DANDO

Revenues for Dando in the third quarter of 2016 were $3.8 million with a margin of 17.1 % compared to revenues of $5.9 million with a gross margin of 17.2% in the same period of 2015. Revenue is typically weak in the first half of the year with deliveries occurring towards the end of the year. Notwithstanding, several orders that management had expected did not materialize; therefore performance in this division has not met expectations.

Dando continues to receive growing interest for its products, however revenue growth has been affected by a number of factors including geopolitical uncertainty in many of the target markets, difficulties experienced by the customers in raising funds and the continuing downturn in the minerals market.  As part of its plans to service future growth, Dando continues to maintain an inventory of additional small rigs for its stock. While this strategy tends to increase costs in the short run, revenue generally follows in later periods.

INDUSTRY OUTLOOK

The Company's mineral drilling division, which represents the largest component of aggregate sales, continues to recover with varying degrees of strength depending on the market. In certain countries in Latin America, the Company's man-portable, frontier style rigs are nearly fully utilized for a seasonally strong mid-2017 period. Equipment is being transferred from other parts of the world to the region to meet demand in various markets. Pricing and volume of meters drilled continue to recover as excess capacity associated with strong safety records are seeing the strongest signs of the ongoing recovery.

The energy market continues to face challenges although several larger customers have indicated their plans to increase spending in the oil patch in 2017 compared to 2016. The Company enjoys several long-term contracts and agreements with major oil companies which have led to ongoing work for the Company's fleet. Notwithstanding, excess capacity still exists and certain rigs are being moved to other markets for the time being. Meanwhile, efforts to reduce costs are ongoing as pricing and profitability remains below historical levels.

The infrastructure division continues to improve and despite its exposure to energy, it has picked up several contracts for national railway and telecom companies. The division offers a higher margin revenue profile for the Company with some of the strongest areas of growth over the next two years.

A conference call is planned for today, November 21, 2016 at 4:30 pm Eastern time. Dial-in numbers for the call are 416-640-5946 or 866-233-4585.

Energold Drilling Corp. is a leading global specialty drilling company that services the mining, energy, water, infrastructure and manufacturing sectors in approximately 25 countries. 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 all commodity sectors and has an established drill rig manufacturer, Dando Drilling International, based in the United Kingdom.

On behalf of the Directors of Energold Drilling Corp.,

"Frederick W. Davidson"
President, CEO

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 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.

SOURCE Energold Drilling Group

For further information: Steven Gold - Chief Financial Officer, (416) 275-4070 or via email at sgold@energold.com or Jerry Huang - Investor Relations Manager, (604) 681-9501 or via email at jhuang@energold.com; 1100 - 543 Granville St., Vancouver, BC V6C 1X8, www.energold.com, Telephone 604 681 9501, Facsimile 604 681 6813, info@energold.com

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