Believe it or not Boart Longyear (BLY), the struggling drilling company, the one with more than nine lives and escapes from near ruin in the past few years – now survives to live another year, judging by its full year report yesterday.
It is punting on a recovery in exploration spending by the embattled mining industry – a punt that was made, and failed in 2014.
After the $US300 million plus recapitalisation which was completed late last month the company sees better times ahead (relative, that is, to the strains of the past three or four years).
The company managed to cut its losses for the full year to $US332.7 million in 2014, almost half the $US619 million loss the previous financial year.
But the company warned profit margins will be under pressure again this year.
But investors, the mad cap punters they are, have heard this before, noticed the company manages to survive after each near death experience, so they chased Boart shares 5% higher yesterday to 21c.
BLY 2Y – Embattled Boart still surviving
CEO Richard O’Brien said in yesterday’s statement that “extremely competitive industry pricing” for drilling services and the strengthening US dollar would continue to put pressure on earnings in 2015.
“We expect rig utilisation rates and product sales volumes will remain broadly consistent with levels experienced in 2014 and, in particular, the second half of 2014,” he said.
“However, we expect revenue and EBITDA will be negatively impacted by the read-through of price reductions experienced in 2014, especially in drilling services.
“We do however remain confident a sustained multi-year recovery in demand for our drilling services and products will occur. We only wish we were as confident in our ability to say exactly when that recovery will occur.”
Mr O’Brien said industry statistics show global exploration spend in 2014 dropped 25% from 2013 levels and is down about 47% from the peak in 2012, suggesting such the current low level of spending is not sustainable.
Revenue slumped from $US1.2 billion in 2013 to $US867 million in last year as miners slashed spending and what they were prepared to pay for the drlling and other services from Boart.
Mr O’Brien said Boart is better positioned to weather the difficult market and capitalise on a recovery after completing the $US352 million recapitalisation late January.
“We no longer face the material uncertainty we faced one year ago, related to our potential inability to refinance our debt,” he said. “Our cash liquidity is much improved and we do not face the prospect of covenant default that we faced one year ago,” he added.
