Orbit Garant Drilling Q1 2024 Earnings Call Transcript

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November 14, 2023

There are 3 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Orbiteran Drilling's Fiscal 20 24 First Quarter Results Conference Call and Webcast. At this time, all lines are in a listen only mode. Following management's remarks, we will conduct a question and answer session. Please be aware that certain information discussed Today may be forward looking and that actual results could differ materially. Certain non IFRS financial measures will also be discussed.

Operator

Please refer to the company's SEDAR filings for additional information on both risk factors and non IFRS measures. This call is being recorded on Tuesday, November 14, 2023. I would now like to turn the conference over to Mr. Pierre Alexandre, President and CEO of Orbit Current. Please go ahead, sir.

Speaker 1

Thank you, Lara, and good morning, ladies and gentlemen. With me on the call is Daniel Mayrouz, CFO. Following my opening remarks, Daniel will review our financial results in greater detail. And I will conclude with comments on our outlook. We will then welcome questions.

Speaker 1

The decline in revenue and profitability in the quarter reflect the temporary suspension of drilling projects in Quebec during July due to the forest fires, as well as customer decision to temporarily suspend and reduce Drilling activity on certain other projects in Canada during the Q4 of last fiscal year. All the projects that were impacted by Forest Fire were back at full operation by July 26, and we are gradually resuming operation on projects that were suspended and are reduced due to customers' decision. 2 of these projects have already resumed, one that was restarted in mid August and the other in early September. We expect to restart operation on the others by January 2024. We are pleased to report that we recently renewed a large specialized drilling contract in Canada with a senior gold Mining customer for a 3 years term.

Speaker 1

This will result in the continued operation of 15 to 20 of our surface and underground drill rigs on the customer's project site for the term of the contract. The contract renewal is in line with our strategy to focus on our project with senior and well financed intermediate Gold Mining Customers in Canada. Price for gold and copper remain favorable to support mineral exploration and development spending in our market. Customer demand remains strong in Canada and we are seeing Increase in demand in Chile. I will now turn the call over to Daniel to review our results for the quarter.

Speaker 1

Daniel?

Speaker 2

Thank you, Pierre, and good morning, everyone. Revenue for the quarter totaled $44,300,000 a decrease of 16.8% compared to Q1 a year ago. Canada revenue was $33,000,000 a decline of 23 compared to Q1 last year. Approximately $2,000,000 of the decline is attributable to the suspension of our project in Quebec during the month of July due to forest fires. The remaining year over year Decline was primarily attributable to customer decision to temporarily suspend or reduce drilling activity on certain projects during the Q4 of fiscal 2023.

Speaker 2

International revenue increased by 8.7 percent to $11,300,000 from $10,500,000 in Q1 last year, Reflecting increased drilling activity in Chile and Guyanese, partially offset by a reduction of drilling activity in Guyana and Burkina Faso. The reduction in Burkina Faso is expect as we are now winding down operations there and expect to complete our final drilling contract there by the end of this fiscal quarter. Gross profit for the quarter was $4,100,000 or 9.4 percent of revenue compared to 6,200,000 or 11.7 percent of revenue in Q1 last year. Adjusted gross margin, Excluding depreciation expenses was 15.2% compared to 16.3% last year. The decline in gross profit, gross margin and adjusted gross margin was primarily attributable to our revenue reduction in Canada Due to the project suspension as discussed previously and the additional costs we incurred as we ramp project backup.

Speaker 2

The decline was partially offset by increased drilling revenue in Chile and Guinee. General and administrative expenses were $4,000,000 or 8.9 percent of revenue in the quarter compared to $3,900,000 or 7.3 percent of revenue in Q1 last year. EBITDA was $3,000,000 compared to $5,800,000 in Q1 a year ago. The decrease reflects the reduction of drilling activity in Canada due to forest fire and project suspension as discussed above And the additional costs incurred to ramp project backup and a reduction in foreign exchange gains, partially offset by increased drilling activity in Chile and Guinee. Our net loss for the quarter was dollars 400,000 or $0.01 per share compared to net earnings of 1,100,000 or $0.03 per share in Q1 last year.

Speaker 2

Our net loss in Q1 this year reflect the reduction of drilling activity in Canada To the forest fire and project suspension and the related additional costs incurred to ramp up project backup And the reduction in foreign exchange gain, partially offset by $200,000 income tax recovery in the quarter and increased drilling activity in Chile and Guinee. Now turning to our balance sheet. Earlier this month, on November 2, we entered into a 5th amended and restated Credit agreement with our senior lender, National Bank of Canada in respect of our credit facility. The credit facility consists of a $30,000,000 revolving facility and a US5 $1,000,000 revolving facility guaranteed by Export Development Canada. The credit facility expire now on November 2, 2026.

Speaker 2

We borrow an additional amount of $2,700,000 from the credit facility in Q1 this year compared to a repayment of $7,000,000 in Q1 a year ago. Our long term debt under the credit facility, including the US2 $1,000,000 draw from the ADC facility And the current portion was $24,900,000 at quarter end compared to $22,200,000 as at June 30, 2023, our fiscal year end. At quarter end, our working capital totaled $51,800,000 compared to $50,400,000 as at June 30, 2023. I will now I'll turn the call back to Pierre for closing comments. Pierre?

Speaker 1

Thanks, Daniel. Despite the temporary drilling project suspension And ensuing project ramp ups that impact our results for the quarter, we remain positive on our longer term outlook. As I noted earlier, customer demand, particularly in Canada, remains strong from both senior and intermediate customers, which is our primary focus right now. Demand from juniors remains soft, reflecting the current Difficult environment for juniors accessing capital. We are experiencing growth in our drilling activities in Chile and Gagne, our pending exit from Burkina Faso will allow us to focus more on these markets and customers.

Speaker 1

The underlying fundamentals driving our business are solid. Gold price remains at historically strong levels. Gold producers are generating strong margin at this price, while struggling to replace their reserves. We are confident that continued strong level of exploration and development spending will be maintained In this industry and the foreseeable future, we generate approximately 2 thirds of our revenue from So we have high exposure to this sector. Copper price have also remained at elevated level over the past 12 months, despite rising interest rate and economic uncertainty.

Speaker 1

Copper is needed for the ongoing electrification of the global economy, which is expected to drive strong demand for years to come. A healthy copper market is positive for our Chilean operation. Looking ahead, We remain focused on our 5 point plan, which consists of primarily focusing on Canadian Gold drilling operation, Prioritizing longer term specialized drilling contract with major and intermediate customers, You're suing international contracts that offer attractive return, continued investment in driller training And computerized drilling technology and building a team oriented leadership structure that fosters Collaboration and Personal Accountability. By continuing to execute on this plan, We believe we can drive growth and build value for our shareholders. That concludes our formal

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer There seems to be no questions at this time. I'd now like to turn the call back over to Mr. Alexandre for final closing comments.

Speaker 1

Thank you everyone for participating today. We look forward to speaking with you again next quarter end. Have a good week. Thank you.

Operator

Thank you, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.

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Key Takeaways

  • Revenue declined 16.8% year-over-year to $44.3 M in Q1, with Canadian revenue down 23% due to forest-fire suspensions and customer project cuts.
  • Net loss of $0.4 M (-$0.01/share) in Q1 versus net earnings of $1.1 M ($0.03/share) last year, reflecting reduced drilling activity and ramp-up costs.
  • Renewed a large 3-year specialized drilling contract with a senior gold miner in Canada, securing 15–20 rigs and reinforcing its focus on well-financed customers.
  • International revenue grew 8.7% to $11.3 M, driven by increased drilling activity in Chile and Guinea despite winding down in Burkina Faso and Guyana.
  • Amended credit facility extended to November 2026 with a C$30 M and US$5 M revolver, leading to long-term debt of C$24.9 M at quarter end.
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Earnings Conference Call
Orbit Garant Drilling Q1 2024
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