Geodrill TSE: GEO reported record quarterly revenue for the second quarter of 2026, but profitability declined sharply as labor costs, inflation and operating challenges in Chile weighed on margins.
Revenue for the quarter ended June 30 rose 10% from a year earlier to $55.1 million, the highest quarterly figure in the company’s history. President and CEO Dave Harper said the performance reflected an improved contract book, higher equipment utilization and robust demand for drilling services across the company’s markets.
“The second quarter was a tale of two outcomes,” Harper said. “We delivered record revenue and continued to see strong demand across our markets. However, this did not translate into the levels of profitability that we expect from the business.”
Margins Fall Despite Record Revenue
Gross profit totaled $8.8 million, producing a gross margin of 16%, down from 24% in the second quarter of 2025. EBITDA was $7.9 million, or a 14% margin, compared with a 28% margin in the prior-year period.
The company posted a net loss of approximately $200,000, or effectively nil per share, compared with net income of $5.4 million in the same quarter last year.
Management attributed the margin compression to higher labor and operating expenses, inflation in consumables and other inputs, appreciation of the Ghanaian cedi, and operating losses in Chile. Harper said Chile delivered the weakest revenue growth among the company’s regions during the quarter and that startup challenges there contributed to its negative performance.
Geodrill said activity remained strong in West Africa and the Middle East, supported by operating programs and its fleet of 104 rigs. The company also said activity improved in Brazil, though margins in that market remained stagnant.
Chile Review Focuses on Contract Profitability
During the question-and-answer session, CFO Greg Borsk said Geodrill is reviewing its Chilean business on a client-by-client basis rather than considering a broad withdrawal from the country.
Borsk said the company is assessing contracts based on profitability and drilling productivity. Because the company is paid by the meter drilled, lower-than-expected productivity has undermined returns on some contracts despite pricing that Borsk said was not the main issue.
“For some of these clients, for some of these contracts in Chile, that hasn’t come to fruition,” Borsk said, referring to anticipated productivity levels. “What we’re doing in Chile is client by client. We’re assessing each client and where it makes sense to wind up the contract, finish drilling, et cetera. Maybe we don’t retender.”
He said the process could take several quarters. The company intends to address unprofitable accounts as quickly as possible while seeking to improve returns from profitable customers. Borsk added that Geodrill has some “very good accounts” in Chile that are expected to continue at least into 2027.
Outside Chile, Borsk said the company was profitable in its primary West African markets of Ghana and Cote d’Ivoire, as well as Senegal and Egypt, its current operating market in the Middle East and North Africa region.
Demand Outlook Remains Constructive
Management said the broader drilling-market outlook remains favorable, citing strong gold prices, long-term copper fundamentals and mining companies’ continued focus on reserve replacement, resource expansion and development projects.
Borsk said exploration budgets remain healthy and bidding activity is active across West Africa and Egypt. The company is seeing customers commit to multi-rig, multi-year drilling programs, providing support for future demand and utilization.
At the same time, management acknowledged that the industry has been working through contracts priced before the recent rise in labor, fuel, consumables, spare parts and mobilization costs. As existing contracts are renewed or new work is secured, Geodrill expects opportunities to incorporate terms and pricing more closely aligned with the current cost environment.
“The opportunity in front of us is not finding work,” Harper said. “The opportunity is executing efficiently, improving margins, and converting record activity levels into stronger returns for our shareholders.”
Balance Sheet and Cote d’Ivoire Tax Matter
Geodrill ended the quarter with approximately $118 million in shareholders’ equity. The company said it will retain cash to support operations rather than pursue share repurchases or dividend payments at this time, though it plans to review those capital-return options quarterly.
The company also provided an update on its arrangement with Cote d’Ivoire tax authorities. Geodrill previously entered into a memorandum of understanding to repay disputed amounts despite stating that it has tax receipts for the missing payments. The company said it requested a reduction in monthly installments to about $450,000 from approximately $900,000 and made $450,000 payments in May, June, July and August.
Through June, Geodrill had repaid approximately $4.5 million of the scheduled $8.4 million repayment, according to management. The company said it continues to pursue available legal remedies but did not provide further comment on the matter.
About Geodrill (TSE:GEO)
Geodrill Ltd is an exploration drilling company. It mainly operates a fleet of multi-purpose, core, air-core, and grade control drill rigs. The company provides reverse circulation, diamond core, air-core, grade control, geo-tech, and water bore drilling services to major, intermediate, and junior mining companies.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider Geodrill, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Geodrill wasn't on the list.
While Geodrill currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
With the proliferation of data centers and electric vehicles, the electric grid will only get more strained. Download this report to learn how energy stocks can play a role in your portfolio as the global demand for energy continues to grow.
Get This Free Report
