The majority of revenue and activity is typically generated in the first quarter primarily due to weather factors. The fourth quarter carries some revenue contribution, although the period is typically used for preparation and retooling of equipment to meet specific client requirements of the upcoming Q1-2013 program. The majority of the activity in the quarter took place in Northern Canada in the oil sands region, although costs associated with retooling equipment to meet client specifications for Q1-2013 resulted in the Company recording those costs in Q4.
Oil sands operations accounted for over $7.2 million of the fourth quarter revenue and $31.1 million (approximately 66.0% of revenue generated in the Energy segment) of full year revenue in 2012, generated from three programs conducted on behalf of major operators. Geothermal and geotechnical drilling activity accounted for $1.0 million of revenue during the fourth quarter and $9.0 million (approximately 19.1% of revenue generated in the Energy segment) of year-to-date revenue.
Throughout 2012, the Energy division experienced seasonal swings in activity where it was very active during the first quarter of 2012 working primarily on oil sands projects and also conducted seismic drilling in Northern Canada and the United States. Early in the second quarter, the oil sands projects were completed and the equipment and personnel was demobilized. In the third quarter, the Energy division had once again mobilized rigs into the oil sands but the weather severely restricted activity. As a result, certain crews and equipment were again demobilized to wait for the ground to freeze. In the first quarter of 2013, activity ramped up as is typical for the period and the Company is beginning to realize revenue associated with ongoing work in the oil sands region.
MANUFACTURING DIVISION - DANDO DRILLING INTERNATIONAL
In 2012, the manufacturing division earned revenue of $13.9 million compared to $14.2 million in 2011. For the fourth quarter 2012, revenue decreased to $2.5 million from $4.4 million in the fourth quarter of 2011. The decrease in revenue relates to fewer products delivered at the end of the quarter. Gross margin during the fourth quarter was $0.6 million, down from $0.8 million in the fourth quarter of 2011. Lower gross margin in the fourth quarter of 2012 was due to increased costs combined with a lower margin product sales mix in the period.
Dando has started to benefit from the implementation of a more structured approach to both procurement and assembly operations while still allowing customer requests to be met when called for. In 2012, Dando launched the Multitec 9000, which has a genuine multipurpose application from water well drilling to reverse circulation sampling and wire line coring. Dando will continue to develop this platform as it will offer an extremely compact and very cost effective solution to all sectors of the market.
During the year, Dando manufactured and shipped two 6-tonne drilling rig packages for geotechnical and water well applications to Africa and the Middle East; four 12.8-tonne mineral exploration rigs complete with tooling packages to Ghana and Indonesia; five large 40-tonne water well drilling rig packages to Nigeria; and, two Multitec 9000 rigs to Uganda and Zambia. Significant other bids have also been successful including six large 40-tonne water well drilling rig and tooling packages and two orders for the Multitec 9000 rigs.
After a year of transformative expansion in 2011, 2012 was a transitional year where economic uncertainties such as news of slowing growth in emerging markets and the Eurozone crisis resulted in reduced financing opportunities for many junior and intermediate miners. This negatively impacted the market for drilling services. With one of the strongest balance sheets in the industry, a variable cost structure based on contract revenue, and diversified business lines, Energold is well positioned to weather the current mineral downturn and to achieve organic and external growth across the sector.
With operations in key markets generating positive cash flow coupled with growth in the energy and manufacturing divisions, management is cautiously optimistic for the year ahead. Management will continue to monitor costs and deploying capital to specific areas of growth. In recognition of Energold's achievements, the Company and its CEO won the prestigious 2012 Ernst & Young Entrepreneur of the Year Award in the Metals and Mining category and was cited amongst the "Profit 200 Fastest Growing Companies" and the TSX Venture "Top 50".
Energold Drilling Corp. is a leading global specialty drilling company that services the mining, energy, and manufacturing sectors in 22 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 both metals and energy sectors and has an established drill rig manufacturer, Dando. Energold also holds 6.98 million shares of IMPACT Silver Corp., a profitable silver producer in Mexico.
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.
Energold Drilling Corp.
Chief Financial Officer
Energold Drilling Corp.
Investor Relations Manager
(604) 681-6813 (FAX)
Most Popular Stories
- 15 Myths That Could Ruin Your Hispanic Ad Campaign
- Bitcoin Clones Lurch Onto Financial Scene
- General Motors Names Mary Barra as First Female CEO
- Clinton to Keynote Annual Simmons Leadership Conference
- AIG to Create 230 Jobs in Charlotte
- How Bitcoin and Other Cryptocurrencies Work
- Californians Want to Legalize Marijuana
- Selena Gomez, Shakira Among Top Hispanic Searches
- Pacific Trade Pact Delay Hinders U.S. Pivot to Asia
- PhD Project Grooms Business Profs