Slide 1: Capital Raising & Acquisition
For personal use only CAPITAL RAISING & ACQUISITION 22 August 2014 1 www.mitchellservices.com.au
Slide 2: Disclaimer
DISCLAIMER For personal use only This investor presentation has been prepared by Mitchell Services Limited (“the Company”). Information in this presentation is of a general nature and does not purport to be complete, nor does it contain all of the information which would be required in a prospectus
Slide 3: Executive Summary
EXECUTIVE SUMMARY For personal use only • Mitchell Services Limited (“Mitchell Services”) is acquiring the assets of Tom Browne Drilling Services (“TBDS”) for $9.5m (plus GST). • The acquisition will be funded by a $20.2m capital raising fully underwritten by Morgans Corporate Limited. The capital r
Slide 4: History
HISTORY For personal use only MITCHELL SERVICES HISTORY DRILL TORQUE HISTORY 1969 Mitchell Drilling commenced 1992 operations 2000 Drill Torque Queensland Mitchell Drilling was at founded with a single rig the forefront of the CSG 2007 2008 Well Drilled industry in QLD Mitchell Drilling established
Slide 5: Cyclical Market Presents Opportunity
CYCLICAL MARKET PRESENTS OPPORTUNITY For personal use only Board and management have a strong understanding of the cyclical nature of the industry which drives investment decisions Mitchell Drilling Contractors sells to AJ Lucas for $150m Mitchell Equipment Hire makes Mitchell Group acquires rigs
Slide 6: Mitchell Services Market Profile
MITCHELL SERVICES MARKET PROFILE For personal use only ASX Stock Symbol: MSV Senior Management Team Major Shareholders Shares Issued: 290,000,010 Executive Chairman – Nathan Mitchell 1 Mitchell Group 30% Performance Options: 98,700,000* CEO - Andrew Elf 2 Miller Family 15% Share Price (at 19/8/14):
Slide 7: Mitchell Services Vision
MITCHELL SERVICES VISION For personal use only To be Australia’s leading provider of drilling services to the global exploration, mining and energy industries Find a better way Management Safety Leading Systems Operational Value Team Technology Capability Proposition 7 www.mitchellservices.com.au
Slide 8: Achievements Following Acquisition and Restructure
ACHIEVEMENTS FOLLOWING ACQUISITION AND RESTRUCTURE For personal use only • Won approximately $30m worth of contracts by revenue since acquisition of Mitchell Services including three Tier 1 clients • Rig utilisation increased three fold from four to twelve rigs • Tier 1 rig utilisation is now operat
Slide 9: Business Development
BUSINESS DEVELOPMENT For personal use only Won approximately $30m worth of contracts since the acquisition • Highly focused on lead generation. Received approximately 90 expressions of interest or tenders since non compete expiry • 14 rigs under tender across Tier 1 and other clients and enquiry lev
Slide 10: Business Development (cont.)
BUSINESS DEVELOPMENT (CONT.) For personal use only • Operational excellence is recognised across a wide range of commodities and drilling market sectors Future Business Opportunities • Coal Seam Gas Drilling – Find a better way • In 2008 Mitchell Group was a pioneer and previous industry leader in t
Slide 11: Tom Browne Drilling Services Acquisition
TOM BROWNE DRILLING SERVICES ACQUISITION For personal use only • Receivers appointed to Tom Browne Drilling Services (TBDS) in April 2014 • Opportunity to acquire - - Significant asset base of 29 rigs and ancillary equipment - Best endeavours to assign an 18 month contract with Tier 1 global mining
Slide 12: Why Acquire TBDS Assets
WHY ACQUIRE TBDS ASSETS For personal use only • The current Tier 1 rig fleet is operating at near full • Strengthen market share position and increase utilisation geographical footprint from predominantly Queensland operations • With the strong tender pipeline Mitchell Services has developed since t
Slide 13: Material Increase in Capability Post Acquisition
MATERIAL INCREASE IN CAPABILITY POST ACQUISITION For personal use only Significant Fleet in Eastern Australia Mitchell Services Competitor 1 Competitor 2 Competitor 3 Competitor 4 Tom Browne Mitchell Competitor 5 Competitor 6 Competitor 7 Post Acquisition Pre Acquisition 58 rigs 29 rigs 29 rigs 23 T
Slide 14: Mitchell Services Fleet Capability
MITCHELL SERVICES FLEET CAPABILITY For personal use only CURRENT FLEET FLEET POST ACQUISITION 8 Rigs 23 Rigs 35 Rigs 21 Rigs Tier 1 Other Tier 1 Other • Limited Tier 1 rigs but utilisation of these rigs is running at 87.5% • 100% increase in total rig fleet from 29 to 58 rigs – These rigs have capab
Slide 15: FY14 Highlights
FY14 HIGHLIGHTS For personal use only Unaudited financials as at reporting date 30 June 2014 FY15 Outlook Revenue $15.01m Baseline revenue forecast of circa $24m revenue at break even EBITDA ($2.90m) operating cash flow basis NPAT ($4.60m) Significant upside potential in forecast revenue in future y
Slide 16: Financial Position
FINANCIAL POSITION For personal use only The unaudited pro forma balance sheet set out above has been Mitchell Services Group derived from Mitchell Services unaudited management accounts Balance Sheet consolidated balance sheet as 30 June 2014 and has been prepared As at 30 June 2014 for illustrativ
Slide 17: Use of Funds and Liquidity
USE OF FUNDS AND LIQUIDITY For personal use only • Set out below are the use of funds and available funding for Mitchell Services post the capital raising and assuming shareholder approval of the Conditional Placement. • Mitchell Services will have access to approximately $6.691m in liquid assets wi
Slide 18: Offer Overview
OFFER OVERVIEW The capital raising consists of the following components For personal use only • A placement to institutional and sophisticated investors to raise $1.5m at $0.035 per share (“Placement”) • A 1 for 1 non-renounceable rights issue to existing shareholders to raise $11.7m at $0.035 per s
Slide 19: Offer Overview
OFFER OVERVIEW The capital raising of approx. $20 million will be used as follows For personal use only • Acquisition of the assets of Tom Browne Drilling Services (“TBDS”) - $9.5m • Relocation and integration of TBDS assets acquired - $0.683m • Repayment of related party loan to Mitchell Group - $2
Slide 20: Offer Overview (Continued)
OFFER OVERVIEW (CONTINUED) For personal use only Activity Date Announcement of Placement, Conditional Placement and Entitlement Offer Friday, 22 August 2014 Ex-date for Entitlement Offer Tuesday, 26 August 2014 Placement Settles Wednesday, 27 August 2014 Allotment of Placement shares Thursday, 28 Au
Slide 21: Summary
SUMMARY For personal use only • Major one off expenses incurred to rebuild and position the business to work for Tier 1 clients • Competitive landscape is improving rapidly and barriers to entry for new competitors have increased • Best pricing for assets that Board and Management have seen. TBDS as
Slide 22: Appendix
APPENDIX For personal use only • Appendix 1 – Capital Structure and Performance Options • Appendix 2 – Assets To Be Acquired From TBDS • Appendix 3 – Board and Management • Appendix 4 – Cyclical Market Presents Opportunity • Appendix 5 – Market Sector Summary • Appendix 6 – Industry Acquisitions and
Slide 23: Appendix – Capital Structure & Performance Options
APPENDIX 1 – CAPITAL STRUCTURE & PERFORMANCE OPTIONS For personal use only Current shares on issue 290,000,010 • Performance options were issued to Mitchell Group and its Placement shares (15%) 43,500,001 senior managers as consideration for the options cancelled through the merger with Drill Torque
Slide 24: Appendix – Assets to be Acquired from TBDS
APPENDIX 2 – ASSETS TO BE ACQUIRED FROM TBDS For personal use only 29 Drilling rigs Best endeavours to assign an 18 month contract with Tier 1 global mining company All Business Records including various documents and files Trucks including prime movers and numerous trailers Light vehicles Compresso
Slide 25: Appendix - Board and Management
APPENDIX 3 - BOARD AND MANAGEMENT For personal use only NATHAN MITCHELL – Executive Chairman ANDREW ELF (B.Com, CPA, MBA, GAICD) – Chief Executive Officer During his tenure as CEO for Mitchell Drilling Contractors the company doubled in Mr. Elf has over 15 years finance, commercial and operation exp
Slide 26: Appendix - Cyclical Industry Presents Opportunity
APPENDIX 4 - CYCLICAL INDUSTRY PRESENTS OPPORTUNITY Listed Drilling Company – Share Price Movements (Average is a non weighted average of daily close prices) For personal use only GROWTH DECLINE GROWTH DECLINE -> Boart Longyear Major Drilling Foraco Orbit Garant AusDrill Capital Drilling Layne Chris
Slide 27: Appendix - Market Sector Summary
APPENDIX 5 - MARKET SECTOR SUMMARY For personal use only Types of Drilling MSV Activity: Low -Activity is primarily focused on production Recognised as experts SURFACE DRILLING Competition: High in this market sector and CCO has extensive COAL CAPEX: Comment: Medium to High Competition has increased
Slide 28: Appendix - Industry Acquisitions & Divestments
APPENDIX 6 - INDUSTRY ACQUISITIONS & DIVESTMENTS For personal use only The drilling industry is highly cyclical and industry majors have tended to make acquisitions at all stages throughout the cycle, often paying high multiples on cyclical earnings. This results in acquisitions at high values w
Slide 29: Appendix – Investment Risks
APPENDIX 7 – INVESTMENT RISKS For personal use only Acquisition of TBDS assets Despite having external due diligence completed on the TBDS assets, the asses have been Industrial accidents bought under a receiver sale on an ‘as is, where is’ basis and there is a risk that they do not Industrial accid
Slide 30: Appendix – Investment Risks (Cont.)
APPENDIX 7 – INVESTMENT RISKS (CONT.) Operational risks particular mine on a continual basis over the duration of a service contract’s life. For personal use only The Company and its customers are exposed to a range of operational risks relating to both Early or unforeseeable closure of a mine could
Slide 31: Appendix – Investment Risks (Cont.)
APPENDIX 7 – INVESTMENT RISKS (CONT.) For personal use only Future funding Concentration of shareholding While the Directors believe that the Company will have sufficient funds to fund its activities in the Entities associated with the Mitchell Group are expected to hold no less than 19.99% of the s