Slide 1: Acquisition & Capital Raising
For personal use only ACQUISITION & CAPITAL RAISING 9 June 2015 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 • Mitchell Services Limited (“Mitchell Services”) has entered into an agreement to acquire the assets of Nitro Drilling (“Nitro”) for $16.125m (plus GST) For personal use only • The acquisition will be funded by a secured corporate lending facility of $8.5m and an underwritten righ
Slide 4: 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 MSV acquires Tom Browne Drilling Services assets Mitchell E
Slide 5: History
HISTORY For personal use only MITCHELL SERVICES HISTORY DRILL TORQUE HISTORY 1969 Mitchell Drilling commenced operations 1992 2000 Drill Torque Queensland Mitchell Drilling was at founded with a single rig the forefront of the CSG 2007 2008 industry in QLD Well Drilled established Mitchell Drilling
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: 867,000,222 Executive Chairman – Nathan Mitchell 1 Mitchell Group 19.98% Performance Options: 98,700,000 Chief Executive Officer – Andrew Elf 2 Acorn Capital 9.89% Sh
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 Be Sure. Be Safe Our people are your success Management Safety Leading Systems Operational Value Find a better way Team Technology Capability
Slide 8: Business Progression
BUSINESS PROGRESSION For personal use only Phase 1: Post Drill Torque merger Nov 2013 – 30 Jun 2014 Phase 2 : Financial Year Targets 2015 Business Ready Ramp Up • Implement initiatives to improve safety culture and performance • ISO certification and implementation of electronic safety, training and
Slide 9: Revenue by Client Type
REVENUE BY CLIENT TYPE For personal use only Tier 1* Operating Income Target $24m Other Operating Income Non-Operating Income VALUE OF TIER 1 • Multinational mining and energy companies Actual $15m • Very high safety and business system requirements • Generally brownfield work for existing mining op
Slide 10: Rig Utilisation
RIG UTILISATION For personal use only Rig Count Acquisition of TBDS 60 50 40 30 20 12 13 15 11 11 10 6 9 13 18 19 20 10 of of of of of of of of of of of of 29 29 29 29 52 52 52 52 52 52 51 50 0 July August September October November December January February March April May June* • Increase post Chr
Slide 11: Business Development
BUSINESS DEVELOPMENT For personal use only Tender pipeline value in excess of $275m Dominant market position in: Queensland Minerals Queensland Coal Strengthening market position in: New South Wales Minerals New South Wales Coal Tender Pipeline continues to grow and historical conversion rat
Slide 12: 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 • Mitchell has identified one large opportunity in this market sector an
Slide 13: Competitive Profile of Market Has Improved
COMPETITIVE PROFILE OF MARKET HAS IMPROVED For personal use only Numerous competitors have exited the market • Major Drilling • Tec Drill • Nitro Drilling • AJ Hickey Contractors • Pinnacle Drilling • Geo Tech Drilling • Macquarie Drilling • WDS • After a period of market consolidation Nitro possibl
Slide 14: Nitro Acquisition
NITRO ACQUISITION For personal use only • Receivers appointed to Nitro Drilling (Nitro) in March 2015 • Opportunity to acquire - - Significant asset base of 25 rigs (20 Tier 1), 3 grouting units and material ancillary equipment and inventory. • Attractive pricing - - Acquiring from receivers for A$1
Slide 15: Why Acquire Nitro Assets
WHY ACQUIRE NITRO ASSETS For personal use only • The current Tier 1 rig fleet is operating at near full • Mitchell Services can utilise Nitro assets for Tier 1 utilization (87.5%) opportunities and generate a superior return versus buying new equipment • With the strong tender pipeline the Nitro acq
Slide 16: Mitchell Services Fleet Capability
MITCHELL SERVICES FLEET CAPABILITY For personal use only CURRENT FLEET FLEET POST ACQUISITION 3 23 Rigs 34 Rigs 43 Rigs 29 Rigs Tier 1 Other Tier 1 Other Grouting • Tier 1 rig utilisation is running at 87.5% • Just under a 100% increase in Tier 1 rigs from 23 to 43 rigs • Increase in total fleet fro
Slide 17: Revenue Highlights
REVENUE HIGHLIGHTS For personal use only FY14 FY15 VARIANCE 10 Months revenue to April $10.64m $18.58m 74.6% Full year revenue $15.01m $24.00m* 59.9% Revenue by Month ($m) Cumulative Revenue by Month ($m) 20.00 4.00 3.50 16.00 3.00 2.50 12.00 2.00 8.00 1.50 1.00 4.00 0.50 - - FY14 FY15 FY14 FY15
Slide 18: 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. • Table 1 is an estimate of the actual cash position post acquisition, post capital raising and inclusive of material post capital raising event
Slide 19: Financial Position
FINANCIAL POSITION For personal use only Mitchell Services Group Balance Sheet As at 30 April 2015 Management Accounts Pro Forma Pro Forma Adjusted Post Balance Balance Sheet Capital Raise Balance Sheet Pro Forma Sheet Event 30 April 2015 Post Raise Balance Sheet The unaudited pro forma balance shee
Slide 20: Equity Offer Overview
EQUITY OFFER OVERVIEW The capital raising consists of the following components For personal use only • A 4 for 7 non-renounceable rights issue to existing shareholders to raise $8.67m at $0.0175 per share (“Entitlement Offer”) THE OFFER • Top-Up Offer to existing shareholders to subscribe for shares
Slide 21: Equity Offer Overview (Continued)
EQUITY OFFER OVERVIEW (CONTINUED) For personal use only Activity Date Announcement of Entitlement Offer Tuesday, 9 June 2015 Ex-date for Entitlement Offer Thursday, 11 June 2015 INDICATIVE Record date Monday, 15 June 2015 TIMETABLE Entitlement Offer opens Tuesday, 16 June 2015 (subject to change) En
Slide 22: Debt Financing Overview
DEBT FINANCING OVERVIEW • Major shareholders, Mitchell Group and Washington H. Soul Pattinson & Company Limited (WHSP) will provide a secured corporate lending facility of $8.5 million For personal use only • Proportions: Mitchell Group - $3.5 million, WHSP - $5 million • 5 year term • 10% interest
Slide 23: Summary
SUMMARY For personal use only • Competitive landscape is improving rapidly and barriers to entry for new competitors have continued to increase • Best pricing for assets that Board and Management have seen. Nitro assets to be acquired at $16.125m versus a replacement value of circa $84m (excluding i
Slide 24: Appendix
APPENDIX For personal use only • Appendix 1 – Capital Structure and Performance Options • Appendix 2 – Assets To Be Acquired From Nitro • Appendix 3 – Board and Management • Appendix 4 – Where are we in the cycle? • Appendix 5 – Types of Drilling • Appendix 6 – Investment Risks 24 www.mitchellservic
Slide 25: Appendix – Capital Structure & Performance Options
APPENDIX 1 – CAPITAL STRUCTURE & PERFORMANCE OPTIONS For personal use only Current shares on issue 867,000,222 • Performance options were issued to Mitchell Group and its senior managers as consideration for the options cancelled Rights issue ratio 4 for 7 through the merger with Drill Torque Rights
Slide 26: Appendix – Assets to Be Acquired from Nitro
APPENDIX 2 – ASSETS TO BE ACQUIRED FROM NITRO For personal use only Asset Description / Type Approximate Number Note Rigs 25 20 Tier 1 and all mounted on Mercedes 8x8 trucks Grouting Units 3 Truck mounted Support Truck 26 Mercedes 8x8 trucks Tilt Tray 4 Mercedes 8x8 trucks Prime Mover 4 Trailers 30
Slide 27: 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 28: Appendix - Where Are We in the Cycle?
APPENDIX 4 - WHERE ARE WE IN THE CYCLE? 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 Christiansen Geo
Slide 29: Appendix – Types of Drilling
APPENDIX 5 – TYPES OF DRILLING 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 mar
Slide 30: Appendix – Investment Risks
APPENDIX 6 – INVESTMENT RISKS For personal use only Acquisition of Nitro assets projects, substantial claims may be brought against the Company. Any such claim could result in Despite having external due diligence completed on the Nitro assets, the assets have been substantial liability for the Comp
Slide 31: Appendix – Investment Risks (cont.)
APPENDIX 6 – 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 32: Appendix – Investment Risks (cont.)
APPENDIX 6 – 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 20% of the issued shares in