MONCTON, NB, Dec. 5 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its second quarter of fiscal year 2007 ended October 31, 2006.
Historical data has been reclassified to reflect the disposition of the Company's manufacturing division, UDR Group, on June 7, 2006, and the discontinuation of its Chinese operations in the first quarter of fiscal 2007.
Highlights
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$ millions 12 months 12 months
(except to to
earnings October October
per Q2-07 Q2-06 YTD-07 YTD-06 31, 2006 31, 2005
share) ----- ----- ------ ------ -------- --------
-------------------------------------------------------------------------
Revenue 101.8 85.8 196.3 169.1 343.7 291.6
-------------------------------------------------------------------------
Gross 33.8 26.5 64.3 51.8 103.0 83.8
profit
As percen-
tage of
sales 33.2% 30.8% 32.8% 30.6% 30.0% 28.7%
-------------------------------------------------------------------------
Earnings
from
continuing
ops 13.0 8.1 23.0 16.1 32.1 22.7
-------------------------------------------------------------------------
Earnings
per share
from
continuing
ops 0.56 0.36 1.00 0.71 1.39 1.02
-------------------------------------------------------------------------
Cash flow
from
continuing
ops(x) 19.8 12.9 35.5 26.7 55.8 40.3
-------------------------------------------------------------------------
(x) before changes in working capital
- The Company recorded the highest quarterly earnings from continuing
operations in its history.
- Major Drilling posted the highest quarterly revenues in its history at
$101.8 million, up 18.6 percent from the $85.8 million recorded for the
same quarter last year.
- Gross margin percentage for the quarter was 33.2 percent, compared to
30.8 percent for the corresponding period last year, with good
performance from all regions.
- Earnings from continuing operations were $13.0 million or $0.56 per
share for the quarter, up 60.5 percent from $8.1 million or $0.36 per
share for the prior year quarter.
- Net earnings for the quarter, after gain from discontinued operations,
were $13.1 million or $0.57 per share, up from $9.3 million or $0.41
per share for the prior year quarter.
- Cash flow from continuing operations before changes in working capital
was $19.8 million for the quarter, up more than 50 percent from the
$12.9 million for the same period last year.
- With the cash level generated, the Company's cash balance is now in
excess of its debt, meaning the Company is debt-free, net of cash.
"Combined strong performance by all of its regions propelled the Company
to record quarterly revenue and profits," said Francis McGuire, President and
CEO of Major Drilling. "With continued improvements in the price environment
and productivity, margins have improved significantly to 33.2 percent, a level
not seen in the last several years. These results were achieved while pressure
on labour and material costs continues. Year-over-year revenue comparisons
continue to be affected by the strengthening of the Canadian dollar against
both U.S. and Australian currencies. The estimated unfavourable FX impact on
revenue compared to the prior year quarter is $4.8 million, although the
estimated impact on net earnings is less than $0.8 million. Excluding our
third quarters, which always face seasonal slowdowns due to the holidays, this
is the tenth consecutive quarter in which the Company has been able to grow
its revenues."
"All regions grew their revenues and margins. Latin American operations
again showed the greatest improvement overall with continued strong demand in
Mexico, Chile and Argentina. North American operations were the best
performers on both revenue and margins due to tightening demand for drilling
services in both Canada and the U.S. In Australasia and Africa, revenues in
Tanzania more than doubled, muting a reduction of revenues in Australia in
Canadian dollars, mostly due to the change in the Australian/Canadian exchange
rate," said Mr. McGuire. "During the quarter, the Company had up to seven rigs
working in the energy sector, mostly in the U.S., where results are improving
significantly."
"Cash flow from continuing operations before changes in working capital in
the quarter continued to strengthen, increasing 53 percent to $19.8 million
compared to the $12.9 million recorded in the prior year quarter," noted Mr.
McGuire. "With this performance, the Company is now debt-free net of cash.
With $36.7 million in cash on hand at the end of the quarter, the Company is
well positioned to execute on its internal growth program and to take
advantage of strategic acquisition opportunities."
"The outlook for Major remains very positive. The prices of nickel,
copper, gold, silver and zinc remain at historically high levels and well
above economical thresholds for exploration, despite recent reductions in the
price of some of these commodities," noted Mr. McGuire. "Because of delays in
deliveries of rigs, transportation bottlenecks and availability of supplies,
ten rigs, which we expected to be working in the second quarter, will not be
in operation until the fourth quarter. The phenomenon is affecting the whole
industry as manufacturers struggle to face the increased demand for rigs and
supplies."
"Recent surges in uranium prices have brought in new clients as demand for
drilling services continues to increase and customers are more often prepared
to pay a premium to secure rigs and crews. The Company will be opening an
office in Saskatoon, Canada to service that area, particularly the uranium
projects," noted Mr. McGuire.
"It is important to note that we are now in our third quarter,
traditionally the weakest quarter of our fiscal year, as mining and
exploration companies shut down operations, often for extended periods, over
the holiday season. Additionally, the Company schedules substantial overhaul
and maintenance work on its equipment during this slower period as it prepares
for the busy fourth quarter. These factors result in reduced revenues,
increased costs, and reduced margins in the quarter," Mr. McGuire observed.
"Typically, the Company posts a loss in the third quarter, before moving into
its fourth quarter, which has historically been its strongest quarter of the
fiscal year."
"As announced on Friday, December 1, we have agreed to purchase the
operations of the Longstaff group which carries on drilling operations in
South Africa, Botswana and Namibia. This acquisition, to be made for
approximately US$12.5 million, will add 55 additional conventional rigs to our
worldwide fleet, as well as provide support equipment, management, employees
and contracts, giving us a presence in, and the ability to expand further
into, the important growth area of southern Africa," said Mr. McGuire.
"Drilling in this operation has generally been conducted on a single shift
basis, which will produce revenues for calendar 2006 of approximately
US$14 million. It is Major's intention to significantly increase the
utilization of these rigs over the next two years as we expand the labor
force. As such we hope to double current revenues over that time frame. We
would like to welcome all the employees of this operation into the Major
group."
Second quarter ended October 31, 2006
Total revenue from continuing operations for the quarter was
$101.8 million, up $16.0 million or 18.6 percent from the $85.8 million
recorded in the same quarter last year.
Revenue for the quarter from Canada-U.S. drilling operations increased by
14.5 percent to $39.4 million compared to $34.4 million for the same period
last year. Improved pricing and increased capacity were responsible for the
growth experienced in both countries, as well as the improvement in results
from energy services in the U.S.
South and Central America had the largest increase in revenue,
year-over-year, with revenues at $29.3 million for the quarter, up 48.7
percent from the $19.7 million posted for the prior year quarter. Revenue
growth was driven primarily by Mexico, Argentina and Chile, which accounted
for 78 percent of the growth over the prior year quarter. The market for
drilling services has improved in Venezuela this quarter and the Company is
gradually increasing activity in that country.
In Australasian/African drilling operations, encompassing Australia,
Mongolia, Indonesia and Tanzania, revenues were $33.2 million, an increase of
4.4 percent over the $31.8 million in the same quarter last year. Tanzanian
revenues grew 115 percent during the quarter. In Australia, revenues in
Australian dollars decreased slightly year-over-year, but were down
7.7 percent in Canadian dollars compared to the prior year quarter due to the
change in the Australian/Canadian exchange rate. Indonesian and Mongolian
revenues were relatively stable year-over-year.
The overall gross margin percentage for the quarter improved to
33.2 percent compared to 30.8 percent for the same period last year. Combined
with the increase in sales volume, gross profit for the quarter increased
$7.3 million or 27.5 percent to $33.8 million from $26.5 million for last
year's second quarter.
General and administrative costs were $7.6 million for the quarter,
compared to $6.7 million in the same period last year. The increase is
primarily due to additions to the management team and to salary increases
across the operation.
Other expenses for the quarter were $2.3 million compared to $2.4 million
last year as an increase in incentive provisions as a result of improved
profitability in this quarter were muted by decreases in one-time expenses.
Foreign exchange loss in the quarter was $0.1 million compared to
$0.4 million in the prior year quarter.
Interest income for the quarter was $0.3 million compared to an expense of
$0.1 million in the prior year quarter, reflecting the Company's favorable
cash position.
Interest expense on long-term debt was down $0.2 million at $0.7 million,
reflecting lower debt levels.
Amortization expense was $5.0 million for the quarter compared to
$4.4 million for the same quarter last year, as a result of the significantly
increased direct investment in equipment.
The provision for income tax was $5.5 million in the quarter compared to
$3.6 million for the prior year quarter, reflecting the increased
profitability of the operations.
Earnings from continuing operations for the quarter were $13.0 million or
$0.56 per share ($0.55 per share diluted) compared to $8.1 million or
$0.36 per share ($0.35 per share diluted) in the prior year period.
Gain from discontinued operations was $0.1 million or $0.01 per share
compared to a gain of $1.2 million or $0.05 per share for the same period last
year. Discontinued operations include the sale of the manufacturing division
and the termination of operations in China. Gain from discontinued operations
in the second quarter of 2007 reflects adjustments to the purchase price from
the sale of the manufacturing division, partially offset by ongoing costs as
the Company closes down its Chinese operations. Gain from discontinued
operations for the second quarter of 2006 represents operating results from
the discontinued operations that have been reclassified from continuing
operations.
Resulting net earnings were $13.1 million or $0.57 per share ($0.56 per
share on a diluted basis) compared to $9.3 million or $0.41 per share ($0.40
diluted) for the same period last year.
On a rolling 12-month basis to October 31, 2006, revenues from continuing
operations increased over 17.9 percent to $343.7 million compared to
$291.6 million for the prior year period. Earnings from continuing operations,
on the same rolling 12-month basis increased by 41.4 percent to $32.1 million
from $22.7 million for the corresponding period last year.
Year to date ended October 31, 2006
Revenues for the six-month period ending October 31, 2006 increased
16.1 percent to $196.3 million from $169.1 million for the corresponding
period last year. More than half of this increase in revenues is related to
Latin America.
Gross margins for the half-year period were 32.8 percent compared to
30.6 percent last year. With the increase in revenues and improving gross
margins, gross profit for the six-month period increased over 24 percent
compared to the prior year period.
General and administrative expenses increased to $14.9 million compared to
$13.6 million for the same period last year. The increase largely relates to
salaries as the Company added additional management and administrative staff
to face increased activity.
Other expenses were $5.1 million for the six-month period compared to $4.4
million for the same period last year reflecting, in part, increased incentive
provisions as a result of improved profitability in the current year,
partially offset by decreases in bad debt expense and one-time expenses.
Foreign exchange loss was $0.4 million for the six-month period compared
to $0.6 million in the prior year.
Interest on short-term debt was nil for the half-year period compared to
an expense of $0.5 million in the prior year, reflecting the Company's
favorable cash position.
Interest expense on long-term debt was down $0.3 million at $1.2 million,
reflecting lower debt levels.
Amortization expense increased to $9.4 million for the half-year period,
compared to $8.5 million for the same period last year, as a result of
increased investment in equipment.
The provision for income tax for the six-month period was $10.3 million
compared to $6.7 million for the prior year period reflecting the increase in
pre-tax earnings in the half-year and the fact that the Company has fully
utilized previously non-tax effected losses from Canadian operations.
Earnings from continuing operations for the six-month period were
$23.0 million or $1.00 per share ($0.98 per share diluted) compared to
$16.1 million or $0.71 per share ($0.70 per share diluted) for the same period
last year.
Gain from discontinued operations was $13.0 million or $0.56 per share
compared to a gain of $1.5 million or $0.07 per share for the same period last
year. Discontinued operations include the sale of the manufacturing division
and the termination of operations in China.
Resulting net earnings were $36.0 million or $1.56 per share ($1.53 per
share on a diluted basis) compared to $17.6 million or $0.78 per share ($0.76
diluted) for the same period last year.
Some of the statements contained in this press release may be
forward-looking statements, such as estimates and statements that describe or
are with respect to the future price of minerals and metals, the Company's
future plans, objectives or goals, including words to the effect that the
Company or management expects a stated condition to exist or occur. Since
forward-looking statements address future events and conditions, by their very
nature, they involve inherent risks and uncertainties. Actual results in each
case could differ materially from those currently anticipated in such
statements by reason of factors such as, but not limited to, the factors set
out in the discussion starting on pages 20 to 23 of the 2006 Annual Report
entitled "General Risks and Uncertainties", as augmented by the section
entitled "General Risks and Uncertainties" in the discussion starting on pages
6, 7 and 8 of the Company's second quarter MD&A, each as filed with the
Canadian Securities Commission (available on SEDAR at www.sedar.com). All such
factors should be considered carefully when making decisions with respect to
the Company. The Company does not undertake to update any forward-looking
statements, including those statements that are incorporated by reference
herein, whether written or oral, that may be made from time to time by or on
its behalf, except in accordance with applicable securities laws.
Based in Moncton, New Brunswick, Major Drilling Group International Inc.
is one of the world's largest metals and minerals contract drilling service
companies. To support its customers' mining operations and mineral exploration
activities, Major Drilling maintains operations in Canada, the United States,
Mexico, South and Central America, and in Australia, Indonesia, southern
Africa and Mongolia.
Financial statements are attached.
Major Drilling will provide a simultaneous webcast of its quarterly
conference call on Tuesday, December 5, 2006 at 9:00 AM (EDT). To access the
webcast please go to the Major Drilling website at www.majordrilling.com and
click the attached link, or go directly to the CNW Group website at
www.newswire.ca for directions. Participants will require Windows MediaPlayer,
which can be downloaded prior to accessing the call. Please note that this is
listen only mode.
Major Drilling Group International Inc.
Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share information)
(unaudited)
Six months ended Three months ended
October 31 October 31
2006 2005 2006 2005
---------- ---------- ---------- ----------
(restated (restated
- note 3) - note 3)
TOTAL REVENUE $ 196,296 $ 169,073 $ 101,845 $ 85,763
DIRECT COSTS 131,968 117,318 68,021 59,313
---------- ---------- ---------- ----------
GROSS PROFIT 64,328 51,755 33,824 26,450
---------- ---------- ---------- ----------
32.8% 30.6% 33.2% 30.8%
OPERATING EXPENSES
General and
administrative 14,860 13,565 7,629 6,718
Other expenses 5,120 4,367 2,287 2,378
Foreign exchange
loss 413 565 89 367
Interest expense
(revenue) (46) 471 (302) 56
Interest expense
on long-term debt 1,247 1,499 653 859
Amortization 9,375 8,459 4,982 4,408
---------- ---------- ---------- ----------
30,969 28,926 15,338 14,786
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME
TAX AND DISCONTINUED
OPERATIONS 33,359 22,829 18,486 11,664
---------- ---------- ---------- ----------
INCOME TAX - PROVISION
Current 8,050 5,547 4,071 3,555
Future 2,300 1,142 1,456 55
---------- ---------- ---------- ----------
10,350 6,689 5,527 3,610
---------- ---------- ---------- ----------
EARNINGS FROM CONTINUING
OPERATIONS 23,009 16,140 12,959 8,054
GAIN FROM DISCONTINUED
OPERATIONS (note 3) 12,983 1,498 150 1,233
---------- ---------- ---------- ----------
NET EARNINGS $ 35,992 $ 17,638 $ 13,109 $ 9,287
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE FROM
-----------------------
CONTINUING OPERATIONS
---------------------
Basic (x) $ 1.00 $ 0.71 $ 0.56 $ 0.36
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted (xx) $ 0.98 $ 0.70 $ 0.55 $ 0.35
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE
------------------
Basic (x) $ 1.56 $ 0.78 $ 0.57 $ 0.41
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted (xx) $ 1.53 $ 0.76 $ 0.56 $ 0.40
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(x) Based on 23,083,444 and 22,637,892 daily weighted average shares
outstanding for the fiscal year to date 2007 and 2006, respectively,
and on 23,102,258 and 22,686,103 daily weighted average shares for
the quarter ended October 31, 2006 and 2005, respectively. The
total number of shares outstanding on October 31, 2006 was
23,103,191.
(xx) Based on 23,578,124 and 23,150,785 daily weighted average shares
outstanding for the fiscal year to date 2007 and 2006, respectively,
and on 23,569,533 and 23,255,084 daily weighted average shares for
the quarter ended October 31, 2006 and 2005, respectively.
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED OCTOBER 31, 2006 AND 2005
(in thousands of Canadian dollars)
1. BASIS OF PRESENTATION
---------------------
These interim financial statements were prepared using accounting policies
and methods consistent with those used in the preparation of the Company's
audited financial statements for the year ended April 30, 2006. These interim
financial statements conform in all respects to the requirements of Canadian
generally accepted accounting principles for annual financial statements, with
the exception of certain note disclosures. As a result, these interim
financial statements should be read in conjunction with the Company's audited
financial statements and notes for the year ended April 30, 2006 contained in
the Company's 2006 annual report.
2. SEASONALITY OF OPERATIONS
-------------------------
The geographic distribution of our growth is having an impact on our
historical seasonal patterns. With the exception of the third quarter, the
Company exhibits comparatively less seasonality in quarterly revenues than in
the past since a relatively higher proportion of revenues is coming from
regions with more temperate or tropical climates that are not impacted by
winter weather conditions, and strong cyclical growth tends to mute normal
seasonal patterns. Historically, the Company's operations tended to exhibit a
seasonal pattern whereby its fourth quarter (February to April) was its
strongest. The third quarter (November to January) is normally the Company's
weakest quarter due to the shutdown of mining and exploration activities for
extended periods over the holiday season, particularly in South and Central
America.
3. DISCONTINUED OPERATIONS
-----------------------
On June 7, 2006, the Company sold its manufacturing subsidiary ("UDR") for
A$46.8 million (C$39.2 million). The consideration for the sale was
A$43.3 million (C$36.2 million) cash and a holdback due in 18 months in the
amount of A$3.5 million (C$3.0 million). The net gain before income taxes is
C$22.3 million being the proceeds of C$39.2 million less the book value of the
assets of C$13.3 million and expenses relating to the sale of C$3.6 million.
UDR previously constituted the Company's entire manufacturing segment. The
Company made the strategic decision to focus its corporate resources on the
mineral drilling business, where it competes as one of the world's largest
contract drillers.
The gain from discontinued operations of UDR is summarized as follows:
2007 YTD 2006 YTD 2007 Q2 2006 Q2
---------- ---------- ---------- ----------
Revenue $ 4,291 $ 16,483 $ 0 $ 7,172
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) before
income tax 280 2,237 (10) 931
Gain from disposal
of discontinued
operations before
income tax 22,262 - 585 -
Income tax (expense)
recovery (6,574) (461) (176) 519
---------- ---------- ---------- ----------
Gain from discontinued
operations $ 15,968 $ 1,776 $ 399 $ 1,450
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The Company made the strategic decision to close its operations in China
in July, 2006. The Company opened a branch in China with the goal of quickly
developing a large pool of Chinese drillers. Having shown little progress to
date in building a local driller pool in China, the Company decided to close
the operation. Chinese operations were previously reported within the
Australasian and African segment.
The loss from discontinued operations of the branch in China is summarized
as follows:
2007 YTD 2006 YTD 2007 Q2 2006 Q2
---------- ---------- ---------- ----------
Revenue $ 820 $ 611 $ 333 $ 611
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Loss (2,204) (278) (249) (217)
Loss on disposition
including write-down
of assets (781) - - -
---------- ---------- ---------- ----------
Loss from discontinued
operations $ (2,985) $ (278) $ (249) $ (217)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The assets and liabilities of discontinued operations of UDR and China are
summarized as follows:
October April
UDR China 2006 UDR China 2006
------- ------- ------- ------- ------- --------
Current Assets
Accounts
receivable $ - $ - $ - $ 6,048 $ 1,167 $ 7,215
Inventories - - - 13,587 - 13,587
Other assets - - - 113 8 121
------- ------- ------- ------- ------- --------
- - - 19,748 1,175 20,923
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
Long-Term Assets
Receivable 3,017 - 3,017 - - -
Capital assets - 384 384 1,167 731 1,898
------- ------- ------- ------- ------- --------
3,017 384 3,401 1,167 731 1,898
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
Current Liabilities
Accounts payable $ 3,667 $ 53 $ 3,720 $ 9,162 $ 329 $ 9,491
Income tax
payable 4,473 11 4,484 406 11 417
------- ------- ------- ------- ------- --------
8,140 64 8,204 9,568 340 9,908
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
Long-Term
Liabilities - - - 18 - 18
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
Non-Controlling
Interest - - - 434 - 434
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
The comparative figures have been restated to reflect the discontinuation
of these components.
4. COMMITMENTS
-----------
The Company, as part of the sale of its manufacturing division, UDR,
entered into a Strategic Cooperation and Supply Agreement with Sandvik AB.
Pursuant to this Agreement and subject to certain carry-over rights, the
Company is required to make minimum purchases from Sandvik of certain products
and services totalling at least A$10.5 million during the first year of the
Agreement, A$9.2 million during the second year, and A$7.9 million during the
third year. The third year commitment will be increased by A$1.0 million
should certain products be available. Additionally, the minimum purchase
amounts are subject to downward adjustments if certain products are not
available, and/or if there are significant decreases in annual worldwide
exploration expenditures.
The Company also has various commitments, primarily for rental of
premises, with arms-length parties as follows: 2007 - $718, 2008 - $697, 2009
- $424, 2010 - $300, 2011 - $295, thereafter - $308.
5. SEGMENTED INFORMATION
---------------------
2007 YTD 2006 YTD 2007 Q2 2006 Q2
---------- ---------- ---------- ----------
(restated (restated
- note 3) - note 3)
Revenue
Canada - U.S. $ 73,889 $ 67,196 $ 39,371 $ 34,351
South and Central
America 56,628 39,906 29,302 19,652
Australasia and Africa 65,779 61,971 33,172 31,760
---------- ---------- ---------- ----------
$ 196,296 $ 169,073 $ 101,845 $ 85,763
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings from continuing
operations
Canada - U.S. $ 16,029 $ 13,187 $ 9,331 $ 7,223
South and Central
America 12,650 4,810 6,747 1,934
Australasia and Africa 13,387 11,748 6,310 6,104
---------- ---------- ---------- ----------
42,066 29,745 22,388 15,261
Eliminations (589) (195) (299) (212)
---------- ---------- ---------- ----------
41,477 29,550 22,089 15,049
Interest expense, net 1,201 1,970 351 915
General corporate expenses 6,917 4,751 3,252 2,470
Income taxes 10,350 6,689 5,527 3,610
---------- ---------- ---------- ----------
Earnings from continuing
operations 23,009 16,140 12,959 8,054
Gain from discontinued
operations 12,983 1,498 150 1,233
---------- ---------- ---------- ----------
Net earnings $ 35,992 $ 17,638 $ 13,109 $ 9,287
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
6. SUBSEQUENT EVENTS
-----------------
On December 1, 2006, the Company entered into an agreement to purchase the assets of the Longstaff group's drilling operations in southern Africa. These include the operations of Raldril (Pty) Limited in South Africa, RA Longstaff (Botswana) (Pty) Ltd in Botswana, and R.A. Longstaff Namibia (Pty) Limited in Namibia.
These businesses operate in regions where Major Drilling does not currently have a presence. Through this purchase Major Drilling will acquire 55 conventional drill rigs, together with related support equipment, inventory, and contracts. It is anticipated that these assets will give Major Drilling the immediate physical capacity to expand further throughout other parts of southern Africa, considered to be an area of continuing growth in the industry.
In addition to purchasing the drilling assets, Major Drilling is retaining the operations management teams, as well as the other employees, including a large number of experienced drillers. Revenues for calendar 2006 are expected to be approximately US$14 million.
The purchase price for the transaction is US$12.5 million, subject to customary working capital post closing adjustments.
The transaction is expected to close in December 2006.