Eurasia Drilling Co. Soars to New Heights
Eurasia Drilling Company Limited ("EDC") is the largest independent provider of onshore drilling services in Russia, providing onshore integrated well construction services and work over services to local and international oil and gas companies primarily in Russia and offshore drilling services to Russian and international oil and gas companies in the Russian, Kazakh and Turkmen sectors of the Caspian Sea.
EDC successfully completed their Initial Public Offering in November 2007 raising 3mm, of which 4mm (including mm from exercise of Greenshoe) was in the form of new shares issued.
Some financial highlights include a top line revenue growth of 37.2% to 492mm, an EBITDA increase of 77.8% to 5mm, an EBITDA margin increase from 15.3% in 2006 to 19.8% in 2007, an operating profit increase of 72.5% to 5mm and an earnings per share increase from .76 in 2006 to .31 in 2007.
Operational highlights include meters drilled increase of 31% to 3.3 mm meters, an increased total number of crews to 263, an increased total number of drilling rigs to 195 at the end of 2007, a secured future rig capacity via assembly and fabrication plant in Kaliningrad, a further diversified customer base with non-LUK OIL business increasing from 18% in 2006 to 24% in 2007 and efficiency gains, including EDC drilling its first million meters in 125 days.
Mr Alexander Djaparidze, Chief Executive Officer of Eurasia Drilling Company, commented, "EDC has increased its overall onshore drilling market share in Russia from 20.3% in 2006 to 22.4%in 2007 and expects 2008 to be an equally positive year. The combination of strong expected demand from E&P producers together with EDC's leading market position should allow for significant further growth and expansion in2008 and beyond."
Revenues increased by US $5 million, or 37.2%, to US $492 million for 2007 from US $88 million in 2006. The key component driving revenue growth was increased demand with EDC having drilled 3,268,564 meters in 2007 compared to 2,495,405 meters in 2006.
CEO Alexander Djaparidze commented that "2007 was an excellent year in terms of building dramatically on our existing platform, and delivering the results promised during our IPO. This increased demand was met by adding drilling crews, improving the productivity of our existing drilling crews and utilizing a greater number of drilling rigs". The number of drilling rigs increased from 178 in 2006 to 195 in 2007.
Cost of services increased by US 3mm, or 30.1%, to US 050mm for 2007. The cost of services for 2007 was primarily affected by a substantial increase in raw material expenses as well as increased labour costs. However, cost of services as a percentage of total revenue decreased from 74.2% for 2006 to 70.4% for 2007. In addition to an increase in revenue, the margin improvement was primarily attributable to a concerted effort by management to minimize cost inflation and improve the cost efficiency associated with the overall drilling process.
EDC's business is capital intensive and expenditures are primarily required to purchase new drilling rigs and equipment, upgrade and modernize the existing drilling rigs and equipment and sustain existing equipment and in 2007 total capital expenditures was 3 million. In response to an extremely tight rig supply market EDC has, together with Le Tourneau, commenced production at its assembly and fabrication plant in Kaliningrad.CFO Ron Harris commented "The facility is expected to provide for all of EDC's internal rig requirements from 2010 onwards. The first rig is due for delivery in Q4 2008 and will be purpose built to EDC's specifications and drilling requirements utilising the manufacturing expertise of Le Tourneau's engineers and supervisors and EDC's long standing experience in deploying rigs tailor made to Russian conditions."