Boart Longyear posts record $2B in sales; forecasts 14% growth this year

Boart Longyear,  the world's largest mineral exploration drilling company, had a record year in 2011 and expects more of the same in 2012 as the mining industry majors continue to demand drill rigs to meet their exploration capital expenditure budgets.

In announcing its full-year numbers, the ASX-listed company (ASX:BLY) with seven manufacturing plants worldwide said its revenues increased 37% to $2 billion in 2011. Earnings per share were up 89% over last year to 35 cents US, while sales of its drilling equipment doubled, indicating "ongoing optimism for a robust drilling market," Boart Longyear stated.

CEO Craig Kipp credited a better pricing environment and higher rig capacity utilization, which averaged 75% throughout 2011, for the robust results:

"When we started 2011 we said this is the year to just put points on the board. We were not going to do anything exotic, any acquisitions, something fancy with our capital structure, we were just going to perform. And that’s what we did in 2011 was basically getting out there, getting rigs to work, getting the factories ramped up to ship product. It was just really a good year's performance for us,” Kipp told on the sidelines of the PDAC conference in Toronto last week.

Kipp said demand for Boart Longyear's drilling services last year was mostly focused in  Latin America and Africa, which reflects the strength in the demand for gold and copper produced in those regions. That is likely continue, he indicated, with Boart Longyear's drill rig capacity currently tapped out in West Africa and Chile, along with Australia, he said.

Kipp said the company is starting to realize the fruits of an aggressive program over the last few years to combine factories and streamline operations, with the goal of expanding  capacity; 25 factories were pared down to seven and the company now has a manufacturing presence on every continent including a facility in China.

“There really isn’t a weak market right now. Everywhere you go it’s strong. Australia is strong, Canada is strong, the US is strong. It’s a very good environment for us."

Kipp indicated the company has navigated successfully out of the financial crisis of 2008. He said Boart Longyear lost about half its revenue in 2009 when most of the junior exploration companies disappeared and the majors, which represent 80% of its revenue, pulled back substantially on their exploration programs. But the doldrums didn't last long, and by the end of that year, a comeback was underway, with juniors beginning to get funding again, along with a steadily improving pricing environment and an uptick in drilling activity.

Boart Longyear is positioned for a 14% growth spurt this year and according to Kipp, it will be "more of the same," meaning a  focus on gold and copper, which represent the lion's share (55-60%) of the company's drilling activities. Boart Longyear also has a plan to expand its Mine Water Services division through what the company says is a leading process:

“Boart Longyear utilizes a unique process which is capable of drilling large diameter holes in the most difficult ground conditions in a single-pass,” said Dale Johnson, Global Director of Drilling Services Operations for Boart Longyear. “Drilling a large diameter borehole in a single-pass versus multiple passes, which can degrade the bore-hole, improves the likelihood of drilling a straight borehole to target depth successfully.  Our unique method of drilling and completing wells provides better overall well efficiency and production – ultimately saving our clients downtime and money over the life of a well.”

The process is used in both dewatering operations and for drilling water wells.