METS

Drilling contractor sees weakness in Australia

TORONTO-listed Major Drilling Group International says it may pull out of Australia due to market...

Kristie Batten

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While reporting its quarterly results, Major CEO Francis McGuire said the company had seen no improvement in Australia since the start of the year.

“The utilisation rates for surface rigs are extremely low,” he said.

“Price competition has been especially intense in eastern Australia where our operations are concentrated.

“We are currently considering all restructuring options for this branch, including the possibility of withdrawing from this market.”

The company also blamed high costs for the cancellation of many Australian projects.

Major’s Australian, Asian and African operations posted revenue of $US20.8 million ($A23.2 million), down 41%, while overall group revenue was $71.8 million, down 42% on the previous corresponding period.

The company posted a $12.8 million loss overall, with the Australian, Asian and African division posting a net loss of $1.9 million.

McGuire said there were many projects for which decisions had not been made regarding start dates, with some delayed due to weather.

“This has resulted in reduced activity in February,” he said.

“With lower utilisation rates and a slow start in activity levels, we are also seeing pricing pressures throughout the industry.

“On the other hand, in many regions we are seeing encouraging signs of increased inquiries, especially from gold customers, which – if they result in successful bids – would generate higher activity levels in the second half of this calendar year.

“Long-term, the fundamental drivers of our business remain positive, with worldwide supply for most metals expected to tighten.

“We believe that in the medium term, most commodities could face an imbalance between supply and demand and that the need to develop resources in areas that are increasingly difficult to access will increase, which should increase demand for specialised drilling.”

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