SALT LAKE CITY – February 24, 2015 – Boart Longyear® (www.BoartLongyear.com) enters its 125th anniversary year expecting to be better-positioned for success and improved financial performance when market conditions improve, even though challenging conditions in the mining markets continue to put pressure on its industry as reflected in the Company’s 2014 financial performance.
In particular, Boart Longyear’s recently completed recapitalization, led by its largest investor, Centerbridge Partners, L.P., strengthens the Company’s balance sheet, providing substantially enhanced liquidity and improving the Company’s financial flexibility to support current operations and execute its strategy for long-term growth.
“Despite the challenges we faced in 2014 from continued reductions in the demand for our services and products, we enter 2015 in a stronger and healthier position than when we communicated with shareholders at this time last year,” said Richard O’Brien, President and Chief Executive Officer. “As a result of the recapitalization, we no longer face the uncertainty related to our potential inability to refinance our debt. We are also much better positioned as a result of substantial and sustainable cost reductions to provide increased earnings and cash flow when our markets recover.
“Very importantly, we operated more safely in 2014 than in any year since going public in 2007, and we intend to continue on a path of improvement. We remain the global leader in drilling services, providing our mining, energy and other customers with a full range of safe, reliable and efficient drilling technologies. And, while carefully managing every dollar of our spending, we continue to deliver and develop next-generation, customer-driven innovations in our Products business.”
He added, “Our markets will improve, and, when they do, we expect to be much better positioned to deliver improved profit margins and cash generation. Our disciplined approach to cost control and a greater emphasis on capital efficiency will allow us to sustainably operate our business at lower SG&A and capital costs than the Company achieved in the 2010 through 2012 market upcycle.”
In the near term, he said, “We will focus on opportunities to increase efficiencies and maintaining pricing discipline in our Drilling Services business, delivering more customer-driven designs from our Products business, continuing to deliver benefits from our combined platforms for supply chain, inventory management and maintenance services and carefully examining our capital deployment and related strategies. We are also working harder to ensure we anticipate and fully serve our customers’ needs and meet our commitments to all of our stakeholders to operate safely and compliantly.”
The Boart Longyear franchise, which celebrates its 125th anniversary this year, is fundamentally strong and valuable, Mr. O’Brien emphasized.
“We are excited and proud to celebrate our 125th anniversary,” he said. “As we have been throughout our history, we continue to be driven by the desire to find more ways to help our customers efficiently discover and delineate new reserves and produce existing reserves while continuously increasing our productivity and improving our safety performance. We have worked hard to navigate through the difficult market environment of recent years. We are energized by a renewed vigor and discipline that we believe positions us to grow far into the future. As we celebrate the many accomplishments of our past, we are moving confidently toward the future.”
Overview of 2014 Financial Results
As reported separately today, Boart Longyear produced revenues of US$867 million in 2014, compared with US$1,223 million the previous year. By continuing to remove costs from the business in response to reduced drilling activity and associated revenues, the Company generated US$31 million of adjusted EBITDA in 2014 and minimized the increase in net debt to $548 million. The increase in net debt was driven by increased interest costs primarily on higher rates. Since late 2012, aggressive actions to reduce the overall cost profile have resulted in over $1.1 billion of costs being removed from the business.
As a result of the recapitalization, the Company ended 2014 with US$169 million of cash and cash equivalents to support ongoing activities. Pro forma for the final recapitalization transactions, which occurred in January 2015, cash was $234 million. The Company’s detailed financial results for 2014 are available on its website at www.boartlongyear.com.
Products Division
Boart Longyear remains a leader in the global supply of products, with a reach of more than 100 countries worldwide. Revenue for the Products division was US$230 million in 2014, a 25 percent decline from the previous year, while EBITDA declined 12 percent to US$14 million.
Product development efforts during 2014 and into 2015 remain focused on innovations that drive productivity and safety on site, with an emphasis on percussive tooling, drilling equipment and incremental enhancements to existing products.
The Company launched its TruCore™ Core Orientation, the first product in its first-in-industry line of instrumentation. The Tru™ line brings more technology into the hands of the drill crew so they can deliver more information and value to the client. Following its successful launch in Australia in 2014, TruCore will be introduced in North America in 2015. TruShot™ and TruProbe™ offerings will also be rolled out over the next 12 months.
Other notable product introductions in 2014 include the expansion of the Company’s line of underground LM™ modular diamond drill rigs to include the new LM110. Ideal for drilling deep holes, the LM110 is the most powerful Boart Longyear underground diamond coring drill rig to date. In addition, Boart Longyear launched a new line of BLH™ down-the-hole (DTH) hammers and bits that can be used in almost all DTH applications, including geotechnical drilling, quarrying/mining, water well/geothermal and mineral exploration.
Expected product introductions in 2015 include the LS250 MiniSonic™, a compact sonic rig that is suited for a wide range of environmental and infrastructure drilling applications, including difficult-to-reach drill sites, and additions to the Company’s range of rod handlers and rod presenters, including retrofit options for some of its most popular surface rigs.
Drilling Services Division
Boart Longyear’s Drilling Services division, which maintains a footprint in over 30 countries, is well-positioned to serve the market when demand for rigs increases and market conditions improve. The division recorded revenue of US$636 million for 2014, a reduction of 31 percent from 2013.
While focused on its core mining markets and successful in securing several significant and strategically important contracts in its traditional markets in 2014, Boart Longyear also has succeeded in diversifying with non-mining projects in the oil & gas, agriculture and water well markets. The division commenced drilling in 2014 at the Magnum NGLs (Natural Gas Liquids) Storage Project in central Utah’s Western Energy Hub. Magnum is building the first underground salt cavern NGLs storage facility in the Rocky Mountain region.
Boart Longyear also continues to demonstrate its commitment and leadership in safety. The Company recorded strong and improved safety performance in 2014 with a Total Case Incident Rate (based on 200,000 hours worked) of 1.35 and a Lost Time Injury Rate (based on 200,000 hours worked) of 0.11. Among other achievements during the year, its Drilling Services business recorded 60 projects that have operated without a lost-time injury (LTI) for at least three years and it earned a 2014 Quarterly Safety Achievement Award from the Canadian Diamond Drill Association (CDDA), which selects just one recipient of the prestigious award each quarter based on the lowest nationwide injury rates for crews that have collectively worked more than 100,000 hours.
Board Changes
Boart Longyear also announced changes to its Board of Directors, effective February 25, 2015, with Barbara Jeremiah and Roy Franklin retiring from the Board and Marcus Randolph and Bret Clayton joining it. Mr. Randolph will assume the responsibilities of Board Chairman from Ms. Jeremiah at the time of his appointment.
Mr. Randolph and Mr. Clayton come to the Board after distinguished careers in the mining industry and extensive senior executive experience at some of the industry’s most respected companies. Most recently, Mr. Randolph was Chief Executive of BHP Billiton’s Ferrous and Coal business from July 2007 to September 2013 and was a member of BHP’s Group Management Committee. Similarly, Mr. Clayton held a series of senior management positions at Rio Tinto, including as chief executive of Rio Tinto’s global Copper and Diamonds groups, president and chief executive officer of Rio Tinto Energy America (now Cloud Peak Energy) and chief financial officer of Rio Tinto Iron Ore.
About Boart Longyear
Celebrating its 125th year anniversary in 2015, Boart Longyear is the world’s leading provider of drilling services, drilling equipment, and performance tooling for mining and drilling companies globally. It also has a substantial presence in aftermarket parts and service, energy, mine de-watering, oil sands exploration, and production drilling.
The Global Drilling Services division operates in 30 countries for a diverse mining customer base spanning a wide range of commodities, including copper, gold, nickel, zinc, uranium, and other metals and minerals. The Global Products division designs, manufactures and sells drilling equipment, performance tooling, and aftermarket parts and services to customers in over 100 countries.
Boart Longyear is headquartered in Salt Lake City, Utah, USA, and listed on the Australian Securities Exchange in Sydney, Australia. More information about Boart Longyear can be found at www.boartlongyear.com. To get Boart Longyear news direct, visit http://www.boartlongyear.com/rssfeed.