Boart warns of soft conditions

SHARES in drilling giant Boart Longyear have slumped after the company said almost half of its rigs weren't being utilised and analysts should reduce profit and earnings expectations.
Boart warns of soft conditions Boart warns of soft conditions Boart warns of soft conditions Boart warns of soft conditions Boart warns of soft conditions

Image courtesy of Boart Longyear.

Kristie Batten

The Utah-based company said conditions had worsened since May, particularly in its drilling services division, with rig utilisation rates dropping to the low 50s as companies reduce or defer exploration programs.

Boart said the full-year outlook given at its May annual general meeting was now out of date and analyst expectations for revenue of $US1.35-1.55 billion ($A1.47-1.69 billion) and earnings before interest, tax, depreciation and amortisation of $176-211 million should be reduced below those ranges.

The company amended its bank debt facility, revising the leverage covenant to ratios of gross debt to EBITDA.

Current pricing will rise from 200 basis points above the London interbank offered rate to 250 basis points over LIBOR, while the total level of available bank commitments will be lowered from $450 million to $350 million by August 2015.

Boart president and chief executive officer Richard O’Brien said the amendments allowed the company to comply with covenants during the current downturn.

“We felt it was prudent to increase our covenant levels to allow us to absorb further adverse changes in our markets and other impacts on working capital, such as security we would be required to provide in some jurisdictions to contest tax assessments in a global environment where taxing authorities are more aggressively seeking to increase revenue,” he said.

Shares in Boart dropped 6.7% to A63c.

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