Geodrill GEO:TOR, Shares Soar by 78% in Six Months

Geodrill, (GEO:TOR) The Toronto listed drilling services contractor based in Ghana, West Africa, have seen their shares soar by 78% in the last six months as the company benefits from a wave of investment continues in exploration activity by mining companies with interests in West Africa.

The company has but out a fantastic set of results just recently. Geodrill is a fast growing cash generating business that is well positioned to capitalise on the continued demand for its drill rigs across West Africa

See Below

Financial Highlights

US$ 000s (except earnings per share)	For the three months ended December 31		For the twelve months ended December 31
	Q4‐11	Q4‐10	2011	2010
Revenue	$20.9	$11.6	$70.1	$45.1
Gross profit	$10.7	$8.8	$38.1	$22.4
As percentage of revenue	51%	76%	54%	50%
Net Earnings	$1.2	$(586)	$12.4	$5.1
Earnings per share – basic	$0.03	$(0.02)	$0.29	$0.17
EBITDA(1)	$7.9	$3.6	$25.2	$14.4
EBITDA margin(1)	38%	31%	36%	32%

(1) Please see “Non‐IFRS Measures” below for additional discussion .These figures account for and include the dissolution of the subsidiary in Cote d’Ivoire and a reduction in an obsolescence provision. EBITDA for the 12 month period ended December 31, 2011 would have been $22.58 million and an EBITDA margin of 32% if these adjustments were not taken into account.
Fourth Quarter and Year End 2011 Operational Highlights:

•   Revenue increased 56% for 2011; Q4 revenue increased 80%;
  
•   Net Earnings increased 144% for 2011;
  
•   Increased the number of drill rigs in operation from 18 to 26;
  
•   Completed 921,471 meters of drilling for 2011 up 92% with addition 14 rigs to be in
  operation by the end of 2012.

•   Strengthened management and operational team with the addition of Roy Sinke, Alan McConnon, and Jocelyn Gingras;
  
•   Strengthened Board of Directors with the addition of Ron Sellwood
  
•   Began construction of a 50 man camp and workshop facilities at North West Ghana for
  the ramp up of drilling the Wa Gold project;
  
•   Increased footprint in Burkino Faso with additional drills and construction of a 80 man
  camp and workshop facilities, currently underway
  
•   Expansion of Kumasi engineering facilities with the addition of one new CNC mill; and
  
•   Increased inventory levels to maintain high levels of mechanical availability for ongoing
  rig expansion.
  “2011 was an outstanding year with record financial and operational achievements for Geodrill. In the first twelve months since our Initial Public Offering, we expanded our rig fleet by 144%, locked in new commitments with existing and new customers and drilled in excess 900,000 meters,” said David Harper, President and CEO of Geodrill Limited. “As we enter 2012, the exploration market in West Africa remains robust opening new opportunities to focused players like Geodrill. With our singular focus on West Africa, we are well positioned for continued growth in 2012.”
  Financial Review
  Revenue
  Revenue increased 56% to $70.15M in 2011 from $45.06M in 2010. Total revenue for Q4‐2011 was $20.86M compared to $11.58M Q4‐2010. Revenue growth was driven by new drilling contracts and the deployment of new drilling rigs throughout the year and the quarter.
  Gross Profit
  Gross profit was $38.06M or 54% of revenue for 2011 compared to $22.39M or 50% for 2010. The increase in gross margins for the year is attributable to an increase in operational drill rigs, meters drilled and operational efficiency. Gross profit for Q4‐2011 was $10.74M or 51% compared to $8.81M or 76% for Q4‐2010. The decrease in the gross margin for Q4‐2011 was primarily due to $1.55M of cost of sales expenses being re‐classified as selling, general and administrative expenses in Q4‐2010.
  Selling, General and Administrative (“SG&A”) Expenses
  SG&A expenses were $19.54M in 2011 compared to $12.17M in 2010. SG&A expenses were $5.04 million in Q4‐2011 compared to $6.38M in Q4‐2010. The increase in SG&A for the year was primarily due to costs associated with acquiring new drill rigs and business expansion, including increases in mobilization and labour costs; increases in travel costs and professional fees.
  Depreciation and Amortization
  Depreciation and amortization of property, plant and equipment expenses increased to $6.64M for 2011, compared to $4.06M for 2010. For Q4‐2011 depreciation and amortisation of property, plant and equipment expenses increased to $2.15M compared to $1.18M in Q4‐2010. The increase for the year and the quarter is as a result of the Company acquiring additional drill rigs and property, plant and equipment throughout the year as part of its expansion.

EBITDA
EBITDA was $25.17M in 2011 or 36% of revenue in 2011, compared to $14.35M or 32% of revenue in 2010. The EBIDTA margin improved as a result in reduction of cost of sales associated with VAT and salary taxes and a reduction of inventory obsolescence provision resulting in additional income of $0.55M. Without these impacts, EBITDA margin would have been 32% for 2011.
For Q4‐2011 EBITDA was $7.86M or 38% compared to $3.63M or 31% in Q4‐2010. The increase is due to increased utilization of drill rig fleet, meters drilled and other operational efficiencies. Q4‐2011 was also affected by reduction of inventory obsolescence provision resulting in additional income of $0.55M and the reversal of a provision for SG&A costs resulting in additional income of 0.84M. Without these changes, EBITDA for Q4‐2011 would have been $4.04M or 31% of revenue.
Net Earnings
Net earnings were $12.41M or $0.29 per share in 2011, compared to $5.08M in 2010 or 0.17 per share in 2010. Net earnings were primarily affected by the dissolution of the Cote d’Ivoire triggering a positive resolution of VAT and salary tax obligations. For Q4‐2011 net earnings were $1.22M or $0.03 per share compared to a loss of 0.59M or a loss of $0.02 per share for Q4‐ 2010. Net earnings for Q4‐2011 were affected by change in depreciation policy and recognition of a deferred tax expense of $3.5M.
Cash from Operations
The Company maintained positive cash flow from operations in the amount of US$7.98M for 2011 compared to positive operating cash flows of US$9.33M for 2010.The lower positive cash flows in 2011 compared to 2010 reflected increased prepayments for drill rigs and other property, plant and equipment of US$6.31M and increased inventory levels of US$5.68M.
For Q4‐2011 the company generated positive cash flows in the amount of $6.50M compared to $1.71M in Q4‐2010. Cash flows for the year and the quarter continue to be driven by an overall increase in revenues.
As at December 31, 2011 the Company had cash and cash equivalents equal to US$8.17 million. The Company currently has 42,476,000 ordinary shares issued and outstanding.
Outlook
The Company views the industry dynamics underlying demand for its services to be favourable and, accordingly, has added significantly to its capacity through the acquisition of additional

drill rigs. All of the Company’s drill rigs, as at December 31, 2011, were committed to contracts. With 26 of the Company’s drill rigs commissioned and being utilized on client sites, 1 drill rig is in transit and 13 drill rigs on order and with the supplier under manufacture (which are expected to arrive in Ghana and be operational in 2012) the Company will be able to leverage increased capacity.
The Company’s drill rig fleet and the drill rigs deployed or planned to be operational in the field are noted below:

Make ‐Model	Type	In Operation as at Mar 31, 2011 No. of Rigs		In Operation as at Jun 30, 2011 No. of Rigs		In Operation as at Sep 30, 2011 No. of Rigs		In Operation as at Dec 31, 2011 No. of Rigs		Planned to be Operational in 2012 No. of Rigs
UDR ‐ 650	Multi‐Purpose	2	1 X 2003 1 X 1993
UDR ‐ KL900	Multi‐Purpose	4	1 X 2007 1 X 2003 1 X 1999 1 X 1998
Sandvik ‐ DE820	Multi‐Purpose	4	1 X 2010 3 X 2008
Sandvik ‐ DE810	Multi‐Purpose									6	6 X 2012
EDM ‐ 2000	Multi‐Purpose	2	2 X 2011							2	2 X 2012
Austex ‐ X900	Multi‐Purpose					2	2 X 2011	1	1 X 2011	4	4 X 2012
Sandvik ‐ DE710	Core	7	1X 2011 5 X 2010 1 X 2009			1	1X2011
Austex ‐ X300	Aircore	2	2 X 2010	1	1 X 2011					2	2 X 2012
Total Drill Rigs		21		1		3		1		14
Cummulative		21		22		25		26		40