Following a review of the business, Ausdrill said this morning that it was looking to rationalise business activities that have suffered in the general economic malaise, and it wants to exit several non-core, non-performing businesses, for which EDA and Diamond Communications fit the bill.
Having warned last September that EDA was facing a challenging 12 months, with the oil and gas sector oversupplied with rigs at a time of shrinking expenditure the company has finally decided to put the business on ice and up for sale.
EDA's core areas are CSG and both conventional and unconventional hydrocarbons, but drilling budgets are shrinking because of low oil prices, and there is less work to go around for Australia's modest drilling fleet.
The EDA fleet includes three drilling camps, a coiled tubing unit, two rapid service rigs, the Foremost Explorer 65 and two Schramm rigs.
The Foremost Explorer is designed for shallow gas drilling tasks, while the modern, highly automated Schramm TXDE 200 and a T500XD Rotadrill rigs are agile units capable of deeper drilling.
While the rigs have successfully drilled five wells for Statoil in the Northern Territory, two wells for Heritage Oil in Papua New Guinea and a number of wells for Strike Energy and Senex Energy in the Cooper Basin in what turned out to be truncated programs, EDA's rigs have been stacked and the business' oil and gas assets placed into care and maintenance.
Shedding EDA and its rigs will allow Ausdrill to focus on its African businesses, its core mineral drilling concerns and its equipment offerings.
In its mineral markets the company saw sales revenue up 6.5% on the previous half as it sought to defend its market share, with earnings up 5.4% to $62.4 million.
The income has been used to help pay off debt to the tune of $46.5 million, bringing the total to 18 months to $141.9 million.
The company is going to take a "cautious approach" to dividend policy in light of market uncertainty, and has decided not to declare an interim ordinary dividend.
Ausdrill boss Ron Sayers said the results represent a turning point for the company, with further opportunity for improvement ahead.
"Ausdrill is responding well to the challenges it faces in light of continuing poor market conditions and is taking proactive steps to divest or exit non-performing assets and to reduce its overhead in line with a lower revenue base," he said.
"Further, the group is well advanced on a range of cost-cutting initiatives, which will enable it to deliver lower cost solutions to its clients and improved margins for shareholders."
He said selling businesses such as EDA would allow the company to respond to the challenges of a depressed mining sector by focusing on its core competencies and ensuring it remains cost competitive in its traditional markets.
"Ausdrill has a long established presence and local know-how in both Australia and Africa, where the resources sector is expected to recover over the medium to long term. The company remains very well placed to remain a long-term profitable service provider in what we expect will be a more rationalised and consolidated industry."
He expects the demand for its mining services to remain tight in the near term, with competition for new contracts, although tender activity, particularly in Africa, is robust, driven mainly by gold mining opportunities.
