Orbit Garant Drilling (TSE:OGD) reported record quarterly revenue in its fiscal 2027 first quarter, but higher costs and lower productivity among trainee drillers pushed the company to a net loss despite strong demand in Canada and South America.
Revenue rose 28.9% from a year earlier to CAD 60.1 million, the first time the company exceeded CAD 60 million in a quarter, President and CEO Daniel Maheu said on the Nov. 12 earnings call. Drill rig utilization reached 72%, its highest quarterly level since fiscal 2012.
Net loss was CAD 0.9 million, or CAD 0.02 per diluted share, compared with net earnings of CAD 0.3 million, or CAD 0.01 per diluted share, a year earlier. Gross margin fell to 8.5% from 12.1%, while adjusted EBITDA edged up to CAD 3.9 million from CAD 3.8 million.
Growth Comes With Margin Pressure
Canadian revenue increased 27.8% to CAD 43.1 million, reflecting greater drilling activity and improved contract pricing, Chief Financial Officer Pier-Luc Laplante said. International revenue rose 31.5% to CAD 17.0 million, primarily because of increased activity in Guyana; activity in Chile was relatively stable year over year.
Maheu said gross profit and margin were hurt by lower Canadian drilling productivity as the company brought on more trainee drillers, as well as inflation in production costs and drilling consumables and spending on workforce training. A CAD 1.1 million year-over-year increase in depreciation expense also weighed on gross profit.
Adjusted gross margin, which excludes depreciation and gains on disposal of property, plant and equipment, was 14.1%, down from 17.0% a year earlier. Adjusted gross profit rose to CAD 8.5 million from CAD 8.0 million.
Laplante said the net loss also reflected higher interest costs and a CAD 0.4 million unfavorable foreign-exchange variation, partly offset by a CAD 0.2 million tax recovery.
Northern Canada Contract Ramps Up
The company has invested in equipment, inventory and hiring to support new projects, including a specialized drilling contract in Northern Canada expected to generate CAD 100 million in revenue over its initial five-year term. Maheu said most of the initial equipment and inventory investment had been made by the end of the quarter.
During the question-and-answer session, Maheu said one rig operated on the contract throughout the first quarter and a second began working near the end of the period. A third rig was starting around the time of the call, with a fourth expected before Christmas and a fifth in January or February.
Maheu said the contract’s full impact would be felt more in the third quarter, with five or six rigs likely in place by the fourth quarter. The company had built four new rigs and purchased the equipment and inventory needed for the project, he said.
Orbit Garant made net capital expenditures of CAD 11.7 million during the quarter and drew a net CAD 10.3 million on its credit facility. Debt under the facility, including the current portion, rose to CAD 34.0 million from CAD 23.7 million at the end of fiscal 2026, primarily to fund startup costs for the Northern Canada contract, Laplante said.
Management Sees Further Utilization Gains
Maheu said demand remains strong and that utilization could approach 75% by fiscal year-end as the company ramps up projects and adds drills to existing work. He pointed to strong gold and copper prices and a favorable financing environment for mining companies as supporting factors.
Management expects improved contract pricing and gradual productivity gains from newer drillers to be progressively reflected in profitability over the rest of fiscal 2027. Maheu said the company’s priority is to improve productivity and margins and turn revenue growth into earnings growth.
Laplante said Orbit Garant does not provide future margin guidance, but has a long-term adjusted gross margin target of 20% or higher. He said it was something the company would like to achieve over approximately the next 12 months, depending on productivity improvements and the new contract’s ramp-up.
Separately, Laplante said the Toronto Stock Exchange accepted the company’s notice for a normal course issuer bid under which it may purchase up to 500,000 common shares over the 12 months beginning Oct. 31, 2026. Under its previous bid, the company repurchased and canceled 246,100 shares at a weighted average price of CAD 1.28 per share.
About Orbit Garant Drilling (TSE:OGD)
Headquartered in Val-d’Or, Quebec, Orbit Garant is one of the largest Canadian-based mineral drilling companies, providing both underground and surface drilling services in Canada and internationally through its 180 drill rigs and approximately 1,300 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production. The Company also provides geotechnical drilling services to mining or mineral exploration companies, engineering and environmental consultant firms, and government agencies.
