Capital Regulatory News (CAPD)

Capital Drilling Limited

("Capital Drilling", the "Group" or "the Company")

Half-year Results

For the period ended 30 June 2016 and Interim Dividend

Capital Drilling Limited (LSE: CAPD), the emerging and developing markets focused drilling company, today announces its half year results for the period ended 30 June 2016.

HALF YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 2016*

* All amounts are in USD unless otherwise stated

** Twelve months rolling average

Financial Overview

· First half revenue 5.0% higher at $41.7 million compared to H2 2015 of $39.7 million (H1 2015: $39.0 million)

· Continued strength in net cash generated from operations of $7.7 million

· Operating cash flow margin of 18.6% (H1 2015: 26.5%)

· Cash reserves increased to $14.2 million at 30 June 2016 from $13.4 million at 31 December 2015

· Net cash of $7.0 million compared to $8.3 million at 31 December 2015 (H1 2015: $2.2 million)

· Final dividend in relation to the 2015 financial year of $3.4 million paid during H1 2015 (H1 2014: $2.6 million)

· Interim dividend up 36% to 1.5 cents per share to be paid on 7th October 2016 (2015: Interim dividend of 1.1 cents per share paid on 9 October 2015)

Operational & Strategic Overview

· New contracts awarded in H1 2016 include:

» Alexander Nubia, Egypt: 1 diamond rig, commenced March

» Algold, Mauritania: 1 multi-purpose rig, commenced May

» OreCorp Limited, Mauritania; 1 diamond rig, commenced March

» Tanga Resources, Tanzania: 1 multi-purpose rig, commenced April

· H1 utilisation of 40%, up from 34% in H1 2015, on an average fleet size of 94 rigs

· H1 Average Revenue per Operating Rig (ARPOR) fell to $175,000 (H1 2015: $189,000) due to the increase in RC drilling

· Contracts awarded after period end:

» RAKITA Exploration (part of the Freeport McMoran Company), Serbia: 4 deep hole exploration directional drilling rigs, commenced early August

» Ascom Mining, Ethiopia: 2 diamond rigs, commenced July

» Resolute, Mali: 1 diamond rig, commenced July

· Purchase and delivery of two new deep hole exploration rigs to support the RAKITA contract

Outlook

· Trading conditions continue to show positive signs of improvement, resulting in increased tendering

· Strengthening gold price and increasing interest in the resources sector by global capital markets

· Long-term core production and grade control contracts in Egypt and Tanzania continue to diversify and underpin performance

· Increasing exploration activity for new contracts and success with the Lean Operating Model generated additional revenue in Q2 and improving exploration fleet utilisation

Health & Safety

· Previously announced World Class Achievement for Tanzania (Geita Gold Mine) which achieved 9 Years LTI free in April 2016, and other achievements of world class safety milestones, including:

» Tanzania (Mwanza Support Facility) achieved 8 years LTI free in January 2016

» Mauritania (Tasiast Project) achieved 5 years LTI free in February 2016

» Botswana (Cupric Project) achieved 1 year LTI free in March 2016

Financials

Commenting on the results, Mark Parsons, CEO of Capital Drilling, said:

"The increasing interest from the mining industry, particularly over the last few months, to invest in assets combined with the firming of selected metal pricing, has injected some momentum in tendering for new contracts as well higher demand from existing clients for the Group's drilling solution services.

The combination of deploying our Lean Operating Model in a steadily improving market environment, particularly the gold industry, our largest market segment, has seen utilization of our exploration rigs improve in line with our growth strategy. Our focus on geographic expansion has also been successful with projects awarded and mobilized in Mali, West Africa, Serbia in Europe, and re-entry into Ethiopia.

For the balance of FY16 we will continue to focus on: further geographic and underground expansion in emerging markets; building on our operational capability to ensure we are appropriately resourced to manage increasing activity levels; diligently managing our costs and providing excellence across a full range of drilling services.

We have a highly competitive operational model, diversified long-term contracts, a strong balance sheet, and a progressive dividend policy - Capital Drilling remains confident that it can continue to leverage its position in what appears to be a sustainable upswing in our core markets."

Capital Drilling will host a conference call on Wednesday 17 August at 9am (London, UK time) to update investors and analysts on its results. Participants may join the call by dialling one of the following numbers, approximately 10 minutes before the start of the call. A copy of the Company's presentation will be available on www.capdrill.com.

UK and International dial in: +44 (0)203 043 2014

ID Number: 832337

For further information, please visit Capital Drilling's website www.capdrill.com or contact:

Capital Drilling Limited +230 464 3250

Jamie Boyton, Chairman investor@capdrill.com 

Mark Parsons, Chief Executive Officer

finnCap +44 (0)20 7220 0500

Christopher Raggett, Corporate Finance

Joanna Scott/Tim Redfern, Corporate Broking

Buchanan +44 (0)20 7466 5000

Bobby Morse capitaldrilling@buchanan.uk.com 

Gemma Mostyn-Owen

About Capital Drilling

Capital Drilling provides specialised drilling services to mineral exploration and mining companies in emerging and developing markets, for exploration, development and production stage projects. The Company currently owns and operates a fleet of 94 drilling rigs with established operations in Botswana, Chile, Egypt, Ethiopia, Mali, Mauritania, Serbia and Tanzania.

Chief Executive Officer Review

Market conditions over the first half of 2016 remain encouraging for Capital Drilling and suggest a sustained cyclical upswing. Improved conditions are generating additional exploration drilling project opportunities, which are expanding both in size and duration. Mining companies have also begun to allocate budget expenditure to new brownfield exploration programs. These developments can largely be attributed to the continued confidence in the sustainability of the recovery of the gold price, together with positive movements for copper, nickel and zinc. Capital Drilling also has begun to see the benefits of increased activity as new exploration contracts extend into longer term programs.

Improvement in the sector has seen the Company experience half-yearly revenue growth since 2014. A marginal increase was reported in the second half of 2015 as the business stabilized from the historical lows of the industry downturn, with a further 3.4% increase in the first half of this financial year. Group revenue for 1H16 was $41.7 million, up from $39.7 million (2H15) and $39.0 million in 1H15 (up 7.0% on 1H15).

Similarly, Capital Drilling has seen incremental increases in its average rig utilization. Utilization for this half was 40%, up from 34% in the first half of 2015 and 35% in the second half. Indeed, Q2 alone this year saw a sharp 22% increase in rig utilisation from Q1 as Capital Drilling delivered on contracts won late in that quarter. All production rigs are fully utilized and focus remains on improving utilization of the exploration fleet. Recently the Company has been successful in a number of tenders for exploration and delineation projects.

Average revenue per operating rig (ARPOR) was down on the previous half due to an increase in reverse circulation (RC) drilling. This type of exploration drilling traditionally yields intermittent revenues due to the stop/start nature through the month resulting in lower overall revenue than production or diamond drilling, in turn negatively impacting ARPOR. Despite this decrease, gross profit margins were successfully maintained due to the Lean Operating Model.

As a result of the upswing of the market, the Group has been preparing its stacked exploration fleet to meet its stringent Drilling Equipment Standard (DES) and ensuring it is operationally ready. The DES provides minimum standards to consistently improve productivity and ensure safe operating conditions on site. Greater exploration activity has also increased expenditure on mobilization, customs and duties in the first half.

Operational Delivery

In the first quarter of 2015, the Group implemented its Lean Operating Model to combat the competitive exploration and delineation markets. This approach continues to deliver benefits, with the award of several new contracts in 1H16 increasing utilization of the exploration fleet. New contracts awarded over the period include:

· Contracts awarded in H1 2016:

» Alexander Nubia, Egypt: 1 diamond rig, commenced March

» Algold, Mauritania: 1 multi-purpose rig, commenced May

» OreCorp Limited, Mauritania; 1 diamond rig, commenced March

» Tanga Resources, Tanzania: 1 multi-purpose rig, commenced April

· Contracts awarded after period end:

» RAKITA Exploration (part of the Freeport McMoran Company), Serbia: 4 deep hole exploration directional drilling rigs, commenced early August

» Ascom Mining, Ethiopia: 2 diamond rigs, mobilised on June, commenced in July

» Resolute, Mali: 1 diamond rig, mobilised in June, commenced in July

Capital Drilling's long-term core production contracts in Egypt (Centamin's Sukari Gold Mine) and Tanzania (AngloGold Ashanti's Geita Gold Mine) continue to underpin performance, providing a stable revenue base for the Group. Additionally, the new Blast Hole and Grade Control contract at Acacia's North Mara Gold Mine is performing well and has diversified the long-term core production contract portfolio.

The Company is operating a fleet of 94 rigs, a significant investment that positions it well to capitalize on improving market conditions. All production rigs are fully utilized on long term contracts - focus for the remainder of 2016 will be on improving utilization of the exploration fleet using the Lean Operating Model. We are already seeing the rewards of this and a benefit from the upswing in the mining industry as a whole as the Company won four new exploration contracts in H1 and three more post-period end.

Quality, Health and Safety

Capital Drilling continues to focus on developing an overarching safety culture throughout the organization. Driven by the Executive Leadership Team (ELT), visible safety leadership across the company is considered of paramount importance.

Capital Drilling is also pleased to report there were no lost time injuries (LTIs) or significant incidents during the start-up of its production contract in North Mara or its other lean operating projects in Mauritania, Egypt, Ethiopia and Mali.

Other significant health and safety achievements for the half as previously announced include:

· Nine years LTI free at the Geita Gold Mine in Tanzania, April 2016;

· Eight years LTI free at the Mwanza Support Facility in Tanzania, January 2016;

· Five years LTI at the Tasiast Gold Mine in Mauritania, February 2016; and

· One year LTI at the new Khoemacau Copper Project in Botswana, March 2016.

Capital Drilling is continually upgrading its fleet to ensure it meets the company's DES to enable consistently high productivity and safe operating conditions and to mitigate potential risks to employees or other personnel on site.

Dividends

The Directors have declared an increased interim dividend of US1.5 cents per share for the first half of 2016 versus US1.1 cents per share in H1 2015, a rise of over 36%. This interim dividend will be paid on 7th October 2016 to shareholders on the Record Date of 9th September 2016. The Company's shares will be ex-dividend on 8th September 2016.

As announced to the market previously, the company paid a final dividend of US2.5 cents per share for the 2015 financial year on 6th May 2016.

Outlook

The increased gold price is expected to generate additional exploration opportunities and it is encouraging that these opportunities are traditionally larger in size and longer in duration. Capital Drilling's exploration rig utilization is expected to continue its gradual upward trend of 1H16 as a result of anticipated growth in the exploration market.

New contracts awarded in the first half and delivered in Q2 and Q3 are expected to have a positive impact on revenue in the current half of the year. Capital Drilling forecasts an incremental uplift in FY16 revenue to $88.0 - $90.0 million, together with a material increase in EBITA in the second half despite the increased capital expenditure anticipated during the period as we gear up for projects in 2017.

For the balance of the 2016 financial year, Capital Drilling will continue to focus on growing its existing exploration projects throughout their lifecycles into prefeasibility, delineation and potential production. The Company also expects to grow its production contracts as expansion projects come on line and budgets are approved.

Maturing open pit mines continue to trend towards underground operations, therefore Capital Drilling's strategy of expanding its underground capacity remains sounds. The Company's agreement with Pybar, a leading underground service provider, to co-market their services for underground hard rock mining contracts in Africa aligns with this strategy.

Geographically, the Company will continue to focus on expansion in West Africa and Serbia to position it for potential copper price increases.

It will also remain focused on disciplined cost management across its operations, generating solid cash flows and maintaining a strong balance sheet.

Capital Drilling's strong balance sheet, diversified long-term contracts, highly competitive operating model and expanding capabilities place the Company in an excellent position to benefit from improving market conditions. The Company remains committed to rewarding shareholders through its dividend policy while maintaining a strong balance sheet.

Mark Parsons

Chief Executive Officer

17 August 2016

Cautionary note regarding forward looking statements

Certain information contained in this report, including any information on Capital Drilling's plans or future financial or operating performance and other statements that express management's expectations, or estimates of future performance, constitute forward-looking statements. Such statements are based on a number of estimates and assumptions that, while considered reasonable by management at the time, are subject to significant business, economic and competitive uncertainties, which remain unchanged from those disclosed in our Prospectus. Capital Drilling cautions that such statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Capital Drilling to be materially different than the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements. These factors include the inherent risks involved in exploration and development of mineral properties, changes in economic conditions, changes in the worldwide price of commodities and project execution delays, many of which are beyond the control of Capital Drilling. Nothing in the report should be construed as either an offer to sell or a solicitation to buy or sell Capital Drilling securities.

Independent review report on the condensed consolidated interim financial statements

To the members of Capital Drilling Limited

We have been engaged by the Capital Drilling Limited ("Company") to review the condensed consolidated set of interim financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the condensed consolidated statement of financial position as of 30 June 2016 and the related condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six month period then ended, and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of interim financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the International Auditing and Assurance Standards Board ("IAASB"). Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual consolidated financial statements of the Company are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (the "IASB"). The condensed consolidated interim financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" issued by the IASB.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated set of interim financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by Independent Auditor of the Entity" issued by the IAASB. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of interim financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte & Touche

Registered Auditors

Per: H. Loonat

Partner

17 August 2016

National Executive: *LL Bam Chief Executive Officer \* TMM Jordan Deputy Chief Executive Officer *MJ Jarvis Chief Operating Officer *GM Pinnock Audit *N Sing Risk Advisory *NB Kader Tax TP Pillay Consulting S Gwala BPaaS *K Black Clients & Industries *JK Mazzocco Talent & Transformation *MJ Comber Reputation & Risk \* TJ Brown Chairman of the Board

A full list of partners and directors is available on request *Partner and Registered Auditor

B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code

Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited