Boart's demise 'hard to watch', says former CEO
The former chief executive of crisis company Boart Longyear has spoken for the first time since his sacking, and expressed his sadness at the mining services company's recent struggles.
Craig Kipp, who led Boart to both record revenues and profits in June 2012 before being sacked three months later, said Boart remained a "great business" that had been hit by two monumental downturns over the past five years.
"It has been hard to watch, I am trying to help as many former employees as I can. I am pulling for them and for Boart," he said. "The impact on the investors, employees and suppliers has been devastating."
Declining revenues and mounting debt forced Boart into a protracted $US300 million refinancing last month, which gave the company less restrictive finance but at higher interest rates.
Boart's decimation from a $4.19 stock in May 2012 to just 41¢ last month has many observers questioning its long-term survival, but in his first public comments Mr Kipp offered hope for shareholders by predicting the drilling market should be healthier by mid 2014.
"I am more optimistic than most analysts on the drilling market's return," he said.
Mr Kipp said relatively strong commodity prices meant large volumes of ore were still being mined, and that miners could not stop exploration drilling forever.
"Eventually companies excavate up to their existing mine plan, plus their depleting reserves need to be increased. Both issues are fixed by more drilling, and eventually this will serve Boart's stock price and their current debt issues well," he said.
Mr Kipp's forecast is more bullish than most local analysts; current Boart boss Richard O'Brien says that cutting in the mining sector could continue for two years.
Mr Kipp also believes the CEOs and directors of big mining companies will soon allow spending on exploration and other projects to resume after several years of cost-cutting and executive culling.
When Boart sacked Mr Kipp in October 2012, the Utah-based company explained that it wanted someone who could better communicate with the market and improve its share price, which had fallen 75 per cent to $1.69 in the space of six months.
One year on, Boart's ASX shares have fallen by a further 75 per cent and debt is soaring.
According to the August results, Boart's net debt is $US564 million, compared with $US373 million on Mr Kipp's watch in August 2012.
Many in the sector believe Mr Kipp was sacked because he wanted to cut expenditure faster than the board thought necessary.
The standoff peaked during Boart's half-year results presentation in August 2012, when Mr Kipp delivered a much more bearish outlook on the future of the sector than did most rival drillers.
"We feel Boart's guidance was rare in it's what they expected as worst-case, where most others played it with a straight bat," said Octa Phillip analyst Cameron Bell last year, in the wake of Mr Kipp's sacking.
Mr Kipp's bearish guidance has been more than vindicated: Boart has since downgraded profit forecasts three times.
Mr Kipp stressed that he did not want to comment on his sacking, saying only that the drilling industry was "not a place for the faint of heart".
He warned mining services executives to be ready for an eventual turnaround.
"Rigs have to be refurbished and mobilised. Crews need to be hired, trained and re-certified. Inventory needs to be built and pre-positioned around the world. All this takes people and cash and it never happens quickly enough for the mining customers," he said.