Orbit Garant Drilling (TSE:OGD) reported fiscal 2026 second-quarter results that management said reflected a rebound in activity following temporary project delays in the prior quarter, alongside continued ramp-up on new Canadian drilling programs. President and CEO Daniel Maheu said overall drilling activity increased in both Canada and South America during the quarter, including a higher proportion of specialized drilling in Canada, though results were “somewhat constrained” by a customer-initiated delay on one project in South America and unexpected modifications to another program.
For the quarter, revenue rose 10.5% year-over-year, while margins declined compared to the prior-year period. Management also pointed to competitive pricing pressure on new projects and contract renewals during the quarter.
Revenue rose as drilling activity increased in Canada and internationally
- Canada revenue was CAD 33.8 million, up 9.8% year-over-year, driven by increased drilling activity and a higher mix of specialized drilling.
- International revenue was CAD 14.1 million, up 12.1% year-over-year, reflecting increased activity in Chile and Guyana.
Laplante said quarterly revenue was constrained by a customer decision to temporarily delay one South American project and modifications to another drill program, adding that the delayed project fully resumed in January 2026.
Margins pressured by productivity issues and competitive pricing
Gross profit was CAD 6.5 million, or 13.5% of revenue, compared with CAD 7.2 million, or 16.5% of revenue, in the prior-year quarter. Adjusted gross margin (excluding depreciation) was 18.5%, down from 21.5% a year earlier.
Management attributed the decline in gross profit and margins primarily to:
- Lower drilling productivity on certain projects in Canada
- A competitive pricing environment on new contracts and renewals
- Customer-initiated delays and program modifications in South America
Despite the lower operating margin, adjusted EBITDA increased to CAD 5.1 million from CAD 4.5 million a year earlier.
Net earnings increased; company repaid debt and continued buybacks
Net earnings for the quarter were CAD 1.3 million, or CAD 0.03 per diluted share, compared with CAD 0.5 million, or CAD 0.01 per diluted share, in the prior-year period. Laplante said the increase in adjusted EBITDA and net earnings was mainly due to lower income tax expense and favorable foreign exchange movement, partially offset by lower operating earnings.
On the balance sheet, Laplante said the company repaid a net CAD 3.3 million on its credit facility during the quarter. Long-term debt under the credit facility (including the current portion) was CAD 16.0 million at quarter-end, down from CAD 19.3 million at the end of fiscal Q1, but up from CAD 14.0 million at fiscal 2025 year-end. Management said the higher debt level in the first half of fiscal 2026 reflected annual shipments of equipment and inventory for Nunavut and Nunavik operations, and the company expects to continue paying down debt on a net basis through the remainder of fiscal 2026.
Laplante also highlighted financing and capital return updates:
- On Dec. 22, 2025, Orbit Garant entered into a sixth amended and restated credit agreement with National Bank and other lenders. The facility includes a CAD 30.0 million revolving credit facility plus CAD 5.0 million for standby letters of credit, and it expires on Dec. 22, 2029.
- The Toronto Stock Exchange approved a renewed normal course issuer bid allowing repurchases of up to 500,000 shares over a 12-month period beginning Oct. 31, 2025.
- During the quarter, the company repurchased and cancelled 141,450 shares at a weighted average price of CAD 1.29 per share. Laplante said management views the NCIB as a tool to enhance shareholder value when the share price does not reflect underlying value.
Working capital was CAD 51.9 million at quarter-end, compared with CAD 50.4 million at the end of fiscal 2025.
Outlook: utilization expected to rise, with winter conditions and cost inflation in focus
Maheu said drill utilization reached its highest level in more than two years, supported by new drilling contracts and renewals. He said the company expects further increases in utilization in fiscal Q3, with minimal mobilization costs, though he cautioned that some gains “may not be fully realized” until fiscal Q4 due to severe winter weather conditions in Canada in January and February.
Management also said it expects to benefit as new Canadian projects advance beyond ramp-up stages, noting that projects typically deliver lower gross margins during ramp-up periods. Maheu added that projects delayed in the first half are now back online, positioning the company to increase utilization to drive revenue growth.
On demand, Maheu said customer interest remains strong in Canada and South America, supported by record gold prices and elevated copper prices, and that bidding activity on new projects remains high.
Q&A: Chile budget caution, Guyana activity, and growing junior exploration requests
During the question-and-answer session, management provided additional detail on international operations. Maheu said Orbit Garant has three major copper-mine customers in Chile, and that these customers can have budget concerns and sometimes request drill moves that can take several weeks. He emphasized the company’s long-term contracts in Chile. In Guyana, Maheu described the market as “very strong,” noting customer requests to move equipment between sites can create delays but are positive for upcoming quarters because market activity is increasing.
In Canada, Maheu said a significant portion of the company’s business is linked to gold-related customers and that higher gold prices are driving increased exploration drilling requests. He said the company added more than 10 drills during the quarter, and linked this to utilization rising from 56% in fiscal Q1 to about 63% in fiscal Q2. Maheu said the company expects utilization to rise to around 65% in fiscal Q3.
Maheu also said requests from junior exploration companies in Canada have accelerated since late December 2025, shifting from smaller programs (less than 5,000 meters over two to three months) toward longer programs over six months and 15,000 to 20,000 meters. While he said junior exploration is not the company’s main market focus—Orbit Garant prioritizes senior and well-financed intermediate customers—he noted that increased junior activity can absorb capacity among smaller drillers and “give us more space” to target longer-term and more specialized drilling opportunities.
Looking ahead, Maheu said Orbit Garant expects cost inflation in supplies, materials, and wages due to sustained industry demand and will work with customers to accommodate expected input cost increases in future contracts and renewals. He added that increased demand from junior explorers could have a positive impact on the current pricing environment.
About Orbit Garant Drilling (TSE:OGD)
Orbit Garant Drilling Inc is a Canadian based drilling company providing services to mining companies through all stages of exploration, development, and production. The company operates a surface and underground diamond drilling business. The firm also manufactures conventional drill rigs while also manufacturing and providing other support equipment such as water recirculation systems, heat recovery systems, and fuel-efficient systems. The company operates in Canada, the United States, Central and South America, and West Africa.
