Good morning, ladies and gentlemen, and welcome to the First Quarter 2022 Results Conference Call. I would now like to turn the meeting over to Chantal Melanson. Please go ahead, Ms. Melanson.
Thank you, and good morning, everyone. As mentioned, we would like to welcome you to Major Drilling's conference call for the Q1 of fiscal 2022. On the call, we will have Denis Ladoc, President and CEO and Ian Ross, our Chief Financial Officer. Our results were released yesterday evening and can be found on our website at www dot majordrilling.com. We also invite you to visit our website for further information.
Before we get started, we'd like to caution you that during this conference call, We will be making forward looking statements about future events or the future financial performance of the company. These statements are forward looking in nature and actual events or results may differ materially from those currently anticipated in such statements. I will now turn the presentation over to Denis Ladoc. Please go ahead.
Thank you, Chantal, and good morning, everyone, and thank you for joining us today. I must start by saying that the team and I are very pleased with the progress we've made this quarter. Our proactive strategy and efforts across The last few quarters focused around having rigs and inventory ready for immediate deployment to customers We have delivered results that have seen Major Drilling grow its revenue by close to 70%. This represents our highest quarterly revenue since our Q2 of 2013. I'm confident that the cyclical recovery is well underway We will continue to see increased activity in the industry, and I will explain the basis for management's view on this later during the call.
During the quarter, we saw strong regional growth in North America where gold projects are still the main driver of activity. We also added 2 months of revenue from Mackay acquisition, which closed June 1. While still in the early stages, the integration is going very well and operations are performing at High level in a very busy market as anticipated. In South America and Asia, our operations We continue to be impacted by the effects of the pandemic, which delayed several projects and The increase in demand for major drilling services this quarter Allowed us to generate net earnings of $11,100,000 compared to $2,100,000 in the same period last year. Despite headwinds brought on by cost inflation, labor challenges and the pandemic, Our operational leverage, combined with more favorable terms in pricing on some of our contracts, are starting to bear fruit.
And we expect this to improve margins going forward, although it will be somewhat offset by cost inflation for supplies and labor. With that, Ian will now walk us through the quarter's financials, then I'd like to further discuss our market outlook before opening up the call for questions. Ian?
Thanks, Denis. Revenue for the quarter was 151,000,000 Up 69% from revenue of $89,400,000 recorded in the same quarter last year as demand for drilling services remained robust in our biggest markets. We reported 2 months' worth of activity from our Mackay acquisition, which contributed approximately $12,000,000 of revenue as operations are extremely busy in Australia. The unfavorable foreign exchange translation impact on revenue for the quarter when comparing to the effective rates for the same period last year It was approximately $9,000,000 with a minimal impact on net earnings. Despite the 4th wave of the pandemic causing continued challenges in certain regions, We are pleased to report our highest quarterly revenue in 9 years.
The overall gross margin percentage for the quarter, excluding depreciation, was 26.3% Compared to 27.8 percent for the same period last year. Margins are trending in the right direction as anticipated with the ramp up costs of the previous quarter behind us. We continue to see short term pressure on wage costs in our busiest markets as the availability of skilled drillers remains a key industry challenge. Suppliers have been raising prices on consumables, which also impacted margins in the quarter. However, we've been working with our customers on pricing to ensure current market Conditions are being reflected.
G and A costs were up $2,400,000 at $13,600,000 when compared to the same quarter last year. The increase was primarily driven by the addition of the Australian operations and inflationary wage adjustments at the start of the new fiscal year. Also certain cost cutting measures and government assistance programs used to navigate the pandemic in the prior year are no longer in place as the company shift towards the growth phase. The income tax provision for the quarter was an expense of $2,700,000 compared to an expense of $1,200,000 for the prior year period. The income tax expense, although up from the previous year due to increased profitability, was aided by the utilization of the previously unrecognized tax losses in certain regions.
Net earnings were $11,100,000 or $0.14 per share, dollars 0.13 per share diluted for the quarter compared to $2,100,000 or $0.03 per share for the prior year quarter, the company's most profitable quarter in 9 years. EBITDA was $24,200,000 compared to $13,900,000 in the prior year quarter. This quarter highlights the operational leverage inherent in the business strategy as top line growth Coupled with disciplined pricing provides strong EBITDA growth and bottom line results. Our balance sheet remains in great shape with total liquidity of 82,400,000 After spending $11,700,000 on capital expenditures, including the Mackay acquisition, we have net debt of $44,500,000 which includes contingent aspects of the Mackay transaction. We added 20 specialized drills from the Mackay acquisition as well as an additional 10 drills in We also disposed of 13 older less efficient rigs, bringing the total rig count to 605.
Most of the rigs purchased this quarter will be immediately deployed in the field this upcoming quarter to meet continued market demand. The new breakdown of our fleet and utilization is as follows: 305 specialized drills at 49% utilization 119 Conventional Drills at 45 percent utilization, 181 Underground Drills at 54% utilization for a total of 605 drills at 50% utilization. As we've mentioned before, specialized work in our definition This is not necessarily conducted with a specialized drill. Rather, it is work that requires that we meet the rigorous standards of our customers in terms of technical capabilities, operational and safety standards and other related factors. Over time, we expect these standards to be increasingly important to our customers.
In the Q1, revenue from specialized work accounted for 64% of our total revenue, up from 60% in the previous quarter. The addition of our highly specialized work in Australia helped push this number up from the previous quarter. We expect the trend to continue as long as the demand is supported by elevated commodity prices. Conventional drilling made up 10% of our revenue for the quarter, mainly driven by the increased demand for work from junior mining companies. Finally, underground drilling revenue was down slightly compared to last quarter at 26% of total revenue.
We continue to see juniors to our revenue stream as they accounted for 21% of our revenue, the senior intermediate making up the remaining 79%. The junior activity is mainly being driven by our North American operations as we've yet to see an influx of junior tenders in our other regions. In terms of commodities, Gold projects represented 58% of our revenue, while copper was at 16% this quarter. Gold continues to dominate our revenue mix, while copper remains below historic norms. The addition of Mackay's has allowed us to diversify our commodity exposure with 9% of this quarter's revenue related to iron ore projects.
With that overview on our financial results, I'll now turn the presentation back to Denis to discuss the outlook.
Thanks, Ian. Demand for major drilling services continues to be strong and we have secured more work for the upcoming quarter. We do expect the wider industry rig and labor shortages and higher utilization rates to continue to drive a more positive price environment. Further, as pandemic restrictions ease in South America, we expect to see increased activity as drilling programs During the quarter, we renegotiated several of our contracts in North America
With
more favorable terms and prices, which should improve margins going forward, although we do expect this to be somewhat offset by cost Inflation of Supplies and Labor. Availability of skilled labor continues to be extremely challenging for everyone in the most operationally intense markets and is putting pressure on labor costs and productivity. Despite this, I am pleased with the training and retention efforts of our teams, which have allowed us to support our rapid growth and deliver value to our customers, Despite the fierce competition for drillers, illustrating that we are the employer of choice in the industry. As a management team, we are confident in our belief that the industry is still very early in a long cyclical upturn. Today, I thought I would share with you why we feel this way.
Now this is not a forecast by any means, but the facts are certainly interesting. Our team is very experienced with our top managers holding more than 25 years on average of experience. Myself, I've been in the industry for 27 years and I've seen my share of mining cycles. And the similarities of this upcycle to the one we saw between 2,004 and 2012 are glaring. If you go back to 1998, We hit the peak in resources and went in a downturn that lasted 6 years, where very little exploration was conducted.
So When we reached 2004, both precious and base metal companies were facing serious reserve issues brought on by that lack of exploration over the prior 6 years. That created an upcycle that lasted 8 years Now if we break down the start of that up cycle, we saw senior gold companies 1st out of the blocks in 2004 increasing their exploration budgets to address their reserve issues. Then in 2005, we saw the financing window open Gold Companies, which brought an extra layer of exploration and the start of increasing drilling prices and labor shortages. In 2006, copper reached $4 and base metal companies joined the fray, which created extreme shortages of drills in the industry and very good market conditions for drilling companies. As mining companies ramped up their definition efforts over the next few years, we saw an increase in exploration.
This was of course temporarily held back to the financial crisis, but it picked back up in late 2010 right up to early 2013, where once again we entered a 6 year downturn. During those years, exploration budgets were cut to a minimum and junior financing and drilling Practically disappear. Now roll the clock forward to 2020 and this is where the similarities to that previous cycle appear. After 6 years of lack of exploration, mining companies faced depleted reserves. So in 2020, despite COVID restrictions, we saw senior gold companies increase their exploration efforts, particularly in North America and Australia in the second half of twenty twenty.
Then late In that same year, we saw the window open for junior financing. And in the 1st 6 months of this calendar year, We have seen a resurgence of junior drilling programs, which has brought some of our markets to near full utilization. Looking forward, we still have not seen copper or base metal companies come to the market with substantial increases in their exploration efforts. Although the increase in copper prices over the last 6 months combined with declining reserves have sparked more discussions from base metal companies for As a reminder, it takes 10 to 15 years to bring a mine into production, which includes Several years of definition drilling before making the decision to build that mine. Therefore, for those reasons, We feel we are still very early in this up cycle, which will require a lot of drilling to replenish depleted mineral reserves.
Over the last few years, we've been strategically preparing the company for this upturn. Importantly, We entered the downturn with the strongest balance sheet in the industry, which allowed us to execute this plan. In preparation, We have been investing in our fleet to get rigs prepared, increased our recruiting and training efforts and stocked up ourselves to avoid a shortage of supplies As the industry grapples with this rapid growth. All of these efforts have allowed us to face the strong growth experience over the last 3 months and will allow us to add more rigs in the field in the coming quarters. So to summarize, Demand for our services continues to be strong and as mentioned, we have secured more work for the upcoming quarter.
We expect higher utilization rates to continue to drive a more positive pricing environment and expedite margin recovery As the cycle progresses, although the shortage of experienced drill crews will continue to put pressure on labor costs and productivity. Finally, I want to welcome all the new recruits and thank you for choosing to join our team. As well, I want to welcome the Mackay employees to the Major Drilling team. Major Drilling's more than 3,700 employees continue to be The integral part of our strength. And I know everybody has been working hard over the last few months and are extremely busy.
And I would like to express our ongoing appreciation to all. Your company continues to be a leader in safety, quality of equipment and working conditions because our culture puts employees at the heart of our business. With that, we can open the call to questions. Operator?
Thank you for your patience. The first question is from Maggie MacDougall with Stifel. Please go ahead.
Good morning.
Good morning.
Thanks for taking my question. I was wondering Denis or Ian, if you could give us An update just on where your utilization sits and perhaps some commentary around the trends in pricing that you're Given that it does appear as though certain markets are busier than others and there's still Some challenges in certain regions related to the pandemic. So any more information you provide would be appreciated. Thanks.
Yes. On the utilization, I'll answer that one first. We're at 50% utilization right now total.
Okay. Yes, the pricing. And on that utilization, a couple of comments here. We always say that maximum utilization for us is at about 75% to 80%. And as well, that 50% is not evenly distributed as you can appreciate.
North America, we're seeing much higher utilization. And in South America, it's because of the pandemic, we're facing much Slower utilization, but things are picking up. On the pricing, It's the same thing. I mean, it's really driven by utilization in market, how hot the market is. And North America and Australia are very hot markets right now in terms of drilling.
Lots of demand. And I mean, you heard us talk about labor shortages. It is an industry Challenge in those markets and it's driving price increases. I mean costs are going up For supplies and labor and price are following and it is Basically providing a better pricing environment at the moment, which Allows us to generate adequate return on capital. But again, It's not equal everywhere.
There are certain markets where things are slower to pick up, but they are certainly picking up and we're seeing Some positive going forward.
Okay, thanks. Another question, we're seeing in the news all kinds of various positions being taken by companies on Requiring employees to be vaccinated and considering that it is a business continuity issue for Many companies, including major drilling and mining companies, I'm wondering first what you're seeing within the industry generally, both mining and perhaps Drilling in particular and then whether you've considered that issue with regards to your own policies.
Yes. It's I mean, vaccination, in fact, between countries, We're seeing very different you have, for example, in Asia, Certain countries that still have very low vaccination rates and really it's more driven by access to vaccination and what We've been doing is helping our employees get access to vaccinations. So we're Working with our employees to improve that. In other markets, Vaccination, as you know, is going well as a country. As a company, we haven't put Policy at this point in terms of requiring vaccination, We're having discussions in terms of what we where we want to go with this.
I mean, there's in terms of field employees, they're working outside, they're working in very small groups. So It's all about risk management and but those discussions are certainly going on in the industry with everybody.
Okay. One final question. I've been watching iron ore prices retrace quite a bit. And I'm wondering if there are any considerations
There's the programs that are ongoing are at existing mines and those mines they have plans, firm plans of development. So it's not exposed to it's not like junior funding or juniors that We are a lot more exposed to the variation of commodity prices. Here, we're talking about very senior companies And like establish programs That needs to go ahead and will go ahead. So no concerns at all there.
Okay. Thanks very much, gentlemen.
Thank you.
Thank you. The next question is from Daryl Young with TD Securities. Please go ahead.
Good morning, gentlemen.
Good morning. Good morning.
Just a couple of quick ones for me. So first, on the new contracts secured For Q2, could you just provide a little bit more detail on what geography those are in? And then potentially even the magnitude of the increase you're Expecting for Q2 over Q1?
Yes. Well, as you know, we never provide guidance. So But it's certainly the fact that we're pointing to having additional work Certainly points in a positive direction. And a lot of that work is still North American based, although we're seeing some pickup in Latin America As well. But I mean, North America is still driving A lot of that.
Okay, great. And then just thinking about South America and maybe the pipeline of work that's there. Would you characterize it as a strong backlog of projects Ready to go and everyone's just sitting on the sidelines waiting to start the work once the COVID challenges subside or Maybe just a little bit of color on what the upside expectation is for those markets?
Yes. We do have customers That are in that case that basically are just waiting for conditions because There's been some very heavy restrictions on travel within states In Chile and in Argentina, that has caused mining companies to basically say, well, It's not worth it to get these drilling programs going at this point. Although we're having lots of conversations To talk about when are we going to get going. So there are some out there, but then there are some that The other piece of work, I think, is going to be driven by copper. So there's like 2 factors at play.
There's COVID and there's copper. And the copper one is the one that we say is the latent is yet to come. And
it's going
to be interesting to see what the budgets for 2022 bring Because we're certainly having discussions about bigger programs for next year, but nothing concrete at this point.
Okay, great. And then just the last question. Your utilization is obviously going higher and Just wondering if there's increased look at M and A and the current environment. I know there's lots of controllers out there with challenges, but you've been very successful with both Nortek and Mackay. And just wondering what you're seeing out there today and whether there's any opportunities?
Yes, there's always opportunities. It's just these things are always timing, and that was the case with NorX and Mackay, we basically we've had discussions for a while and then The owners were ready came to a point where they were ready to sell. So we're having lots of discussions with So the different companies that are, for the most part, specialized, it's always been our driver. But again, it just it all depends on their timing and their timeline. They know that we're interested.
But there are lots of other companies out there up for sale and lots of time it's a short The conversation because the there's lots of companies out there that have not been able to maintain their equipment. And then when you look at the fleet, sometimes The reinvestment needed to bring the fleet back is too much. So it's It's a bit of a balancing act, but there are some certainly some out there That will take them up in the future.
Okay, great. Congrats on a good quarter, guys. I'll get back in the queue.
Thank you. Thanks.
Thank you. The next question is from Gordon Wasson with Paradigm Capital. Please go ahead.
Hey, good morning and thank you for taking my question. So after seeing the integration of Mackay into the company, are you Still guiding towards $60,000,000 in revenue and $17,000,000 in EBITDA? Or are there any adjustments for that?
Well, We're certainly looking to grow those numbers. So that's when we closed the acquisition, that's The run rate they were on, but with the Australian market being hot, We're certainly looking at growing those numbers going forward.
Okay. Thank you. And With the new debt, I'm just curious, what are your priorities in terms of paying down debt versus paying for growth? Yes.
From a capital allocation strategy standpoint, the key for us is to maintain flexibility. So I think The current plan would be to look at growth for now and we're well positioned and we want to remain flexible, but we've always said to look at growth for the time being.
Okay. Thank you very much. That's it for me.
Thank you. The next question is from James Faihle with Arcadia Advisors. Please go ahead.
Good morning. Just a quick question. Several of the juniors I follow were impacted by forest fires In, I guess, July early August, which seems to have been taken care of, did that impact your business in any way? And I guess another way, could the quarter have been better without that impact?
Well, thanks for the question. You're right. It wasn't substantial. That's why we didn't mention it. But there was certainly a few Of our programs that were impacted by forest fires in Canada, we saw that You're talking sometimes a couple of weeks.
So it's again nothing significant, but it certainly had impacts In a few of the programs where we were.
Okay. Great stuff, guys. I remember the last cycle. I hope you're right.
Thank you. The next question is with from Ahmed Shah with Beacon Securities. Please go ahead.
Hey, guys. Congrats on the solid I guess one just one follow-up question for me on geographic, maybe revenue breakdown. How are the discussions and the operations going in the other regions in Africa and Asia? And How would you quantify or characterize the impact of this quarter and then going forward? With the COVID Do you expect the recovery there or how does the environment in general there?
Yes. I mean, we In Asia, it's certainly been impacted and somewhat in South Africa, although we saw Things recover in South Africa this quarter, but in Asia, it was still held back because of COVID restrictions In a few of our countries and we expect going forward that as These restrictions are lifted that things are going to improve in that region.
That's great. That's it for me. Congrats again, guys.
Thank you. Thank you. The next question is from Sarah Ahebirl with Mill Road Capital. Please go ahead.
Hi. Thanks so much for taking my questions and congratulations on a great quarter, guys. As you know, Mill Road has been a long term shareholder and we really appreciate all of the team's hard work to navigate Through this cyclical downturn and remain really excited about the company's future. So I first just wanted to thank you, Denis, Ian and the rest of the
Thank you.
So there are a couple of different topics that I'd like to cover today just to help us update our internal model and confirm our belief in what we see as A very significant cyclical upturn and opportunity for the company as you've discussed. The first topic Is the macro environment and you already provided a lot of really helpful color on this in your prepared remarks. So I just have a couple Confirmatory questions here. The first is, our understanding is your EBITDA is highly correlated to Global Exploration Spend. Is that correct?
Yes. I mean, although we've over The last 5 years, we've been our strategy has been we've added diversification, so getting into Percussive and underground more underground work, which is more tied to the mine production, which helps Bring more stability to our revenue, but yes, you're right, we still have a high level of when you look The underground at the last peak, underground made 8% of our revenue. And right now, we're at in the 30s. So that part of the strategy has worked in terms of bringing more, but you're right, 70% is still tied to the exploration.
Great, great. So with exploration spend Still in what appears to be the early innings of a recovery, that should mean there is meaningfully more upside yet to come, I would think. And with gold and copper prices both up significantly from their lows, I imagine they're now both well above the Threshold levels that have historically been necessary to really kick start and sustain exploration spend, Is that fair based on your experience with past cycles?
Yes, absolutely. I mean, Gold in the $1800 level and copper being above $4 those are very healthy. Mining companies are generating a lot of cash flows and therefore, they're incented to build their reserves Because the price is driven, yes, by demand, but there's also the price of the commodities, People tend to focus on demand. For example, copper, there's lots Talks about electric vehicles and all of that and the demand coming, which is what's driving copper, but there's also the supply side, Which has been depleted both on base metal and gold, that is driving those high commodity prices. And that supply side can only be fixed by More exploration and heavy exploration campaigns.
And again, it takes 10 to 15 years to bring mines into production. So there will The drilling needed to fix that and as you said, the commodity prices are there to finance those investments.
Great, great. And I mean despite the prices being where they are, It looks like gold reserves and copper reserves both remain really low. Based on our Research gold reserves are down to levels we haven't seen since around 2,005. Does that sound directionally correct
Companies that are talking about gold reserves being less than 10 years left in the tank. And again, to my point about takes 10 to 15 years to bring a mine into production, some are at critical A critical stage where they really if they want to have products on the shelf in 10 years from now, they need to start now to fix that. So yes, you're right.
Okay, great. So that sounds like a really strong macro backdrop. And the second topic I had for you is we're trying to do some basic math that really looks at your performance during the last cyclical peak to get a sense for EBITDA potential of the company during this next cyclical peak. And I'd just like to sense check some of my assumptions And I will caveat this by saying that I appreciate that, A, the calculation is an oversimplification And B, I'm not asking you to provide any sort of forecast or guidance or confirm any of my numbers. I'm just trying to get a rough sense of the potential for the business going forward.
Yes.
So maybe If we were to start off with revenue, is there any reason to believe that the pricing levels shouldn't recover to Similar levels that you saw during the last cycle?
No, I mean the pricing is really a factor of The utilization rates in the industry and activity levels. And right now, when you look I mean, we have had a graph with the S&B Global Market Intelligence numbers In terms of exploration budgets, we're still a long way from in 2012, the numbers were around in the $20,000,000,000 and I think we're not even at $10,000,000,000 yet in exploration. So still a long way from there, but as those numbers, there is exploration budgets pick up, Then activity levels pick up and that's where pricing really picks up because You have more demand than you can supply and that's where in really good times that's where you have mining companies that are coming to you Desperate for rigs and sometimes we they are dictating the prices in a sense that they are Coming to us offering prices to get our rigs. So yes, now to answer your question, I think if we get back to those levels of activity, I think, yes, We could see those prices coming back to the previous levels.
Okay. So then would it be reasonable to assume that your revenue per utilized rig out in the field Should be or could be similar to what you achieved during the last cyclical peak?
Yes, you could say that. Yes.
Okay. Okay, great. So I guess for my simple calculation here, I'm just going to use your Fiscal year 2012 is a rough proxy for the last peak. And by our calculations, your revenue per utilized rig in that year It was around $1,700,000 And with respect to utilized rigs, I believe you mentioned earlier on the call that peak utilization is Around 75% to 80%. Did I hear that correctly?
Yes. When basically, There's always rigs that are in transit. There are rigs that are parked that only get to be used, for example, in the Arctic, rigs that are parked For 5, 6 months of the year, just because of the season, we don't bring them back. They're small rigs, but they do Make really good money in times when they work, so it's worth having them there just working 6 months of the year. So because of that, that basically means that we can only reach that 75% to 80% utilization.
Got it. Got it. So I'll just then conservatively pick 75%, the low end of the range. And with your current rig count at about 605 rigs, that gets me to About 454 rigs out in the field, if you didn't add anything else to the fleet. And if I assume that your revenue per utilized rig is in line with 2012, which may even be conservative because I know you guys have made a lot of operational improvements and you've continued to innovate to make the rigs more productive.
That gets me to a revenue number of about $770,000,000 Now Turning to your adjusted gross margins, which exclude depreciation, Would it be reasonable to assume that you can ultimately achieve adjusted gross margins in line with the levels you achieved during the last peak?
Certainly possible. The last peak, well, if we look at 2012, our margins were, I think I don't have numbers in front of me, but 31.5%, I think, 31.5%. But that was for the full year, But we did have a slowdown in near the end of the year because of We were starting to go in the downturn. So therefore, Those numbers are certainly can certainly be achievable, yes.
Okay, great. And as I look back Before you got interrupted by the Great Recession, it looks like in 2,008, you had 33.1%, 2,009, 33 So I'll just take something in the middle and go with 32.5% for kind of peak gross margin level. And that implies a peak gross profit based So my revenue number of about $250,000,000 Now I believe your G and A expenses are largely And I think you've also been able to take a reasonable amount of fixed costs out of the business permanently since the last peak. Is that correct?
Yes. Well, I mean, we've streamlined the way we do business. We Close some of our smaller branches and move some of the rigs to bigger operations. So we have And we have an infrastructure in place on which we can grow. It will require a little bit As we grow, because we don't want to stretch our operations Beyond the breaking point, so we'll need to but it's not certainly Not going to grow at the same rate as the top line.
So it's The G and A, you can sort of say that it's going to be fixed with inflation and Some additional costs to just take on the growth, but again, nothing substantial. Firing an acquisition or anything like that.
Got it. That makes sense. So For G and A, what I'll do is I'll take this past quarter, which includes at least 2 months of MacKay, That annualizes about $52,000,000 understanding there's some inflationary growth, let's say, G and A is about $55,000,000 The only other line item I think I need to get to EBITDA would be your Other expenses and I believe those are primarily variable costs. Is that right?
Yes.
Okay, great. So what I think I'll do there is assume that they run about the same percentage of revenue that they did back In 2012, as the approximation of a peak year, which was about 2%. So that gets you to about $15,000,000 in other expenses and ultimately all of that math gets me to a next Peak EBITDA roughly of around $180,000,000 which is right about where you were back in fiscal 2012. And that's not a number I expect you to comment on. I just wanted to make sure that none of my assumptions in that calculation We're crazy.
So I guess I'll move on to the 3rd topic, which is CapEx. I believe On your last earnings release, you disclosed your CapEx budget for fiscal year 2022 to be $50,000,000 And that is the highest CapEx you've had since 2013. And if I look back, I think you started spending around that much at the turn of the last cycle back In fiscal 2007, is that directionally correct?
Yes. When what happens, Especially at the beginning of an upcycle like this is, as you put rigs, it's not necessarily driven All by rigs, it's driven by all the support equipment because what happens is We did conserve rigs, but for example, pickup trucks, when you go in a downturn and everything comes to a stop, You end up with a surplus of pickup trucks. So you either park them and use them and as You discard 1, you just keep using until you get to the optimum level of pure activity level Or we sold the excess as well. So and we haven't it's not like we have kept up That same level of pickup trucks throughout the downturn. So when things pick up, you need to equip The rigs that are going back in the field with the support equipment, the support trucks and everything, and that's a lot of that 50,000,000 Although there are some rigs in there for growth this year, for specific And those rigs, by the way, when they are ordered for the most part, they have a place to go before they even arrive.
So that's So that CapEx on the rig side, again, this has Contracts attached to it for the most part.
Okay, great. And my calculation, I was just using Your rigs that you disclosed today, the 605, to get to my number in line with 2012. So it sounds like there may be even more Upside there, I think that type of a CapEx budget really speaks to the positive trends that you're seeing. So that's great. And the last topic I have for you is I just wanted to touch upon the competitive landscape, which I know you mentioned a little bit as well.
Since the last peak in 2012, I believe your 2 largest competitors Have faced some significant balance sheet challenges, while over that same period, you've been able to use your Strong balance sheet to invest in maintaining your fleet as you mentioned and making a number of acquisitions. Does that imply that you're in a stronger A better position today than you were during and going into the last peak?
Yes, definitely. When you compare again when we go through the long diatribe on the previous cycle, We entered that up cycle with while we were in that In the down cycle, we had a lot of debt and that held back our ability To get rigs prepared, we on the people side, we kept minimum Levels, just to survive. So when things picked up, we were playing catch up mode. And whereas And in fact, at that time, a few of our competitors were in much better shape than we were Financially, this time around, the roles are reversed and we entered this upcycle, while We went in a down cycle with net cash on hand, a very strong balance sheet and we've been able to execute a plan Without having to necessarily worry about making the payment at the end of the month, So we were able to keep our key people, able to prepare rigs, Keith, a very good fleet. So and also on inventory, have inventory on hand.
So again, it showed In these numbers of this quarter, we were able to hit get out of the block Real quick because of that position.
Great. That's really good news. It sounds like you're in a very strong position to capitalize on this next cyclical upswing. So thanks again for bearing with me through all these
There are no further questions registered at this time. So I would now like to turn the meeting over to Mr. Larocque.
Well, thank you and Thank you again. I want to repeat thanks to our employees For all the hard work and things are Getting a lot more positive after years and we really appreciate you sticking with us And we look forward to a much brighter future. Thank you, operator.
Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.