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Boart's long year
AdvertisementEmail Print Normal font Large font AdvertisementMichael West
November 24, 2008 - 11:50PM
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The question must be put: is the name of the largest drilling company in the world spelt incorrectly? Are the letters 'a' and 'r' around the wrong way?

Boart Longyear was only floated in April last year at $1.85 a share, and briefly rose to $2.75 at its peak. Lately, it hovers at 24 cents, despite recent guidance for a 22% rise in revenues this year.

True, times are tough in resources. Yet weaker commodity prices hardly account for such a dramatic drop in the stock price.

Chief operating officer Craig Kipp sold half his 10 million share holding back in September at $1.95 - not a good look - and the company has pulled down the shutters on analysts wanting to know what is going on.

Either Boart is one of the greatest bargains about or its managers are not telling us something.

Perhaps a little ray of light may be shed at a briefing slated for December 2. However, if there is something material afoot Boart would have an obligation to declare it, not next week, but when it became aware of the change in circumstances.

The share price surely suggests, both by price and volume, that somebody seems to know something.

Best guesses

Best guess is it may be some issue related to currency and interest rate swaps. In the half-year accounts, there is nothing about currency or interest rate hedges.

There is mention, though, of these hedges in the 2007 annual report - but no numbers. As Boart reports in US dollars and apparently operates in 40 countries (supplying services, components and parts to 100 countries) there will be understandable volatility in its accounting.

Volume of drilling contracts with explorers is said to be down 20% across the sector. And hedges will be critical as the Australian dollar was 96 cents in June but is now 63 cents.

Perhaps the ASX knows what is going on because it has not issued Boart with a price query.