Disclosure: I own shares in GEO. I am not a professional. Please do your own due diligence. Price: $3.61 CAD / $2.52 USD
MC: 127 million USD
EV: 113 million USD
1-year performance: +36%
Geodrill reported Q3 2025 results on November 13 before market. Results were
weak and below my expectations, driven entirely by margin compression and heavy cost absorption tied to the South American expansion. The stock was initially down more at the open and has since recovered. It’s down 1-2% at time of writing.
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Quarter Recap
Results vs Last Year
- Revenue: $39.0M (+14%)
- Gross profit: $2.36M (vs $8.35M)
- Gross margin: 6% (vs 24%)
- EBITDA: $4.3M (11% margin) vs $7.6M (22% margin)
Sequentially, revenue was down 23% vs Q2 due to wet season impacts in West Africa and the seasonal shutdown at high-altitude sites in Chile.
Regional Performance
West Africa The biggest drag (~66% of YoY gross margin decline):
- Wet season (fewer meters)
- Higher wages implemented earlier this year
- Mix shift toward more core drilling
- Ghana CEDI appreciation (15–16 → 11–12 per USD), which inflated USD-reported costs
Management expects a strong Q4 in Ghana and a post-election ramp in Cte d’Ivoire.
Egypt (MENA) Down year-over-year (17% of margin decline) due to lower activity.
Multiple surface programs restart in Q4.
South America The remaining ~17% of margin decline.
GEO doubled its SA rig count (9 → 19) and absorbed heavy onboarding, training, safety, and mobilization costs.
The large Chile job suffered delays and low drilling time.
The high-altitude job only drilled for ~2 weeks in the quarter.
Revenue in South America increased from
$0.7M to $6.6M, but cost absorption led to a
gross loss in the region.
Balance Sheet & Cash
- Net cash: $14.8M (excluding leases)
- GEO still has:
- $9.5M available on the Medium-Term Loan
- $6M on the revolver
Capex in Q3 was $5.9M (fleet/tier-one site builds in Chile).
Relevant Data Points
- Total rig count: 98 owned, 96 available + 1 rented = 99 rigs total
- SA rigs: ~20, with ~15 currently active
- Commodity mix: ~80% gold / 20% copper
- Q4 utilization so far: 72% → trending toward 75%
- Expect 80%+ utilization in Q1/Q2 next year (historical peak periods)
- Customer base remains diversified: majors/intermediates now > juniors
- Receivables aging: 16% >90 days; ECL reserve ~$2M
- Multi-year, multi-rig contracts continue to anchor future revenue (3–5 year visibility)
Conference Call Notes
Context to the weak quarter
- Q3 was “a year of two halves” and a “short-term cost absorption quarter” as the company executed its South American expansion.
- CEO emphasized that they are investing to outperform.
- Confident margins will return.
South America
- Expansion doubled rig count; onboarding and certification required 2–3 months per rig.
- Large Chile job delayed its start (safety onboarding, client protocols).
- High-altitude program was nearly shut all quarter; only drilled late September.
- All major rigs are now drilling in Q4, with two significant jobs fully operational.
Management strongly expects:
- Substantial revenue increase in Q4 from SA
- Sequential margin recovery as fixed costs normalize
West Africa
- Wet season hit Ghana, Cte d’Ivoire, and Senegal simultaneously.
- Wage inflation and CEDI appreciation amplified the impact.
- Guided to “extremely busy” Q4 in Ghana; Cte d’Ivoire to rebound post-election.
Egypt
- Low activity in Q3.
- Several surface programs restarting — should produce a Q4 margin uplift.
Utilization Trends
- Group utilization: north of 70%, trending toward 75% into late November.
- Expect 80–83% in Q1 and Q2 — GEO’s historically strongest quarters.
Peru Exit / Chile Focus
- GEO will wind down Peru to focus entirely on Chile.
- Long-term strategy is to build a Tier 1, multi-rig presence in Chile for copper.
Capital Allocation
- Dividend: only when earnings return.
- NCIB: used as a floor, not for aggressive repurchases.
Valuation
Geodrill is trading at about 3.5x EV/EBITDA on a trailing basis.
Given the temporary Q3 margin compression, trailing numbers may not be representative of the business moving forward.
I think we are under 3x EV/EBITDA on a forward basis.
Closing Thoughts
The quarter was weaker than I was expecting. I had expected a tough quarter seasonally, but there were quite a bit of extra costs this quarter that I did not account for. Having said that, they are positioned well as demand for drilling should be strong moving forward.
I continue to hold my position.
Thanks for reading my work.
Dean
long GEO.to