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Major Drilling: The Turnaround Gains Traction

Philip MacKellar profile picture
Philip MacKellar


  • Major Drilling is an industry leader with a unique business model, strong balance sheet, and good valuations.
  • Recent results and outlook suggest the company could be turning the corner.
  • Going forward look for further revenue growth, profitability, and higher utilization rates to determine if the turnaround is legitimate.


Major Drilling (OTCPK:MJDLF) is a drilling service company for the mining industry. It is listed on the Toronto Stock Exchange and is headquartered in Moncton, New Brunswick. Major Drilling is held within the Vice-President’s Portfolio here at Contra the Heard. The holding was last added to in December 2018 at $4.51 CAD, though the average cost is $5.51 CAD, meaning the position is currently underwater. However, although it is down versus the average purchase price, the shares appear cheap, and the company may finally be turning the corner after reporting losses for years.

Corporate Characteristics and Investment Rationale:

Major Drilling is a well-managed industry leader with a unique business model and corporate strategy. The company is globally diversified, has a modern and well-maintained fleet, and has deep relationships with both senior and junior miners. Their primary focus is specialized drilling, which management defines as “exploration or definition drilling, with significant barriers to entry, such as deep-hole drilling, directional drilling, and mobilizations to remote locations or high altitudes.” As they go on to note, the above specializations demand higher pricing and allow for wider margins.

In 2014, Major acquired Taurus Drilling to better endure the mining downturn and to expand its conventional and underground drilling services. These segments were indeed more popular than specialized drilling during the commodities selloff. While this shift to lower margin services hurt the income statement, it also grew Major into a turn-key service provider during a period of reduced specialized drilling. In the latest quarter, for example, 57% of revenues were generated from specialized drilling versus around 50% at the cycle low in late 2016, and down from roughly 75% in the period before Taurus was purchased.

The corporate strategy prioritizes employee safety, margins over volumes, and customer satisfaction via strong field and equipment support. It also empowers

This article was written by

Philip MacKellar profile picture
Philip MacKellar is an analyst, portfolio manager, and investor at Contra the Heard Investment Newsletter. He has been with the company since 2011 and has been investing since 2004. The newsletter’s primary focus is on contrarian and value-oriented investment opportunities traded in the United States and Canada. In addition, Philip sometimes engages in M&A, other special situations, and holds bonds, preferred shares, and convertible securities. Contra the Heard is a Toronto based company and was founded in 1995. Philip also blogs about personal finance topics on his own website called mymoneymoves.ca in his free time. You can also follow Philip at the Globe & Mail, on Twitter @Rallekcam, and catch him on YouTube at Contra the Heard.

Analyst’s Disclosure: I am/we are long MJDLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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