Mitchell Services Achieves 67% EBITDA Surge in FY26 Amid Strategic Shift to Gold and Rig Fleet Expansion

Robust Q4 Performance Propels FY26 EBITDA to $42.8 Million

In Q4 FY26, Mitchell Services posted $56.5 million in revenue, a 12% increase year-on-year, alongside EBITDA of $10.2 million, up 32% from the prior year’s corresponding quarter. The quarterly EBITDA margin improved to 18%, reflecting enhanced operational efficiency driven by the company’s strategic shift to higher-margin metalliferous and gold drilling projects. Operating cash flow for the quarter hit $12.3 million, yielding a cash conversion ratio exceeding 120%, underscoring strong earnings-to-cash conversion capabilities.

For the full FY26 period, EBITDA surged 67% to $42.8 million from $25.7 million in FY25, with an EBITDA margin expansion to 20.6% from 13.1%. This growth was fueled by increased revenues and operational leverage amid evolving commodity exposure. Earnings before tax skyrocketed by 2,744% to $20.8 million from $0.7 million, highlighting significant bottom-line improvement. The company anticipates profit after tax of approximately $15.2 million once tax finalizations are complete.

Strategic Commodity Shift Reduces Queensland Coal Reliance

A key highlight of FY26 results is Mitchell Services’ successful transition away from declining Queensland coal operations toward higher-margin metalliferous and gold sectors. Facing substantial revenue declines from Queensland coal in FY25, management executed a deliberate diversification strategy, expanding metalliferous exposure and entering new geographic markets to reduce single-commodity dependency.

By FY26 end, gold accounted for 61% of revenue, with coal reduced to 30%, marking a significant repositioning. This shift drove a remarkable increase in annualised return on invested capital (ROIC) to 25.2% from 2.0% in FY25. The operating rig count bottomed in April 2026 following expected coal rig demobilisations, with rig activity steadily rising thereafter due to new contracts and expanded scopes, signaling the transition’s successful completion and entry into growth.

Rig Fleet Expansion and Growth Outlook for FY27

Mitchell Services closed FY26 with 65 operating rigs, and management anticipates continued rig count growth throughout H1 FY27, supported by recent contract wins and scope expansions. The rig count is a crucial indicator of revenue capacity and utilisation in drilling services. The FY26 average rig count was 61.5, down from 63.2 in FY25, reflecting coal rig demobilisations primarily in H1 FY26.

The increase from an average of 61.5 rigs to 65 rigs at year-end demonstrates building momentum. Despite fewer average rigs, revenue per rig rose 8.4% to $3.373 million in FY26 from $3.112 million in FY25, driven by higher-margin gold and metalliferous work. With the April 2026 low behind them, management sees strong visibility for further rig count increases in early FY27.

Balance Sheet Strengthened to $3.5 Million Net Cash Position

Mitchell Services transformed its balance sheet in FY26, shifting from $8.4 million net debt at 30 June 2025 to a net cash position of $3.5 million at 30 June 2026—a 142% improvement. The net cash comprises $12.1 million in cash offset by $8.6 million in equipment finance debt. This enhanced financial position provides flexibility for growth investments, disciplined capital management, and shareholder returns.

Strong operating cash flow of $37.4 million in FY26—more than double FY25’s $17.9 million—and improved cash conversion ratio of 87.4% (up from 69.8%) drove this balance sheet turnaround. Capital expenditure was controlled at $21.3 million, marginally higher than $20.5 million in FY25, reflecting prudent investment in rig fleet and capacity to support growth. Management describes the net cash position as offering "optionality and flexibility" for capital management and expansion.

Loop Decarbonisation Unit Advances with New Drilling Contract

Mitchell Services’ Loop Decarbonisation unit, specializing in drilling and in-field carbon storage services, commenced drilling for "customer two" during FY26 Q4, providing full in-field services. Early project indicators are positive, though it remains in initial stages. This marks a key step in commercialising Loop beyond advisory roles.

Loop continues to attract client interest for advisory services, driven by increasing awareness and regulatory pressures related to safeguard mechanism liabilities. While early-stage, Loop represents a strategic growth opportunity amid rising decarbonisation demands across Australian industries.

Revenue Growth and Operational Efficiency Gains

Total revenue for FY26 reached $207.4 million, up 5.5% or $10.8 million from $196.7 million in FY25. This modest headline growth masks strong underlying performance amid sector transitions and rig count reductions. Shifts worked increased 1.7% to 35,999, indicating stable operational activity despite strategic repositioning.

Revenue per rig improved 8.4% to $3.373 million in FY26 from $3.112 million in FY25, reflecting higher-margin gold and metalliferous work. EBITDA margin expanded from 13.1% to 20.6%, and ROIC surged from 2.0% to 25.2%, confirming the financial benefits of the company’s commodity mix realignment beyond top-line growth.

Capital Management and Dividend Outlook

The Board is scheduled to approve FY26 financials and consider capital management in August 2026. Given strong earnings and balance sheet improvements, it expects to declare fully franked dividends from FY26 profits, signaling confidence in earnings sustainability and commitment to shareholder returns.

Management aims to balance maximizing shareholder cash returns, pursuing growth opportunities amid a growing pipeline, and maintaining prudent debt levels. The $3.5 million net cash position offers flexibility to determine dividend levels without compromising growth funding or conservative leverage. The improved earnings base, with FY26 EBT of $20.8 million and expected PAT of $15.2 million, supports sustainable dividend distribution compared to marginal FY25 profits.

Sector Outlook and Growth Drivers in Metalliferous and Gold Drilling

Operating within Australia’s contract drilling sector, Mitchell Services benefits from commodity exploration, capital investment cycles, and mining operational needs. Its strategic pivot to gold and metalliferous sectors positions it to capitalize on rising gold prices, strong demand for copper and lithium driven by energy transition, and ongoing mining investments.

The shift away from coal aligns with broader Australian trends, as coal faces pricing and regulatory challenges while gold and metalliferous sectors enjoy favorable market conditions and sustained exploration funding. Management’s rig count growth outlook for H1 FY27 is supported by an expanding opportunity pipeline and geographic diversification beyond Queensland, reducing concentration risk and enabling multiple growth avenues.

Execution Risks and Commodity Price Sensitivities

Despite FY26 gains, Mitchell Services faces risks typical of contract drilling and commodity markets. Exposure to commodity price volatility and exploration spending cycles could impact demand if gold prices fall or budgets tighten. The strategic shift concentrates exposure in gold and metalliferous commodities, which remain cyclical. The Loop Decarbonisation unit, though promising, is early-stage and may encounter technical, regulatory, or competitive hurdles.

Operational risks include integrating new contracts, maintaining service quality amid rig count growth, competitive pricing pressures, and cost inflation risks. The strengthened balance sheet offers a buffer, but investors should monitor rig counts, bid pipelines, and commodity trends to gauge whether FY26’s growth momentum sustains into FY27.