Drilling contractor and parts supplier Imdex Limited (ASX: IMD) has reported a solid 14% growth in its Oil and Gas division to a record $38.2 million, offset by a continued slide in revenues (down 38%) to $63.7 million within its Minerals division. Overall group revenue declined 25%.
The strength of the Oil & Gas division appears to have pleased investors with the stock gaining over 12% after the results were released. However, while the growth in the Oil and Gas division is pleasing, it is still a significantly smaller contributor to the group than the Minerals division, thus the division was unable to fully offset the decline in Minerals. This was apparent from the underlying EBITDA loss of $100,000 which excludes a $20 million profit on the partial sale of Imdex's holding in Sino Gas and Energy.
Foolish takeaway
Imdex's share price is down around 67% over the past year and fellow drilling company Ausdrill Limited (ASX: ASL) is down around 70%. While it is likely that after the massive hit to the share prices of mining services companies there are some bargains to be found, investors need to be very selective in their choices and may be better off waiting for more sustainable signs of life in the sector.
