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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everyone. My name is Allen Chan from Bridge Street Capital. Thank you for joining us this morning for Mitchell Services Third Quarter Update. Just [indiscernible] we are having some issues with the cameras. So you won't be able to see Andrew or Greg, but you should be able to hear them loud and clear. I will address any Q&A at the end. So if you could just type questions in the Q&A section, and then I'll address them at the end. Andrew Elf, MD; and Greg Switala, CFO, is joining us for the presentation. Andrew, over to you. Thank you.
Thanks, Allen. And can you hear me okay, just to confirm?
I can hear you loudly. Thank you.
Okay. Thanks, Allen, and welcome, everyone. Thanks for your interest in the company. Probably not a bad thing that you can't see me, but apologies again for the technical difficulties. Look a quick introduction to the company first off, and then we'll jump into a couple of key points on the quarterly and then I'll open it up for questions. So in regards to Mitchell Services, for those that don't know and are new to the story, the brand itself has got over 50 years of history in the mining services sector. The current business as it stands today, 55% of the revenue from surface operations, 45% from underground operations, 50% of revenue from gold, 35% of revenue from metallurgical coal and the balance of revenue from copper, lead, zinc, other. No exposure to lithium or nickel, predominantly, WA commodities.
And importantly, 90% of our revenue is coming from global major miners and from us operating on their mine sites, which obviously, a large ongoing operations through the cycle at the lowest on the cost curve. Just jumping into the quarterly, I've got a handful of points to make, and then we'll really just open it up for questions and see what people would like to talk about. But look, a solid quarter for Q3. I think limited wet weather, which was good. We had a timely restart after Christmas and got back out there up and running fairly quickly, which was again good. If you think about other Q3-s, you can have more bad weather, you can go out a little bit slower. So certainly, it was a good one for us from that perspective and the EBITDA percentage for the quarter would support that. Some of the larger contracts that we needed to win this year have been rewon, which is good when we sort of start turning our attention a little bit more now to the rewins required in FY '25. The business itself, as the numbers would show a relatively steady state, which was good for cash conversion. Net debt reduction has continued and now $7.9 million, which is extremely pleasing, obviously. We've effectively achieved our target of less than $15 million net debt by 30th of June, which is fantastic as well. And again, make the point as we do in the quarterly that the company remains committed to its capital management objectives. So look, Allen, there really the main points I wanted to make very quickly at the start, and we'll let you -- let us away with some questions.
All right. Fantastic. So for the investors of [ joint site ] again, any questions you would like to raise, please kickoff in the chat. But, I guess, from [indiscernible] kick it off. I guess, you spoke about an increase in rigs. Is that -- where is that coming from? And do you see a few more rigs being brought on?
Thanks, Allen. Look, I think we talk about the, obviously, the rig count in there and we talk about movement and shift count and that the business is fairly steady state. I'd expect that to continue as we move forward. I'm not really seeing any huge increases or any huge decreases at the current time. The business is sort of ticking along nicely. I mean obviously, we've got 93 rigs in the fleet. We've got sort of mid-70s there working on average. We'd like to have a few more out. There's some good opportunities in hand, but you've got to win those before you can put rigs out. But as we've always said to people, we'll be patient, we'll be disciplined. We'll put rigs out at the right percentages. That justifies the returns. So we're really happy with how the business is going. It's been a good year through the 3 quarters year-to-date with all of those key metrics heading in the right direction. We're just going to bring it home now with a decent last quarter.
I'm Daniel Seeney. Gold prices have been extremely strong particularly in Australian dollars. Are you seeing this flow through to any additional demand at this point.
Yes, it's really interesting. Isn't -- I mean, gold is half of our contract book, as I said, and historic high Aussie dollar gold prices. But to be honest, no, I think we haven't seen it come through yet. So there's certainly, I think, upside if and when it may. Really, what we've seen so far with our clients is they're obviously very profitable and producing some good cash. Obviously, we're working on the mine sites. And they're really -- they've had, I would say, a fairly strong level of activity and a fairly strong level of demand for drilling services for quite some time now, and that's continuing. We really haven't seen them pick up the phone and say, all right, I need not these as many rigs because it's -- we're shooting the lights out as such. So -- but at some stage, you would think that the worm is going to turn and that demand, given that gold price will pick up. Obviously, junior equity raisings are always a good indicator. But certainly, I'd like to think of it stays at this level. Those phone calls may start coming.
Question from [ Shaw ]. Can you provide an update on some of the new contract tender opportunities, what's been won, what's been lost and the reasons why you've lost them?
Yes. Look, I think I'll probably answer that question in 2 parts. Firstly, rewins. So a big focus of the team every year is to rewin any existing contracts that come up. Typically, about 1/3 of our contract book would roll every year. Typical contract length is 3 years. And therefore, there's a certain percentage that will come up for renewal. And importantly, for the team, we've had a good year this year in that regard, and we've rewon everything we have to rewin. There's a couple of smaller ones between now and 30 June. But that's it. As far as new wins go, probably won't commentate on this call today in regards to specific tender opportunities themselves, but fair to say there's probably 4 or 5 multi-rig, multiyear tenders in hand right now. And they don't come around every day. It's obviously a lot harder to win new ones than it is to retain the ones you've got if you're doing a good job, obviously. So a couple of those submissions are in. One of them was a loss and there's a couple of others to still go in. So again, you never count chickens before they hatch with those ones, but you'd like to think that you got to at least land one of them. But the one we did lose -- again, I won't say who the client was or whether it was surface underground, et cetera, but it was a Chinese client that is very sensitive to price. And again, I think a very much a price-driven decision rather than quality and value. And as a result, we didn't win that tender. So -- but all in all, there's still some good ones in the pipeline, and we'll give them our best shot.
Another from [ Shaw ]. Consolidation amongst the gold miners, what impact is this like to have on MSV?
Sorry, Allen, could you just repeat the first part of that question, please? I couldn't hear it, sorry.
Consolidation amongst the gold miners, what's the impact for you guys?
Look, it doesn't change a great deal, to be honest. I think there may be times where they get more aggressive on certain assets or less aggressive on certain assets post transaction. Again, if you look at Newmont, Newcrest, they are obviously both of them pretransaction, good clients of ours and obviously, a good client now that they've come together. Sometimes you'll see posttransaction, they take time to assess what they've got, what they're going to keep, what they're going to sell, et cetera. But again, in that portfolio, there's a whole lot of world-class assets that keep going from Cadia to Boddington where we work to the Northern Territory, et cetera. So again -- generally, it doesn't really change things a great deal ordinarily.
Yes. Question from Tom. The working capital build was possibly smaller than we expected. Please, can you comment on that and whether there was any other influence on operating cash flow?
Yes. Thanks, Allen. I think a couple of points worth noting there. The first one being just traditionally and typically -- and Andrew sort of touched on it earlier in his summary. Traditionally, the ramp-up in terms of that third quarter would be far more skewed to March say. And so what I mean by that is it's sort of your EBITDA, your operating rigs in sort of January and February would be lower and then a tick up in March. And in fact, you can see that quite clearly demonstrated on the second page of the quarterly. If you have a look at the number of operating rigs for the prior comparative period, you can see that gray line really tick up in March following a fairly subdued January and February. But positively this year and the lack of wet weather played a part there as well. You can sort of see that we got out fairly quickly in January and then sort of held that level. And so in this business, a steady operating rig count is always going to drive positive cash as opposed to one, like we saw last year with that steep uptick. So that's certainly a reason. And then secondly, as strange as this might sound, you've got that month end. There's a number of public holidays towards the back end of March just with Easter. And again, as strange as this might sound, just depending on what clients choose to do in terms of when to pay given all those public holidays that can drive an increase or a decrease in receivables accordingly and what we saw this quarter, fortuitously, I suppose, is that a large number of those month-end payments were paid pre-Easter Friday as opposed to post-Easter Monday. And I realize that may sound arbitrary but it does make quite a difference. So I think steadiness of operating rigs and earlier remobilizations in January, coupled with that sort of nuance around the Easter public holidays.
Yes. And I mean, just to add to that, Greg, it could have gone the other way. If they had at all paid on Monday, we could have been sitting here saying cash was terrible. But again, they paid pre-Good Friday.
Thanks, guys. Next question from Glenn. Where is the growth coming from? And are you getting lots of inquiries and doing tendering?
Yes. So obviously, the market in which we operate is predominantly Central and Eastern Australia. We will operate in WA, given the right circumstances and the right clients. So we're really focused on our key markets. Obviously, we're #1 in our respective market in Eastern Australia. And similar to the question before, there's been a lot of consolidation in the drilling services sector as well. So we're predominantly focused on operating mine sites in Central and Eastern Australia with multi-rig, multiyear tendering or drilling services opportunities. And we've got a good market share, but there's still opportunities out there for us to win. We've got rigs available to us. As I mentioned previously there, there is a handful of multi-rig, multiyear tenders in hand, and the better the conversion rate is for those, the more rigs we can get out and have running. I should qualify that by saying that we've always said that we'll be patient with deploying our rigs. We don't want to be the biggest company for the sake of being big. We don't want to have all the rigs running for the sake of having them running, right rigs, right clients, right places, right returns, good people, good service, all those sort of things. So there's still opportunities for us to grow in the markets we're in with the rigs we've got. And then secondly, and I've spoken to this a little bit. It's very, very early days, of course. But the government has released the safeguard mechanism legislation in regards to emission reductions, which -- the long short of that is, if you don't reduce your emissions, you'll be paying a tax. And there's certainly some clients that we work for that have spoken about that in their own presentations to the market. And we certainly believe there's an opportunity for us to start drilling in a whole new total available market to assist these clients with reducing their emissions. And effectively, what that means is drilling in open cut coal mines to drain the gas out of the coal in advance of the clients' mining that open cut coal and that will -- that gas can then either be used in haul trucks. It could be used in power plants. It can even be flared and flaring the gas alone reduces the emissions by 25x. So that is a very exciting growth opportunity for the company. It's probably the first time since the early 2000s when coal seam gas started that you're seeing a whole new potential total available market for drilling. But as I said, it's very early days, and it's going to take some time to come on. On a positive note, we have had someone go over to the U.S. We've purchased a rig secondhand. It's on its way. We'll get that rig together, and we're hoping to see that rig add in the first half of the next financial year drilling in that market. And let's hope to get some [ legs ] and we can grow into that as that market grows. So I certainly think the company has got options available to it. And then needless to say, as the balance sheet gets stronger, as the net debt keeps reducing, that alone gives us options. We can go and buy more rigs if we want to take an organic approach, and we can do that with big 4 bank debt from NAB who is our house banker with very good rates, and we do not need to raise capital. We do not intend to raise capital. Alternatively, something else might come up that we're interested in as well. So I certainly think that the company is in the best position it's been since it rekicked off in November 2013. It's sort of taken 10 years to get to a good, strong point where it is now. And really from here, we can be quite smart with the opportunities we take advantage of and really try and drive some shareholder value.
Perfect. Next question is anonymous. Can you talk through the working capital into third quarter? And what can we expect in the short term?
Thanks, Allen. I think just noting the earlier comments around why cash was positive in the third quarter given that lack of working capital requirements and reasons why. So I won't go into that again in terms of the third quarter. What we expect to see in terms of Q4 probably pretty similar, again, my earlier comments, the need for increased working capital investment in this business is generally driven off the back of steep utilization increases. And again, noting Andrew's comments around the business being a fairly steady state, noting, of course, those tender opportunities but assuming none of those transact as such in the months ahead, we expect to see a reasonably steady level of utilization. Therefore, not a significant need for working capital investment, and therefore, a cash conversion ratio that should be pretty similar to current levels.
Thanks Greg. Another question from [ Shaw ]. Can you comment on labor availability and rates?
Yes. We're just going through our FY '25 budgeting process at the moment. So we're really starting to turn our minds to some of those things. So it's certainly a timely question. I want to talk a little bit to the market and what we're seeing. And then, Greg, maybe you can just talk to blended averages and things we're sort of looking at. But look, I think the junior space has been a little bit quiet in regards to drilling services. I think that's taken a little bit of pressure off the labor market, particularly in Western Australia. Some of the people that live in Eastern Australia and work in Western Australia have come back home to the east. So I think at a high level or a more senior level in the business, we've seen the pressure come off a little bit. I think that the pressure for rates to go up has certainly reduced. And I can't see rates increasing much at all, if anything, at those sort of levels. Maybe just with fitting people or mechanics that they're sort of a little bit harder to get and find. And then at the lower end, I think it's -- those people in our business are much closer to the award. So worth remembering with Mitchell Services, no unions in the business, no EBA, all individual contracts. So it's a very good industrial relations mechanism that we work under, but our lower-level employees are closer to the award. And I think if you look at fair work, I think employees and unions want 6, business groups want 2, inflation is running at 4. You probably think that they'll meet the Midland 4s around about the number. So you sort of probably see a little bit more at the lower end and a little bit less at the higher end. And Greg, maybe just talk to the business as a whole, maybe.
Yes, probably not too much more to add to that other than to sort of say if you note some of the comments from the federal treasurer, et cetera, that has sort of support potentially the 4% that Andrew called out. So we're sort of budgeting on the basis that, that increase per the awards and therefore, impacting the lower level of staff will be in the order of 4%. The portion of our staff that aren't impacted by award movements, et cetera, which is more market driven in terms of rates. We really don't anticipate much at all there, given, again, some of the market forces that Andrew spoken about and the fact that in the last sort of 18 months or so, that portion of the labor force has benefited from decent increases. It's probably about 25% of our overall labor force is at that lower end. So, therefore, an overall labor increase of sort of 1.5% or there thereabouts is probably what we're expecting into '25.
A question from Daniel. The fourth quarter last year was very strong, partly due to the high utilization of the 3 large diameter rigs during that quarter. How are those rigs utilized at the moment? And how do you think those margins should track into the fourth quarter relative to the third?
Yes, I'd love to sit here and say we're going to have the same as we did last year in Q4, but we're not -- we've got one of those rigs running or just starting to run, and we've got a second one running. So probably -- we had 3 running full tilt with one in particular on an extremely attractive contract last year versus this year, we've got one running, got a second one starting and the third one will not run in this quarter.
So it's fair to say that we absolutely shot the lights out in that last quarter last year. We're hoping, as Greg said, to sort of have enough solid quarter but it won't meet Q4 last year.
[indiscernible]. Can you provide total rig count and productivity figures?
Yes. So 93 rigs in the fleet. And you can -- you sort of -- the productivity figures you can see there in the quarterly. I'm not going to run through those in detail, but average operating rigs number of ships, revenue, revenue per ship, et cetera. Obviously, they'll move around as things change within the business. But certainly, these reports have been put out for quite some time, and people can certainly go back and have look at how things have moved over time and things like that. But just high level, looking at the business, you've probably seen a bit of a movement from underground to surface in the last 12 months. It probably was 50% surface revenue, 50% underground revenue. It's probably, as I said at the start, 55 surface, 45 underground, and you've probably seen a little bit of movement towards gold and a little bit of movement towards metallurgical coal as well. But certainly, those high-level productivity figures there, you can see are being presented to the market for a long time.
Another from [ Shaw ]. Contract renewals in Q4 and FY '25, how many rigs are up for renewal coming up?
Q4 '24, Allen?
Yes. Yes.
Maybe 5?
Yes, it's negligible. As Andy sort of said earlier, the vast -- the significant majority of contracts requiring a rewin noting that the average tenure is 3 years as has been done recently. So it's negligible in Q4. And given how recent a lot of those roles have been or rollovers have been. Looking ahead into '25, it's still a fairly small -- yes, fairly small percentage.
Yes, that's right. And you have -- we say that 30% rolls on average, and it's always changing as contracts change and terms start, finish whatever. But if you looked at FY '25 in isolation versus previous years. There's less to rewin in '25 than there was to rewin in '24 and '23. And importantly, the work that's been rewon in '23 and '24 has been where we've been resetting rates post the spike in inflation. So it's in a good state where it is right now, the book moving forward.
Question from Alex. Are there any future plans for asset sales given your current drill count?
Look, we always buy and sell assets. And I'll say assets because you've got sort of rigs and trucks and cars and pumps and compressors and boosters and [ lighting ] parts and you name it in this business. We're always buying and selling things. The other thing we'll do is, we'll look at the year ahead. We look at idle rigs and we'll sort of go, okay, well, could we scrap an idle rig and take the parts and then use that to reduce the cash cost on a refurbishment or a rebuild of a rig? So yes, look, we certainly can't definitively sit here and say, yes, we will, but we'll do what's best for the business. Yes, we may sell. But yes, we may use for something else. And yes, we may win something as well. So again, it's a balance between managing your cash, having the capacity or capability to bid tender on new work, look after your existing clients whilst using your capital efficiently and effectively as well. So we certainly do our best on that every day.
Now another question from Daniel. Buyback activity, how are you thinking about this going forward? Should we expect to continue into FY '25? How many shares have been bought back and not yet canceled to date?
To answer the first part of that question, Allen, I think, and I suppose to an extent talking on behalf of the Board, the view has been to stick with the original strategy in the short term, which is return profits to shareholders via dividends. And to the extent that there are surplus asset sales, as Andrew mentioned earlier, then given that ties in with the overall capital management distribute the proceeds from those surplus asset sales in the form of a buyback. So the buyback activity in terms of -- between now and the end of the financial year, probably fair to say, not significant. There is still to target a dividend at sort of similar levels to the interim one based on profitability. But I think it's also fair to say that depending where the share price then ends come the end of this year, to perhaps have a slight rethink just in terms of the proportions there. So perhaps lower the dividend slightly and increase the buyback depending on where the share price is. And that will no doubt be communicated in early FY '25 as part of that overall capital management objective settings. I can't give you the exact number in terms of what's remaining out of that 10%. It's a nonmarket buyback up to 10%. We know we're near 10%. So there's still significant headroom there if that's the way the Board chooses to go. But I think probably fair to say an average purchase price of high 30s. I think somewhere around sort of 38, 38.5 is where we're at currently from a buyback perspective.
Yes. I mean, and all I'd say is just from an internal process perspective, we go through our budgeting. There's a Board strategy session that's held preaccepting the budget, of course, and that's typically where we talk about the year ahead and that sort of thing. And as Greg said, I think we'll come out and communicate at a future point in time regarding the capital management. But I know Nathan is not with us today, but -- and he said it in the past on calls, his view is you've got growth options and debt reduction, and you've got dividends and you've got buybacks and you turn the dials on each one of those based on the best outcomes for the shareholders of the business. So certainly, I think, at a future point in time, as Greg said, we'll come out and communicate some of those things.
A question from [ Carls ], obviously, on tenders. What are you doing around tenders that you are not incumbent?
Look, it varies. And the reason I say that is you'll have a tender that might be a couple of hundred thousand dollars worth of drilling. It could be $1 million worth of drilling. It could be $10 million of drilling, it could be $50 million of drilling. So your conversion rates are different in different sizes of projects. The other thing that varies is how aggressively you bid those respective projects. The other thing that varies is have you got availability for that type of project when it comes up, a rig nearby, all those sort of things. So it's a tough one to give a straight out answer to. It will also depend on the client, the commodity, the ground, all of those sort of things, some clients, as I said, buy on price, some buy on value, do you need to have a higher Headcount in all these sort of things? So it really does depend. But typically, I would say that if you've got 4 multi-rig, multiyear tenders in hand, you'd like to try and win one out of 4.
Another question from Daniel. [indiscernible] back to labor costs. So -- on cost inflation, how are you seeing labor market dynamics in some of the weaknesses in some pockets in WA mining, such as lithium and nickel? Any improvement in labor availability starting to come through? And what sort of wage inflation is likely to still get worse over the next 12 to 24 months? Maybe just to recap.
Yes, I think we probably answered most of that, Allen, to be honest. I think [indiscernible] there's a [ cost ] of thousands available. It's just eased, and we've got the people that we need to do what we have to do. And if we win any of the jobs that we're currently tendering on, I've got no concerns either. So I think we're in good shape in that regard. Importantly, a majority of our contracts have risen 4 clauses. So on the anniversary date of the contract, it's generally an industry style calculation that allows us to increase the rates. And again, just given where inflation is in the current environment, it is fair to say it's easing in our sector. And our view is that any indices style calculation rate increases should cover our respective cost increases.
Another question from Alex again [indiscernible] but he's asking what is the company's plans for net debt given already under the target of $15 million?
Look, we -- that we're going to sit down and talk about that with the Board as we go through the planning session. I mean, $15 million was our targeted number by 30 June. It's pleasing to be where we are given the fact we've returned over $10 million to shareholders as well, including the recent dividend. But it's a question of where to from here, I think, a drilling services company should be run with a conservative balance sheet. I think you can certainly take on debt to fund growth or opportunities and with a view to bringing debt back down. So again, I think, we go through our planning process. We have a look at the year ahead. We come out and communicate with people and let them know where to go from here. But I think fair to say unless we take advantage of growth opportunities, fairly conservative in nature.
Question from Mark on rigs utilization again. So what was the current level of competitive intensity? And what is the current level of surplus unused rigs at this time?
Yes. No one really publishes, this is how many rigs there are and this is how many are running and that sort of thing. As you sort of got to grab little bits of information from here, there and everywhere and make a few assumptions. But I think probably the best way to look at the market is -- I sort of spoke to us being strong in the East. You've seen Mitchell Services over the last 10 years, consolidate a number of businesses being Drill Torque, Deepcore, Nitro, Tom Brown and Radco. And in the West, similarly, you've seen Parenti take DDH, Strike, Ranger and Swick.
So you've seen a significant amount of consolidation in the East through Mitchell Services and a significant amount of consolidation in the West through Perenti. That business over there in the West is a very strong #1 in its market. And so again, I think, it's harder to start a new drilling company now. There's a lot more red tape, green tape capital costs, et cetera. So you've seen consolidation in this sector. It's harder to start up and grow a drilling business, even smaller clients' expectations of what they expect of a drilling company have increased in regards to quality as social license and how you act and perform in a community and with landholders becomes more important. So I certainly think the competitive profile of the drilling services' sector has improved. No doubt about that. And I think that everybody wants to try and make a dollar and just -- and have a good company, a stronger balance sheet and do a good job. And I think we're certainly not seeing people out there bidding irrationally at all, which is good. So it's competitive, absolutely, it's competitive. It's not like there's never anybody there to tender against you and those sort of things, but it's more rational than perhaps it has been at previous points in time.
This one for you Greg, just to -- you can pass this one so try and [indiscernible]. With EBITDA increasing due to heavily reduced depreciation over the last year, is the current EBITDA level expected to be maintained going forward or depreciation expense is expected to increase materially in the coming financial years?
Yes. Yes. So I suppose just to clarify, obviously, the EBITDA is prior to any depreciation. So depreciation, amortization is I suppose, not applicable to the increase in EBITDA. So if we do look at the increase in EBITDA, which has gone from $25 million to $30 million comparing the 2 periods ended March. The reason for that increase and really all the things that Andrew has touched on earlier is an increase in revenue, better rates and a corresponding increase in EBITDA percentage or margin. So that's the first point. There was a $4.5 million improvement there driven by items excluding depreciation and amortization. If you then have -- if you go down to the EBIT line, which has obviously increased from $2.3 million to $9.8 million, which is a $7.5 million increase in total. That increase is really a result of the two things. One, that EBITDA improvement of $4 million; and two, you can sort of back calculate the numbers, there's a DNA improvement there embedded in there of about $3 million. That improvement is obviously driven by lower debt levels, which drives the interest cost down as well as normalized CapEx levels over the last 2 years or so, which is resulting in depreciation beginning to normalize. Subject to what may or may not transpire with some of the growth opportunities that Andrew mentioned earlier, if we just have a look at this business steady state, then these depreciation levels that we're seeing now are absolutely sustainable, and it wouldn't result in an increase. But I suppose in summary, that the point there is that, that EBITDA or the EBIT improvement was driven by not just a decrease in depreciation, but also by an increase in EBITDA, which had nothing to do with depreciation, if that makes sense.
No. Great. Next, and also part two here. It's about rigs here, Andrew. So are there any expected purchase of new rigs? Or is the fleet of sufficient quality and quantity, and also that moat into the specialized drilling rig required for the safeguard mechanism you have mentioned. So I guess...
Yes, the safeguard mechanism opportunity is a specialist rig that we'll need to get for that type of drilling. It's effectively taking a lot of the smarts from our underground business and our surface business, mixing them together and then using the rig that we bought. So probably not going to say too much about that rig that we bought at this point in time. We want to get a little bit further down the track with everything. But importantly, what we did do when we went to the U.S. and how to look around is we looked at that rig and we bought it secondhand. We probably saved well over $0.5 million of what it would cost to buy new. And the good thing is there's a number of them available in the U.S. and generally always is. So if that market does grow, if that market does get busy, we've got the ability to buy these rigs at a good price with a reasonable length lead time. It's not going to blow out and certainly a very good rig for us moving forward. So start with one. And then we'll sort of go from there and see how that market develops. As for other purchases, yes, look, we might buy rigs here and there. But again, I can't see unless there's something that comes up. We're not going to make a huge demand, I wouldn't think.
Question from [indiscernible]. What is having to drill rates? Are they stable now or still rising?
Yes, flat. Flat with increases for [ indices ] calculations on contract adversaries.
Sure. There's no questions I have at the moment. If there's any others, please feel free to add to the chat now. Otherwise, if you have any more, feel free to reach out to myself, and I can coordinate with Andrew and Greg and get them to revert ASAP.
All right. Well, thanks, Allen, for having us signed. Obviously, we're covered by Morgan's, we're covered by QValue, there's papers out there. Encourage people to read those if they're interested in the company, and thanks for your interest and your questions.
No. Thank you Andrew. Thanks, Greg. This is recorded, guys. So I will send out the recording post after this afternoon. Andrew and Greg, thank you again, and everyone on the call. Thanks.
Thanks, Allen.
Thank you.