Geodrill shares experienced a significant drop after the company announced its decision to suspend its dividend. The drop in stock was influenced by a noncash credit loss provision and an expected loss in the third quarter.
Negative Financial Impact
At 10:54 a.m. ET, the stock plummeted by 24% to 1.80 Canadian dollars ($1.30) per share. Geodrill, a Canadian drilling services company, released a statement on Monday, disclosing that it anticipates an unaudited noncash credit loss provision worth approximately $3.6 million on a pre-tax basis. This loss provision is attributed to the aging of trade receivables for certain customers.
Decreased Revenue Projection
Geodrill also expects unaudited revenue of about $30 million for the current quarter, primarily due to slower-than-expected drilling activity in West Africa and South America. This projection is lower than the company’s revenue from the third quarter of last year, which amounted to $35.2 million.
Adverse Impact on Earnings
The negative financial developments will directly affect Geodrill’s earnings, earnings before interest, taxes, depreciation and amortization (EBITDA), and earnings per share (EPS). Consequently, the company anticipates recording a net loss for the third quarter.
Dividend Suspension and Future Review
In response to the challenging financial circumstances, Geodrill’s board of directors have unanimously decided against paying its second semi-annual dividend this year. The company plans to review its position on dividend payments again in 2024.