Northern Drilling Ltd.'s (OB:NODL) Profit Outlook

With the business potentially at an important milestone, we thought we'd take a closer look at Northern Drilling Ltd.'s (OB:NODL) future prospects. Northern Drilling Ltd., a drilling contractor, focuses on acquiring and operating offshore drilling rigs for oil and gas industry. The company’s loss has recently broadened since it announced a US$11m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$13m, moving it further away from breakeven. Many investors are wondering about the rate at which Northern Drilling will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Northern Drilling

Northern Drilling is bordering on breakeven, according to some Norwegian Energy Services analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$31m in 2022. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 76% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Northern Drilling given that this is a high-level summary, though, keep in mind that by and large energy companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Northern Drilling has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Northern Drilling, so if you are interested in understanding the company at a deeper level, take a look at Northern Drilling's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

1. Valuation: What is Northern Drilling worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Northern Drilling is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Northern Drilling’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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