When Will Northern Drilling Limited (OB:NODL) Breakeven?

Northern Drilling Limited’s (OB:NODL): Northern Drilling Limited operates as a drilling contractor that owns offshore drilling rigs. On 31 December 2017, the ØRE4.76B market-cap posted a loss of -US$6.11M for its most recent financial year. The most pressing concern for investors is NODL’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for NODL’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Northern Drilling

NODL is bordering on breakeven, according to analysts. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$111.00M in 2020. So, NODL is predicted to breakeven approximately 2 years from now. In order to meet this breakeven date, I calculated the rate at which NODL must grow year-on-year. It turns out an average annual growth rate of 44.96% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

OB:NODL Past Future Earnings Mar 12th 18
OB:NODL Past Future Earnings Mar 12th 18

I’m not going to go through company-specific developments for NODL given that this is a high-level summary, but, bear in mind that typically an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing I’d like to point out is that NODL 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 NODL 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:

There are key fundamentals of NODL which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at NODL, take a look at NODL’s company page on Simply Wall St. I’ve also compiled a list of key factors you should further research:

  1. Valuation: What is NODL 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 NODL 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 back ground.
  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.