OREANDA-NEWS. May 20, 2010. Eurasia Drilling Company has released a 1Q10 operating update and some Q1 IFRS financials (the company generally posts only half-year results). Its revenue rose 27% YoY to USD388m, while its EBITDA margin from 18% to 23%. Investments amounted to USD21m (-9% YoY), reported the press-centre of OTKRITIE Financial Corporation.

View: In 2010, EDC management anticipates revenue of at least USD 1.7bn (+23% YoY), with an EBITDA margin of 22-23.5%. In order to achieve these targets, EDC needs to demonstrate stronger operating and financial results for the next few quarters. Its 1Q10 operating results were less impressive because drilling volumes fell 5% YoY to 855,000 meters. Severe winter conditions have had a negative effect on the company’s drilling business. All in all, we expect that EDC will ramp up its drilling volumes by at least 4% YoY to 3.9m meters, exceeding pre-crisis drilling volumes by 2.6%.

Valuation and Action: We view this news as neutral for the stock. EDC’s stock trades on a 2010 P/E of 9.2x, which is a 30% discount to the rest of the oilfield service sector. At present, we have no target price for the stock.