Mitchell Services Posts $11.8m EBITDA and Near Debt-Free Balance Sheet in Q1
Mitchell Services Limited delivered a robust Q1 FY26 performance, marked by a 68% jump in EBITDA and a dramatic 93% reduction in net debt. The company’s strategic investment in a decarbonisation joint venture signals a forward-looking growth trajectory.
- 68% increase in quarterly EBITDA to $11.8 million
- 93% reduction in net debt to $0.9 million
- Operating cash flow up 70% to $9.8 million
- Investment in Loop Decarbonisation joint venture with Sumitomo Corporation
- Average rig utilisation at 62 out of 90 rigs, indicating upside potential
Strong Financial Momentum in Q1 FY26
Mitchell Services Limited (ASX, MSV) has kicked off FY26 with a striking financial performance, reporting a 68% increase in quarterly EBITDA to $11.8 million compared to the same period last year. This surge was accompanied by a 70% rise in operating cash flow, which reached $9.8 million, underscoring the company’s improved operational efficiency and cash generation capabilities.
The company’s net debt position has also seen a remarkable turnaround, plummeting 93% to just $0.9 million from $8.4 million at the end of June 2025. This substantial deleveraging not only strengthens the balance sheet but also provides Mitchell Services with greater financial flexibility to pursue growth or capital management initiatives.
Operational Drivers and Market Context
Improved weather conditions and fewer client-related delays were key contributors to the enhanced performance this quarter. Additionally, projects that had previously been in ramp-up phases during FY25 have now transitioned to steady-state operations, further boosting earnings stability.
Mitchell Services operates a fleet of 90 rigs, with an average of 62 rigs active during Q1. This utilisation rate suggests significant room for growth should demand increase, particularly in the gold sector where drill rig demand is showing early signs of strengthening amid record-high gold prices. Conversely, demand in the steelmaking coal sector, especially in Queensland, remains subdued, tempering upside in that segment.
Strategic Investment in Decarbonisation
Beyond its core drilling services, Mitchell Services has made a strategic $1.5 million equity investment in Loop Decarbonisation, a joint venture with Sumitomo Corporation. This move aligns the company with emerging environmental trends and positions it to benefit from growing demand for decarbonisation solutions. The Loop JV is progressing well, with new customers engaging for advisory services and operational milestones approaching.
Sumitomo’s investment not only validates the potential of the Loop venture but also provides Mitchell Services with a foothold in a sector likely to gain prominence as industries worldwide intensify their focus on sustainability.
Looking Ahead
With a diversified revenue base, a strengthened balance sheet, and operational leverage through underutilised rig capacity, Mitchell Services is well positioned to capitalise on any uptick in sector demand. The company’s ability to convert earnings into cash and reduce debt rapidly offers a solid foundation for future growth or shareholder returns.
Bottom Line?
Mitchell Services’ strong start to FY26 sets the stage for growth, but future gains hinge on rig utilisation and sector dynamics.
Questions in the middle?
- Will rig utilisation improve significantly to drive further earnings growth?
- How will demand trends evolve in the steelmaking coal sector amid subdued activity?
- What milestones and customer acquisitions can be expected next from the Loop Decarbonisation JV?
