$31.4 million revenue marks AJ Lucas drilling rebound in first quarter

Drilling recovery restores Australian profitability

AJ Lucas Group Limited (ASX:AJL) has put the previous quarter’s operational disruption behind it, with Australian Operations EBITDA recovering to $6.3 million in the three months to 30 September from a $1.2 million loss in the June quarter. Revenue reached $31.4 million, up from $24.0 million in the prior quarter, as drilling activity improved after geotechnical issues disrupted a key client’s underground longwall operation.

The rebound is meaningful, but it is not yet a return to last year’s level. Quarterly revenue was down from $35.7 million, while Australian EBITDA fell from $7.9 million. AJ Lucas described the result as a “robust beginning to the year”, but the comparison shows that the business is recovering from a weak base rather than accelerating across every measure.

Settlement distortion fades from group earnings

Group EBITDA came in at $6.0 million, compared with $32.6 million in the same quarter last year. That headline decline is heavily distorted by the prior year’s $25.9 million UK dispute settlement, which was included in last year’s result. Excluding that settlement, prior-year quarterly Group EBITDA was $6.7 million, putting the latest figure slightly below the underlying comparison.

The UK business remains constrained by the hydraulic fracturing moratorium, which is still in force. AJ Lucas said it was pursuing conventional gas opportunities on onshore licences unaffected by the moratorium, while restoration continued at the Preston New Road site and the Elswick conventional gas well continued generating revenue. The company’s earlier £12.5 million UK settlement explains why the prior-year group comparison looks unusually strong.

Cash generation and borrowing remain the pressure points

Improved EBITDA did not translate into positive operating cash flow. AJ Lucas used $4.6 million in operating cash during the quarter, primarily reflecting increased drilling activity, and spent a further $3.2 million on property, plant and equipment. Financing activities provided $5.5 million after $35.2 million of borrowings and $29.6 million of repayments, leaving cash and cash equivalents at $5.9 million compared with $8.3 million at the end of June.

The group reported $98.1 million of drawn financing facilities against total facilities of $104.5 million, leaving $6.4 million unused. On the company’s prescribed ASX calculation, cash plus available facilities represented $12.3 million, or 2.6 quarters of funding at the quarter’s operating cash usage. That figure is a liquidity measure based on the current period, not a forecast of future cash performance.

Borrowing costs add another layer of sensitivity. The senior syndicated facility, provided by Balmain and secured against assets including drilling equipment and receivables, carried an interest rate of 12.3% at September, up from 12.0% in June. The related-party Kerogen facility had total principal and accrued interest of US$49.4 million at quarter end, with its maturity extended to September 2027. AJ Lucas said its financial covenants were complied with during the period, while related-party payments of approximately $1.1 million included executive remuneration, tax and superannuation payments, as well as incentives accrued in the 2026 annual report.