A key positive takeaway from the 3Q18 update is the continued improvement in drilling margin. This reflects a strategy to roll over contracts at higher prices and the discipline to walk away from clients unprepared to accept higher rates. Despite the slight downgrade to FY18 guidance, we maintain a positive view on the trends in the drilling business and the blue-sky upside from Orexplore. In our view SWK’s EV is supported by its recovering core drilling business alone and we maintain a BUY call on a $0.37 valuation (prior $0.40).
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