SWK anticipates 65 rigs working across Australia and internationally by the end of this half, up from 49 at end FY19. While we expect costs deploying these rigs to impact 1H20 margins, increased fleet utilisation at better rates should generate the 20%+ Drilling EBITDA margins needed to deliver reasonable returns in the medium term. The recent $15m capital raise strengthens the balance sheet, and will help cover the working capital requirements getting rigs to work. Our valuation drops to $0.32 (prior $0.34) from dilution and we maintain a SPEC BUY call, with strategy execution key in the coming months.
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