Superior Drilling Exploring Middle East Sales, Analysts Review and Target Price

Superior Drilling Products, Inc. (NYSE: SDPI)



2 Wall Street analysts have issued ratings and price targets for Superior Drilling Products in the last 12 months. Their average twelve-month price target is $4.00, suggesting that the stock has a possible upside of 92.31%. The high price target for SDPI is $5.00 and the low-price target for SDPI is $3.00. There are currently 1 hold rating and 1 buy rating for the stock, resulting in a consensus rating of “Buy.”

Date                   Brokerage                       Action                Rating                Price Target

10/18/2018      Imperial Capital            Boost Target    Outperform     $3.00 ➝ $5.00

9/18/2018        Roth Capital                   Downgrade      Buy ➝ Neutral




Superior Drilling Products, Inc., a drilling and completion tool technology company, innovates, designs, engineers, manufactures, sells, rents, and repairs drilling and completion tools in the United States and internationally. It is involved in the design and manufacture of new drill bit and horizontal drill string enhancement tools; and the refurbishment of polycrystalline diamond compact drill bits for the oil, natural gas, and mining service industries. The company’s horizontal drilling tools include Drill-N-Ream, a dual-section wellbore conditioning tool; Strider, a drill string oscillation system; V-Stream, an advanced conditioning system; and dedicated reamer stingers to enhance dedicated reamer operations. It serves companies operating in the exploration and production of oil and natural gas. The company was formerly known as SD Company, Inc. and changed its name to Superior Drilling Products, Inc. in May 2014. Superior Drilling Products, Inc. was founded in 1999 and is headquartered in Vernal, Utah.



Recent Events

November 15, 2018. Superior Drilling Products, Inc. (NYSE American: SDPI) (“SDP” or “Company”), a designer and manufacturer of drilling tool technologies, today announced that it has executed an agreement with a subsidiary of Odfjell Drilling Ltd (ODL.OL)(“Odfjell”) to launch a Middle East short-term joint market development program around its patented Drill-N-Ream® (“DnR”) well bore conditioning tool.

Troy Meier, Chairman and CEO of SDP, noted, “Odfjell’s interest in using the DnR for their service offering is validation of the success the tool is having in the Middle East. Odfjell is a well-respected oil field service firm and, by partnering with them, it enables us to accelerate our entry into the Middle East market. We are pleased that Odfjell recognized the value of the DnR and are looking forward to establishing a distribution agreement with them in the not so distant future.”



Recent accomplishments include the following, according to management:


Opened our Abilene, Texas facility. We are processing tool repairs there, improving tool turnaround time and reducing transportation costs for our distributor by localizing our presence where demand is strong.

Finalizing a new, mutually beneficial distribution agreement with our exclusive U.S. distributor.

Engaged a servicing partner in the Middle East and expect them to be fully up and running by January 2019.

Expanding market channels in the Middle East. In final stages of negotiations with a sophisticated, global oilfield service company to represent the Drill-N-Ream® well bore conditioning tool (“DnR”) in the Middle East, while also addressing additional inquiries by others.

Refinancing our debt to recapitalize our balance sheet.”



Financial review

Total revenues for Q3 were $4.765 million and operating expenses were $4.475 million.

Revenue in the first nine months of 2018 increased 24% when compared with the same period last year. The growth reflects higher tool revenue supported by increasing market share, U.S. drilling activity and contributions from penetration into the Middle East. Strong operating leverage from higher volume enabled the measurable improvement in operating income and margin.

Net income for the first nine months of 2018 increased 2.5 times to $1.3 million compared with


$0.5 million for the same period in the prior-year. Adjusted EBITDA (1) for the nine-month period was $4.7 million, or 32.1% of sales, compared with $4.2 million, or 35.2% of sales, for the first nine months of 2017.

Balance Sheet and Liquidity

Cash and cash equivalents were $4.3 million at September 30, 2018, up from $2.4 million at the end of 2017 and $3.1 million at the end of the trailing second quarter. Cash generated from operations in the quarter was $1.9 million, compared with $1.7 million in the prior-year period.

In the third quarter of 2018, the Company had capital expenditures of $52 thousand.

Total debt at the end of the quarter was $11.0 million, down $1.8 million, or 14.4%, compared with $12.8 million at December 31, 2017.

At September 30, 2018, SDP had a working capital deficit of approximately $1.2 million. The Company’s manufacturing facility is financed by a commercial bank loan with principal of $4.2 million due February 15, 2019. The debt was reclassified to short-term and results in a working capital deficit at September 30, 2018.



Stock influences and risk factors

Their level of indebtedness could adversely affect future ability to raise additional capital to fund growth, limit their ability to react to changes in the business or the industry.

Their customer base is concentrated and the loss of, or nonperformance by, one or more of their significant customers, or failure to expand their channels to market and further commercialize could cause revenue to decline substantially.

Possible new tariffs could have a material adverse effect on their business.



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