MITCHELL SERVICES LIMITED — Interim / Quarterly Report 2018

Oct 30, 2017

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31 October 2017

MITCHELL SERVICES LIMITED

(ASX: MSV)

Appendix 4C Quarterly Report and Investor Update

Dear Shareholder,

Mitchell Services Limited ( the Company ) is pleased to provide the following operational Investor Update for the quarter ended 30 September 2017.

As announced to the market in recent times, the Company has won multiple new contracts that have driven a material increase in operating rig count and shift numbers from 30 June 2017 to 30 September 2017 as the below charts demonstrate. This trend has continued post September as the Company continues to mobilise additional rigs with the operating rig count reaching 40 in October.

Operating Rig Count

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45
40
35
30
25
20
15
10
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Last Year This Year
Number of Shifts
1400
1200
1000
800
600
400
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Last Year This Year
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The September 2017 quarter saw unprecedented growth for the Company with the average operating rig count increasing by 50% when compared to the average operating rig count for the quarter ended 30 June 2017. The mobilisations of new projects over the past three months were conducted in a safe and efficient manner.

From a cashflow perspective the net operating cash outflow was $2.56 million for the quarter. This was reflective of the increase in operating rig count and associated mobilisation costs. As disclosed in the previous 4C Quarterly Report, the Company had secured a new $2.6 million working capital facility to fund this operating cashflow requirement.

I would like to thank all shareholders who took part in the recent capital raising. Our tender opportunity pipeline remains strong amid general market conditions that are more favourable than those in more recent years and the capital raising will ensure that the Company is adequately funded to mobilise additional rigs.

Safety remains a key focus across the entire business and it is pleasing to note that our safety performance has continued to improve during a period of sustained growth. I am looking forward to another extremely busy quarter ahead where we will seek to replicate the mobilisation success of the September quarter.

Yours Faithfully

Andrew Elf Chief Executive Officer

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

+Rule 4.7B

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

Mitchell Services Limited

ABN Quarter ended (“current quarter”) 31 149 206 333 30 September 2017

Consolidated statement of cash flows 1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	Current quarter $A'000 11,486 - (5,447) (23) - (7,610) (606) - - (364) - - - (2,564)	Year to date (3 months) $A'000 11,486 - (5,447) (23) - (7,610) (606) - - (364) - - - (2,564)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10) (c) investments	(1,323) - -	(1,323) - -

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows (d) intellectual property (e) other non-current assets 2.2 Proceeds from disposal of: (a) property, plant and equipment (b) businesses (see item 10) (c) investments (d) intellectual property (e) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities	Current quarter $A'000 - - - - - - - - - - (1,323)	Year to date (3 months) $A'000 - - - - - - - - - - (1,323)
3. Cash flows from financing activities 3.1 Proceeds from issues of shares 3.2 Proceeds from issue of convertible notes 3.3 Proceeds from exercise of share options 3.4 Transaction costs related to issues of shares, convertible notes or options 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities	2,516 - - (144) - (527) - - - 1,845	2,516 - - (144) - (527) - - - 1,845
4. Net increase / (decrease) in cash and cash equivalents for the period 4.1 Cash and cash equivalents at beginning of quarter/year to date 4.2 Net cash from / (used in) operating activities (item 1.9 above) 4.3 Net cash from / (used in) investing activities (item 2.6 above) 4.4 Net cash from / (used in) financing activities (item 3.10 above)	282 (2,564) (1,323) 1,845	282 (2,564) (1,323) 1,845

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows 4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of quarter	Current quarter $A'000 - (1,760)	Year to date (3 months) $A'000 - (1,760)
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts 5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)	Current quarter $A’000 169 674 (2,603) - (1,760)	Previous quarter $A’000 817 - (535) - 282
6. Payments to directors of the entity and their associates Current quarter $A'000 6.1 Aggregate amount of payments to these parties included in item 1.2 58 6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3 - 6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2 The transactions included in 6.1 above relate to director’s fees and associated superannuation payments.
7. Payments to related entities of the entity and their associates Current quarter $A'000 7.1 Aggregate amount of payments to these parties included in item 1.2 135 7.2 Aggregate amount of cash flow from loans to these parties included in item 2.3 - 7.3 Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2 The transactions included in 7.1 above relate to payments made to entities that are controlled by certain directors. The nature of these transactions has not changed from those outlined in note 21 of the Company’s most recent published Annual Report and include equipment hire, repair and maintenance type services and office rental.

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

8.	Financing facilities available Total facility amount Amount drawn at
	Add notes as necessary for an at quarter end quarter end
	understanding of the position $A’000 $A’000
8.1	Loan facilities 8,500 8,500
8.2	Credit standby arrangements 5,100 2,603
8.3	Other (equipment finance facilities) 6,978 6,978
8.4	Include below a description of each facility above, including the lender, interest rate and
	whether it is secured or unsecured. If any additional facilities have been entered into or are
	proposed to be entered into after quarter end, include details of those facilities as well.
8.1
Secured shareholder loan facility provided by major shareholders Washington H. Soul Pattinson &
Company Limited and Mitchell Family Investments (Qld) Pty Ltd as trustee for the Mitchell Family
Investment Trust. This loan was provided to partly fund the acquisition of all Nitro Drilling Pty Ltd
assets in 2015. Interest is charged at a fixed rate of 10% pa on this facility.
8.2
	 $2.5m Secured overdraft facility with Suncorp at a variable lending rate (currently 5.55%
	pa).
	 $2.6m working capital facility provided by National Australia Bank Limited on terms as
	described in the Company’s 30 June 2017 Appendix 4C.
8.3	Secured equipment finance facilities through a range of lenders including Westpac,
Commonwealth Bank, Suncorp, Toyota Equipment Finance, Atlas Copco Financial Solutions,
National Australia Bank and MEH Equipment Hire, at fixed interest rates between 4.45% and 8.33%
pa.
Note – After quarter end the Company raised approximately $6.27 million in equity funding through
a 1	for 8 non-renounceable entitlement offer at an offer price of $0.034 per share (Entitlement
Offer). The new shares issued under the Entitlement Offer settled on 16 October 2017 and were
readily available in cash on the same date.

9. Estimated cash outflows for next quarter 9.1 Research and development 9.2 Product manufacturing and operating costs 9.3 Advertising and marketing 9.4 Leased assets 9.5 Staff costs 9.6 Administration and corporate costs 9.7 Other (repayment of borrowings and capital expenditure) 9.8 Total estimated cash outflows	$A’000 - 7,629 25 - 7,832 600 3,659 19,745

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

	10. Acquisitions and disposals of business entities (items 2.1(b) and 2.2(b) above) 10.1 Name of entity 10.2 Place of incorporation or registration 10.3 Consideration for acquisition or disposal 10.4 Total net assets 10.5 Nature of business	Acquisitions N/A N/A N/A N/A N/A	Disposals N/A N/A N/A N/A N/A

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here: ............................................................

Date: 31 October 2017

(Company secretary)

Print name: Greg Switala

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms 1 September 2016

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