Orbit Garant Drilling Inc. (TSE:OGD): Is the Stock’s Rally Justified by Operational and Industry Tailwinds?

Orbit Garant Drilling Inc. (TSE:OGD) has surged 78.33% year-to-date as of September 2025, with its stock price recently crossing above the 200-day moving average—a technical signal often interpreted as a bullish trend [4]. This rally coincides with operational improvements, including a strategic exit from unprofitable West Africa operations and new long-term contracts in Chile. However, the company’s ability to sustain this momentum hinges on broader industry dynamics, including Canadian government infrastructure initiatives and the ripple effects of U.S. tariffs on its South American operations.

Operational Improvements: A Foundation for Growth

Orbit Garant’s Q4 2024 earnings report underscored a turnaround in profitability, with adjusted gross margins rising to 21.7%, the highest since Q2 2021 [1]. This improvement was driven by the divestiture of $7.5 million in West African assets and the securing of two multi-year drilling contracts in Chile—a copper-rich region critical to global energy transition efforts. The company’s Q3 2025 results further reinforced this trend, with international revenue surging 26.3% year-over-year to $13.9 million, primarily from South American operations [3].

Financial metrics also appear to support the stock’s ascent. Orbit Garant reported a GAAP EPS of C$0.08 and revenue of C$50 million in its most recent quarter, while its adjusted EBITDA climbed to C$6.4 million despite a 3% revenue decline [1]. These figures suggest improved cost management and pricing power, particularly in high-demand markets like Chile.

Industry Tailwinds: Government Initiatives and Energy Demand

The Canadian government’s push to expedite major energy and infrastructure projects could further bolster Orbit Garant’s prospects. A new federal office, led by oil industry veteran Mark Carney, aims to streamline permitting for large-scale projects, reducing delays that have historically hampered drilling activity [3]. This aligns with the company’s focus on Canada and South America, where rising gold and copper prices are fueling demand for underground drilling services [2].

However, the sector faces headwinds from U.S. trade policies. President Trump’s 2025 tariffs on imports from South Korea, Japan, and the EU—potentially extending to South American countries—have increased costs for imported drilling equipment and components [5]. Orbit Garant’s Q3 earnings call acknowledged these pressures, noting that margin expansion in South America was partially offset by higher equipment costs [1]. While the company has not disclosed specific tariff-related losses, industry reports suggest that such tariffs could delay project timelines and reduce profitability for firms reliant on cross-border supply chains [4].

Risks and Uncertainties

Despite these positives, several risks linger. Orbit Garant carries a high debt load, and insider selling—such as Senior Officer Daniel Maheu’s recent disposal of 22,000 shares at C$1.53—raises questions about management’s confidence in the stock’s valuation [4]. Additionally, while the company has secured contracts in Quebec (e.g., Pivotal Metals’ Horden Lake project), there is no evidence of direct involvement in Canadian government infrastructure programs as of Q3 2025 [2]. The absence of such contracts limits near-term visibility on how government spending might directly benefit the firm.

Is the Rally Justified?

The stock’s performance appears partially justified by operational improvements and favorable industry trends. The exit from West Africa and entry into Chile have enhanced margins, while rising commodity prices and government initiatives create a supportive backdrop. However, the impact of U.S. tariffs and the lack of confirmed government contracts introduce uncertainty. Investors should monitor the company’s Q4 2025 results, scheduled for release on September 24, 2025, for clarity on how these factors are shaping its trajectory [2].

In the short term, the stock’s technical strength and earnings momentum suggest a continuation of the uptrend. Yet, long-term sustainability will depend on the company’s ability to navigate trade-related costs and capitalize on infrastructure spending. For now, the rally reflects optimism about Orbit Garant’s strategic shifts and sector tailwinds—but caution is warranted given the risks.

Source:
[1] Orbit Garant Drilling Q4 2024 Earnings Report [https://www.marketbeat.com/earnings/reports/2024-9-19-orbit-garant-drilling-inc-ogdto-stock/]
[2] ORBIT GARANT FISCAL 2025 FOURTH QUARTER AND YEAR-END CONFERENCE CALL AND WEBCAST [https://www.barchart.com/story/news/34545309/orbit-garant-fiscal-2025-fourth-quarter-and-year-end-conference-call-and-webcast]
[3] Mark Carney taps oil patch veteran to fast-track 'nation-building' projects [https://subscriber.politicopro.com/article/2025/08/mark-carney-taps-oil-patch-veteran-to-fast-track-nation-building-projects-00536092]
[4] Orbit Garant Drilling (TSE:OGD) Shares Cross Above 200-Day Moving Average [https://www.marketbeat.com/instant-alerts/orbit-garant-drilling-tseogd-shares-cross-above-200-day-moving-average-whats-next-2025-09-06/]
[5] Trump's broad tariffs go into effect, just as economic pain is ... [https://www.npr.org/2025/08/07/nx-s1-5495218/trump-tariffs-trade-economy]