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Cabo Announces Record 1st Quarter Results

North Vancouver, BC – Cabo Drilling Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its fiscal year 2007 first quarter ended September 30, 2006.

(CDN $000s, except earnings per share)
 
Q1- 07
Sept. 30
Q1- 06
Sept. 30
FY 2006
June 30
 Revenue  10,498   8,819       28,791  

Net Earnings (Loss) Before Interest, Tax, Amortization, Stock-based Compensation and Other Items (EBITDA)

 1,194 469 530 
 Net Earnings (Loss) After Taxes  423 117  (2,762)

 Earnings (Loss) per Share ($) Basic Before Interest, Tax, Amortization, Stock-based Compensation and Other Items (EBITDA)

 0.04 0.02 0.02
 Earnings (Loss) per Share ($) Basic  0.01 0.00  (0.09) 
 Cash from operations*  863 336  407 
 Gross Margin %  23.6% 17.0%  20.0% 
 Working Capital (deficiency)  3,503 4,576  3,326 
*before changes in non-cash working capital items

The Company reports:

  • Its highest quarterly revenue of $10.50 million in the 1ST quarter of FY2007, a 19.5% increase over revenue of $8.82 million in the 1st quarter of FY2006.
  • Net 1st quarter FY2007 earnings before interest, taxes, amortization, stock based compensation and other items of $1.19 million compared to 1st quarter FY2006 earnings before interest, tax, amortization, stock based compensation and other items of $469,455.
  • Net earnings after taxes for the 1st quarter of FY2007 of $422,553 compared to 1st quarter FY2006 net earnings after taxes of $116,545, resulting in 1st quarter FY2007 net earnings after taxes of $0.01 per share compared to FY2006 1st quarter earnings of $0.00 per share.
  • Gross margin percentage for the 1st quarter FY2007 was 23.6% compared with a gross margin of 17.0% in the FY2006 1st quarter.
  • Cash from operations, before changes in non-cash working capital items, was $862,786 for the 1st quarter FY2007 compared to 1st quarter FY2006 cash from operations of $336,164.
  • A current asset balance of $11.78 million and working capital of $3.50 million.
  • Total assets of $23.25 million and total liabilities of $10.04 million.

"Cabo began fiscal year 2007 with its highest quarterly revenues to date,” said Mr. John A. Versfelt, Chairman, President & CEO of Cabo Drilling Corp. “The Company achieved first quarter revenues of $10.50 million, an increase of $1.68 million or 19.5% compared to fiscal year 2006 first quarter revenues of $8.82 million. Additionally, Cabo reported a pre-tax income of $703,334 in the first quarter of fiscal 2007, compared to a pre-tax income of $168,161 for the same period in fiscal 2006. This represents a 318% increase from the first quarter in fiscal 2006 and the highest quarterly earnings before taxes in Cabo’s history.”

“Gross margins for the first quarter increased 35% to 23.6% in fiscal 2007, compared to 17.0% in the first quarter of fiscal 2006,” stated Mr. Versfelt. “The improved margins are a result of increased pricing, improved cost rationalization and benefits of longer term contracts. The Company anticipates that margins throughout fiscal 2007 will be in the 23-25% range, due to longer term projects, continual efforts to improve utilization and efficiency, and increasing both technological and technical expertise across all divisions.”

“Quarter to quarter the Company’s current and total assets, less liabilities and working capital, remained relatively strong. Net earnings after taxes per share of $0.01 improved compared to $0.00 earnings for the first quarter of fiscal 2006,” said Mr. Versfelt. “Net income after taxes increased 262% or $306,014 to $422,553 in the first quarter of fiscal 2007 compared to the $116,545 earned during the same period in fiscal 2006.”

“Heading into the 2nd and 3rd quarters it is expected that Cabo will likely experience reduced revenues as the Company’s operations follow seasonal patterns,” said Mr. Versfelt. “Past experience shows that business in December through January slows down due to the holiday season and more difficult weather conditions. However, Cabo is in a better position this year with more underground drilling contracts that are impacted less by the holiday season and the weather conditions.”

“Exploration budgets for all commodities have increased, with Latin America and Canada continuing to be the preferential locations. We are focusing our expansion efforts in Canada, U.S.A. and Spanish speaking countries – where increased demand will lead to improved pricing in countries with favourable drilling environments,” said Mr. Versfelt.

First quarter ended September 30, 2006

Cabo recorded its highest ever quarterly revenue in the first quarter of fiscal 2007, a 19.5% increase to $10.50 million compared to $8.82 million in the first quarter of fiscal 2006, a $1.68 million increase. Revenue from surface drilling increased to $7.96 million in the first quarter of fiscal 2007 from $5.97 million in the first quarter of fiscal 2006, a 33% increase, primarily from the Advanced Drilling Group and Petro Drilling Company divisions. Additionally, the Company has expanded operations into Mexico where it recorded revenues of $250,334 during first quarter of fiscal 2007.

In the first quarter of fiscal 2007, contract core drilling services represented 98% of revenues and geotechnical and geo-environmental drilling services represented 2%. Surface drilling revenues increased $2.00 million to $7.96 million in the first quarter of fiscal 2007 from $5.97 million in the first quarter of fiscal 2006, while underground drilling decreased 9% or $237,456 to $2.28 million in the first quarter of fiscal 2007 compared to $2.52 million in the same period in fiscal 2006. Geotechnical/geo-environmental drilling decreased 23% during the first quarter of fiscal 2007, primarily due to an extended slow down during August and September not experienced in fiscal 2006.

The overall gross margin for the first quarter of fiscal 2007 was 23.6% compared to 17.0% in the first quarter of fiscal 2006. Gross margin improved throughout the quarter as a result of higher productivity, implementation of new policies and procedures and improved project management, as well as better revenues per contract. Forages Cabo’s gross margin decreased due to project delays in the first quarter of fiscal 2007.

The Company recorded EBITDA (earnings before interest, taxes, amortization, stock-based compensation and other items such as write-downs of the resource properties, software costs and goodwill) of $1.19 million in the first quarter of fiscal 2007, a substantial increase from $469,455 in the first quarter of fiscal 2006.

General and administrative (“G&A”) costs were $1.27 million in the first quarter of fiscal 2007 compared to $1.07 million in the first quarter of fiscal 2006. The increase can be attributed to a $122,500 allowance for doubtful accounts and slightly higher wages during the first quarter of fiscal 2007, when compared to the first quarter of fiscal 2006. G&A costs decreased in the first quarter of fiscal 2007 from $1.45 million in the fourth quarter of fiscal 2006 due to non-recurring charges in the fourth quarter of fiscal 2006.

Amortization expense increased $17,626 from $277,858 in the first quarter of fiscal 2006 to $295,484 in the first quarter fiscal 2007.

Net income increased 262% or $306,014 to $422,553 in the first quarter of fiscal 2007 from $116,545 earned during the same period in fiscal 2006.

The Company’s current cash (marketable securities and cash equivalents) position at September 30, 2006, is $285,998 compared to $1.43 million at June 30, 2006. The decrease in cash is due to the timing differences on collection of receivables. Cabo collects the accounts receivable in sixty days while disbursing payroll costs on a current bi-monthly basis creating a timing difference as evident in the higher accounts receivable balance at September 30, 2006, compared to the accounts receivable balance at June 30, 2006.

Cash flow from operations (before changes in non-cash operating working capital items) was $862,792 during the first quarter of fiscal 2007, an increase of $526,628 from $ 336,614 in the first quarter of fiscal 2006.

Working capital increased by $176,507 from $3.33 million at June 30, 2006 to $3.50 million at September 30, 2007. The increase is due to higher activity levels partially offset by capital assets purchased with cash.

Mineral exploration expenses and mineral property expenditures for the first quarter of fiscal 2007 were $129,597 compared to $206,330 in the first quarter of fiscal 2006.

Cabo has positioned itself to capture an increase in revenues and improve its gross margin as the demand for exploration drilling services increases. The Company’s strategy is to focus on growth by expanding its existing long term customer base revenues, attracting new customers and by identifying favourable geographical locations in which to expand its drilling services business.

Cabo Drilling Corp. is a drilling services company headquartered in North Vancouver, British Columbia, Canada. The Company provides mining related and specialty drilling services through its subsidiaries Advanced Drilling Ltd. of Surrey, British Columbia; Forages Cabo Inc. of Montréal, Quebec; Heath & Sherwood Drilling Inc. of Kirkland Lake, Ontario; and Petro Drilling Company Limited of Springdale, Newfoundland. The Company’s common shares trade on the TSX Venture Exchange under the symbol: CBE.

ON BEHALF OF THE BOARD

“John A. Versfelt”

John A. Versfelt
Chairman, President and CEO

Further information about the Company can be found on the Cabo website (http://www.cabo.ca) and SEDAR (www.sedar.com) or by contacting Investor Relations Ms. Sheri Barton at 403-217-5830 or Mr. John A. Versfelt, Chairman, President & CEO of the Company at 604-984-8894.
* * * *
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, potential mineral recovery processes and other business transactions timing. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.
 


Last Updated: 11/27/2006