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Cabo Revenue & Margin Up Over 2nd Quarter Last Year

North Vancouver, BC– Cabo Drilling Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its second quarter ended December 31, 2005.

2ND QUARTER HIGHLIGHTS

(CDN $000s, except earnings per share)
 

3 months ending  Dec 31-05

3 months ending  Dec 31-04

6 months ending    Dec 31-05

6 months ending   Dec 31- 04

Revenue

 6,410 4,694  15,229 9,985

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

 462 4 932 454

Net Earnings (Loss) After Taxes

 110 (773)  227  (416)

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

 0.015 0.00 0.03 0.016 

Earnings (Loss) per Share ($) Basic

 (0.004) (0.028)  0.007  (0.015) 

Cash from operations*

340 (26) 676 401

Gross Margin %

 25.1% 14.7%  20.04%  16.4% 

Working Capital

 5.293 7,304  5.293  7,304

 *before changes in non-cash working capital items

The Company reports:

  • 2nd quarter revenue of $6.410 million in FY2006, a 37% increase over revenue of $4.694 million in the 2nd quarter of FY2005.
  • Net 2nd quarter FY2006 earnings before interest, tax, amortization and stock based compensation of $0.462 million compared to a 2nd quarter FY2005 earnings before interest, tax, amortization and stock based compensation of $4,045.
  • Net earnings after taxes for the 2nd quarter of FY2006 of $0.110 million compared to a 2nd quarter FY2005 net loss after taxes of $0.773 million resulting in 2nd quarter FY2006 earnings of $0.004 per share compared to a loss of 0.028 per share in 2nd quarter FY2005.
  • Gross margin percentage for the 2nd quarter FY2006 was 25.1% compared with a gross margin of 14.7% in the 2nd quarter of FY2005.
  • Cash from operations, before changes in non-cash working capital items, was $0.340 million for the 2nd quarter FY2006 compared to 2nd quarter FY2005 decrease in cash from operations of $ 25,955.
  • A current asset balance of $9.34 million and working capital of $5.293 million.
  • Total assets of $21.509 million and total liabilities of $6.038 million.
  • The Company has secured a $4.0 million debt financing facility with HSBC Bank Canada comprised of a $2.5 million operating loan secured by accounts receivable and a $1.5 million demand loan.

“Cabo continues to show steady growth and in this quarter delivered improved top and bottom line performances,” said Mr. John A. Versfelt, Chairman, President & CEO of Cabo Drilling Corp. “Revenues for the quarter were $6.410 million, almost 37% higher than revenues of $4.694 recorded during the same quarter last year. The Company recorded its highest gross margin of 25.1% compared to 17% in the last quarter and 21.1% in the fourth quarter fiscal 2005. Our gross margin percentage is becoming better as a result of improved pricing, greater operational efficiencies and longer term projects.”

“The Company recorded EBITDA of $0.462 million during the second quarter of fiscal 2006 compared to EBITDA of $0.469 million recorded during the first quarter of fiscal 2006 for a combined EBITDA for the first six months of fiscal 2006 of $0.932 million compared to $0.454 million EBITDA recorded during the first six months of fiscal 2005,” stated Mr. Versfelt. “Indicating steady growing performance as the industry improves.”

“During the second quarter of fiscal 2006 the Company improved its cash reserves by $0.375 million to $1.582 million compared to $1.207 million at the end of the last quarter, “said Mr. Versfelt. “Working capital also increased during this quarter to $5.293 million from $4.576 million, a $0.717 million increase. Increased cash reserves, combined with the commitment from HSBC Bank Canada will provide Cabo with sufficient funds for its growing drilling operations.”

“Net earnings for the quarter were $0.110 million an increase of $0.883 million compared to a net loss of $0.773 million during the same period of fiscal 2005,” said Mr. Versfelt. “The primary reasons for the difference are increased revenues and strengthening of the Company’s margins and no stock based compensation. ($0.666 million recorded in the second quarter of fiscal 2005).”

“The continued strengthening of mineral exploration and mine development in the Americas coupled together with the Company’s improved productivity, focus on cost control and operating efficiencies should increase the profitability of Cabo providing a good return to our shareholders,” said Mr. Versfelt.

2nd Quarter Ended December 31, 2005 – Results of Operations
Revenue in this quarter of $6.410 million represents a 37% increase from $4.694 million in the same quarter for last year. The majority of the increase is a result of revenues earned by Advanced Drilling Group and Forages Cabo Inc., which were acquired in the 3rd and 4th quarters of fiscal 2005. Second quarter revenues decreased 27% compared to the first quarter fiscal 2006 due to planned shutdowns during the holiday season.

Drilling operations follow seasonal patterns, with the first and fourth quarter (April through September) being the most active. Summer and fall months generally provide the best drilling conditions. December through early February months are typically the weakest due to general slowdown in the mineral exploration activity, as well as the holiday season.

Gross margin for the second quarter of fiscal 2006 was 25.1% compared to 16.4 % for fiscal 2005 and significantly higher than the 17.0% earned in the first quarter of fiscal 2006. The improved margins are a result of improved pricing, improved labor productivity and strengthening cost controls implemented during the previous quarter. The Company continues to look for further improvements in efficiencies through standardization of procedures and the sharing of technology and expertise across the divisions.

General and administrative (“G&A”) expenses increased by $89,765 from the previous quarter to $1.157 million in the second quarter of fiscal 2006. The increase in G&A expenses in the second quarter of 2006 compared to the first quarter of 2006 can be largely attributed to higher costs incurred for travel, investor relations costs and professional fees. G&A costs increased by $0.473 million in the second quarter of fiscal 2006 compared to the second quarter of 2005. This increase can be attributed to the additional G&A expenses of the drilling companies that were acquired throughout the year and subsequently consolidated with existing operations. Investor relation costs and travel expenses also contributed to the higher costs during the second quarter of fiscal 2006.

 
 


Last Updated: 02/22/2006