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Cabo announces 1st quarter results

North Vancouver, BC – Cabo Mining Enterprises Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its first quarter ended September 30, 2005.

1st QUARTER HIGHLIGHTS

((CDN $000s, except earnings per share) Q1 – 06 Sept. 30 Q1 - 05 Sept. 30 FY 2005 June 30
Revenue 8,819 5,291 23,222
Net Earnings (Loss) Before Interest, Tax, Amortization and Stock Based Compensation (EBITDA) 469 424 525
Net Earnings (Loss) After Taxes 117 356 (752) Earnings (Loss) per Share ($) Basic Before Interest, Tax, and Amortization (EBITDA) 0.015 0.016 0.02
Earnings (Loss) per Share ($) Basic 0.004 0.013 (0.03)
Cash from operations* 336 427 454
Gross Margin % 17.0% 17.8% 16.4%
Working Capital (deficiency) 4,576 7,005 4,704

*before changes in non-cash working capital items

The Company reports: 

  • Its highest quarterly revenue of $8.819 million in the 1ST quarter of 2006, a 20% increase over revenue of $7.339 in the 4th quarter of FY2005 and a 67% increase over revenue of $5.292 million in the 1st quarter of FY2005.
  • Net 1st quarter FY2006 earnings before interest, tax, amortization and stock based compensation of $0.469 million compared to 4th quarter FY2005 earnings before interest, tax, amortization and stock based compensation of $0.094 million and a net earnings before interest, tax and amortization of $0.424 million for the 1st quarter of FY2005.
  • Net earnings after taxes for the 1st quarter of FY2006 of $0.117 million compared to a 4th quarter FY2005 net loss after taxes of $0.575 million and a net earnings after taxes of $0.356 million for the first quarter of FY2005 resulting in 1st quarter FY2006 earnings of $0.004 per share, FY2005 4th quarter loss of $0.003 per share, and FY2005 1st quarter earnings of $0.013 per share.
  • Gross margin percentage for the 1st quarter FY2005 was 17.0% compared with a gross margin of 21.1% in the 4th quarter of FY2005 and 17.8% in the FY2005 1st quarter.
  • Cash from operations, before changes in non-cash working capital items, was $0.336 million for the 1st quarter FY2006 compared to 4th quarter FY2005 cash from operations of $0.023 million and $0.427 million for the 1st quarter FY2005.
  • A current asset balance of $10.32 million and working capital of $4.58 million.
  • Total assets of $22.63 million and total liabilities of $7.28 million.

     “Cabo begins the fiscal year 2006 with strong first quarter revenues,” said Mr. John A. Versfelt, Chairman, President & CEO of Cabo Mining Enterprises Corp. “The Company achieved record quarterly revenues of $8.819 million, an increase of $1.480 million or 20% compared to the previous quarter and an increase of $3.528 million or 67% compared to the first quarter 2005. This large increase can be partially attributed to the fact that all of the drilling services companies, acquired by Cabo throughout fiscal 2005, reported a full quarter of earnings under the Cabo banner. Furthermore, the mineral exploration and mining sector in Canada is continuing to improve as a result of strong global demand for all metals. This in turn has lead to an increased demand for drilling services and improved pricing.”

    “Gross margin performance of 17% for the first quarter 2006 was slightly lower than the 17.8% in the first quarter 2005 and the 21% in the fourth quarter 2005, but marginally higher than the 16.4% for the full year 2005,” said Mr. Versfelt. “Consumable, servicing and maintenance costs continue to drag down margins in our Heath & Sherwood division. In an effort to improve overall margins management in this division has been reorganized and new procedures have been implemented in the first quarter of 2006. Overall, in addition to higher fuel and steel costs, the Heath & Sherwood division continues to experience higher than normal costs primarily due to training of drillers and other operational personnel. However, gross margins and net revenues should improve as the new procedures take effect.”

    “Cabo will likely have reduced revenues over the next two quarters as the Company’s operations follow seasonal patterns,” said Mr. Versfelt. “Past experience shows that business in December and January slows down due to the holiday season and more difficult weather conditions.”

    “Quarter to quarter the Company’s remained relatively strong. Net earnings per share of $0.004 improved compared to a $0.03 loss for the 2005 fiscal year,” said Mr. Versfelt. “After tax earnings, while lower than the first quarter, showed improvement compared to the fourth quarter of 2005 and the annual results for the fiscal year 2005. Management continues to focus on administration cost controls and expects no significant increases in fiscal 2006. However, the development and implementation of our new computerized accounting and management information system is currently being reevaluated. This may lead to some write downs if the company finds it beneficial to change its strategy and implement a more cost beneficial system.”

    “As announced in October 2005, Cabo intends to sell its mineral property portfolio to another public mineral exploration company,” said Mr. Versfelt. “Subject to approval of the transaction consideration for the properties shall be paid through the issuance of common shares from the purchasing company’s treasury. No less than seventy-five percent of these shares shall be distributed to Cabo shareholders on a pro-rated basis upon receipt of regulatory approval. The Company’s Board of Directors has received an offer which shall be presented to our shareholders for consideration and if appropriate for approval at the December 15, 2005 annual general and special meeting. Management believes that this event is of significant benefit to the shareholders as they will receive shares in an exploration company while at the same time retaining their shares in Cabo. Cabo will then be able to focus all of its resources on growing the drilling services business. Subject to shareholder approval, the Company will change its name to Cabo Drilling Corp.”

    “We believe that with continued strength in mineral exploration and mine development in the Americas, our improved productivity and our determined focus on cost control and improved efficiencies, Cabo should increase its profitability to meet management expectations and provide a good return to our shareholders,” said Mr. Versfelt.

    First quarter ended September 30, 2005

    The Company’s first quarter revenue of $8.82 million is the highest quarterly revenue recorded since Cabo began its drilling operations. This represents a 20% increase over the previous quarter and 67% increase from the first quarter of 2005. Revenues from Heath & Sherwood and Petro Drilling increased 21% from the same period last year, with the balance of revenues from the Advanced Drilling Group and Forages Cabo Inc., acquired in the 3rd quarter of 2005.

    Revenue for the quarter from surface drilling operations increased by 55 percent from the same period last year to $5,965,605. While revenues from underground drilling increased by 75 percent from the same period last year to $2,516,321. Geotechnical drilling contributed an additional $337,073 for the quarter.

    The gross margin for the first quarter of fiscal 2005 was marginally higher at 17.0% compared to fiscal 2005 (16.4%) and slightly lower than the 17.8% earned in the first quarter in 2005. The Company continues to look at improvements in efficiencies through standardization of procedures sand the sharing of technology and expertise across the divisions. Gross margins should improve as the policies implemented by management in late summer 2005 take affect.

    General and administrative expenses (“G&A”) decreased by $0.163 million from the previous quarter to $1.067 million in the first quarter of 2006. The decrease in G&A expenses in the first quarter of 2006 compared to the fourth quarter of 2005 can be partially attributed to higher costs incurred as a result of acquisitions. G&A costs increased by $0.533 compared to the first quarter of 2005. This increase can be partially attributed to the additional G&A expenses of the drilling companies that were acquired throughout the year and subsequently consolidated with existing operations. Increases in costs can also be attributed to the Corporate Employee Health and Benefit Plan that was initiated across the Company during the year.

    Amortization expense for the first quarter was $0.279 million as compared to $0.284 million in the fourth quarter of fiscal 2005 and $0.070 million in the first quarter of 2006. The increase is a result of a larger asset base compared to last year and minimal change from the last quarter.

    Cabo’s current cash (marketable securities and cash equivalents) position at September 30, 2005, is $1.259 million as compared to $2.025 million at June 30, 2005. The decrease in cash can be primarily attributed to the decrease in long term liabilities, capital asset acquisitions and resource property expenditures.

    Cash flow from operations (before changes in non-cash operating working capital items) was $0.336 million, down $0.090 million or 21% from $0.426 million in the quarter ended September 30, 2005. The decrease resulted because of lower margins caused by higher fuel costs, increased wage costs and maintenance expenses, as well as over-budget consumables and servicing costs at the Heath & Sherwood Division. Mineral exploration expenses and mineral property payments for the first quarter of 2006 were $0.206 million compared to $0.756 million for the same period in 2005. Cabo remains committed to funding and operating its exploration activities separately from its drilling operations until it vends its properties to another public entity as announced in October 2005. Cabo maintains its mineral properties in good standing and they have good potential for the discovery of mineral reserves that could add value to the Company.

    Cabo is well positioned to capture an increase in revenues as the demand for mineral exploration, development and mining grows and continues to remain high. The Company’s strategy is to focus on growth by expanding its existing long term customer base revenues, attracting new customers, and by achieving operating and administrative efficiencies.

    Cabo Mining Enterprises Corp. is a drilling services company headquartered in North Vancouver, British Columbia, Canada. The Company provides services through its subsidiaries Advanced Drilling Ltd. of Surrey, British Columbia; Forages Cabo Inc. of Montréal, Quebec; Heath & Sherwood Drilling (1986) Inc., of Kirkland Lake, Ontario; and Petro Drilling Company Limited of Springdale, Newfoundland. Cabo also holds interests in mineral exploration properties located near Cobalt, Kenora and Sudbury, Ontario, Canada. The Company’s common shares trade on the TSX Venture Exchange under the symbol: CBE.

    ON BEHALF OF THE BOARD

    (signed “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 (ww.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.

    * * * *

    The Exchange has not in any way passed upon the merits of this news 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: 11/28/2005