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Cabo Announces 1st Quarter Results

North Vancouver, BC – Cabo Drilling Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its fiscal year 2010 first quarter ended September 30, 2009.

1st QUARTER HIGHLIGHTS

(CDN $000s, except earnings per share)
 

Q1-2010
Sept. 30

Q1-2009 Sept. 30

FY-2009
June 30

Revenue

 6,340

16,617

41,162

Earnings (Loss) Before Interest, Taxes, Amortization, Stock Based Compensation and Other Items  (EBITDA)

482

2,504

6,773

Net Earnings (Loss) Before Taxes

 (463)

1,695

408

Net Earnings (Loss) After Taxes

(463)

1,090

(847)

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

 (0.01)

0.05

0.08

Earnings (Loss) per Share ($) (Basic and Diluted)

(0.01)

0.02

(0.02)

Cash from Operations*

 338

1,821

2,060

Gross Margin %

 29.1%

26.0%

26.7%

Working Capital (deficiency)

4,706

7,716

4,588

 * before changes in non-cash working capital items
 
The Company reports:

  • Quarterly revenue for the 1st quarter fiscal 2010 of $6.34 million, compared to $16.62 million in 1st quarter fiscal 2009.
  • 1st quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $482,152 compared to 1st quarter fiscal 2009 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $2.50 million, resulting in 1st quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.01 per share and $0.05 per share in the 1st quarter of fiscal 2009.
  • Net before tax loss for the 1st quarter of fiscal 2010 of $463,495 compared to 1st quarter fiscal 2009 before tax earnings of $1.70 million.
  • Net after tax loss for the 1st quarter of fiscal 2010 of $463,495 compared to net after tax earnings for the 1st quarter of fiscal 2009 of $1.09 million, resulting in 1st quarter fiscal 2010 net after tax loss of $0.01 per share compared to net after tax earnings for 1st quarter fiscal 2009 of $0.02 per share.
  • Gross margin percentage for the 1st quarter fiscal 2010 was 29.1% compared with a gross margin of 26.0% in 1st quarter fiscal 2009 and 29.6% in the 4th quarter of fiscal 2009.
  • Cash from operations, before changes in non-cash working capital items, was $388,239 for the 1st quarter fiscal 2010 compared to 1st quarter fiscal 2009 cash from operations of $1.82 million.
  • A current asset balance of $16.49 million and working capital of $4.7 million.
  • Total assets of $32.60 million and total liabilities of $14.02 million.

“The first quarter of fiscal 2010 reversed the trend of three consecutive quarters of reduced revenues compared to the previous quarter, giving us renewed optimism that the Company has experienced the bottom of the cycle. The Company has drills operating in all regions at this time.” stated John A. Versfelt, Cabo’s President & CEO.   “Drill utilization has increased in all divisions with new signed contracts in Atlantic, Pacific, Mexico and Europe divisions and a more substantial increase in the Ontario division. ”
 
 “General and administration costs have decreased in the first quarter of fiscal 2010 by 24% compared to the first quarter of fiscal 2009 and 17% compared to the fourth quarter of fiscal 2009,” noted Mr. Versfelt.  “This is a result of the salary and wage reductions, restructuring, and improved control costs.  Management expects additional efficiencies through the use of technology, and expects general and administration expenses in the range of $5.2 million to $5.6 million for the fiscal year 2010.”

“Gross margins remained consistent for the first quarter of fiscal 2010 at 29.1% compared to 29.6% in the fourth quarter of fiscal 2009 and improved from the 26.0% recorded in the 1st quarter of fiscal 2009,” stated John A. Versfelt.  “The Company is experiencing improved cost controls, reduced unit costs, more efficient purchasing, wage reductions and better supervision. All these changes have resulted in the gross margin averaging 29% for the previous two quarters.” 

 “The Company recorded a net loss of $463,495 during the 1st quarter of fiscal 2010 or $0.01 loss per share compared $1.09 million or $0.02 earnings per share in the 1st quarter of fiscal 2009,” noted John A. Versfelt.  “EBITDA decreased to $482,152 during the first quarter of fiscal 2010, compared to $2.50 million in the previous corresponding period.”

“As stated at the end of fiscal 2009, the Company is receiving more bid requests. Gold is leading the way in Canada, as well as in Mexico and Central America,” said Mr. Versfelt.  “Copper and iron ore projects are also requesting bids for drilling services.  Consequently, Cabo Drilling is experiencing and projecting growth in drill utilization for the balance of fiscal 2010.”

First quarter ended September 30, 2009
Revenue for the quarter ending September 30, 2009 decreased $10.28 million or 62% to $6.34 million, compared to $16.62 million in the first quarter of fiscal 2009; however it improved from $6.20 million recorded in the fourth quarter fiscal 2009. The primary reason for the decrease is due to the contraction of the drilling market that began in the Fall of 2008 as a result of the economic downturn. The revenues from the Canadian and United States divisions decreased by 59%, while the other divisions decreased by 68%. There was no activity in the Spain or Albania during the first quarter of fiscal 2010, while both Mexico and Panama had two drills operating. Overall drill utilization is down 65% during the first quarter of fiscal 2010, but drill utilization did increase during the month of September and will continue to increase in the second quarter of fiscal 2010.

Surface drilling revenues decreased 67% from $12.95 million in the first quarter of fiscal 2009 as compared to $4.21 million recorded during the first quarter of fiscal 2010. This compares to a decrease of 43% in underground activity from $3.49 million in the first quarter of fiscal 2009 as compared to $1.99 million in the comparable period in fiscal 2010. Geotechnical drilling decreased by 22% during the comparable periods in fiscal 2009 and fiscal 2010.

Direct costs for the quarter ended September 30, 2009 were $4.50 million compared to $12.29 million in the first quarter of fiscal 2009. The decrease is a result of the decreased activity in fiscal 2010. Gross margins for the quarter ended September 30, 2009 were 29.1% compared to 26.0% during the first quarter of fiscal 2009 and 29.6% during the fourth quarter of fiscal 2009. Management expects gross margins to be maintained between 28-30% range during the balance of fiscal 2010, due to improved cost controls, equipment upgrades and modernization of the drill fleet.

General and administrative expenses decreased by approximately 24.0% or
$427,318 from $1.79 million in the first quarter of fiscal 2009 to $1.37 million the first quarter of fiscal 2010. The primary reason for the decrease is a 27% reduction in salaries and wages to $723,254 in the first quarter of fiscal 2010, as compared to $989,608 recorded in the first quarter of fiscal 2009 due to the corporate restructuring and salary/wage reductions that occurred in fiscal 2009. There were other significant reductions in office supplies, marketing and travel costs during the first quarter of fiscal 2010.

When compared to the fourth quarter of fiscal 2009, Cabo also recorded a reduction in general and administration costs in the first quarter of fiscal 2010 of approximately 17%, from $1.65 million to $1.37 million. The primary reason for this reduction is lower wages, professional fees, office costs, and travel costs. We anticipate these reduced general and administrative costs to continue throughout fiscal 2010 as management maintains its strict cost control measures.

Amortization of property, plant and equipment for the quarter ending September 30, 2009 increased by $174,160 to $851,734 during the first quarter of fiscal 2010 as compared to $677,574 in the first quarter of fiscal 2009 and increased by $64,724 when compared to $787,010 recorded in the fourth quarter of fiscal 2009. The reason for the increase is due to the acquisition of $4.84 million of capital assets during fiscal 2009.
 
Net loss for the first quarter of fiscal 2010 was $463,495 compared to net earnings of $1.09 million in the first quarter of fiscal 2009. Earnings decreased due to lower revenues and increased amortization.

The Company’s cash (cash and cash equivalents) position at September 30, 2009, is $587,126 compared to $455,006 at June 30, 2009. Short term investments and marketable securities increased $19,830, from $40,728 at June 30, 2009, to $60,558 at September 30, 2009. The increase can be attributed to changes in market share prices at September 30, 2009. We have adjusted the value of our holdings at September 30, 2009, as recorded in the comprehensive income statement. At September 30, 2009, the balance of $60,558 consists of shares in Canadian public corporations.

Accounts receivable decreased by $578,573 or 9% to $5.59 million at September 30, 2009 from $6.17 million at June 30, 2009. The decrease is a result of the increased collections during the quarter.

Property plant & equipment decreased to $15.05 million at September 30, 2009 from $15.33 million at June 30, 2009, a decrease of $283,257 during the first quarter of fiscal 2010. The decrease is a direct result of the higher depreciation expense recorded during the quarter.

Cash flow from operations (before changes in non-cash operating working capital items) was $388,239 during the 1st quarter of fiscal 2010, compared $1.82 million in the 1st quarter of fiscal 2009.

Management’s expectation is that it’s cycle bottomed in July 2009. Drill and inventory rationalization in the seven areas of the world, where the Company now works, is taking place on an ongoing basis. Furthermore, Management continues to focus on reducing debt, cutting costs, reducing capital and inventory expenditures, and increasing cash. Cabo Drilling is fortunate in that it has a strong senior management team, which has experienced severe downturns in the past. It has an excellent group of professionals with many years of experience of managing through tough economic cycles into the next expanding cycle.

In order to improve on profitability in an environment of improving demand and more stable commodity prices, we will maintain our cost control diligence and a tight grip on expenditures, while at the same time maintaining our experienced workforce, enforcing our high safety standards, and remaining focused on high employee relations and customer relations.

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 Canadian divisions in Surrey, British Columbia; Montréal, Quebec; Kirkland Lake, Ontario; and Springdale, Newfoundland; as well as Cabo Drilling de Mexico S.A. de C.V. of Hermosillo, Mexico; Cabo Drilling (Panama) Corp. of Panama, Republic of Panama; Cabo Drilling Spain S.L. of Sevilla, Spain; Balkan States Drilling SH.P.K. of Tirana, Albania; Cabo Drilling (Ghana) Limited of Accra, Ghana; and Cabo Drilling (International) Inc.  The Company’s common shares trade on the Frankfurt Exchange under the symbol: DHL and 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 Sheri Barton, Corporate Communications at 403-217-5830 or Mr. John A. Versfelt, Chairman, President & CEO of the Company at 604-984-8894.  For general investor relation inquiries you may also contact Renmark Financial Communications Inc. Barbara Komorowski: bkomorowski@renmarkfinancial.com or Dan Symons: dsymons@renmarkfinancial.com at Tel: 514-939-3989 or 416-644-2020.
 

*    *    *    *

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: 11/30/2009