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Cabo Announces 2nd Quarter Results

North Vancouver, BC – Cabo Drilling Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its fiscal year 2010 second quarter ended December 31, 2009.

2nd QUARTER HIGHLIGHTS

(CDN $000s, except earnings per share)
 

3 months ending

Dec. 31/09

3 months ending

Dec. 31/08

6 months ending

Dec. 31/09

6 months ending

Dec. 31/08

Revenue

7,983

11,825

14,324

28,442

EarningsINSERT INTO `pages`(`pid`, `pagename`, `urlname`, `cid`, `date`, `webcontent`, `rank`) VALUES (Loss) Before Interest, Taxes, Amortization, Stock Based Compensation and Other Items  (EBITDA)

836

1,441

1,318

3,941

Net Earnings (Loss) Before Taxes

(147)

515

(611)

2,201

Net Earnings (Loss) After Taxes

(150)

339

(614)

1,420

Earnings (Loss) per Share ($)INSERT INTO `pages`(`pid`, `pagename`, `urlname`, `cid`, `date`, `webcontent`, `rank`) VALUES (Basic and Diluted) Before Interest, Taxes, Amortization, Stock-based Compensation and Other Items (EBITDA)

0.02

0.03

0.02

0.08

Earnings (Loss) per Share ($)INSERT INTO `pages`(`pid`, `pagename`, `urlname`, `cid`, `date`, `webcontent`, `rank`) VALUES (Basic and Diluted)

0.00

0.01

(0.01)

0.03

Cash from Operations*

729

924

1,117

2,745

Gross Margin %

28.5%

26.1%

28.8%

26.0%

Working Capital (deficiency)

6,076

7,765

6,076

7,765

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

  • Improved quarterly revenue for the 2nd quarter fiscal 2010 of $7.98 million, compared to $6.34 million in the 1st quarter fiscal 2010 and a decrease compared to $11.82 million in 2nd quarter fiscal 2009.
  • 2nd quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $835,577 compared to 2nd quarter fiscal 2009 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $1.44 million, resulting in 2nd quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.02 per share and $0.03 per share in the 2nd quarter of fiscal 2009.
  • Net before tax loss for the 2nd quarter of fiscal 2010 of $147,386 compared to 2nd quarter fiscal 2009 before tax earnings of $514,716.
  • Net after tax loss for the 2nd quarter of fiscal 2010 of $150,093 compared to net after tax earnings for the 2nd quarter of fiscal 2009 of $339,053, resulting in 2nd quarter fiscal 2010 net after tax earnings of $0.00 per share compared to net after tax earnings for 2nd quarter fiscal 2009 of $0.01 per share.
  • Gross margin percentage for the 2ndquarter fiscal 2010 was 28.5% compared with a gross margin of 26.1% in 2nd quarter fiscal 2009 and 29.1% in the 1st quarter of fiscal 2010.
  • Cash from operations, before changes in non-cash working capital items, was $728,657 for the 2nd quarter fiscal 2010 compared to 2nd quarter fiscal 2009 cash from operations of $924,014.
  • A current asset balance of $17.14 million and working capital of $6.08 million.
  • Total assets of $32.55 million and total liabilities of $13.14 million.

“The second quarter of fiscal 2010 is the second consecutive quarter of improved revenues, after three consecutive quarters of reduced revenues,” stated John A. Versfelt, Cabo’s President & CEO.  “At this time, the Company has drills operating in all operating regions.  Drill utilization has increased in all divisions with newly signed contracts in Atlantic, Pacific, Mexico and European divisions and a more substantial increase in contracts in the Ontario division. We expect modest revenue growth over the balance of the year.”

“General and administration costs have decreased in the second quarter of fiscal 2010 by 15.5% compared to the second quarter of fiscal 2009,” noted Mr. Versfelt.  “This is a result of the salary and wage reductions, restructuring, and improved cost controls. Compared to the first quarter of fiscal 2010, general and administration costs increased approximately $69,000.  Management anticipates additional efficiencies through the use of technology and expects to see general and administration costs in the range of $5.2 million to $5.6 million for fiscal year 2010.”

 “Gross margins showed a slight decrease for the second quarter of fiscal 2010 at 28.5% compared to 29.1% in the 1st quarter of fiscal 2010 and 29.6% in the fourth quarter of fiscal 2009,” stated John A. Versfelt.  “This decrease is a result of a 5% increase in general and administrations costs experienced during the 2nd quarter of fiscal 2010 compared to the 1st quarter fiscal 2010. The primary reason for this increase is higher travel, the 2009 annual report and annual general meeting expenses and filing costs.”

“The Company recorded a net after tax loss of  $150,093 during the 2nd quarter of fiscal 2010 or $0.00 per share compared to earnings of $339,053 or $0.01 earnings per share in the 2nd quarter of fiscal 2009,” noted John A. Versfelt.  “Our second quarter is a 69% improvement over our 1st quarter fiscal 2010 loss of $463,495 or $0.01 loss per share.  EBITDA decreased to $835,577 during the second quarter of fiscal 2010, compared to $1.44 million in the previous corresponding period and increased 73% from the $482,152 recorded during the first quarter of fiscal 2010.”

 “Our expectation is that we will continue to see slight increases of exploration spending during 2010 and a greater improvement in 2011,” remarked John A. Versfelt.  “This increase in spending will be supported by the current gold and base metal market and pricing improvements, as well as the lack of new discoveries, lower metal supply and higher metal demand factors.”

Second quarter ended December 31, 2009

Revenue for the quarter ending December 31, 2009 decreased $3.84 million or 32% to $7.98 million, compared to $11.82 million in the second quarter of fiscal 2009; however it improved from $6.34 million recorded in the first quarter fiscal 2010. 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. Revenues from the Canadian and United States divisions decreased by 23% and the other divisions decreased by 48%. The Company had drills operating in all Canadian and international divisions during the quarter. Overall drill utilization increased from the previous quarter but still remains lower than 40%.

Revenues increased by 26% to $7.98 million in the second quarter of fiscal 2010, as compared to the $6.34 million recorded in the first quarter of fiscal 2010. Drilling activity in Ontario, Atlantic, Europe and the Mexico divisions increased with a decrease in the Pacific division. Our Atlantic division completed a significant geotechnical drilling project in the quarter as geotechnical revenues increased to 25% of quarterly revenue.

Surface drilling revenues decreased 48% from $8.51 million in the second quarter of fiscal 2009 as compared to $4.42 million recorded during the second quarter of fiscal 2010. This compares to a decrease of 48% in underground activity from $3.05 million in the second quarter of fiscal 2009 as compared to $1.59 million in the comparable period in fiscal 2010. Geotechnical drilling increased by 637% during the comparable periods in fiscal 2009 and fiscal 2010.

Direct costs for the quarter ended December 31, 2009 were $5.71 million compared to $8.74 million in the second quarter of fiscal 2009. The decrease is a result of the decreased activity in fiscal 2010. Gross margins for the quarter ended December 31, 2009 were 28% compared to 26% during the second quarter of fiscal 2009 and 29% during the first quarter of fiscal 2010. Management expects gross margins to be maintained in the 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 15.5% or $263,353, from $1.70 million in the second quarter of fiscal 2009 to $1.43 million the second quarter of fiscal 2010. The primary reason for the decrease is a 10% reduction in salaries and wages to $783,337 in the second quarter of fiscal 2010 as compared to $867,101 recorded in the second quarter of fiscal 2009, due to the corporate restructuring and salary reduction that occurred in early fiscal 2009. There were other significant reductions in marketing and travel costs during the second quarter of fiscal 2010.

When compared to the first quarter of fiscal 2010, Cabo recorded a slight increase of $68,895 in general and administration costs in the second quarter of fiscal 2010 of approximately 5%, from $1.37 million to $1.43 million. The primary reason for this increase is higher travel, the 2009 annual report and annual general meeting expenses and filing costs. We anticipate 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 December 31, 2009 increased by $87,891 to $829,409 during the second quarter of fiscal 2010 as compared to $741,518 in the second quarter of fiscal 2009. The reason for the increase is the acquisition of $4.84 million of capital assets during fiscal 2009. Amortization decreased by $22,325 when compared to $851,734 recorded in the first quarter of fiscal 2010 as some assets have been fully depreciated. 

Net loss for the second quarter of fiscal 2010 was $150,093 compared to net earnings of $339,053 in the second quarter of fiscal 2009. Earnings decreased due to lower revenues, and increased amortization.

The Company’s cash (cash and cash equivalents) position at December 31, 2009, is $683,300 compared to $455,006 at June 30, 2009.

Accounts receivable decreased by $138,473 or 2% to $6.03 million at December 31, 2009 from $6.17 million at June 30, 2009.

Property plant & equipment decreased to $14.16 million at December 31, 2009 from $15.33 million at June 30, 2009, a decrease of $1.17 million during the first six months of fiscal 2010. The decrease is a direct result of the higher depreciation expense recorded during the quarter due to $4.84 million in new property plant and equipment acquired fiscal 2009.

Cash flow from operations (before changes in non-cash operating working capital items) was $728,657 during the 2nd quarter of fiscal 2010, compared $924,014 in the 2nd quarter of fiscal 2009.

Consolidated Financial Results for six months ending December 31, 2009

Revenue for the six months ending December 31, 2009 decreased approximately 50% to $14.32 million, compared to $28.44 million in the comparable period in fiscal 2008. All regions were affected by the economic slowdown with revenues from the international divisions decreasing by 59% to $3.79 million and our Canadian divisions decreased by 46%.  Revenues from our international divisions continue to represent a significant part of our operations with 24% of revenues from the international divisions, which is down from the 32% in the comparable period last year.

Direct costs for the six months ended December 31, 2009 were $10.21 million compared to $21.03 million in the comparable period in fiscal 2008. Gross margins for the six months ended December 31, 2009 were 28.5% compared to 26.0% during the six months ended December 31, 2008. Management expects lower margins throughout the balance of fiscal 2009 due to increased competitions of Canadian drilling contractors with excess drill supply.

General and administrative expenses decreased by approximately 19.8% or $690,671 from $3.49 million in the first six months of fiscal 2009 to $2.80 million in the first six months of fiscal 2010. Decreased costs can be attributed to a 22% decrease in wages in salaries and wages during the first six months. This decrease is a result of the staff reductions and salary reductions implemented in the third quarter of fiscal 2009. There were other reductions in expenses due to the restructuring; travel expenses decreased by 31% to $133,940 in fiscal 2010 as compared to $193,024 in fiscal 2009; investor relation costs decreased by 46% to $61,722 in fiscal 2010 as compared to $113,478 in fiscal 2009; and reductions in insurance and office supplies. 

Net loss for the first six months of fiscal 2010 were $613,588 compared to net earnings of $1.42 million earned in the comparable period of fiscal 2009.

Management’s expectation is that the downturn 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 decreasing demand and volatile commodity prices, we are relentless on cost control and reducing our spending, 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.


*    *    *    *

TheTSX 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: 03/02/2010