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Cabo Announces 3rd Quarter Results

Cabo Announces 3rd Quarter Results

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

3RD QUARTER HIGHLIGHTS

(CDN $000s, except earnings per share)
 

3 months ending

Mar. 31/10

3 months ending

Mar. 31/09

9 months ending

Mar. 31/10

9 months ending

Mar. 31/09

Revenue

6,505

6,522

20,829

34,964

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

153

102

1,471 

4,043

Net Earnings (Loss) Before Taxes

(778)

(765)

(1,389)

1,435

Net Earnings (Loss) After Taxes

(777)

(1,075)

(1,390)

345

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

0.00

0.00

0.03

0.08

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

(0.02)

(0.02)

(0.03)

0.01

Cash from Operations*

3

(346)

1,120

2,399

Gross Margin %

25.0%

27.0%

27.6%

26.2%

Working Capital (deficiency)

5,778

7,243

5,778

7,243

 * before changes in non-cash working capital items

 The Company reports:

Revenue for the 3rd quarter fiscal 2010 of $6.51 million, compared to $6.52 million in 3rd quarter fiscal 2009 and $7.98 million in the 2nd quarter fiscal 2010.

3rd quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $153,175 compared to 3rd quarter fiscal 2009 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $101,828 resulting in 3rd quarter fiscal 2010 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.00 per share and $0.00 per share in the 3rd quarter of fiscal 2009.

  • Net before tax loss for the 3rd quarter of fiscal 2010 of $778,377 compared to 3rd quarter fiscal 2009 before tax loss of $765,330.
  • Net after tax loss for the 3rd quarter of fiscal 2010 of $776,683 compared to net after tax loss for the 3rd quarter of fiscal 2009 of $1.075 million resulting in 3rd quarter fiscal 2010 net after tax loss of $0.02 per share compared to net after tax loss for 3rd quarter fiscal 2009 of $0.02 per share.
  • Gross margin percentage for the 3rd quarter fiscal 2010 was 25.0% compared with a gross margin of 27.0% in 3rd quarter fiscal 2009 and 28.5% in the 2nd quarter of fiscal 2010.
  • Cash from operations, before changes in non-cash working capital items, was $3,456 for the 3rd quarter fiscal 2010 compared to 3rd quarter fiscal 2009 cash from operations of $(345,533).
  • A current asset balance of $16.51 million and working capital of $5.78 million.
  • Total assets of $31.12 million and total liabilities of $12.67 million.

 “Although revenues have decreased slightly in the third quarter of fiscal 2010, the Company has recently been awarded several large long term contracts in the Ontario, Pacific, and Panama divisions,” stated John A. Versfelt, Cabo’s President & CEO.  “The third quarter is normally one of the slowest quarters due to the reduced activity because of seasonal conditions throughout Canada. 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 the Ontario division. We expect modest revenue growth over the balance of the year.”

“General and administration costs have decreased during the nine months ending March 31, 2010 by 17% compared to the comparable period in fiscal 2009,” noted Mr. Versfelt.  “This is a result of the salary and wage reductions, restructuring, and improved cost controls. Management anticipates additional efficiencies through the use of technology and we should see general and administration costs in the range of $5.6 million to $5.8 million for fiscal year 2010.”

 “Gross margins showed a decrease for the third quarter of fiscal 2010 to 25.0% compared to 28.5% in the 2nd quarter of fiscal 2010 and 27.0% in the third quarter of fiscal 2009,” stated John A. Versfelt.  “The decrease in margin is a result of significant start up costs incurred to prepare for the spring and summer 2010 drilling season. Management expects gross margins to improve to the 27-29% range during the balance of fiscal 2010.”

“The Company recorded a net after tax loss of $776,683 during the 3rd quarter of fiscal 2010 or $0.02 loss per share compared to a loss of $1,074,666 or $0.02 loss per share in the 3rd quarter of fiscal 2009,” noted John A. Versfelt.  “Our third quarter is a 28% improvement over the same quarter in fiscal 2009.  EBITDA increased to $153,175 during the third quarter of fiscal 2010, compared to $101,828 in the previous corresponding period.”

“At this time drilling companies are experiencing the competitive squeeze that can be expected when demand is ramping up after a significant downturn,” remarked John A. Versfelt.  “The customers are expecting lower prices, but the labour force is pushing for higher wages; however, the utilization of drills is increasing and drilling companies are less willing to offer lower drill rates, which in turn is relieving the pressure on margins going into the Summer and Fall, 2010.”

Third quarter ended March 31, 2010

Revenue for the quarter ending March 31, 2010 decreased marginally by $16,404 to $6.51 million, compared to $6.52 million in the third quarter of fiscal 2009; and decreased by 18% from $7.98 million recorded in the second quarter fiscal 2010. The primary reason for the decrease is normal seasonal slowdown during parts of Canada resulting in lower revenues.  Revenues from the Canadian and United States divisions increased by 116% and the other divisions decreased by 63%. The Company had drills operating in all Canadian and international divisions during the quarter. Overall drill utilization decreased from the previous quarter and still remains lower than 40%.

Revenues decreased by 19% to $6.51 million in the third quarter of fiscal 2010, as compared to the $7.98 million recorded in the second quarter of fiscal 2010. There was no significant change in drilling activity in Ontario, Panama, and Europe divisions but there was a decrease in the Atlantic and Mexico divisions during the third quarter of fiscal 2010, as compared to the second quarter of fiscal 2010. The Atlantic division completed a significant geotechnical drilling project in the second quarter of fiscal 2010.

Surface drilling revenues increased 11% from $4.65 million in the third quarter of fiscal 2009 as compared to $5.14 million recorded during the third 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.

Direct costs for the quarter ended March 31, 2010 were $4.88 million compared to $4.76 million in the third quarter of fiscal 2009. The increase is a result of the decreased gross margin during the quarter. Gross margins for the quarter ended March 31, 2010 were 25% compared to 27% during the third quarter of fiscal 2009 and 29% during the second quarter of fiscal 2010. The decrease in margin is a result of significant start up costs incurred to prepare for the spring and summer 2010 drilling season and increased drill crew wages. Management expects gross margins to improve to the 27-29% range during the balance of fiscal 2010.

General and administrative expenses decreased by approximately 11.8% or $193,124, from $1.63 million in the third quarter of fiscal 2009 to $1.44 million the third quarter of fiscal 2010. The primary reason for the decrease is a reduction in salaries and wages to $701,469 in the third quarter of fiscal 2010 as compared to $895,321 recorded in the third 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 third quarter of fiscal 2010.

Amortization of property, plant and equipment for the quarter ending December 31, 2009 increased by $54,102 to $845,145 during the third quarter of fiscal 2010 as compared to $791,043 in the third quarter of fiscal 2009. The reason for the increase continues to be the amortization related to the acquisition of $4.84 million of capital assets during fiscal 2009.

Net loss for the third quarter of fiscal 2010 was $776,683 compared to a net loss of $1.07 million in the third quarter of fiscal 2009. A net improvement of $293,320.

The Company’s cash (cash and cash equivalents) position at March 31, 2010, is $377,116 compared to $455,006 at June 30, 2009.

Accounts receivable decreased by $1.21 million or 20% to $4.96 million at March 31, 2010 from $6.17 million at June 30, 2009.

Property plant & equipment decreased to $13.41 million at March 31, 2010 from $15.33 million at June 30, 2009, a decrease of $1.92 million during the first nine 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 $3,456 during the 3rd quarter of fiscal 2010, compared to $(345,533) in the 3rd quarter of fiscal 2009.

Consolidated Financial Results for nine months ending March 31, 2010

Revenue for the nine months ending March 31, 2010 decreased approximately 40% to $20.83 million, compared to $34.96 million in the comparable period in fiscal 2009. All regions were affected by the economic slowdown with revenues from the international divisions decreasing by 61% to $5.26 million and our Canadian divisions decreasing by 28%.  International divisions continue to represent a significant part of our operations with 26% of revenues from the international divisions, but this is down from the 38% in the comparable period last year.

Direct costs for the nine months ended March 31, 2010 were $15.08 million compared to $25.80 million in the comparable period in fiscal 2009. Gross margins for the nine months ended March 31, 2010 were 27.6% compared to 26.0% during the nine months ended March 31, 2009. Management expects margins to be in the range of 27-29% for the balance of fiscal 2010 due to increased competitions of Canadian drilling contractors with excess drill supply.

General and administrative expenses decreased by approximately 17.2% or $883,795 from $5.13 million in the first nine months of fiscal 2009 to $4.24 million in the first nine months of fiscal 2010. Decreased costs can be attributed to a 23% decrease in wages in salaries and wages during the first nine 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 26% to $198,697 in fiscal 2010 as compared to $270,718 in fiscal 2009 and insurance costs increased by 16% to $391,983 due to higher foreign workers compensation

Net loss for the first nine months of fiscal 2010 was $1.39 million compared to net earnings of $345,237 earned in the comparable period of fiscal 2009.

According to a March – April 2010 Metals Economics Group (MEG); the number of significant financings announced by junior and intermediate companies increased 14% in the last period to 129, while the amount of money raised almost doubled to $3.4 billion, returning to the levels of the second half of 2009 after a sharp drop at the beginning of 2010. For the first time since May 2009, base metals financings in April accounted for just over half of the monthly total raised, and bimonthly total amount raised in base metals financings in March – April 2010 is at its highest amount since the MEG survey begin May – June 2008. Both the proportion and amount raised through debt also increased significantly in March – April 2010. These financings will continue to put pressure on increased demand for exploration activities and, therefore, drilling activity. The long-expected spike in acquisitions activity may be under way, as the number of acquisitions (which are not included in the PAI calculation) for the latest bimonthly period increased more than 40% over the previous two months and more than 140% from the risk-adverse year-ago period.

In order to improve on profitability in this environment of improving demand and more stable commodity prices, we will maintain our cost control diligence and keep 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 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; 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: 05/31/2010