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Cabo Announces Record 2nd Quarter Results

North Vancouver, BC – Cabo Drilling Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported results for its second quarter ended December 31, 2007.

2nd QUARTER HIGHLIGHTS

(CDN $000s, except earnings per share)
 

3 months ending Mar 31-08

3 months ending Mar 31-07

9 months ending
Mar 31-08

9 months ending
Mar 31-07

Revenue

 13,635 7,372   27,974 17,871 

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

 1,853 687 4,202 1,881

Net Earnings (Loss) Before Taxes

 1,212 349  2,971  1,052 

Net Earnings (Loss) After Taxes

 807 211  1,890  634 

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

 0.04 0.02 0.09  0.06 

Earnings (Loss) per Share ($) Basic

 0.02 0.01  0.04  0.02 

Cash from operations*

 1,340 539 2,912  1,272 

Gross Margin %

 25.0% 25.8%  25.6%  24.5% 

Working Capital

 7,056 4,189  7,056 4,189
*before changes in non-cash working capital items

The Company reports:

Its highest ever second quarter revenue of $13.64 million in the 2nd quarter of FY2008, an 84% increase from the 2nd quarter FY2007 of $7.37 million.
Record net 2nd quarter FY2008 EBITDA (earnings before interest, taxes, amortization, stock based compensation and other items) of $1.85 million compared to 2nd quarter FY2007 earnings before interest, tax, amortization, stock based compensation and other items of $686,776.

Record net earnings before taxes for the 2nd quarter of FY2008 of $1.21 million compared to 2nd quarter F2007 net earnings before taxes of $349,107.
Record 2nd quarter net earnings after taxes for the 2nd quarter of FY2008 of $806,971 compared to 2nd quarter FY2007 net earnings after taxes of $210,947, resulting in 2nd quarter FY2008 net earnings after taxes of $0.02 per share compared to FY2007 2nd quarter earnings of $0.01 per share.

Gross margin percentage for the 2nd quarter FY2008 of 25.0% compared with a gross margin of 25.8% in the FY2007 2nd quarter.

Cash from operations, before changes in non-cash working capital items, was $1.34 million for the 2nd quarter FY2008 compared to 2nd quarter FY2007 cash from operations of $538,792.

A current asset balance of $20.37 million and working capital of $7.06 million.
Total assets of $33.44 million and total liabilities of $14.66 million.
Cabo’s Pacific Division expanded its operations into the United States of America, with their first project in Nevada.

“Cabo recorded its highest ever second quarter revenues of $13.64 million, an 84% increase from the second quarter revenues of fiscal 2007 and only marginally off the highest ever quarterly revenue earned during the first quarter of fiscal 2008,” stated Mr. Versfelt, President and CEO of Cabo Drilling Corp. “The growth in revenues can be attributed to record revenues from our international operations and strong growth from all Canadian divisions. The international operations recorded revenues of $2.32 million or 17% of quarterly revenues as compared to $280,440 or 4% in the second quarter of fiscal 2007.”

“During the second quarter of fiscal 2008, Cabo achieved record second quarter net income. The Company recorded net income, after taxes, of $806,971 and an earnings per share of $0.02,” Mr. Versfelt said. “We also improved our net earnings before taxes by 247% from $349,107 in the second quarter of fiscal 2007 to $1.21 million in earnings before taxes in the second quarter of fiscal 2008. EBITDA also increased significantly in the second quarter of fiscal 2008 to $1.85 million from $686,776 in the comparable period in the previous year.”

“Cabo has now recorded three consecutive quarters of gross margins exceeding 25%,” reported Mr. Versfelt. “The Company recorded a gross margin of 25.0% during the second quarter of fiscal 2008, 26.1% during the first quarter of fiscal 2008; and 26.5% during the fourth quarter of fiscal 2007. Going forward we will strive to improve upon our margin numbers to achieve our year end goal of a gross margin of approximately 27%.”

“Cabo successfully expanded its operations into the United States. The Company’s Pacific division was awarded their first project in Nevada in November 2007,” stated Mr. Versfelt. “We have also identified other favourable exploration and mining markets in which we can continue our organic growth.”

“Cabo is continuing on its path of achieving profitability quarter over quarter,” commented Mr. Versfelt. “The Company’s second quarter of 2008 is our sixth consecutive quarter of achieving profitability. This is a great milestone for the Cabo team. The Company will continue on this path of improving both our top line and bottom line numbers and creating value for our shareholders, employees and clients.”

“Cabo continues to strengthen its balance sheet with an increase of $5.47 million during the six months ending December 31, 2007 as a result of the funds received from the exercise of warrants and the improved cash flow,” stated Mr. Verfselt.

Second quarter ended December 31, 2007

Revenue for the quarter ending December 31, 2007 was $13.64 million compared to $7.37 million in the second quarter of fiscal 2007, an 84% increase. This increase can be attributed primarily to significant growth from all divisions with the Mexico Division increasing by 364%, Ontario by 79%, Atlantic by 67% and the Pacific Division by 34%. International revenues represented 17% of revenues for the quarter, as compared to 4.5% for the second quarter in fiscal 2007. Revenues decreased slightly by 5% from the first quarter of fiscal 2008 from $14.34 million but they were significantly higher than budget and expectations for the holiday season. Management believes the international operations will contribute a growing percentage of the Company’s total revenue stream as we continue to increase the drilling fleet in Panama and Spain during the balance of fiscal 2008.

In the second quarter of FY2008 surface drilling increased $5.95 million or 140% to $10.20 million from $4.25 million in the first quarter of fiscal 2008, while underground drilling increased 18% to $3.12 million during the second quarter of fiscal 2008. Geotechnical drilling revenues decreased 34% on revenues, quarter over quarter.

Gross margins for the quarter ended December 31, 2007 were 25.0% compared to 25.8% during the second quarter of fiscal 2007 and 26.1% earned in the first quarter of fiscal 2008. The marginal decrease in gross margin is due to operational issues on several projects at the Pacific and Ontario Divisions. Direct costs for the quarter ended December 31, 2007 were $10.22 million compared to $5.49 million. The increase is a direct result of significantly higher activity, which resulted in higher revenue in the second quarter of fiscal 2008.

The Company recorded EBITDA (earnings before interest, tax, amortization, stock-based compensation and other items) of $1.85 million for the quarter ending December 31, 2007 as compared to $686,776 in the same period last fiscal year.

General and administrative expenses increased to $1.63 million for the quarter compared to $1.24 million for the comparable period last year. This increase is a result of additional administration costs incurred for the international and United States operations, higher insurance costs as a result of increased assets, increased salaries and higher audit costs. As a percentage of revenue in the second quarter of fiscal 2008, general and administration costs at 12% have decreased from the 16.8% recorded in the prior year period. While the Company has maintained salaries at the cost of living index for the past couple of years, it is expected that in this fiscal year salaries will increase at a higher percentage.

Amortization of property, plant and equipment for the quarter ending December 31, 2007 increased to $547,639 compared to $351,604 in the second quarter of fiscal 2007. The increase is due to an increased property, plant and equipment base. Amortization expense increased marginally during the quarter when comparing the second quarter expense of $547,639 to the expense of $516,089 in the first quarter of fiscal 2008. This increase is a result of additions of property plant and equipment.

Net income, after taxes, increased to $806,971 for the quarter ending December 31, 2007 as compared to $210,947 recorded in the second quarter of fiscal 2007. This represents a 282% increase that is directly related to the increased revenues and the improved gross margin.

Six Months Ended December 31, 2007

Revenues for the six months ending December 31, 2007 were $27.97 million compared to $17.87 million in the six months ending December 31, 2006, a 56% increase. This increase can be attributed primarily to significant growth from the Mexico Division, increasing by 578%, Ontario by 65%, and Atlantic by 37%. International revenues represented 13% of revenues for the six month period as compared to 2.0% for the same period in fiscal 2007.

The gross margin for the six months ending December 31, 2007 was 25.6% compared to 24.5% during the same period in fiscal 2007. The increase in gross margin is primarily due to higher margins earned by the international operations. Direct costs for the six months ending December 31, 2007 were $20.82 million compared to $13.49 million for the comparable period in fiscal 2007.

General and administrative expenses were $2.99 million for the six months ending December 31, 2007 compared to $2.50 million for the same period last year. This increase is a result of additional administration costs incurred for the international and United States operations, increased salaries, higher audit costs and costs attributed to establishing our shipping centre in Kirkland Lake, Ontario, plus higher costs related to a growing business. Overall general and administrations costs have decreased as a percentage of revenue to 11% during the first six months of fiscal 2008, as compared to 14% during the same period in fiscal 2007.

Amortization of property, plant and equipment for the six month period ending December 31, 2007 increased to $1.06 million compared to $647,088 in the same period of fiscal 2007. The increase is due to property, plant and equipment additions made during fiscal 2007 and during the first six months of fiscal 2008.

The Company incurred a $168,190 interest expense during six months ending December 31, 2007 compared to $118,420, during the same period in fiscal 2007. The increase is primarily due to the increased utilization of the operating line and new capital leases for drilling equipment that were not in place during the second quarter in fiscal 2007.

Net income, after taxes, increased to $1.89 million for the six months ending December 31, 2007 as compared to $633,500 recorded during the same period of fiscal 2007. This represents an increase of 196% that is directly related to the increased revenues and the improved gross margin.

The Company recorded EBITDA (earnings before interest, tax, amortization, stock-based compensation and other items) of $4.20 million during the six months ending December 31, 2007 compared to $1.88 million in the same period last fiscal year.

Consolidated total assets increased $6.47 million to $33.44 million at December 31, 2007, compared to $26.97 million at June 30, 2007. The increase is primarily due to the higher accounts receivable from increased revenues, additional inventory and additions to property, plant and equipment.

Consolidated total liabilities increased by $1.00 million to $14.66 million at December 31, 2007, from $13.66 million at June 30, 2007, primarily as a result of the increased utilization of the operating line of credit required to fund the increased inventory and capital assets levels. Unearned revenue increased by 10% during the period to a total of $2.93 million at December 31, 2007 primarily from projects in Spain, Panama and Ontario.

Overall, as a result of the funds received from the exercise of warrants and the improved cash flow, the Company’s Balance Sheet has, in a period of six months improved by $5.47 million.

The Company’s current cash (cash and cash equivalents) position at December 31, 2007, is $674,953 compared to $422,337 at June 30, 2007. Short term investments and marketable securities decreased $70,787, from $204,460 at June 30, 2007, to $133,673 at December 31, 2007. There were no dispositions during the quarter but the decrease is attributed to the adjustment to market value at December 31, 2007. The adjustment of $70,787 is recorded on the statement of comprehensive income.

Cash flow from operations (before changes in non-cash operating working capital items) was $2.91 million during the six months ending December 31, 2007 as compared to $1.27 million earned in the same period in the prior fiscal year.

Working capital increased by $3.79 million from $3.27 million at June 30, 2007 to $7.06 million at December 31, 2007. The increase is due the funds received from the exercise of the warrants and the improved financial results during the period.

The Company has worked towards its strategic objective of becoming a drilling service provider of sufficient size to benefit from economies of scale and to provide the foundation from which to pursue new opportunities. Cabo is well positioned to capture an increase in revenues as the demand for mineral exploration, development and mining continues to grow. 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 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, Sonora, Mexico; Cabo Drilling (Panama) Corp. of Panama, Republic of Panama; and Cabo Drilling Spain S.L. of Sevilla, Spain. 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 (www.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 at 604-984-8894.


* * * *

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: 02/29/2008