Cabo Drilling Announces 2013 Fourth Quarter and Annual Results

NEW WESTMINSTER, BRITISH COLUMBIA--(Marketwired - Oct 29, 2013) - Cabo Drilling Corp. ("Cabo" or the "Company") (TSX VENTURE:CBE) reports results for its fourth quarter and fiscal year ended June 30, 2013.

SELECTED ANNUAL HIGHLIGHTS

The Company reports:

• Fiscal revenue for the year ended June 30, 2013, of $42.53 million, a 28% decrease compared to $58.95 million in fiscal 2012, and quarterly revenue for the 4^th quarter of fiscal 2013 of $8.91 million, a 35% decrease compared to $13.61 million in the 4^th quarter fiscal 2012.
• Fiscal 2013 income before interest, taxes, amortization, stock-based compensation and other items ("EBITDA") of $3.96 million compared to fiscal 2012 EBITDA of $6.38 million, resulting in fiscal 2013 EBITDA of $0.05 per share compared to $0.08 per share in fiscal 2012, and 4^th quarter fiscal 2013 EBITDA of $429,299 compared to 4^th quarter fiscal 2012 EBITDA of $293,734, resulting in 4^th quarter fiscal 2013 EBITDA of $0.01 per share and $0.00 per share in the 4^th quarter of fiscal 2012.
• Net loss after taxes for fiscal 2013 of $565,110 compared to net income after taxes of $1.66 million in fiscal 2012, resulting in a fiscal 2013 net after tax loss of $0.01 per share compared to net after tax income for fiscal 2012 of $0.02 per share and an after tax loss for the 4^th quarter of fiscal 2013 of $709,901 compared to a net after tax loss for the 4^th quarter of fiscal 2012 of $734,090, resulting in 4^th quarter fiscal 2013 net after tax loss of $0.01 per share and a net after tax loss for 4^th quarter fiscal 2012 of $0.01 per share.
• Cash from operations, before changes in non-cash working capital items, was $2.62 million for fiscal 2013 compared to fiscal 2012 cash from operations of $3.35 million.
• A current asset balance of $22.62 million and working capital of $13.45 million.

"Cabo Drilling generated revenues for fiscal 2013 of $42.53 million," stated Mr. Versfelt, Cabo's President & CEO. "This represents a 28% decrease compared to the $58.95 million recorded in the comparable period in fiscal 2012. The Company's quarterly gross revenue for the three months ended June 30, 2013 also decreased by 35% to $8.91 million compared to $13.61 million in the comparable three month period in fiscal 2012."

"Gross margin, adjusted to include amortization, was 19.3% or $8.21 million in fiscal 2013, as compared to 18.2% or $10.75 million in fiscal 2012," commented Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $2.47 million are included in direct costs as compared to $2.62 million in fiscal 2012. Adjusted gross margin, when depreciation expense is excluded from direct costs is 25.1% in fiscal 2013, as compared to 22.7% in fiscal 2012."

"The Company reported $3.96 million in EBITDA or $0.05 per share, for the year ending June 30, 2013 compared to $6.38 million, or $0.08 per share, in fiscal 2012," stated Mr. Versfelt.

"Approximately 59% of Cabo's revenues were generated from gold related projects, 18% from copper, 18% from iron and the balance from other base metals," commented Mr. Versfelt.

"Working capital increased to $13.45 million during fiscal 2013, from $12.72 million at June 30, 2012," stated Mr. Versfelt. "Total liabilities decreased by $4.75 million during fiscal 2013 to $13.83 million at June 30, 2013. During the fiscal 2013 year the Company paid, in full, the debentures totalling $1.997 million that were due and payable on February 14, 2013."

"Cabo Drilling has reduced costs over the past two years and has improved its balance sheet. Productivity has improved, our safety record is one of the best in the industry and our client relationships are very good," commented John Versfelt. "With a continued focus on excellent safety, high environmental stewardship and improved productivity, plus the improved availability of good to excellent drilling personnel, we believe we will experience better projects and better margins, with high safety standards and high quality clients."

Consolidated Annual Financial Results

Revenue for the year ending June 30, 2013, decreased $16.42 million, or 28%, to $42.53 million, compared to $58.95 million in fiscal 2012. The primary reason for the decrease is due to reduced demand for drilling, as a result of projects being scaled back, delayed or terminated. Latin America division revenues decreased by 16% with slightly higher drill utilization in Panama, offset by the decreased activity in Colombia during the second half of fiscal 2013. The Canadian and USA divisions recorded a significant decrease in revenues of 34% to $26.81 million in fiscal 2013, as compared to $40.72 million in fiscal 2012.

Surface drilling revenues decreased 33%, from $45.02 million in fiscal 2012 to $29.93 million in fiscal 2013, largely due to the early completion or termination of drilling projects with major mining clients in Canada and Colombia. Revenues from reverse circulation programs decreased by 13% to $4.49 million; however, activity in iron ore formations showed little change. Underground drilling decreased by 4% in 2013 to $7.35 million, as compared to $7.68 million in fiscal 2012.

Direct costs for the year ended June 30, 2013, were $34.32 million compared to $48.20 million in the year ending June 30, 2012, as adjusted to include depreciation in accordance with IFRS. The decrease is a direct result of the decreased activity in fiscal 2013. Gross margins, under IFRS reporting, for the year ended June 30, 2013, were 19.3% compared to 18.2% during the year ending June 30, 2012. While the Company experienced higher fixed costs in the Canadian operations, these costs were offset mostly by higher margins in the Panama and Colombia operations, resulting in a small improvement in overall gross margin, compared to 2012. Management restructured two of its Canadian operations, which is beginning to result in improved margins and profitability.

In accordance with IFRS, $2.47 million of depreciation expense of property, plant and equipment is included in direct costs for the year ending June 30, 2013, as compared to $2.62 million in fiscal 2012.

General and administrative expenses decreased by $706,352 from $7.61 million in fiscal 2012 to $6.90 million in fiscal 2013. The decrease is a result of lower salaries and travel costs. During the year, the company reduced the general and administration payroll by 21%, but the entire effect will not be noticed until fiscal 2014.

General and administration costs represent 16% of revenues of fiscal 2013, as compared to 13% reported in the second year of fiscal 2012. Management expects general and administration costs to range between $5.4 and $5.8 million for 2014.

The Company incurred a $1.29 million finance and accretion interest expense during fiscal 2013, compared to $1.43 million incurred during fiscal 2012. The decrease can be directly attributed to the payment in full in February 2013 of the $1.997 million debenture. Cabo continues to accrue and pay semi-annual interest on the $2.70 million debentures.

Net loss after taxes for fiscal 2013 is $565,110 compared to a net income of $1.66 million in fiscal 2012. This is a direct result of the decreased activity in the global drilling market.

The Company's cash (cash and cash equivalents) position at June 30, 2013 is $134,248 compared to $1.24 million at June 30, 2012. The reduction in cash is largely due to the payment of the debentures in February, 2013 and the reduced drilling activities.

Cash flow from operations (before changes in non-cash operating working capital items) was $2.61 million during fiscal 2013, compared to $3.35 million during fiscal 2012.

Consolidated Fourth Quarter Financial Results

Revenue for the three months ending June 30, 2013 decreased approximately 35% to $8.91 million, compared to $13.61 million in fiscal 2012. Revenues from our international divisions continue to represent a significant portion of Cabo Drilling's operations with 41% of revenues for the three month period ending June 30, 2013, compared to 36% during the same period in fiscal 2012. Management expects the international revenues to continue to represent a significant portion of overall revenues looking forward to fiscal 2014.

Surface drilling decreased by 40% during the three month period ending June 30, 2013 to $6.14 million, due to decreased utilization in the Atlantic, Colombia, and Pacific divisions. Underground drilling decreased 49% during the three month period ending June 30, 2013 to $1.35 million. This compares to $2.65 million during the same period in fiscal 2012. The decrease is due to an underground contract not being renewed in the Atlantic division.

Direct costs for the three months ended June 30, 2013 were $7.49 million compared to $11.75 million in the comparable period in fiscal 2012. Gross margins for the three months ended June 30, 2013 were 16.0% compared to 13.7% during the three months ended June 30, 2012, when direct costs include depreciation expenses (or 21.7% compared to 18.4% for the respective periods, when direct costs are adjusted to exclude depreciation expense). The Company's margins should continue to improve due to restructuring in the Ontario and Pacific divisions that took place in the fourth quarter fiscal 2013.

General and administrative expenses decreased by approximately 18% from $2.10 million in the three months ended June 30, 2012 to $1.72 million in the three months ending June 30, 2013. The decrease is primarily a result of decreased salary costs from restructuring the Canadian operations, lower travel expenditures and lower bad debt allowance.

Net loss for the last quarter of fiscal 2013 was $709,901 compared to a net loss of $734,090 in the comparable period in fiscal 2012.

As has been stated in the past, the drilling services business is always challenging. In times of high demand for drilling services, like 2011 and the first half of 2012, revenues were high, but good drill crews were difficult to recruit and retain at cost effective prices, plus productivity was compromised and safety and environmental concerns escalated, resulting in higher costs. In slower times, like today, revenues decrease, but drilling crews are better and more experienced, and costs per meter are reduced as well. There is no easy formula for managing a drilling company, but good old fashioned business practices, like quality customer relations, high respect for employees and quality human relations, superb safety procedures and practises, careful attention to the protection of the environment and community relations, continue to be critical for Cabo Drilling's management team. These practices, plus effective cost controls and management of equipment and drilling practices, and services invoiced to the customer at a fair price and in an honest manner, will enhance a drilling company's ability to grow profitably at all times.

About Cabo Drilling Corp. (TSX VENTURE:CBE)

Cabo Drilling Corp. is a drilling services company headquartered in New Westminster, British Columbia, Canada. The Company provides mining specialty drilling services through its Canadian divisions in Surrey, British Columbia; Kirkland Lake, Ontario; and Springdale, Newfoundland; as well as Cabo Drilling (America) Inc. of the United States; Cabo Drilling (Panama) Corp. of Panama, Republic of Panama; Cabo Drilling Panama-Pacifico Corp. of Panama, Republic of Panama doing business as Cabo Drilling Colombia Corp.; 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, 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).

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, those relating to worldwide demand for gold and base metals and overall commodity prices, the level of activity in the minerals and metals industry and the demand for the Company's services, the Canadian and international economic environments, the impact of operational changes, changes in jurisdictions in which the Company operates (including changes in regulation), failure by counterparties to fulfill contractual obligations, and other factors as may be set forth, as well as objectives or goals. 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.