Cabo Announces Fiscal 2014 1st Quarter Results

NEW WESTMINSTER, BRITISH COLUMBIA--(Marketwired - Dec 2, 2013) - Cabo Drilling Corp. ("Cabo" or the "Company") (TSX VENTURE:CBE)(FRANKFURT:DHL) reports the results for its fiscal year 2014 first quarter ended September 30, 2013.

1^st QUARTER HIGHLIGHTS

The Company reports:

• Quarterly revenue for the first quarter fiscal 2014 of $6.65 million, a 52% decrease compared to $13.84 million in the 1^st quarter fiscal 2013.
• 1^st quarter fiscal 2014 earnings before interest, taxes, amortization, stock-based compensation and other items (EBITDA) of $54,974 compared to 1^st quarter fiscal 2013 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $1.83 million, resulting in 1^st quarter fiscal 2014 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.00 per share, compared to $0.02 per share in the 1^st quarter of fiscal 2013.
• Net before tax loss for the 1^st quarter of fiscal 2014 of $876,488 compared to net before tax income for the 1^st quarter fiscal 2013 of $768,965.
• Net after tax loss for the 1^st quarter of fiscal 2014 of $816,619 compared to net after tax earnings for the 1^st quarter of fiscal 2013 of $559,737, resulting in a 1^st quarter fiscal 2014 net after tax loss of $0.01 per share compared to net after tax earnings for 1^st quarter fiscal 2013 of $0.01 per share.
• Gross margin percentage for the 1^st quarter fiscal 2014 was 13.2%, with amortization included in direct costs, compared with a gross margin of 21.3% in 1^st quarter fiscal 2013 and 16.0% in the 4^th quarter of fiscal 2013.
• Cash from operations was $735,060 for the 1^st quarter fiscal 2014 compared to 1^st quarter fiscal 2013 cash from operations of $1.35 million.
• A current asset balance of $21.1 million and working capital of $12.6 million.

"Cabo Drilling generated gross revenues of $6.65 million during the first quarter of fiscal 2014," stated Mr. Versfelt, Cabo Drilling's President and CEO. "This represents a 52% decrease compared to the $13.84 million in the comparable period in fiscal 2013."

"Gross margin, adjusted to include amortization, was 13.2% or $875,244 in first quarter of fiscal 2014, as compared to 21.3% in the first quarter of fiscal 2013," reported Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $624,445 are included in direct costs as compared to $631,003 in the first quarter of fiscal 2013. Adjusted gross margin, when amortization expense is excluded, is 22.5% in first quarter of fiscal 2014, as compared to 26% in the first quarter of fiscal 2013.

"The Company recorded a loss of $816,619 during the first quarter of fiscal 2014, or a $0.01 loss per share, compared to earnings of $559,737 or $0.01 per share in the first quarter of fiscal 2013," noted Mr. Versfelt. "EBITDA for the first quarter of fiscal 2014 was $54,974, compared to $1.83 million in the first quarter of fiscal 2013."

"Cabo Drilling's working capital decreased to $12.64 million during the first quarter of fiscal 2014, from $13.45 million at the June 30, 2103," commented Mr Versfelt. "Total liabilities decreased by $921,017 during the first three months of fiscal 2014 to $12.74 million at September 30, 2013."

"During the first quarter, approximately 43% of revenues came from gold related projects, 45% from copper, 4% from iron and the remaining 6% from other base metals," stated Mr. Versfelt.

First quarter ended September 30, 2013

Revenue for the quarter ending September 30, 2013, decreased $7.20 million, or 52%, to $6.65 million, compared to $13.84 million in first three months of fiscal 2013. The primary reason for the decrease is due to reduced demand for drilling in North America, as a result of projects being scaled back, delayed or terminated. Latin America division revenues increased by 17% with slightly higher drilling and ground servicing activities utilization in Panama, offset by the decreased activity in Colombia. The Canadian and USA divisions recorded a significant decrease in revenues of 69% to $3.49 million in the first three months of fiscal 2014, as compared to $11.16 million in the comparable period in fiscal 2013.

Revenues from surface drilling services decreased 49%, from $8.73 million in the first quarter of fiscal 2013 to $4.46 million in the first three months of fiscal 2014, 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 57% to $928,497; however, activity in iron ore formations showed little change. Underground drilling decreased by 57% in the first quarter of fiscal 2014 to $1.16 million, as compared to $1.16 million in the comparable period in fiscal 2013.

Direct costs for the quarter ended September 30, 2013, were $5.77 million compared to $10.90 million in the quarter ending September 30, 2012, as adjusted to include depreciation in accordance with IFRS. The decrease is a direct result of the decreased activity in fiscal 2014. Gross margins, under IFRS reporting, for the quarter ended September 30, 2013, were 13.2% compared to 21.3% during the quarter ending September 30, 2012. The lower margins are primarily a result of two projects terminating earlier than expected, resulting in lower margins for those projects.

In accordance with IFRS, depreciation expense of property, plant and equipment of $624,205 is included in direct costs for the quarter ending September 30, 2013, as compared to $655,113 in the first quarter of fiscal 2013.

General and administrative expenses decreased by $222,276 from $1.76 million for the first three months of fiscal 2013 to $1.54 million in the first three months of fiscal 2014. Included in the first quarter of fiscal 2014 is $56,730 in stock based compensation, compared to nil stock based compensation in the comparable fiscal 2013 period. General and administration costs have decreased by 18% in comparable periods, when excluding the stock based compensation costs. The decrease is a result of lower salary and travel costs.

Net loss for the first quarter of fiscal 2014 is $816,619 compared to a net income of $559,737 in the first three months of fiscal 2013. This is a direct result of the decreased activity in the global drilling market.

The Company's cash (cash and cash equivalents) position at September 30, 2013 is $362,714 compared to $134,248 at June 30, 2013.

Marketable securities decreased $228,098 from $1.11 million at June 30, 2013, to $882,248 at September 30, 2013. Marketable securities consist primarily of 1.50 million shares in Standard Gold Inc. and 4.31 million shares of International Millennium Mining Corp. We have adjusted the value of our holdings at September 30, 2013, as recorded in the comprehensive income statement. At September 30, 2013, the balance of $882,248 consists of shares in public corporations.

Accounts receivable decreased by $1.21 million to $6.27 million at September 30, 2013, from $7.48 million at June 30, 2013. The decrease is primarily due to reduced activity during fiscal 2014.

Property, plant & equipment decreased to $11.63 million at September 30, 2013 from $12.28 million at June 30, 2013, a decrease of $650,885 during the first three months of fiscal 2014, primarily resulting from equipment depreciation, with minimal capital expenditures in the quarter.

Cash flow from operations (before changes in non-cash operating working capital items) was $735,060 during the first quarter of fiscal 2014, compared $1.35 million in the first quarter of fiscal 2013.

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 practices, 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.

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 (Colombia) Corp. of Colombia; 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 Drilling 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 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.