Cabo Drilling Announces 2014 Fourth Quarter and Annual Results

NEW WESTMINSTER, BRITISH COLUMBIA--(Marketwired - Oct 29, 2014) - Cabo Drilling Corp. ("Cabo" or the "Company") (TSX VENTURE:CBE) reports results for its fourth quarter and fiscal year ended June 30, 2014.

SELECTED ANNUAL HIGHLIGHTS

The Company reports:

• Revenue for the fourth quarter fiscal 2014 ("Q4 FY2014") of $4.74 million compared to $8.91 million in the fourth quarter fiscal 2013 ("Q4 FY2013").
• Gross margin percentage for the quarter was (20.8%) (with depreciation included in direct costs), compared with 16.0% in for the corresponding period last year.
• Negative EBITDA of $2.47 million for the quarter compared to $429,299 in Q4 FY2013, resulting in negative EBITDA per share of $0.03 for the quarter compared to $0.01 in Q4 FY2013.
• Net after tax loss was for the quarter was $1.28 million or a loss of $0.06 per share (loss of $0.06 per share diluted), compared to net after tax loss of $709,901 or a loss of $0.01 per share (loss of $0.01 per share diluted) for the corresponding period last year.
• Cash from operations, before changes in non-cash working capital items, was negative $4.31 million for the year ending June 30, 2014 compared to $2.61 for the year ending June 30, 2013.

"Cabo Drilling has dramatically reorganized its drilling operations in Canada, including closing its Montreal division and moving all geotechnical drilling equipment and management to our other divisions. Consequently, we have reduced operating and general and administration expenses, which should result in better margins and an improved bottom line, beginning in the third and fourth quarters of 2015. Revenues should remain steady in the $4.0 to $4.5 million per quarter range," stated Mr. Versfelt, President and CEO of Cabo Drilling.

"Cabo Drilling generated revenues for fiscal 2014 of $23.01 million," commented Mr. Versfelt. "This represents a 46% decrease compared to the $42.53 million recorded in the comparable period in fiscal 2013. The Company's quarterly gross revenue for the three months ended June 30, 2014 also decreased by 47% to $4.74 million compared to $8.91 million in the comparable three month period in fiscal 2013."

"Gross margin, adjusted to include depreciation, was 3.6% or $816,707 in fiscal 2014, as compared to 19.3% in fiscal 2013," commented Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $2.31 million are included in direct costs as compared to $2.47 million in fiscal 2013. Adjusted gross margin, when depreciation expense is excluded from direct costs is 13.6% in fiscal 2014, as compared to 25.1% in fiscal 2013."

"The Company recorded several non-recurring charges to direct expenses, inventory provision for obsolete inventory, and costs to close our Chambly, Quebec geotechnical division. The total for all these expenses in fiscal 2014 is $1.16 million. These costs are included in direct costs and have negatively affected our gross margin," stated Mr. Versfelt. "Other non-recurring costs that are included in general and administration are $407,000 in bad debt provisions and approximately $22,000 in costs for closing our Chambly, Quebec division."

"Total liabilities decreased by $729,976 during fiscal 2014 to $13.10 million at June 30, 2014," Mr. Versfelt noted. "The Company recorded a deferred tax asset due to the losses incurred during fiscal 2014. At June 30, 2014, the Company has 22,813,000 in tax losses expiring primarily between 2025-2035."

"The Company reports negative EBITDA of $3.03 million for fiscal 2014, compared to $3.96 million in fiscal 2013," stated Mr. Versfelt.

"Approximately 36% of fiscal 2014 revenues came from gold related projects, 38% from copper, 6% from iron and the remaining 20% from other base metals," commented Mr. Versfelt.

"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 Fourth Quarter Financial Results

Revenue for the three months ending June 30, 2014 decreased approximately 47% to $4.74 million, compared to $8.91 million in the comparable period in fiscal 2013. Revenues from our international divisions for the quarter represented 66% of revenues as compared to 41% recorded in the fourth quarter of fiscal 2013. Management expects the international revenues to continue to represent a significant portion of overall revenues looking forward to fiscal 2015.

Surface drilling decreased by 32% during the three month period ending June 30, 2014 to $4.07 million, due to decreased utilization in the Atlantic, Colombia, and Pacific divisions. Underground drilling decreased 54% during the three month period ending June 30, 2014 to $619,360. This compares to $1.35 million during the same period in fiscal 2013. The decrease is due to an underground contract not being renewed in the Atlantic division and lower drill utilization in Ontario.

Direct costs for the three months ended June 30, 2014 were $5.72 million compared to $7.49 million in the comparable period in fiscal 2013. Gross margins for the three months ended June 30, 2014 were (20.8%) compared to 16.0% during the three months ended June 30, 2013, when direct costs include depreciation expenses (or (10.6%)% compared to 21.7% for the respective periods, when direct costs are adjusted to exclude depreciation expense). The decrease is largely due to the $1.02 million allowance for obsolete inventory.

General and administrative expenses increased by approximately 12% from $1.72 million in the three months ended June 30, 2013 to $1.98 million in the three months ending June 30, 2014. The increase is primarily a result of the $407,000 bad debt provisions on accounts receivable from our Europe and Mexico divisions. Salary costs have decreased due to terminations or not replacing employees who left the company.

Net loss for the last quarter of fiscal 2013 was $1.28 million compared to net loss of $709,901 in the comparable period of fiscal 2013.

As has been stated in the past, the drilling services business is always challenging. 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, which 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. We believe we are at the bottom, but we do not believe there will be any dramatic turnaround in the industry in the near future, We are trusting that our demonstrated business values and a continued focus on strong marketing, will encourage growth with new clients as the mining markets improve.

Financial Statements and Management's Discussion and Analysis are available on the Company's website (www.cabo.ca) and on SEDAR (www.sedar.com).

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 divisions in Kirkland Lake, Ontario, Canada, with branches in Surrey, British Columbia 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 (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.