Cabo Drilling Corp. Announces 2015 First Quarter Results

1st QUARTER HIGHLIGHTS

The Company reports:

• Revenue for the first quarter fiscal 2015 ("Q1 FY2015") of $3.88 million compared to $6.65 million in the first quarter fiscal 2014 ("Q1 FY2014").
  
  
• Gross margin percentage for the quarter was 10.6% (with depreciation included in direct costs), compared with 13.2% in for the corresponding period last year.
  
  
• EBITDA of $43,948 for the quarter compared to $54,794, in Q1 FY2014, resulting in EBITDA per share of $0.00 for the quarter compared to $0.00 in Q1 FY2014.
  
  
• Net after tax loss for the quarter was $770,061 or a loss of $0.01 per share (loss of $0.01 per share diluted), compared to net after tax loss of $816,619 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 $10,146 for the three months ending September 30, 2014, compared to negative $57,500 for the first three months of fiscal 2014.
  
  

"Cabo Drilling generated revenues of $3.88 million during the first quarter of fiscal 2015," stated Mr. Versfelt, Cabo's President & CEO. "This represents a 42% decrease compared to the $6.65 million recorded in the first three months of fiscal 2014."

"Gross margin, adjusted to include depreciation, was 10.6% or $413,403 in the first three months of fiscal 2015, as compared to 13.2% in the comparable period in fiscal 2014," stated Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $542,400 are included in direct costs as compared to $624,445 in fiscal 2014. Adjusted gross margin, when depreciation expense is excluded from direct costs is 24.6% in the first quarter of fiscal 2015, as compared to 22.5% in fiscal 2014."

"General and administration costs decreased by 38% when compared to the first quarter of fiscal 2014 and by 52% when compared to the fourth quarter of fiscal 2014. The decrease is a direct result of restructuring activities that began in fiscal 2014 and continued in the first quarter of fiscal 2015," commented Mr. Versfelt.

"Total liabilities decreased by $821,122 during the first quarter of fiscal 2015 to $12.82 million at September 30, 2014," Mr. Versfelt noted. "At September 30, 2014, the Company has $22,813,000 in tax losses expiring primarily between 2025-2035."

"The Company reports positive EBITDA of $43,948 during the first quarter of fiscal 2015, compared to $54,794 in the comparable period in fiscal 2014, and a substantial improvement over the year end negative EBITDA of $3.03 million recorded for the fiscal year 2014" stated Mr. Versfelt.

Mr. Versfelt observed that "approximately 74% of fiscal 2015 revenues came from gold related projects, 24% from copper, and the remaining 2% from other base metals."

"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 Quarterly Financial Results

Revenue for the quarter ending September 30, 2014, decreased $2.76 million, or 42%, to $3.88 million, compared to $6.65 million in the first quarter of fiscal 2013. The primary reason for the decrease is reduced demand for drilling, as a result of projects being scaled back, delayed or terminated. Latin America division revenues decreased by 70%, primarily due to a client labour issue, that resulted in reduced revenues for the period. Management expects the Panama activity to improve each quarter during fiscal 2015, but it will not likely reach levels experienced prior to the year ended June 30, 2014. The Canadian and USA divisions recorded a 48% decrease in revenues from $3.49 million in the first quarter of fiscal 2014 to $1.81 million the first quarter of fiscal 2015, primarily due to no activity in the Labrador iron ore formation this period. Activity in the Europe division has increased due to new contracts that we expect to continue throughout 2015.

Surface drilling revenues decreased 39%, from $ 4.46 million in the first three months of fiscal 2014 to $2.74 million in the first three months of fiscal 2015, largely due to the overall decline in drilling activities in the worldwide mining markets. Revenues from reverse circulation programs decreased by 100%, as there were no such revenues in first three months of fiscal 2015. Underground drilling revenues were stable with a decrease in underground revenues from the Canadian division offset by increased activity in the Europe division. Surface drilling revenue decreased due to the reduced activities in Panama and Canada.

Direct costs for the quarter ended September 30, 2014, were $3.47 million compared to $5.77 million in the quarter ending September 30, 2013, as adjusted to include depreciation in accordance with IFRS. The decrease is a direct result of the decreased activity. Gross margins, under IFRS reporting, for the quarter ended September 30, 2014, were 10.6% compared to 13.2% during the quarter ending September 30, 2013 Adjusted gross margin to exclude deprecation for the first quarter of fiscal 2015 is 24.6% as compared to 22.5% in the first quarter of fiscal 2014.

General and administrative expenses decreased by $590,950 from $1.54 million in the first quarter of fiscal 2014 to $951,341 in the first quarter of fiscal 2015. The decrease is a direct result of reduced administration staff, lower investor relation costs, lower insurance and professional fees and lower office costs in all divisions. Further staffing reductions were made subsequent to the quarter end in the restructuring of the Canadian operations; these reductions will result in a continued improvement to the bottom line in the following quarters and will enhance the cash flow and EBITDA numbers.

The Company incurred a $204,581 finance and accretion interest expense during the first quarter of fiscal 2015, compared to $224,087 incurred during fiscal 2014. Cabo continues to accrue and pay semi-annual interest on the $2.70 million debentures.

The Company recorded a $140,000 current income tax provision for the quarter ending September 30, 2014 compared to a nil income tax provision for the quarter ending September 30, 2013. Cabo also recorded a deferred tax recovery of $146,500 during the first quarter of fiscal 2015, due to the losses in the Canadian divisions as compared to a deferred tax recovery of $59,869 in the first quarter of fiscal 2014. At September 30, 2014, the Company had $22.8 million in tax losses to apply against current income taxes for an extended number of years.

Net loss for the first quarter of fiscal 2014 is $770,061 compared to a net loss of $816,619 in the comparable period in fiscal 2014.

Cabo did not make the November 30, 2014, interest payment on the debenture. The debenture holders have been notified and the Company is working towards replacing the debenture that comes due on May 31, 2015.

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.

About Cabo Drilling Corp. (TSX VENTURE:CBE)(FRANKFURT:DHL)

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 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.