Cabo Drilling Corp. Announces Third Quarter Results

The Company reports:

• Revenue for the third quarter fiscal 2016 ("Q3 FY2016") of $3.75 million compared to $2.97 million in the third quarter fiscal 2015 ("Q3 FY2015").
• Gross margin percentage for the quarter was 16.4% (with depreciation included in direct costs), compared with 8.7% in for the corresponding period last year.
• EBITDA of $207,724 for the quarter compared to a negative EBITDA of $126,796, in Q3 FY2015, resulting in EBITDA per share of $0.00 for the quarter compared to $0.00 in Q3 FY2015.
• Net after tax loss for Q3 FY2016 was $462,073 or $0.00 per share ($0.00 per share diluted), compared to net after tax loss of $747,845 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 $38,832 for Q3 FY2016, compared to negative $434,335 for Q3 FY2015.

"Cabo Drilling generated revenues of $12.65 million during the first nine months of fiscal 2016," stated Mr. Versfelt, Cabo's President & CEO. "This represents a 19% increase compared to the $10.64 million recorded in the comparable period in fiscal 2015."

"Gross margin, adjusted to include depreciation, was 13.6% or $1.72 million in the first nine months of fiscal 2016, as compared to 10.3% in the first nine months of fiscal 2015," stated Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $1.27 million are included in direct costs for the nine months ended March 31, 2016, as compared to $1.52 million in the first nine months of fiscal 2015. Adjusted gross margin, when depreciation expense is excluded from direct costs, is 24.4% in the first nine months of fiscal 2016, as compared to 24.9% in first nine months of fiscal 2015."

"General and administration costs decreased by 7.8% to $2.46 million when compared to the $2.67 million in fiscal 2015. The decrease is a direct result of restructuring activities that began in fiscal 2013 and continued into fiscal 2016," commented Mr. Versfelt.

"Total liabilities decreased by $512,470 during the first nine months of fiscal 2016 to $11.7 million at March 31, 2016," Mr. Versfelt noted. "At the end of the current quarter, the Company has $26,506,000 in tax losses expiring primarily between 2025-2035."

"Effective July 7, 2015, the Company entered into the infrastructure services industry, with its purchase of WorldWide EnviroChem Corporation. As a result of this transaction, Cabo will hold the exclusive rights to distribute the proprietary RoadMaster (Superpave) and BondMaster (Supercrete) product lines used in road building and waterproofing of underground and water exposed concrete, to road contractors, precast concrete manufacturers, concrete contractors and ready-mix suppliers throughout North, Central and South America, excluding Chile, but including the Caribbean, plus Southern Africa, including South Africa, Namibia, Botswana, Zambia and Malawi," explained Mr. Versfelt.

Mr. Versfelt noted that "the Company has engaged financial advisors to assist in refinancing or replacing the $3.137 million debentures and the $1.122 million equipment loan, including interest, the repayments of which were due in May, 2015. The Company is in arrears on its debenture and equipment loan interest payments. The Company is currently in second stage discussions for no less than $6.0 million in debt financing to replace the $1.4 million lender and the debenture loans. It is also exploring additional finance opportunities in Central America and Canada to continue the restructuring of the Company's debenture debt."

"The Company reports EBITDA of $604,593 during the first nine months of fiscal 2016, compared to a negative $27,916 during the first nine months of fiscal 2015," stated Mr. Versfelt.

Mr. Versfelt observed that, "54% of the second quarter, fiscal 2016, revenues came from gold related projects, 42% from copper, and the remaining 4% 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. "We believe that expansion into infrastructure services in 2016 will enhance Cabo's operations in 2016, particularly in Latin America."

Consolidated Quarterly Financial Results

Revenue for the quarter ending March 31, 2016, increased $772,014, or 26%, to $3.75 million, compared to $2.97 million in the third quarter of fiscal 2015. The primary reason for the increase is due to new drill contracts and increased tree falling and clearing services provided in our Latin American division. Latin America division revenues increased by 75%. The Canadian and USA divisions recorded a decrease in revenues to $1.65 million in the third quarter of fiscal 2016, as compared to $1.80 million in the comparable period in fiscal 2015.

Revenues from surface services increased 84%, from $2.03 million in the third quarter of fiscal 2015 to $3.75 million in the third quarter of fiscal 2016, primarily due to increased drill utilization in Colombia and additional service revenue in the Latin American division. The Company's underground contract in Ontario was completed in the second quarter of fiscal 2016, resulting in Nil underground revenues for the quarter.

Direct costs for the quarter ended March 31, 2016, were $3.13 million compared to $2.72 million in the quarter ending March 31, 2015, as adjusted to include depreciation, in accordance with IFRS. The increase is a direct result of the increased activity in fiscal 2016. Gross margins, under IFRS reporting, for the quarter ended March 31, 2016, were 16.4% compared to 8.7% during the quarter ending March 31, 2015. Adjusted gross margin to exclude deprecation for the third quarter of fiscal 2016 is 27.2% as compared to 22.7% in the third quarter of fiscal 2015. During the third quarter of fiscal 2016 the Company recorded an allowance for obsolete inventory of $365,000

General and administrative expenses decreased by $32,981 from $808,089 for the third quarter of fiscal 2015 to $775,108 in the third quarter of fiscal 2016. The Company recorded an allowance for doubtful accounts of $40,000 during the quarter of fiscal 2016 as compared to nil in the third quarter of fiscal 2015. The Company made significant expense reductions in fiscal 2015, but continues to look for other cost savings. The decreases in the third quarter, 2016 were a direct result of reduced administration staff. Our salary costs have decreased by 52% from the comparable period in fiscal 2015.

Net loss for the third quarter of fiscal 2016 is $462,073 compared to a net loss of $747,845 in the third quarter of fiscal 2015.

The extraordinary downward slide in exploration, development and geotechnical demand for drilling services since 2012, plus the severe challenges we experienced with substantially reduced meter and hourly price rates, reduced Cabo's gross revenue in 2015; however, during the last two quarters, Cabo experienced an improvement in revenues, largely as a result of increased tree falling and clearing work and two new drilling contracts. We do expect that continued constraints in the mining companies will inhibit any real growth in the drilling sector in the immediate future. We have reduced operating and general and administration expenses, which has resulted in better margins and an improved bottom line. We are looking forward to somewhat better quarterly gross revenue, cash flow and bottom line for our financial year to June 30, 2016. We believe that the Company's quarterly revenues will improve looking forward; revenues should remain steady in the $3.5 - $4.0 million per quarter range.

Cabo's goal for long term growth is to be one of the safest and most environmentally responsible infrastructure services company in the areas of the world where we work, focused on strong customer relations and working with its customers to develop local community training and recruiting programs.

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); Cabo Drilling (Panama) 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.



Contact

Cabo Drilling Corp.
Mr. John A. Versfelt, Chairman, President & CEO
604-527-4201
www.cabo.ca