Cabo Drilling Corp.

Cabo Drilling Corp.

March 01, 2005 18:57 ET

Cabo Mining Enterprises Corp. Reports Q2-05 Results




MARCH 1, 2005 - 18:57 ET

Cabo Mining Enterprises Corp. Reports Q2-05 Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 1, 2005) - Cabo Mining
Enterprises Corp. (TSX VENTURE:CBE) ("Cabo" or the "Company") today
reported a second quarter loss before stock-based compensation and taxes
of $76,000 ($0.003 per common share - basic) and net loss after
stock-based compensation and taxes of $772,000 ($0.028) per common share
- basic), compared to a loss of $101,000 (0.011 per common share -
basic) recorded in the second quarter of 2004.

"Essentially, Cabo was near break even before interest, amortization,
foreign currency losses, stock based compensation, and taxes were taken
into account" says John Versfelt, Chairman, President and CEO of Cabo.


3 months 3 months 6 months 6 months
(CND $000s, except ending ending ending ending
earnings per share) Dec 31-05 Dec 31-04 Dec 31-05 Dec 31-04
Revenue $ 4,693 $ - $ 9,985 $ -
Net Earnings (loss) before
interest, amortization,
foreign exchange, loss on
termination of contracts,
stock compensation and
taxes 3 (98) 441 (126)
Net Earnings (Loss) Before
Stock-based Compensation
and Taxes (76) (101) 303 (160)
Net Earnings (Loss) After
Stock-based Compensation
and Taxes (772) (101) (416) (160)
Earnings (Loss) per Share
($) Basic Before Stock-based
Compensation and Taxes (0.003) (0.011) 0.011 (0.017)
Earnings (Loss) per Share ($)
Basic After Stock-based
Compensation and Taxes (0.028) (0.011) (0.015) (0.017)
Gross Margin % 14.7% - 16.4% -
Working Capital (deficiency) 7,304 (241) 7,304 (241)

The Company recorded:

- Second quarter fiscal 2005 revenues of $4,693 million compared with
$5.292 million in the first quarter of fiscal 2005, and $0 for the
second quarter fiscal year 2004.

- Loss for the second quarter fiscal 2005 was $76,000 before stock-based
compensation and taxes and $772,000 after stock-based compensation and
taxes resulting in earnings (loss) per share of ($0.003) and ($0.028)
respectively. This compares with first quarter fiscal 2005 profit of
$438,000 before stock-based compensation and taxes and $356,000 after
stock-based compensation and taxes resulting in earnings per share
(basic) of $0.016 and $0.013 respectively.

- Overall gross margin percentage for the second quarter fiscal 2005 of
14.7%, compared with gross margin of 17.9% in the first quarter fiscal
2005 and 0% in previous quarters.

- Entry into the geotechnical and environmental drilling sectors with
the acquisition of Stratacan.

- Inroads into the Mexican mineral drilling market.

- The acquisition of Advanced Drilling, a major presence in Western
Canada's mineral drilling sector.

- A letter of intent to acquire Forages de Montreal.

- A current asset balance of $10.05 million and working capital in
excess of $7 million.

The second quarter of the current fiscal year marks Cabo's six months as
an operating mineral drilling services and exploration company. During
the second quarter we continued to gain new muscle and new momentum as
Cabo has shifted direction from that of an organization exclusively
concentrating on mineral exploration to one that also focuses on
providing mineral drilling services.

"The markets for mineral drilling services in central and eastern Canada
strengthened during Q2. We also saw an accelerated demand for
international drilling services," said Mr. Versfelt. "Strong gold and
improving base metal prices have translated into improved demand for our
services and subsequently we have experienced a significant increase in
the volume of bid requests. In fact, the volume of mineral drilling
business is such that we anticipate strong upward pressure on prices in
coming fiscal periods resulting in improved gross margins."

Seasonal factors resulted in Q2 being the weakest quarter in mineral
drilling services. Cold weather had an adverse impact on productivity
and two to four weeks of holiday breaks resulted in higher job costs as
crews were demobilized and remobilized. Because rigs were available for
maintenance, we also incurred additional maintenance costs and higher
than normal expenses were incurred in ramping up for anticipated
increased demand in following quarters. Cabo incurred higher hiring and
training expenses and experienced reduced productivity as our new crews
and supervision gained experience working together. The Company also
incurred onetime expenses as recent acquisitions were integrated.

Looking ahead to our third quarter, the continuation of the winter
season will initially impede productivity, but warming temperatures and
the absence of the holiday break should see overall top and bottom line
improvements. Top line growth is anticipated through our continued
international expansion where premium margins are obtained, and as a
result of the integration of Advanced Drilling. In addition, the
improved pricing environment and further acquisitions should also
enhance top line growth. Bottom line growth is expected as a result of
the realization of operating synergies, improvement in new driller
productivity as experience is gained, and improved pricing conditions in
the marketplace.

"With the Advanced Drilling acquisition, we are now the third largest
mineral drilling services company in Canada," continued Mr. Versfelt.
"We trust that the continued strength in the mineral sector and our plan
of market share expansion through acquisition should lead to continued
and improving shareholder returns."

Second Quarter ended December 31, 2004

The Company's second quarter revenue of $4,693 million was lower than
revenue earned in the previous quarter. This decrease can be attributed
to the seasonality of the industry as drilling operations are impacted
by the winter holidays and the extreme winter conditions in December. It
is expected that with the holidays past, and improving weather
conditions, increased drilling activities will be less disruptive which
will in turn result in higher revenues and increased gross margins.

The integration of Heath & Sherwood Drilling (1986) Inc. and Petro
Drilling (Maritimes) Limited into the Company's operating portfolios is
meeting expectations. During the quarter, the Company also finalized the
acquisition of Stratacan Inc., Stratacan (Quebec) Inc. and integrated
their operations into Cabo's portfolio of drilling companies.

The Company remains fully committed to the mineral exploration aspect of
its business. During the quarter, it finalized a one million dollar
flow-through financing whereby the Company issued 1,250,000 common
shares at $0.80 per share. Cabo maintains that its mineral properties
have good potential to discover mineral reserves that will add further
asset value. The Company remains committed to funding and operating its
exploration activities separately from its drilling operations.

Cabo remains in a strong financial position and this strength is
reflected on the balance sheet with a current asset balance of $10.05
million and working capital in excess of $7 million. The Company's
growth plans include the ability to offer its existing customers other
value added services. Through the acquisition of companies that
specialize in different aspects of drilling, Cabo plans to become an
industry leader in providing drilling services.

Results of Operations - Second Quarter Ended December 31, 2004

At the beginning of the fiscal year, Cabo embarked on a new beginning as
it shifted direction from an organization exclusively concentrating on
mineral exploration to one that also focuses on providing mineral and
specialty drilling services. The diversification is anticipated to
provide a source of cash flow to the Company that will better insulate
it from the cyclical nature of the mineral exploration business. Prior
period comparatives are not applicable because of the addition to the
Company's business.

Total revenue for the second quarter was $4.693 million. Surface
drilling revenue was $3.137 million compared to the $1.476 realized from
underground drilling activities for the three months ended December 31,
2004. Sundry sales totalled $0.80 million for the period.

The overall gross margin percentage for the quarter was 14.7 percent.
The decreased margin in the quarter (relative to 17.9% realized in
Q1-05) can not only be attributed to the additional costs of the holiday
season, but also to the higher than normal ratio of demobilizing the
drill rigs from projects completed in December to mobilizing them to new
projects that will begin in January 2005. In addition, as drill rigs
demobilized, maintenance costs increased as the Company took advantage
of the opportunity to service the drill rigs and other equipment without
interrupting their future availability to generate revenue. The Company
is also in the process of hiring new drill operators, resulting in
increased training expenses and decreased productivity. It should be
noted that the gross margin has shown improvement compared with the
gross margins of the Company's subsidiaries prior to their acquisition
by Cabo. This improvement in gross margin is driven primarily from
improvements in the mineral drilling industry which continues to benefit
from the sustained rise in metals prices over the last 3 years.

During the three months ended December 31, 2004, general and
administrative expenditures totalled $0.688 million, an increase of
$0.165 million from the previous quarter of $0.523. This increase can be
largely attributed to the increased marketing and investor relations
costs, additional professional and administrative costs as a result of
acquisition and integration, and increased administrative costs
occurring due to an internal system review to better consolidate
operational and administrative functions within the Company upon
integration of the drilling subsidiaries.

Additional costs incurred during the quarter also included a charge of
$0.666 million for stock-based compensation.

Mineral Properties

Mineral exploration expenses and mineral property expenditures for the
three months ended December 31, 2004 totalled $0.181 million compared to
$0.756 million for the first quarter of the fiscal year. During that
period, a lump sum payment of $0.599 million was made to Prairie C to
acquire a 100% interest in their Cobalt, Ontario property.

Future Developments

Going forward, the Company anticipates that current mineral and metal
prices should remain buoyant which bodes well for Canadian and
international exploration and mine development projects and
consequently, the mineral drilling services sector. Cabo anticipates
further acquisitions of drilling services companies and is forecasting
improved revenues as a result. These acquisitions will also result in
additional acquisition and integration expenses. Management of Cabo
remains committed to good, sound fiscal management practices that
provide value to its shareholders.

The Company's mission, to be the first choice for mineral exploration
and mining customers for drilling and exploration services by offering
the best value in the industry, remains key to sustaining Cabo's
success. We continue to be committed to our most valuable resource -our
employees - and strive to develop and maintain a safe, stable and
rewarding work environment that will attract and retain dedicated
workers. Furthermore, our goal is to develop a Company that will be a
leader in the industry in all aspects of service delivery as well as
corporate governance.

A copy of the Quarterly Report is available through SEDAR
( and the Company's website (

Cabo Mining Enterprises Corp. is a drilling services and mineral
exploration company headquartered in North Vancouver, British Columbia,
Canada. The Company, presently with more than 100 drills and more than
225 staff, provides drilling services through it subsidiaries Heath &
Sherwood Drilling (1986) Inc., of Kirkland Lake, Ontario; Petro Drilling
Company Limited of Springdale, Newfoundland; Stratacan Inc. of St.
John's, Newfoundland; Stratacan (Quebec) Inc. of St. Julie, Quebec; and
Advanced Drilling Ltd., of Surrey, British Columbia. Cabo's mineral
exploration properties are located near Cobalt, Kenora, and Sudbury,
Ontario, Canada. The Company's common shares trade on the TSX Venture
Exchange under the symbol: CBE.


(signed "John Versfelt")

John A. Versfelt

Chairman, President and CEO

Further information about the Company can be found on the Cabo website
( and Sedar ( or by contacting Investor
Relations Ms. Sheri Barton at 403-217-5830 or Mr. John A. Versfelt,
President of the Company.

All figures are compiled according to Canadian GAAP. This news release
provides a summary of the information contained in the Company's
Quarterly Report. A copy of the Quarterly Report is available
immediately on the SEDAR website at or the Company's
website at or can be delivered by surface mail upon request.

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 Information

    Cabo Mining Enterprises Corp.
    John Versfelt
    Chairman, President and CEO
    (604) 984-8894
    (604) 983-8056 (FAX)
    Cabo Mining Enterprises Corp.
    Ms. Sheri Barton
    Investor Relations
    (403) 217-5830
    The Exchange has not in any way passed upon the merits of this news