Energold Drilling Corp.
TSX VENTURE : EGD

Energold Drilling Corp.

May 29, 2006 18:09 ET

Energold Announces First Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 29, 2006) - Energold Drilling Corp. ("the Company") (TSX VENTURE:EGD) is pleased to announce the consolidated results for the quarter ended March 31, 2006. The Company fully consolidates its 50.01% owned Pac Rim Drilling S.A.C., 50% owned subsidiary Kluane International Drilling and its affiliates. The Company's interest in IMPACT Silver Corp. (TSX VENTURE:IPT) is accounted for on an equity basis.

Results of Operations:

Gross drilling revenues for the quarter were $4.1 million on 32,000m (2005 - $2.5 million on 20,800m), however, the Company recorded only a small profit for the drilling sector for the quarter of $107,000. This was primarily due to mobilization charges and the lower margins experienced for the drill rigs starting up during the quarter, as well as certain start-up costs incurred in the new Mexican division. The Company also accounted for a gain of $42,000, recognizing its proportion of the earnings sustained by IMPACT in the first quarter of acquisition and reorganization of the Zacualpan silver mines in Mexico, increasing the consolidated quarterly earnings to $149,000 (2005- earnings of $239,000).



Summary of Quarterly Results (Canadian $ 000's except per share
amounts and meters drilled)
--------------------------------------------------------------------
March 31, 2006 2006 2005 % Change
--------------------------------------------------------------------
Gross Profit 1,162 997 17
--------------------------------------------------------------------
Net Income 149 239 (38)
--------------------------------------------------------------------
Earnings Per Share 0.01 0.01 0
--------------------------------------------------------------------

--------------------------------------------------------------------
Consolidated Cash 4,756 7,198 (34)
--------------------------------------------------------------------
Consolidated Working Capital 14,082 12,466 13
--------------------------------------------------------------------

--------------------------------------------------------------------
Meters Drilled 32,000 20,800 54
--------------------------------------------------------------------
Market Value of IMPACT Silver
Position(i) 9,500 2,480 383
--------------------------------------------------------------------
(i) Carried on the Company's balance sheet at $984,000


The Company continues to maintain a strong balance sheet with a net working capital position of about $14.1 million as at March 31, 2006, an increase of just over $1.5 million from its net working capital position of $12.5 million at March 31, 2005. Consolidated group cash and cash equivalents on hand at the end of the quarter are about $4.8 million. A significant portion of our working capital position reflects our increased investment in drilling supplies inventories to better service our clients needs. Non-current amounts shown as due to a related party and non-controlling interests (i.e. long term indebtedness) decreased to $5.7 million from $5.9 million at March 31, 2005. In addition, our balance sheet strength does not reflect the current market value of our equity investment in IMPACT, of which the Company currently owns 6.6 million shares. Based on closing market prices at May 26th, the investment has a current market value of $9.5 million or almost $8.5 million more than our carrying cost.

Revenues are generally denominated in US dollars and the Company's margins remain sensitive to foreign exchange variations. Some of our operating costs are US$ denominated, which provides a partial natural hedge against such fluctuations. Nonetheless, the relative rise in the value of the Canadian dollar to the US dollar in the past year has had a significant impact on our overall profitability. We estimate that our overall net realized revenues in Canadian dollar terms have been reduced by about $90,000 to $120,000, in the current quarter compared to the previous year, as a result of exchange rate changes during the quarter and this has had a direct impact on our margins and net income.

Contract Drilling Operations

Historically, the first quarter margins tend to be lower-than mid year and this year was no exception. This year, activity in the first quarter was quite busy with the Company mobilizing the majority of its rigs during the February and March period. While total activity increased, utilization per rig was relatively unchanged as a majority of the increase in meterage drilled related to the addition of new rigs in the field. Higher costs were experienced due to the mobilization of two new rigs in Mexico. Mobilization costs were also incurred for a number of other rigs that didn't begin contributing drilling revenues until April. Rising prices for down-hole supplies and extreme fluctuations in fuel costs also added to the higher costs. With the increasing demand for drill rigs worldwide it is the shortage of quality crews and down-hole supplies which remain the critical items.



--------------------------------------------------------------------
Three Months Ended March 31 2006 2005 % Change
--------------------------------------------------------------------
Number of Drill Rigs 24 19 26
--------------------------------------------------------------------
Energold Drilling (100%) 6 2 300
--------------------------------------------------------------------
Kluane International Drilling (50%) 14 13 8
--------------------------------------------------------------------
Pac Rim Drilling S.A. (50.01%) 4 4 0
--------------------------------------------------------------------


The Company's investment in drilling supplies inventories has increased by more than $2.8 million in the past twelve months from $4.4 million at March 31, 2005 to $7.2 million at March 31, 2006. Part of this increase in inventory carrying value is attributable to higher supplier prices and part to our decision to put more inventories into the field to have supplies closer at hand to service our client drilling needs. Because of the man portable nature of the equipment and the need to be self sustaining in remote operating locations, the Company estimates that it requires an investment in inventory of approximately $300,000 for each new drill put into the field.

The Company's crews are some of the best in the industry; personnel from local communities are continuing to be trained to fill a number of positions, including some positions as drillers. Especially for smaller programs, these personnel can substantially reduce the Company's mobilization costs and at the same time provide an effective statement as to our willingness to ensure there are social benefits to the local communities from our activities.

Outlook

Overall, new contracts and requests for tenders suggest that 2006 will be extremely busy. With the first quarter exceeding 32,000 meters drilled and given the existing demand for equipment we anticipate the first half of the year will represent record production. With new rigs in place and new ones under construction we hope to capitalize on the continuing demand.

The Company's equipment is amongst the newest in design and performance, but we continue to redesign our rigs and are now producing a new Series III rig with additional power and pull back while retaining its high degree of mobility. It is anticipated that approximately six to eight more of the Company's Series II and Series III rigs will be built during the next 18 months. The Company is continuing to conduct research and development to keep its equipment on the leading edge technically and continues to upgrade its existing equipment in the field.

Webcast

Energold will be reviewing its 2006 First-Quarter results via the Internet at 4:00 pm ET, 1:00 pm PT, Tuesday, May 30, 2006. The webcast (audio only) can be accessed at: http://events.onlinebroadcasting.com/energold/053006/index.php and will feature management discussing Energold's financial and operational results ending with a question and answer period. Investors are encouraged to forward any questions they may have to info@energold.com.

Energold Drilling Corp. is an environmentally and socially sensitive diamond drilling company that services the mining industry. Energold also holds a controlling interest in silver miner IMPACT Silver Corp. and a project portfolio in the Dominican Republic.

On behalf of the Directors of Energold Drilling Corp.

Frederick W. Davidson, President, CEO

The TSX Venture Exchange has neither approved nor disapproved this news release.

Contact Information