Cabo Announces 2nd Quarter Results

North Vancouver, BC - Cabo Drilling Corp. ("Cabo" or the "Company") (TSX-V:CBE) today reported results for its fiscal year 2011 second quarter ended December 31, 2010.
2nd  QUARTER HIGHLIGHTS

*before changes in non-cash working capital items
The Company reports:

1. Increased quarterly revenue for the 2nd quarter fiscal 2011 of $10.58 million, a 24.6% improvement compared to $7.98 million in the 2nd quarter fiscal 2010.
2. 2nd quarter fiscal 2011 earnings before interest, taxes, amortization, stock-based compensation and other items (EBITDA) of $1.24 million compared to 2nd quarter fiscal 2010 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $839,383, resulting in 2nd quarter fiscal 2011 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.02 per share and $0.02 per share in the 2nd quarter of fiscal 2010.
3. Net before tax income for the 2nd quarter of fiscal 2011 of $486,772 compared to a 2nd quarter fiscal 2010 before tax loss of $147,386.
4. Net after tax earnings for the 2nd quarter of fiscal 2011 of $393,132 compared to a net after tax loss for the 2nd  quarter of fiscal 2010 of $150,093, resulting in 2nd quarter fiscal 2011 net after tax earnings of $0.01 per share compared to a net after tax loss for 2nd quarter fiscal 2010 of $0.01 per share.
5. Gross margin percentage for the 2nd quarter fiscal 2011 was 26.1% compared with a gross margin of 28.5% in 2nd quarter fiscal 2010 and 24.0% in the 1st quarter of fiscal 2011.
6. Cash from operations, before changes in non-cash working capital items, was $985,199 for the 2nd quarter fiscal 2011 compared to 2nd quarter fiscal 2010 cash from operations of $728,657.
7. A current asset balance of $20.41 million and working capital of $6.3 million.
8. Total assets of $35.64 million and total liabilities of $15.87 million.

"Cabo has now recorded three consecutive quarters of increased revenues," stated Mr. Versfelt, Cabo's President & CEO.  "Revenue for the quarter ending December 31, 2010 increased $2.60 million or 33% to $10.58 million, compared to $7.98 million in the comparable period in fiscal 2010.  Revenues for the first six months of fiscal 2011 were $20.86 million, a 46% improvement compared to the first six months of fiscal 2010."

"Gross margin improved from 24.0% in the first quarter of fiscal 2011 to 26.1% in the second quarter of fiscal 2011," added Mr. Versfelt.    "Management expects gross margins in the 25-27% range for the balance of fiscal 2011."

"Drilling activity and revenues in all regions where Cabo Drilling is working has been steady with average utilization at approximately 44% for the quarter," said Mr. Versfelt.  "Management expects utilization to increase to around 60% in the fourth quarter of fiscal 2011.

"EBITDA improved quarter over quarter to $1.24 million for the second quarter ending December 31, 2010 from $839,383 in the second quarter of fiscal 2010 and from $1.01 million in the first quarter of fiscal 2011," noted Mr. Versfelt.  "Both before and after tax earnings of $476,097 and $393,132 respectively for the second quarter of fiscal 2011 were the highest earnings that the Company experienced since the December 31, 2008 quarter."

Second quarter ended December 31, 2010

Revenue for the quarter ending December 31, 2010 increased $2.60 million or 33% to $10.58 million, compared to $7.98 million in the comparable period in fiscal 2010. The primary reason for the increase is the increased activity in Canada and the international activity in Colombia, Panama and Albania. All Canadian divisions recorded increases in the second quarter of fiscal 2011 as compared to the second quarter of fiscal 2010.

The Company recorded a 3% increase in revenues comparing the $10.27 million recorded in the first quarter of fiscal 2011 to the $10.58 million in the second quarter of fiscal 2011.

Surface drilling revenues increased 104% from $4.21 million in the second quarter of fiscal 2010 to $8.62 million during the second quarter in fiscal 2011. Underground activity decreased from $1.99 million in the second quarter of fiscal 2010 to $1.57 million during the comparable period in fiscal 2011. The increased activity in surface revenues was a result of several new multi-drill programs in the Pacific and Ontario Divisions compared to fiscal 2010 and the addition of the second drill in Colombia. Underground revenues decreased as a result of the less than normal activity during the quarter in the Ontario Division. Geotechnical drilling increased by 166% during the second quarter of fiscal 2011, due to increased demand in the Montreal Division for such services.

Direct costs for the quarter ended December 31, 2010 were $7.82 million compared to $5.71 million in the quarter ended December 31, 2009. The increase is a direct result of the increased drilling services activity in fiscal 2011. Gross margin for the quarter ended December 31, 2010 was 26.1% compared to 28.5% during the quarter ending December 31, 2009. The decreased gross margin is a direct result of increased pricing pressures experienced in the expanding markets. Field wage costs increased without a corresponding increase in prices for drilling and the Company experienced higher operating costs in the Ontario and Pacific Divisions primarily due to our clients experiencing technical difficulties.  Management expects gross margins to remain in the 25% to 26% range during fiscal 2011.

General and administrative expenses increased by approximately 5.7 % or $82,088 from $1.43 million in the second quarter of fiscal 2010 to $1.52 million in the second quarter of fiscal 2011. The increase from the second quarter of fiscal 2010 is a direct result of increased salary costs of 5%, and some additional travel and marketing costs when comparing the second quarter of fiscal 2011.  General and administration costs represent 14% of revenues during the second quarter of fiscal 2011 as compared to 18% in the second quarter of fiscal 2010.

An increase in general and administration costs of $59,216 from $1.46 million incurred in the first quarter of fiscal 2010 as compared to the $1.52 million in the second quarter of fiscal 2011 is largely due to increased travel during the second quarter of fiscal 2011.

Amortization of property, plant and equipment for the quarter ending December 31, 2010 decreased by $199,700 to $629,709 during the second quarter of fiscal 2011 as compared to $829,409 in the comparable period in fiscal 2010. The decrease in amortization expense on the drilling equipment is due to the change in estimated life of our drill fleet. This change effectively extends the amortization period by three years for the drilling equipment.

EBITDA increased to $1.24 million in the second quarter of 2011, compared to $839,383 in the same period of the prior year, an increase of $402,211, or 48%, a result of a increased revenues.  EBITDA in the second quarter of fiscal 2011 represents 12% of sales, compared to 11% in the previous comparable period in fiscal 2010.

Net income for the second quarter of fiscal 2011 was $393,132 compared to a net loss of $150,093 in the second quarter of fiscal 2010 and a net income of $197,544 during the first quarter of fiscal 2011.

The Company's cash (cash and cash equivalents) position at December 31, 2010, is $689,316 compared to $43,502 at June 30, 2010.  Short term investments and marketable securities increased $47,940, from $37,560 at June 30, 2010, to $85,500 at December 31, 2010. The increase can be attributed to the acquisition of $65,000 of marketable securities as payment of an outstanding receivable. At December 31, 2010, the balance of $85,500 consists of shares in Canadian public corporations.

Accounts receivable increased by $363,124 or 5% to $7.25 million at December 31, 2010 from $6.89 million at June 30, 2010. The increase is primarily due to increased activity during the first six months of fiscal 2011. 

Property, plant & equipment decreased to $12.64 million at December 31, 2010 from $12.74 million at June 30, 2010, a decrease of $95,619 during the first six months of fiscal 2011. The decrease is  largely due to amortization and taking into account a $130,205 in capital expenditures. The Company is budgeting for an increase in the utilization of its fleet without significant capital expansion in fiscal 2011. The Company invested over $4.54 million in new property plant and equipment during fiscal 2009 and 2010. This will favourably position the Company in the present drilling cycle with a modernized and upgraded drill fleet.

Cash flow from operations (before changes in non-cash operating working capital items) was $985,199 during the 2nd quarter of fiscal 2011, compared $728,657 in the 2nd quarter of fiscal 2010.

Consolidated Financial Results for six months ending December 31, 2010

Revenue for the six months ending December 31, 2010 increased approximately 46% to $20.86 million, compared to $14.32 million in the comparable period in fiscal 2010. All divisions have shown increased revenues during this period with the Pacific Division and new operations in Colombia leading the way. Revenues from our international divisions continue to represent a significant part of our operations with 23% of revenues from the international divisions, although this is down in percentage terms, by 3%, compared to last year.

Direct costs for the six months ended December 31, 2010 were $15.63 million compared to $10.21 million in the comparable period in fiscal 2009. Gross margins for the six months ended December 31,2010 were 25.1% compared to 28.8% during the six months ended December 31, 2009. The overall lower margins are a result of lower margins earned on projects in the Ontario and Pacific Divisions, primarily because of increased wages in those areas, that could not be passed on to the clients.

General and administrative expenses increased by approximately 6.2% or $173,855 from $2.80 million in the first six months of fiscal 2010 to $2.97 million in the first six months of fiscal 2011. The increase is a direct result of increased travel costs and higher administration wage costs in the Pacific Division due to the addition of new people.

Net income for the first six months of fiscal 2011 was $590,676 compared to a net loss of $613,588 recorded in the comparable period of fiscal 2010.

The mineral drilling industry is dependent on demand for and supply of precious, base and strategic metals as well as precious stones. Demand and supply factors for these commodities can change dramatically up and down, as we have witnessed in the past two years, causing dynamic shifts in the supply of drills and drilling personnel from under supply to over supply and back to under supply. Management has put in place comprehensive cost and spending controls, as well as risk management procedures throughout the Company. Senior management is focused on careful cash management, reduction of debt, high customer relations and high employee relations.

About Cabo Drilling Corp. (TSX-V: CBE)

Cabo Drilling Corp. is a drilling services company headquartered in North Vancouver, British Columbia, Canada.  The Company provides mining related and specialty drilling services through its Canadian divisions in Surrey, British Columbia; Montr�al, Quebec; Kirkland Lake, Ontario; and Springdale, Newfoundland; as well as Cabo Drilling (Panama) Corp. of Panama, Republic of Panama; 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"

John A. Versfelt
Chairman, President and CEO

Further information about the Company can be found on the Cabo website (http://www.cabo.ca) and SEDAR (www.sedar.com) or by contacting Sheri Barton, Corporate Communications at 403-217-5830 or Mr. John A. Versfelt, Chairman, President & CEO of the Company at 604-984-8894.  For general investor relation inquiries you may also contact Renmark Financial Communications Inc. Barbara Komorowski: bkomorowski@renmarkfinancial.com or Arash Shahi: ashahi@renmarkfinancial.com at Tel: 514-939-3989 or 416-644-2020.
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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.