Cabo Announces 3rd Quarter Results

North Vancouver, BC - Cabo Drilling Corp. ("Cabo" or the "Company") (TSX-V:CBE) today reported results for its fiscal year 2011 third quarter ended March 31, 2011.
3rd  QUARTER HIGHLIGHTS

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

• Increased quarterly revenue for the 3rd quarter fiscal 2011 of $9.54 million, a 47% improvement compared to $6.51 million in the 3rd quarter fiscal 2010.
• 3rd quarter fiscal 2011 loss before interest, taxes, amortization, stock-based compensation and other items (EBITDA) of $30,039 compared to 3rd quarter fiscal 2010 earnings before interest, tax, amortization, stock based compensation and other items (EBITDA) of $153,175, resulting in 3rd quarter fiscal 2011 earnings before interest, taxes, amortization, stock-based compensation and other items of $0.00 per share and $0.00 per share in the 3rd quarter of fiscal 2010.
• Net before tax loss for the 3rd quarter of fiscal 2011 of $800,862 compared to a 3rd quarter fiscal 2010 before tax loss of $778,377.
• Net after tax loss for the 3rd quarter of fiscal 2011 of $624,422 compared to a net after tax loss for the 3rd quarter of fiscal 2010 of $776,683, resulting in 3rd quarter fiscal 2011 net after tax loss of $0.01 per share compared to a net after tax loss for 3rd quarter fiscal 2010 of $0.01 per share.
• Gross margin percentage for the 3rd quarter fiscal 2011 was 18.8% compared with a gross margin of 25.0% in 3rd  quarter fiscal 2010 and 26.1% in the 2nd quarter of fiscal 2011.
• Cash from operations, before changes in non-cash working capital items, was $(247,589) for the 3rd quarter fiscal 2011 compared to 3rd quarter fiscal 2010 cash from operations of $3,456.
• A current asset balance of $39.04 million and working capital of $8.04 million.
• Total assets of $39.04 million and total liabilities of $16.99 million.

"Cabo Drilling's first nine months of fiscal 2011 is on track for the budgeted $40 million in gross revenues for fiscal 2011," stated Mr. Versfelt, Cabo's President & CEO.  "Gross revenues of $30.40 million improved 46% compared to the first nine months of fiscal 2010.  In addition, Cabo has recorded four consecutive quarters of increased revenue."

"Gross margin decreased to 18.8% in the third quarter of fiscal 2011 due to operational issues at one of the Company's largest multi-drill contracts and higher than expected start up costs in the Pacific and Atlantic divisions," added Mr. Versfelt.  " Management expects gross margins in the 24-25% range for the balance of fiscal 2011."

"Drilling activity and revenues in all regions where Cabo Drilling is working has been steady, with 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 to $2.24 million for the nine months ending March 31, 2011 from $1.47 million in the comparable period of fiscal 2010," noted Mr. Versfelt. 

Third quarter ended March 31, 2011

Revenue for the quarter ending March 31, 2011 increased $3.03 million or 47% to $9.54 million, compared to $6.51 million in the comparable period in fiscal 2010. The primary reason for the increase is the increased activity in Ontario and USA divisions and the international activity in Colombia 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 10% decrease in revenues comparing the 10.58 million recorded in the second quarter of fiscal 2011 to the $9.54 million in the third quarter of fiscal 2011.

Management expects international operations from its bases in Panama and Albania to achieve approximately 25-30% of revenues in fiscal 2011 as additional drills have been mobilized in Panama.

Surface drilling revenues increased 42% from $5.14 million in the third quarter of fiscal 2010 to $7.32 million during the third quarter in fiscal 2011. Underground activity increased from $1.18 million in the third quarter of fiscal 2010 to $1.82 million during the comparable period in fiscal 2011. The increased activity in surface revenues was a result of several new drill programs in the Ontario divisions compared to fiscal 2010 and the addition of the second drill in Colombia. Increased revenues from the underground revenues was a result of the additional shifts added during the quarter in the Ontario division. Geotechnical drilling increased by 67% during the third quarter of fiscal 2011, due to increased demand in the division for Montreal division for such services.

Direct costs for the quarter ended March 31, 2011 were $7.75 million compared to $4.88 million in the quarter ended March 31, 2010. The increase is a direct result of the increased drilling services activity in fiscal 2011. Gross margin for the quarter ended March 31, 2011 was 18.8% compared to 25.0% during the quarter ending March 31, 2010. The decreased gross margin is a direct result of increased pricing, higher start up costs and lower production. 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% range during fiscal 2011.

General and administrative expenses increased by approximately 18.7% or $269,918 from $1.44 million in the third quarter of fiscal 2010 to $1.71 million in the third quarter of fiscal 2011. The increase from the third quarter of fiscal 2010 is a direct result of increased salary costs of 5%, settlement costs on changes to senior management, regulatory and filing costs incurred in the private placement, higher audit accrual, some additional travel and marketing costs when comparing the third quarter of fiscal 2011.  As a percentage of revenues general and administration costs have decreased to represent 18% of revenues during the third quarter of fiscal 2011 as compared to 22% in the third quarter of fiscal 2010.

An increase in general and administration costs of $194,914 from $1.52 million incurred in the second quarter of fiscal 2011 as compared to the $1.71 million in the third quarter of fiscal 2011 is largely due to higher wage costs, additional investor relation costs, and regulatory costs during the third quarter of fiscal 2011.

Amortization of property, plant and equipment for the quarter ending March 31, 2011 decreased by $182,891 to $662,254 during the third quarter of fiscal 2011 as compared to $845,145 in the comparable period in fiscal 2010. The decrease is due to the lower amortization expense on the drilling equipment 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.

Net loss for the third quarter of fiscal 2011 was $624,422 compared to a net loss of $776,683 in the third quarter of fiscal 2010 and a net income of $393,132 during the second quarter of fiscal 2011.

The Company's cash (cash and cash equivalents) position at March 31, 2011, is $417,501 compared to $43,502 at June 30, 2010.  Short term investments and marketable securities increased $59,940, from $37,560 at June 30, 2010, to $97,500 at March 31, 2011. The increase can be attributed to the acquisition of $65,000 of marketable securities as payment of an outstanding receivable. At March 31, 2011, the balance of $97,500 consists of shares in Canadian public corporations.

Accounts receivable increased by $1.67 million or 24% to $8.56 million at March 31, 2011 from $6.89 million at June 30, 2010. The increase is primarily due to increased activity during the fiscal 2011 and higher revenues in March 2011. 

Property, plant & equipment decreased to $12.57 million at March 31, 2011 from $12.74 million at June 30, 2010, a decrease of $160,803 during the first nine 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 $(247,589) during the 3rd quarter of fiscal 2011, compared $3,456 in the 3rd quarter of fiscal 2010.

Consolidated Financial Results for nine months ending March 31, 2011

Revenue for the nine months ending March 31, 2011 increased approximately 46% to $30.40 million, compared to $20.83 million in the comparable period in fiscal 2010. All divisions have shown increased revenues during this period with the Pacific and new operations in Colombia leading the way. Revenues from our international divisions continue to represent a significant part of our operations with 22% at $6.78 million of revenues as compared to $5.26 million during the nine month period ending March 31, 2010. The Company experienced higher revenues from the Canadian divisions in fiscal 2011 as compared to the same period in fiscal 2011.

Direct costs for the nine months ended March 31, 2011 were $23.38 million compared to $15.08 million in the comparable period in fiscal 2010. Gross margins for the nine months ended March 31, 2011 were 23.1% compared to 27.6% during the nine months ended March 31, 2010. The lower margins are a result of lower margins earned on projects in the Ontario and Pacific division.

General and administrative expenses increased by approximately 10.5% or $443,773 from $4.24 million in the first nine months of fiscal 2010 to $4.69 million in the first nine months of fiscal 2011. The increased is a direct results increased travel costs and higher administration wage costs and additional costs in settlement from changes to senior management. As a percentage of revenues general and administration decreased to represent 15% of revenues during the nine months ending March 31, 2011 as compared to 20% in the comparable period in fiscal 2010.

EBITDA improved to $2.24 million for the nine months ending March 31, 2011 from $1.47 million in the comparable period of fiscal 2010.

Net loss for the first nine months of fiscal 2011 were $33,746 compared to a net loss of $1.39 million 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. The recent financial stress in financial credit and equity markets, as well as significant global currency and economy changes have caused substantial negative changes to the global metals supply and demand factors, resulting in much uncertainty in the global mining and related services markets. Management has initiated 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.