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Cabo Drilling Announces 2nd Quarter Results

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NEW WESTMINSTER, BRITISH COLUMBIA -- (Marketwire) -- 02/28/13 -- Cabo Drilling Corp. ("Cabo" or the "Company") (TSX VENTURE: CBE) reports the Company's results for its fiscal year 2013 second quarter ended December 31, 2012.

2nd QUARTER HIGHLIGHTS

---------------------------------------------------------------------------- 3 months 3 months 6 months 6 months(CDN $000s, except ending ending ending ending earnings per share) Dec 31/12 Dec 31/11 Dec 31/12 Dec 31/11----------------------------------------------------------------------------Revenue 9,161 14,363 23,003 31,293----------------------------------------------------------------------------Earnings (Loss) Before Interest, Taxes, Depreciation, Stock Based Compensation and Other Items (EBITDA) 624 1,476 2,453 4,530----------------------------------------------------------------------------Net Earnings (Loss) Before Taxes (372) 637 397 2,899----------------------------------------------------------------------------Net Earnings (Loss) After Taxes (435) 440 125 1,960----------------------------------------------------------------------------Earnings (Loss) per Share ($) (Basic and Diluted) Before Interest, Taxes, Depreciation, Stock- based Compensation and Other Items (EBITDA) 0.01 0.02 0.03 0.06----------------------------------------------------------------------------Earnings (Loss) per Share ($) (Basic and Diluted) (0.01) 0.01 0.00 0.03----------------------------------------------------------------------------Cash from Operations(i) 1,685 2,581 1,685 2,581----------------------------------------------------------------------------Gross Margin % 19.1% 19.8% 20.4% 20.4%----------------------------------------------------------------------------Gross Margin % Adjusted(ii) 25.8% 24.1% 25.9% 24.3%----------------------------------------------------------------------------Working Capital 13,571 8,855 13,571 8,855----------------------------------------------------------------------------



(i)before changes in non-cash working capital items

(ii)gross margin adjusted to exclude depreciation expense

The Company reports:

-- Quarterly revenue for the 2nd quarter fiscal 2013 of $9.16 million compared to $14.36 million in the 2nd quarter fiscal 2012.-- 2nd quarter fiscal 2013 earnings before interest, taxes, depreciation, stock-based compensation and other items (EBITDA) of $624,100 compared to 2nd quarter fiscal 2012 earnings before interest, tax, depreciation, stock based compensation and other items (EBITDA) of $1.48 million, resulting in 2nd quarter fiscal 2013 earnings before interest, taxes, depreciation, stock-based compensation and other items of $0.01 per share and $0.02 per share in the 2nd quarter of fiscal 2012.-- Net before tax loss for the 2nd quarter of fiscal 2013 of $372,126 compared to a 2nd quarter fiscal 2012 before tax income of $636,638.-- Net after tax loss for the 2nd quarter of fiscal 2013 of $434,676 compared to a net after tax earnings for the 2nd quarter of fiscal 2012 of $439,638, resulting in 2nd quarter fiscal 2013 net after tax loss of $0.01 per share compared to a net after tax earnings for 2nd quarter fiscal 2012 of $0.01 per share.-- Gross margin percentage for the 2ndquarter fiscal 2013 was 19.1% with depreciation included in direct costs, compared with a gross margin of 19.8% in 2nd quarter fiscal 2012 and 21.3% in the 1st quarter of fiscal 2013.-- Cash from operations, before changes in non-cash working capital items, was $1.69 million for the 2nd quarter fiscal 2013 compared to 2nd quarter fiscal 2012 cash from operations of $2.85 million.-- A current asset balance of $23.63 million and working capital of $13.57 million.-- Total assets of $38.81 million and total liabilities of $14.96 million.



"Cabo Drilling generated revenues of $23.00 million during the first six months of fiscal 2012," stated Mr. Versfelt, Cabo's President & CEO. "This represents a 26% decrease over the $31.29 million recorded in the comparable period in fiscal 2012."

"Gross margin adjusted to include depreciation was 19.1% or $1.75 million in the second quarter of fiscal 2013, as compared to 19.8% in the second quarter of fiscal 2012," stated Mr. Versfelt. "In accordance with IFRS, depreciation expenses of $649,821 are included in direct costs as compared to $663,782 in the second quarter of fiscal 2012. Adjusted gross margin when depreciation expense is excluded from direct costs is 25.8% in the second quarter of fiscal 2013, as compared to 24.1% in the second quarter of fiscal 2012."

"The Company reported $2.45 million in EBITDA (10.7%) for the first six months of fiscal 2013, compared to $4.53 million in the first six months of fiscal 2012 (12.2% after adjustment for one time gain), said Mr. Versfelt. "The $4.53 million in fiscal 2012 included a one time gain on the settlement of a debenture of $710,889."

"Working capital increased to $13.57 million during the six months ending December 31, 2012, from $12.72 million at June 30, 2012," stated Mr. Versfelt. "Total liabilities decreased by $3.63 million during the six months to $14.96 million at December 31, 2012. Additionally, subsequent to the quarter ended December 31, 2012, the Company paid, in full, the debentures totalling $1.997 million that were due and payable on February 14, 2013.

"Approximately 49% of revenues came from gold related projects, 17% from copper, 26% from iron and the remaining 8% from other base metals. Overall, Cabo Drilling management expects average drill utilization in fiscal 2013 to remain near the 40-45% level, with gross margins at 25-26%, prior to depreciation expenses included in direct costs." stated Mr. Versfelt. "General and administration expenses should remain in the $7 million range. Cabo Drilling is budgeting annual gross revenues of approximately $46-48 million for fiscal 2013."

Second quarter ended December 31, 2012

Revenue for the quarter ending December 31, 2012, decreased $5.20 million or 36% to $9.16 million, compared to $14.36 million in the second quarter of fiscal 2012, and decreased 34% from the $13.84 million in the first quarter of fiscal 2013. The primary reason for the decrease is due to reduced demand for drilling in the last two months of calendar 2012. Latin America division revenues decreased by 11% with lower drill utilization in Colombia as compared to the second quarter of fiscal 2012, decreasing revenues to $3.76 million, as compared to $4.23 million in the comparable period in fiscal 2012. The Canadian and USA divisions recorded a significant decrease in revenues of 49% to $5.05 million in the second quarter of fiscal 2013, as compared to $9.92 million in the second quarter of fiscal 2012. Management expects the second half of fiscal 2013 to be lower than the second half of fiscal 2012, but higher than the first half of fiscal 2013.

Surface drilling revenues decreased 34%, from $10.29 million in the second quarter of fiscal 2012 to $6.82 million during the second quarter of fiscal 2013, largely due to the early completion of drilling projects with major mining clients in Canada. Several of these projects may restart after 2013 budgets are approved and the new drilling season begins. Revenues from reverse circulation programs decreased by 88% to $235,400 in the three months ending December 31, 2012, as compared to $1.92 million in the comparable period in fiscal 2012 for similar reasons. Underground drilling increased by 3% in the second quarter of fiscal 2013 to $1.81 million, as compared to $1.75 million in the second quarter of fiscal 2012, as a result of increased underground drill utilization.

Direct costs for the quarter ended December 31, 2012, were $7.41 million compared to $11.54 million in the quarter ending December 31, 2011, as adjusted to include depreciation in accordance with IFRS. The decrease is a direct result of the decreased activity in the second quarter of fiscal 2013. Gross margins for the quarter ended December 31, 2012, were 19.1% compared to 19.8% during the quarter ending December 31, 2011 and lower than the 21.3% recorded in the first quarter of fiscal 2013. The small decrease in gross margin from year to year is directly related to higher fixed costs in the Canadian operations that were offset mostly by higher margins in the Panama and Columbia operations. Management restructured two of its Canadian operations, which is beginning to result in improved margins and profitability.

In accordance with IFRS, $649,821 of depreciation expense of property, plant and equipment is included in direct costs for the quarter ending December 31, 2012, as compared to $663,782 in the second quarter of fiscal 2012.

General and administrative expenses decreased by $145,869 from $1.92 million in the second quarter of fiscal 2012 to $1.78 million in the second quarter of fiscal 2013. During the quarter, the Company recorded a bad debt allowance of $45,000, a reduction of $12,780 in travel expenditures and $112,300 in lower salaries from restructuring in the Canadian operations.

General and administration costs represent 19% of revenues during the second quarter of fiscal 2013, as compared to 13% reported in the first quarter of fiscal 2013, and 13% in the second quarter of fiscal 2012. Management expects general and administration costs to remain around $1.70 million per quarter for the remainder of fiscal 2013.

Net loss after tax for the second quarter of fiscal 2013 is $434,676 compared to a net income after tax of $439,638 in the first second quarter of fiscal 2012.

The Company's cash (cash and cash equivalents) position at December 31, 2012, is $1.48 million compared to $1.24 million at June 30, 2012.

Marketable securities increased $192,171, from $338,698 at June 30, 2012, to $530,869 at December 31, 2012. Marketable securities consist primarily of 1.50 million shares in Standard Gold Inc and 3.56 million shares of International Millennium Mining Corp. We have adjusted the value of our holdings at December 31, 2012, as recorded in the comprehensive income statement. At December 31, 2012, the balance of $530,869 consists of shares in public corporations.

Accounts receivable decreased by $3.64 million to $6.73 million at December 31, 2012, from $10.37 million at June 30, 2012. The decrease is primarily due to reduced activity during the first six months of fiscal 2013.

Property, plant & equipment decreased to $12.51 million at December 31, 2012 from $13.47 million at June 30, 2012, a decrease of $967,146 during the first six months of fiscal 2013, resulting from equipment depreciation offset by equipment purchases of $337,788. The Company has a capital expenditure budget of $1.80 million for fiscal 2013 with an emphasis on modernizing its drill fleet.

Consolidated Financial Results for six months ending December 31, 2012

Revenue for the six months ending December 31, 2012 decreased approximately 26% to $23.00 million, compared to $31.29 million in the comparable period in fiscal 2012. Revenues from our international divisions continue to represent a significant part of Cabo Drilling's operations with 30% of revenues for the first six months of fiscal 2013, as compared to 28% during the comparable period in fiscal 2012. Management expects the international revenues to continue to represent a larger portion of overall revenues in the remaining six months of fiscal 2013.

Surface drilling decreased by 36% during the six month period ending December 31, 2012 to $16.93 million due to projects finishing earlier than anticipated in the Canadian operations. Underground drilling increased by 24% during the six month period ending December 31, 2012 to $5.49 million, as compared to $4.44 million during the comparable period in fiscal 2012. The increase came primarily from underground drilling operations in the Ontario and Atlantic divisions.

Direct costs for the six months ended December 31, 2012 were $18.31 million compared to $24.93 million in the comparable period in fiscal 2011. Gross margins for the six months ended December 31, 2012 were 20.4% compared to 20.4% during the six months ended December 31, 2011, when direct costs include depreciation expenses (or 25.8% compared to 24.1% for the respective periods, when direct costs are adjusted to exclude depreciation expense). Although margins in Canada were lower, the Company was able to maintain higher margins in the international operations.

General and administrative expenses decreased by approximately 5% or $171,245 from $3.71 million in the first six months of fiscal 2012 to $3.54 million in the first six months of fiscal 2013. The decrease is primarily a result of decreased salary costs from restructuring the Canadian operations and fewer travel expenditures.

Net income after tax for the first six months of fiscal 2013 was $125,061 compared to net income after tax of $1.96 million earned in the comparable period of fiscal 2012. The main difference is the $710,889 extraordinary gain recorded in the first quarter of fiscal 2012 and lower revenues reported in the first six months of fiscal 2013, as compared to the first six months of fiscal 2012.

Cash flow from operations (before changes in non-cash operating working capital items) was $1.69 million during the first six months of fiscal 2013, compared to $2.58 million during the first six months of fiscal 2012.

Projecting global exploration expenditures in 2013 is a real challenge. In general, the outlook for base metal commodity prices is stable. While gold and silver commodity prices are flirting with lows seen in mid-2011 and mid-2012, the overall opinion of the analysts suggests that these commodity prices will improve to the levels experienced in the second half of 2012. However, the mining project budget reductions and deferrals by the mid-tier and major mining companies, as well as the lack of equity financings for junior exploration companies, will likely result in lower drilling activity through mid-2013. We still believe that there will be a turn to the positive in the last half of 2013 and into 2014; however, the dearth of financings for the junior sector to date is cause for concern. While Cabo Drilling's business is no longer largely founded on the junior mineral exploration sector, the overall health of the drilling services sector is very much impacted by the financial position, whether negative or positive, of the junior mineral exploration sector. Around 50% of all drills in the mineral exploration mining sector worldwide are operated by small family or single operator drilling companies, whose financial health is largely impacted by the financial position of the juniors. These drillers will underbid for work in slow times, which can cause significant price adjustment in the overall drilling industry. We have not yet experienced major adjustments in most areas, but unless there is a turn in the financial markets in the latter half of 2013, it appears this could happen.

In times of high demand, like 2011 and the first half of 2012, good drill crews were difficult to recruit and to retain at cost effective prices, because many drilling company owners and/or senior managers were prepared to pay unreasonable wages and bonuses. In slower times, like the second half of 2012, good drill crews are available at a more reasonable price; however, unless drilling companies have developed quality relationships with well financed mining and exploration companies and/or mining and exploration companies that are not prepared to compromise their ore reserve or deposit development programs, thereby creating potential balance sheet problems, they will begin to offer their services at less than healthy prices. There is no easy formula to manage a drilling company, but good old fashioned business practices, like quality customer relations, high respect for employees and quality human relations, superb safety procedures and practises, careful attention to the protection of the environment and community relations. These practices, plus effective cost controls and management of equipment and drilling practices, and services invoiced to the customer at a fair price and in an honest manner, will enhance a drilling company's ability to grow profitably at all times.

Management continues its attention on comprehensive cost and spending controls, as well as risk management procedures throughout the Company. Senior management is focused on careful cash management, realignment of debt, high customer relations and high employee relations.

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 Canadian divisions in Surrey, British Columbia; Kirkland Lake, Ontario; and Springdale, Newfoundland; as well as Cabo Drilling (America) Inc. of the United States; Cabo Drilling (Panama) Corp. of Panama, Republic of Panama; Cabo Drilling Panama-Pacifico Corp. of Panama, Republic of Panama doing business as Cabo Drilling Colombia 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 website (http://www.cabo.ca) and SEDAR (www.sedar.com).

This news release may contain forward-looking statements including but not limited to, those relating to worldwide demand for gold and base metals and overall commodity prices, the level of activity in the minerals and metals industry and the demand for the Company's services, the Canadian and international economic environments, the impact of operational changes, changes in jurisdictions in which the Company operates (including changes in regulation), failure by counterparties to fulfill contractual obligations, and other factors as may be set forth, as well as objectives or goals. 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.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.



Contacts:
Cabo Drilling Corp.
Sheri Barton
Corporate Communications
(403) 217-5830

Cabo Drilling Corp.
Mr. John A. Versfelt
Chairman, President & CEO
(604) 527-4201
(604) 527-9126 (FAX)
ir@cabo.ca
www.cabo.ca



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