🕐02.03.12 - 18:27 Uhr
CABO PRESIDENT’S PERSPECTIVE
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Cabo President’s Perspective
Fiscal 2012 began with a bang in the Summer of 2011 and demand for our
service has continued strongly since.
Our first quarter of fiscal 2012
was a record setting quarter, with revenues of $16.93 million, a 65%
increase over the same period of the previous fiscal year.
Numerous other milestones were accomplished during our first quarter,
including our highest ever net after tax income and EBITDA.
These
milestones are the result of the dedication of our people and
initiatives taken during 2010 and early 2011 to position Cabo to
increase its gross margin, increase drill utilization and return to
profitability.
Additionally, our efforts to improve our administrative
practices and cut costs have been successful.
Consequently, our
percentage gross margin improved from 24.0% in the comparable quarter
in the previous year to 24.6% for the first quarter of fiscal 2012.
The Company’s strategy of focusing on mid-tier, higher quality juniors
and medium to higher level quality exploration/mining companies has
paid off and we will continue that strategy in 2012.
In spite of
ongoing economic uncertainty, the drilling outlook for 2012 suggests
that the more mature juniors and seniors are not holding onto their
cash for fear they won’t be able to either earn more or raise more in
the near future, as they did in 2009-2010.
During the challenging times of late 2008 through 2011, inventories of
industrial metals were drawn down by the manufacturing sector, but at
the same time mills and mines were shut down and exploration programs
were put on hold.
As OECD economies have begun to recover, we are
noting that the manufacturers are again increasing production and
replenishing their inventories, resulting in an increased demand for
commodities and a commensurate rise in metals prices.
This is spurring
the exploration sector and driving strong demand for drilling.
We are
also observing that many of the major mining companies are striving to
replenish or increase their reserves and, accordingly, we expect strong
demand for drilling services to continue as exploration programs are
expanded throughout 2012 and 2013.
Our contemporaries in the drilling industry are also experiencing
strong demand for drill rigs, as noted by the President of Major
Drilling, Francis McGuire, in a recent mineweb.com article, "the market
(for drilling services) at this point is probably the strongest weve
seen it" (Keen, 2012).
In the same article, another industry player
remarked that if he was approached with a significant order, his
company would have to refuse at this juncture.
Bolstering these observations, figures from the November/December
Metals Economics Group (MEG) Industry Monitor report that “November &
December had a combined 19 initial resource announcements, bringing
2011’s total to 108, or nine per month – a substantial improvement over
76 announcements (six per month) in 2010.” The MEG also offers a
positive projection for 2012 in their report where they maintain that
“if metals prices hold – particularly gold – we expect the number to
trend upwards in 2012, given the healthy number of initial finds and
new zones reported throughout 2011.”
It is interesting to note, from a market trend perspective, that
exploration activities are more focused on searches for deeper deposits
at existing mines or previously abandoned mines, as well as more remote
areas of Canada and other areas of the world.
In 2011-2012, we have
experienced more requests for drilling services around older mining
projects, often requiring larger drills for deep drilling and for
helicopter support drilling in remote areas of Canada and the USA.
This
suggests that increased metals prices are supporting more costly
project development and that existing ore reserves are not only
depleting at a higher rate, but that new deposit discoveries are less
frequent and more difficult to find.
This bodes well for the longer
term growth in drilling services revenues, but the drilling industry is
also facing significant challenges in recruiting, training and
retaining drillers and helpers who have the skill sets required for the
more difficult deep drill holes or who can properly carry out the more
complex helicopter support drill programs in areas where man portable
rigs are not a viable option.
At Cabo, we are also experiencing another interesting phenomena, where
demand for larger drill rigs and helicopter support rigs is growing
in developing countries, as an alternative to the man portable rigs,
primarily because the man portable rigs cannot achieve the drill hole
depths that the geologists are requesting.
We believe that many
opportunities exist for finding new mineral discoveries
internationally, using all types of rigs that will comply with
environmental regulations and best practices.
Cabo has chosen to
explore opportunities in locations such as East Europe, Turkey, Panama
and Colombia, where human rights are not undermined, environmental
standards are balanced and social conditions are good for our
employees.
During the next quarter, the Company will continue to focus on cost and
spending controls, improved drill capacity and best risk management
practices.
The emphasis on very good safety procedures will continue
and will not be compromised by cost controls.
The Company will also
continue to train our people to practice excellent customer and
employee relations, improved communication and showing respect to each
other, to our client personnel, and to the community people with whom
we are in continuing contact.
Please feel free to direct any inquiries to [2] or contact
Sheri Barton at (403)217-5830.
As always, you can contact me at
(778)999-4997 or at [3].
Links:
2.
mailto:
3.
mailto:
Thank you for your support!
Most Sincerely,
John A.
Versfelt
President and CEO
Cabo Drilling Corp.
[4]www.cabo.ca
Links:
4.
http://www.cabo.ca
Reference:
Keen, K.
(2012, Feb 3).
[5]2012 drilling demand: No let up in sight
from juniors, seniors.
www.mineweb.com.
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