Is this email not displaying correctly? [1]View it in your browser. Analyst Research Reports Show Cabo Undervalued On February 29^th 2012 Haywood Securities published their report “[2]Cabo is Contracted to Drill for Profit” authored by Megan MacNeill and Geoff Scott.

On the same day Beacon Securities Limited published their report by Michael Mills, “Profitable Q2 and Improving Balance Sheet”, which can be accessed for free through the [3]Beacon Securities web page.

The reports provide a comprehensive evaluation of Cabo Drilling and should be read along with this blog to appreciate the context for the 12 month target price of $0.40 per share. Links: 1.

http://us4.campaign-archive1.com/?u=ea1ed614a184dec77e57a3c0b&id=bf667ca93f&e=f658dfadc6 2.

http://clientcentre.haywood.com/uploadfiles/secured_reports/CBEFeb292012.pdf 3.

http://beaconsecurities.ca/research Key Points The key points justifying the share price forecasted in the research reports are: * Demand for drilling services industry wide is predicted to carry on through 2013 * Growth in the European and Latin American markets serviced by Cabo Drilling * Demand for high-margin unconventional drilling services * Number of drill rigs * Good balance of drill rig types * Cabo Drilling’s safety record and standards * Company has reduced its debt levels * Cabo Drilling had better than expected results in the 1^st & 2^nd quarter s * The company is undervalued relative to market peers Report Summary The reports provide the following rational for their pricing forecast: * The pent-up demand for mineral exploration, created by the recession years, is already buoying demand for drilling, but the other thing to realize is that the new drilling contracts are also delivering better margins.

So Cabo is seeing the percentage utilization of the corporate drill fleet rising and at the same time is seeing better margins, which is delivering an improved bottom line. * With a foothold in Albania, which has seen the training of local workers, the Company is also positioned for growth in the markets surrounding Albania.

This bodes well for Cabo as these markets are safe to operate in and are currently experiencing an expansion. The jurisdictions of Panama and Columbia also show good growth and Cabo is well positioned there.

On January 3^rd and 10^th the Company’s largest client in the Latin America market place achieved two significant milestones in their development of the Cobre Panama copper project in Panama and as a result Cabo anticipates drilling through to October 2012 with 8 drills.

In Columbia 2 drills have been working full-time and a 3^rd, new drill, is expected to begin work as this article is posted. * Unconventional drilling services see increasing demand as geologists are targeting deeper anomalies and exploring in ever more challenging settings.

This type of drilling requires specialized equipment and highly trained workers, affording the Company higher margins and contributing to the bottom line. * The company’s 100+ drill rigs are specifically tailored to meet a variety of drilling needs, affording the company the ability to take advantage of market demands in both conventional and nonconventional services. * Safety is a competitive advantage for Cabo. + The Company has earned safety awards from organizations in Ontario and from the Mine Safety and Health Administration (MSHA) organization.

In addition, in 2009 the Company received the Award of Excellence for Safety from Workplace Safety North in Ontario.

This highly prestigious award recognizes the lowest frequency of accidents amongst mineral drilling companies and highlights Cabo’s emphasis on safety. + In the final analysis a good safety record will better enable the Company to recruit skilled workers, reduce expensive downtime and grant a competitive advantage in securing drilling contracts. * Through the application of good administrative practices Cabo Drilling has reduced debt, bringing it into line with industry norms which again will positively impact the bottom line going forward. * Results for the first two quarters of the new fiscal year have been better than expected.

This speaks to the implementation of tight spending controls in addition to management’s ability to secure drill contracts and improve the margins on their contracts.

This increased the analysts’ confidence in the Company and contributed significantly to their forecasted share price. $0.40 per share MacNeill and Scott from Haywood Securities write: “Our $0.40 per share target price for Cabo is based on a 2013 EV/EBITDA multiple approach.

We believe Cabo, with a current 2012 EV/EBITDA multiple of 1.8x, is undervalued relative to its peers who trade at an average of 5.7x 2012 EV/EBITDA.

Our one-year $0.40 per share price target is derived using a 4.0x 2013 EV/EBITDA multiple totaling $0.40 per share.

On a cash flow basis, our target implies in a 2013 P/CFPS ratio of 4.0x, conservatively below its 2013 peer group average of 6.0x.

The market discount does not reflect organic growth opportunities and expanding large-scale drilling programs for both senior and intermediate mining companies.

To support our multiple analysis we have also included a DCF analysis, which yields a one-year target of $0.42 per share using a 20% discount rate and 4.0x terminal EBITDA multiple.” My Take: These independent research reports confirm that the hard work and good management practices employed by Cabo during the economic downturn have paid off.

I believe the significant undervaluation of the Company makes it particularly attractive to new investors and that our current investors will be rewarded for their patience. We would like to thank MacNeill, Scott and Mills for the thorough research they have put into their reports and their efforts to inform current and prospective shareholders about the drilling services industry and Cabo Drilling Corp. To access the reports please click on the following hyperlinks: Haywood Securities: [4]http://clientcentre.haywood.com/uploadfiles/secured_reports/CBEFeb29 2012.pdf Beacon Securities: http://beaconsecurities.ca/research* * You must register for a free account, after which you may search the Research menu for Cabo Drilling [6]Cabo Company Blog | | | [7]forward to a friend Links: 4.

http://clientcentre.haywood.com/uploadfiles/secured_reports/CBEFeb292012.pdf 6.

http://www.cabo.ca/Blog.aspx 7.

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