Cabo Drilling Corp. provides drilling services in Canada, the United States, Mexico, Panama and Spain.

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As it has moved into the mineral and specialty drilling services field, Cabo Drilling Corp. has flourished, President and CEO John Versfelt states. Based in North Vancouver, British Columbia, Canada, the company provides drilling services in Canada, the United States, Mexico, Panama and Spain.

Cabo Drilling began in 1985 as another Vancouver Stock Exchange “penny terrible.” However, when the company experienced a severe downturn as a mineral exploration company in 1999 through 2001, its president decided that the company should alter its business model to enter the mineral drilling services sector. It did this by purchasing drilling companies to acquire cash flow that could grow as the mining sector improved after many lean years.

At the time, Cabo Drilling explains, drilling companies were suffering financially as a result of the metals bear market, but the company (at that time known as Cabo Mining Enterprises Corp.) believed that when the market turned, drilling services would be in great demand.

Consequently, the potential for profitability and cash flow would be good. After suffering through two very lean years, the company completed two private placements in early 2004 totaling $7.2 million, closed the first two drilling company acquisitions on June 30, 2004, and then began acquiring other drilling contractors and creating new divisions.

Ultimately, Cabo Drilling acquired a total of five drilling companies whose gross revenue totaled $17 million, but together they were barely profitable.

Changing Cabo
In late 2005, Cabo Drilling decided to divest itself of its exploration properties. “However, we didn’t want to lose the value of them,” Versfelt says. The company sold the properties to International Millennium Mining Corp. (IMMC), a sister company focused on mineral exploration.

Today, Cabo Drilling owns 12 percent of IMMC and has more than 100 drills, and employs more than 300 people in six countries. “We’re the third-largest mineral-drilling company in Canada,” Versfelt observes, adding that Cabo Drilling has enjoyed growth in its revenues each year since the first drilling company acquisitions.

“When we acquired the companies, if you had taken the acquired companies’ combined year-end revenues, it would have been about $17 million,” he points out. “Now Cabo Drilling expects to be closer to $50 million in gross revenues in our fiscal 2008 year. The business has [nearly] tripled in four years; it is profitable and generates good cash flow.”

A Firm Foundation
Versfelt has 26 years’ experience in repairing and building junior public companies, the majority of which were in the mineral exploration business. Although he has also worked in the real estate and software fields, he observes that the mineral drilling services business gives him the opportunity to produce an essential commodity.

“In this world, you’re never going to be in a situation where you’re not going to use metals,” he explains. “Virtually all hard goods that society builds, produces or uses today utilize some type of metal.”

He adds that Cabo Drilling has assembled a staff with extensive experience in the mineral drilling industry. In its senior management group, “We have over 250 years of combined experience,” Versfelt notes. “They’re committed to the industry and they are quite knowledgeable.”

This includes Controller and CFO Calvin Lucyshyn, who held several senior financial positions in drilling before joining Cabo Drilling.

Previously, at NQL Energy Services Inc., Lucyshyn oversaw financial reporting and participated in the company’s strategic planning, acquisitions, due diligence and business development.