Mr. Frederick Davidson reprots

ENERGOLD DRILLING GROUP ANNOUNCES SECOND QUARTER 2014 FINANCIAL RESULTS

Energold Drilling Corp. had second quarter 2014 revenue of $20.8-million across four business divisions, representing a 10.5-per-cent decrease over second quarter 2013 revenue of $23.3-million. Lower year-over-year revenue is due mostly to the decline in the mineral drilling as well as the manufacturing segment, although the company realized strong offsetting results in the energy business. These results continue to highlight the successful diversification objectives made by the company over the last several years.

Gross margin for the quarter on a company-wide basis improved to 18.7 per cent in the second quarter of 2014 compared with 13.5 per cent in the same period in 2013. There was a net loss per share in the second quarter of 2014 of eight cents compared with a net loss per share of three cents in the second quarter of 2013. The adjusted net loss in the second quarter for 2014 was $3.2-million or seven cents per share compared with net loss of $3.4-million or seven cents per share in 2013.

The second quarter is historically one of the busiest periods for the mineral drilling segment. Presently, there is softness in the junior mining segment, a lack of financial resources to initiate and maintain drill programs, and an overall cautious approach toward exploration worldwide. Senior and well-financed intermediate miners still represent the majority of the industry's drilling activity. Notwithstanding, some markets are beginning to improve in Central and South America, while in Africa some programs have been delayed due to the Ebola crisis. Meanwhile, the diversification of the company's divisions continues to provide some offsetting results, as the energy division has more than tripled its revenue in the second quarter compared with the second quarter of 2013. The manufacturing division's contribution during the period reflects typical seasonal effects where this first half of the year involves marketing of products and tendering bids, while the latter part of the year reflects fulfilling contracts.

Energold's balance sheet at the end of the second quarter of 2014 remained well capitalized with $18.5-million in cash and $70.1-million in working capital. Subsequent to quarter-end, the company announced that it had raised, by way of three-year convertible debentures, $13.5-million which replaced the $10.0-million debentures that matured in July, 2014. The remainder of the proceeds will be used to finance expansion and general working capital requirements.

     QUARTER-TO-DATE AND YEAR-TO-DATE RESULTS COMPARISON, JUNE 30, 2014
                     ($000s except per-share amounts)

                                    For three months      For the six months
                                     ended June 30,          ended June 30,
                                    2014        2013        2014        2013
Revenue
Mineral                           $9,736     $16,180     $15,064     $34,509
Manufacturing                      2,655       4,691       5,770       8,791
Energy                             8,432       2,402      37,029      33,837
Total revenue                     20,823      23,273      57,863      77,137
(Loss)
Mineral                              139       1,981      (1,108)      5,780
Manufacturing                       (311)       (262)     (1,640)       (937)
Energy                            (1,454)       (935)      4,257       1,756
Corporate                         (2,491)     (2,110)     (4,210)     (4,437)
Total (loss) earnings             (4,117)     (1,326)     (2,701)      2,162
Earnings per share
Basic                             $(0.08)     $(0.03)     $(0.05)      $0.05
Diluted                           $(0.08)     $(0.03)     $(0.05)      $0.05
EBITDA (i)                       $(1,392)       $731      $4,749      $9,439
Adjusted (loss) earnings (ii)    $(3,237)    $(3,404)    $(1,431)     $3,906
Adjusted (loss) earnings
per share
Basic                             $(0.07)     $(0.07)     $(0.03)      $0.08
Diluted                           $(0.07)     $(0.07)     $(0.03)      $0.08
                                                                           
(i) EBITDA -- Earnings before interest, taxes, depreciation and amortization
(ii) Adjusted earnings -- Extraordinary and non-cash items include earn-out
payment related to Bertram, accretion expense on debenture, finance cost for
sales leaseback financing, share-based payments, foreign exchange, dilution
and equity gain/loss on Impact, amd impairment/writedown of assets.

Energy division

Given the seasonality of the energy business, the division performed well in the second quarter, thanks to strong results from the United States, where the company is working through a multiyear geothermal work program. As well, some oil sands work during the period helped the company achieve significant increase in revenue on a year-over-year basis. Management is making use of innovative drilling methods to meet evolving demands in the region. Long-term customers appear to be receptive to this approach, and have requested specific items and procedures that many competitors cannot offer at this time.

Year-to-date revenue for the energy division, which includes the company's North America and Latin America regions, in 2014 was $37.0-million compared with $33.8-million in 2013. Revenue in the second quarter of 2014 was $8.4-million compared with $2.4-million in the second quarter of 2013. Gross margin for the first half of 2014 was 29.5 per cent compared with 24.3 per cent in 2013. Gross margin for the second quarter of 2014 was 9.5 per cent compared with negative 53.6 per cent in the second quarter of 2013.

The majority of revenues and activity for Bertram are typically generated in the first quarter, primarily due to weather factors. The company has expanded its energy business into Latin America. Other than Colombia, the energy business in Latin America is operated by wholly owned subsidiaries of the company. In the latter half of 2013, the company entered into a joint venture, called EESI, with a local partner in Colombia which is a leader in the seismic drilling business. Energold holds 60-per-cent ownership of EESI, and the partner holds 40 per cent.

Mineral drilling division

There is generally a seasonal uptick in activity leading up to and during the summer months in certain regions where the company operates. While the second quarter's performance remains below levels seen in previous years, management is encouraged by quarter-over-quarter improvements. Many of the company's existing customers remain cautious with their exploration budgets and are committing to smaller programs on a case-by-case basis.

During the second quarter of 2014, Energold's mineral division drilled 61,300 metres compared with 92,100 metres in the second quarter of 2013, a decrease of 33 per cent. Revenues for the second quarter of 2014 were $9.7-million compared with $16.2-million for the same period in 2013. Year-to-date revenues for 2014 were $15.1-million compared with $34.5-million for 2013. Average revenue per metre for the second quarter of 2014 was $159 compared with $176 in the second quarter of 2013. The decrease in price is due primarily to competitive pricing pressures from customers seeking to maximize exploration budgets while excess capacity continues to put pressure on pricing, and as a result, profit margin remains depressed. Notwithstanding, gross margin remains positive, as management seeks to maximize its variable cost structure, employing rigs in contracts where the margin for error can be managed such that profits are mostly protected in the event of delays or malfunctions.

Gross margin percentage from mineral drilling in the second quarter 2014 was 23.7 per cent, compared with 4.5 per cent in the first quarter of 2014 and 22.6 per cent in second quarter 2013. On a year-to-date basis, gross margin was 17.0 per cent compared with 29.2 per cent in 2013. The company maintains a strong infrastructure network in all regions where it operates, which allows for a relatively lean operation.

On a geographical basis, management is seeing some encouraging trends from Central America and the Caribbean, while South America remains impacted by social and political issues as well as the onset of the rainy season. In West Africa, the company is seeing some improvements in tendering opportunities although the Ebola outbreak has had and will continue to have an impact on productivity, as governments tighten work conditions and import controls during the crisis while customers may consider delaying programs until later this year.

Manufacturing and water drilling -- Dando Manufacturing and Hydrofor

Revenues for manufacturing in the second quarter of 2014 were $2.2-million with a gross margin of 31.6 per cent compared with revenues of $4.4-million with a gross margin of 14.6 per cent in the second quarter of 2013. Year-to-date 2014 revenues of $5.0-million with a gross margin of 18.3 per cent compared with revenues of $8.3-million with a gross margin of 12.7 per cent in 2013. During the first half of 2014, Dando delivered five terriers and 10 D-type rigs (2,000 to 4,000 capacity), one S3.5 rig, and six WaterTec6 rigs. Revenue for the latter two rigs were accounted for on a percentage-of-completion basis in 2013.

Revenues for Energold's water drilling joint venture (Hydrofor Togo) for the second quarter of 2014 were $500,000 with a gross margin of 15.5 per cent compared with $300,000 with a gross margin of 37.8 per cent in the second quarter of 2013. Year-to-date revenues for the first half of 2014 were $800,000 with gross margin of 14.1 per cent compared with $400,000 with gross margin of 31.4 per cent in 2013.

Industry outlook

Management continues to believe the difficult environment for mineral drilling will last through year-end, and a recovery is expected to begin in mid-2015. Activity levels in some geographical areas have provided some encouraging signs although other factors including social, political, weather and health crises continue to create headwinds at this time. Notwithstanding, reserve replacement through exploration is expected to remain the preferred route for most senior miners, as acquisitions have become riskier and more costly over recent years.

The company's energy business remains strong as oil prices remain at levels required to encourage new exploration and production. Management has been working on growing the business, both overseas and in North America, especially during the summer months when activity levels in Northern Canada are lower. Cost-containment efforts in the energy division have led to gross margin improvements, and while this process is in progress, management continues to focus on winning new non-winter business to reduce seasonality.

The manufacturing business has been involved in a greater number of tender opportunities that should help increase output levels and sales to key African and Southeast Asian markets. Management expects the majority of Dando's sales to continue to come from the water drilling business where it holds a niche market position.

The company remains well capitalized and maintains a strong balance sheet. With a global footprint across all continents and in approximately 25 countries, management continues to evaluate new expansion opportunities on a regular basis.

A conference call is planned for Aug. 28, 2014, at 4:30 p.m. Eastern Time. Dial-in numbers are 416-640-5946 and 1-866-233-4585.

Subsequent events

On July 21, 2014, the company issued three-year convertible debentures for a total amount of $13.5-million. The proceeds were used to repay the previous convertible debentures of $10.0-million with the remainder to be used for, but limited to, bolt-on acquisitions and other expansion opportunities.

In July, 2014, the board of directors approved the final earn-out payment of $2.8-million related to the 2011 acquisition of Bertram Drilling Corp. The settlement for this payment was agreed upon and expensed in December, 2013; therefore, no amount was expensed for the period ending June 30, 2014. The earn-out payment was composed of $1.8-million in cash and $1.0-million in shares of Energold. The recorded price of the share payment was $1.74, and the number of shares issued was 574,713.

We seek Safe Harbor.