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Pason Reports Second Quarter 2013 Results

Friday, August 2, 2013 6:16 PM


Pason Reports Second Quarter 2013 Results

CALGARY, Aug. 2, 2013 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 2013 second quarter results.

Performance Data

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(reclassified)
(restated)
Change 2013 2012
(reclassified)
(restated)
Change
(CDN 000s, except per share data) ($) ($) (%) ($) ($) (%)
Revenue (1) 82,387 84,112 (2) 191,654 199,257 (4)
EBITDA (2) (27,817) 31,656 31,973 95,802 (67)
  As a % of revenue n/a 37.6 16.7 48.1 (65)
  Per share - basic (0.34) 0.39 0.39 1.17 (67)
  Per share - diluted (0.34) 0.38 0.39 1.16 (66)
Cash flow from operating activities (2) 51,236 48,105 7 97,430 93,109 5
  Per share - basic 0.62 0.59 5 1.19 1.14 4
  Per share - diluted 0.62 0.58 7 1.19 1.13 5
(Loss) earnings (3) (39,376) 6,772 (9,768) 35,845
  Per share - basic (0.48) 0.08 (0.12) 0.44
  Per share - diluted (0.48) 0.08 (0.12) 0.43
Capital expenditures 14,043 19,312 (27) 27,982 38,795 (28)
Working capital (3) 109,718 151,772 (28) 109,718 151,772  (28)
Total assets 536,183 485,166 11 536,183 485,166 11
Total long-term debt   —
Total equity 351,849 390,702 (10) 351,849 390,702 (10)
Market capitalization 1,570,020 1,219,758 29 1,570,020 1,219,758 29
Cash dividends declared (4) 0.13 0.22 (41) 0.26 0.22 18
Common shares outstanding (#)            
  Basic 82,050 81,943 82,050 81,924
  Diluted 82,050 82,590 (1) 82,050 82,492 (1)
Shares outstanding end of period (#) 82,114 81,973 82,114 81,973
(1)  Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, cash flow from operating activities, or earnings.
(2)  EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Cash flow from operating activities is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes, and other non-cash items impacting operations and changes in non-cash items as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
(3)  Earnings for the three months ended June 30, 2012, have been restated to correct a $1,700 non-cash error relating to stock-based compensation expense. The 2012 year-to-date correction was $2,100.  Per share amounts have been adjusted accordingly.
(4)  The Company changed its dividend policy whereby effective for 2013, the Company adopted a quarterly dividend to replace the semi-annual dividend.

President's Message

The second quarter is usually the weakest due to the seasonality of Canadian drilling activity. Pason's performance was further affected by continued declines in drilling activity across North America.

As previously disclosed in the consolidated financial statements and in various other press releases, the Company had been defending its position in three patent infringement lawsuits relating to its AutoDriller since 2003. On August 1, 2013, the Company and the plaintiff in the litigation negotiated a final resolution to all three of these cases. The June 30, 2013 consolidated financial statements have been adjusted to reflect the payment of $115.8 million (USD $112.0 million) required to resolve all claims against the Company regarding the infringement. The second quarter provision related to this resolution amounts to $61.6 million bringing the total accrual on the balance sheet to $115.8 million.

Drilling days and active rig counts in North America were lower in the second quarter of 2013 than in the second quarter of the previous year, with a decline in industry days of 11% in both the United States and Canada. As in previous periods, activity in international markets was higher than a year ago. However, revenue growth in the International markets was more than offset by a decline in revenue in North America. As a result, total Pason revenue decreased 2% to $82.4 million in the second quarter of 2013 compared to the second quarter of 2012. As in the previous quarter, all major product categories generated revenue growth above drilling industry activity, with the exception of the Hazardous Gas Alarm and AutoDriller. The Communications segment demonstrated the highest year-over-year growth rates at 31%, followed by the Gas Analyzer segment at 5%. 

EBITDA for the second quarter was negative $27.8 million while cash flow from operating activities was up 7% to $51.2 million. Pason recorded a net loss of $39.4 million. In addition to the increase in the provision for resolving the infringement claims, second quarter results were impacted by the following factors:

  • An increase in stock-based compensation due to the  increase in our stock price during the second quarter of 2013
  • An increase in R&D costs as we completed the hiring of staff to support our Electronic Drilling Recorder (EDR) evolution projects combined with an increase in costs to support our information technology systems
  • A foreign exchange gain recorded in the second quarter compared to a loss in the corresponding period in 2012

Capital expenditures for the second quarter were $14.0 million, down from $19.3 million the previous year, as the North American roll-out of the Gas Analyzer was completed over the previous summer.

On June 30, our cash position stood at $195.4 million and our working capital stood at $109.7 million. There is no debt on the balance sheet. We are maintaining our quarterly dividend at $0.13 per share.

United States

The US segment, our largest business unit, includes our US rental business and 3PS Inc., our Austin-based equipment manufacturer.

Drilling activity in the United States continued its downward trend. While industry days were down 11% in the second quarter of 2013 compared to the second quarter of 2012, revenue was down 2% to $58.5 million. On average, 969 US land rigs were operating Pason equipment during the second quarter of 2013, compared to 1,079 in the same period of 2012. Revenue growth above industry day growth was achieved through higher product penetration and a change to the Communications pricing model. Average daily revenue per rig increased by 7% from USD $564 in the second quarter of 2012 to USD $603 in 2013. A number of segments achieved above-average revenue growth. Our EDR market share for the second quarter of 2013 was 57%, the same level that was realized in the first quarter of 2013.

Operating costs decreased by 7% and depreciation and amortization decreased by 15%. As a result, our US business unit was able to generate an operating profit of $28.7 million in the second quarter, an increase of 7% over 2012.

Canada

Drilling activity in Canada was lower in the second quarter of 2013 than in the previous year, with industry days down 11%. Our Canadian business unit was able to partially offset this reduction in activity levels through increased product penetration. Revenue for the second quarter was down 10% to $13.6 million. On average, 130 Canadian land rigs were operating Pason equipment compared to 149 the year before. EDR market share in the second quarter of 2013 was 87% compared to 89% the previous year.

Average daily revenue generated on each rig with a Pason product installed grew 5% to $1,139 in the second quarter of 2013. EDR, Pit Volume Totalizer, Communications and Gas Analyzer showed above average growth rates during the period.

Operating costs were up by 5% and depreciation and amortization decreased by 17%. As a result, our Canadian business unit was able to generate an operating profit of $0.3 million for the second quarter, compared to $1.1 million for the same period in 2012.

International

Our International business unit, which includes our businesses in Latin America, Australia, and Offshore, had a solid quarter. Revenue increased by 9% to $10.3 million for the second quarter 2013 compared to the second quarter 2012. The International business unit was thus able to generate almost 13% of Pason's total revenue for the quarter. Revenue increases in both Argentina and Australia were partially offset by continued industry weakness in Mexico and Brazil.

Operating costs were up 26% and depreciation and amortization were down 8%, driven by improved asset utilization. The increase in operating costs was driven by importation costs and one time administrative costs. As a result, the International business unit was able to generate a quarterly operating profit of $1.1 million, down 31% from $1.6 million the previous year.

Outlook

Beyond the seasonal increase in the Canadian drilling activity in the third quarter, consensus calls for North American rig counts to hold in the current range or gradually decline in the near to medium term. Key drivers for consensus opinion are the maturing of major unconventional plays, greater drilling efficiencies, and lagging midstream infrastructure. However, North American land rig counts are directly correlated to volatile underlying commodity prices, and "expert consensus" is often wrong in the near term. With higher oil prices and reduced differentials for Canadian crude, we expect a modest recovery of North American drilling activity towards the end of 2013 and in 2014.

Our capital expenditure budget for the next 12 months is $86 million, $57 million of which is directed towards equipment that can generate incremental revenue or save operating costs, $16 million for maintenance capital, and $13 million for capitalized R&D.

Our cash-generating capacity and our cash position at $195.4 million are strong enough to cover new business development, planned equipment upgrades, the dividend, and the payment for the final resolution of all three patent infringement cases.

(Signed)

Marcel Kessler
President and Chief Executive Officer
August 1, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of August 1, 2013, and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the consolidated financial statements and accompanying notes.

Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements.

All financial measures presented in this quarterly report are expressed in Canadian dollars unless otherwise indicated.

Overview of the 2013 Second Quarter

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(reclassified)
(restated)
2011
(reclassified)
2013 2012
(reclassified)
(restated)
2011
(reclassified)
(000s, except per share data) ($) ($) ($) ($) ($) ($)
Revenue (1) 82,387 84,112 65,546 191,654 199,257 153,764
EBITDA (2) (27,817) 31,656 25,850 31,973 95,802 70,579
  As a % of revenue n/a 37.6  39.4 16.7 48.1 45.9
  Per share - basic (0.34) 0.39 0.31 0.39 1.17 0.86
  Per share - diluted (0.34) 0.38 0.30 0.39 1.16 0.85
Cash flow from operating activities (2) 51,236  48,105 30,756 97,430 93,109 59,586
  Per share - basic 0.62  0.59 0.38 1.19 1.14 0.73
  Per share - diluted 0.62  0.58 0.37 1.19 1.13 0.72
(Loss) earnings (3) (39,376) 6,772 8,217 (9,768) 35,845 25,974
  Per share - basic (0.48) 0.08 0.10 (0.12) 0.44 0.32
  Per share - diluted (0.48) 0.08 0.09 (0.12) 0.43 0.31
Total assets 536,183  485,166 405,437 536,183 485,166 405,437
Total long-term debt  —
(1)  Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, cash flow from operating activities, or earnings.
(2)  EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Cash flow from operating activities is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes, and other non-cash items impacting operations and changes in non-cash items as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
(3) Earnings for the three months ended June 30, 2012, have been restated to correct a $1,700 non-cash error relating to stock-based compensation expense. The 2012 year-to-date correction was $2,100.  Per share amounts have been adjusted accordingly.

Overall Performance

  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012
(reclassified)
Change 2013 2012
(reclassified)
Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
  Electronic Drilling Recorder (1) 34,424 34,998 (2) 79,088 81,533 (3)
  Pit Volume Totalizer 12,164  12,551 (3) 29,034 30,497 (5)
  Communications (1) 7,801  5,933 31 18,755 16,930 11
  Software 4,767  5,384 (11) 12,130 12,457 (3)
  AutoDriller 7,341  8,603 (15) 17,851 21,054 (15)
  Gas Analyzer/Total Gas System 5,915  5,654 5 14,649 13,289 10
  Hazardous Gas Alarm System 1,092  1,618 (33) 2,694 3,632 (26)
  Mobilization 2,854  3,004 (5) 5,449 5,987 (9)
  Other 6,029  6,367 (5) 12,004 13,878 (14)
Total revenue 82,387  84,112 (2) 191,654 199,257 (4)
(1)  Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.

Change in Accounting Classification

In the fourth quarter of 2012, the Company changed the way it records expenses associated with data transmission costs. Previously, the Company recorded these costs as a reduction in revenue. Effective for 2012, these costs have been reclassified to rental services expense. This change, which does not impact EBITDA or net income, was applied retroactively, with all comparative figures being restated accordingly. All revenue and operating cost figures, as well as key metrics based upon revenue, in the following Management Discussion and Analysis, have been calculated based upon this new presentation.

The impact of this reclassification on the 2012 comparative figures presented above is as follows:

Three Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 34,998 32,202 2,796
Communications (1) 5,933 5,669 264
Total revenue 84,112 81,052 3,060
       
       
Six Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 81,533 75,864 5,669
Communications (1) 16,930 16,049 881
Total revenue 199,257 192,707 6,550

EDR and PVT rental day performance for Canada and the United States is reported below:

Canada  
  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012 Change 2013 2012   Change
      (%)     (%)
EDR rental days (#) 11,800 13,600 (13) 54,600 59,900 (9)
PVT rental days (#) 11,600 13,100 (11) 53,400 59,000 (9)
             
 
United States  
  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012 Change 2013 2012   Change
      (%)     (%)
EDR rental days (#) 88,200 98,200 (10) 174,100 199,000 (13)
PVT rental days (#) 65,300  69,200 (6) 128,900 138,900 (7)

Electronic Drilling Recorder

The Pason Electronic Drilling Recorder (EDR) remains the Company's primary product. The EDR provides a complete system of drilling data acquisition, data networking, and drilling management tools and reports at both the wellsite and customer offices. The EDR is the base product from which all other wellsite instrumentation products are linked. By linking these products, a number of otherwise redundant elements such as data processing, display, storage, and networking are eliminated. This ensures greater reliability and a more robust system of instrumentation for the customer. Revenue generated from the EDR declined 2% for the second quarter of 2013 compared to the same period in 2012 and on a year-to-date basis revenue dropped 3%. This decrease is attributable to a decrease in rig activity in both the US and Canadian markets offset by an increase in expanding demand from customers for EDR peripheral devices. Canadian EDR days were down 13% in the three months ended June 2013 while US EDR days dropped by 10%. On a year-to-date basis, EDR days dropped 9% in Canada and 13% in the US.

During the first six months of 2013, the Pason EDR was installed on 96% of all active land rigs in Canada and 57% of the land rigs in the US.

Pit Volume Totalizer

The Pit Volume Totalizer (PVT) is Pason's proprietary solution for the detection and early warning of "kicks" that are caused by hydrocarbons entering the wellbore under high pressure and expanding as they migrate to the surface. PVT revenue for the quarter was impacted by the drop in rig activity previously described above, offset by increased product penetration in the US market. During the first half of 2013, the PVT was installed on 99% of rigs with a Pason EDR in Canada and 74% in the US, compared to 99% and 70%, respectively, in 2012.

Communications

Pason's Communications rental revenue is derived from the Company's automatic aiming satellite system. This system provides high-speed wellsite communications for email and web application management tools. Pason displays all data in standard forms on its DataHub web application, although if customers require greater analysis or desire to have the information transferred to another supplier's database, data is available for export from the Pason DataHub using WITSML (a specification for transferring data among oilfield service companies, drilling contractors, and operators). The Company continues to complement its satellite equipment with High Speed Packet Access (HSPA), a high-speed wireless ground system that requires lower capital cost, less service, and lower cost per Internet kilobyte, benefiting company margins. In Canada, HSPA has been installed on all rigs, and the majority of the rigs running will benefit from the investment in HSPA given the growth in cellular coverage. In the US, field coverage tests for HSPA are continuing with positive results.

Software

The Pason DataHub is the Company's data management system that collects, stores, and displays drilling data, reports, and real-time information from drilling operations. The DataHub provides access to data through a number of innovative applications or services including:

  • Live Rig View (LRV), which provides advanced data viewing, directional drilling, and 3D visualization of drilling data in real time via a web browser.

  • Mobile Viewer and Mobile, which allow users to access their data on mobile devices including iPhone, iPad, BlackBerry, and Android.

  • WITSML, which provides seamless data sharing with third-party applications enhancing the value of data hosted by Pason.

  • Additional specialized software.

During the first six months of 2013, 97% of the Company's Canadian customers and 89% of customers in the US were using all or a portion of the functionality of the DataHub, compared to 98% and 86%, respectively, in 2012.

Gas Analyzer and Total Gas System

The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the Canadian and US markets, measures the total hydrocarbon gases (C1 through C41) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced. The Gas Analyzer increases the functionality that was found in the TGAS product to include the actual composition of the gas and further calculates geologic ratios from the gas composition to assist in indicating the type of gas, natural gas liquid, or oil in the formation. The Company continues to realize increased product penetration for this product. For 2013, the Gas Analyzer was installed on 52% of Canadian and 23% of US land rigs operating with a Pason EDR system. The penetration in Canada is an increase of approximately 4% in market share over 2012 levels while the US has seen an increase of 5%. The roll out of the Gas Analyzer in the International markets continues with anticipated completion in most of the major markets by the end of 2013.

AutoDriller

Pason's AutoDriller is used to maintain constant weight on the drill bit while a well is being drilled. During the first six months of 2013, the AutoDriller was installed on 71% of Canadian and 46% of US land rigs operating with a Pason EDR system, compared to 77% and 50%, respectively, in 2012. Pason's market share for this particular product has declined from previous levels due to the introduction and advancement of integrated drilling rigs.

Hazardous Gas Alarm System

The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit (LEL) gases and H2S gases and displays the readings on the EDR. If a hazardous rig atmosphere is detected, the system reacts immediately, sounding an alarm and flashing a strobe light. Early in 2013, the Company identified a sensor on the H2S product, a part of the HGAS system, which was not performing to the manufacturer's standards. As a result, the Company has temporarily suspended the functionality of this portion of the HGAS while it investigates a solution to the problem. The Company continues to investigate alternative technologies and field trials of an improved  system are scheduled for the third quarter of 2013.

Discussion of Operations

United States Operations

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(reclassified)
Change 2013 2012
(reclassified)
Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
Electronic Drilling Recorder (1) 24,457 25,540 (4) 47,807 50,830 (6)
  Pit Volume Totalizer 8,349  8,740 (4) 16,368 17,462 (6)
Communications (1) 5,567  3,827 45 9,806 7,732 27
Software 4,176  4,395 (5) 8,436 8,357 1
  AutoDriller 5,151  6,177 (17) 10,131 12,358 (18)
  Gas Analyzer/Total Gas System 3,343  3,159 6 6,345 5,688 12
  Hazardous Gas Alarm System 495  842 (41) 1,141 1,559 (27)
  Mobilization 2,193  2,303 (5) 4,154 4,600 (10)
Other 4,757  4,635 3 7,784 9,061 (14)
Total revenue 58,488  59,618 (2) 111,972 117,647 (5)
Operating costs 22,528  24,148 (7) 44,768 46,816 (4)
Depreciation and amortization 7,281  8,580 (15) 14,665 16,199 (9)
Segment operating profit 28,679  26,890 7 52,539 54,632 (4)
(1)  Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2012 comparative figures presented above:

       
Three Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 25,540 23,835 1,705
Communications (1) 3,827  3,697 130
Total revenue 59,618  57,783 1,835
Operating costs 24,148  22,313 1,835
Revenue per EDR day 570  556 14
Revenue per Industry day 323  316 7
       
Six Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 50,830 47,640 3,190
Communications (1) 7,732  7,481 251
Total revenue 117,647  114,206 3,441
Operating costs 46,816  43,375 3,441
Revenue per EDR day 555  537 18
Revenue per Industry day 317  307 10

US segment revenue decreased by 2% in the second quarter of 2013 over the 2012 comparable period (3% decrease when measured in USD), while revenue from the rental of instrumentation equipment was down 3% for the quarter (USD 4%).

For the first six months of 2013, US segment revenue decreased by 5% (USD 6%) over the previous year.

The number of US drilling days were down approximately 11% in the second quarter of 2013 versus the second quarter of 2012 due to a pullback in drilling for both natural gas and oil. However, revenue from the rental of instrumentation compared favorably to the drop in activity, with a decrease of 3% (USD 4%) over 2012 levels.

Year-to-date drilling days were down 12% over 2012 levels while rental revenue was down 4% (USD 5%)

Revenue was impacted by the following factors:

  • More products on each rig and new product adoption. Revenue increased as a result of a shift in the business units pricing model for communications service, additional product penetration, primarily with gains in EDR peripheral devices (Workstations and Sidekicks), increased PVT market share, customer acceptance of the Company's Live Rig View (LRV) real-time data software, and a continued increase in the adoption of the Gas Analyzer. These factors combined resulted in an increase in revenue per EDR day in the second quarter of 2013 over 2012 levels of $47 (USD $39).

  • A decrease in EDR rental days of 10% for the three months ended June 2013, over the same time period in 2012, and a drop of 13% for the first six months of 2013 over 2012 levels.

The factors explained above resulted in the US segment being able to realize revenue per EDR day during the second quarter of 2013 of $617 (USD $603) compared to $570 (USD $564) during the same time period in 2012. For the first six months, revenue per EDR day increased by $51 (USD $45) to $606 (USD $597) over 2012 amounts.

Revenue per industry day for the second quarter of the year was $355 (USD $347) compared to $323 (USD $320) in 2012. On a year-to-date basis this metric increased by $29 (USD $26) to $346 (USD $340).

US market share was 57% during the first six months of 2013, the same level as the corresponding period in 2012.

The majority of the decrease in "Other" revenue for the first six months of 2013 relates to a drop in sales at 3PS, Inc. compared to 2012 levels. This is a result of a decline in sales of the Torque and Tension Sub to the Canadian and US business units due to a lack of demand for the rental of these assets.

Segment profit, as a percentage of revenue, was 49% for the second quarter of 2013 compared to 45% for the corresponding period in 2012.

The 2013 second quarter segment profit percentage was impacted by the following factors:

  • An increase in communication-related expenses due to the US business unit implementing a more robust level of service to its customers.

  • Field technician-related costs and repair costs in the second quarter of 2013 compared to 2012 decreased due to the change in rig activity and a focus on cost control which led to a reduction in repair costs and a drop in field parts and other consumables.

  • Second quarter 2013 depreciation and amortization expense was down compared to the same period in 2012
    • the Company began to accelerate the depreciation on its TGAS system in 2012 to recognize the fact that it was being replaced by the Gas Analyzer. The TGAS systems are now fully depreciated, resulting in a drop in depreciation expense.

    • the Company, in the first quarter of 2012, began to accelerate the depreciation on a portion of its base EDR system, which will become obsolete as a result of the EDR evolution project. Later in 2012, the Company re-evaluated the assumption of when the equipment being replaced will become obsolete and adjusted downwards the amount of accelerated depreciation being recorded.
    • the above reductions were offset by depreciation on the Gas Analyzer system and upgrades to its communication infrastructure to accommodate increased functionality.

The 2013 year-to-date segment profit was down $2.1 million compared to 2012 levels. The factors impacting the second quarter results are the same factors impacting the six month results.

Canadian Operations

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(reclassified)
Change 2013 2012
(reclassified)
Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
Electronic Drilling Recorder (1) 5,622 5,690 (1) 22,996 23,489 (2)
  Pit Volume Totalizer 2,089  2,288 (9) 9,380 10,210 (8)
Communications (1) 1,864  1,966 (5) 8,243 8,893 (7)
  Software 500  864 (42) 3,503 3,885 (10)
  AutoDriller 1,196  1,533 (22) 5,815 6,872 (15)
  Gas Analyzer/Total Gas System 1,458  1,534 (5) 6,112 5,777 6
  Hazardous Gas Alarm System 279  331 (16) 817 1,289 (37)
  Mobilization 65  104 (38) 241 306 (21)
Other 488  702 (30) 2,409 2,635 (9)
Total revenue 13,561  15,012 (10) 59,516 63,356 (6)
Operating costs 7,898  7,512 5 17,505 18,915 (7)
Depreciation and amortization 5,315  6,430 (17) 11,336 13,473 (16)
Segment operating profit 348  1,070 (67) 30,675 30,968 (1)
(1) Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2012 comparative figures presented above:

       
Three Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 5,690 4,656 1,034
Communications (1) 1,966 1,832 134
Total revenue 15,012 13,844 1,168
Operating costs 7,512 6,344 1,168
Revenue per EDR day 1,081 996 85
Revenue per Industry day 968 892 76
       
Six Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 23,489 21,115 2,374
Communications (1) 8,893 8,263 630
Total revenue 63,356 60,352 3,004
Operating costs 18,915 15,911 3,004
Revenue per EDR day 1,045 994 51
Revenue per Industry day 989 941 48

Canadian segment revenue decreased 10% for the three months ended June 2013, compared to the same period in 2012. This decrease is a result of an 11% decrease in the number of drilling industry days from 2012 levels, offset by increased product penetration in a number of different products. On a year-to-date basis, revenue decreased by 6%, compared to the first six months of 2012.

EDR rental days declined 13% in the second quarter of 2013 over 2012 levels. The drop in EDR rental days for the first six months of 2013 was 9%, compared to a drop in industry days of 10%.

Canadian market share was 96% during the first six months of 2013, compared to 95% in the corresponding period in 2012.

The Canadian business unit was able to lessen the impact of the reduction in activity levels in Canada in the second quarter mostly through increased product adoption, notably EDR peripherals including SideKicks and Workstations. In addition, the business unit continued to gain market acceptance of the Gas Analyzer. These factors combined to lessen the impact of the drop in AutoDriller revenue described previously and the drop in the number of wells being drilled.

The factors above combined to result in:

  • An increase in revenue per EDR day during the second quarter of 2013 compared to 2012 of 5% ($58) to $1,139, and represents a record quarterly high. For the first six months of 2013, revenue per EDR increased by $33 to $1,078.

  • Second quarter revenue per industry day of $992 in 2013 compared to $968 in 2012. This metric for the first six months of 2013 was $1,030, an increase of 4% over the similar period in 2012.

The segment profit for the second quarter of 2013 of $0.3 million is a decrease of $0.8 million over the 2012 amount. Factors impacting the second quarter results include:

  • The second quarter activity levels in Canada were lower than the normal seasonal weakness. Wet conditions in Saskatchewan and above normal rainfall in Alberta, combined with continued uncertainty around oil and gas pricing, impacted drilling activity in the Western Canadian Sedimentary Basin (WCSB). This resulted in 1,800 fewer EDR days during the second quarter of 2013 compared to 2012.

  • Year-to-date operating costs have declined as a result of a drop in field-related costs due in most part to the drop in rig activity combined with less repairs being done due to the drop in  equipment use.

  • A decrease in depreciation and amortization expense due to:
    • a decrease in the loss on disposal of assets,

    • the replaced TGAS being fully depreciated, resulting in a decline in the expense, combined with a drop in the acceleration of depreciation on a portion of its base EDR system,

    • the above reductions in depreciation and amortization expense were offset by an increase in amortization costs relating to capitalized research and development costs, as a result of the deployment of new software applications.

The segment profit, as a percent of revenue, was 52% for the first half of 2013, compared to 49% for the 2012 time period. Factors impacting the year-to-date results include continued weakness in drilling activity in Canada, which led to a drop in industry days of 6,100 and a corresponding drop in EDR rental days of 5,300 combined with similar factors that impacted the second quarter results, described above.

International Operations

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(reclassified)
Change 2013 2012
(reclassified)
Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
Electronic Drilling Recorder (1) 4,345 3,768 15 8,285 7,214 15
  Pit Volume Totalizer 1,726  1,523 13 3,286 2,825 16
Communications (1) 370  140 164 706 305 131
Software 91  125 (27) 191 215 (11)
  AutoDriller 994  893 11 1,905 1,824 4
  Gas Analyzer/Total Gas System 1,114  961 16 2,192 1,824 20
  Hazardous Gas Alarm System 318  445 (29) 736 784 (6)
  Mobilization 596  597 1,054 1,081 (2)
Other 784  1,030 (24) 1,811 2,182 (17)
Total revenue 10,338  9,482 9 20,166 18,254 10
Operating costs 7,414  5,890 26 13,808 11,042 25
Depreciation and amortization 1,810  1,977 (8) 3,339 4,212 (21)
Segment operating profit 1,114  1,615 (31) 3,019 3,000 1
(1) Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2012 comparative figures presented above:

       
Three Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 3,768 3,711 57
Communications (1) 140  140
Total revenue 9,482  9,425 57
Operating costs 5,890  5,833 57
       
Six Months Ended June 30, 2012 Reported Previously
Disclosed
Change
(000s) ($) ($) ($)
Revenue      
Electronic Drilling Recorder (1) 7,214 7,109 105
Communications (1) 305  305
Total revenue 18,254  18,149 105
Operating costs 11,042  10,937 105

Revenue in the International operations improved 9% in the second quarter of 2013 from the same period in 2012. Year-to-date revenue increased 10%.

Operating profit dropped by $0.5 million for the second quarter of 2013 over 2012 results. For the first six months operating profit was essentially flat over the first six months of 2012.

A number of factors influenced these results:

  • Increased EDR days in both Argentina,  Australia and Offshore business units for the second quarter and year-to-date, were offset with continued industry weakness in Brazil and Mexico.

  • Australia's revenue continues to increase over the prior year. Revenue increased over 60%  from 2012 levels, translating to a doubling of operating profit.

  • Operating costs increased due to importation-related expenses in getting additional equipment into certain markets and one time administrative costs.

Consolidated Results

  Three Months Ended June 30, Six Months Ended June 30,
     
  2013 2012 Change 2013 2012 Change
(000s) ($) ($) (%) ($) ($) (%)
Other expenses            
Research and development 7,349 4,513 63 13,875 10,053 38
Corporate services 4,480  3,556 26 8,640 7,962 9
Stock-based compensation 6,871  4,244 62 10,621 11,163 (5)
Other            
  Litigation provision 61,614  5,413 1,038 61,614 5,413 1,038
  Foreign exchange (gain) loss (1,471) 1,324 (1,251) 3,035
  Other 392  100 292 722 219 230
  79,235  19,150 314 94,221 37,845 149

Q2 2013 versus Q2 2012

The active rig count in both the US and Canadian markets declined from the second quarter of 2012, with both markets seeing a drop in activity of approximately 11%. The International market saw a modest  increase in drilling days. This change in activity, combined with the increase in the litigation provision recorded in the second quarter of 2013 led to a decline in most of the Company's key consolidated financial metrics.

The Company recorded a net loss of $39.4 million or $0.48 per share compared to earnings of $6.8 million or $0.08 per share in the second quarter of 2012. The second quarter consolidated results, when compared to 2012 figures, were impacted by the following significant items:

  • An increase in the litigation provision of $56.2 million, to $61.6 million.

  • An increase in research and development costs in the second quarter of 2013  as the Company completed the hiring of additional staff in the second half of 2012 to support the EDR evolution project and other product development initiatives combined with increased information technology costs to upgrade  the functionality of the Company's internal  network infrastructure.

  • Stock-based compensation increased compared to the second quarter of 2012 due to an increase in the  Company's stock price in the three months ended June 2013.

  • A foreign exchange gain recorded in the second quarter of 2013 compared to a loss in the corresponding period in 2012.

Q2 2013 versus Q1 2013

The Company's first quarter is usually its strongest due in most part to the seasonality of the Canadian market, while the second quarter is usually its weakest. The Canadian business unit realized a profit of $0.3 million for the three months ended June 2013, compared to a $30.3 million profit in the first quarter of 2013. The US business unit profit increased from $23.9 million in the previous quarter to a profit of $28.7 million in the current quarter.

The following items also impacted the comparison to the first quarter 2013 results:

  • The additional provision relating to the AutoDriller litigation.

  • An increase in research and development and information technology costs.

  • An increase in stock-based compensation expense due to an increase in the Company's stock price of 11% during the quarter.

  • A foreign exchange gain versus a small loss recorded in the previous quarter, due in most part to a weakening Canadian dollar versus the US dollar.

Second Quarter Conference Call

Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its second quarter results at 9:00 a.m. (Calgary time) on Tuesday, August 6, 2013. The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450. You can access the seven-day replay by dialing 1-855-859-2056 or 1-416-849-0833, using password 97078595.

Pason Systems Inc. is a leading provider of instrumentation systems to land-based and offshore drilling rigs worldwide. The company's rental solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, maximize rig uptime, improve work efficiency, and minimize operating costs. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.

Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2012, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.

Condensed Consolidated Interim Balance Sheets

As at   June 30, 2013 December 31, 2012
(CDN 000s) (unaudited)   ($) ($)
       
Assets      
Current      
  Cash and cash equivalents   195,445 157,944
  Trade and other receivables   78,210  84,506
  Prepaid expenses   1,477  2,920
  Income taxes recoverable   10,194  —
  Total current assets   285,326 245,370
Non-current      
  Property, plant and equipment   175,093  174,651
  Intangible assets   64,816  59,593
  Deferred tax assets   10,948 8,764
  Total non-current assets   250,857  243,008
Total assets   536,183  488,378
Liabilities and equity      
Current      
  Trade payables and accruals   32,232 25,674
  Litigation provision   115,785  19,533
  Income taxes payable    3,313
  Stock-based compensation liability   16,917  13,788
  Dividend payable   10,674  19,691
  Total current liabilities   175,608  81,999
Non-current      
  Stock-based compensation liability   6,126 2,583
  Deferred tax liabilities   2,600  2,600
  Litigation provision    32,500
  Total non-current liabilities   8,726  37,683
Equity      
  Share capital   80,196  79,393
  Share-based benefits reserve   12,927  12,927
  Foreign currency translation reserve   5,111  (8,348)
  Retained earnings   253,615 284,724
  Total equity   351,849  368,696
Total liabilities and equity   536,183  488,378

Condensed Consolidated Interim Statements of Operations

    Three Months Ended June 30, Six Months Ended June 30,
Six Months Ended June 30,   2013 2012
(reclassified
restated)
2013 2012
(reclassified
restated)
(CDN 000s, except per share data) (unaudited)   ($) ($) ($) ($)
Revenue          
  Equipment rentals and other   82,387 84,112 191,654 199,257
Operating expenses          
  Rental services   33,192 31,869 67,068 65,570
  Local administration   4,648 5,681 9,013 11,203
  Depreciation and amortization   14,406 16,987 29,340 33,884
    52,246 54,537 105,421 110,657
           
Operating profit   30,141 29,575 86,233 88,600
Other expenses          
  Research and development   7,349 4,513 13,875 10,053
  Corporate services   4,480 3,556 8,640 7,962
  Stock-based compensation   6,871 4,244 10,621 11,163
  Other expenses   60,535 6,837 61,085 8,667
    79,235 19,150 94,221 37,845
           
(Loss) income before income taxes   (49,094) 10,425 (7,988) 50,755
  Income taxes   (9,718) 3,653 1,780 14,910
(Loss) net income   (39,376) 6,772 (9,768) 35,845
(Loss) earnings per share          
  Basic   (0.48) 0.08 (0.12) 0.44
  Diluted   (0.48) 0.08 (0.12) 0.43
Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, funds flow from operations, or earnings.
Earnings for the three months ended June 30, 2012, have been restated to correct a non-cash error relating to stock-based compensation expense of $1,700. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.

Condensed Consolidated Interim Statements of Other Comprehensive Income

  Three Months Ended June 30,   Six Months Ended June 30,
  2013 2012
(restated)
2013 2012
(restated)
(CDN 000s) (unaudited) ($) ($) ($) ($)
(Loss) net income (39,376) 6,772 (9,768) 35,845
Other comprehensive income (loss)        
  Foreign currency translation adjustment 7,609  6,303 13,459 4,792
Total comprehensive (loss) income (31,767) 13,075 3,691 40,637

Condensed Consolidated Interim Statements of Changes in Equity

    Share Capital Share-Based
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity
(CDN 000s) (unaudited)   ($) ($) ($) ($) ($)
Balance at January 1, 2012   77,613 12,927 (5,835) 282,564 367,269
  Net income (restated)    — 35,845 35,845
  Dividends    — (18,033) (18,033)
  Other comprehensive income    — 4,792 4,792
  Exercise of stock options   829  — 829
Balance at June 30, 2012   78,442  12,927 (1,043) 300,376 390,702
  Net income (restated)    — 4,039 4,039
  Dividends    — (19,691) (19,691)
  Other comprehensive loss   (7,305) (7,305)
  Exercise of stock options   951  — 951
Balance at December 31, 2012   79,393  12,927 (8,348) 284,724 368,696
  Net loss    — (9,768) (9,768)
  Dividends    — (21,341) (21,341)
  Other comprehensive income    — 13,459 13,459
  Exercise of stock options   803  — 803
Balance at June 30, 2013   80,196  12,927 5,111 253,615 351,849
Earnings for the three months ended June 30, 2012, have been restated to correct a non-cash error relating to stock-based compensation expense of $1,700. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.

Condensed Consolidated Interim Statements of Cash Flows

    Three Months Ended June 30,   Six Months Ended June 30,
           
    2013 2012
(restated)
2013 2012
(restated)
(CDN 000s) (unaudited)   ($) ($) ($) ($)
Cash flows from operating activities          
  Net (loss) income   (39,376) 6,772 (9,768) 35,845
Adjustment for non-cash items:          
  Depreciation and amortization   14,406  16,987 29,340 33,884
  Stock-based compensation   4,064  2,436 5,559 7,475
  Deferred income taxes   (3,859) 4,228 (2,139) 3,679
  Unrealized foreign exchange (gain) loss   (214) (291) (136) 956
Movements in non-cash items:          
  Decrease in trade and other receivables   18,659  16,268 8,978 9,734
  Decrease (increase) in prepaid expenses   1,082  (539) 1,488 (964)
  (Decrease) increase in income taxes   (9,982) 857 (3,112) 9,049
  Increase in litigation provision   63,752  5,443 63,752 5,443
  Increase (decrease) in trade payables and accruals   4,535  (199) 6,496 (2,117)
  Increase in stock-based compensation liability   2,665  1,600 4,886 3,405
  Effects of exchange rate changes   1,507  (457) 2,589 (53)
Cash generated from operating activities   57,239  53,105 107,933 106,336
  Income tax paid   (6,003) (5,000) (10,503) (13,227)
Net cash from operating activities   51,236  48,105 97,430 93,109
Cash flows from (used in) financing activities          
  Proceeds from issuance of common shares   785  547 803 829
  Purchase of stock options   (1,130) (1,685) (3,052) (2,089)
  Payment of dividends   (10,667) (30,358) (16,380)
Net cash used in financing activities   (11,012) (1,138) (32,607) (17,640)
Cash flows (used in) from investing activities          
  Additions to property, plant and equipment   (10,470) (16,331) (20,666) (33,567)
  Additions to intangibles   (134) (400) (139) (400)
  Deferred development costs   (3,573) (2,981) (7,316) (5,228)
  Proceeds on disposal of property, plant and equipment    300 44 300
  Acquisitions, net of cash acquired    (1,274) (1,274)
  Changes in non-cash working capital   239  (1,535) (515) (2,397)
Net cash used in investing activities   (13,938) (22,221) (28,592) (42,566)
Effect of exchange rate on cash and cash equivalents   291  1,490 1,270 715
Net increase in cash and cash equivalents   26,577  26,236 37,501 33,618
Cash and cash equivalents, beginning of period   168,868  112,375 157,944 104,993
Cash and cash equivalents, end of period   195,445  138,611 195,445 138,611
Earnings for the three months ended June 30, 2012, have been restated to correct a non-cash error relating to stock-based compensation expense of $1,700. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.

The Company operates in three geographic segments: Canada, the United States, and Internationally (Latin America, Offshore, and the Eastern Hemisphere). The amounts related to each segment are as follows:

Three Months Ended June 30, 2013 Canada United States International Total
  ($) ($) ($) ($)
Revenue 13,561 58,488 10,338 82,387
Operating costs 7,898  22,528 7,414 37,840
Depreciation and amortization 5,315  7,281 1,810 14,406
Segment operating profit 348  28,679 1,114 30,141
Research and development       7,349
Corporate services       4,480
Stock-based compensation       6,871
Other expenses       60,535
Income taxes       (9,718)
Net loss       (39,376)
Capital expenditures 6,772  5,463 1,808 14,043
Goodwill  19,456 2,600 22,056
Intangible assets 30,496  8,995 3,269 42,760
Segment assets 216,212  259,290 60,681 536,183
Segment liabilities 102,941  71,918 9,475 184,334
         
Three Months Ended June 30, 2012 (reclassified, restated)
         
Revenue 15,012 59,618 9,482 84,112
Operating costs 7,512  24,148 5,890 37,550
Depreciation and amortization 6,430  8,580 1,977 16,987
Segment operating profit 1,070  26,890 1,615 29,575
Research and development       4,513
Corporate services       3,556
Stock-based compensation       4,244
Other expenses       6,837
Income taxes       3,653
Net income       6,772
Capital expenditures 7,085  10,611 1,616 19,312
Goodwill  18,862 2,600 21,462
Intangible assets 23,692  12,165 3,903 39,760
Segment assets 133,765  286,338 65,063 485,166
Segment liabilities 66,832  16,414 11,218 94,464
         
         
Six Months Ended June 30, 2013 Canada United States International Total
  ($) ($) ($) ($)
Revenue 59,516 111,972 20,166 191,654
Operating costs 17,505  44,768 13,808 76,081
Depreciation and amortization 11,336  14,665 3,339 29,340
Segment operating profit 30,675  52,539 3,019 86,233
Research and development       13,875
Corporate services       8,640
Stock-based compensation       10,621
Other expenses       61,085
Income taxes       1,780
Net loss       (9,768)
Capital expenditures 13,799  9,769 4,414 27,982
Goodwill  19,456 2,600 22,056
Intangible assets 30,496  8,995 3,269 42,760
Segment assets 216,212  259,290 60,681 536,183
Segment liabilities 102,941  71,918 9,475 184,334
         
Six Months Ended June 30, 2012 (reclassified, restated)
         
Revenue 63,356 117,647 18,254 199,257
Operating costs 18,915  46,816 11,042 76,773
Depreciation and amortization 13,473  16,199 4,212 33,884
Segment operating profit 30,968  54,632 3,000 88,600
Research and development       10,053
Corporate services       7,962
Stock-based compensation       11,163
Other expenses       8,667
Income taxes       14,910
Net income       35,845
Capital expenditures 13,127  23,511 2,157 38,795
Goodwill  18,862 2,600 21,462
Intangible assets 23,692  12,165 3,903 39,760
Segment assets 133,765  286,338 65,063 485,166
Segment liabilities 66,832  16,414 11,218 94,464
Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, cash flow from operating activities, or earnings.
Earnings for the three months ended June 30, 2012, have been restated to correct a non-cash error relating to stock-based compensation expense of $1,700. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.

Correction of Error

During the year ended December 31, 2012, the Company identified a non-cash accounting error related to stock-based compensation being understated. The error was corrected in the Company's consolidated financial statements for the year ended December 31, 2012. The Company determined the error impacted the interim financial statements for both the three and six month periods ended June 30, 2012 and has corrected the comparative periods included in these condensed consolidated financial statements.

Three Months Ended June 30, 2012 Previously
Disclosed
Adjustment Restated
  ($) ($) ($)
Statement of Operations      
  Stock based compensation expense 2,544 1,700 4,244
  Net Income 8,472  (1,700) 6,772
       
Six Months Ended June 30, 2012 Previously
Disclosed
Adjustment Restated
  ($) ($) ($)
Balance Sheet      
  Stock based compensation liability - current 9,718 2,100 11,818
  Retained earnings 302,476  (2,100) 300,376
Statement of Operations      
  Stock based compensation expense 9,063  2,100 11,163
  Net Income 37,945  (2,100) 35,845

Other Expenses

  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012 2013 2012
  ($) ($) ($) ($)
Litigation provision 61,614 5,413 61,614 5,413
Foreign exchange (gain) loss (1,471) 1,324 (1,251) 3,035
Other 392  100 722 219
Other expenses 60,535  6,837 61,085 8,667

As previously disclosed in the consolidated financial statements for the year ended December 31, 2012 (Note 20) and in various other press releases, the Company had been defending its position in three patent infringement lawsuits relating to its AutoDriller since 2003.

On August 1,2013, the Company and the plaintiff in the litigation negotiated a final resolution to all three of these cases. The June 30, 2013 consolidated financial statements have been adjusted to reflect the final payment required to resolve all claims against the Company regarding the infringement.

  Balance,
December 31,
2012
Provision Foreign
Exchange
Adjustment
and Interest
Balance,
June 30,
2013
  ($) ($) ($) ($)
Provision for patent infringement 52,033 61,614 2,138 115,785

Pason Systems Inc.

Pason Systems Inc. is a leading provider of instrumentation systems to land-based and offshore drilling rigs worldwide. The company's rental solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, maximize rig uptime, improve work efficiency, and minimize operating costs. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.

Certain information regarding the Company contained herein may constitute forward-looking information under applicable securities law. The words "anticipate", "expect", "believe", "may", "should", "will", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information and statements. Forward-looking statements in this document may include statements, express or implied regarding the anticipated business prospects and financial performance of Pason; expectations or projections about future strategies and goals for growth and expansion; expected and future cash flows and revenues; and expected impact of future commitments. These forward-looking statements are based upon various underlying factors and assumptions, including the state of the economy and the oil and gas exploration and production business, in particular; the Company's business prospects and opportunities; and estimates of the financial and operational performance of Pason.

Forward-looking information and statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking information and statements. Risk factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of Pason to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of Pason's assets and businesses, the price of energy commodities, competitive factors in the energy industry, changes in laws and regulations affecting Pason's businesses, technological developments, and general economic conditions.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such forward looking statements, although considered reasonable by management as of the date hereof, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Additional information on risks and uncertainties and other factors that could affect Pason's operations or financial results are included in Pason's reports on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or through Pason's website (www.pason.com). Furthermore, any forward looking statements contained in this news release are made as of the date of this news release, and Pason does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

SOURCE: Pason Systems Inc.

For more information about Pason Systems Inc., visit the company's website at www.pason.com or contact:

Marcel Kessler
President and CEO
403-301-3400
marcel.kessler@pason.com

David Elliott
Chief Financial Officer
403-301-3441
david.elliott@pason.com

Copyright CNW Group 2013
(Source: CNW )
(Source: Quotemedia)

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