Pason Reports Fourth Quarter and Year End 2012 Results

CALGARY, Feb. 21, 2013 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 
2012 fourth quarter and year end results. 
Performance Data 


               Three Months Ended December 31,        Years Ended December 31,
                                   2011                            2011
                    2012 (reclassified) Change      2012 (reclassified) Change

(CDN 000s,
except per
share data)          ($)            ($)    (%)       ($)            ($)    (%)

Revenue ((1))     90,995        100,933   (10)   386,514        346,158     12

EBITDA ((2))       8,286         47,920   (83)   151,753        171,661   (12)

  As a % of
  revenue            9.1           47.5   (81)      39.3           49.6   (21)

  Per share -
  basic             0.10           0.59   (83)      1.85           2.10   (12)

  Per share -
  diluted           0.10           0.58   (83)      1.84           2.08   (12)

Funds flow
from
operations (
(2))              36,278         42,089   (14)   158,948        145,358      9

  Per share -
  basic             0.44           0.51   (14)      1.94           1.78      9

  Per share -
  diluted           0.44           0.51   (14)      1.92           1.76      9

(Loss)
earnings        (13,703)         31,702    N/A    39,884         86,223   (54)

  Per share -
  basic           (0.17)           0.39    N/A      0.49           1.05   (54)

  Per share -
  diluted         (0.17)           0.38    N/A      0.48           1.04   (54)

Capital
expenditures      13,602         21,927   (38)    69,780         78,357   (11)

Working
capital          163,371        126,605     29   163,371        126,605     29

Total assets     488,378        455,901      7   488,378        455,901      7

Total
long-term debt        --             --     --        --             --     --

Total equity     368,696        367,269     --   368,696        367,269     --

Market
capitalization 1,407,141        982,848     43 1,407,141        982,848     43

Cash dividends
declared            0.24           0.20     20      0.46           0.38     21

Common shares
outstanding
(#)                                                                           

  Basic           82,035         81,903     --    81,968         81,851     --

  Diluted         83,056         82,077      2    82,679         82,572      2

Shares
outstanding
end of period
(#)               82,049         81,904     --    82,049         81,904     --

(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, funds
    flow from operations or earnings.

(2) EBITDA is defined as earnings before interest expense, income
    taxes, stock-based compensation expense, and depreciation and
    amortization expense.  Funds flow from operations 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 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.

President's Message

Drilling days and active rig counts in North America were lower in the fourth 
quarter of 2012 than in the fourth quarter of the previous year, with the 
decline in Canadian activity being steeper than in the United States. 
International markets continued their steady activity increase. Strong revenue 
growth in the International markets was more than offset by a decline in 
revenue in both the United States and Canada. As a result, total revenue 
decreased 10% to $91.0 million in the fourth quarter of 2012. For the full 
year, however, revenue increased 12% to $386.5 million.

All product categories generated revenue growth above drilling industry 
activity during the quarter with the exception of the Pit Volume Totalizer and 
Communications. As in previous quarters, the Software segment demonstrated the 
highest year-over-year growth rate at 33%, followed by the Hazardous Gas Alarm 
at 30% and the Gas Analyzer at 8%. These three product categories also led 
growth for the full year, with 68% for Software, 40% for Hazardous Gas Alarm 
and 28% for Gas Analyzer.

Funds flow from operations decreased 14% to $36.3 million for the fourth 
quarter, however for the full year it grew 9% to $158.9 million.

EBITDA for the quarter dropped by 83% to $8.3 million. EBITDA, as a percentage 
of revenue, was 9% in the fourth quarter compared to 47% in the fourth quarter 
of the previous year, and 39% versus 50% for the full year. The Company 
generated a net loss for the quarter of $13.7 million, or $0.17 per share, 
compared to net earnings of $31.7 million, or $0.39 per share, in the fourth 
quarter of 2011. Fourth quarter net earnings were negatively impacted by a 
number of significant factors:
    --  A non-cash accrual of an additional $32.5 million for the
        liability related to the ongoing patent litigation. Management
        continues to be confident in its defenses in the three cases,
        namely that the asserted claims of the 142 patent are not
        valid, and/or the Company does not infringe on any valid
        claims.  Nevertheless, in light of the cumulative effect of the
        progress on these cases in 2012, including the appeal of the
        Colorado case, the fact that the Texas case has been filed, the
        reopening of the Canadian case, and a recent mediation that did
        not result in a voluntary resolution, the Company decided to
        accrue, in accordance with accounting guidelines, this
        additional amount;
    --  A $9.8 million increase in stock-based compensation due to an
        increase in the Company's stock price;
    --  A non-cash impairment loss of $4.7 million charged against our
        Torque and Tension Sub program. While interest in sold systems
        has been robust, progress on the rental side has been slow. The
        impairment relates primarily to certain peripheral equipment
        that is required for the rental fleet but not for sold systems;
    --  A final non-cash impairment loss of $0.6 million charged
        against the US water treatment business as we sold our plant in
        Colorado;
    --  A $1.7 million increase in R&D costs as we completed the hiring
        of staff to support our Electronic Drilling Recorder (EDR)
        evolution project.

Capital expenditures for the quarter were $13.6 million, down from $21.9 
million the previous year, as the North American roll-out of the new Gas 
Analyzer was completed over the summer. For the full year, capital 
expenditures were $69.8 million compared to $78.4 million in 2011.

On December 31, our cash position stood at $157.9 million and our working 
capital stood at $163.4 million. We are increasing our quarterly dividend by 
8% to $0.13 per share. The Pason Board of Directors previously made the 
decision to adopt a quarterly dividend policy starting in 2013.

United States
The US segment includes our US rental business, 3PS Inc., our Austin-based 
equipment manufacturer, and the water treatment business, which we shut down 
during 2012.

Drilling activity in the United States continued its downward trend. While 
industry days were down 11% in the fourth quarter 2012 compared to the fourth 
quarter of 2011, revenue in the US segment was down 10% to $49.0 million. For 
the full year, revenue was up 18% to $223.1 million. On average, 936 US land 
rigs were operating Pason equipment during the fourth quarter of 2012, 
compared to 1,089 in the same period of 2011. Our EDR market share for the 
fourth quarter of 2012 was 54%, compared to 55% in the third quarter.

Revenue growth above industry day growth was achieved through higher product 
penetration and a price increase at the beginning of 2012, resulting in a 13% 
increase in average daily revenue per rig from US$507 in the fourth quarter of 
2011 to US$574 in 2012. The Software, Gas Analyzer, and Hazardous Gas Alarm 
products again achieved above-average revenue growth.

Operating costs decreased 18% and depreciation and amortization increased by 
39%. As a result, our US business unit was able to generate an operating 
profit of $23.2 million in the fourth quarter, a decrease of 13% over 2011. 
For the full year, operating profit increased 18% to $104.9 million.

Canada
Drilling activity in Canada was significantly lower in the fourth quarter of 
2012 than in the previous year, with industry days down 24%. Our Canadian 
business unit was able to partially offset this significant reduction in 
activity levels through new product adoption and more products on each rig.

Revenue for the fourth quarter was down 19% to $32.0 million. On average, 308 
Canadian land rigs were operating Pason equipment compared to 443 the year 
before. EDR market share was 92% compared to 91% in the previous quarter. For 
the full year, revenue was down 2% to $125.7 million.

Average daily revenue generated on each rig with a Pason product installed 
grew 16% to $1,120 in the fourth quarter of 2012 from $963 in 2011. As in the 
United States, the Software, Gas Analyzer, and Hazardous Gas Alarm products 
showed above average growth rates during the period.

Operating costs decreased by 18% and depreciation and amortization decreased 
by 9%. As a result, our Canadian business unit was able to generate an 
operating profit of $16.9 million for the quarter, compared to $22.1 million 
for the same period in 2011, a decrease of 23%. For the full year, operating 
profit increased 5% to $62.5 million.

International
Our International business unit, which includes our businesses in Latin 
America, Australia, and offshore, had another excellent quarter. Revenue 
increased 45% to $9.9 million for the quarter. This represents 11% of Pason's 
total revenue. We realized gains in all major international markets with 
notable gains in Argentina, Brazil, Australia, and Mexico. For the full year, 
revenue was up 32% to a record $37.7 million.

Operating costs were down 11% and depreciation and amortization decreased by 
35%. As a result, the International business unit was able to generate a 
quarterly operating profit of $1.3 million, up from a loss of $3.9 million the 
previous year. For the full year, an operating profit of $5.8 million was 
realized compared to a loss of $1.5 million in 2011.

Outlook
There is significant uncertainty regarding the outlook for North American 
drilling activity in 2013 at this point in time. Many operating companies have 
started reducing CAPEX budgets. The natural gas glut generated by 
unconventional plays does limit gas-directed drilling activity, challenging 
our ability to significantly grow revenue in the short term. As with every 
year, the timing of spring break-up in Canada will be a key driver of first 
quarter 2013 results. We expect the International business unit to continue to 
realize robust profitable growth this year.

Our capital expenditure budget for the next 12 months is $84.3 million, $57.5 
million of which is directed towards equipment that can generate incremental 
revenue or save operating costs, $13.0 million for maintenance capital, and 
$13.8 million for capitalized R&D.

Our cash-generating capacity, a cash position at $157.9 million, and working 
capital of $163.4 million are strong enough to comfortably cover new business 
development, planned equipment upgrades, our dividend, and any probable 
adverse outcome in the patent litigation.

As the industry leader in field services, with outstanding technical support, 
a competitive product suite, and a promising R&D project pipeline, Pason is 
well positioned to weather a period of lower North American drilling activity 
and to capitalize on growth opportunities.

(Signed)

Marcel Kessler
President and Chief Executive Officer February 21, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of 
February 21, 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 report are expressed in Canadian 
dollars unless otherwise indicated.

Overview of the 2012 Fourth Quarter
                                                                                       
                  Three Months Ended December 31,              Years Ended December 31,
                              2011           2010                   2011           2010
               2012 (reclassified) (reclassified)    2012 (reclassified) (reclassified)

(000s,
except per
share
data)           ($)            ($)            ($)     ($)            ($)            ($)

Revenue (
(1))         90,995        100,933         76,390 386,514        346,158        260,397

EBITDA (
(2))          8,286         47,920         29,359 151,753        171,661        110,867

  As a %
  of
  revenue       9.1           47.5           38.4    39.3           49.6           42.6

  Per
  share -
  basic        0.10           0.59           0.36    1.85           2.10           1.36

  Per
  share -
  diluted      0.10           0.58           0.36    1.84           2.08           1.36

Funds flow
from
operations
((2))        36,278         42,089         27,899 158,948        145,358         93,973

  Per
  share -
  basic        0.44           0.51           0.34    1.94           1.78           1.15

  Per
  share -
  diluted      0.44           0.51           0.34    1.92           1.76           1.15

(Loss)
earnings   (13,703)         31,702         10,525  39,884         86,223         36,474

  Per
  share -
  basic      (0.17)           0.39           0.13    0.49           1.05           0.45

  Per
  share -
  diluted    (0.17)           0.38           0.13    0.48           1.04           0.45

Total
assets      488,378        455,901        402,082 488,378        455,901        402,082

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, funds
    flow from operations or earnings.

(2) EBITDA is defined as earnings before interest expense, income
    taxes, stock-based compensation expense, and depreciation and
    amortization expense. Funds flow from operations 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 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.
    

Overall Performance
                  Three Months Ended December
                                          31,         Years Ended December 31,
                                  2011                             2011
                   2012 (reclassified) Change       2012 (reclassified) Change

(000s)              ($)            ($)    (%)        ($)            ($)    (%)

Revenue                                                                       

  Electronic
  Drilling
  Recorder ((1)) 38,448         42,905   (10)    159,607        145,771      9

  Pit Volume
  Totalizer      14,100         16,888   (17)     59,220         58,591      1

  Communications
  ((1)(2))        7,533          9,196   (18)     32,227         32,209     --

  Software ((2))  6,188          4,662     33     24,916         14,798     68

  Automatic
  Driller         9,410         11,520   (18)     40,399         39,395      3

  Gas
  Analyzer/Total
  Gas System      6,898          6,413      8     27,304         21,306     28

  Hazardous Gas
  Alarm System    1,932          1,490     30      7,345          5,258     40

  Mobilization    3,098          2,481     25     12,265          9,523     29

  Other ((2))     3,388          5,378   (37)     23,231         19,307     20

Total revenue    90,995        100,933   (10)    386,514        346,158     12

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly.

(2)  2011 revenue associated with the Company's software applications
     has been reclassified from Communications to Software.

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 and 
Discussion and Analysis, have been calculated based upon this new presentation.

The impact of this reclassification on the 2011 comparative figures presented 
above is as follows:
               Three Months Ended December
                                  31, 2011 Year Ended December 31,2011
                        Previously                  Previously
               Reported Disclosed   Change Reported Disclosed   Change

(000s)              ($)        ($)     ($)      ($)        ($)     ($)

Revenue                                                               

Electronic
Drilling 
Recorder ((1))   42,905     40,079   2,826  145,771    134,935  10,836

Communications
((1)(2))          9,196      8,711     485   32,209     30,407   1,802

Total revenue   100,933     97,622   3,311  346,158    333,520  12,638
                                               Canada
                 Three Months Ended December Years Ended December 31,
                                         31,
                   2012   2011        Change    2012    2011   Change
                                         (%)                      (%)

EDR rental days  28,300 40,800          (31) 115,800 141,200     (18)
(#)

PVT rental days  27,900 37,900          (26) 114,100 135,400     (16)
(#)
                                         United States
                Three Months Ended December Years Ended December 31,
                                        31,
                  2012    2011       Change    2012    2011   Change
                                        (%)                      (%)

EDR rental days 86,100 100,200         (14) 378,800 381,700      (1)
(#)

PVT rental days 62,100  70,100         (11) 267,800 264,200        1
(#)

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 10% for the fourth quarter of 2012 compared to the same period in 
2011; however, for the year ended December 2012, EDR revenue increased 9% over 
2011 levels. The decrease in the fourth quarter is attributable to a decrease 
in rig activity in both the United States (US) and Canadian markets, offset by 
an increase in the Company's International markets. The year to date increase 
in revenue is due to previous price increases, continued demand by customers 
for EDR peripheral devices in all of its markets, and a strong increase in 
International rentals, reduced by an 18% drop in EDR days in Canada.

During 2012, the Pason EDR was installed on 93% of all active land rigs in 
Canada and 56% 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 both the quarter and year to date were impacted by an 
increase in product penetration in all of the Company's markets as well as 
changes to rig activity and price increases previously described above. During 
the 2012 fiscal year, the PVT was installed on 99% of rigs with a Pason EDR in 
Canada and 71% in the US, compared to 96% and 69%, respectively, in 2011.

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 amongst 
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. DataHub provides access to data through a number of 
innovative applications or services including:
    --  Enhanced Live Rig View (eLRV), which provides advanced data
        viewing, directional drilling, and 3D visualization of drilling
        data in real-time via a web browser.
    --  Mobile Viewer and Pason Mobile, which allow users to access
        their data on mobile devices including iPhone, iPad, and
        BlackBerry.
    --  WITSML, which provides seamless data sharing with third-party
        applications enhancing the value of data hosted by Pason.
    --  Additional specialized software.

During the 2012 year, 98% of the Company's Canadian customers and 87% of 
customers in the US were using all or a portion of the functionality of the 
DataHub, compared to 94% and 76%, respectively, in 2011. The 2012 revenue 
generated from customers using the applications included with the DataHub rose 
68% over comparable 2011 levels, even though rig activity was relatively flat 
in the US and down significantly in Canada.

Gas Analyzer and Total Gas System
The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the 
Company's major markets, measures the total hydrocarbon gases (C1 through 
C4(1)) exiting the wellbore, and then calculates the lag time to show the 
formation depth where the gases were produced. The new Gas Analyzer increases 
the functionality that was found in the TGAS product to include the actual 
composition of the gas, much like a gas chromatograph, 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. For the twelve months ended 
December 2012, the Gas Analyzer generated $21.3 million of revenue compared to 
$6.0 million for TGAS. The Company has now completed the deployment of the Gas 
Analyzer in both Canada and the US and is realizing increased product 
penetration as compared to TGAS in both markets. For 2012, both of these 
systems combined were installed on 52% of Canadian and 19% of US land rigs 
operating with a Pason EDR system. The combined market penetration of both 
products in Canada is an increase of approximately 9% over 2011 levels while 
the US has seen an increase of 2%. The roll out of the Gas Analyzer in the 
International markets started in 2012, and will accelerate in 2013.

Automatic Driller
Pason's Automatic Driller (AutoDriller) is used to maintain constant weight on 
the drill bit while a well is being drilled. During 2012, Pason's AutoDriller 
was installed on 78% of Canadian and 49% of US land rigs operating with a 
Pason EDR system, compared to 78% and 47%, respectively, in 2011.

Hazardous Gas Alarm System
The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit 
(LEL) 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. The Hazardous Gas Alarm System was installed on 21% 
of Canadian rigs in 2012, up from 18% for the same period in 2011, and 9% of 
US land rigs operating with a Pason EDR system, an increase from 6% in 2011. 
This increase in product penetration, along with price increases in particular 
markets, led to an increase in revenue of 30% for the fourth quarter of 2012 
over 2011 levels, and an increase of 40% for the full year.

_______________________
(1)C4 also includes nC5

Discussion of Operations

United States Operations
                  Three Months Ended December
                                          31,        Years Ended December 31,
                                  2011                            2011
                   2012 (reclassified) Change      2012 (reclassified) Change

(000s)              ($)            ($)    (%)       ($)            ($)    (%)

Revenue                                                                      

  Electronic
  Drilling
  Recorder ((1)) 22,552         25,154   (10)    97,816         89,634      9

  Pit Volume
  Totalizer       7,685          8,959   (14)    33,459         32,623      3

  Communications
  ((1)(2))        3,112          3,931   (21)    14,367         13,916      3

  Software ((2))  4,075          2,266     80    16,741          7,761    116

  Automatic
  Driller         5,073          6,230   (19)    23,222         21,900      6

  Gas
  Analyzer/Total
  Gas System      2,667          2,134     25    11,312          7,906     43

  Hazardous Gas
  Alarm System      800            565     42     3,169          1,620     96

  Mobilization    2,299          1,924     19     9,233          6,939     33

  Other ((2))       746          3,147   (76)    13,735          6,992     96

Total revenue    49,009         54,310   (10)   223,054        189,291     18

Operating costs  18,073         21,988   (18)    85,811         78,105     10

Depreciation and
amortization      7,713          5,538     39    32,381         22,535     44

Segment
operating profit 23,223         26,784   (13)   104,862         88,651     18

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly.

(2)  2011 revenue associated with the Company's software applications
     has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from 
revenue to operating costs previously discussed had the following impact on 
the 2011 comparative figures presented above:
               Three Months Ended December
                                  31, 2011 Year Ended December 31,2011
                        Previously                  Previously
               Reported Disclosed   Change Reported Disclosed   Change

(000s)              ($)        ($)     ($)      ($)        ($)     ($)

Revenue                                                               

Electronic
Drilling 
Recorder ((1))   25,154     23,685   1,469   89,634     84,040   5,594

Communications
((1)(2))          3,931      3,834      97   13,916     13,609     307

Total revenue    54,310     52,744   1,566  189,291    183,390   5,901

Operating
costs            21,988     20,422   1,566   78,105     72,204   5,901

Revenue per
EDR day             517        495      22      484        473      11

Revenue per
Industry day        289        280       9      278        266      12

US segment revenue decreased by 10% in the fourth quarter of 2012 over the 
2011 comparable period (7% decrease when measured in US dollars). Rental 
service revenue decreased 6% for the quarter (USD 3%) while the remaining 
difference is a result of a drop in sales at 3PS, Inc. and a drop in revenue 
from Auxsol.

For the full year 2012, US segment revenue increased by 18% (USD 17%), which 
includes $7.8 million of sales by 3PS, Inc., included in Other revenue.

As expected, the number of US drilling days were down approximately 11% in the 
fourth quarter of 2012 versus the fourth quarter of 2011 due to a pullback in 
drilling for both natural gas and oil. However, revenue from the rental of 
instrumentation compared very favourably to the drop in activity, with a 
decrease of only 6% (USD 3%) over 2011 levels. On a year to date basis, rental 
instrumentation revenue increased 15% (USD 14%) over 2011 levels, compared to 
only a very modest increase in industry days of 2%.

Revenue was impacted by the following factors:
    --  More products on each rig, new product adoption, and better
        pricing. Revenue was increased by additional product
        penetration on each rig, primarily with gains in EDR peripheral
        devices, AutoDriller rentals, customer acceptance of the
        Company's Enhanced Live Rig View (eLRV) real-time data
        software, and increased adoption of the Gas Analyzer compared
        to the previous TGAS system. Mobilization income, which
        represents the cost recovery of the labour incurred by the
        Company for a field technician visit to a rig, was up 33% for
        the full year due to an increased number of "rig ups" and "rig
        downs" as a result of higher rig turnover compared to 2011. In
        addition, prices on specific products increased at the
        beginning of 2012. These factors combined resulted in an
        increase in revenue per EDR day in the fourth quarter of 2012
        over 2011 levels of $51 (USD $67). On a year to date basis
        revenue per EDR day increased 16% or $77 (USD $73).
    --  A decrease in EDR rental days of 14% for the three months ended
        December 2012, over the same time period in 2011, and a small
        drop of 1% on a year to date basis over 2011 levels. This
        compares to a drop in industry days of 11% and an increase in
        industry days of 1% for the similar time period.

The factors explained above resulted in the US segment being able to realize 
revenue per EDR day during the fourth quarter of 2012 of $568 (USD $574) 
compared to $517 (USD $507) during the same time period in 2011. For the full 
year of 2012, revenue per EDR day was $561 (USD $562) compared to $484 (USD 
$489) in 2011.

Revenue per industry day for the fourth quarter of the year was $305 (USD 
$308) compared to $289 (USD $283) in 2011. Year to date figures were $314 (USD 
$314) compared to 2011 amounts of $278 (USD $281).

The majority of the increase in "Other" revenue relates to the Company 
realizing an entire year of sales of 3PS,Inc. compared to only approximately 
five months in 2011. Segment profit, as a percentage of revenue, was 47% for 
the fourth quarter of 2012 and 47% year to date, compared to 49% and 47% for 
the respective periods in 2011.

The US business unit was able to maintain its operating margin year over year, 
even with a significant increase in depreciation and amortization costs, by 
leveraging its fixed cost structure while at the same time continuing to 
control variable costs and implementing changes to operations to adapt to 
changing market conditions. The 2012 segment profit percentage was impacted by 
the following factors (all amounts in $CDN):
    --  Field technician-related costs and repair costs in the fourth
        quarter of 2012 compared to 2011 increased approximately $0.3
        million. On a year to date basis, these costs increased by
        approximately $2.7 million.  This increased consists of a 7%
        increase in field costs (attributed to an increase in health
        care-related costs and other field technician-related costs),
        offset by a reduction in repair costs of $1.0 million
        (associated with the phased out TGAS system).
    --  As disclosed in prior quarters, the US business unit made a
        concerted effort in 2012 to strengthen its sales presence. This
        led to an increase in sales and marketing costs of $1.5 million
        for the twelve months ended December, 2012 over 2011 amounts.
    --  Fourth quarter 2012 depreciation and amortization expense was
        up $2.2 million compared to the same period in 2011. On a year
        to date basis, these costs were up $9.8 million, due in large


    part to
  o The accelerated depreciation on the Company's original EDR system 
as a result of the EDR evolution project, which will make obsolete 
a portion of the Company's base EDR system,
  o A full twelve months depreciation on 3PS, Inc. assets,
  o Depreciation on the new Gas Analyzer system, and
  o Depreciation costs relating to the vehicle fleet as vehicles are 


    now purchased rather than leased.
    --  Legal fees associated with the Automatic Driller lawsuit
        decreased $0.3 million in the fourth quarter of 2012 and $0.9
        million for the year compared to the respective 2011 periods.
    --  Year-to-date 2012 figures include a full year's results of 3PS,
        Inc., which generates a lower margin than the US rental
        business.

Canadian Operations
                  Three Months Ended December
                                          31,        Years Ended December 31,
                                  2011                            2011
                   2012 (reclassified) Change      2012 (reclassified) Change

(000s)              ($)            ($)    (%)       ($)            ($)    (%)

Revenue                                                                      

  Electronic
  Drilling
  Recorder ((1)) 11,864         14,715   (19)    46,632         46,163      1

  Pit Volume
  Totalizer       4,929          6,445   (24)    19,921         21,649    (8)

  Communications
  ((1)(2))        4,308          5,443   (21)    17,323         18,193    (5)

  Software ((2))  1,938          2,303   (16)     7,662          6,721     14

  Automatic
  Driller         3,368          4,678   (28)    13,500         15,175   (11)

  Gas
  Analyzer/Total
  Gas System      3,357          3,405    (1)    12,303         11,252      9

  Hazardous Gas
  Alarm System      609            682   (11)     2,443          2,603    (6)

  Mobilization      178            198   (10)       638            781   (18)

  Other ((2))     1,488          1,893   (21)     5,316          5,795    (8)

Total revenue    32,039         39,762   (19)   125,738        128,332    (2)

Operating costs   8,858         10,788   (18)    36,291         42,616   (15)

Depreciation and
amortization      6,246          6,897    (9)    26,964         25,934      4

Segment
operating 
profit           16,935         22,077   (23)    62,483         59,782      5

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly.

(2)  2011 revenue associated with the Company's software applications
     has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from 
revenue to operating costs previously discussed had the following impact on 
the 2011 comparative figures presented above:
               Three Months Ended December
                                  31, 2011 Year Ended December 31,2011
                        Previously                  Previously
               Reported Disclosed   Change Reported Disclosed   Change

(000s)              ($)        ($)     ($)      ($)        ($)     ($)

Revenue                                                               

Electronic
Drilling 
Recorder ((1))   14,715     13,464   1,251   46,163     41,130   5,033

Communications
((1)(2))          5,443      5,055     388   18,193     16,698   1,495

Total revenue    39,762     38,123   1,639  128,332    121,804   6,528

Operating
costs            10,788      9,149   1,639   42,616     36,088   6,528

Revenue per
EDR day             963        923      40      897        850      47

Revenue per
Industry day        968        927      41      872        827      45

Canadian segment revenue decreased 19% for the three months ended December 
2012, compared to the fourth quarter of 2011. This decrease is a result of a 
24% decrease in the number of Canadian drilling industry days from 2011 
levels. On a year to date basis, revenue decreased only 2% when compared to a 
decline in the number of Canadian drilling days of 14%.

EDR rental days declined 31% in the fourth quarter of 2012 over the fourth 
quarter of 2011. On a year to date basis, EDR rental days declined by 18% over 
2011 levels.

The Canadian business unit was able to lessen the impact of the significant 
reduction in activity levels in Canada, due to current weak oil and natural 
gas prices and uncertainty around future pricing, through better pricing, new 
product adoption, and more products on each rig. The business unit increased 
pricing on most of its key products in the fourth quarter of 2011 and this 
combined with increased market penetration of the Gas Analyzer and Hazardous 
Gas Alarm System, customer acceptance of the Company's Enhanced Live Rig View 
(eLRV) real-time data software, and more products on each rig, primarily with 
gains in EDR peripheral devices, lessened the impact of the significant drop 
in the number of wells being drilled.

The factors above combined to result in:
    --  An increase in revenue per EDR day during the fourth quarter of
        2012 compared to 2011 of 16% ($157) to $1,120. For 2012,
        revenue per EDR day increased by $177 to $1,073.
    --  Fourth quarter revenue per industry day of $1,025 in 2012
        compared to $968 in 2011. For the entire year, revenue per
        industry day increased 14% to $997.

The segment profit for the fourth quarter of 2012 of $16.9 million is a 
decrease of $5.1 million over the 2011 amount. Factors impacting the fourth 
quarter results include:
    --  The weak drilling activity in the Western Canadian Sedimentary
        Basin (WCSB), together with a slight decrease in the Company's
        market share, resulted in 12,500 fewer EDR days during the
        fourth quarter of 2012 compared to 2011, resulting in much
        lower revenue.
    --  A decrease in the loss on the disposal of assets of $0.8
        million, which is included in depreciation and amortization,
        offset by an increase in amortization costs relating to
        capitalized research and development costs, as a result of the
        deployment of new software applications to customers.
    --  A decrease in most repair cost categories due to a drop in
        drilling activity, combined with a reduction in costs
        associated with the new Gas Analyzer as compared to the TGAS
        system.
    --  In the fourth quarter of 2011, $1.3 million of legal fees were
        incurred, mostly relating to the Automatic Driller litigation.
        These costs were minimal in the fourth quarter of 2012.

The segment profit, as a percent of revenue, was 50% for the year ended 
December 2012, compared to 47% for 2011. Factors impacting the year results 
include:
    --  An increase in depreciation and amortization charges relating
        to the accelerated depreciation on the Company's EDR systems,
        the depreciation on the new Gas Analyzer system and increased
        amortization of previously deferred research and development
        costs. These increases were offset by a reduction in
        depreciation relating to the previously disposed water
        treatment business and a decline in the loss relating to the
        scrapping of obsolete equipment.
    --  An increase in field costs of $1.2 million, which is mostly
        attributable to the expansion of the work force. This was
        deemed necessary given the shift in drilling activity in the
        WCSB, anticipation of additional product opportunities, and an
        adjustment to the field technician shift schedule.
    --  A decrease in repair costs of $2.8 million, mostly attributable
        to the roll out of the new Gas Analyzer, resulting in a decline
        in repair costs for this category, combined with a decline in
        other repair costs due to lower drilling activity.
    --  In 2011, the Canadian business unit incurred $4.5 million in
        legal costs, mostly related with the Automatic Driller
        litigation. Total legal expense for 2012 was approximately $0.7
        million.
    --  $1.5 million of net expenses relating to the water treatment
        business were recorded in the 2011. This business unit was
        disposed of in the fourth quarter of 2011.

International Operations
                 Three Months Ended December
                                         31,        Years Ended December 31,
                                 2011                            2011
                  2012 (reclassified) Change      2012 (reclassified) Change

(000s)             ($)            ($)    (%)       ($)            ($)    (%)

Revenue                                                                     

  Electronic                    3,036
  Drilling
  Recorder ((1)) 4,032                    33    15,159          9,974     52

  Pit Volume                    1,484
  Totalizer      1,486                    --     5,840          4,319     35

  Communications                (178)
  ((1)(2))         113                   N/A       537            100    437

  Software ((2))   175             93     88       513            316     62

  Automatic                       612
  Driller          969                    58     3,677          2,320     58

  Gas                             874
  Analyzer/Total
  Gas System       874                    --     3,689          2,148     72

  Hazardous Gas                   243
  Alarm System     523                   115     1,733          1,035     67

  Mobilization     621            359     73     2,394          1,803     33

  Other ((2))    1,154            338    241     4,180          6,520   (36)

Total revenue    9,947          6,861     45    37,722         28,535     32

Operating costs  6,152          6,897   (11)    23,073         19,967     16

Depreciation and                3,903
amortization     2,518                  (35)     8,868         10,096   (12)

Segment                       (3,939)
operating profit
(loss)           1,277                   N/A     5,781        (1,528)    N/A

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly.

(2)  2011 revenue associated with the Company's software applications
     has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from 
revenue to operating costs previously discussed had the following impact on 
the 2011 comparative figures presented above:
               Three Months Ended December
                                  31, 2011 Year Ended December 31,2011
                        Previously                  Previously
               Reported Disclosed   Change Reported Disclosed   Change

(000s)              ($)        ($)     ($)      ($)        ($)     ($)

Revenue                                                               

Electronic
Drilling 
Recorder ((1))    3,036      2,930     106    9,974      9,765     209

Communications
((1)(2))          (178)      (178)      --      100        100      --

Total revenue     6,861      6,755     106   28,535     28,326     209

Operating
costs             6,897      6,791     106   19,967     19,758     209

Revenue in the International operations improved 45% in the fourth quarter of 
2012 from the same period in 2011. On a year-over-year basis, revenue 
increased approximately $9.2 million or 32% over 2011 amounts. The Company 
realized gains in all of its major markets, with notable gains in both revenue 
and segment profit in Argentina, Brazil, Australia, and Mexico.

Operating profit increased by $5.2 million for the fourth quarter of 2012 and 
by $7.3 million for the twelve months ending December 31, over 2011 results.

A number of factors influenced these results:
    --  Increased market share combined with price increases in
        Argentina contributed to significant gains in both revenue and
        operating profit. Year over year operating profit has increased
        $1.9 million.
    --  Triple-digit revenue growth in Brazil as a result of an
        increase in the number of rigs deploying the Company's
        equipment, resulting in an increase in the year to date revenue
        of $2.1 million and an increase in operating profit of $2.0
        million over 2011 levels.
    --  An increase in drilling activity in both Mexico and Australia
        has led to these two business units realizing increases in
        operating profit from 2011 levels of $2.2 million and $2.1
        million, respectively.
    --  The Company's International segment includes our Offshore
        business unit which generated a triple digit increase in its
        rental revenue for the twelve months ended December, 2012 over
        the same period in 2011. These gains are as a result of the
        deployment of Pason hardware onto offshore drilling rigs in the
        Gulf of Mexico and internationally.
    --  Depreciation expense is down in large part due to a decrease in
        capital expenditures as a result of a concerted effort to
        increase the utilization of equipment within this market.

Consolidated Results
                  Three Months Ended       Years Ended December 31,
                        December 31,
                 2012    2011 Change        2012        2011 Change

(000s)            ($)     ($)    (%)         ($)         ($)    (%)

Other expenses                                                     

Research and    7,033   5,371     31      22,467      17,366     29
development

Corporate       4,326   3,816     13      15,723      12,975     21
services

Stock-based     7,237 (2,561)    N/A      23,792       1,309  1,718
compensation

Other                                                              


Litigation  32,500      --    N/A      37,913          --    N/A 
provision 
Foreign         10     690   (99)       4,573     (2,713)    N/A 
exchange 
loss (gain) 
Impairment   5,282   2,780     90       7,918       4,580     73 
loss 
Other          475     683   (30)         992       1,601   (38) 


               56,863  10,779    527     113,378      35,118    223

Q4 2012 versus Q4 2011
The active rig count in both the US and Canadian markets declined from the 
fourth quarter of 2011, with the Canadian drop in activity much more severe 
than the US decline. The International market saw an increase in drilling 
days. The increased revenue and profitability in the International markets 
were not sufficient to offset the drop in operating results in both Canada and 
the US. Revenue decreased 10%, while EBITDA dropped by 83% and funds flow from 
operations was down 14%.

The company incurred a net loss of $13.7 million or $0.17 per share compared 
to net earnings of $31.7 million or $0.39 per share in the fourth quarter of 
2011. The fourth quarter consolidated results, when compared to 2011 figures, 
were impacted by the following significant items:
    --  A non-cash accrual of an additional $32.5 million for the
        liability related to the ongoing patent litigation. Management
        continues to be confident in its defenses in the three cases,
        namely that the asserted claims of the 142 patent are not
        valid, and/or the Company does not infringe on any valid
        claims.  Nevertheless, in light of the cumulative effect of the
        progress on these cases in 2012, including the appeal of the
        Colorado case, the fact that the Texas case has been filed, the
        reopening of the Canadian case, and a recent mediation that did
        not result in a voluntary resolution, the Company decided to
        accrue, in accordance with accounting guidelines, this
        additional amount;
    --  Increase in research and development costs in the fourth
        quarter of 2012 of $1.7 million as the Company completed the
        hiring of additional staff to support the EDR evolution project
        and other product developments.
    --  Stock-based compensation increased by $9.8 million compared to
        the fourth quarter of 2011 due to an increase in the Company's
        stock price, which impacts the valuation under the
        Black-Scholes pricing model. The Company's stock price
        increased approximately 5% during the fourth quarter of 2012
        compared to a decline in the corresponding period in 2011.
    --  During the fourth quarter of 2012, the Company recorded a
        non-cash impairment loss of $4.7 million against its Torque and
        Tension Sub (TTS) program, and an additional $0.6 million
        against the US water treatment business.   In 2012, the Company
        initiated the roll-out of the (TTS), and initial field trials
        were promising; the TTS was able to provide measurements that
        were more accurate than indirect readings. However, due to a
        number of complications, including deployment issues and sales
        and marketing challenges due to the fact that the TTS is
        different than the Company's traditional products, customer
        acceptance and the resulting revenue was lower than the Company
        initially anticipated. As a result, the Company made the
        decision in the fourth quarter of 2012 to alter its business
        model. Management made the decision to supplement the rental
        model by providing its customers the option of sold units and
        at the same time identified new markets within the oil and gas
        industry. The Canadian and US business units will continue to
        rent these assets while 3PS, Inc. will offer to sell the units
        to a wider range of customers. The Company believes that this
        change in strategy, which expands the customer base and allows
        for more options to the customer, will result in an increase in
        demand from current levels. As a result of this change the
        Company identified raw materials that are no longer required
        and that some of the TTS accessories are obsolete, which led
        the Company to record the non-cash impairment loss. In the
        fourth quarter of 2011, a non-cash impairment loss of $2.8
        million was recorded against the US water treatment business.
    --  Decrease in the foreign exchange loss recorded in the fourth
        quarter of 2012 of $0.5 million
    --  An increase in corporate service costs of $0.9 million due in
        most part to staff restructuring costs.

Q4 2012 versus Q3 2012
Revenue was lower in the fourth quarter of 2012 versus the third quarter by 
$5.3 million. The Canadian business unit realized an increase in revenue of 
$1.7 million but this was offset by a drop of $4.5 million in the US rental 
market. The Canadian business unit realized a profit of $16.9 million for the 
three months ended December 2012 compared to a $14.6 million profit in the 
third quarter. The US business unit profit declined from a profit of $27.0 
million in the previous quarter to a profit of $23.2 million in the current 
quarter, due to a drop in drilling days.

The following items also impacted the comparison to the 2012 third quarter 
results:
    --  Increase in the litigation accrual described above of $32.5
        million.
    --  An increase in research and development costs of $1.7 million.
    --  During the third quarter of 2012, the Company recorded a
        non-cash impairment loss of $2.6 million on its US water
        treatment assets. During the fourth quarter of 2012, the
        Company recorded a non-cash impairment loss of $4.7 million
        against its Torque and Tension Sub program and an additional
        $0.6 million on the US water treatment asset.
    --  An increase in corporate service costs of $0.9 million due in
        most part to staff restructuring costs.
    --  An increase in stock-based compensation expense of $1.8
        million.
    --  A decrease in foreign exchange loss of $1.5 million.

Summary of Quarterly Results

Three         Mar    Jun    Sep                    Jun
Months        31,    30,    30, Dec 31, Mar 31,    30, Sep 30, Dec 31,
Ended        2011   2011   2011    2011    2012   2012    2012     2012

(000s,
except per
share
data)         ($)    ($)    ($)     ($)     ($)    ($)     ($)      ($)

Revenue (
(1))       88,218 65,546 91,461 100,933 115,145 84,112  96,262   90,995

EBITDA (
(2)())     44,729 25,850 53,162  47,920  64,146 31,656  47,665    8,286

  Per
  share -
  basic      0.55   0.31   0.65    0.59    0.78   0.39    0.58     0.10

  Per
  share -
  diluted    0.55   0.30   0.64    0.58    0.78   0.38    0.58     0.10

Funds flow
from
operations
((2)())    39,082 22,917 41,270  42,089  51,707 30,132  40,831   36,278

  Per
  share -
  basic      0.48   0.28   0.50    0.51    0.63   0.37    0.50     0.44

  Per
  share -
  diluted    0.48   0.27   0.50    0.51    0.63   0.37    0.50     0.44

Earnings
(loss) (
(3))       17,757  8,217 28,547  31,702  29,073  6,772  17,742 (13,703)

  Per
  share -
  basic      0.22   0.10   0.35    0.39    0.35   0.08    0.22   (0.17)

  Per
  share -
  diluted    0.22   0.09   0.35    0.39    0.35   0.08    0.21   (0.17)

(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, funds
     flow from operations or earnings.

(2)  EBITDA is defined as earnings before interest expense, income
     taxes, stock-based compensation expense, and depreciation and
     amortization expense. Funds flow from operations 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 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 quarters ended March 31, June 30, and September
     30, 2012 have been reduced to correct a non-cash error in the
     statement of operations related to stock-based compensation of
     $400, $1,700, and $1,600 respectively.  Per share amounts have
     been recalculated accordingly.


            Mar    Jun                    Mar    Jun    Sep
Three Months    31,    30, Sep 30, Dec 31,    31,    30,    30, Dec 31,
Ended          2011   2011    2011    2011   2012   2012   2012     2012 
(000s)          ($)    ($)     ($)     ($)    ($)    ($)    ($)      ($) 
Income
(loss)
before taxes
((3))        26,337 11,833  39,474  34,143 40,329 10,425 24,422 (15,428) 
Depreciation
and
amortization 12,945 14,247  15,035  16,338 16,897 16,987 17,852   16,477 
Stock-based
compensation
((3))         5,447  (230) (1,347) (2,561)  6,920  4,244  5,391    7,237 
EBITDA ((2)) 44,729 25,850  53,162  47,920 64,146 31,656 47,665    8,286 
Variations in Pason's quarterly financial results are due in part to the 
seasonality of the oil and gas service industry in Canada, which is somewhat 
offset by the less seasonal nature of US and International operations. The 
first quarter is generally the strongest quarter for the Company due to strong 
activity in Canada when location access is best during the winter. The second 
quarter is always the slowest due to spring break up in Canada when many areas 
are not accessible due to ground conditions, and therefore, do not permit the 
movement of heavy equipment. Activity generally increases in the third 
quarter, depending on the year, as ground conditions have often improved and 
location access becomes available; however, a rainy summer can have a 
significant adverse effect on drilling activity. By the fourth quarter, often 
the Company's second strongest quarter, access to most areas in Canada become 
available with ground freezing. Consequently, the performance of the Company 
may not be comparable quarter to consecutive quarter and should be considered 
on the basis of results for the whole year, or by comparing results in a 
quarter with results in the same quarter for the previous year. 
Fourth Quarter & Year End Conference Call 
Pason will be conducting a conference call for interested analysts, brokers, 
investors and media representatives to review its fourth quarter and year-end 
results at 9:00 a.m. (MST) on Friday, February 22, 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 
85698063. 
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. 
Shareholders are also invited to attend the Company's Annual General Meeting 
on Thursday, May 2, 2013, at 3:30 pm at the offices of Pason Systems Inc., 
6120 Third Street SE, Calgary, Alberta. 
Consolidated Financial Statements 
Consolidated Balance Sheets 


                                                                      

As at                               December 31, 2012 December 31,2011

(CDN 000s) (unaudited)                            ($)              ($)

Assets                                                                

Current                                                               

  Cash and cash equivalents                   157,944          104,993

  Trade and other receivables                  84,506          102,321

  Prepaid expenses                              2,920            1,970

  Total current assets                        245,370          209,284

Non-current                                                           

  Property, plant and equipment               174,651          183,007

  Intangible assets                            59,593           58,071

  Deferred tax assets                           8,764            5,539

  Total non-current assets                    243,008          246,617

Total assets                                  488,378          455,901

Liabilities and equity                                                

Current                                                               

  Trade payables and accruals                  25,674           40,668

  Litigation provision                         19,533           14,543

  Income taxes payable                          3,313            5,318

  Stock-based compensation                     13,788            5,770
  liability

  Dividend payable                             19,691           16,380

  Total current liabilities                    81,999           82,679

Non-current                                                           

  Stock-based compensation                      2,583            1,030
  liability

  Deferred tax liabilities                      2,600            4,923

  Litigation provision                         32,500               --

  Total non-current liabilities                37,683            5,953

Equity                                                                

  Share capital                                79,393           77,613

  Employee benefits reserve                    12,927           12,927

  Foreign currency translation                (8,348)          (5,835)
  reserve

  Retained earnings                           284,724          282,564

  Total equity                                368,696          367,269

Total liabilities and equity                  488,378          455,901

Consolidated Statements of Operations
                                                                       
                         Three Months Ended                 Years Ended
                               December 31,                December 31,
                                       2011                        2011
                        2012 (reclassified)         2012 (reclassified)

(CDN 000s, except        ($)            ($)          ($)            ($)
per share data)
(unaudited)

Revenue                                                                

  Equipment           90,995        100,933      386,514        346,158
  rentals and
  other

Operating                                                              
expenses

  Rental services     28,652         33,503      125,269        119,342

  Local                4,431          6,170       19,906         21,346
  administration

  Depreciation        16,477         16,338       68,213         58,565
  and
  amortization
                      49,560         56,011      213,388        199,253
                                                                       

Operating profit      41,435         44,922      173,126        146,905

Other expenses                                                         

  Research and         7,033          5,371       22,467         17,366
  development

  Corporate            4,326          3,816       15,723         12,975
  services

  Stock-based          7,237        (2,561)       23,792          1,309
  compensation
  (recovery)

  Other expenses      38,267          4,153       51,396          3,468
                      56,863         10,779      113,378         35,118
                                                                       

(Loss) income       (15,428)         34,143       59,748        111,787
before income
taxes

  Income taxes       (1,725)          2,441       19,864         25,564

Net (loss) income   (13,703)         31,702       39,884         86,223

(Loss) earnings                                                        
per share

  Basic               (0.17)           0.39         0.49           1.05

  Diluted             (0.17)           0.38         0.48           1.04

Change in Accounting Classification

In the fourth quarter of 2012, the Company changed the way in which 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.

Consolidated Statements of Other Comprehensive Income
                                    Three Months Ended    Years Ended
                                          December 31,   December 31,
                                        2012      2011    2012   2011

(CDN 000s) (unaudited)                   ($)       ($)     ($)    ($)

Net (loss) income                   (13,703)    31,702  39,884 86,223

Other comprehensive income (loss)                                    

  Foreign currency translation         2,681   (6,049) (2,513)    213
  adjustment

Total comprehensive income          (11,022)    25,653  37,371 86,436



Consolidated Statements of Changes in Equity 


                                                                    
                                       Foreign
                          Employee    Currency
                    Share Benefits Translation Retained
                  Capital  Reserve     Reserve Earnings Total Equity

(CDN 000s)       
(unaudited)           ($)      ($)         ($)      ($)          ($)

Balance at       
December 31,
2010               75,040   13,228     (6,048)  227,464      309,684

  Net income           --       --          --   86,223       86,223

  Dividends            --       --          -- (31,123)     (31,123)

  Other          
  comprehensive
  income               --       --         213       --          213

  Exercise of    
  stock options     2,265       --          --       --        2,265

  Options        
  exercised
  that were
  previously
  expensed            308    (308)          --       --           --

  Stock-based    
  compensation         --        7          --       --            7

Balance at       
December 31,
2011               77,613   12,927     (5,835)  282,564      367,269

  Net income           --       --          --   39,884       39,884

  Dividends            --       --          -- (37,724)     (37,724)

  Other          
  comprehensive
  loss                 --       --     (2,513)       --      (2,513)

  Exercise of    
  stock options     1,780       --          --       --        1,780

Balance at       
December 31,
2012               79,393   12,927     (8,348)  284,724      368,696
    

Consolidated Statements of Cash Flows
                             Three Months Ended            Years Ended
                                   December 31,           December 31,
                          2012             2011        2012       2011

(CDN 000s)                 ($)              ($)         ($)        ($)
(unaudited)

Cash flows from                                                       
operating
activities

  Net (loss) income   (13,703)           31,702      39,884     86,223

Adjustment for                                                        
non-cash items:

  Depreciation and      16,477           16,338      68,213     58,565
  amortization

  Litigation            32,500               --      32,500         --
  provision

  Impairment loss        5,282            2,780       7,918      4,580

  Stock-based            5,541          (3,048)      16,067    (2,112)
  compensation
  (recovery)

  Deferred income      (8,223)          (6,660)     (6,019)      1,329
  taxes

  Unrealized           (1,596)              977         385    (3,227)
  foreign exchange
  (gain) loss

Funds flow from         36,278           42,089     158,948    145,358
operations

Movements in                                                          
non-cash working
capital

  Decrease               7,391          (6,376)      16,376   (19,896)
  (increase) in
  trade and other
  receivables

  Decrease               1,853            2,481       (994)      (446)
  (increase) in
  prepaid expenses

  Increase in            3,513            3,448      18,072     13,819
  income taxes
  payable

  (Decrease)          (10,076)            (221)     (7,101)      5,444
  increase in trade
  payables,
  accruals and
  provisions

  (Decrease)           (3,564)          (3,524)       2,312      (732)
  increase in
  stock-based
  compensation
  liability

  Effects of             2,808             (46)       1,778        832
  exchange rate
  changes

  Changes in             1,925          (4,238)      30,443      (979)
  non-cash working
  capital

Cash generated from     38,203           37,851     189,391    144,379
operating
activities

  Income tax paid      (3,988)          (1,400)    (20,213)          
                                                              (18,050)

Net cash from           34,215           36,451     169,178    126,329
operating
activities

Cash flows (used                                                      
in) from financing
activities

  Proceeds from            558               33       1,780      2,265
  issuance of
  common shares

  Purchase of stock    (3,532)             (89)     (8,772)    (3,355)
  options

  Payment of                --               --    (34,413)   (28,631)
  dividends

Net cash used in       (2,974)             (56)    (41,405)   (29,721)
financing
activities

Cash flows (used                                                      
in) from investing
activities

  Additions to        (10,173)         (20,647)    (58,640)   (71,382)
  property, plant
  and equipment

  Additions to           (414)            (184)     (1,644)      (184)
  intangibles

  Deferred             (3,429)                     (11,140)    (6,975)
  development costs                     (1,280)

  Proceeds on              586              505         586        505
  disposal of
  property, plant
  and equipment

  Acquisitions, net         --            (841)          --   (24,410)
  of cash acquired

  Changes in              (35)            2,249     (2,646)      (520)
  non-cash working
  capital

Net cash used in      (13,465)         (20,198)    (73,484)  (102,966)
investing
activities

Effect of exchange         356          (1,096)     (1,338)        951
rate on cash and
cash equivalents

Net increase            18,132           15,101      52,951    (5,407)
(decrease) in cash
and cash
equivalents

Cash and cash          139,812           89,892     104,993    110,400
equivalents,
beginning of period

Cash and cash          157,944          104,993     157,944    104,993
equivalents, end of
period

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    Canada United States International          Total
December 31, 2012

(unaudited)              ($)           ($)           ($)            ($)

Revenue               32,039        49,009         9,947         90,995

Operating costs        8,858        18,073         6,152         33,083

Depreciation and       6,246         7,713         2,518         16,477
amortization

Segment operating     16,935        23,223         1,277         41,435
profit

Research and                                                      7,033
development

Corporate services                                                4,326

Stock-based                                                       7,237
compensation

Other expenses                                                   38,267

Income taxes                                                    (1,725)
(recovery)

Net loss                                                       (13,703)

Capital                5,006         5,926         2,670         13,602
expenditures and
acquisitions

Goodwill                  --        18,414         2,600         21,014

Intangible assets     25,583         9,711         3,285         38,579

Segment assets       182,458       241,391        64,529        488,378

Segment               96,780        13,120         9,782        119,682
liabilities
                                                                       
                                                                       

Three Months Ended                                                     
December 31, 2011
                                                                       

Revenue               39,762        54,310         6,861        100,933

Operating costs       10,788        21,988         6,897         39,673

Depreciation and       6,897         5,538         3,903         16,338
amortization

Segment operating     22,077        26,784       (3,939)         44,922
profit (loss)

Research and                                                      5,371
development

Corporate services                                                3,816

Stock-based                                                     (2,561)
compensation
(recovery)

Other expenses                                                    4,153

Income taxes                                                      2,441

Net income                                                       31,702

Capital                9,245        11,844           838         21,927
expenditures and
acquisitions

Goodwill                  --        18,823         2,600         21,423

Intangible assets     20,188        11,890         4,570         36,648

Segment assets       149,453       243,423        63,025        455,901

Segment               64,194        15,433         9,005         88,632
liabilities



Year Ended December     Canada United States International        Total
31, 2012 
(unaudited)                ($)           ($)           ($)          ($) 
Revenue                125,738       223,054        37,722      386,514 
Operating costs         36,291        85,811        23,073      145,175 
Depreciation and        26,964        32,381         8,868       68,213
amortization 
Segment operating       62,483       104,862         5,781      173,126
profit 
Research and                                                     22,467
development 
Corporate services                                               15,723 
Stock-based                                                      23,792
compensation 
Other expenses                                                   51,396 
Income taxes                                                     19,864 
Net income                                                       39,884 
Capital expenditures    25,682        37,850         7,892       71,424
and acquisitions 
Goodwill                    --        18,414         2,600       21,014 
Intangible assets       25,583         9,711         3,285       38,579 
Segment assets         182,458       241,391        64,529      488,378 
Segment liabilities     96,780        13,120         9,782      119,682 
                                                                    
                                                                    
Year Ended December                                                    
31, 2011 
                                                                    
Revenue                128,332       189,291        28,535      346,158 
Operating costs         42,616        78,105        19,967      140,688 
Depreciation and        25,934        22,535        10,096       58,565
amortization 
Segment operating       59,782        88,651       (1,528)      146,905
profit (loss) 
Research and                                                     17,366
development 
Corporate services                                               12,975 
Stock-based                                                       1,309
compensation 
Other expenses                                                    3,468 
Income taxes                                                     25,564 
Net income                                                       86,223 
Capital expenditures    29,488        64,249         9,214      102,951
and acquisitions 
Goodwill                    --        18,823         2,600       21,423 
Intangible assets       20,188        11,890         4,570       36,648 
Segment assets         149,453       243,423        63,025      455,901 
Segment liabilities     64,194        15,433         9,005       88,632 
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. 
For more information about Pason Systems Inc., visit the company's  website 
atwww.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 
SOURCE: Pason Systems Inc. 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/February2013/21/c7675.html 
CO: Pason Systems Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Feb/22/2013 03:37 GMT
 
 
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