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Pason Reports First Quarter 2013 Results

CALGARY, May 1, 2013 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 
2013 first quarter results. 
Performance Data 
                                                    2012   
                                          (reclassified)
Three Months Ended March 31,           2013       (restated)    Change 
(CDN 000s, except per share data)       ($)              ($)       (%) 
Revenue ((1))                       109,267          115,145       (5) 
EBITDA ((2))                         59,790           64,146       (7) 
As a % of revenue                    54.7             55.7       (2) 
Per share - basic                    0.73             0.78       (6) 
Per share - diluted                  0.72             0.78       (8) 
Funds flow from operations ((2))     47,835           51,707       (7) 
Per share - basic                    0.58             0.63       (8) 
Per share - diluted                  0.58             0.63       (8) 
Earnings ((3))                       29,608           29,073         2 
Per share - basic                    0.36             0.35         3 
Per share - diluted                  0.36             0.35         3 
Capital expenditures                 13,939           19,483      (28) 
Working capital ((3))               190,487          155,515        22 
Total assets                        509,914          469,546         9 
Total long-term debt                —          —   — 
Total equity                        393,505          395,113   — 
Market capitalization             1,453,926        1,150,273        26 
Cash dividends declared ((4))          0.13          —   — 
Common shares outstanding (#)                                          
Basic                              82,050           81,916   — 
Diluted                            82,928           82,445         1 
Shares outstanding end of period                              
(#)                                  82,050           81,928   — 
(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 quarter ended March 31, 2012, have been restated
     to correct a non-cash error relating to stock-based compensation
     expense of $400.  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
Drilling days and active rig counts in North America were lower in the first 
quarter of 2013 than in the first quarter of the previous year, with a decline 
in industry days of 14% and 9% in the United States and Canada, respectively. 
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 5% to 
$109.3 million in the first quarter of 2013 compared to the first quarter of 
2012.

All major product categories generated revenue growth above drilling industry 
activity with the exception of the Hazardous Gas Alarm and AutoDriller. Market 
penetration of the Hazardous Gas Alarm was negatively affected by the 
temporary suspension of the H(2)S sensor functionality due to reliability 
issues. AutoDriller market penetration was lower, in part, because a larger 
number of coring rigs - which do not typically utilize the AutoDriller - were 
active during the Canadian winter drilling season. The Gas Analyzer segment 
demonstrated the highest year-over-year growth rates at 14%, followed by 
Software at 4%.

EBITDA for the first quarter dropped by 7% to $59.8 million and cash flow from 
operations was down 7% to $47.8 million. EBITDA, as a percentage of revenue, 
was 55% in the first quarter compared to 56% in the first quarter of the 
previous year. Net earnings increased by 2% to $29.6 million, or $0.36 per 
share, compared to $29.1 million, or $0.35 per share, in the first quarter of 
2012. First quarter net earnings were impacted by the following factors:
    --  A $3.2 million decrease in stock-based compensation due to a
        smaller increase in our stock price during the first quarter of
        2013 compared to the first quarter of 2012;
    --  A $1.0 million increase in R&D costs as we completed the hiring
        of staff to support our Electronic Drilling Recorder (EDR)
        evolution projects;
    --  A drop in foreign exchange loss of $1.5 million.

Capital expenditures for the first quarter were $13.9 million, down from $19.5 
million the previous year, as the North American roll-out of the new Gas 
Analyzer was completed over the previous summer.

On March 31, our cash position stood at $168.9 million and our working capital 
stood at $190.5 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 14% in the first quarter of 2013 compared to the first 
quarter of 2012, revenue was down 8% to $53.5 million. On average, 955 US land 
rigs were operating Pason equipment during the first quarter of 2013, compared 
to 1,107 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 9% 
from USD $539 in the first quarter of 2012 to USD $590 in 2013, and was up 4% 
from the previous quarter. Software, Gas Analyzer, and Communications achieved 
above-average revenue growth. Our EDR market share for the first quarter of 
2013 was 57%, compared to 54% in the fourth quarter of 2012.

Operating costs decreased by 2% and depreciation and amortization decreased by 
3%. As a result, our US business unit was able to generate an operating profit 
of $23.9 million in the first quarter, a decrease of 14% over 2012.

Canada
Drilling activity in Canada was lower in the first quarter of 2013 than in the 
previous year, with industry days down 9%. Our Canadian business unit was able 
to partially offset this reduction in activity levels through increased 
product penetration and market share gains. Revenue for the first quarter was 
down 5% to $46.0 million. On average, 475 Canadian land rigs were operating 
Pason equipment compared to 509 the year before. EDR market share in the first 
quarter of 2013 was 98% compared to 92% in the fourth quarter of 2012.

Average daily revenue generated on each rig with a Pason product installed 
grew 3% to $1,061 in the first quarter of 2013. Compared to the previous 
quarter, revenue per EDR days was down by 5%, primarily because a larger 
number of coring rigs, which use less Pason equipment, were active during the 
winter drilling season. As in the United States, Gas Analyzer and Software 
showed above average growth rates during the period.

Operating costs were down by 16% and depreciation and amortization decreased 
by 15%. As a result, our Canadian business unit was able to generate an 
operating profit of $30.3 million for the first quarter, compared to $29.9 
million for the same period in 2012, an increase of 1%.

International
Our International business unit, which includes our businesses in Latin 
America, Australia, and offshore, had another good quarter. Revenue increased 
by 12% to $9.8 million for the first quarter 2013 compared to the first 
quarter 2012. We realized gains in most of our major international markets 
with notable gains in Argentina, Australia, and Mexico. However, compared to 
the fourth quarter of 2012, International's revenue was essentially flat as 
growth in Mexico and Brazil stalled and Australia experienced some weather 
related delays.

Operating costs were up 24% and depreciation and amortization were down 32% 
driven by improved asset utilization. As a result, the International business 
unit was able to generate a quarterly operating profit of $1.9 million, up 38% 
from $1.4 million the previous year.

Outlook
There continues to be uncertainty regarding the outlook for North American 
drilling activity going forward. The natural gas glut generated by 
unconventional plays does limit gas-directed drilling activity, thereby 
challenging our ability to significantly grow revenue in the short term. 
However, the outlook has improved somewhat and industry observers are 
expecting a modest recovery in North America during the second half of 2013 
and beyond. As with every year, the duration of spring break-up in Canada 
will be a key driver of second quarter 2013 results. We expect the 
International business unit to continue to realize profitable growth this year.

Our capital expenditure budget for the next 12 months is $79 million, $56 
million of which is directed towards equipment that can generate incremental 
revenue or save operating costs, $10 million for maintenance capital, and $13 
million for capitalized R&D.

Our cash-generating capacity, cash position at $168.9 million, and working 
capital position at $190.5 million are strong enough to comfortably cover new 
business development, planned equipment upgrades, and the dividend.

(Signed)

Marcel Kessler
President and Chief Executive Officer
May1, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of 
May1, 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 First Quarter
                                                  2012  


                                    (reclassified)             2011
Three Months Ended March 31,     2013       (restated)   (reclassified) 
(000s, except per share data)     ($)              ($)              ($) 
Revenue ((1))                 109,267          115,145           88,218 
EBITDA ((2))                   59,790           64,146           44,729 
As a % of revenue              54.7             55.7             50.7 
Per share - basic              0.73             0.78             0.55 
Per share - diluted            0.72             0.78             0.55 
Funds flow from operations (                            
(2))                           47,835           51,707           39,082 
Per share - basic              0.58             0.63             0.48 
Per share - diluted            0.58             0.63             0.48 
Earnings ((3))                 29,608           29,073           17,757 
Per share - basic              0.36             0.35             0.22 
Per share - diluted            0.36             0.35             0.22 
Total assets                  509,914          469,546          396,792 
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.

(3)  Earnings for the quarter ended March 31, 2012, have been restated
     to correct a non-cash error relating to stock-based compensation
     expense of $400.  Per share amounts have been adjusted
     accordingly.

Overall Performance


                                                     2012  
Three Months Ended March 31,            2013   (reclassified)    Change 
(000s)                                   ($)              ($)       (%) 
Revenue                                                                 
Electronic Drilling Recorder ((1))  44,664           46,535       (4) 
Pit Volume Totalizer                16,870           17,946       (6) 
Communications ((1))                10,954           10,997   — 
Software                             7,363            7,073         4 
AutoDriller                         10,510           12,451      (16) 
Gas Analyzer/Total Gas System        8,734            7,635        14 
Hazardous Gas Alarm System           1,602            2,014      (20) 
Mobilization                         2,595            2,983      (13) 
Other                                5,975            7,511      (20) 
Total revenue                        109,267          115,145       (5) 
(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: 
                                            Previously
Three Months Ended March 31, 2012    Reported    Disclosed   Change 
(000s)                                    ($)          ($)      ($) 
Revenue                                                             
Electronic Drilling Recorder ((1))     46,535       43,662    2,873 
Communications ((1))                   10,997       10,380      617 
Total revenue                         115,145      111,655    3,490 
EDR and PVT rental day performance for Canada and the United States is 
reported below: 
                              Canada   
Three Months Ended March 31,   2013      2012   Change 


                                                   (%)

EDR rental days (#)          42,800    46,300      (8)

PVT rental days (#)          41,800    45,900      (9)
                                                      
                             United States  

Three Months Ended March 31,   2013      2012   Change
                                                   (%)

EDR rental days (#)          85,900   100,800     (15)

PVT rental days (#)          63,600    69,700      (9)

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 4% for the first quarter of 2013 compared to the same period in 2012. 
The decrease in the first quarter is attributable mostly to a decrease in rig 
activity in both the US and Canadian markets offset by an increase in the 
Company's International markets. Canadian EDR days were down 8% in the first 
three months of 2013 compared to the same time period in 2012 while US EDR 
days dropped by 15%.

During the first three months of 2013, the Pason EDR was installed on 98% 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, off-set by increased product penetration in the US 
market. During the first quarter 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 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. The 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 Mobile, which allow users to access their
        data on mobile devices including iPhone, iPad, and 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 quarter of 2013, 97% of the Company's Canadian customers and 
88% of customers in the US were using all or a portion of the functionality of 
the DataHub, compared to 98% and 84%, 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 
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 first quarter of 
2013, both systems combined generated $8.7 million of revenue compared to $7.6 
million in 2012. The Company is realizing increased product penetration 
compared to TGAS. For 2013, Gas Analyzer was installed on 51% of Canadian and 
22% of US land rigs operating with a Pason EDR system. The combined market 
penetration in Canada is an increase of approximately 6% over 2012 levels 
while the US has seen an increase of 4%. The rollout of the Gas Analyzer in 
the International markets started in late 2012, and is accelerating in 2013.

AutoDriller
Pason's AutoDriller is used to maintain constant weight on the drill bit while 
a well is being drilled. During the first three months of 2013, the 
AutoDriller was installed on 72% of Canadian and 46% of US land rigs operating 
with a Pason EDR system, compared to 77% and 50%, respectively, in 2012. The 
drop in market penetration on this product is not a result of a decrease in 
customer acceptance but due to the Company increasing its presence with its 
EDR base system on rigs that traditionally do not require the functionality of 
the AutoDriller.

Hazardous Gas Alarm System
The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit 
(LEL) gases and H(2)S 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 H(2)S 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 effect on the Canadian market was 
greater than any other business unit as the H(2)S sensor is more widely used 
in Canada. As a result, market penetration for this product was impacted in 
the first quarter of 2013; the product was installed on 15% of Canadian rigs, 
down from 20% for the same period in 2012, and 8% of US land rigs operating 
with a Pason EDR system, a similar level to 2012. The company estimates that 
the impact on revenue in the first quarter of 2013 was approximately $0.4 
million. The Company is currently investigating alternative sensor 
manufacturers and technologies to ensure that the replacement H(2)S product 
meets industry standards and customer expectations. Replacement of the sensor 
will happen in the second half of 2013.


Discussion of Operations

United States Operations


                                                    2012  
Three Months Ended March 31,           2013   (reclassified)   Change 
(000s)                                  ($)              ($)      (%) 
Revenue                                                               
Electronic Drilling Recorder ((1))   23,350           25,290      (8) 
Pit Volume Totalizer                  8,019            8,722      (8) 
Communications ((1))                  4,239            3,905        9 
Software                              4,260            3,962        8 
AutoDriller                           4,980            6,181     (19) 
Gas Analyzer/Total Gas System         3,002            2,529       19 
Hazardous Gas Alarm System              646              717     (10) 
Mobilization                          1,961            2,297     (15) 
Other                                 3,027            4,426     (32) 
Total revenue                        53,484           58,029      (8) 
Operating costs                      22,240           22,668      (2) 
Depreciation and amortization         7,384            7,619      (3) 
Segment operating profit             23,860           27,742     (14) 
(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: 
                                                Previously  
Three Months Ended March 31, 2012        Reported    Disclosed   Change 
(000s)                                        ($)          ($)      ($) 
Revenue                                                                 
Electronic Drilling Recorder ((1))         25,290       23,805    1,485 
Communications ((1))                        3,905        3,784      121 
Total revenue                              58,029       56,423    1,606 
Operating costs                            22,668       21,062    1,606 
Revenue per EDR day                           540          523       17 
Revenue per Industry day                      310          300       10 
US segment revenue decreased by 8% in the first quarter of 2013 over the 2012 
comparable period (9% decrease when measured in USD). Rental service revenue 
decreases were 6% for the quarter (USD 7%), while sales at 3PS, Inc. dropped 
in the first quarter of 2013 compared to 2012. 
As expected, the number of US drilling days were down approximately 14% in the 
first quarter of 2013 versus the first 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 
6% (USD 7%) over 2012 levels. 
Revenue was impacted by the following factors: 


    --  More products on each rig and new product adoption. Revenue
        increased by additional product penetration on each rig,
        primarily with gains in EDR peripheral devices, increased PVT
        market share, customer acceptance of the Company's Enhanced
        Live Rig View (eLRV) real-time data software, an increase in
        WITSML revenue, and increased adoption of the Gas Analyzer
        compared to the TGAS. These factors combined resulted in an
        increase in revenue per EDR day in the first quarter of 2013
        over 2012 levels of $55 (USD $51).
    --  A decrease in EDR rental days of 15% for the three months ended
        March 2013, over the same time period in 2012. The US market
        share stayed constant at 57%.

The factors explained above resulted in the US segment being able to realize 
revenue per EDR day during the first quarter of 2013 of $595 (USD $590) 
compared to $540 (USD $539) during the same time period in 2012.

Revenue per industry day for the first quarter of the year was $337 (USD $334) 
compared to $310 (USD $309) in 2012.

The majority of the decrease in "Other" revenue 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 45% for the first quarter of 
2013 compared to 48% for the corresponding period in 2012.

The US business was able to maintain a robust margin despite the drop in 
activity and its fixed cost structure by managing its variable costs and 
implementing changes to operations to adapt to changing market conditions. The 
2013 segment profit percentage was impacted by the following factors (all 
amounts in $CDN):
    --  An increase in communication-related expenses of $0.9 million
        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 first
        quarter of 2013 compared to 2012 decreased by approximately
        $1.3 million. This reduction was attributable to the change in
        rig activity which led to a reduction in repair costs and a
        drop in field parts and other consumables.
    --  First quarter 2013 depreciation and amortization expense was


    down $0.3 million compared to the same period in 2012
  o 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 of $1.0 million,
  o 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, resulting in a drop in
    depreciation expense of $1.0 million,
    --  the above reduction was offset by depreciation on the new Gas
        Analyzer system and other new additions.

Canadian Operations


                                                    2012  
Three Months Ended March 31,           2013   (reclassified)   Change 
(000s)                                  ($)              ($)      (%) 
Revenue                                                               
Electronic Drilling Recorder ((1))   17,374           17,799      (2) 
Pit Volume Totalizer                  7,291            7,922      (8) 
Communications ((1))                  6,379            6,927      (8) 
Software                              3,003            3,021      (1) 
AutoDriller                           4,619            5,339     (13) 
Gas Analyzer/Total Gas System         4,654            4,243       10 
Hazardous Gas Alarm System              538              958     (44) 
Mobilization                            176              202     (13) 
Other                                 1,921            1,933      (1) 
Total revenue                        45,955           48,344      (5) 
Operating costs                       9,607           11,403     (16) 
Depreciation and amortization         6,021            7,043     (15) 
Segment operating profit             30,327           29,898        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:
                                                              


                                            Previously  
Three Months Ended March 31, 2012    Reported    Disclosed   Change 
(000s)                                    ($)          ($)      ($) 
Revenue                                                             
Electronic Drilling Recorder ((1))     17,799       16,459    1,340 
Communications ((1))                    6,927        6,431      496 
Total revenue                          48,344       46,508    1,836 
Operating costs                        11,403        9,567    1,836 
Revenue per EDR day                     1,034          994       40 
Revenue per Industry day                  995          935       60 
Canadian segment revenue decreased 5% for the three months ended March 2013, 
compared to the first quarter of 2012. This decrease is a result of a 9% 
decrease in the number of Canadian drilling industry days from 2012 levels. 
EDR rental days declined 8% in the first quarter of 2013 over 2012 levels. 
Canadian market share was 98% during the first quarter 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 through new product adoption, and more products on 
each rig. The business unit continued to increase the market penetration of 
the Gas Analyzer and continued to realize gains in EDR peripheral devices and 
an increase in WITSML revenue. These factors combined to lessen the impact of 
the drop in HGAS 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 first quarter of
        2013 compared to 2012 of 3% ($27) to $1,061.
    --  First quarter revenue per industry day of $1,042 in 2013
        compared to $995 in 2012.

The segment profit for the first quarter of 2013 of $30.3 million is an 
increase of $0.4 million over the 2012 amount. The segment profit, as a 
percent of revenue, was 66% for the three months ended March 2013, compared to 
62% for 2012. Factors impacting the first quarter results include:
    --  The weak drilling activity in the Western Canadian Sedimentary
        Basin (WCSB) resulted in 3,500 fewer EDR days during the first
        quarter of 2013 compared to 2012.
    --  A decrease in field costs of $0.8 million, which is mostly
        attributable to the decline in drilling activity.
    --  A decrease in most repair cost categories, totaling $0.5
        million.
    --  A decrease in depreciation and amortization expense of $1.0


    million
  o a decrease in the loss on disposal of assets of $0.4 million,
  o the TGAS being fully depreciated, described above, resulting in a 
decline in the expense of $0.3 million,
  o a drop in the acceleration of depreciation on a portion of its base 
EDR system, described above, resulting in a drop in depreciation of 
$0.5 million,
  o the above reductions in depreciation and amortization expense were 


    offset by depreciation on the new Gas Analyzer system as well as an
    increase in amortization costs relating to capitalized research and
    development costs, as a result of the deployment of new software
    applications.
    --  In the first quarter of 2012, $0.3 million of legal fees were
        incurred, mostly relating to the AutoDriller litigation. These
        costs were minimal in the first quarter of 2013.

International Operations


                                                   2012  
Three Months Ended March 31,          2013   (reclassified)   Change 
(000s)                                 ($)              ($)      (%) 
Revenue                                                              
Electronic Drilling Recorder ((1))   3,940            3,446       14 
Pit Volume Totalizer                 1,560            1,302       20 
Communications ((1))                   336              165      104 
Software                               100               90       11 
AutoDriller                            911              931      (2) 
Gas Analyzer/Total Gas System        1,078              863       25 
Hazardous Gas Alarm System             418              339       23 
Mobilization                           458              484      (5) 
Other                                1,027            1,152     (11) 
Total revenue                        9,828            8,772       12 
Operating costs                      6,394            5,152       24 
Depreciation and amortization        1,529            2,235     (32) 
Segment operating profit             1,905            1,385       38 
(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:
                                                                    


                                            Previously  
Three Months Ended March 31, 2012    Reported    Disclosed    Change 
(000s)                                    ($)          ($)       ($) 
Revenue                                                              
Electronic Drilling Recorder ((1))      3,446        3,398        48 
Communications ((1))                      165          165   — 
Total revenue                           8,772        8,724        48 
Operating costs                         5,152        5,104        48 
Revenue in the International operations improved 12% in the first quarter of 
2013 from the same period in 2012. 
Operating profit increased by $0.5 million for the first quarter of 2013 over 
2012 results. 
A number of factors influenced these results: 


    --  Increased EDR days in both Mexico and Argentina contributed to
        an increase revenue of $0.6 million.
    --  Australia revenue continues to ramp up at an impressive rate.
        Revenue increased by approximately $0.9 million compared to the
        first quarter of 2012. This increase in revenue translated into
        an increase in operating profit of $0.4 million over 2012
        levels.
    --  Depreciation expense is down due to a decrease in capital
        expenditures in prior periods as a result of a concerted effort
        to increase the utilization of equipment within this market,
        combined with gains realized on the disposal of non-rental
        assets and intangible assets that are now fully amortized.

Consolidated Results

Three Months Ended March 31,     2013     2012   Change

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

Other expenses                                         

Research and development        6,526    5,540       18

Corporate services              4,160    4,406      (6)

Stock-based compensation        3,750    6,919     (46)

Other                                                  

  Foreign exchange loss           220    1,711     (87)

  Other                           330      119      177
                               14,986   18,695     (20)

Q1 2013 versus Q1 2012
The active rig count in both the US and Canadian markets declined from the 
first quarter of 2012, with the US drop in activity much more severe than the 
Canadian decline. The International market saw a slight increase in drilling 
days. This change in activity led to a decline in most of the Company's key 
consolidated financial metrics. Revenue decreased 5%, while EBITDA dropped by 
7% and funds flow from operations was down 7%.

The company realized net earnings of $29.6 million or $0.36 per share compared 
to earnings of $29.1 million or $0.35 per share in the first quarter of 2012. 
The first quarter consolidated results, when compared to 2012 figures, were 
impacted by the following significant items:
    --  An increase in research and development costs in the first
        quarter of 2013 of $1.0 million 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.
    --  Stock-based compensation decreased by $3.2 million compared to
        the first quarter of 2012 due to a large increase in the 
        Company's stock price in the first three months in 2012
        compared to the increase that occurred in the stock price
        during the first quarter of 2013.
    --  A decrease in the foreign exchange loss recorded in the first
        quarter of 2013 of $1.5 million compared to the corresponding
        period in 2012.

Q1 2013 versus Q4 2012
The Company's first quarter is usually its strongest due in most part to the 
seasonality of the Canadian market. Revenue was higher in the first quarter of 
2013 versus the fourth quarter of 2012 by $18.3 million. The Canadian business 
unit realized an increase in revenue of $13.9 million, while the US rental 
market realized an increase in revenue of $4.5 million, due in part to a 
strengthening US dollar (increase in USD of $1.3 million). The Canadian 
business unit realized a profit of $30.3 million for the three months ended 
March 2013, compared to a $16.9 million profit in the fourth quarter of 2012. 
The US business unit profit was little changed, profit increased from $23.2 
million in the previous quarter to a profit of $23.9 million in the current 
quarter.

The following items also impacted the comparison to the 2012 fourth quarter 
results:
    --  In the fourth quarter of 2012, the Company recorded an
        additional non-cash accrual relating to the AutoDriller
        litigation of $32.5 million.
    --  In the fourth 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.
    --  A decrease in corporate service costs of $0.5 million, due in
        most part to staff restructuring costs incurred in the fourth
        quarter of 2012.
    --  A decrease in stock-based compensation expense of $3.5 million
        due to a smaller increase  in the Company's stock price in the
        first quarter of 2013 compared to the increase in stock price
        that occurred in the fourth quarter of 2012. The stock price
        increased by 5% in the fourth quarter of 2012, which impacts
        the valuation under the Black-Scholes pricing model. The change
        in the Company's stock price during the first quarter of 2013
        was smaller, resulting in a decline in the expense.

First Quarter Conference Call and Annual General Meeting
Pason will be conducting a conference call for interested analysts, brokers, 
investors and media representatives to review its first quarter results at 
9:00 a.m. (Calgary time) on Thursday, May 2, 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 20487585.

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.

Condensed Consolidated Interim Financial Statements and Notes

Condensed Consolidated Interim Balance Sheets

As at                             March 31, 2013   December 31, 2012

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

Assets                                                              

Current                                                             

  Cash and cash equivalents              168,868             157,944

  Trade and other receivables             95,377              84,506

  Prepaid expenses                         2,556               2,920

  Total current assets                   266,801             245,370

Non-current                                                         

  Property, plant and equipment          174,341             174,651

  Intangible assets                       61,684              59,593

  Deferred tax assets                      7,088               8,764

  Total non-current assets               243,113             243,008

Total assets                             509,914             488,378

Liabilities and equity                                              

  Current                                                           

  Trade payables and accruals             26,157              25,674

  Litigation provision                    19,684              19,533

  Income taxes payable                     5,703               3,313

  Stock-based compensation                14,103              13,788
  liability

  Dividend payable                        10,667              19,691

  Total current liabilities               76,314              81,999

Non-current                                                         

  Stock-based compensation                 4,062               2,583
  liability

  Deferred tax liabilities                 2,600               2,600

  Litigation provision                    33,433              32,500

  Total non-current liabilities           40,095              37,683

Equity                                                              

  Share capital                           79,411              79,393

  Share-based reserve                     12,927              12,927

  Foreign currency translation           (2,498)             (8,348)
  reserve

  Retained earnings                      303,665             284,724

  Total equity                           393,505             368,696

Total liabilities and equity             509,914             488,378



Condensed Consolidated Interim Statements of Operations 
                                                               2012 
                                                      (reclassified
Three Months Ended March 31,                         2013     restated) 
(CDN 000s, except per share data) (unaudited)         ($)           ($) 
Revenue                                                                 
Equipment rentals and other                     109,267       115,145 
Operating expenses                                                      
Rental services                                  33,876        33,701 
Local administration                              4,365         5,522 
Depreciation and amortization                    14,934        16,897 
                                               53,175        56,120 


                                                                       

Operating profit                                   56,092        59,025

Other expenses                                                         

  Research and development                          6,526         5,540

  Corporate services                                4,160         4,406

  Stock-based compensation                          3,750         6,919

  Other expenses                                      550         1,830
                                                   14,986        18,695
                                                                       

Income before income taxes                         41,106        40,330

  Income taxes                                     11,498        11,257

Net income                                         29,608        29,073

Earnings per share                                                     

  Basic                                              0.36          0.35

  Diluted                                            0.36          0.35

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 quarter ended March 31, 2012, have been restated to
correct a non-cash error relating to stock-based compensation expense
of $400.  Per share amounts have been adjusted accordingly.

Condensed Consolidated Interim Statements of Other Comprehensive Income


                                                       2012
Three Months Ended March 31,                  2013   (restated) 
(CDN 000s) (unaudited)                         ($)          ($) 
Net income                                  29,608       29,073 
Other comprehensive income (loss)                               
Foreign currency translation adjustment    5,850      (1,511) 
Total comprehensive income                  35,458       27,562 

Condensed Consolidated Interim Statements of Changes in Equity 


                                          Foreign             
                             Share-      Currency
                    Share     based   Translation   Retained      Total
                  Capital   Reserve       Reserve   Earnings     Equity

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

Balance at                                                    
January 1, 2012    77,613    12,927       (5,835)    282,564    367,269

  Net income                                                  
  (restated)      —   —       —     29,073     29,073

  Other                                                       
  comprehensive
  income          —   —       (1,511)    —    (1,511)

  Exercise of                                                 
  stock options       282   —       —    —        282

Balance at                                                    
March 31, 2012     77,895    12,927       (7,346)    311,637    395,113

  Net income      —   —       —     10,811     10,811

  Dividends       —   —       —   (37,724)   (37,724)

  Other                                                       
  comprehensive
  loss            —   —       (1,002)    —    (1,002)

  Exercise of                                                 
  stock options     1,498   —       —    —      1,498

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

  Net income      —   —       —     29,608     29,608

  Dividends       —   —       —   (10,667)   (10,667)

  Other                                                       
  comprehensive
  income          —   —         5,850    —      5,850

  Exercise of                                                 
  stock options        18   —       —    —         18

Balance at                                                    
March 31, 2013     79,411    12,927       (2,498)    303,665    393,505

Earnings for the quarter ended March 31, 2012, have been restated to
correct a non-cash error relating to stock-based compensation expense
of $400.



Condensed Consolidated Interim Statements of Cash Flows 
                                                              2012
Three Months Ended March 31,                         2013   (restated) 
(CDN 000s) (unaudited)                                ($)          ($) 
Cash flows from operating activities                                   
Net income                                       29,608       29,073 
Adjustment for non-cash items:                                         
Depreciation and amortization                    14,934       16,897 
Stock-based compensation                          1,495        5,039 
Deferred income taxes                             1,720        (549) 
Unrealized foreign exchange loss                     78        1,247 
Funds flow from operations                         47,835       51,707 
Movements in non-cash working capital                                  
Increase in trade and other receivables         (9,681)      (6,534) 
Decrease (increase) in prepaid expenses             406        (425) 
Increase in income taxes payable                  6,870        8,192 
Increase (decrease) in trade payables,                   
  accruals and provisions                           1,961      (1,918) 
Increase in stock-based compensation                     
  liability                                         2,221        1,805 
Effects of exchange rate changes                  1,082          404 
Changes in non-cash working capital                 2,859        1,524 
Cash generated from operating activities           50,694       53,231 
Income tax paid                                 (4,500)      (8,227) 
Net cash from operating activities                 46,194       45,004 
Cash flows from (used in) financing activities                         
Proceeds from issuance of common shares              18          282 
Purchase of stock options                       (1,922)        (404) 
Payment of dividends                           (19,691)     (16,380) 
Net cash used in financing activities            (21,595)     (16,502) 
Cash flows (used in) from investing activities                         
Additions to property, plant and equipment     (10,196)     (17,236) 
Additions to intangibles                            (5)      — 
Deferred development costs                      (3,743)      (2,247) 
Proceeds on disposal of property, plant and              
  equipment                                            44      — 
Changes in non-cash working capital               (754)        (862) 
Net cash used in investing activities            (14,654)     (20,345) 
Effect of exchange rate on cash and cash                   
equivalents                                           979        (775) 
Net increase in cash and cash equivalents          10,924        7,382 
Cash and cash equivalents, beginning of period    157,944      104,993 
Cash and cash equivalents, end of period          168,868      112,375 
Earnings for the quarter ended March 31, 2012, have been restated to
correct a non-cash error relating to stock-based compensation expense
of $400. 

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
March 31, 2013 
                     ($)             ($)             ($)        ($) 
Revenue               45,955          53,484           9,828    109,267 
Operating costs        9,607          22,240           6,394     38,241 
Depreciation and       6,021           7,384           1,529     14,934
amortization 
Segment operating     30,327          23,860           1,905     56,092
profit 
Research and                                                      6,526
development 
Corporate services                                                4,160 
Stock-based                                                       3,750
compensation 
Other expenses                                                      550 
Income taxes                                                     11,498 
Net income                                                       29,608 
Capital                7,027           4,306           2,606     13,939
expenditures 
Goodwill             —          18,797           2,600     21,397 
Intangible assets     27,523           9,353           3,411     40,287 
Segment assets       188,825         255,898          65,191    509,914 
Segment               91,469          15,518           9,422    116,409
liabilities 
                                                                    
Three Months Ended March 31, 2012 (reclassified, restated)       
                                                                    
Revenue               48,344          58,029           8,772    115,145 
Operating costs       11,403          22,668           5,152     39,223 
Depreciation and       7,043           7,619           2,235     16,897
amortization 
Segment operating     29,898          27,742           1,385     59,025
profit 
Research and                                                      5,540
development 
Corporate services                                                4,406 
Stock-based                                                       6,919
compensation 
Other expenses                                                    1,830 
Income taxes                                                     11,257 
Net income                                                       29,073 
Capital                6,042          12,900             541     19,483
expenditures 
Goodwill             —          20,909           2,600     23,509 
Intangible assets     21,340           8,702           4,393     34,435 
Segment assets       139,380         269,870          60,296    469,546 
Segment               45,204          20,738           8,491     74,433
liabilities 
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 quarter ended March 31, 2012, have been restated to
correct a non-cash error relating to stock-based compensation expense
of $400. 
Correction of Error 
During the year ended December 31, 2012, the Company identified a non-cash 
accounting error related to stock-based compensation being understated. The 
error was corrected in the Company's consolidated financial statements for the 
year ended December 31, 2012. The Company determined the error impacted the 
interim financial statements for the three month period ended March 31, 2012 
and has corrected the comparative period included in these condensed 
consolidated financial statements. 
                                 Previously               
Three Months Ended March 31, 2012     Disclosed   Adjustment   Restated 
                                        ($)          ($)        ($) 
Balance Sheet                                                           
Stock based compensation               10,371          400     10,771
  liability - current                                          
Retained earnings                     312,037        (400)    311,637 
Statement of Operations                                                 
Stock based compensation expense        6,519          400      6,919 
Net Income                             29,473        (400)     29,073 
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/May2013/01/c2202.html 
CO: Pason Systems Inc.
ST: Alberta
NI: OIL ERN  
-0- May/02/2013 00:33 GMT