Pason Reports Second Quarter 2013 Results

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


                    Three Months Ended June 30,        Six Months Ended June 30,
                                   2012                             2012
                         (reclassified)                   (reclassified)
                    2013     (restated)  Change      2013     (restated)  Change

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

Revenue ((1))     82,387         84,112     (2)   191,654        199,257     (4)

EBITDA ((2))    (27,817)         31,656 —    31,973         95,802    (67)

  As a % of
  revenue            n/a           37.6 —      16.7           48.1    (65)

  Per share -
  basic           (0.34)           0.39 —      0.39           1.17    (67)

  Per share -
  diluted         (0.34)           0.38 —      0.39           1.16    (66)

Cash flow from
operating
activities (
(2))              51,236         48,105       7    97,430         93,109       5

  Per share -
  basic             0.62           0.59       5      1.19           1.14       4

  Per share -
  diluted           0.62           0.58       7      1.19           1.13       5

(Loss)
earnings ((3))  (39,376)          6,772 —   (9,768)         35,845 —

  Per share -
  basic           (0.48)           0.08 —    (0.12)           0.44 —

  Per share -
  diluted         (0.48)           0.08 —    (0.12)           0.43 —

Capital
expenditures      14,043         19,312    (27)    27,982         38,795    (28)

Working
capital ((3))    109,718        151,772    (28)   109,718        151,772    (28)

Total assets     536,183        485,166      11   536,183        485,166      11

Total                                          
long-term debt   —        — —   —        — —

Total equity     351,849        390,702    (10)   351,849        390,702    (10)

Market
capitalization 1,570,020      1,219,758      29 1,570,020      1,219,758      29

Cash dividends
declared ((4))      0.13           0.22    (41)      0.26           0.22      18

Common shares
outstanding
(#)                                                                             

  Basic           82,050         81,943 —    82,050         81,924 —

  Diluted         82,050         82,590     (1)    82,050         82,492     (1)

Shares
outstanding
end of period
(#)               82,114         81,973 —    82,114         81,973 —

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly. This change has no impact on reported EBITDA, cash
     flow from operating activities, or earnings.

(2)  EBITDA is defined as earnings before interest expense, income
     taxes, stock-based compensation expense, and depreciation and
     amortization expense. Cash flow from operating activities is
     defined as earnings adjusted for depreciation and amortization
     expense, impairment losses, stock-based compensation expense,
     deferred income taxes, and other non-cash items impacting
     operations and changes in non-cash items as presented in the
     Consolidated Statements of Cash Flows. These definitions are not
     recognized measures under International Financial Reporting
     Standards, and accordingly, may not be comparable to measures used
     by other companies.

(3)  Earnings for the three months ended June 30, 2012, have been
     restated to correct a $1,700 non-cash error relating to
     stock-based compensation expense. The 2012 year-to-date correction
     was $2,100.  Per share amounts have been adjusted accordingly.

(4)  The Company changed its dividend policy whereby effective for
     2013, the Company adopted a quarterly dividend to replace the
     semi-annual dividend.

President's Message

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

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

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

EBITDA for the second quarter was negative $27.8 million while cash flow from 
operating activities was up 7% to $51.2 million. Pason recorded a net loss of 
$39.4 million. In addition to the increase in the provision for resolving the 
infringement claims, second quarter results were impacted by the following 
factors:
    --  An increase in stock-based compensation due to the  increase in
        our stock price during the second quarter of 2013
    --  An increase in R&D costs as we completed the hiring of staff to
        support our Electronic Drilling Recorder (EDR) evolution
        projects combined with an increase in costs to support our
        information technology systems
    --  A foreign exchange gain recorded in the second quarter compared
        to a loss in the corresponding period in 2012

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

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

United States

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

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

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

Canada

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

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

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

International

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

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

Outlook

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

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

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

(Signed)

Marcel Kessler
President and Chief Executive Officer August1, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of 
August1, 2013, and is a review of the financial condition and results of 
operations of Pason Systems Inc. (Pason or the Company) based on International 
Financial Reporting Standards (IFRS) and should be read in conjunction with 
the consolidated financial statements and accompanying notes.

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

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

Overview of the 2013 Second Quarter
                      Three Months Ended June 30,             Six Months Ended June 30,
                              2012                                  2012
                    (reclassified)           2011         (reclassified)           2011
               2013     (restated) (reclassified)    2013     (restated) (reclassified)

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

Revenue (
(1))         82,387         84,112         65,546 191,654        199,257        153,764

EBITDA (
(2))       (27,817)         31,656         25,850  31,973         95,802         70,579

  As a %
  of
  revenue       n/a           37.6           39.4    16.7           48.1           45.9

  Per
  share -
  basic      (0.34)           0.39           0.31    0.39           1.17           0.86

  Per
  share -
  diluted    (0.34)           0.38           0.30    0.39           1.16           0.85

Cash flow
from
operating
activities
((2))        51,236         48,105         30,756  97,430         93,109         59,586

  Per
  share -
  basic        0.62           0.59           0.38    1.19           1.14           0.73

  Per
  share -
  diluted      0.62           0.58           0.37    1.19           1.13           0.72

(Loss)
earnings (
(3))       (39,376)          6,772          8,217 (9,768)         35,845         25,974

  Per
  share -
  basic      (0.48)           0.08           0.10  (0.12)           0.44           0.32

  Per
  share -
  diluted    (0.48)           0.08           0.09  (0.12)           0.43           0.31

Total
assets      536,183        485,166        405,437 536,183        485,166        405,437

Total
long-term
debt        —        —        — —        —        —

(1)  Data transmission expenses have been reclassified from revenue to
     rental service expense. All comparative figures have been restated
     accordingly. This change has no impact on reported EBITDA, cash
     flow from operating activities, or earnings.

(2)  EBITDA is defined as earnings before interest expense, income
     taxes, stock-based compensation expense, and depreciation and
     amortization expense. Cash flow from operating activities is
     defined as earnings adjusted for depreciation and amortization
     expense, impairment losses, stock-based compensation expense,
     deferred income taxes, and other non-cash items impacting
     operations and changes in non-cash items as presented in the
     Consolidated Statements of Cash Flows. These definitions are not
     recognized measures under International Financial Reporting
     Standards, and accordingly, may not be comparable to measures used
     by other companies.

(3)  Earnings for the three months ended June 30, 2012, have been
     restated to correct a $1,700 non-cash error relating to
     stock-based compensation expense. The 2012 year-to-date correction
     was $2,100.  Per share amounts have been adjusted accordingly.

Overall Performance
                  Three Months Ended June 30,       Six Months Ended June 30,
                                  2012                          2012
                   2013 (reclassified) Change    2013 (reclassified) Change

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

Revenue                                                                    

  Electronic
  Drilling
  Recorder ((1)) 34,424         34,998    (2)  79,088         81,533    (3)

  Pit Volume
  Totalizer      12,164         12,551    (3)  29,034         30,497    (5)

  Communications
  ((1))           7,801          5,933     31  18,755         16,930     11

  Software        4,767          5,384   (11)  12,130         12,457    (3)

  AutoDriller     7,341          8,603   (15)  17,851         21,054   (15)

  Gas
  Analyzer/Total
  Gas System      5,915          5,654      5  14,649         13,289     10

  Hazardous Gas
  Alarm System    1,092          1,618   (33)   2,694          3,632   (26)

  Mobilization    2,854          3,004    (5)   5,449          5,987    (9)

  Other           6,029          6,367    (5)  12,004         13,878   (14)

Total revenue    82,387         84,112    (2) 191,654        199,257    (4)

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

Change in Accounting Classification

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

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

Three Months Ended June 30, 2012   Reported  Disclosed Change

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

Revenue                                                      

Electronic Drilling Recorder ((1))   34,998     32,202  2,796

Communications ((1))                  5,933      5,669    264

Total revenue                        84,112     81,052  3,060
                                                        
                                                        
                                            Previously

Six Months Ended June 30, 2012     Reported  Disclosed Change

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

Revenue                                                      

Electronic Drilling Recorder ((1))   81,533     75,864  5,669

Communications ((1))                 16,930     16,049    881

Total revenue                       199,257    192,707  6,550

EDR and PVT rental day performance for Canada and the United States is 
reported below:
                                               Canada  
                Three Months Ended June 30,   Six Months Ended June 30,
                  2013    2012       Change    2013    2012      Change
                                        (%)                         (%)

EDR rental days
(#)             11,800  13,600         (13)  54,600  59,900         (9)

PVT rental days
(#)             11,600  13,100         (11)  53,400  59,000         (9)
                                                                       
                                             United States  
                Three Months Ended June 30,   Six Months Ended June 30,
                  2013    2012       Change    2013    2012      Change
                                        (%)                         (%)

EDR rental days
(#)             88,200  98,200         (10) 174,100 199,000        (13)

PVT rental days
(#)             65,300  69,200          (6) 128,900 138,900         (7)

Electronic Drilling Recorder

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

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

Pit Volume Totalizer

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

Communications

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

Software

The Pason DataHub is the Company's data management system that collects, 
stores, and displays drilling data, reports, and real-time information from 
drilling operations. The DataHub provides access to data through a number of 
innovative applications or services including:
    --  Live Rig View (LRV), which provides advanced data viewing,
        directional drilling, and 3D visualization of drilling data in
        real time via a web browser.
    --  Mobile Viewer and Mobile, which allow users to access their
        data on mobile devices including iPhone, iPad, BlackBerry, and
        Android.
    --  WITSML, which provides seamless data sharing with third-party
        applications enhancing the value of data hosted by Pason.
    --  Additional specialized software.

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

Gas Analyzer and Total Gas System

The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the 
Canadian and US markets, measures the total hydrocarbon gases (C1 through 
C4(1)) exiting the wellbore, and then calculates the lag time to show the 
formation depth where the gases were produced. The Gas Analyzer increases the 
functionality that was found in the TGAS product to include the actual 
composition of the gas and further calculates geologic ratios from the gas 
composition to assist in indicating the type of gas, natural gas liquid, or 
oil in the formation. The Company continues to realize increased product 
penetration for this product. For 2013, the Gas Analyzer was installed on 52% 
of Canadian and 23% of US land rigs operating with a Pason EDR system. The 
penetration in Canada is an increase of approximately 4% in market share over 
2012 levels while the US has seen an increase of 5%. The roll out of the Gas 
Analyzer in the International markets continues with anticipated completion in 
most of the major markets by the end of 2013.

AutoDriller

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

Hazardous Gas Alarm System

The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit 
(LEL) gases and 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 Company continues to investigate 
alternative technologies and field trials of an improved system are 
scheduled for the third quarter of 2013.

Discussion of Operations

United States Operations
                  Three Months Ended June 30,     Six Months Ended June 30,
                                  2012                          2012
                   2013 (reclassified) Change    2013 (reclassified) Change

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

Revenue                                                                    

Electronic
Drilling
Recorder ((1))   24,457         25,540    (4)  47,807         50,830    (6)

  Pit Volume
  Totalizer       8,349          8,740    (4)  16,368         17,462    (6)

Communications (
(1))              5,567          3,827     45   9,806          7,732     27

Software          4,176          4,395    (5)   8,436          8,357      1

  AutoDriller     5,151          6,177   (17)  10,131         12,358   (18)

  Gas
  Analyzer/Total
  Gas System      3,343          3,159      6   6,345          5,688     12

  Hazardous Gas
  Alarm System      495            842   (41)   1,141          1,559   (27)

  Mobilization    2,193          2,303    (5)   4,154          4,600   (10)

Other             4,757          4,635      3   7,784          9,061   (14)

Total revenue    58,488         59,618    (2) 111,972        117,647    (5)

Operating costs  22,528         24,148    (7)  44,768         46,816    (4)

Depreciation and
amortization      7,281          8,580   (15)  14,665         16,199    (9)

Segment
operating profit 28,679         26,890      7  52,539         54,632    (4)

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

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

Three Months Ended June 30, 2012   Reported  Disclosed Change

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

Revenue                                                      

Electronic Drilling Recorder ((1))   25,540     23,835  1,705

Communications ((1))                  3,827      3,697    130

Total revenue                        59,618     57,783  1,835

Operating costs                      24,148     22,313  1,835

Revenue per EDR day                     570        556     14

Revenue per Industry day                323        316      7
                                                        
                                            Previously

Six Months Ended June 30, 2012     Reported  Disclosed Change

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

Revenue                                                       

Electronic Drilling Recorder ((1))   50,830     47,640  3,190

Communications ((1))                  7,732      7,481    251

Total revenue                       117,647    114,206  3,441

Operating costs                      46,816     43,375  3,441

Revenue per EDR day                     555        537     18

Revenue per Industry day                317        307     10

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

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

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

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

Revenue was impacted by the following factors:
    --  More products on each rig and new product adoption. Revenue
        increased as a result of a shift in the business units pricing
        model for communications service, additional product
        penetration, primarily with gains in EDR peripheral devices
        (Workstations and Sidekicks), increased PVT market share,
        customer acceptance of the Company's Live Rig View (LRV)
        real-time data software, and a continued increase in the
        adoption of the Gas Analyzer. These factors combined resulted
        in an increase in revenue per EDR day in the second quarter of
        2013 over 2012 levels of $47 (USD $39).
    --  A decrease in EDR rental days of 10% for the three months ended
        June 2013, over the same time period in 2012, and a drop of 13%
        for the first six months of 2013 over 2012 levels.

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

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

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

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

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

The 2013 second quarter segment profit percentage was impacted by the 
following factors:
    --  An increase in communication-related expenses due to the US
        business unit implementing a more robust level of service to
        its customers.
    --  Field technician-related costs and repair costs in the second
        quarter of 2013 compared to 2012 decreased due to the change in
        rig activity and a focus on cost control which led to a
        reduction in repair costs and a drop in field parts and other
        consumables.
    --  Second quarter 2013 depreciation and amortization expense was


    down compared to the same period in 2012
  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.

  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.
  o the above reductions were offset by depreciation on the Gas 
Analyzer system and upgrades to its communication infrastructure to 


    accommodate increased functionality.

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

Canadian Operations
                  Three Months Ended June 30,    Six Months Ended June 30,
                                  2012                         2012
                   2013 (reclassified) Change   2013 (reclassified) Change

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

Revenue                                                                   

Electronic
Drilling
Recorder ((1))    5,622          5,690    (1) 22,996         23,489    (2)

  Pit Volume
  Totalizer       2,089          2,288    (9)  9,380         10,210    (8)

Communications (
(1))              1,864          1,966    (5)  8,243          8,893    (7)

  Software          500            864   (42)  3,503          3,885   (10)

  AutoDriller     1,196          1,533   (22)  5,815          6,872   (15)

  Gas
  Analyzer/Total
  Gas System      1,458          1,534    (5)  6,112          5,777      6

  Hazardous Gas
  Alarm System      279            331   (16)    817          1,289   (37)

  Mobilization       65            104   (38)    241            306   (21)

Other               488            702   (30)  2,409          2,635    (9)

Total revenue    13,561         15,012   (10) 59,516         63,356    (6)

Operating costs   7,898          7,512      5 17,505         18,915    (7)

Depreciation and
amortization      5,315          6,430   (17) 11,336         13,473   (16)

Segment
operating profit    348          1,070   (67) 30,675         30,968    (1)

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

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

Three Months Ended June 30, 2012   Reported  Disclosed Change

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

Revenue                                                      

Electronic Drilling Recorder ((1))    5,690      4,656  1,034

Communications ((1))                  1,966      1,832    134

Total revenue                        15,012     13,844  1,168

Operating costs                       7,512      6,344  1,168

Revenue per EDR day                   1,081        996     85

Revenue per Industry day                968        892     76
                                                             
                                            Previously

Six Months Ended June 30, 2012     Reported  Disclosed Change

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

Revenue                                                      

Electronic Drilling Recorder ((1))   23,489     21,115  2,374

Communications ((1))                  8,893      8,263    630

Total revenue                        63,356     60,352  3,004

Operating costs                      18,915     15,911  3,004

Revenue per EDR day                   1,045        994     51

Revenue per Industry day                989        941     48

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

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

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

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

The factors above combined to result in:
    --  An increase in revenue per EDR day during the second quarter of
        2013 compared to 2012 of 5% ($58) to $1,139, and represents a
        record quarterly high. For the first six months of 2013,
        revenue per EDR increased by $33 to $1,078.
    --  Second quarter revenue per industry day of $992 in 2013
        compared to $968 in 2012. This metric for the first six months
        of 2013 was $1,030, an increase of 4% over the similar period
        in 2012.

The segment profit for the second quarter of 2013 of $0.3 million is a 
decrease of $0.8 million over the 2012 amount. Factors impacting the second 
quarter results include:
    --  The second quarter activity levels in Canada were lower than
        the normal seasonal weakness. Wet conditions in Saskatchewan
        and above normal rainfall in Alberta, combined with continued
        uncertainty around oil and gas pricing, impacted drilling
        activity in the Western Canadian Sedimentary Basin (WCSB). This
        resulted in 1,800 fewer EDR days during the second quarter of
        2013 compared to 2012.
    --  Year-to-date operating costs have declined as a result of a
        drop in field-related costs due in most part to the drop in rig
        activity combined with less repairs being done due to the drop
        in  equipment use.


--  A decrease in depreciation and amortization expense due to:
  o a decrease in the loss on disposal of assets, 
o the replaced TGAS being fully depreciated, resulting in a decline 
in the expense, combined with a drop in the acceleration of 


    depreciation on a portion of its base EDR system,

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

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

International Operations
                   Three Months Ended June 30,    Six Months Ended June 30,
                                  2012                          2012
                   2013 (reclassified)  Change   2013 (reclassified) Change

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

Revenue                                                                     

Electronic
Drilling
Recorder ((1))    4,345          3,768      15  8,285          7,214     15

  Pit Volume
  Totalizer       1,726          1,523      13  3,286          2,825     16

Communications (
(1))                370            140     164    706            305    131

Software             91            125    (27)    191            215   (11)

  AutoDriller       994            893      11  1,905          1,824      4

  Gas
  Analyzer/Total
  Gas System      1,114            961      16  2,192          1,824     20

  Hazardous Gas
  Alarm System      318            445    (29)    736            784    (6)

  Mobilization      596            597 —  1,054          1,081    (2)

Other               784          1,030    (24)  1,811          2,182   (17)

Total revenue    10,338          9,482       9 20,166         18,254     10

Operating costs   7,414          5,890      26 13,808         11,042     25

Depreciation and
amortization      1,810          1,977     (8)  3,339          4,212   (21)

Segment
operating profit  1,114          1,615    (31)  3,019          3,000      1

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

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

Three Months Ended June 30, 2012   Reported  Disclosed  Change

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

Revenue                                                        

Electronic Drilling Recorder ((1))    3,768      3,711      57

Communications ((1))                    140        140 —

Total revenue                         9,482      9,425      57

Operating costs                       5,890      5,833      57
                                                              
                                            Previously

Six Months Ended June 30, 2012     Reported  Disclosed   Change

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

Revenue                                                       

Electronic Drilling Recorder ((1))    7,214      7,109     105

Communications ((1))                    305        305 —

Total revenue                        18,254     18,149     105

Operating costs                      11,042     10,937     105

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

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

A number of factors influenced these results:
    --  Increased EDR days in both Argentina,  Australia and Offshore
        business units for the second quarter and year-to-date, were
        offset with continued industry weakness in Brazil and Mexico.
    --  Australia's revenue continues to increase over the prior year.
        Revenue increased over 60%  from 2012 levels, translating to a
        doubling of operating profit.
    --  Operating costs increased due to importation-related expenses
        in getting additional equipment into certain markets and one
        time administrative costs.

Consolidated Results
               Three Months Ended June 30, Six Months Ended June 30,
                
                  2013    2012      Change    2013   2012     Change

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

Other expenses                                                      

Research and
development      7,349   4,513          63  13,875 10,053         38

Corporate
services         4,480   3,556          26   8,640  7,962          9

Stock-based
compensation     6,871   4,244          62  10,621 11,163        (5)

Other                                                                

  Litigation
  provision     61,614   5,413       1,038  61,614  5,413      1,038

  Foreign
  exchange
  (gain) loss  (1,471)   1,324     — (1,251)  3,035    —

  Other            392     100         292     722    219        230
                79,235  19,150         314  94,221 37,845        149

Q2 2013 versus Q2 2012

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

The Company recorded a net loss of $39.4 million or $0.48 per share compared 
to earnings of $6.8 million or $0.08 per share in the second quarter of 2012. 
The second quarter consolidated results, when compared to 2012 figures, were 
impacted by the following significant items:
    --  An increase in the litigation provision of $56.2 million, to
        $61.6 million.
    --  An increase in research and development costs in the second
        quarter of 2013  as the Company completed the hiring of
        additional staff in the second half of 2012 to support the EDR
        evolution project and other product development initiatives
        combined with increased information technology costs to
        upgrade  the functionality of the Company's internal  network
        infrastructure.
    --  Stock-based compensation increased compared to the second
        quarter of 2012 due to an increase in the  Company's stock
        price in the three months ended June 2013.
    --  A foreign exchange gain recorded in the second quarter of 2013
        compared to a loss in the corresponding period in 2012.

Q2 2013 versus Q1 2013

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

The following items also impacted the comparison to the first quarter 2013 
results:
    --  The additional provision relating to the AutoDriller
        litigation.
    --  An increase in research and development and information
        technology costs.
    --  An increase in stock-based compensation expense due to an
        increase in the Company's stock price of 11% during the
        quarter.
    --  A foreign exchange gain versus a small loss recorded in the
        previous quarter, due in most part to a weakening Canadian
        dollar versus the US dollar.

Second Quarter Conference Call

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

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

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

Condensed Consolidated Interim Balance Sheets

As at                                  June 30, 2013 December 31, 2012

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

Assets                                                                

Current                                                               

  Cash and cash equivalents                  195,445           157,944

  Trade and other receivables                 78,210            84,506

  Prepaid expenses                             1,477             2,920

  Income taxes recoverable                    10,194           —

  Total current assets                       285,326           245,370

Non-current                                                           

  Property, plant and equipment              175,093           174,651

  Intangible assets                           64,816            59,593

  Deferred tax assets                         10,948             8,764

  Total non-current assets                   250,857           243,008

Total assets                                 536,183           488,378

Liabilities and equity                                                

Current                                                               

  Trade payables and accruals                 32,232            25,674

  Litigation provision                       115,785            19,533

  Income taxes payable                       —             3,313

  Stock-based compensation liability          16,917            13,788

  Dividend payable                            10,674            19,691

  Total current liabilities                  175,608            81,999

Non-current                                                           

  Stock-based compensation liability           6,126             2,583

  Deferred tax liabilities                     2,600             2,600

  Litigation provision                       —            32,500

  Total non-current liabilities                8,726            37,683

Equity                                                                 

  Share capital                               80,196            79,393

  Share-based benefits reserve                12,927            12,927

  Foreign currency translation        
  reserve                                      5,111           (8,348)

  Retained earnings                          253,615           284,724

  Total equity                               351,849           368,696

Total liabilities and equity                 536,183           488,378

Condensed Consolidated Interim Statements of Operations
                      Three Months Ended June
                                          30, Six Months Ended June 30,
                                         2012                      2012


                            (reclassified             (reclassified
Six Months Ended
June 30,                  2013      restated)    2013         restated) 
(CDN 000s, except    
per share data)
(unaudited)                ($)            ($)     ($)               ($) 
Revenue                                                                 
Equipment rentals  
  and other             82,387         84,112 191,654           199,257 
Operating expenses                                                      
Rental services       33,192         31,869  67,068            65,570 
Local              
  administration         4,648          5,681   9,013            11,203 
Depreciation and   
  amortization          14,406         16,987  29,340            33,884 
                    52,246         54,537 105,421           110,657 


                                                                       

Operating profit        30,141         29,575  86,233            88,600

Other expenses                                                         

  Research and       
  development            7,349          4,513  13,875            10,053

  Corporate          
  services               4,480          3,556   8,640             7,962

  Stock-based        
  compensation           6,871          4,244  10,621            11,163

  Other expenses        60,535          6,837  61,085             8,667
                        79,235         19,150  94,221            37,845
                                                                       

(Loss) income        
before income taxes   (49,094)         10,425 (7,988)            50,755

  Income taxes         (9,718)          3,653   1,780            14,910

(Loss) net income     (39,376)          6,772 (9,768)            35,845

(Loss) earnings per  
share                                                                  

  Basic                 (0.48)           0.08  (0.12)              0.44

  Diluted               (0.48)           0.08  (0.12)              0.43

Data transmission expenses have been reclassified from revenue to
rental service expense. All comparative figures have been restated
accordingly. This change has no impact on reported EBITDA, funds flow
from operations, or earnings.

Earnings for the three months ended June 30, 2012, have been restated
to correct a non-cash error relating to stock-based compensation
expense of $1,700. The 2012 year-to-date correction was $2,100. Per
share amounts have been adjusted accordingly.

Condensed Consolidated Interim Statements of Other Comprehensive Income
                                                  Six Months Ended June
                    Three Months Ended June 30,                     30,
                                           2012                    2012
                        2013         (restated)    2013      (restated)

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

(Loss) net income   (39,376)              6,772 (9,768)          35,845

Other comprehensive
income (loss)                                                          

  Foreign currency
  translation
  adjustment           7,609              6,303  13,459           4,792

Total comprehensive
(loss) income       (31,767)             13,075   3,691          40,637

Condensed Consolidated Interim Statements of Changes in Equity
                                          Foreign
                          Share-Based    Currency
                             Benefits Translation Retained
                    Share
                  Capital     Reserve     Reserve Earnings Total Equity

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

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

  Net income     
  (restated)      —     —     —   35,845       35,845

  Dividends       —     —     — (18,033)     (18,033)

  Other          
  comprehensive
  income          —     —       4,792  —        4,792

  Exercise of    
  stock options       829     —     —  —          829

Balance at June  
30, 2012           78,442      12,927     (1,043)  300,376      390,702

  Net income     
  (restated)      —     —     —    4,039        4,039

  Dividends       —     —     — (19,691)     (19,691)

  Other          
  comprehensive
  loss            —     —     (7,305)  —      (7,305)

  Exercise of    
  stock options       951     —     —  —          951

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

  Net loss        —     —     —  (9,768)      (9,768)

  Dividends       —     —     — (21,341)     (21,341)

  Other          
  comprehensive
  income          —     —      13,459  —       13,459

  Exercise of    
  stock options       803     —     —  —          803

Balance at June  
30, 2013           80,196      12,927       5,111  253,615      351,849

Earnings for the three months ended June 30, 2012, have been restated
to correct a non-cash error relating to stock-based compensation
expense of $1,700. The 2012 year-to-date correction was $2,100. Per
share amounts have been adjusted accordingly.

Condensed Consolidated Interim Statements of Cash Flows
                      Three Months Ended June   Six Months Ended June
                                          30,                     30,
                                               
                                         2012                    2012
                          2013     (restated)     2013     (restated)

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

Cash flows from      
operating
activities                                                           

  Net (loss) income   (39,376)          6,772  (9,768)         35,845

Adjustment for       
non-cash items:                                                      

  Depreciation and   
  amortization          14,406         16,987   29,340         33,884

  Stock-based        
  compensation           4,064          2,436    5,559          7,475

  Deferred income    
  taxes                (3,859)          4,228  (2,139)          3,679

  Unrealized         
  foreign exchange
  (gain) loss            (214)          (291)    (136)            956

Movements in         
non-cash items:                                                      

  Decrease in trade  
  and other
  receivables           18,659         16,268    8,978          9,734

  Decrease           
  (increase) in
  prepaid expenses       1,082          (539)    1,488          (964)

  (Decrease)         
  increase in
  income taxes         (9,982)            857  (3,112)          9,049

  Increase in        
  litigation
  provision             63,752          5,443   63,752          5,443

  Increase           
  (decrease) in
  trade payables
  and accruals           4,535          (199)    6,496        (2,117)

  Increase in        
  stock-based
  compensation
  liability              2,665          1,600    4,886          3,405

  Effects of         
  exchange rate
  changes                1,507          (457)    2,589           (53)

Cash generated from  
operating
activities              57,239         53,105  107,933        106,336

  Income tax paid      (6,003)        (5,000) (10,503)       (13,227)

Net cash from        
operating
activities              51,236         48,105   97,430         93,109

Cash flows from      
(used in) financing
activities                                                           

  Proceeds from      
  issuance of
  common shares            785            547      803            829

  Purchase of stock  
  options              (1,130)        (1,685)  (3,052)        (2,089)

  Payment of         
  dividends           (10,667)        — (30,358)       (16,380)

Net cash used in     
financing
activities            (11,012)        (1,138) (32,607)       (17,640)

Cash flows (used     
in) from investing
activities                                                           

  Additions to       
  property, plant
  and equipment       (10,470)       (16,331) (20,666)       (33,567)

  Additions to       
  intangibles            (134)          (400)    (139)          (400)

  Deferred           
  development costs    (3,573)        (2,981)  (7,316)        (5,228)

  Proceeds on        
  disposal of
  property, plant
  and equipment        —            300       44            300

  Acquisitions, net  
  of cash acquired     —        (1,274)  —        (1,274)

  Changes in         
  non-cash working
  capital                  239        (1,535)    (515)        (2,397)

Net cash used in     
investing
activities            (13,938)       (22,221) (28,592)       (42,566)

Effect of exchange   
rate on cash and
cash equivalents           291          1,490    1,270            715

Net increase in      
cash and cash
equivalents             26,577         26,236   37,501         33,618

Cash and cash        
equivalents,
beginning of period    168,868        112,375  157,944        104,993

Cash and cash        
equivalents, end of
period                 195,445        138,611  195,445        138,611

Earnings for the three months ended June 30, 2012, have been restated
to correct a non-cash error relating to stock-based compensation
expense of $1,700. The 2012 year-to-date correction was $2,100. Per
share amounts have been adjusted accordingly.

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

Three Months Ended June
30, 2013                   Canada United States International    Total
                              ($)           ($)           ($)      ($)

Revenue                    13,561        58,488        10,338   82,387

Operating costs             7,898        22,528         7,414   37,840

Depreciation and
amortization                5,315         7,281         1,810   14,406

Segment operating profit      348        28,679         1,114   30,141

Research and development                                         7,349

Corporate services                                               4,480

Stock-based compensation                                         6,871

Other expenses                                                  60,535

Income taxes                                                   (9,718)

Net loss                                                      (39,376)

Capital expenditures        6,772         5,463         1,808   14,043

Goodwill                  —        19,456         2,600   22,056

Intangible assets          30,496         8,995         3,269   42,760

Segment assets            216,212       259,290        60,681  536,183

Segment liabilities       102,941        71,918         9,475  184,334
                                                                      

Three Months Ended June 30, 2012 (reclassified, restated)
                                                                      

Revenue                    15,012        59,618         9,482   84,112

Operating costs             7,512        24,148         5,890   37,550

Depreciation and
amortization                6,430         8,580         1,977   16,987

Segment operating profit    1,070        26,890         1,615   29,575

Research and development                                         4,513

Corporate services                                               3,556

Stock-based compensation                                         4,244

Other expenses                                                   6,837

Income taxes                                                     3,653

Net income                                                       6,772

Capital expenditures        7,085        10,611         1,616   19,312

Goodwill                  —        18,862         2,600   21,462

Intangible assets          23,692        12,165         3,903   39,760

Segment assets            133,765       286,338        65,063  485,166

Segment liabilities        66,832        16,414        11,218   94,464
                                                                      
                                                                      

Six Months Ended June 30,
2013                       Canada United States International    Total
                              ($)           ($)           ($)      ($)

Revenue                    59,516       111,972        20,166  191,654

Operating costs            17,505        44,768        13,808   76,081

Depreciation and
amortization               11,336        14,665         3,339   29,340

Segment operating profit   30,675        52,539         3,019   86,233

Research and development                                        13,875

Corporate services                                               8,640

Stock-based compensation                                        10,621

Other expenses                                                  61,085

Income taxes                                                     1,780

Net loss                                                       (9,768)

Capital expenditures       13,799         9,769         4,414   27,982

Goodwill                  —        19,456         2,600   22,056

Intangible assets          30,496         8,995         3,269   42,760

Segment assets            216,212       259,290        60,681  536,183

Segment liabilities       102,941        71,918         9,475  184,334
                                                                      

Six Months Ended June 30, 2012 (reclassified, restated)
                                                                      

Revenue                    63,356       117,647        18,254  199,257

Operating costs            18,915        46,816        11,042   76,773

Depreciation and
amortization               13,473        16,199         4,212   33,884

Segment operating profit   30,968        54,632         3,000   88,600

Research and development                                        10,053

Corporate services                                               7,962

Stock-based compensation                                        11,163

Other expenses                                                   8,667

Income taxes                                                    14,910

Net income                                                      35,845

Capital expenditures       13,127        23,511         2,157   38,795

Goodwill                  —        18,862         2,600   21,462

Intangible assets          23,692        12,165         3,903   39,760

Segment assets            133,765       286,338        65,063  485,166

Segment liabilities        66,832        16,414        11,218   94,464

Data transmission expenses have been reclassified from revenue to
rental service expense. All comparative figures have been restated
accordingly. This change has no impact on reported EBITDA, cash flow
from operating activities, or earnings.

Earnings for the three months ended June 30, 2012, have been restated
to correct a non-cash error relating to stock-based compensation
expense of $1,700. The 2012 year-to-date correction was $2,100. Per
share amounts have been adjusted accordingly.

Correction of Error

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

Three Months Ended June 30, 2012        Disclosed Adjustment Restated
                                              ($)        ($)      ($)

Statement of Operations                                              

  Stock based compensation expense          2,544      1,700    4,244

  Net Income                                8,472    (1,700)    6,772
                                                            
                                       Previously

Six Months Ended June 30, 2012          Disclosed Adjustment Restated
                                              ($)        ($)      ($)

Balance Sheet                                                        

  Stock based compensation liability -                         11,818
  current                                   9,718      2,100

  Retained earnings                       302,476    (2,100)  300,376

Statement of Operations                                               

  Stock based compensation expense          9,063      2,100   11,163

  Net Income                               37,945    (2,100)   35,845

Other Expenses
                  Three Months Ended June
                                      30, Six Months Ended June 30,
                     2013            2012    2013               2012
                      ($)             ($)     ($)               ($)

Litigation
provision          61,614           5,413  61,614             5,413

Foreign exchange
(gain) loss       (1,471)           1,324 (1,251)             3,035

Other                 392             100     722               219

Other expenses     60,535           6,837  61,085             8,667

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

On August 1,2013, the Company and the plaintiff in the litigation negotiated a 
final resolution to all three of these cases. The June 30, 2013 consolidated 
financial statements have been adjusted to reflect the final payment required 
to resolve all claims against the Company regarding the infringement.
                                                 Foreign
                         Balance,               Exchange Balance,
                     December 31,             Adjustment June 30,
                             2012 Provision and Interest     2013
                              ($)       ($)          ($)      ($)

Provision for patent
infringement               52,033    61,614        2,138  115,785

Pason Systems Inc.

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

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

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

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

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



SOURCE  Pason Systems Inc. 
For more information about Pason Systems Inc., visit the company's  website 
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 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/August2013/02/c3338.html 
CO: Pason Systems Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Aug/02/2013 22:16 GMT
 
 
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