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Pason Reports Third Quarter 2013 Results

CALGARY, Nov. 4, 2013 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 
2013 third quarter results. 
Performance Data 


               Three Months Ended September 30,  Nine Months Ended September 30,
                                   2012                             2012
                         (reclassified)                   (reclassified)
                    2013     (restated)  Change      2013     (restated)  Change

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

Revenue ((1))                                 8                                 
                 104,016         96,262           295,670        295,519 —

EBITDA ((2))      50,131         47,665       5    82,104        143,467    (43)

  As a % of                        49.5                             48.5
  revenue           48.2                    (3)      27.8                   (43)

  Per share -                      0.58                             1.75
  basic             0.61                      5      1.00                   (43)

  Per share -                      0.58                             1.74
  diluted           0.60                      3      1.00                   (43)

Cash flow from                              (5)                                2
operating
activities (
(2))              39,837         41,854           137,267        134,963

  Per share -                      0.51                             1.65
  basic             0.49                    (4)      1.67                      1

  Per share -                      0.51                             1.64
  diluted           0.48                    (6)      1.67                      2

Earnings                                   (49)                                 
(loss) ((3))       9,135         17,742             (633)         53,587 —

  Per share -                      0.22                             0.65        
  basic             0.11                   (50)    (0.01)                —

  Per share -                      0.21                             0.65        
  diluted           0.11                   (48)    (0.01)                —

Capital                                      32                             (10)
expenditures      22,402         16,983            50,384         55,778

Working                                    (27)                             (27)
capital ((3))    120,346        165,486           120,346        165,486

Total assets     555,869        480,637      16   555,869        480,637      16

Total                                                                           
long-term debt   —        — —   —        — —

Total equity     343,950        398,851    (14)   343,950        398,851    (14)

Market                                       39                               39
capitalization 1,865,218      1,345,702         1,865,218      1,345,702

Cash dividends                                                                77
declared ((4))      0.13        — —      0.39           0.22

Common shares                                                             
outstanding
(#)        


                             81,985                           81,948        
  Basic           82,122                —    82,087                — 
Diluted         83,269         82,757       1    82,087         82,500     (1) 
Shares                                                                          
outstanding                             —                          —
end of period
(#)               82,132         82,005            82,132         82,005 
(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. These Non-GAAP measures provide readers with
     additional information regarding the Company's ability to generate
     funds to finance its operations, research and development, and
     capital expenditure program.

(3)  Earnings for the three months ended September 30, 2012, have been
     restated to correct a $1,600 non-cash error relating to
     stock-based compensation expense. The 2012 year-to-date correction
     was $3,700. 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

Pason demonstrated robust operational performance during the third quarter, 
despite continued declines in drilling activity in North America. Drilling 
days in the United States were 8% lower in the third quarter of 2013 than in 
the third quarter of the previous year. In Canada, drilling days were up 1% 
for the period. As in previous periods, activity in international markets was 
higher than a year ago, but the picture there varied widely between countries.

Total revenue increased 8% to $104.0 million, an all-time high for the third 
quarter. As in previous quarters, all of Pason's 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 rate, at 35%, followed by the 
Gas Analyzer segment at 16%.

EBITDA for the third quarter was up 5% to $50.1 million, while cash flow from 
operating activities was down 5% to $39.8 million due to an increase in 
working capital for the quarter.

The Company recorded a net profit of $9.1 million, or $0.11 per share, 
compared to earnings of $17.7 million, or $0.22 per share, in the third 
quarter of 2012. This year's third quarter results, when compared to 2012 
figures, were impacted by the following items:
    --  Stock-based compensation expense increased by $10.3 million due
        to a significant increase in the Company's stock price;
    --  The 2009 purchase of Petron contained an earn-out clause that
        was conditional on the successful commercialization of a
        revenue stream based on a technology developed by Petron. Pason
        and the former shareholders of Petron agreed to an amount of
        $3.1 million;
    --  R&D and Corporate service costs increased by $2.2 million as
        the Company hired additional staff to support product
        development and business development initiatives;
    --  Income taxes were higher by $2.2 million, given that the
        effective tax rate for the quarter was significantly higher
        than the statutory rate of 25% due to a number of factors,
        including non-deductible accounting expenses (primarily
        stock-based compensation expense).

Capital expenditures for the third quarter were $22.4 million, up from $17.0 
million the previous year, as deployment of new hardware - including Pason Rig 
Display (a ruggedized Touch Screen Computer) and components of the EDR 
evolution- ramped up.

On September 30, our cash position stood at $198.1 million. The payment of 
US$112.0 million, announced on August 2(nd), required to resolve all claims 
against Pason regarding the infringement lawsuits relating to our AutoDriller, 
will be made during the fourth quarter. There is no debt on the balance sheet.

We are increasing our quarterly dividend by 8% to $0.14 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. Activity 
in the key oil plays, including Bakken, Permian and Eagle Ford remained 
robust, but there has been a pullback in conventional oil activity.

While industry days were down 8% in the third quarter of 2013 compared to 
third quarter of 2012, revenue was up 7% to $60.2 million. On average, 964 US 
land rigs were operating Pason equipment during the third quarter of 2013, 
compared to 1,019 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 US$573 in the third 
quarter of 2012 to US$615 in 2013. Communications and Gas Analyzer showed 
above average growth rates during the period. EDR market share for the third 
quarter of 2013 was 57%, unchanged from the previous quarter and up 2% from 
the same period in 2012.

Revenue for 3PS for the quarter was $4.9 million and EBITDA was $0.5 million.

Overall, operating costs in the US segment increased by 6% due to the purchase 
of additional satellite bandwidth (which is treated as an operating expense), 
and depreciation and amortization decreased by 12%. As a result, our US 
business unit was able to generate an operating profit of $30.5 million in the 
third quarter, an increase of 13% over 2012.

Canada

Drilling activity in Canada was slightly higher in the third quarter of 2013 
than in the previous year, with industry days up 1%. Unfavourable weather and 
hesitance by producers to commit additional capital spending limited activity 
during the period. Our Canadian business unit was able to modestly grow market 
share and increase product penetration. Revenue for the third quarter was up 
6% to $32.3 million. On average, 309 Canadian land rigs were operating Pason 
equipment compared to 299 the year before. EDR market share in the third 
quarter of 2013 was 93% compared to 91% the previous year and 87% the previous 
quarter.

Average daily revenue per rig increased by 3% from $1,088 in the third quarter 
of 2012 to $1,123 in 2013. EDR (including Workstations and Sidekicks), 
Communications, and Gas Analyzer showed above average growth rates during the 
period.

Operating costs were up by 10% due to the purchase of additional satellite 
bandwidth, and depreciation and amortization decreased by 3%. As a result, our 
Canadian business unit was able to generate an operating profit of $15.9 
million for the third quarter, compared to $14.6 million for the same period 
in 2012.

International

Our International business unit, which includes our businesses in Latin 
America, Australia, and Offshore & Eastern Hemisphere, had a good quarter. 
Revenue increased by 21% to $11.5 million for the third quarter 2013 compared 
to the third quarter 2012. Revenue was up 12% from the previous quarter.

Strong revenue growth in Australia, Argentina and Offshore & Eastern 
Hemisphere was partially offset by continued industry weakness in Brazil and 
Mexico.

Operating costs were up 22% and depreciation and amortization were down 14%. 
The increase in operating costs was driven primarily by higher importation 
costs as we delivered additional equipment to certain markets. As a result, 
the International business unit was able to generate a quarterly operating 
profit of $2.5 million, up 67% the previous year and up 127% from the previous 
quarter.

Outlook

Beyond the seasonal increase in Canadian drilling activity in the winter 
drilling season, we expect to see an increase in capital spending by the 
larger producers in 2014, and a gradual increase in natural gas directed 
drilling in Northeastern British Columbia related to West Coast LNG projects. 
In the United States, we expect modest activity increases primarily from 
higher natural gas activity going forward. Internationally, we anticipate 
robust but uneven growth across countries and regions.

In 2014, we anticipate that some of the new products and product enhancements, 
both on the hardware and software sides, will start gaining traction in the 
North American market. We also expect continued growth in the Offshore & 
frontier segment where Pason equipment is already deployed on about 30 
drilling rigs.

Our capital expenditure budget for the next 12 months is $96 million, $61 
million of which is directed towards new hardware that can generate 
incremental revenue or save operating costs, $21 million for maintenance 
capital, and $14 million for capitalized R&D.

Our cash-generating capacity and our cash position are more than sufficient to 
cover new business development, planned equipment upgrades and the dividend.

(Signed)

Marcel Kessler
President and Chief Executive Officer November4, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of 
November4, 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 Third Quarter
              Three Months Ended September 30,       Nine Months Ended September 30,
                             2012                                  2012
                   (reclassified)           2011         (reclassified)           2011
              2013     (restated) (reclassified)    2013     (restated) (reclassified)

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

Revenue (                                 91,461                               245,225
(1))       104,016         96,262                295,670        295,519

EBITDA (                                  53,162                               123,741
(2))        50,131         47,665                 82,104        143,467

  As a %                     49.5                                  48.5
  of
  revenue     48.2                          58.1    27.8                          50.5

  Per                        0.58                                  1.75
  share -
  basic       0.61                          0.65    1.00                          1.51

  Per                        0.58                                  1.74
  share -
  diluted     0.60                          0.64    1.00                          1.50

Cash flow
from
operating
activities
((2))       39,837         41,854         30,292 137,267        134,963         89,878

  Per                        0.51                                  1.65
  share -
  basic       0.49                          0.37    1.67                          1.10

  Per                        0.51                                  1.64
  share -
  diluted     0.48                          0.37    1.67                          1.09

Earnings                                  28,547                                54,521
(loss) (
(3))         9,135         17,742                  (633)         53,587

  Per                        0.22                                  0.65
  share -
  basic       0.11                          0.35  (0.01)                          0.67

  Per                        0.21                                  0.65
  share -
  diluted     0.11                          0.35  (0.01)                          0.66

Total                                    435,783                               435,783
assets     555,869        480,637                555,869        480,637

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. These Non-GAAP measures provide readers with
     additional information regarding the Company's ability to generate
     funds to finance its operations, research and development, and
     capital expenditure program.

(3)  Earnings for the three months ended September 30, 2012, have been
     restated to correct a $1,600 non-cash error relating to
     stock-based compensation expense. The 2012 year-to-date correction
     was $3,700. Per share amounts have been adjusted accordingly.

Overall Performance
                  Three Months Ended September    Nine Months Ended September
                                           30,                            30,
                                   2012                          2012
                    2013 (reclassified) Change    2013 (reclassified)  Change

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

Revenue                                                                      

  Electronic
  Drilling
  Recorder ((1))  42,770         39,626      8 121,858        121,159       1

  Pit Volume                                 7                            (1)
  Totalizer       15,624         14,623         44,658         45,120

  Communications
  ((1))           10,478          7,764     35  29,233         24,694      18

  Software         6,457          6,271      3  18,587         18,728     (1)

  AutoDriller      9,698          9,935    (2)  27,549         30,989    (11)

  Gas                                       16                             12
  Analyzer/Total
  Gas System       8,267          7,117         22,916         20,406

  Hazardous Gas                           (30)                           (27)
  Alarm System     1,240          1,781          3,934          5,413

  Mobilization     2,946          3,180    (7)   8,395          9,167     (8)

  Other            6,536          5,965     10  18,540         19,843     (7)

Total revenue    104,016         96,262      8 295,670        295,519 —

(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 September 30,
2012                                      Reported  Disclosed  Change 
(000s)                                         ($)        ($)     ($) 
Revenue                                                               
Electronic Drilling Recorder ((1))          39,626     36,852   2,774 
Communications ((1))                         7,764      7,357     407 
Total revenue                               96,262     93,081   3,181 


                                                    Previously

Nine Months Ended September 30, 2012       Reported  Disclosed  Change

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

Revenue                                                               

Electronic Drilling Recorder ((1))          121,159    112,716   8,443

Communications ((1))                         24,694     23,406   1,288

Total revenue                               295,519    285,788   9,731

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

EDR rental 28,400 27,500              3  83,000  87,400           (5)
days (#)

PVT rental 28,000 27,300              3  81,400  86,300           (6)
days (#)
                                                                     
                                          United States
           Three Months Ended September   Nine Months Ended September
                                    30,                         30,  
             2013   2012         Change    2013    2012        Change
                                    (%)                           (%)

EDR rental 88,700 93,700            (5) 262,800 292,700          (10)
days (#)

PVT rental 68,100 66,800              2 197,000 205,700           (4)
days (#)

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 
increased 8% for the third quarter of 2013 compared to the same period in 
2012 and on a year-to-date basis revenue was up 1%. This increase is 
attributable to continued growth in demand for EDR peripheral devices in all 
of the Company's major markets, an increase in US market share over the third 
quarter of 2012 (57% vs 55%), a similar increase in the Canadian market share 
(93% vs 91%), a strengthening US dollar relative to the Canadian dollar, and 
new revenue in frontier markets. These factors were offset by a drop in rig 
activity in the US market (third quarter and year-to-date) while third quarter 
Canadian rig activity was relatively flat year-over-year, but down 6% on a 
year-to-date basis. Canadian EDR days were up 3% in the three months ended 
September 2013, while US EDR days dropped by 5%. On a year-to-date basis, EDR 
days dropped 5% in Canada and 10% in the US.

During the first nine months of 2013, the Pason EDR was installed on 95% 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 an increase in product 
penetration in the US market and the foreign exchange fluctuation, offset by 
the change in rig activity previously described above. During the first nine 
months of 2013, the PVT was installed on 98% of rigs with a Pason EDR in 
Canada and 75% 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. In addition, the US business unit increased its revenue 
as a result of a shift in the pricing model for communication services.

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 nine months of 2013, 97% of the Company's Canadian customers 
and 90% 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) 
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 55% 
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 7%. 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 nine months of 2013, the AutoDriller 
was installed on 73% of Canadian and 46% of US land rigs operating with a 
Pason EDR system, compared to 78% and 49%, 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 suspended 
the functionality of this portion of the HGAS while it investigates a solution 
to the problem. The Company initiated field trials with a new technology in 
the third quarter of 2013 and while results showed improvements in performance 
the Company continues to research alternatives.

Discussion of Operations

United States Operations
                 Three Months Ended September
                             30,              Nine Months Ended September 30,
                                  2012                            2012
                   2013 (reclassified) Change      2013 (reclassified) Change

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

Revenue                                                                      

  Electronic                                                            
  Drilling
  Recorder ((1)) 25,620         24,434      5    73,427         75,264    (2)

  Pit Volume                                                            
  Totalizer       8,836          8,312      6    25,204         25,774    (2)

  Communications                                                        
  ((1))           5,645          3,523     60    15,451         11,255     37

  Software        4,442          4,309      3    12,878         12,666      2

  AutoDriller     5,212          5,791   (10)    15,343         18,149   (15)

  Gas                                                                   
  Analyzer/Total
  Gas System      3,479          2,957     18     9,824          8,645     14

  Hazardous Gas                                                         
  Alarm System      525            810   (35)     1,666          2,369   (30)

  Mobilization    2,233          2,334    (4)     6,387          6,934    (8)

  Other           4,234          3,928      8    12,018         12,989    (7)

Total revenue    60,226         56,398      7   172,198        174,045    (1)

Operating costs  22,268         20,922      6    67,036         67,738    (1)

Depreciation and                                                        
amortization      7,480          8,469   (12)    22,145         24,668   (10)

Segment                                                                 
operating profit 30,478         27,007     13    83,017         81,639      2


 Data transmission expenses have been reclassified from revenue to
(1)  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 September 30, 2012 Reported  Disclosed  Change

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

Revenue                                                          

Electronic Drilling Recorder ((1))      24,434     22,800   1,634

Communications ((1))                     3,523      3,402     121

Total revenue                           56,398     54,643   1,755

Operating costs                         20,922     19,167   1,755

Revenue per EDR day                        570        551      19

Revenue per Industry day                   316        305      11
                                               Previously

Nine Months Ended September 30, 2012  Reported  Disclosed  Change

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

Revenue                                                          

Electronic Drilling Recorder ((1))      75,264     70,440   4,824

Communications ((1))                    11,255     10,883     372

Total revenue                          174,045    168,849   5,196

Operating costs                         67,738     62,542   5,196

Revenue per EDR day                        560        542      18

Revenue per Industry day                   316        306      10

US segment revenue increased by 7% in the third quarter of 2013 over the 2012 
comparable period (5% increase when measured in USD), while revenue from the 
rental of instrumentation equipment increased 6% for the quarter (USD 2%).

For the first nine months of 2013, US segment revenue decreased by 1% (USD 3%) 
over the previous year.

The number of US drilling days decreased approximately 8% in the third quarter 
of 2013 versus the third 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 an increase of 6% (USD 2%) 
over 2012 levels.

Year-to-date drilling days decreased 11% over 2012 levels while rental revenue 
continued to hold up well against the drop in activity with only a modest 
decrease of 1% (USD 3%).

Revenue was impacted by the following factors:
    --  More products on each rig, new product adoption and a favorable
        exchange rate. 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 an increase in the
        adoption of the Gas Analyzer. These factors combined resulted
        in an increase in revenue per EDR day in the third quarter of
        2013 over 2012 levels of $68 (USD $42).
    --  A decrease in EDR rental days of 5% for the three months ended
        September 30, 2013, over the same time period in 2012, and a
        decrease of 10% for the first nine 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 third quarter of 2013 of $638 (USD $615) 
compared to $570 (USD $573) during the same time period in 2012. For the first 
nine months, revenue per EDR day increase by $57 (USD $45) to $617 (USD $603) 
over 2012 amounts.

Revenue per industry day for the third quarter of the year was $365 (USD $351) 
compared to $316 (USD $317) in 2012. On a year-to-date basis this metric 
increased by $36 (USD $28) to $352 (USD $344).

US market share was 57% during the first nine months of 2013, a slight 
increase from the same level as the corresponding period in 2012.

Segment profit, as a percentage of revenue, was 51% for the third quarter of 
2013 compared to 48% for the corresponding period in 2012.

The 2013 third quarter and year-to-date 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. The business unit revised its pricing structure
        to reflect this increased level of performance.
    --  Field technician-related costs in the third quarter of 2013
        compared to 2012 increased due to an increase in employee
        benefit related expenses (mostly health care claims) reduced by
        a  drop in field parts, repairs costs, and other consumables
        due to the change in rig activity.
    --  Third quarter 2013 depreciation and amortization expense was
        down compared to the same period in 2012 due to the following:
    --  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.
    --  in the first quarter of 2012, the Company 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 reduced
        the amount of accelerated depreciation being recorded.
    --  the above reductions were offset by an increase in depreciation
        on the Gas Analyzer system and upgrades to its communication
        infrastructure to accommodate increased functionality.

Canadian Operations
                 Three Months Ended September   Nine Months Ended September
                             30,                            30,
                                  2012                           2012
                   2013 (reclassified) Change     2013 (reclassified) Change

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

Revenue                                                                     

  Electronic                                                           
  Drilling
  Recorder ((1)) 12,326         11,279      9   35,322         34,768      2

  Pit Volume                                                           
  Totalizer       4,983          4,782      4   14,363         14,992    (4)

  Communications                                                       
  ((1))           4,409          4,122      7   12,652         13,015    (3)

  Software        1,899          1,839      3    5,402          5,724    (6)

  AutoDriller     3,232          3,260    (1)    9,047         10,132   (11)

  Gas                                                                  
  Analyzer/Total
  Gas System      3,593          3,169     13    9,705          8,946      8

  Hazardous Gas                                                        
  Alarm System      326            545   (40)    1,143          1,834   (38)

  Mobilization      114            154   (26)      355            460   (23)

  Other           1,371          1,193     15    3,780          3,828    (1)

Total revenue    32,253         30,343      6   91,769         93,699    (2)

Operating costs   9,383          8,518     10   26,888         27,433    (2)

Depreciation and
amortization      6,995          7,245    (3)   18,331         20,718   (12)

Segment
operating profit 15,875         14,580      9   46,550         45,548      2


Data transmission expenses have been reclassified from revenue to
(1) 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 September 30, 2012 Reported    Disclosed   Change

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

Revenue                                                               

Electronic Drilling Recorder ((1))      11,279       10,247    1,032  

Communications ((1))                     4,122        3,836      286  

Total revenue                           30,343       29,025    1,318  

Operating costs                          8,518        7,200    1,318  

Revenue per EDR day                      1,088        1,040       48  

Revenue per Industry day                   984          948       36  
                                                 Previously           

Nine Months Ended September 30, 2012  Reported    Disclosed   Change

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

Revenue                                                               

Electronic Drilling Recorder ((1))      34,768       31,362    3,406  

Communications ((1))                    13,015       12,099      916  

Total revenue                           93,699       89,377    4,322  

Operating costs                         27,433       23,111    4,322  

Revenue per EDR day                      1,058        1,009       49  

Revenue per Industry day                   987          943       44  

Canadian segment revenue increased 6% for the three months ended 
September30, 2013, compared to the same period in 2012. This increase is a 
result of a 1% increase in the number of drilling industry days from 2012 
levels, combined with increased product penetration in a number of different 
products and an increase in market share to 93% vs 91% in 2012. On a 
year-to-date basis, revenue decreased by 2%, compared to the first nine months 
of 2012.

EDR rental days increased 3% in the third quarter of 2013 over 2012 levels. 
The decrease in EDR rental days for the first nine months of 2013 was 5%, 
compared to a decrease in industry days of 6%.

Canadian market share was 95% during the first nine months of 2013, compared 
to 94% in the corresponding period in 2012.

The Canadian business unit was able to increase its revenue over and above the 
change in industry activity in the third 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 and Hazardous Gas Alarm System described 
previously.

The factors above combined to result in:
    --  An increase in revenue per EDR day during the third quarter of
        2013 compared to 2012 of 3% ($35) to $1,123. For the first nine
        months of 2013, revenue per EDR increased by $35 to $1,093.
    --  Third quarter revenue per industry day of $1,041 in 2013
        compared to $984 in 2012. This metric for the first nine months
        of 2013 was $1,034, an increase of 5% over the similar period
        in 2012.

The segment profit for the third quarter of 2013 of $15.9 million is up $1.3 
million over the 2012 amount. Factors impacting the third quarter results 
include:
    --  Third quarter activity levels in Canada were modestly stronger
        year-over-year, although  unfavorable weather (flooding in
        Southern Alberta and wet conditions in Northern Alberta and
        Northeast British Columbia) impacted drilling activity in the
        Western Canadian Sedimentary Basin (WCSB).
    --  Third quarter operating expenses include an increase in
        satellite bandwidth costs as an additional segment was added to
        improve the customer experience at the rig. These costs should
        drop slightly going forward as a portion of the bandwidth
        considered to be redundant is returned to the supplier.


--  A decrease in depreciation and amortization expense due to:
  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 depreciation costs relating to the Gas
    Analyzer, increased costs relating to the amortization of
    capitalized research and development (R&D) costs (as a result of
    the deployment of new software applications), and the write-off of
    previously capitalized R&D costs.

The segment profit, as a percent of revenue, was 49% for the third quarter of 
2013, compared to 48% for the 2012 time period. Factors impacting the 
year-to-date results include weakness in drilling activity in the first half 
of 2013, which led to a decrease in industry days of 5,900 for the nine 
months ended, with a corresponding decrease in EDR rental days of 4,400, 
combined with similar cost factors that impacted the third quarter results, 
described above.

International Operations
                 Three Months Ended September    Nine Months Ended September  
                                        30,                              30,
                                  2012                           2012         
                   2013 (reclassified) Change     2013 (reclassified) Change

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

Revenue                                                                       

  Electronic      4,824          3,913     23   13,109         11,127     18  
  Drilling
  Recorder ((1))

  Pit Volume      1,805          1,529     18    5,091          4,354     17  
  Totalizer

  Communications    424            119    256    1,130            424    167  
  ((1))

  Software          116            123    (6)      307            338    (9)  

  AutoDriller     1,254            884     42    3,159          2,708     17  

  Gas             1,195            991     21    3,387          2,815     20  
  Analyzer/Total
  Gas System

  Hazardous Gas     389            426    (9)    1,125          1,210    (7)  
  Alarm System

  Mobilization      599            692   (13)    1,653          1,773    (7)  

  Other             931            844     10    2,742          3,026    (9)  

Total revenue    11,537          9,521     21   31,703         27,775     14  

Operating costs   7,179          5,879     22   20,987         16,921     24  

Depreciation and  1,844          2,138   (14)    5,183          6,350   (18)  
amortization

Segment           2,514          1,504     67    5,533          4,504     23  
operating profit

(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 September
30, 2012                           Reported      Disclosed      Change 
(000s)                                  ($)            ($)         ($) 
Revenue                                                                
Electronic Drilling Recorder          3,913          3,805         108
((1)) 
Communications ((1))                    119            119      — 
Total revenue                         9,521          9,413         108 
Operating costs                       5,879          5,771         108 
                                            Previously    
Nine Months Ended September
30, 2012                           Reported      Disclosed      Change 
(000s)                                  ($)            ($)         ($) 
Revenue                                                                
Electronic Drilling Recorder         11,127         10,914         213
((1)) 
Communications ((1))                    424            424     — 
Total revenue                        27,775         27,562         213 
Operating costs                      16,921         16,708         213 
Revenue in the International operations increased 21% in the third quarter of 
2013 from the same period in 2012. Year-to-date revenue increased 14%. 
Operating profit is up by $1.0 million for the third quarter of 2013 over 2012 
results. Operating profit for the first nine months of 2013 is up 23% over the 
similar period in 2012. 
A number of factors influenced these results: 


    --  In Latin America, increased activity in Argentina and the
        Andean region offset continued market weakness in Brazil and
        Mexico. Revenue was up almost 7% over the similar period in
        2012.
    --  Australia revenue increased almost 60% from 2012 levels as
        drilling activity continues to increase across the region,
        translating to a doubling of operating profit.
    --  Company continues to increase its customer base in areas the
        Company has identified as "frontier markets", including the
        Middle East and North Africa (MENA) regions. These new markets,
        combined with increases in market share in the Gulf of Mexico,
        resulted in an increase in year-to-date revenue of 45% over
        2012 levels.
    --  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 September 30,  Nine Months Ended September 30,
                                   2012                             2012            
                      2013   (restated)    Change      2013   (restated)    Change

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

Other                                                                               
expenses

Research and         6,557        5,381        22    20,432       15,434        32  
development

Corporate            4,414        3,435        29    13,054       11,397        15  
services

Stock-based         15,746        5,391       192    26,367       16,554        59  
compensation
((1))

Other                                                                               

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

  Foreign              629        1,528      (59)     (622)        4,563   —  
  exchange
  loss
  (gain)

  Earn-out           3,071      —   —     3,071      —   —  
  provision

  Impairment       —        2,636     (100)   —        2,636     (100)  
  loss

  Other                384          298        29     1,106          517       114  
                    30,801       18,669        65   125,022       56,514       121  

(1) During the year ended December 31, 2012, the Company identified a
    non-cash accounting error related to stock-based compensation being
    understated. Three months ended September 30, 2012 has been
    restated by $1,600 and 2012 year-to-date has been restated by
    $3,700.

Q3 2013 versus Q3 2012

The active rig count in US dropped by approximately 8% over the third quarter 
of 2012, while the Canadian market increased marginally, while both segments 
saw an increase in their market share. The International market saw a modest 
increase in total drilling days, with pockets of significant growth (Offshore, 
Australia) combined with continued weakness in other markets (Brazil, Mexico). 
This change in activity, combined with a significant increase in stock-based 
compensation expense recorded in the third quarter of 2013 and a relatively 
high effective tax rate led to a decline in net profit in the third quarter of 
the current year relative to the similar period in 2012.

The Company recorded a net profit of $9.1 million or $0.11 per share in the 
third quarter of 2013 compared to earnings of $17.7 million or $0.22 per share 
in the third quarter of 2012. The third quarter consolidated results, when 
compared to 2012 figures, were impacted by the following significant items:
    --  An increase in research and development costs in the third
        quarter of 2013 as the Company completed the hiring of
        additional staff in the second half of 2012 to support the EDR
        innovation project and other product development initiatives.
    --  Corporate service costs relate primarily to personnel located
        in the corporate headquarters who directly support the field
        operations and perform other corporate functions. These costs
        have increased over the third quarter of 2012 as a result of
        additional resources being dedicated to business development
        and initiatives to enhance our customers' experience. In
        addition, the Company incurred legal expenses during the third
        quarter of 2013 relating to the Autodriller litigation.
    --  Stock-based compensation expense increased over the third
        quarter of 2012 due to a significant increase in the Company's
        stock price during the three months ended September, 2013.
    --  Part of the 2009 purchase of Petron was an earn-out clause that
        was conditional on the successful commercialization of a
        revenue stream generated from a product designed by Petron. In
        the third quarter of 2013, the Company and the previous
        shareholders of Petron agreed to an amount of $3.1 million and
        a provision for this amount was recorded.
    --  In the first half of 2012, the Company made a formal decision
        to dispose of its US water treatment facility. As a result, a
        non-cash impairment loss of $2.6 million was recorded in the
        third quarter of 2012.
    --  The effective tax rate for the third quarter of 2013 is
        significantly higher than the expected statutory rate of 25%


    due to the following factors:
  o The significant non-deductible, non-cash expense provision for the 
expensing of common share options under the Black-Scholes pricing 
model. 
o The Petron earn-out provision which is non-deductible in the 
current quarter. 
o Larger profits, in relative terms, realized in tax jurisdictions 


    with higher tax rates than the statutory rate.

Q3 2013 versus Q2 2013

The Company's second quarter is usually its weakest due in most part to the 
seasonality of the Canadian market. The Canadian business unit realized a 
profit of $15.9 million for the three months ended September 2013, compared to 
a $0.3 million profit in the second quarter of 2013. The US business unit 
realized a profit of $30.5 million for the three months ended September 2013 
compared to a $28.7 million profit in the second quarter of 2013.

The following items also impacted the comparison to the second quarter 2013 
results:
    --  In the second quarter of 2013 an additional provision of $61.6
        million relating to the AutoDriller litigation was recorded.
    --  An increase in stock-based compensation expense of $8.8 million
        compared to the second quarter of the current year due to an
        increase in the Company's stock price of 19% during the third
        quarter.
    --  Increase in depreciation and amortization expense of $1.9
        million due to the Company recording into income in the second
        quarter of 2013 R&D tax credits received combined with a third
        quarter write-off of previously capitalized R&D costs.
    --  A foreign exchange loss versus a gain recorded in the previous
        quarter, due in most part to a weakening Canadian dollar versus
        the US dollar.
    --  Petron earn-out provision of $3.1 million recorded in the third
        quarter of 2013.

Third Quarter Conference Call

Pason will be conducting a conference call for interested analysts, brokers, 
investors and media representatives to review its third quarter results at 
9:00 a.m. (Calgary time) on Tuesday, November 5, 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 
35071566.

Pason Systems Inc. is a leading global provider of specialized data management 
systems for drilling rigs. Our solutions, which include data acquisition, 
wellsite reporting, remote communications, and web-based information 
management, enable collaboration between the rig and the office. 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                          September 30, 2013   December 31, 2012  

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

Assets                                                                 

Current                                                                

  Cash and cash equivalents               198,149             157,944  

  Trade and other                          88,749              84,506  
  receivables

  Prepaid expenses                          3,520               2,920  

  Income taxes recoverable                 22,657             —  

  Total current assets                    313,075             245,370  

Non-current                                                            

  Property, plant and                     177,080             174,651  
  equipment

  Intangible assets                        65,714              59,593  

  Deferred tax assets                     —               8,764  

  Total non-current assets                242,794             243,008  

Total assets                              555,869             488,378  

Liabilities and equity                                                 

Current                                                                

  Trade payables and                       39,614              25,674  
  accruals

  Litigation provision                    115,192              19,533  

  Income taxes payable                      1,341               3,313  

  Stock-based compensation                 25,905              13,788  
  liability

  Dividend payable                         10,677              19,691  

  Total current liabilities               192,729              81,999  

Non-current                                                            

  Stock-based compensation                 10,097               2,583  
  liability

  Deferred tax liabilities                  9,093               2,600  

  Litigation provision                    —              32,500  

  Total non-current                        19,190              37,683  
  liabilities

Equity                                                                 

  Share capital                            80,413              79,393  

  Share-based benefits                     12,927              12,927  
  reserve

  Foreign currency                        (1,463)             (8,348)  
  translation reserve

  Retained earnings                       252,073             284,724  

  Total equity                            343,950             368,696  

Total liabilities and equity              555,869             488,378  
    Condensed Consolidated Interim Statements of Operations
                        Three Months Ended         Nine Months Ended  
                             September 30,             September 30,
                                      2012                      2012  
                             (reclassified             (reclassified
                      2013       restated)      2013       restated)

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

Revenue                                                               

  Equipment        104,016          96,262   295,670         295,519  
  rentals and
  other

Operating expenses                                                    

  Rental            34,438          31,047   101,506          96,617  
  services

  Local              4,392           4,272    13,405          15,475  
  administration

  Depreciation      16,319          17,852    45,659          51,736  
  and
  amortization
                    55,149          53,171   160,570         163,828  
                                                                       

Operating profit    48,867          43,091   135,100         131,691  

Other expenses                                                        

  Research and       6,557           5,381    20,432          15,434  
  development

  Corporate          4,414           3,435    13,054          11,397  
  services

  Stock-based       15,746           5,391    26,367          16,554  
  compensation

  Other expenses     4,084           4,462    65,169          13,129  
                    30,801          18,669   125,022          56,514  
                                                                       

Income before       18,066          24,422    10,078          75,177  
income taxes

  Income taxes       8,931           6,680    10,711          21,590  

Net income           9,135          17,742     (633)          53,587  
(loss)

Earnings (loss)                                                       
per share

  Basic               0.11            0.22    (0.01)            0.65  

  Diluted             0.11            0.21    (0.01)            0.65  

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 September 30, 2012, have been restated to 
correct a non-cash error relating to stock-based compensation expense of 
$1,600. The 2012 year-to-date correction was $3,700. Per share amounts have 
been adjusted accordingly.
    Condensed Consolidated Interim Statements of Other Comprehensive Income
                     Three Months Ended September  Nine Months Ended  
                                              30,      September 30,
                                             2012               2012  
                        2013           (restated)  2013   (restated)

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

Net income (loss)      9,135               17,742 (633)       53,587  

Other comprehensive                                                   
(loss) income

  Foreign currency   (6,574)              (9,986) 6,885      (5,194)  
  translation
  adjustment

Total comprehensive    2,561                7,756 6,252       48,393  
income
    Condensed Consolidated Interim Statements of Changes in Equity
                                              Foreign                        
                            Share-Based      Currency
                               Benefits   Translation   Retained      Total
                    Share
                  Capital       Reserve       Reserve   Earnings     Equity

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

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

  Net income      —       —       —     53,587     53,587  
  (restated)

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

  Other           —       —       (5,194)    —    (5,194)  
  comprehensive
  loss

  Exercise of       1,222       —       —    —      1,222  
  stock options

Balance at         78,835        12,927      (11,029)    318,118    398,851  
September 30,
2012

  Net loss        —       —       —   (13,703)   (13,703)  

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

  Other           —       —         2,681    —      2,681  
  comprehensive
  income

  Exercise of         558       —       —    —        558  
  stock options

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

  Net loss        —       —       —      (633)      (633)  

  Dividends       —       —       —   (32,018)   (32,018)  

  Other           —       —         6,885    —      6,885  
  comprehensive
  income

  Exercise of       1,020       —       —    —      1,020  
  stock options

Balance at         80,413        12,927       (1,463)    252,073    343,950  
September 30,
2013

Earnings for the three months ended September 30, 2012, have been restated to 
correct a non-cash error relating to stock-based compensation expense of 
$1,600. The 2012 year-to-date correction was $3,700. Per share amounts have 
been adjusted accordingly.  

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

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

Cash flows from                                                       
operating
activities

  Net income         9,135       17,742           (633)       53,587  
  (loss)

Adjustment for                                                        
non-cash items:

  Depreciation      16,319       17,852          45,659       51,736  
  and
  amortization

  Impairment       —        2,636         —        2,636  
  loss

  Stock-based       11,429        3,051          16,988       10,526  
  compensation

  Deferred          17,396      (1,475)          15,257        2,204  
  income taxes

  Unrealized         1,647          355           2,104        1,981  
  foreign
  exchange loss

Movements in                                                          
non-cash items:

  (Increase)      (12,689)        (749)         (3,711)        8,985  
  decrease in
  trade and
  other
  receivables

  (Increase) in    (2,076)      (1,883)           (588)      (2,847)  
  prepaid
  expenses

  (Decrease)      (11,150)        5,510        (14,262)       14,559  
  increase in
  income taxes

  Increase in      —      —          63,159        4,773  
  litigation
  provision

  Increase in        7,981          319          14,477      (1,798)  
  trade
  payables and
  accruals

  Increase in        4,266        2,471           9,152        5,876  
  stock-based
  compensation
  liability

  Effects of       (2,408)        (977)             181      (1,030)  
  exchange rate
  changes

Cash generated      39,850       44,852         147,783      151,188  
from operating
activities

  Income tax          (13)      (2,998)        (10,516)     (16,225)  
  paid

Net cash from       39,837       41,854         137,267      134,963  
operating
activities

Cash flows from                                                       
(used in)
financing
activities

  Proceeds from        217          393           1,020        1,222  
  issuance of
  common shares

  Purchase of      (3,458)      (3,151)         (6,510)      (5,240)  
  stock options

  Payment of      (10,674)     (18,033)        (41,032)     (34,413)  
  dividends

Net cash used     (13,915)     (20,791)        (46,522)     (38,431)  
in financing
activities

Cash flows                                                            
(used in) from
investing
activities

  Additions to    (18,087)     (14,500)        (38,753)     (48,067)  
  property,
  plant and
  equipment

  Additions to        (14)      —           (153)        (400)  
  intangibles

  Deferred         (4,315)      (2,483)        (11,631)      (7,711)  
  development
  costs

  Proceeds on          281      —             325          300  
  disposal of
  property,
  plant and
  equipment

  Acquisitions,    —           44         —      (1,230)  
  net of cash
  acquired

  Changes in             8        (514)           (507)      (2,911)  
  non-cash
  working
  capital

Net cash used     (22,127)     (17,453)        (50,719)     (60,019)  
in investing
activities

Effect of          (1,091)      (2,409)             179      (1,694)  
exchange rate
on cash and
cash
equivalents

Net increase in      2,704        1,201          40,205       34,819  
cash and cash
equivalents

Cash and cash      195,445      138,611         157,944      104,993  
equivalents,
beginning of
period

Cash and cash      198,149      139,812         198,149      139,812  
equivalents,
end of period

Earnings for the three months ended September 30, 2012, have been restated to 
correct a non-cash error relating to stock-based compensation expense of 
$1,600. The 2012 year-to-date correction was $3,700. Per share amounts have 
been adjusted accordingly.

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

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

Revenue              32,253          60,226          11,537   104,016  

Operating             9,383          22,268           7,179    38,830  
costs

Depreciation          6,995           7,480           1,844    16,319  
and
amortization

Segment              15,875          30,478           2,514    48,867  
operating
profit

Research and                                                    6,557  
development

Corporate                                                       4,414  
services

Stock-based                                                    15,746  
compensation

Other                                                           4,084  
expenses

Income taxes                                                    8,931  

Net income                                                      9,135  

Capital              13,760           8,326             316    22,402  
expenditures

Goodwill            —          19,379           2,600    21,979  

Intangible           32,322           8,439           2,974    43,735  
assets

Segment             280,968         213,164          61,737   555,869  
assets

Segment             168,663          32,518          10,738   211,919  
liabilities
                                                                       

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

Revenue              30,343          56,398           9,521    96,262  

Operating             8,518          20,922           5,879    35,319  
costs

Depreciation          7,245           8,469           2,138    17,852  
and
amortization

Segment              14,580          27,007           1,504    43,091  
operating
profit

Research and                                                    5,381  
development

Corporate                                                       3,435  
services

Stock-based                                                     5,391  
compensation

Other                                                           4,462  
expenses

Income taxes                                                    6,680  

Net income                                                     17,742  

Capital               6,748           7,170           3,065    16,983  
expenditures

Goodwill            —          18,206           2,600    20,806  

Intangible           24,255          11,162           3,522    38,939  
assets

Segment             117,432         300,501          62,704   480,637  
assets

Segment              54,448          18,568           8,770    81,786  
liabilities
                                                                       
                                                                       

Nine Months          Canada   United States   International     Total  
Ended
September
30, 2013
                        ($)             ($)             ($)       ($)  

Revenue              91,769         172,198          31,703   295,670  

Operating            26,888          67,036          20,987   114,911  
costs

Depreciation         18,331          22,145           5,183    45,659  
and
amortization

Segment              46,550          83,017           5,533   135,100  
operating
profit

Research and                                                   20,432  
development

Corporate                                                      13,054  
services

Stock-based                                                    26,367  
compensation

Other                                                          65,169  
expenses

Income taxes                                                   10,711  

Net loss                                                        (633)  

Capital              27,559          18,095           4,730    50,384  
expenditures

Goodwill            —          19,379           2,600    21,979  

Intangible           32,322           8,439           2,974    43,735  
assets

Segment             280,968         213,164          61,737   555,869  
assets

Segment             168,663          32,518          10,738   211,919  
liabilities
                                                                       

Nine Months Ended September                                            
30, 2012 (reclassified,
restated)
                                                                       

Revenue              93,699         174,045          27,775   295,519  

Operating            27,433          67,738          16,921   112,092  
costs

Depreciation         20,718          24,668           6,350    51,736  
and
amortization

Segment              45,548          81,639           4,504   131,691  
operating
profit

Research and                                                   15,434  
development

Corporate                                                      11,397  
services

Stock-based                                                    16,554  
compensation

Other                                                          13,129  
expenses

Income taxes                                                   21,590  

Net income                                                     53,587  

Capital              19,875          30,681           5,222    55,778  
expenditures

Goodwill            —          18,206           2,600    20,806  

Intangible           24,255          11,162           3,522    38,939  
assets

Segment             117,432         300,501          62,704   480,637  
assets

Segment              54,448          18,568           8,770    81,786  
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, cash flow from operating
    activities, or earnings.
        Earnings for the three months ended September 30,
    2012, have been restated to correct a non-cash
    error relating to stock-based compensation
    expense of $1,600. The 2012 year-to-date
    correction was $3,700. 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 nine month periods ended 
September30, 2012 and has corrected the comparative periods included in 
these condensed consolidated financial statements.


                               Previously                          
Three Months Ended September 30,
2012                                Disclosed   Adjustment   Restated 


                                          ($)          ($)        ($)  

Statement of Operations                                                

  Stock-based compensation expense      3,791        1,600      5,391  

  Net Income                           19,342      (1,600)     17,742  
                                                                       
                                                                       


                               Previously                          
Nine Months Ended September 30,
2012                                Disclosed   Adjustment   Restated 


                                          ($)          ($)        ($)  

Balance Sheet                                                          
          Stock-based compensation      9,790        3,700     13,490  
               liability - current

  Retained earnings                   321,818      (3,700)    318,118  

Statement of Operations                                                

  Stock-based compensation expense     12,854        3,700     16,554  

  Net Income                           57,287      (3,700)     53,587  
                                                                       

Other Expenses
                   Three Months Ended   Nine Months Ended September  
                        September 30,                           30,
                      2013       2012      2013                2012  
                       ($)        ($)       ($)                 ($)  

Litigation         —    —    61,614               5,413  
provision

Foreign exchange       629      1,528     (622)               4,563  
loss (gain)

Earn-out provision   3,071    —     3,071             —  

Impairment loss    —      2,636   —               2,636  

Other                  384        298     1,106                 517  

Other expenses       4,084      4,462    65,169              13,129  

Part of the 2009 purchase of Petron was an earn-out clause that was 
conditional on the successful commercialization of a revenue stream generated 
from a product designed by Petron. There had been some uncertainty around 
whether an amount would be due to the formal shareholders of Petron. 
Management concluded in the third quarter of 2013 that an amount was owing and 
the Company and former shareholders of Petron agreed to $3.1 million. The 
Company anticipates that the payment will be made in the fourth quarter of 
2013.

In 2012 the Company made a formal decision to dispose of its US water 
treatment facility. As a result, a non-cash impairment loss of $2,636 was 
recorded in the third quarter of 2012.

Pason Systems Inc.

Pason Systems Inc. is a leading global provider of specialized data management 
systems for drilling rigs. Our solutions, which include data acquisition, 
wellsite reporting, remote communications, and web-based information 
management, enable collaboration between the rig and the office. 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/November2013/04/c9585.html 
CO: Pason Systems Inc.
ST: Alberta
NI: OIL ERN CONF  
-0- Nov/04/2013 22:12 GMT
 
 
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