Pason Reports First Quarter 2014 Results

 CALGARY, May 6, 2014 /CNW/ - Pason Systems Inc. (TSX:PSI) announced today its  2014 first quarter results.  Performance Data                                                                                  Three Months Ended March 31,             2014        2013      Change     (CDN 000s, except per share data)         ($)         ($)         (%)     Revenue                               123,174     109,267          13     Income                                 20,821      29,608        (30)       Per share - basic                      0.25        0.36        (31)       Per share - diluted                    0.25        0.36        (31)     EBITDA (1)                             70,469      59,790          18       As a % of revenue                      57.2        54.7           5     Funds flow from operations             56,311      50,090          12       Per share - basic                      0.68        0.61          11       Per share - diluted                    0.67        0.60          12     Cash from operating                                               activities                             64,385      46,194          39     Free cash flow (1)                     47,876      32,250          48       Per share - basic                      0.58        0.39          49       Per share - diluted                    0.57        0.39          46     Capital expenditures                   16,509      13,944          18     Working capital                       152,227     190,487        (20)     Total assets                          493,291     509,914         (3)     Total long-term debt                  —     —     —     Cash dividends declared                  0.15        0.13          15     Shares outstanding end of period                                  (#)                                    82,422      82,050     —     (1)  Non-IFRS financial measures are defined in the Management's          Discussion and Analysis section.   Q1 2014 vs Q1 2013 The Company generated consolidated revenue of $123.2 million in the first  quarter of 2014, up 13% from $109.3 million in the same period of 2013.   Growth in US market share, increased penetration of the Company's major  product groups, continued strong growth in Communications, Gas Analyzer and  EDR peripherals revenue and a strengthening of the US dollar relative to the  Canadian dollar all contributed to revenue growth in the first quarter.  Consolidated EBITDA increased to $70.5 million in the first quarter, 18%  higher than the first quarter of 2013 and funds flow from operations increased  12% to $56.3 million for the three months ended March 31, 2014.  Net income decreased by $8.8 million to $20.8 million ($0.25 per share) in the  first quarter of 2014 from $29.6 million ($0.36 per share) in the prior year  period.  Earnings were negatively impacted by a $13.9 million increase in  stock-based compensation as a result of a significant increase in the  Company's share price in the first three months of 2014.  President's Message  North American land drilling activity demonstrated very modest growth in the  first quarter of 2014 compared to the first quarter of the previous year.  Drilling industry days in Canada were 3% higher, while in the United States  drilling activity was unchanged. In international markets, drilling activity  increased in Australia and Argentina; however, there was significant  devaluation of the Argentine currency and activity levels in Mexico and Brazil  remained weak.  Against this backdrop, Pason demonstrated strong operational and financial  performance. Total revenue increased 13% from the previous year period to  $123.2 million, representing record quarterly revenue for the Company. This  growth was driven by an increase in US market share, continued growth in  product penetration, new revenue in frontier markets, and a strengthening of  the US dollar relative to the Canadian dollar. The change in foreign exchange  rates was responsible for approximately one third of the revenue increase. All  of Pason's major product categories generated revenue growth above industry  activity, led by year-over-year increases in Communications of 27% followed by  Gas Analyzer of 15%.  EBITDA for the first quarter was a record $70.5 million, an increase of 18%  compared to the previous year period, and 57% of revenue compared to 55% the  previous year. Free cash flow was $47.9 million, up 48% from the previous  year. The Company recorded net income of $20.8 million, or $0.25 per share,  compared to $29.6 million, or $0.36 per share, in the first quarter of 2013.  Earnings were significantly impacted by a $13.9 million increase in  stock-based compensation expense driven by an increase in share price.  Capital expenditures for the first quarter were $16.5 million, up from $13.9  million the previous year, as deployment of new hardware, including Pason Rig  Display and components of the EDR evolution, continued and we upgraded a  significant portion of our fleet of Workstations in the United States. On  March 31, our cash position stood at $116.8 million, plus $12.4 million cash  held in trust for the payment of the dividend in April. There is no debt on  the balance sheet. Our quarterly dividend remains unchanged at $0.15 per share.  United States  The US segment, our largest business unit, includes our US rental business and  3PS Inc., our Austin-based sensor manufacturer.  The number of drilling industry days in the first quarter of 2014 was  essentially unchanged from the first quarter of the previous year and down 1%  from the previous quarter. Revenue for the period increased 20% to $64.1  million. Revenue growth above industry day growth was achieved through an  increase in market share, higher product penetration and a favourable movement  in the exchange rate. EDR market share for the first quarter averaged 59%, up  two percentage points from the previous quarter and also up two percentage  points from a year ago. On average, 991 US land rigs were operating Pason  equipment during the first quarter of 2014, compared to 955 in the same period  of 2013.  Average daily revenue per rig increased by 6%, from US$590 to US$628 from the  previous year and by 3% from the previous quarter. Communications and Gas  Analyzer again showed above average growth rates during the period.  Our US business unit was able to generate an operating profit of $33.4 million  in the first quarter, an increase of 40% over 2013. Operating profit was 52%  of revenue compared to 45% for the previous year, as the business unit was  able to effectively leverage its fixed cost structure and control variable  costs.  Canada  Drilling activity in Canada was modestly higher in the first quarter of 2014  than in the previous year, with industry days up 3%. Revenue for the first  quarter increased 4% from the prior year period to $47.9 million. Market share  was 96%, up two percentage points from the previous quarter, and down two  percentage points from a year ago. On average, 474 Canadian land rigs were  operating Pason equipment compared to 475 the year before.  Average daily revenue per rig increased 5% year-over-year to $1,113. Gas  Analyzer, Communications and EDR peripherals (Workstations, SideKicks, and  PRDs) showed above average growth rates during the period.  Operating costs increased by 14% year-over-year, primarily due to the  acquisition of an additional segment of satellite bandwidth to improve the  customer experience at the rig during the winter drilling season. As a result,  our Canadian business unit was able to generate an operating profit of $30.5  million for the first quarter of 2014, essentially unchanged from the same  period in 2013.  International  Our International business unit, which includes our businesses in Latin  America, Australia, and Offshore & Frontier, had a solid quarter overall with  widely differing results by country. Revenue increased by 14% to $11.2 million  for the first quarter of 2014 compared to the previous year period; however,  revenue was down 13% from the previous quarter. Significant devaluation in the  Argentine Peso, together with continued industry weakness in Brazil and  Mexico, more than offset increased activity in Argentina and revenue growth in  Australia, Gulf of Mexico and the Middle East.  The International business unit was able to generate a quarterly operating  profit of $3.0 million, an increase of 57% over the previous year, but down  34% from the previous quarter.  Outlook  Analyst outlooks for drilling industry activity in North America are flat to  modestly positive for the remainder of 2014, with a potential for increased  activity towards the end of the year and into 2015 driven by LNG-related gas  drilling activity in Canada.  We expect that some of the new products and product enhancements, both on the  hardware and software sides, will continue to gain traction in the North  American market. This includes the new Pason Rig Display (a ruggedized 19 inch  touch screen computer) and the enhanced Pit Volume Totalizer (ePVT). We also  expect continued growth in the Gulf of Mexico, Middle East, and other frontier  regions.  We plan for an increase in our R&D, IT and Corporate Services cost as we make  important investments in our technical infrastructure and systems, as well as  in our business development capabilities. Our capital expenditure forecast for  the next 12 months is up to about $100 million, $70 million of which is  directed towards new hardware that can generate incremental revenue or save  operating costs. Our cash-generating capacity and our cash position are more  than sufficient to cover new business development, planned equipment upgrades  and the dividend.  Marcel Kessler President and Chief Executive Officer May 6, 2014  Management's Discussion and Analysis  The following discussion and analysis has been prepared by management as of  May 6, 2014, and is a review of the financial condition and results of  operations of Pason Systems Inc. (Pason or the Company) based on International  Financial Reporting Standards (IFRS) and should be read in conjunction with  the consolidated financial statements and accompanying notes.  Certain information regarding the Company contained herein may constitute  forward-looking statements under applicable securities laws. Such statements  are subject to known or unknown risks and uncertainties that may cause actual  results to differ materially from those anticipated or implied in the  forward-looking statements.  All financial measures presented in this report are expressed in Canadian  dollars unless otherwise indicated.  Overview of the 2014 First Quarter        Three Months Ended March 31,        2014      2013      2012     (000s, except per share data)        ($)       ($)       ($)     Revenue                          123,174   109,267   115,145     Income                            20,821    29,608    29,073       Per share - basic                 0.25      0.36      0.35       Per share - diluted               0.25      0.36      0.35     EBITDA (1)                        70,469    59,790    64,146       As a % of revenue                 57.2      54.7      55.7     Funds flow from operations        56,311    50,090    53,587       Per share - basic                 0.68      0.61      0.65       Per share - diluted               0.67      0.60      0.65     Cash from operating activities    64,385    46,194    45,004     Free cash flow (1)                47,876    32,250    25,521       Per share - basic                 0.58      0.39      0.31       Per share - diluted               0.57      0.39      0.31     Cash dividends declared (2)         0.15      0.13      0.00     (1)  Non-IFRS financial measures are defined in the Management's          Discussion and Analysis section.     (2)  The Company changed its dividend policy whereby, effective for          2013, the Company adopted a quarterly dividend to replace the          semi-annual dividend.  Additional IFRS Measures In its audited consolidated financial statements, the Corporation uses certain  additional IFRS measures. Management believes these measures provide useful  supplemental information to readers.  Funds flow from operations Management believes that funds flow from operations, as reported in the  Consolidated Statements of Cash Flows, is a useful additional measure as it  represents the cash generated during the period, regardless of the timing of  collection of receivables and payment of payables. Funds flow from operations  represents the cash flow from continuing operations, excluding non-cash items.  Funds flow from operations is defined as net income adjusted for depreciation  and amortization expense, non-cash stock-based compensation expense, deferred  taxes, and other non-cash items impacting operations.  Cash from operating activities Cash from operating activities is defined as funds flow from operations  adjusted for changes in working capital items.  Funds flow from operations and cash from operating activities were impacted by  the Company's accounting for the litigation provision. Before 2013, the  Company recorded it as a non-cash add back to arrive at funds flow from  operations. In 2013, the provision and settlement was treated as a change in  working capital to calculate cash from operating activities.  Non-IFRS Financial Measures These definitions are not recognized measures under IFRS, and accordingly, may  not be comparable to measures used by other companies. These Non-IFRS measures  provide readers with additional information regarding the Company's ability to  generate funds to finance its operations, fund its research and development  and capital expenditure program, and pay dividends.  EBITDA EBITDA is defined as net income before interest expense, income taxes,  stock-based compensation expense, and depreciation and amortization expense.  Free cash flow Free cash flow is defined as cash from operating activities less capital  expenditures and deferred development costs.  Overall Performance     Three Months Ended March 31,          2014      2013   Change     (000s)                                 ($)       ($)      (%)     Revenue                                                           Electronic Drilling Recorder (1)    53,515    46,874       14     Pit Volume Totalizer                18,641    16,870       10     Communications (1)                  10,155     7,965       27     Software                             8,710     8,142        7     AutoDriller                         11,479    10,510        9     Gas Analyzer/Total Gas System       10,050     8,734       15     Sales                                2,451     2,391        3     Other                                8,173     7,781        5     Total revenue                      123,174   109,267       13     (1)  A portion of the Company's USA communications revenue was          reclassified to EDR revenue to better reflect the nature of such          revenue. All comparative figures have been restated accordingly.          This change had no impact on reported key metrics, EBITDA, cash          flow from operating activities, or net income (Q1 2013 - $2,210).  Electronic Drilling Recorder (EDR) and Pit Volume Totalizer (PVT) rental day  performance for Canada and the United States is reported below:                                               Canada     Three Months Ended March 31,       2014       2013      Change                                                                (%)     EDR rental days (#)              42,700     42,800     —     PVT rental days (#)              41,300     41,800         (1)                                                                                                            United States     Three Months Ended March 31,       2014       2013      Change                                                                (%)     EDR rental days (#)              89,100     85,900           4     PVT rental days (#)              68,300     63,600           7  Electronic Drilling Recorder The Pason 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 14%  for the first quarter of 2014 compared to the same period in 2013. 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 first quarter of 2013 (59% versus 57%), a strengthening US dollar  relative to the Canadian dollar, and new revenue in frontier markets. Industry  activity in the US market was unchanged in the first quarter of 2014, while  first quarter Canadian rig activity increased 3% compared to the same period  in 2013. Canadian EDR days were unchanged in the first quarter of 2014  compared to the same period in 2013, while US EDR days increased by 4%.  During the quarter ended March 31, 2014, the Pason EDR was installed on 96% of  all active land rigs in Canada and 59% of the land rigs in the US.  In addition, the Company continues to gain new customers in its International  business unit.  Pit Volume Totalizer The 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 quarter ended March 31, 2014, the PVT  was installed on 97% of rigs with a Pason EDR in Canada and 77% in the US,  compared to 98% and 74%, respectively, in the same period of 2013.  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.  Communications revenue increased by 27% in the first quarter of 2014 compared  to the same period in 2013, driven in large part by increased revenue in the  US market due to increased product usage and the strengthening US dollar  relative to the Canadian dollar.  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, which allows 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, including remote directional.  During the first quarter of 2014, 96% of the Company's Canadian customers and  91% of customers in the US were using all or a portion of the functionality of  the DataHub, compared to 96% and 88%, respectively, in the first quarter of  2013.  AutoDriller Pason's AutoDriller is used to maintain constant weight on the drill bit while  a well is being drilled. During the quarter ended March 31, 2014, the  AutoDriller was installed on 75% of Canadian and 45% of US land rigs operating  with a Pason EDR system, compared to 72% and 46%, respectively, in 2013.  Gas Analyzer 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. During the first three months of 2014, the Gas  Analyzer was installed on 59% of Canadian and 23% of US land rigs operating  with a Pason EDR system. The penetration in Canada is an increase of  approximately 8% in market share over 2013 levels while the US has seen an  increase of 1%. The roll out of the Gas Analyzer in the International markets  continues with anticipated completion in most of the major markets in 2014.  Sales Sales represent sensors and other systems sold by 3PS, Inc. and spare parts  sold by Pason Offshore.  Other Other is comprised mostly of the rental of service rig recorders in Latin  America, the Electronic Choke Actuator, Hazardous Gas Alarm products, and  Mobilization revenue.  Discussion of Operations  United States Operations     Three Months Ended March 31,           2014       2013     Change     (000s)                                  ($)        ($)        (%)     Revenue                                                               Electronic Drilling Recorder (1)     30,453     25,560         19     Pit Volume Totalizer                  9,393      8,019         17     Communications (1)                    3,782      1,980         91     Software                              5,049      4,309         17     AutoDriller                           5,498      4,980         10     Gas Analyzer                          3,630      3,002         21     Sales                                 2,271      2,041         11     Other                                 4,056      3,593         13     Total revenue                        64,132     53,484         20     Operating costs                      23,147     22,240          4     Depreciation and amortization         7,560      7,384          2     Segment operating profit             33,425     23,860         40     (1)  A portion of the Company's USA communications revenue was          reclassified to EDR revenue to better reflect the nature of such          revenue. All comparative figures have been restated accordingly.          This change had no impact on reported key metrics, EBITDA, cash          flow from operating activities, or net income (Q1 2013 - $2,210).     Three Months Ended March 31,        2014        2013                                      USD   CAD   USD   CAD     Revenue per EDR day              628   693   590   595     Revenue per industry day         368   406   334   337  US segment revenue increased by 20% in the first quarter of 2014 over the 2013  comparable period (10% increase when measured in USD).  Industry activity in the US market during the first quarter of 2014 was  unchanged from the prior year; however, revenue from the rental of  instrumentation increased by 21% over 2013 levels.  EDR rental days increased  by 4% for the three months ended March 31, 2014, over the same time period in  2013, while revenue per EDR day in the first quarter of 2014 increased to  $693, an increase of $98 over the same period in 2013.  Market share gains, increased product penetration and a favourable movement in  the exchange rate all contributed to revenue growth in the US segment. US  market share was 59% during the quarter ended March 31, 2014, up from 57% in  the same period of 2013. During the quarter, the US segment saw the most  significant improvements in product penetration for EDR peripheral devices,  Pit Volume Totalizer, Communications, and the Gas Analyzer. Revenue across all  product lines was positively impacted by a favorable change in the US dollar  exchange rate.  Segment profit, as a percentage of revenue, was 52% for the first quarter of  2013 compared to 45% for the corresponding period in 2013, an increase of $9.6  million. The US business unit was able to increase its operating margin  primarily by leveraging its fixed cost structure and controlling variable  costs.  Canadian Operations     Three Months Ended March 31,         2014        2013      Change     (000s)                                ($)         ($)         (%)     Revenue                                                               Electronic Drilling Recorder       18,438      17,374           6     Pit Volume Totalizer                7,447       7,291           2     Communications                      5,994       5,649           6     Software                            3,502       3,733         (6)     AutoDriller                         4,816       4,619           4     Gas Analyzer                        5,245       4,654          13     Sales                             —     —     —     Other                               2,419       2,635         (8)     Total revenue                      47,861      45,955           4     Operating costs                    10,923       9,607          14     Depreciation and amortization       6,479       6,021           8     Segment operating profit           30,459      30,327     —  Canadian segment revenue grew by 4% for the three months ended March 31, 2014,  compared to the same period in 2013. This positive growth is a result of a 3%  increase in the number of drilling industry days from 2013 levels, combined  with greater penetration of a number of different product groups, while market  share decreased to 96% from 98% in the comparable period of 2013. EDR rental  days were unchanged in the first quarter of 2014 compared to 2013 levels.  The Canadian business unit was able to increase its revenue in the first  quarter mostly through increased product adoption, notably EDR peripherals and  the Gas Analyzer, and increases in Communications revenue.  The factors above combined to result in the following:         --  An increase in revenue per EDR day during the first quarter of             2014 compared to 2013 of $52 to $1,113.         --  First quarter revenue per industry day of $1,064 in 2014             compared to $1,045 in 2013.  Operating costs increased by 14% in the first quarter of 2014 relative to the  same period in 2013, primarily due to a $0.9 million increase in satellite  bandwidth costs, as an additional segment was added to improve the customer  experience at the rig.   As a result, segment operating profit for the first  quarter of 2014 of $30.5 million is an increase of $0.1 million over the same  period in 2013.  International Operations     Three Months Ended March 31,        2014      2013     Change     (000s)                               ($)       ($)        (%)     Revenue                                                           Electronic Drilling Recorder       4,624     3,940         17     Pit Volume Totalizer               1,801     1,560         15     Communications                       379       336         13     Software                             159       100         59     AutoDriller                        1,165       911         28     Gas Analyzer/Total Gas System      1,175     1,078          9     Sales                                180       350       (49)     Other                              1,698     1,553          9     Total revenue                     11,181     9,828         14     Operating costs                    6,491     6,394          2     Depreciation and amortization      1,703     1,529         11     Segment operating profit           2,987     1,905         57  Revenue in the International operations increased 14% in the first quarter of  2014 compared to the same time period in 2013, with increased revenue from  each of the Company's rental products.  Operating profit increased by $1.1 million for the first quarter of 2014 over  2013, an increase of 57%.  A number of factors influenced these results:         --  Australia revenue increased 38% for the first quarter of 2014             as drilling activity continues to increase across the region,             accompanied by increased penetration of the company's rental             products, most significantly EDR peripheral devices and the Gas             Analyzer.         --  The Company saw increased activity in Argentina, however             significant devaluation of the Argentine Peso, together with             continued market weakness in Mexico and Brazil, led to a 6%             decrease in revenue from Latin America in the first quarter of             2014 compared to 2013.         --  The 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,             experienced an increase in first quarter revenue of 83% over             the same period in 2013.  Segment operating profit increased by 57% year-over-year to $3.0 million in  the first quarter of 2014, compared to $1.9 million in the same period of 2013.  Corporate Expenses     Three Months Ended March 31,         2014     2013   Change     (000s)                                ($)      ($)      (%)     Other expenses                                                  Research and development            7,658    6,526       17     Corporate services                  4,476    4,160        8     Stock-based compensation           17,668    3,750      371     Other                                                             Foreign exchange (gain) loss      (450)      220      N/A       Other                               460      330       39     Total corporate expenses           29,812   14,986       99  Q1 2014 vs Q4 2013 The first quarter of the year is typically the strongest for Pason due to the  seasonality of Canadian drilling activity. Consolidated revenue of $123.2  million in the first quarter of 2014 compared to $108.9 million in the fourth  quarter of 2013, an increase of 13%.  The Company experienced revenue growth  in all of its rental product groups in the United States and Canada, while  international revenues decreased due to a significant devaluation in the  Argentine Peso and continued weakness in industry activity in Mexico and  Brazil.  Sequentially, EBITDA increased 28%, from $55.2 million in the fourth quarter  of 2013 to $70.5 million in the first quarter of 2014, while funds flow from  operations increased 19%, to $56.3 million in the first quarter of 2014 from  $47.5 million in the previous quarter.  Net income decreased by 14% to $20.8 million ($0.25 per share) in the first  quarter of 2014 from $24.3 million ($0.29 per share) in the prior quarter.   Due to a significant increase in the Company's share price in the first  quarter of 2014, stock-based compensation was $11.5 million higher in the  first quarter of 2014 than in the fourth quarter of 2013. The effective tax  rate for the first quarter of 2014 is significantly higher than the same  period of 2013 as a result of the significant non-deductible, non-cash expense  provision for the expensing of common share options under the Black-Scholes  pricing model.  First Quarter Conference Call Pason will be conducting a conference call for interested analysts, brokers,  investors and media representatives to review its first quarter results at  9:00 am (Calgary time) on Wednesday, May 7, 2014. The conference call dial-in  number is 1-888-231-8191 or 1-647-427-7450. You can access the seven-day  replay by dialing 1-855-859-2056 or 1-416-849-0833, using password 10605098.  Pason Systems Inc. is a leading global provider of specialized data management  systems for drilling rigs. Our solutions, which include data acquisition,  wellsite reporting, remote communications, and web-based information  management, enable collaboration between the rig and the office. Pason's  common shares trade on the Toronto Stock Exchange under the symbol PSI.  Additional information, including the Company's Annual Report and Annual  Information Form for the year ended December 31, 2013, is available on SEDAR  at www.sedar.com or on the Company's website at www.pason.com.  Shareholders are also invited to attend the Company's Annual and Special  Meeting on Wednesday, May 7, 2014, at 3:30 pm at the offices of Pason Systems  Inc., 6120 Third Street SE, Calgary, Alberta.                                                               Condensed Consolidated Interim Balance Sheets                                                               As at                              March 31, 2014   December 31, 2013     (CDN 000s) (unaudited)                        ($)                 ($)     Assets                                                                    Current                                                                     Cash and cash equivalents               116,803              78,018       Cash held in trust                       12,356              11,502       Trade and other receivables              98,390              87,469       Prepaid expenses                          2,268               3,121       Income taxes recoverable                  8,512              15,752       Total current assets                    238,329             195,862     Non-current                                                                 Property, plant and equipment           188,840             183,601       Intangible assets and goodwill           66,122              65,261       Deferred tax assets                     —               1,152       Total non-current assets                254,962             250,014     Total assets                              493,291             445,876     Liabilities and equity                                                      Current                                                                   Trade payables and accruals              37,318              30,485       Income taxes payable                      2,525             —       Stock-based compensation                                liability                                33,903              25,942       Dividend payable                         12,356              11,502       Total current liabilities                86,102              67,929     Non-current                                                                 Stock-based compensation                                liability                                 7,089               3,905       Deferred tax liabilities                  9,045               7,573       Total non-current liabilities            16,134              11,478     Equity                                                                      Share capital                            88,176              80,725       Share-based benefits reserve             12,927              12,927       Foreign currency translation                            reserve                                  16,628               7,958       Retained earnings                       273,324             264,859       Total equity                            391,055             366,469     Total liabilities and equity              493,291             445,876                                                Condensed Consolidated Interim Statements of Operations                                                                                     Three Months Ended March 31,                                             2014                 2013     (CDN 000s, except per share data)                  (unaudited)                              ($)                  ($)     Revenue                                                                 Equipment rentals and sales        123,174              109,267     Operating expenses                                                      Rental services                     35,572               33,876       Local administration                 4,989                4,365       Depreciation and amortization       15,742               14,934                                           56,303               53,175                                                                           Operating profit                      66,871               56,092     Other expenses                                                          Research and development             7,658                6,526       Corporate services                   4,476                4,160       Stock-based compensation            17,668                3,750       Other expenses                          10                  550                                           29,812               14,986                                                                           Income before income taxes            37,059               41,106       Income taxes                        16,238               11,498     Net income                            20,821               29,608     Income per share                                                        Basic                                 0.25                 0.36       Diluted                               0.25                 0.36                                            Condensed Consolidated Interim Statements of Other     Comprehensive Income                                                                             Three Months Ended March 31,                                        2014                  2013     (CDN 000s) (unaudited)              ($)                   ($)     Net income                       20,821                29,608     Items that may be reclassified     subsequently to net income:                                         Foreign currency translation       adjustment                      8,670                 5,850     Total comprehensive income       29,491                35,458                                                                              Condensed Consolidated Interim Statements of Changes in Equity                                                                                                                            Foreign                                 Share-Based      Currency                         Share      Benefits   Translation   Retained      Total                       Capital       Reserve       Reserve   Earnings     Equity     (CDN 000s)            ($)           ($)           ($)        ($)        ($)     (unaudited)     Balance at         79,393        12,927       (8,348)    284,724    368,696     January 1, 2013       Net income      —       —       —     29,608     29,608       Dividends       —       —       —   (10,667)   (10,667)       Other           —       —         5,850    —      5,850       comprehensive       income       Exercise of          18       —       —    —         18       stock options     Balance at         79,411        12,927       (2,498)    303,665    393,505     March 31, 2013       Net loss        —       —       —    (5,953)    (5,953)       Dividends       —       —       —   (32,853)   (32,853)       Other           —       —        10,456    —     10,456       comprehensive       income       Exercise of       1,314       —       —    —      1,314       stock options     Balance at         80,725        12,927         7,958    264,859    366,469     December 31,     2013       Net income      —       —       —     20,821     20,821       Dividends       —       —       —   (12,356)   (12,356)       Other           —       —         8,670    —      8,670       comprehensive       income       Exercise of       7,451       —       —    —      7,451       stock options     Balance at         88,176        12,927        16,628    273,324    391,055     March 31, 2014                                                     Condensed Consolidated Interim Statements of Cash Flows                                                                                               Three Months Ended March 31,                                                   2014                2013     (CDN 000s) (unaudited)                         ($)                 ($)     Cash from operating activities                                               Net income                                20,821              29,608     Adjustment for non-cash items:                                               Depreciation and amortization             15,742              14,934       Stock-based compensation                  17,668               3,750       Deferred income taxes                      2,657               1,720       Unrealized foreign exchange (gain) loss    (577)                  78     Funds flow from operations                  56,311              50,090     Movements in non-cash working capital                    items:                                                                       Increase in trade and other receivables  (9,594)             (9,681)       Decrease in prepaid expenses                 924                 406       Decrease in income taxes                  10,774               6,870       Increase in trade payables and accruals    5,293               1,961       Effects of exchange rate changes           1,778               1,048     Cash generated from operating activities    65,486              50,694       Income tax paid                          (1,101)             (4,500)     Net cash from operating activities          64,385              46,194     Cash flows from (used in) financing                      activities                                                                   Proceeds from issuance of common shares    3,565                  18       Purchase of stock options                (2,592)             (1,922)       Payment of dividends                    (11,502)            (19,691)     Net cash used in financing activities     (10,529)            (21,595)     Cash flows (used in) from investing                      activities                                                                   Additions to property, plant and                         equipment                               (14,453)            (10,201)       Deferred development costs               (2,056)             (3,743)       Proceeds on disposal of property, plant                  and equipment                                 86                  44       Changes in non-cash working capital          997               (754)     Net cash used in investing activities     (15,426)            (14,654)     Effect of exchange rate on cash and cash                 equivalents                                  1,209                 979     Net increase in cash and cash equivalents   39,639              10,924     Cash and cash equivalents, beginning of                  period                                      89,520             157,944     Cash and cash equivalents, end of period   129,159             168,868                                                                                Cash and cash equivalents consists of:                                     Cash and cash equivalents                  116,803             158,201     Cash held in trust                          12,356              10,667     Cash and cash equivalents, end of period   129,159             168,868  Prior year comparatives have been restated to conform to current year  presentation     Operating Segments  The Company operates in three geographic segments: Canada, the United States,  and International (Latin America, Offshore, the Eastern Hemisphere, and the  Middle East). The amounts related to each segment are as follows:     Three Months                                                   Ended March                   United     31, 2014          Canada      States     International       Total                          ($)         ($)               ($)         ($)     Revenue           47,861      64,132            11,181     123,174     Operating                                                      costs             10,923      23,147             6,491      40,561     Depreciation                                                   and     amortization       6,479       7,560             1,703      15,742     Segment                                                        operating     profit            30,459      33,425             2,987      66,871     Research and                                                   development                                                  7,658     Corporate                                                      services                                                     4,476     Stock-based                                                    compensation                                                17,668     Other                                                          expenses                                                        10     Income taxes                                                16,238     Net income                                                  20,821     Capital                                                        expenditures       3,913      11,018             1,578      16,509     Goodwill         —      20,457             2,600      23,057     Intangible                                                     assets            32,828       7,436             2,801      43,065     Segment                                                        assets           166,469     262,406            64,416     493,291     Segment                                                        liabilities       60,681      32,945             8,610     102,236                                                                            Three Months                                                   Ended March     31, 2013                                                                                                                                      Revenue           45,955      53,484             9,828     109,267     Operating                                                      costs              9,607      22,240             6,394      38,241     Depreciation                                                   and     amortization       6,021       7,384             1,529      14,934     Segment                                                        operating     profit            30,327      23,860             1,905      56,092     Research and                                                   development                                                  6,526     Corporate                                                      services                                                     4,160     Stock-based                                                    compensation                                                 3,750     Other                                                          expenses                                                       550     Income taxes                                                11,498     Net income                                                  29,608     Capital                                                        expenditures       7,027       4,311             2,606      13,944     Goodwill         —      18,797             2,600      21,397     Intangible                                                     assets            27,523       9,353             3,411      40,287     Segment                                                        assets           188,825     255,898            65,191     509,914     Segment                                                        liabilities       91,469      15,518             9,422     116,409                                               Other Expenses                                                                             Three Months Ended March 31,                                       2014                   2013                                        ($)                    ($)     Foreign exchange (gain) loss     (450)                    220     Other                              460                    330     Other expenses                      10                    550  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  Jon Faber Chief Financial Officer 403-301-3400 jon.faber@pason.com  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/May2014/06/c6773.html  CO: Pason Systems Inc. ST: Alberta NI: OIL ERN CONF  
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