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  
-0- May/06/2014 21:30 GMT
 
 
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