Pason Reports Fourth Quarter and Year End 2011 Results

CALGARY, Feb. 21, 2012 /CNW/ - Pason Systems Inc. (TSX: PSI) announced today its 2011 fourth quarter and year end results.

Performance Data

		Three Months Ended December 31,			Year Ended December 31,
		2011	2010^(1)	Change	2011	2010 ^(1)	Change
(CDN 000s, except per share data)		($)	($)	(%)	($)	($)	(%)
Revenue		97,622	73,494	33	333,520	249,562	34
EBITDA ^(2)		50,700	36,016	41	176,241	117,524	50
	As a % of revenue	51.9	49.0	6	52.8	47.1	12
	Per share - basic	0.62	0.44	40	2.15	1.44	49
	Per share - diluted	0.61	0.44	39	2.13	1.44	48
Funds flow from operations ^(2)		42,089	27,899	51	145,358	93,973	55
	Per share - basic	0.51	0.34	50	1.78	1.15	54
	Per share - diluted	0.51	0.34	50	1.76	1.15	53
Earnings		31,702	10,525	201	86,223	36,474	136
	Per share - basic	0.39	0.13	200	1.05	0.45	135
	Per share - diluted	0.38	0.13	197	1.04	0.45	131
Capital expenditures and acquisitions		22,951	32,329	(29)	102,951	59,108	74
Working capital		126,605	105,815	20	126,605	105,815	20
Total assets		455,901	402,082	13	455,901	402,082	13
Total long-term debt		--	--	--	--	--	--
Shareholders' equity		367,269	309,684	19	367,269	309,684	19
Market capitalization		982,848	1,140,729	(14)	982,848	1,140,729	(14)
Cash dividends declared		0.20	0.17	17	0.38	0.33	15
Common shares outstanding (#)
	Basic	81,903	81,619	--	81,851	81,525	--
	Diluted	82,077	82,007	--	82,572	81,525	--
Shares outstanding end of period (#)		81,904	81,714	--	81,904	81,714	--

(1)	Comparative figures for 2010 have been restated to conform to International Financial Reporting Standards.
(2)	EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense and impairment losses. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of February 21, 2012, 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 Company's 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 2011 Fourth Quarter

				Three Months Ended December 31,				Year Ended December 31,
				2011	2010 ^(1)	2009 ^(1)		2011	2010 ^(1)	2009 ^(1)
(000s, except per share data)				($)	($)	($)		($)	($)	($)
Revenue				97,622	73,494	41,013		333,520	249,562	145,861
EBITDA ^(2)				50,700	36,016	13,620		176,241	117,524	46,651
			As a % of revenue	51.9	49.0	33.2		52.8	47.1	32.0
			Per share - basic	0.62	0.44	0.17		2.15	1.44	0.57
			Per share - diluted	0.61	0.44	0.17		2.13	1.44	0.57
Funds flow from operations^(2)				42,089	27,899	12,238		145,358	93,973	41,354
			Per share - basic	0.51	0.34	0.15		1.78	1.15	0.51
			Per share - diluted	0.51	0.34	0.15		1.76	1.15	0.51
Earnings (loss)				31,702	10,525	2,480		86,223	36,474	(5,510)
			Per share - basic	0.39	0.13	0.03		1.05	0.45	(0.07)
			Per share - diluted	0.38	0.13	0.03		1.04	0.45	(0.07)
Total assets				455,901	402,082	373,097		455,901	402,082	373,097
Total long-term debt				--	--	--		--	--	--

(1)	Comparative figures for 2010 have been restated to conform to International Financial Reporting Standards. Figures for 2009 are presented in accordance with the Company's previous accounting framework, Canadian generally accepted accounting principles.
(2)	EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense and impairment losses. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.

Overall Performance

		Three Months Ended December 31,				Year Ended December 31,
		2011	2010	Change		2011	2010	Change
(000s)		($)	($)	(%)		($)	($)	(%)
Revenue
	Electronic Drilling Recorder	40,079	30,024	33		134,935	99,857	35
	Pit Volume Totalizer	16,888	13,532	25		58,591	45,610	28
	Communications	12,937	9,547	36		43,579	31,201	40
	Automatic Driller	11,520	8,761	31		39,395	28,567	38
	Total Gas System	6,413	4,846	32		21,306	16,601	28
	Hazardous Gas Alarm System	1,490	789	89		5,258	2,945	79
	Mobilization	2,481	1,956	27		9,523	8,270	15
	Other	5,814	4,039	44		20,933	16,511	27
Total revenue		97,622	73,494	33		333,520	249,562	34

	Canada
	Three Months Ended December 31,			Year Ended December 31,
	2011	2010	Change	2011	2010	Change
			(%)			(%)
EDR rental days (#)	40,800	33,700	21	141,200	110,700	28
PVT rental days (#)	37,900	32,700	16	135,400	107,900	25

	United States
	Three Months Ended December 31,			Year Ended December 31,
	2011	2010	Change	2011	2010	Change
			(%)			(%)
EDR rental days (#)	100,200	95,100	5	381,700	337,000	13
PVT rental days (#)	70,100	63,500	10	264,200	221,800	19

Electronic Drilling Recorder

Consistent with prior years, the Pason Electronic Drilling Recorder ("EDR") remains the Company's prime 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 rig site 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. The EDR generated a 33% increase in revenue for the fourth quarter of 2011 compared to 2010 and an increase of 35% on a full year basis versus the prior year. These increases are due to increased rig activity in the Company's major markets, price increases in both Canada and the U.S., the Company's purchase of its former Latin American partner in 2010 and expanding demand by customers for EDR peripheral devices.

During 2011, the EDR was installed on 97% of all active land rigs in Canada and approximately 57% of the land rigs in the U.S.

In Canada, until the start of 2011, industry days used to calculate market share were based upon a 24-hour period. As a result, since the adoption of the Company's new billing policy described below, Canada was reporting slightly lower market share figures than was actually the case. Starting in 2011, the industry drilling day definition now recognizes these partial days and brings this method of activity reporting in line with how the Company bills.

In the U.S. the opposite impact is occurring. The Company is tracking EDR rental days under the new partial- billing method, but the industry days that are reported are still calculated on a 24-hour basis. The Company's calculated U.S. market share for 2011 was 57% but management believes this is understated by almost three percentage points due to the inconsistency between Pason's method of tracking rental days and how the industry calculates drilling days.

The method by which the Company bills its customers has impacted both the Canadian and U.S. market share figures. Previously, the Company billed for an entire day's worth of rentals regardless of whether the equipment was activated for the entire 24-hour period or not. To address customer concerns, the Company implemented a change to bill in increments, recognizing that during the initial start up or tear down of a rig the equipment is only utilized a portion of the day.

This partial billing process has been in place in Canada since 2009 and was rolled out to the U.S. market beginning in 2010.

Pit Volume Totalizer

The Pit Volume Totalizer ("PVT") is Pason's proprietary solution for the detection and early warning of "kicks" that are caused by hydrocarbons entering the wellbore under high-pressure and expanding as they migrate to the surface.  Revenue increases for this product were in line with the rise in drilling days in North America. During 2011, the PVT was installed on 96% of rigs with a Pason EDR in Canada and 69% in the U.S., compared to 97% and 66%, respectively, in 2010.

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 Internet DataHub, although if customers require greater analysis or desire to have the information transferred to another supplier's database, data is available for export from the Pason DataHub using WITSML (a specification for transferring data amongst oilfield service companies, drilling contractors and operators).  During 2010, the Company began complementing its satellite equipment with High Speed Packet Access ("HSPA"), a high speed wireless ground system that requires  lower capital cost, less service and lower cost per internet kilobyte, benefiting company margins. In Canada, HSPA has been installed on 90% of the rigs, and the majority of the rigs running will benefit from the investment in HSPA given the growth in cellular coverage. In the U.S. field coverage tests for HSPA are under way.

Total Gas System and Gas Analyzer

The Pason Total Gas System ("TGAS") , which is being replaced by the Company's new Gas Analyzer, measures the total hydrocarbon gases (C1 through C5) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced.  The new Gas Analyzer increases this functionality to include the actual break down by type of gas and also provides chromatograph features. For the year ended Decemer 31, 2011, both of these systems combined were installed on 43% of Canadian and 17% of U.S. land rigs operating with a Pason EDR system. The market penetration in both countries is an increase of approximately two percentage points over 2010 levels.

Automatic Driller

Pason's Automatic Driller ("ADR") is used to maintain constant weight on the drill bit while a well is being drilled. During 2011, Pason's ADR was installed on 78% of Canadian and 47% of U.S. land rigs operating with a Pason EDR system compared to 77% and 38%, respectively, in 2010.

Hazardous Gas Alarm System

Pason's Hazardous Gas Alarm System monitors both lower explosive limit gases (LEL) and H₂S where both readings and an alarm system are integrated with the EDR. Pason's Hazardous Gas Alarm System was installed on 18% of Canadian rigs in 2011, up from 15% for the same period in 2010, and 6% of U.S. land rigs operating with a Pason EDR system, an increase from 3% in 2010.

Discussion of Operations

United States Operations

			Three Months Ended December 31,				Year Ended December 31,
			2011	2010	Change		2011	2010	Change
(000s)			($)	($)	(%)		($)	($)	(%)
Revenue
		Electronic Drilling Recorder	23,685	20,001	18		84,040	67,042	25
		Pit Volume Totalizer	8,959	8,026	12		32,623	27,561	18
		Communications	5,871	4,404	33		20,399	14,363	42
		Automatic Driller	6,230	4,943	26		21,900	15,776	39
		Total Gas System	2,134	2,021	6		7,906	6,679	18
		Hazardous Gas Alarm System	565	280	102		1,620	701	131
		Mobilization	1,924	1,809	6		6,939	6,938	--
		Other	3,376	1,066	217		7,963	5,857	36
Total revenue			52,744	42,550	24		183,390	144,917	27
Operating costs			20,422	14,108	45		72,204	60,979	18
Depreciation and amortization			5,538	4,525	22		22,535	19,573	15
Segment operating profit			26,784	23,917	12		88,651	64,365	38

U.S. segment revenue increased by 24% in the fourth quarter of 2011 over the 2010 comparable period (18% increase when measured in U.S dollars (USD)), which compared with U.S. drilling industry days that were up 18% over the fourth quarter of 2010. For the year, revenue increased 27% versus 2010 results (a 29% increase when measured in USD), compared to an increase in U.S. drilling industry days of 22%.

Revenue was impacted by the following factors:

• Better pricing. Prices increased by approximately 30% in the second quarter of 2010 and have held steady since. The net impact of average weighted pricing, when comparing the full 12-month period of 2011 to 2010, was to increase revenue by approximately 10% in USD.
• More products on each rig.  Revenue was increased by more products on each rig, primarily with gains in ADR rentals and customer acceptance of the Company's live rig view and rig data software. Increased product penetration contributed to approximately a 2% revenue gain for 2011.

The factors explained above resulted in the U.S. segment being able to realize an increase in revenue per EDR day during the fourth quarter of $53 (USD$52) from 2010 amounts while the full year increase was $61 (USD$62). These increases are due to the Company's customers requesting additional Pason products on their rigs.

In the fourth quarter of 2011, revenue per industry day was $280 (USD$275) compared to $277 (USD$276) in 2010 and $153 (USD$146) in 2009. The U.S. business unit realized annual revenue per industry day of $266 (USD$272) for 2011, compared to $264 (USD$256) for 2010 and $186 (USD$155) for 2009.

The majority of the increase in "Other" revenue relates to sales realized by 3PS, Inc., the U.S. based company acquired in August of 2011.

Segment profit, as a percentage of revenue, was 51% for the fourth quarter of 2011, compared to 56% realized in 2010 and a loss of 14% in the fourth quarter of 2009.

For 2011, segment profit, as a percentage of revenue, was 48%, compared to 44% generated in 2010 and a loss of 7% realized in 2009.

The benefit of the increase in revenue for the fourth quarter and twelve months ending December 31, 2011, was reduced by increases in operating costs from 2010 levels:

• An increase in field technician related costs, to support the increase in rig activity, of $1.5 million for the quarter and $6.8 million year to date, mostly attributable to increased staff levels and the costs associated to support such an increase, including vehicle expense and consumable supplies.
  
  
• Year to date net operating expenses of 3PS Inc. of $1.7 million.
  
  
• Increase in depreciation expense for the quarter of $1.0 million and year to date of $3.0 million, due in most part to the continuing increase in capital expenditures as well as accelerating the depreciation rate on the Company's TGAS systems, which are being phased out by the new gas analyzer.
  
  
• Legal costs increased by $0.9 million due to the continuing ADR litigation.

Canadian Operations

		Three Months Ended December 31,				Year Ended December 31,
		2011	2010	Change		2011	2010	Change
(000s)		($)	($)	(%)		($)	($)	(%)
Revenue
	Electronic Drilling Recorder	13,464	8,916	51		41,130	26,882	53
	Pit Volume Totalizer	6,445	4,968	30		21,649	15,247	42
	Communications	7,233	5,111	42		23,020	16,529	39
	Automatic Driller	4,678	3,543	32		15,175	11,514	32
	Total Gas System	3,405	2,583	32		11,252	8,064	40
	Hazardous Gas Alarm System	682	425	60		2,603	1,566	66
	Mobilization	198	108	83		781	750	4
	Other	2,018	1,889	7		6,194	5,493	13
Total revenue		38,123	27,543	38		121,804	86,045	42
Operating costs		9,149	9,462	(3)		36,088	28,870	25
Depreciation and amortization		6,897	5,677	21		25,934	20,884	24
Segment operating  profit		22,077	12,404	78		59,782	36,291	65

Canadian segment revenue rose 38% for the three months ended December 31, 2011, a significant increase over the change in the number of Canadian drilling industry days of 18%. On an annual basis, revenue increased 42% compared to industry days increasing by 22%.

The improvement in revenue for both the fourth quarter and 2011 was due to:

• An increase in EDR rental days of 21% for the fourth quarter of 2011 and 28% for the full year, compared to the corresponding period in 2010.
  
  
• Improved pricing. Prices were reduced by approximately 20% in the second quarter of 2009 and did not rise again until a 10% price increase was applied in the fourth quarter of 2010. In addition, a price increase was implemented in the fourth quarter of 2011. The net impact of average weighted pricing, when comparing the fourth quarter and year to date 2011 to 2010, was an increase to revenue of approximately 12%.
  
  
• More products on each rig.  Revenue was increased by more products on each rig, primarily with gains in sensors, workstations and sidekick rentals. Increased product penetration contributed to approximately a 3% revenue gain for 2011.

The factors explained above resulted in fourth quarter revenue per industry day of $927 in 2011 compared to $748 in 2010 and $695 in 2009.  For 2011, revenue per industry day was $827, compared to $709 in 2010 and $712 in 2009.

The segment profit for the fourth quarter of 2011 of $22.1 million is significantly higher than the $12.4 million profit in 2010 and a significant improvement over the $7.6 million profit in 2009. During the fourth quarter of 2011, the Canadian business unit was able to reduce its operating costs by $0.3 million over the same period in 2010 and at the same time increase revenue by 38%.

Other factors impacting the fourth quarter of 2011 results include:

• A price increase applied in October 2011.
  
  
• An increase in the inventory obsolescence reserve of $1.5 million, due to the phasing out of the Company's TGAS system as well as the EDR evolution project. This increase is included in depreciation and amortization expense.

Segment profit, as a percent of revenue, was 49% for 2011, up from 42% when compared to 2010 levels, and a significant improvement from the 24% realized in 2009. The profit for the year was impacted by the following factors:

• Improvement in the business unit's ability to leverage its cost structure. Rental costs rose 25%, while at the same time revenue increased by 42%. The increase in rental costs is due in large part to higher field costs as a result of the increase in the rig count.
  
  
• Legal costs increased by $1.5 million as a result of the ADR litigation.
  
  
• $1.5 million of net expenses relating to water treatment. The Company disposed of this segment in the fourth quarter of 2011.
  
  
• Increase in the inventory obsolescence reserve of $3.4 million.
  
  
• Increase in repair costs of $0.7 million.

International Operations

		Three Months Ended December 31,			Year Ended December 31,
		2011	2010	Change		2011	2010	Change
(000s)		($)	($)	(%)		($)	($)	(%)
Revenue
	Electronic Drilling Recorder	2,930	1,107	165		9,765	5,933	65
	Pit Volume Totalizer	1,484	538	176		4,319	2,802	54
	Communications	(167)	32	(622)		160	309	(48)
	Automatic Driller	612	275	123		2,320	1,277	82
	Total Gas System	874	242	261		2,148	1,858	16
	Hazardous Gas Alarm System	243	84	189		1,035	678	53
	Mobilization	359	39	821		1,803	582	210
	Other	420	1,084	(61)		6,776	5,161	31
Total revenue		6,755	3,401	99		28,326	18,600	52
Operating costs		6,791	3,431	98		19,758	12,911	53
Depreciation and amortization		3,903	2,647	47		10,096	8,651	17
Segment operating loss		(3,939)	(2,677)	47		(1,528)	(2,962)	(48)

.

Revenue in the International operations improved 99% from the fourth quarter of 2010, while the operating loss increased by $1.3 million. For 2011, revenue increased by 52% while the operating loss improved by $1.4 million from 2010. At the close of 2010, the Company purchased the distribution rights and operating companies of its Latin American partner. This purchase increased revenue and costs in 2011 relative to 2010 as the Company now benefits from 100% of the operating results.

A number of factors influenced these results:

• The South American operations recorded significant expenses in 2011 due to the change in the business model that was implemented as a result of the change in ownership that occurred when the company purchased the distribution rights. One-time costs were incurred relating to changing the ownership of the assets to comply with local laws and regulations as well as integration costs. These one-time costs, a majority of which were incurred in the fourth quarter of 2011, exceeded $2.0 million.
  
  
• Drilling activity in Mexico continued to increase in 2011 from the lows seen in the second half of 2010. Full year 2011 revenue was up approximately 29% over 2010 results and the business unit was able to record operating profit of $0.9 million, an increase of 10% over 2010 levels.
  
  
• Results in Australia continue to improve with the operation posting record revenues in Q4 2011.  The business continues to benefit from increased drilling activity in Australia. This, combined with cost control initiatives, resulted in this segment generating $1.0 million of operating profit for the full year 2011 compared to $0.5 million for 2010.
  
  
• The Company's International segment includes Pason Offshore, which represents the offshore portion of the business acquired from Petron. In 2011, a decision was made to only offer Pason equipment for rent in lieu of Petron systems, which were historically sold.  Progress has been made with Pason equipment being installed on offshore rigs both in the Gulf of Mexico and internationally.  Offshore operating results have increased by approximately $1.9 million for the year ending December 31, 2011, as compared to the same period in 2010.

Q4 2011 versus Q4 2010

The active rig count in both Canada and the U.S. improved over the fourth quarter of 2010, resulting in gains in all of the Company's key metrics. Revenue increased 33%, while EBITDA increased by 41% and funds flow from operations was up 51%.

Net earnings increased to $31.7 million or $0.39 per share compared to $10.5 million or $0.13 per share in the fourth quarter of 2010. The fourth quarter consolidated results were impacted by the following items:

• Increase in depreciation expense of $3.5 million, attributable mostly to increased capital expenditures, the accelerated depreciation on the Company's TGAS systems, and an increase in the inventory obsolescence reserve.
  
  
• Increase in research and developments costs of $1.8 million as the Company hires additional staff to support its EDR evolution project.
  
  
• Corporate services costs primarily relate to personnel located in the corporate headquarters who directly support the Company's field operations and perform other corporate functions.  The increase in corporate operating expenses from 2010 of $0.9 million is mainly due to higher expenses as a result of more resources dedicated to the Company's growth strategy.
  
  
• Stock-based compensation decreased by $7.0 million compared to the fourth quarter of 2010 due to a reduction in the Company's stock price, which impacts the pricing under the Black-Scholes pricing model.
  
  
• Gains and losses from foreign exchange changes relating to monetary assets and liabilities must be taken into earnings in the period in which they occurred.  The fluctuation in the exchange rate between the Canadian dollar and U.S dollar resulted in a foreign exchange loss of $0.7 million compared to a loss of $3.4 million in 2010.
  
  
• In 2011, the Company recorded an impairment loss against its U.S water treatment assets of $2.8 million. In the fourth quarter of 2010, the Company recorded an impairment loss against its Offshore business unit of $5.6 million.
  
  
• The effective tax rate for 2011 of 7%, compared to a rate of 20% in 2010, is a result of a change in the relative amounts of taxable income earned in each respective tax jurisdiction combined with prior year adjustments flowing through the current quarter provision. Taxable income increased year over year in lower rate jurisdictions.

Q4 2011 versus Q3 2011

Revenue was higher in the fourth quarter of 2011 versus the third quarter due to an increase in drilling days in both the Canadian and U.S. markets. Operating profit of $44.9 million in the fourth quarter exceeded the third quarter results by $5.2 million, due mostly to the combination of increased rig activity and the Company's ability to leverage its cost structure, which is largely fixed in nature.

The Canadian business unit realized a profit of $22.1 million, compared to $16.4 million in the third quarter of 2011. Revenue was up 13% while operating profit increased by $5.7 million.

The U.S. business unit operating profit of $26.8 million was up $4.5 million compared to the results achieved in the third quarter of 2011. Revenue was up 10% while operating profit, as a percentage of revenue, was 51% versus 46% in the previous quarter.

Other items affecting the results of the fourth quarter of 2011 as compared to the third quarter of 2011 include the following items:

• In the fourth quarter, an impairment loss was recorded against the Company's U.S water treatment assets of $2.8 million.
  
  
• Increase in research and developments costs of $1.0 million, as the Company invests in maintaining and upgrading its product offerings.
  
  
• Increase in costs in Latin America relating to integration and logistic costs of $1.5 million.
  
  
• Increase in foreign exchange expense of $6.9 million.
  
  
• Reduction in the effective tax rate of approximately 14%.

Fourth Quarter & Year End Conference Call

Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its fourth quarter and annual results at 9:00 a.m. (Calgary time) Thursday, February 23, 2012.  The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450.  You can access the 7-day replay by dialing 1-855-859-2056 or 416-849-0833 password 31089821.

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, 2011, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.

Shareholders are also invited to attend the Company's Annual General Meeting on Tuesday, May 8, 2012, at 3:30 pm at the offices of Pason Systems Inc., 6120 Third Street S.E., Calgary, Alberta.

Consolidated Balance Sheets

As at December 31,			2011		2010
(CDN 000s)			($)		($)
Assets
Current
	Cash and cash equivalents		104,993		110,400
	Trade and other receivables		102,321		79,880
	Prepaid expenses		1,970		1,489
	Income taxes recoverable		--		--
	Total current assets		209,284		191,769
Non-current
	Property, plant and equipment		183,007		161,882
	Intangible assets		58,071		38,588
	Deferred tax assets		5,539		9,843
	Total non-current assets		246,617		210,313
Total assets			455,901		402,082
Liabilities and equity
Current
	Trade payables, accruals and provisions		55,211		51,398
	Income taxes payable		5,318		9,021
	Stock-based compensation liability		5,770		11,645
	Dividend payable		16,380		13,890
	Total current liabilities		82,679		85,954
Non-current
	Stock-based compensation liability		1,030		1,360
	Deferred tax liabilities		4,923		5,084
	Total non-current liabilities		5,953		6,444
Equity
	Share capital		77,613		75,040
	Employee benefits reserve		12,927		13,228
	Foreign currency translation reserve		(5,835)		(6,048)
	Retained earnings		282,564		227,464
	Total equity		367,269		309,684
Total liabilities and equity			455,901		402,082

Consolidated Statements of Operations

			Three Months Ended December 31,		Year Ended December 31,
			2011	2010	2011	2010
(CDN 000s, except per share data)			($)	($)	($)	($)
Revenue
	Equipment rentals and other		97,622	73,494	333,520	249,562
Operating expenses
	Rental services		31,264	24,824	111,364	94,299
	Local administration		5,098	2,177	16,686	8,461
	Depreciation and amortization		16,338	12,849	58,565	49,108
			52,700	39,850	186,615	151,868
Operating profit			44,922	33,644	146,905	97,694
Other expenses
	Research and development		5,371	3,561	17,366	16,472
	Corporate services		3,816	2,945	12,975	9,309
	Stock-based compensation		(2,561)	4,393	1,309	11,233
	Manufacturing and distribution		683	534	1,601	1,450
	Foreign exchange and other		690	3,437	(2,713)	2,047
	Impairment loss		2,780	5,575	4,580	6,656
			10,779	20,445	35,118	47,167
Income before income taxes			34,143	13,199	111,787	50,527
	Income taxes		2,441	2,674	25,564	14,053
Net income			31,702	10,525	86,223	36,474
Earnings per share
	Basic		0.39	0.13	1.05	0.45
	Diluted		0.38	0.13	1.04	0.45

Consolidated Statements of Cash Flows

			Three Months Ended December 31,		Year Ended December 31,
			2011	2010	2011	2010
(CDN 000s)			($)	($)	($)	($)
Cash flows from operating activities
	Net income		31,702	10,525	86,223	36,474
Adjustment for non-cash items:
	Depreciation and amortization		16,338	12,849	58,565	49,108
	Impairment loss		2,780	5,575	4,580	6,656
	Stock-based compensation		(3,048)	2,839	(2,112)	7,109
	Deferred income taxes		(6,660)	(5,783)	1,329	(5,771)
	Unrealized foreign exchange loss (gain)		977	1,894	(3,227)	397
			42,089	27,899	145,358	93,973
Movements in working capital
	Increase in  trade and other receivables		(6,376)	(4,775)	(19,896)	(35,010)
	Decrease (increase) in prepaid expenses		2,481	279	(446)	(112)
	Increase in income taxes payable/recoverable		3,448	9,026	13,819	13,450
	(Decrease) increase in trade payables, accruals and provisions		(221)	(5,538)	5,444	6,248
	(Decrease) increase in stock-based compensation liability		(3,524)	(1,878)	(732)	639
	Effects of exchange rate changes		(46)	(1,489)	832	1,667
			(4,238)	(4,375)	(979)	(13,118)
Cash generated from operating activities			37,851	23,524	144,379	80,855
	Income tax paid		(1,400)	--	(18,050)	(1,500)
Net cash from operating activities			36,451	23,524	126,329	79,355
Cash flows (used in) from financing activities
	Proceeds from issuance of common shares under the option plan		33	2,538	2,265	2,736
	Purchase of stock options		(89)	(1,849)	(3,355)	(1,854)
	Payment of dividends		--	--	(28,631)	(24,448)
Net cash (used in) from financing activities			(56)	689	(29,721)	(23,566)
Cash flows used in investing activities
	Additions to property, plant and equipment		(20,647)	(23,924)	(71,382)	(45,419)
	Additions to intangibles		(184)	--	(184)	(358)
	Deferred development costs		(1,279)	(2,290)	(6,975)	(4,387)
	Proceeds on disposal of property, plant and equipment		505	(22)	505	72
	Business acquisitions, net of cash acquired		(841)	(6,115)	(24,410)	(8,944)
	Changes in non-cash working capital		2,248	7,266	(520)	5,973
Net cash used in investing activities			(20,198)	(25,085)	(102,966)	(53,063)
Effect of exchange rate changes on cash			(1,096)	(1,540)	951	(2,175)
Net increase (decrease) in cash and cash equivalents			15,101	(2,412)	(5,407)	551
Cash and cash equivalents, beginning of year			89,892	112,812	110,400	109,849
Cash and cash equivalents, end of year			104,993	110,400	104,993	110,400

Segmented Information

Three months ended December 31, 2011	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	38,123	52,744	6,755	97,622
Operating costs	9,149	20,422	6,791	36,362
Depreciation and amortization	6,897	5,538	3,903	16,338
Segment operating profit (loss)	22,077	26,784	(3,939)	44,922
Research and development				5,371
Corporate services				3,816
Stock-based compensation				(2,561)
Manufacturing and distribution				683
Foreign exchange and other				690
Impairment loss				2,780
Income taxes				2,441
Net income				31,702
Capital expenditures and acquisitions	10,270	11,844	837	22,951
Goodwill	--	18,823	2,600	21,423
Intangible assets	20,188	11,890	4,570	36,648
Segment assets	149,453	243,423	63,025	455,901
Segment liabilities	64,194	15,433	9,005	88,632
Three months ended December 31, 2010
Revenue	27,543	42,550	3,401	73,494
Operating costs	9,462	14,108	3,431	27,001
Depreciation and amortization	5,677	4,525	2,647	12,849
Segment operating profit (loss)	12,404	23,917	(2,677)	33,644
Research and development				3,561
Corporate services				2,945
Stock-based compensation				4,393
Manufacturing and distribution				534
Foreign exchange and other				3,437
Impairment loss				5,575
Income taxes				2,674
Net income				10,525
Capital expenditures and acquisitions	12,022	10,859	9,448	32,329
Goodwill	--	5,676	2,600	8,276
Intangible assets	13,482	6,070	10,760	30,312
Segment assets	169,309	163,483	69,290	402,082
Segment liabilities	63,223	15,421	13,754	92,398

Year ended December 31, 2011	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	121,804	183,390	28,326	333,520
Operating costs	36,088	72,204	19,758	128,050
Depreciation and amortization	25,934	22,535	10,096	58,565
Segment operating profit (loss)	59,782	88,651	(1,528)	146,905
Research and development				17,366
Corporate services				12,975
Stock-based compensation				1,309
Manufacturing and distribution				1,601
Foreign exchange and other				(2,713)
Impairment loss				4,580
Income taxes				25,564
Net income				86,223
Capital expenditures and acquisitions	29,488	64,249	9,214	102,951
Goodwill	--	18,823	2,600	21,423
Intangible assets	20,188	11,890	4,570	36,648
Segment assets	149,453	243,423	63,025	455,901
Segment liabilities	64,194	15,433	9,005	88,632
Year ended December 31, 2010
Revenue	86,045	144,917	18,600	249,562
Operating costs	28,870	60,979	12,911	102,760
Depreciation and amortization	20,884	19,573	8,651	49,108
Segment operating profit (loss)	36,291	64,365	(2,962)	97,694
Research and development				16,472
Corporate services				9,309
Stock-based compensation				11,233
Manufacturing and distribution				1,450
Foreign exchange and other				2,047
Impairment loss				6,656
Income taxes				14,053
Net income				36,474
Capital expenditures and acquisitions	18,192	22,545	18,371	59,108
Goodwill	--	5,676	2,600	8,276
Intangible assets	13,482	6,070	10,760	30,312
Segment assets	169,309	163,483	69,290	402,082
Segment liabilities	63,223	15,421	13,754	92,398

Pason Systems Inc.

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

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. 

 

about Pason Systems Inc., visit the company's website at www.pason.com or contact:

Marcel Kessler 
President and CEO
403-301-3400
[email protected]

David Elliott
Chief Financial Officer
403-301-3441
[email protected]