Pason Reports Second Quarter 2013 Results

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Aug 02, 2013, 18:16 ET

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

Performance Data

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified) (restated)	Change	2013	2012 (reclassified) (restated)	Change
(CDN 000s, except per share data)		($)	($)	(%)	($)	($)	(%)
Revenue ⁽¹⁾		82,387	84,112	(2)	191,654	199,257	(4)
EBITDA ⁽²⁾		(27,817)	31,656	—	31,973	95,802	(67)
	As a % of revenue	n/a	37.6	—	16.7	48.1	(65)
	Per share - basic	(0.34)	0.39	—	0.39	1.17	(67)
	Per share - diluted	(0.34)	0.38	—	0.39	1.16	(66)
Cash flow from operating activities ⁽²⁾		51,236	48,105	7	97,430	93,109	5
	Per share - basic	0.62	0.59	5	1.19	1.14	4
	Per share - diluted	0.62	0.58	7	1.19	1.13	5
(Loss) earnings ⁽³⁾		(39,376)	6,772	—	(9,768)	35,845	—
	Per share - basic	(0.48)	0.08	—	(0.12)	0.44	—
	Per share - diluted	(0.48)	0.08	—	(0.12)	0.43	—
Capital expenditures		14,043	19,312	(27)	27,982	38,795	(28)
Working capital ⁽³⁾		109,718	151,772	(28)	109,718	151,772	(28)
Total assets		536,183	485,166	11	536,183	485,166	11
Total long-term debt		—	—	—	—	—	—
Total equity		351,849	390,702	(10)	351,849	390,702	(10)
Market capitalization		1,570,020	1,219,758	29	1,570,020	1,219,758	29
Cash dividends declared ⁽⁴⁾		0.13	0.22	(41)	0.26	0.22	18
Common shares outstanding (#)
	Basic	82,050	81,943	—	82,050	81,924	—
	Diluted	82,050	82,590	(1)	82,050	82,492	(1)
Shares outstanding end of period (#)		82,114	81,973	—	82,114	81,973	—

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, cash flow from operating activities, or earnings.
(2)	EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Cash flow from operating activities is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes, and other non-cash items impacting operations and changes in non-cash items as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
(3)	Earnings for the three months ended June 30, 2012, have been restated to correct a $1,700 non-cash error relating to stock-based compensation expense. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.
(4)	The Company changed its dividend policy whereby effective for 2013, the Company adopted a quarterly dividend to replace the semi-annual dividend.

President's Message

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

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

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

EBITDA for the second quarter was negative $27.8 million while cash flow from operating activities was up 7% to $51.2 million. Pason recorded a net loss of $39.4 million. In addition to the increase in the provision for resolving the infringement claims, second quarter results were impacted by the following factors:

An increase in stock-based compensation due to the increase in our stock price during the second quarter of 2013
An increase in R&D costs as we completed the hiring of staff to support our Electronic Drilling Recorder (EDR) evolution projects combined with an increase in costs to support our information technology systems
A foreign exchange gain recorded in the second quarter compared to a loss in the corresponding period in 2012

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

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

United States

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

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

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

Canada

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

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

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

International

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

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

Outlook

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

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

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

(Signed)

Marcel Kessler
President and Chief Executive Officer
August 1, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of August 1, 2013, and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the consolidated financial statements and accompanying notes.

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

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

Overview of the 2013 Second Quarter

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified) (restated)	2011 (reclassified)	2013	2012 (reclassified) (restated)	2011 (reclassified)
(000s, except per share data)		($)	($)	($)	($)	($)	($)
Revenue ⁽¹⁾		82,387	84,112	65,546	191,654	199,257	153,764
EBITDA ⁽²⁾		(27,817)	31,656	25,850	31,973	95,802	70,579
	As a % of revenue	n/a	37.6	39.4	16.7	48.1	45.9
	Per share - basic	(0.34)	0.39	0.31	0.39	1.17	0.86
	Per share - diluted	(0.34)	0.38	0.30	0.39	1.16	0.85
Cash flow from operating activities ⁽²⁾		51,236	48,105	30,756	97,430	93,109	59,586
	Per share - basic	0.62	0.59	0.38	1.19	1.14	0.73
	Per share - diluted	0.62	0.58	0.37	1.19	1.13	0.72
(Loss) earnings ⁽³⁾		(39,376)	6,772	8,217	(9,768)	35,845	25,974
	Per share - basic	(0.48)	0.08	0.10	(0.12)	0.44	0.32
	Per share - diluted	(0.48)	0.08	0.09	(0.12)	0.43	0.31
Total assets		536,183	485,166	405,437	536,183	485,166	405,437
Total long-term debt		—	—	—	—	—	—

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, cash flow from operating activities, or earnings.
(2)	EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Cash flow from operating activities is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes, and other non-cash items impacting operations and changes in non-cash items as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
(3)	Earnings for the three months ended June 30, 2012, have been restated to correct a $1,700 non-cash error relating to stock-based compensation expense. The 2012 year-to-date correction was $2,100. Per share amounts have been adjusted accordingly.

Overall Performance

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified)	Change	2013	2012 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder ⁽¹⁾	34,424	34,998	(2)	79,088	81,533	(3)
	Pit Volume Totalizer	12,164	12,551	(3)	29,034	30,497	(5)
	Communications ⁽¹⁾	7,801	5,933	31	18,755	16,930	11
	Software	4,767	5,384	(11)	12,130	12,457	(3)
	AutoDriller	7,341	8,603	(15)	17,851	21,054	(15)
	Gas Analyzer/Total Gas System	5,915	5,654	5	14,649	13,289	10
	Hazardous Gas Alarm System	1,092	1,618	(33)	2,694	3,632	(26)
	Mobilization	2,854	3,004	(5)	5,449	5,987	(9)
	Other	6,029	6,367	(5)	12,004	13,878	(14)
Total revenue		82,387	84,112	(2)	191,654	199,257	(4)

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

Change in Accounting Classification

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

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

Three Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	34,998	32,202	2,796
Communications ⁽¹⁾	5,933	5,669	264
Total revenue	84,112	81,052	3,060


Six Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	81,533	75,864	5,669
Communications ⁽¹⁾	16,930	16,049	881
Total revenue	199,257	192,707	6,550

EDR and PVT rental day performance for Canada and the United States is reported below:

Canada
	Three Months Ended June 30,			Six Months Ended June 30,
	2013	2012	Change	2013	2012	Change
			(%)			(%)
EDR rental days (#)	11,800	13,600	(13)	54,600	59,900	(9)
PVT rental days (#)	11,600	13,100	(11)	53,400	59,000	(9)


United States
	Three Months Ended June 30,			Six Months Ended June 30,
	2013	2012	Change	2013	2012	Change
			(%)			(%)
EDR rental days (#)	88,200	98,200	(10)	174,100	199,000	(13)
PVT rental days (#)	65,300	69,200	(6)	128,900	138,900	(7)

Electronic Drilling Recorder

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

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

Pit Volume Totalizer

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

Communications

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

Software

The Pason DataHub is the Company's data management system that collects, stores, and displays drilling data, reports, and real-time information from drilling operations. The DataHub provides access to data through a number of innovative applications or services including:

Live Rig View (LRV), which provides advanced data viewing, directional drilling, and 3D visualization of drilling data in real time via a web browser.
Mobile Viewer and Mobile, which allow users to access their data on mobile devices including iPhone, iPad, BlackBerry, and Android.
WITSML, which provides seamless data sharing with third-party applications enhancing the value of data hosted by Pason.
Additional specialized software.

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

Gas Analyzer and Total Gas System

The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the Canadian and US markets, measures the total hydrocarbon gases (C1 through C4¹) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced. The Gas Analyzer increases the functionality that was found in the TGAS product to include the actual composition of the gas and further calculates geologic ratios from the gas composition to assist in indicating the type of gas, natural gas liquid, or oil in the formation. The Company continues to realize increased product penetration for this product. For 2013, the Gas Analyzer was installed on 52% of Canadian and 23% of US land rigs operating with a Pason EDR system. The penetration in Canada is an increase of approximately 4% in market share over 2012 levels while the US has seen an increase of 5%. The roll out of the Gas Analyzer in the International markets continues with anticipated completion in most of the major markets by the end of 2013.

AutoDriller

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

Hazardous Gas Alarm System

The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit (LEL) gases and H₂S gases and displays the readings on the EDR. If a hazardous rig atmosphere is detected, the system reacts immediately, sounding an alarm and flashing a strobe light. Early in 2013, the Company identified a sensor on the H₂S product, a part of the HGAS system, which was not performing to the manufacturer's standards. As a result, the Company has temporarily suspended the functionality of this portion of the HGAS while it investigates a solution to the problem. The Company continues to investigate alternative technologies and field trials of an improved system are scheduled for the third quarter of 2013.

Discussion of Operations

United States Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified)	Change	2013	2012 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
Electronic Drilling Recorder ⁽¹⁾		24,457	25,540	(4)	47,807	50,830	(6)
	Pit Volume Totalizer	8,349	8,740	(4)	16,368	17,462	(6)
Communications ⁽¹⁾		5,567	3,827	45	9,806	7,732	27
Software		4,176	4,395	(5)	8,436	8,357	1
	AutoDriller	5,151	6,177	(17)	10,131	12,358	(18)
	Gas Analyzer/Total Gas System	3,343	3,159	6	6,345	5,688	12
	Hazardous Gas Alarm System	495	842	(41)	1,141	1,559	(27)
	Mobilization	2,193	2,303	(5)	4,154	4,600	(10)
Other		4,757	4,635	3	7,784	9,061	(14)
Total revenue		58,488	59,618	(2)	111,972	117,647	(5)
Operating costs		22,528	24,148	(7)	44,768	46,816	(4)
Depreciation and amortization		7,281	8,580	(15)	14,665	16,199	(9)
Segment operating profit		28,679	26,890	7	52,539	54,632	(4)

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

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


Three Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	25,540	23,835	1,705
Communications ⁽¹⁾	3,827	3,697	130
Total revenue	59,618	57,783	1,835
Operating costs	24,148	22,313	1,835
Revenue per EDR day	570	556	14
Revenue per Industry day	323	316	7

Six Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	50,830	47,640	3,190
Communications ⁽¹⁾	7,732	7,481	251
Total revenue	117,647	114,206	3,441
Operating costs	46,816	43,375	3,441
Revenue per EDR day	555	537	18
Revenue per Industry day	317	307	10

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

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

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

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

Revenue was impacted by the following factors:

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

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

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

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

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

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

The 2013 second quarter segment profit percentage was impacted by the following factors:

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

the Company began to accelerate the depreciation on its TGAS system in 2012 to recognize the fact that it was being replaced by the Gas Analyzer. The TGAS systems are now fully depreciated, resulting in a drop in depreciation expense.
the Company, in the first quarter of 2012, began to accelerate the depreciation on a portion of its base EDR system, which will become obsolete as a result of the EDR evolution project. Later in 2012, the Company re-evaluated the assumption of when the equipment being replaced will become obsolete and adjusted downwards the amount of accelerated depreciation being recorded.

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

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

Canadian Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified)	Change	2013	2012 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
Electronic Drilling Recorder ⁽¹⁾		5,622	5,690	(1)	22,996	23,489	(2)
	Pit Volume Totalizer	2,089	2,288	(9)	9,380	10,210	(8)
Communications ⁽¹⁾		1,864	1,966	(5)	8,243	8,893	(7)
	Software	500	864	(42)	3,503	3,885	(10)
	AutoDriller	1,196	1,533	(22)	5,815	6,872	(15)
	Gas Analyzer/Total Gas System	1,458	1,534	(5)	6,112	5,777	6
	Hazardous Gas Alarm System	279	331	(16)	817	1,289	(37)
	Mobilization	65	104	(38)	241	306	(21)
Other		488	702	(30)	2,409	2,635	(9)
Total revenue		13,561	15,012	(10)	59,516	63,356	(6)
Operating costs		7,898	7,512	5	17,505	18,915	(7)
Depreciation and amortization		5,315	6,430	(17)	11,336	13,473	(16)
Segment operating profit		348	1,070	(67)	30,675	30,968	(1)

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

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


Three Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	5,690	4,656	1,034
Communications ⁽¹⁾	1,966	1,832	134
Total revenue	15,012	13,844	1,168
Operating costs	7,512	6,344	1,168
Revenue per EDR day	1,081	996	85
Revenue per Industry day	968	892	76

Six Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	23,489	21,115	2,374
Communications ⁽¹⁾	8,893	8,263	630
Total revenue	63,356	60,352	3,004
Operating costs	18,915	15,911	3,004
Revenue per EDR day	1,045	994	51
Revenue per Industry day	989	941	48

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

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

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

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

The factors above combined to result in:

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

The segment profit for the second quarter of 2013 of $0.3 million is a decrease of $0.8 million over the 2012 amount. Factors impacting the second quarter results include:

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

a decrease in the loss on disposal of assets,
the replaced TGAS being fully depreciated, resulting in a decline in the expense, combined with a drop in the acceleration of depreciation on a portion of its base EDR system,
the above reductions in depreciation and amortization expense were offset by an increase in amortization costs relating to capitalized research and development costs, as a result of the deployment of new software applications.

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

International Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2013	2012 (reclassified)	Change	2013	2012 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
Electronic Drilling Recorder ⁽¹⁾		4,345	3,768	15	8,285	7,214	15
	Pit Volume Totalizer	1,726	1,523	13	3,286	2,825	16
Communications ⁽¹⁾		370	140	164	706	305	131
Software		91	125	(27)	191	215	(11)
	AutoDriller	994	893	11	1,905	1,824	4
	Gas Analyzer/Total Gas System	1,114	961	16	2,192	1,824	20
	Hazardous Gas Alarm System	318	445	(29)	736	784	(6)
	Mobilization	596	597	—	1,054	1,081	(2)
Other		784	1,030	(24)	1,811	2,182	(17)
Total revenue		10,338	9,482	9	20,166	18,254	10
Operating costs		7,414	5,890	26	13,808	11,042	25
Depreciation and amortization		1,810	1,977	(8)	3,339	4,212	(21)
Segment operating profit		1,114	1,615	(31)	3,019	3,000	1

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

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


Three Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	3,768	3,711	57
Communications ⁽¹⁾	140	140	—
Total revenue	9,482	9,425	57
Operating costs	5,890	5,833	57

Six Months Ended June 30, 2012	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	7,214	7,109	105
Communications ⁽¹⁾	305	305	—
Total revenue	18,254	18,149	105
Operating costs	11,042	10,937	105

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

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

A number of factors influenced these results:

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

Consolidated Results

		Three Months Ended June 30,			Six Months Ended June 30,

		2013	2012	Change	2013	2012	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Other expenses
Research and development		7,349	4,513	63	13,875	10,053	38
Corporate services		4,480	3,556	26	8,640	7,962	9
Stock-based compensation		6,871	4,244	62	10,621	11,163	(5)
Other
	Litigation provision	61,614	5,413	1,038	61,614	5,413	1,038
	Foreign exchange (gain) loss	(1,471)	1,324	—	(1,251)	3,035	—
	Other	392	100	292	722	219	230
		79,235	19,150	314	94,221	37,845	149

Q2 2013 versus Q2 2012

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

The Company recorded a net loss of $39.4 million or $0.48 per share compared to earnings of $6.8 million or $0.08 per share in the second quarter of 2012. The second quarter consolidated results, when compared to 2012 figures, were impacted by the following significant items:

An increase in the litigation provision of $56.2 million, to $61.6 million.
An increase in research and development costs in the second quarter of 2013 as the Company completed the hiring of additional staff in the second half of 2012 to support the EDR evolution project and other product development initiatives combined with increased information technology costs to upgrade the functionality of the Company's internal network infrastructure.
Stock-based compensation increased compared to the second quarter of 2012 due to an increase in the Company's stock price in the three months ended June 2013.
A foreign exchange gain recorded in the second quarter of 2013 compared to a loss in the corresponding period in 2012.

Q2 2013 versus Q1 2013

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

The following items also impacted the comparison to the first quarter 2013 results:

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

Second Quarter Conference Call

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

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

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

Condensed Consolidated Interim Balance Sheets

As at		June 30, 2013	December 31, 2012
(CDN 000s) (unaudited)		($)	($)

Assets
Current
	Cash and cash equivalents	195,445	157,944
	Trade and other receivables	78,210	84,506
	Prepaid expenses	1,477	2,920
	Income taxes recoverable	10,194	—
	Total current assets	285,326	245,370
Non-current
	Property, plant and equipment	175,093	174,651
	Intangible assets	64,816	59,593
	Deferred tax assets	10,948	8,764
	Total non-current assets	250,857	243,008
Total assets		536,183	488,378
Liabilities and equity
Current
	Trade payables and accruals	32,232	25,674
	Litigation provision	115,785	19,533
	Income taxes payable	—	3,313
	Stock-based compensation liability	16,917	13,788
	Dividend payable	10,674	19,691
	Total current liabilities	175,608	81,999
Non-current
	Stock-based compensation liability	6,126	2,583
	Deferred tax liabilities	2,600	2,600
	Litigation provision	—	32,500
	Total non-current liabilities	8,726	37,683
Equity
	Share capital	80,196	79,393
	Share-based benefits reserve	12,927	12,927
	Foreign currency translation reserve	5,111	(8,348)
	Retained earnings	253,615	284,724
	Total equity	351,849	368,696
Total liabilities and equity		536,183	488,378

Condensed Consolidated Interim Statements of Operations

		Three Months Ended June 30,		Six Months Ended June 30,
Six Months Ended June 30,		2013	2012 (reclassified restated)	2013	2012 (reclassified restated)
(CDN 000s, except per share data) (unaudited)		($)	($)	($)	($)
Revenue
	Equipment rentals and other	82,387	84,112	191,654	199,257
Operating expenses
	Rental services	33,192	31,869	67,068	65,570
	Local administration	4,648	5,681	9,013	11,203
	Depreciation and amortization	14,406	16,987	29,340	33,884
		52,246	54,537	105,421	110,657

Operating profit		30,141	29,575	86,233	88,600
Other expenses
	Research and development	7,349	4,513	13,875	10,053
	Corporate services	4,480	3,556	8,640	7,962
	Stock-based compensation	6,871	4,244	10,621	11,163
	Other expenses	60,535	6,837	61,085	8,667
		79,235	19,150	94,221	37,845

(Loss) income before income taxes		(49,094)	10,425	(7,988)	50,755
	Income taxes	(9,718)	3,653	1,780	14,910
(Loss) net income		(39,376)	6,772	(9,768)	35,845
(Loss) earnings per share
	Basic	(0.48)	0.08	(0.12)	0.44
	Diluted	(0.48)	0.08	(0.12)	0.43

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

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

Condensed Consolidated Interim Statements of Other Comprehensive Income

		Three Months Ended June 30,		Six Months Ended June 30,
		2013	2012 (restated)	2013	2012 (restated)
(CDN 000s) (unaudited)		($)	($)	($)	($)
(Loss) net income		(39,376)	6,772	(9,768)	35,845
Other comprehensive income (loss)
	Foreign currency translation adjustment	7,609	6,303	13,459	4,792
Total comprehensive (loss) income		(31,767)	13,075	3,691	40,637

Condensed Consolidated Interim Statements of Changes in Equity

		Share Capital	Share-Based Benefits Reserve	Foreign Currency Translation Reserve	Retained Earnings	Total Equity
(CDN 000s) (unaudited)		($)	($)	($)	($)	($)
Balance at January 1, 2012		77,613	12,927	(5,835)	282,564	367,269
	Net income (restated)	—	—	—	35,845	35,845
	Dividends	—	—	—	(18,033)	(18,033)
	Other comprehensive income	—	—	4,792	—	4,792
	Exercise of stock options	829	—	—	—	829
Balance at June 30, 2012		78,442	12,927	(1,043)	300,376	390,702
	Net income (restated)	—	—	—	4,039	4,039
	Dividends	—	—	—	(19,691)	(19,691)
	Other comprehensive loss	—	—	(7,305)	—	(7,305)
	Exercise of stock options	951	—	—	—	951
Balance at December 31, 2012		79,393	12,927	(8,348)	284,724	368,696
	Net loss	—	—	—	(9,768)	(9,768)
	Dividends	—	—	—	(21,341)	(21,341)
	Other comprehensive income	—	—	13,459	—	13,459
	Exercise of stock options	803	—	—	—	803
Balance at June 30, 2013		80,196	12,927	5,111	253,615	351,849

Condensed Consolidated Interim Statements of Cash Flows

		Three Months Ended June 30,		Six Months Ended June 30,

		2013	2012 (restated)	2013	2012 (restated)
(CDN 000s) (unaudited)		($)	($)	($)	($)
Cash flows from operating activities
	Net (loss) income	(39,376)	6,772	(9,768)	35,845
Adjustment for non-cash items:
	Depreciation and amortization	14,406	16,987	29,340	33,884
	Stock-based compensation	4,064	2,436	5,559	7,475
	Deferred income taxes	(3,859)	4,228	(2,139)	3,679
	Unrealized foreign exchange (gain) loss	(214)	(291)	(136)	956
Movements in non-cash items:
	Decrease in trade and other receivables	18,659	16,268	8,978	9,734
	Decrease (increase) in prepaid expenses	1,082	(539)	1,488	(964)
	(Decrease) increase in income taxes	(9,982)	857	(3,112)	9,049
	Increase in litigation provision	63,752	5,443	63,752	5,443
	Increase (decrease) in trade payables and accruals	4,535	(199)	6,496	(2,117)
	Increase in stock-based compensation liability	2,665	1,600	4,886	3,405
	Effects of exchange rate changes	1,507	(457)	2,589	(53)
Cash generated from operating activities		57,239	53,105	107,933	106,336
	Income tax paid	(6,003)	(5,000)	(10,503)	(13,227)
Net cash from operating activities		51,236	48,105	97,430	93,109
Cash flows from (used in) financing activities
	Proceeds from issuance of common shares	785	547	803	829
	Purchase of stock options	(1,130)	(1,685)	(3,052)	(2,089)
	Payment of dividends	(10,667)	—	(30,358)	(16,380)
Net cash used in financing activities		(11,012)	(1,138)	(32,607)	(17,640)
Cash flows (used in) from investing activities
	Additions to property, plant and equipment	(10,470)	(16,331)	(20,666)	(33,567)
	Additions to intangibles	(134)	(400)	(139)	(400)
	Deferred development costs	(3,573)	(2,981)	(7,316)	(5,228)
	Proceeds on disposal of property, plant and equipment	—	300	44	300
	Acquisitions, net of cash acquired	—	(1,274)	—	(1,274)
	Changes in non-cash working capital	239	(1,535)	(515)	(2,397)
Net cash used in investing activities		(13,938)	(22,221)	(28,592)	(42,566)
Effect of exchange rate on cash and cash equivalents		291	1,490	1,270	715
Net increase in cash and cash equivalents		26,577	26,236	37,501	33,618
Cash and cash equivalents, beginning of period		168,868	112,375	157,944	104,993
Cash and cash equivalents, end of period		195,445	138,611	195,445	138,611

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

Three Months Ended June 30, 2013	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	13,561	58,488	10,338	82,387
Operating costs	7,898	22,528	7,414	37,840
Depreciation and amortization	5,315	7,281	1,810	14,406
Segment operating profit	348	28,679	1,114	30,141
Research and development				7,349
Corporate services				4,480
Stock-based compensation				6,871
Other expenses				60,535
Income taxes				(9,718)
Net loss				(39,376)
Capital expenditures	6,772	5,463	1,808	14,043
Goodwill	—	19,456	2,600	22,056
Intangible assets	30,496	8,995	3,269	42,760
Segment assets	216,212	259,290	60,681	536,183
Segment liabilities	102,941	71,918	9,475	184,334

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

Revenue	15,012	59,618	9,482	84,112
Operating costs	7,512	24,148	5,890	37,550
Depreciation and amortization	6,430	8,580	1,977	16,987
Segment operating profit	1,070	26,890	1,615	29,575
Research and development				4,513
Corporate services				3,556
Stock-based compensation				4,244
Other expenses				6,837
Income taxes				3,653
Net income				6,772
Capital expenditures	7,085	10,611	1,616	19,312
Goodwill	—	18,862	2,600	21,462
Intangible assets	23,692	12,165	3,903	39,760
Segment assets	133,765	286,338	65,063	485,166
Segment liabilities	66,832	16,414	11,218	94,464


Six Months Ended June 30, 2013	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	59,516	111,972	20,166	191,654
Operating costs	17,505	44,768	13,808	76,081
Depreciation and amortization	11,336	14,665	3,339	29,340
Segment operating profit	30,675	52,539	3,019	86,233
Research and development				13,875
Corporate services				8,640
Stock-based compensation				10,621
Other expenses				61,085
Income taxes				1,780
Net loss				(9,768)
Capital expenditures	13,799	9,769	4,414	27,982
Goodwill	—	19,456	2,600	22,056
Intangible assets	30,496	8,995	3,269	42,760
Segment assets	216,212	259,290	60,681	536,183
Segment liabilities	102,941	71,918	9,475	184,334

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

Revenue	63,356	117,647	18,254	199,257
Operating costs	18,915	46,816	11,042	76,773
Depreciation and amortization	13,473	16,199	4,212	33,884
Segment operating profit	30,968	54,632	3,000	88,600
Research and development				10,053
Corporate services				7,962
Stock-based compensation				11,163
Other expenses				8,667
Income taxes				14,910
Net income				35,845
Capital expenditures	13,127	23,511	2,157	38,795
Goodwill	—	18,862	2,600	21,462
Intangible assets	23,692	12,165	3,903	39,760
Segment assets	133,765	286,338	65,063	485,166
Segment liabilities	66,832	16,414	11,218	94,464

Correction of Error

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

Three Months Ended June 30, 2012		Previously Disclosed	Adjustment	Restated
		($)	($)	($)
Statement of Operations
	Stock based compensation expense	2,544	1,700	4,244
	Net Income	8,472	(1,700)	6,772

Six Months Ended June 30, 2012		Previously Disclosed	Adjustment	Restated
		($)	($)	($)
Balance Sheet
	Stock based compensation liability - current	9,718	2,100	11,818
	Retained earnings	302,476	(2,100)	300,376
Statement of Operations
	Stock based compensation expense	9,063	2,100	11,163
	Net Income	37,945	(2,100)	35,845

Other Expenses

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
	($)	($)	($)	($)
Litigation provision	61,614	5,413	61,614	5,413
Foreign exchange (gain) loss	(1,471)	1,324	(1,251)	3,035
Other	392	100	722	219
Other expenses	60,535	6,837	61,085	8,667

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

On August 1,2013, the Company and the plaintiff in the litigation negotiated a final resolution to all three of these cases. The June 30, 2013 consolidated financial statements have been adjusted to reflect the final payment required to resolve all claims against the Company regarding the infringement.

	Balance, December 31, 2012	Provision	Foreign Exchange Adjustment and Interest	Balance, June 30, 2013
	($)	($)	($)	($)
Provision for patent infringement	52,033	61,614	2,138	115,785

Pason Systems Inc.

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 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]

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