Pason Reports Third Quarter 2015 Results
Pason Reports Third Quarter 2015 Results
Canada NewsWire
CALGARY, Nov. 4, 2015
CALGARY, Nov. 4, 2015 /CNW/ - Pason Systems Inc. (TSX:PSI) announced today its 2015 third quarter results.
Performance Data
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(CDN 000s, except per share data)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Revenue
|
68,468
|
|
134,041
|
|
(49)
|
|
225,310
|
|
361,066
|
|
(38)
|
(Loss) income
|
(18,558)
|
|
26,466
|
|
-
|
|
(13,771)
|
|
64,893
|
|
-
|
|
Per share – basic
|
(0.22)
|
|
0.32
|
|
-
|
|
(0.16)
|
|
0.79
|
|
-
|
|
Per share – diluted
|
(0.22)
|
|
0.31
|
|
-
|
|
(0.16)
|
|
0.77
|
|
-
|
EBITDA (1)
|
(2,717)
|
|
76,090
|
|
-
|
|
48,894
|
|
192,558
|
|
(75)
|
|
As a % of revenue
|
(4.0)
|
|
56.8
|
|
-
|
|
21.7
|
|
53.3
|
|
(59)
|
Funds flow from operations
|
23,791
|
|
63,691
|
|
(63)
|
|
76,330
|
|
164,257
|
|
(54)
|
|
Per share – basic
|
0.28
|
|
0.77
|
|
(64)
|
|
0.91
|
|
1.99
|
|
(54)
|
|
Per share – diluted
|
0.28
|
|
0.75
|
|
(63)
|
|
0.91
|
|
1.96
|
|
(54)
|
Cash from operating activities
|
16,332
|
|
50,758
|
|
(68)
|
|
119,165
|
|
171,123
|
|
(30)
|
Free cash flow (1)
|
5,902
|
|
11,110
|
|
(47)
|
|
75,419
|
|
96,835
|
|
(22)
|
|
Per share – basic
|
0.07
|
|
0.13
|
|
(46)
|
|
0.90
|
|
1.17
|
|
(23)
|
|
Per share – diluted
|
0.07
|
|
0.13
|
|
(46)
|
|
0.90
|
|
1.15
|
|
(22)
|
Capital expenditures
|
10,769
|
|
39,648
|
|
(73)
|
|
44,284
|
|
74,288
|
|
(40)
|
Working capital
|
244,324
|
|
173,949
|
|
40
|
|
244,324
|
|
173,949
|
|
40
|
Total assets
|
541,276
|
|
571,422
|
|
(5)
|
|
541,276
|
|
571,422
|
|
(5)
|
Total long-term debt
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Cash dividends declared
|
0.17
|
|
0.17
|
|
—
|
|
0.51
|
|
0.47
|
|
9
|
Shares outstanding end of period (#000's)
|
83,772
|
|
82,891
|
|
1
|
|
83,772
|
|
82,891
|
|
1
|
(1) Non-IFRS financial measures are defined in the Management's Discussion and Analysis section.
|
Q3 2015 vs Q3 2014 The Company generated consolidated revenue of $68.5 million in the third quarter of 2015, down 49% from $134.0 million in the same period of 2014. The continued slowdown in oil and gas drilling activity, combined with a reduction in product adoption on certain products and pricing pressure from customers, contributed to the decrease in revenue, which was partially offset by the strengthening of the US dollar relative to the Canadian dollar.
Consolidated EBITDA was a loss of $2.7 million in the third quarter, a decrease of $78.8 million from the third quarter of 2014. Included in the 2015 third quarter results are impairment charges related to excess quantities of equipment totaling $26.6 million.
The Company recorded a net loss of $18.6 million ($0.22 per share) in the third quarter, a decrease of $45.0 million from the net income of $26.5 million ($0.31 per share) recorded in same period in 2014.
President's Message Pason's third-quarter revenue increased 19% sequentially, but decreased 49% compared to the same period last year driven by continuing declines in drilling activity and persistent pricing pressure. Drilling industry days were down 55% in the United States and 51% in Canada year over year. The challenges felt in North America have spread around the world and customers have started pushing for lower service prices internationally.
Third-quarter revenue in the United States was down 49% year over year. We were able to hold market share at 61%, but revenue per EDR day was down 4% (when measured in USD) driven by select price concessions and steep declines in AutoDriller adoption as many non-AC rigs were stacked. In Canada, third-quarter revenue was down 51% in line with industry activity. Revenue per EDR day was down 8% and market share was up to 96%. International revenue dropped by 41% driven by rapid declines in industry activity in Australia, several Latin American countries, and offshore.
With low rental asset usage, and no expectation of a near-term rebound on the horizon, we have taken impairment charges totalling $26.6 million related to excess quantities of equipment. This has resulted in an EBITDA loss for the quarter of $2.7 million and a net loss of $18.6 million or $0.22 per share.
Funds flow from operations was $23.8 million in the third quarter while free cash flow was $5.9 million. On September 30, 2015, our cash position stood at $198.1 million and working capital at $244.3 million. There is no debt on the balance sheet. We are maintaining our quarterly dividend at $0.17 per share.
The short-term outlook remains very challenging and industry activity in all geographies may be reduced further in the fourth quarter and going into 2016. US horizontal rig counts are expected to see more drops and there may not be much of a seasonal winter drilling rebound in Canada. Pricing pressure continues with no signs of abatement as operators continue to seek further reductions in well costs.
At some point, a supply response from curtailed drilling is expected to correct the supply-demand imbalance leading to a gradual improvement in oil prices, but there could be a delay before drilling activity recovers and E&P capital spending will almost certainly be lower in 2016. In addition, natural gas prices may continue to weaken as El Nino promises a warmer than usual winter for large parts of North America. We believe that any meaningful recovery in activity levels for our business will not happen before 2017. However, the longer the recovery takes the sharper it will be, and we believe that North American land drilling will be the quickest to respond.
The implication for Pason is that we need to strike the optimal balance between cost control and investments in future growth. We expect material savings from the operating and capital cost savings initiatives implemented throughout 2015. Our total headcount is more than 20% below where we started the year, and discretionary spending (especially for equipment repairs) is down significantly. Capital expenditures for 2015 are expected to be reduced by approximately 50% in 2015 compared to 2014.
We will continue to invest in future growth, including investments in new product development, in service capabilities, in infrastructure and systems, and in our international footprint. We expect to allocate significant resources for R&D and IT in 2016. We plan to spend approximately $45 million in capital expenditures in 2016. We are focusing our development efforts on products and services that create significant and visible value, either by cost savings or by increasing revenues, for our customers.
We believe that Pason continues to be well-positioned to maximize returns in the industry's eventual upturn.
(signed) Marcel Kessler President and Chief Executive Officer November 4, 2015
Management's Discussion and Analysis The following discussion and analysis has been prepared by management as of November 4, 2015, and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the consolidated financial statements and accompanying notes.
Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements.
All financial measures presented in this report are expressed in Canadian dollars unless otherwise indicated.
Additional IFRS Measures In its interim condensed consolidated financial statements, the Corporation uses certain additional IFRS measures. Management believes these measures provide useful supplemental information to readers.
Funds flow from operations Management believes that funds flow from operations, as reported in the Consolidated Statements of Cash Flows, is a useful additional measure as it represents the cash generated during the period, regardless of the timing of collection of receivables and payment of payables. Funds flow from operations represents the cash flow from continuing operations, excluding non-cash items. Funds flow from operations is defined as net income adjusted for depreciation and amortization expense, non-cash stock-based compensation expense, deferred taxes, and other non-cash items impacting operations.
Cash from operating activities Cash from operating activities is defined as funds flow from operations adjusted for changes in working capital items.
Non-IFRS Financial Measures These definitions are not recognized measures under IFRS, and accordingly, may not be comparable to measures used by other companies. These Non-IFRS measures provide readers with additional information regarding the Company's ability to generate funds to finance its operations, fund its research and development and capital expenditure program, and pay dividends.
EBITDA EBITDA is defined as net income before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense, and gains on disposal of investments.
Free cash flow Free cash flow is defined as cash from operating activities plus proceeds on disposal of property, plant and equipment, less capital expenditures, and deferred development costs.
Overall Performance
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(000s)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Drilling Recorder
|
27,299
|
|
57,265
|
|
(52)
|
|
93,626
|
|
157,519
|
|
(41)
|
|
Pit Volume Totalizer/ePVT
|
10,340
|
|
18,865
|
|
(45)
|
|
32,086
|
|
52,641
|
|
(39)
|
|
Communications
|
7,252
|
|
11,366
|
|
(36)
|
|
22,364
|
|
29,578
|
|
(24)
|
|
Software
|
4,672
|
|
8,509
|
|
(45)
|
|
15,253
|
|
24,014
|
|
(36)
|
|
AutoDriller
|
4,943
|
|
11,673
|
|
(58)
|
|
16,457
|
|
32,288
|
|
(49)
|
|
Gas Analyzer
|
4,985
|
|
9,919
|
|
(50)
|
|
16,511
|
|
27,483
|
|
(40)
|
|
Other
|
8,977
|
|
16,444
|
|
(45)
|
|
29,013
|
|
37,543
|
|
(23)
|
Total revenue
|
68,468
|
|
134,041
|
|
(49)
|
|
225,310
|
|
361,066
|
|
(38)
|
Electronic Drilling Recorder (EDR) and Pit Volume Totalizer (PVT) rental day performance for Canada and the United States is reported below:
Canada
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
|
#
|
|
#
|
|
(%)
|
|
#
|
|
#
|
|
(%)
|
EDR rental days
|
17,000
|
|
32,000
|
|
(47)
|
|
51,600
|
|
91,100
|
|
(43)
|
PVT rental days
|
15,900
|
|
31,900
|
|
(50)
|
|
48,600
|
|
89,000
|
|
(45)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
|
#
|
|
#
|
|
(%)
|
|
#
|
|
#
|
|
(%)
|
EDR rental days
|
46,000
|
|
103,400
|
|
(56)
|
|
159,200
|
|
290,200
|
|
(45)
|
PVT rental days
|
33,800
|
|
79,600
|
|
(58)
|
|
121,100
|
|
222,900
|
|
(46)
|
Electronic Drilling Recorder (EDR) The Pason EDR remains the Company's primary product. The EDR provides a complete system of drilling data acquisition, data networking, and drilling management tools and reports at both the wellsite and customer offices. The EDR is the base product from which all other wellsite instrumentation products are linked. By linking these products, a number of otherwise redundant elements such as data processing, display, storage, and networking are eliminated. This ensures greater reliability and a more robust system of instrumentation for the customer. Revenue generated from the EDR decreased 52% for the third quarter of 2015 compared to the same period in 2014. This decrease is attributable to the industry slowdown, lower product adoption of certain peripheral devices, and pricing pressures from customers which were offset by a strengthening US dollar relative to the Canadian dollar. Industry activity in the US market decreased 55% in the third quarter of 2015 compared to the corresponding period in 2014 (44% on a year-to-date basis), while third quarter Canadian rig activity decreased 51% compared to the same period in 2014 (49% on a year-to-date basis). Canadian EDR days decreased 47% in the third quarter of 2015 from 2014 levels (43% on a year-to-date basis), while US EDR days decreased by 56% for the third quarter of 2015 (45% on a year-to-date basis).
During the first nine months of the year, the Pason EDR was installed on 97% of all active land rigs in Canada and 58% of the land rigs in the US, compared to 93% and 60% respectively in the first nine months of 2014.
Pit Volume Totalizer (PVT) and Enhanced Pit Volume Totalizer (ePVT) The PVT is Pason's proprietary solution for the detection and early warning of "kicks" that are caused by hydrocarbons entering the wellbore under high pressure and expanding as they migrate to the surface. PVT revenue for the first nine months of 2015 was impacted by the decline in rig count activity, offset partially with continued customer adoption of the new ePVT. During the first nine months of 2015, the PVT was installed on 95% of rigs with a Pason EDR in Canada and 75% in the US, compared to 98% and 77% respectively, in the same period of 2014.
Communications Pason's Communications revenue comes from a number of communication service offerings, including providing customers with bandwidth through the Company's automatically-aiming satellite system and terrestrial networks. This system provides reliable 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 complements its satellite equipment with High Speed Packet Access (HSPA), a high-speed wireless ground system which provides automatic fail-over between satellite and terrestrial networks to achieve greater reliability in its service offering.
Communications revenue decreased by 24% in the first nine months of 2015 compared to the same period in 2014 due to the industry slowdown, offset by an increase in customer adoption of new communication solutions rolled out in the Canadian and USA markets (RigSite wireless and VSP Intercom), and the strengthening of the US dollar relative to the Canadian dollar.
Software The Pason DataHub is the Company's data management system that collects, stores, and displays drilling data, reports, and real-time information from drilling operations. The DataHub provides access to data through a number of innovative applications or services, including:
- Live Rig View (LRV), which provides advanced data viewing, directional drilling, and 3D visualization of drilling data in real time via a web browser.
- LRV Mobile, which allows users to access their data on mobile devices, including iPhone, iPad, BlackBerry, and Android.
- WITSML, which provides seamless data sharing with third-party applications, enhancing the value of data hosted by Pason.
- Additional specialized software, including directional offerings.
During the first three quarters of 2015, 98% of the Company's Canadian customers and 86% of customers in the US were using all or a portion of the functionality of the DataHub, compared to 98% and 91% respectively in the same period in 2014.
AutoDriller Pason's AutoDriller is used to maintain constant weight on the drill bit while a well is being drilled. During the nine months ended September 30, 2015, the AutoDriller was installed on 62% of Canadian and 33% of US land rigs operating with a Pason EDR system, compared to 74% and 46%, respectively, in 2014.
Gas Analyzer The Pason Gas Analyzer measures the total hydrocarbon gases (C1 through C4 and CO2) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced. The Gas Analyzer provides information about the 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. During the first nine months of 2015, the Gas Analyzer was installed on 58% of Canadian and 26% of US land rigs operating with a Pason EDR system, compared to 62% and 24% for the Canadian and US segments respectively in the prior year period.
Other Other is comprised mostly of the rental of service rig recorders in Latin America, the Electronic Choke Actuator, Hazardous Gas Alarm products, Mobilization revenue, sales of sensors and other systems sold by 3PS, and spare parts sold by Pason Offshore.
Discussion of Operations
United States Operations
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(000s)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Drilling Recorder
|
16,918
|
|
36,161
|
|
(53)
|
|
60,362
|
|
100,222
|
|
(40)
|
|
Pit Volume Totalizer/ePVT
|
6,315
|
|
10,970
|
|
(42)
|
|
19,356
|
|
30,625
|
|
(37)
|
|
Communications
|
3,682
|
|
5,814
|
|
(37)
|
|
11,514
|
|
14,790
|
|
(22)
|
|
Software
|
3,062
|
|
5,584
|
|
(45)
|
|
10,321
|
|
15,856
|
|
(35)
|
|
AutoDriller
|
2,383
|
|
6,476
|
|
(63)
|
|
8,208
|
|
18,100
|
|
(55)
|
|
Gas Analyzer
|
2,383
|
|
4,225
|
|
(44)
|
|
8,342
|
|
11,973
|
|
(30)
|
|
Other
|
5,408
|
|
10,169
|
|
(47)
|
|
18,041
|
|
23,727
|
|
(24)
|
Total revenue
|
40,151
|
|
79,399
|
|
(49)
|
|
136,144
|
|
215,293
|
|
(37)
|
Operating costs
|
17,250
|
|
25,865
|
|
(33)
|
|
61,600
|
|
72,467
|
|
(15)
|
Depreciation and amortization
|
7,862
|
|
7,746
|
|
1
|
|
25,874
|
|
23,439
|
|
10
|
Segment operating profit
|
15,039
|
|
45,788
|
|
(67)
|
|
48,670
|
|
119,387
|
|
(59)
|
|
Three Months Ended September 30,
|
|
2015
|
|
2014
|
|
USD
|
|
CAD
|
|
USD
|
|
CAD
|
|
$
|
|
$
|
|
$
|
|
$
|
Revenue per EDR day
|
628
|
|
822
|
|
656
|
|
715
|
Revenue per industry day
|
382
|
|
500
|
|
405
|
|
441
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
USD
|
|
CAD
|
|
USD
|
|
CAD
|
|
$
|
|
$
|
|
$
|
|
$
|
Revenue per EDR day
|
642
|
|
809
|
|
643
|
|
704
|
Revenue per industry day
|
375
|
|
472
|
|
388
|
|
425
|
US segment revenue decreased by 49% in the third quarter of 2015 over the 2014 comparable period (57% decrease when measured in USD). For the first nine months, revenue decreased by 37% (45% decrease when measured in USD).
Industry activity in the US market during the third quarter of 2015 decreased 55% from the prior year, while revenue from the rental of instrumentation decreased by 48% for the quarter over 2014 levels (57% decrease when measured in USD). For the first nine months, industry activity decreased 44% from 2014 levels, while instrumentation revenue decreased 36% (45% decrease when measured in USD).
EDR rental days decreased by 56% for the quarter ended September 30, 2015 over the same time period in 2014, while revenue per EDR day in the third quarter of 2015 decreased to US$628, a decrease of US$28 over the same period in 2014. For the first nine months, EDR rental days decreased 45%, while revenue per EDR day was relatively flat when measured in USD.
The decrease in industry activity, combined with pricing pressure from customers and lower product adoption on certain products, accounted for the drop in revenue for both the quarter and nine months ended September 30, 2015. This decrease was offset by the favourable movement in the USD/CAD exchange rate and continued customer usage of premium communication services. US market share was 61% during the three months ended September 30, 2015, down slightly from 62% in the same period of 2014.
Operating costs decreased by 33% in the third quarter relative to the same period in the prior year. When measured in USD, operating costs decreased 38% (20% on a year-to-date basis) as the business unit continues to identify and implement changes to its fixed cost structure to meet the challenging business environment while maintaining customer service.
Depreciation expense for the first nine months of 2015 increased 10% over 2014 amounts. This increase is due to the exchange rate movement noted above combined with the 2014 roll out of capital equipment associated with the commercialization of the ePVT, including the continued roll out of the Rig Display, the upgrade program to the Company's fleet of workstations, and the introduction of the new Versatile Services Platform (VSP) server.
Segment profit, as a percentage of revenue, was 37% for the third quarter of 2015 compared to 58% for the corresponding period in 2014. Segment profit decreased to $48.7 million for the first nine months of 2015, a drop of 59% from the same period in 2014.
Canadian Operations
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(000s)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Drilling Recorder
|
6,614
|
|
15,167
|
|
(56)
|
|
20,759
|
|
41,557
|
|
(50)
|
|
Pit Volume Totalizer/ePVT
|
2,945
|
|
5,817
|
|
(49)
|
|
8,969
|
|
16,218
|
|
(45)
|
|
Communications
|
3,101
|
|
5,026
|
|
(38)
|
|
9,281
|
|
13,421
|
|
(31)
|
|
Software
|
1,490
|
|
2,646
|
|
(44)
|
|
4,516
|
|
7,525
|
|
(40)
|
|
AutoDriller
|
1,482
|
|
3,632
|
|
(59)
|
|
4,669
|
|
10,159
|
|
(54)
|
|
Gas Analyzer
|
2,084
|
|
4,414
|
|
(53)
|
|
6,073
|
|
11,902
|
|
(49)
|
|
Other
|
1,107
|
|
1,889
|
|
(41)
|
|
3,156
|
|
5,508
|
|
(43)
|
Total revenue
|
18,823
|
|
38,591
|
|
(51)
|
|
57,423
|
|
106,290
|
|
(46)
|
Operating costs
|
6,256
|
|
10,446
|
|
(40)
|
|
21,959
|
|
30,836
|
|
(29)
|
Depreciation and amortization
|
9,447
|
|
6,765
|
|
40
|
|
28,408
|
|
19,160
|
|
48
|
Segment operating profit
|
3,120
|
|
21,380
|
|
(85)
|
|
7,056
|
|
56,294
|
|
(87)
|
|
Three Months Ended September 30,
|
|
2015
|
|
2014
|
|
CAD
|
|
CAD
|
|
$
|
|
$
|
Revenue per EDR day
|
1,095
|
|
1,191
|
Revenue per industry day
|
1,055
|
|
1,119
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
CAD
|
|
CAD
|
|
$
|
|
$
|
Revenue per EDR day
|
1,100
|
|
1,155
|
Revenue per industry day
|
1,069
|
|
1,079
|
Canadian segment revenue decreased by 51% for the quarter ended September 30, 2015 compared to the same period in 2014. This drop is the result of a 51% decrease in the number of drilling industry days in the third quarter compared to 2014 levels, pricing pressures from customers, and lower product adoption on some products. These factors were off-set by an increase in market share, to 96% in the third quarter of 2015 compared to 94% in 2014.
On a year-to-date basis, revenue decreased 46% while industry days declined 49%.
EDR rental days decreased 47% in the third quarter compared to 2014 (43% for the first nine months of 2015).
The factors above combined to result in a decrease in revenue per EDR day of $96 to $1,095 during the third quarter of 2015 compared to 2014. Revenue per EDR day for the first nine months of 2015 was $1,100, down $55 from the same period in 2014.
Operating costs decreased by 40% in the third quarter of 2015 relative to the same period in 2014 (29% on a year-to-date basis), primarily due to a drop in activity combined with cost control initiatives implemented by all of the business units.
Depreciation expense increased for both the three month and nine month periods ended September 30, 2015 due to the Company's 2014 capital expenditure program explained above in the United States operations update, combined with the amortization of previously capitalized research and development costs.
Third quarter operating profit of $3.1 million is a decrease of $18.3 million over the prior year. Segment operating profit for the first nine months of 2015 is down 87% from last year's comparatives.
International Operations
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(000s)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic Drilling Recorder
|
3,767
|
|
5,937
|
|
(37)
|
|
12,505
|
|
15,740
|
|
(21)
|
|
Pit Volume Totalizer/ePVT
|
1,080
|
|
2,078
|
|
(48)
|
|
3,761
|
|
5,798
|
|
(35)
|
|
Communications
|
469
|
|
526
|
|
(11)
|
|
1,569
|
|
1,367
|
|
15
|
|
Software
|
120
|
|
279
|
|
(57)
|
|
416
|
|
633
|
|
(34)
|
|
AutoDriller
|
1,078
|
|
1,565
|
|
(31)
|
|
3,580
|
|
4,029
|
|
(11)
|
|
Gas Analyzer
|
518
|
|
1,280
|
|
(60)
|
|
2,096
|
|
3,608
|
|
(42)
|
|
Other
|
2,462
|
|
4,386
|
|
(44)
|
|
7,816
|
|
8,308
|
|
(6)
|
Total revenue
|
9,494
|
|
16,051
|
|
(41)
|
|
31,743
|
|
39,483
|
|
(20)
|
Operating costs
|
7,156
|
|
7,020
|
|
2
|
|
22,723
|
|
20,365
|
|
12
|
Depreciation and amortization
|
1,950
|
|
1,900
|
|
3
|
|
7,297
|
|
5,458
|
|
34
|
Segment operating profit
|
388
|
|
7,131
|
|
(95)
|
|
1,723
|
|
13,660
|
|
(87)
|
The market forces impacting the Company's US and Canadian segments also exist in the majority of the Company's International markets.
Revenue in the International operations segment decreased 41% in the third quarter of 2015 compared to the same period in 2014. For the first nine months of 2015, revenue decreased $7.7 million, or 20%.
Operating profit decreased by $6.7 million for the third quarter of 2015 over 2014 amounts. Year-to-date profit declined 87%, or $11.9 million.
A number of factors influenced these results:
- During the third quarter of 2014 , the company received a $1.5 million payment relating to a contractual foreign exchange and inflationary related adjustment clause with one of its major customers.
- Operating costs increased for the third quarter of 2015 over 2014 levels due to an increase in importation costs in Argentina relating to the deployment of new technology previously rolled out to the Company's North American markets ($0.6 million of the increase) combined with increased staffing costs in Argentina to support the drilling activity ($0.3 million of the increase). All other International business units saw a decline in their controllable costs.
- Depreciation costs increased due to 2014 capital expenditures and a write-off of obsolete spare parts.
Corporate Expenses
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
(000s)
|
($)
|
|
($)
|
|
(%)
|
|
($)
|
|
($)
|
|
(%)
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
7,288
|
|
8,599
|
|
(15)
|
|
25,431
|
|
24,774
|
|
3
|
Corporate services
|
5,134
|
|
6,038
|
|
(15)
|
|
15,040
|
|
16,229
|
|
(7)
|
Stock-based compensation
|
808
|
|
15,267
|
|
(95)
|
|
4,596
|
|
40,071
|
|
(89)
|
Other
|
|
|
|
|
|
|
|
Restructuring costs
|
—
|
|
—
|
|
—
|
|
2,572
|
|
—
|
|
—
|
|
Foreign exchange loss (gain)
|
904
|
|
(682)
|
|
—
|
|
(1,555)
|
|
2,227
|
|
—
|
|
Impairment loss
|
26,555
|
|
—
|
|
—
|
|
26,555
|
|
—
|
|
—
|
|
Gain on sale of investment
|
—
|
|
—
|
|
—
|
|
(2,290)
|
|
—
|
|
—
|
|
Other
|
642
|
|
665
|
|
(3)
|
|
2,091
|
|
1,610
|
|
30
|
Total corporate expenses
|
41,331
|
|
29,887
|
|
38
|
|
72,440
|
|
84,911
|
|
(15)
|
In 2014, the company reviewed the level of rental equipment deployed in each respective business unit versus the anticipated decline in usage rates of such equipment due to the reduction in drilling activity as a result of the drop in oil and gas prices. In the third quarter of 2015, management concluded that drilling activity is likely to be at depressed levels for a longer period of time than originally anticipated and this resulted in the company updating its assumptions on equipment usage. This current review identified additional excess equipment based upon management's best estimate of drilling activity in 2016. The net book value of this excess equipment, totaling $26.6 million, of which $7.7 million relates to the Canadian operating segment and $18.9 relates to the US operating segment, was recorded as a non-cash impairment loss in the third quarter of 2015.
In response to the current business environment, the Company reduced its staffing levels during the second quarter of 2015 and recorded a restructuring charge of $2.6 million.
In the first quarter of 2015, the Company disposed of its investment in a small privately held company and realized a gain of $2.3 million.
Q3 2015 vs Q2 2015 Consolidated revenue was $68.5 million in the third quarter of 2015 compared to $57.4 million in the second quarter of 2015, an increase of $11.1 million or 19%. The third quarter of the year is usually stronger compared to the second quarter due to the seasonality of Canadian drilling activity. This increase in Canadian activity was offset by a further decline in US activity. The Canadian segment earned revenue of $18.8 million in the third quarter as compared to $9.2 million in the second quarter of 2015. Revenue in the US market increased 4%; as a further decline in activity in the third quarter of 2015 was offset by a further weakening of the Canadian dollar compared to the US dollar. The International segment experienced a revenue decrease of $0.2 million.
The Company recorded a net loss in the third quarter of 2015 of $18.9 million ($0.22 per share) compared to a loss of $9.4 million ($0.11 per share) in the second quarter of 2015. The increase in operating profit of $14.9 million over the second quarter of 2015 was more than offset by the third quarter impairment charge of $26.6 million.
Sequentially, EBITDA decreased from $7.5 million in the second quarter of 2015 to a negative $2.7 million in the third quarter of 2015, impacted by the impairment charge. Funds flow from operations increased to $23.8 million in the third quarter from $9.3 million in the second quarter of 2015.
In May 2015, shareholders approved a modification to the Option Plan to eliminate the ability for the option holder to settle options for cash. As a result of this change, stock-based compensation expense relating to the Option Plan will be less volatile going forward as the fair value of the option is calculated at the time of grant and is not subsequently re-valued at the end of each reporting period.
Third Quarter Conference Call Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its third quarter 2015 results at 9:00 am (Calgary time) on Thursday, November 5, 2015. The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450. You can access the seven-day replay by dialing 1-855-859-2056 or 1-416-849-0833, using password 27238683.
Pason Systems Inc. is a leading global provider of specialized data management systems for drilling rigs. Our solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, enable collaboration between the rig and the office. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.
Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2014, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.
Condensed Consolidated Interim Balance Sheets
As at
|
|
September 30, 2015
|
|
December 31, 2014
|
(CDN 000s) (unaudited)
|
|
($)
|
|
($)
|
Assets
|
|
|
|
|
Current
|
|
|
|
|
|
Cash and cash equivalents
|
|
198,115
|
|
144,858
|
|
Trade and other receivables
|
|
55,636
|
|
122,494
|
|
Prepaid expenses
|
|
5,787
|
|
5,811
|
|
Income taxes recoverable
|
|
11,917
|
|
491
|
|
Total current assets
|
|
271,455
|
|
273,654
|
Non-current
|
|
|
|
|
Property, plant and equipment
|
|
210,077
|
|
234,344
|
|
Intangible assets and goodwill
|
|
59,744
|
|
62,068
|
|
Total non-current assets
|
|
269,821
|
|
296,412
|
Total assets
|
|
541,276
|
|
570,066
|
Liabilities and equity
|
|
|
|
Current
|
|
|
|
|
Trade payables and accruals
|
|
21,671
|
|
47,414
|
|
Income taxes payable
|
|
—
|
|
3,544
|
|
Stock-based compensation liability
|
|
5,460
|
|
16,125
|
|
Total current liabilities
|
|
27,131
|
|
67,083
|
Non-current
|
|
|
|
|
Stock-based compensation liability
|
|
3,800
|
|
3,018
|
|
Deferred tax liabilities
|
|
14,061
|
|
16,442
|
|
Total non-current liabilities
|
|
17,861
|
|
19,460
|
Equity
|
|
|
|
|
Share capital
|
|
122,057
|
|
113,827
|
|
Share-based benefits reserve
|
|
24,630
|
|
12,927
|
|
Foreign currency translation reserve
|
|
82,056
|
|
32,807
|
|
Retained earnings
|
|
267,541
|
|
323,962
|
|
Total equity
|
|
496,284
|
|
483,523
|
Total liabilities and equity
|
|
541,276
|
|
570,066
|
Condensed Consolidated Interim Statements of Operations
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
(CDN 000s, except per share data) (unaudited)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
68,468
|
|
134,041
|
|
225,310
|
|
361,066
|
Operating expenses
|
|
|
|
|
|
|
Rental services
|
|
26,892
|
|
38,788
|
|
93,335
|
|
109,541
|
|
Local administration
|
|
3,770
|
|
4,543
|
|
12,947
|
|
14,127
|
|
Depreciation and amortization
|
|
19,259
|
|
16,411
|
|
61,579
|
|
48,057
|
|
|
49,921
|
|
59,742
|
|
167,861
|
|
171,725
|
|
|
|
|
|
|
Operating profit
|
|
18,547
|
|
74,299
|
|
57,449
|
|
189,341
|
Other expenses
|
|
|
|
|
|
|
Research and development
|
|
7,288
|
|
8,599
|
|
25,431
|
|
24,774
|
|
Corporate services
|
|
5,134
|
|
6,038
|
|
15,040
|
|
16,229
|
|
Stock-based compensation expense
|
|
808
|
|
15,267
|
|
4,596
|
|
40,071
|
|
Impairment and other expense (income)
|
|
28,101
|
|
(17)
|
|
27,373
|
|
3,837
|
|
|
41,331
|
|
29,887
|
|
72,440
|
|
84,911
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
(22,784)
|
|
44,412
|
|
(14,991)
|
|
104,430
|
|
Income tax (recovery) expense
|
|
(4,226)
|
|
17,946
|
|
(1,220)
|
|
39,537
|
Net (loss) income
|
|
(18,558)
|
|
26,466
|
|
(13,771)
|
|
64,893
|
(Loss) income per share
|
|
|
|
|
|
|
Basic
|
|
(0.22)
|
|
0.32
|
|
(0.16)
|
|
0.79
|
|
Diluted
|
|
(0.22)
|
|
0.31
|
|
(0.16)
|
|
0.77
|
Condensed Consolidated Interim Statements of Other Comprehensive Income
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
(CDN 000s) (unaudited)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Net (loss) income
|
|
(18,558)
|
|
26,466
|
|
(13,771)
|
|
64,893
|
Items that may be reclassified subsequently to net income:
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
25,119
|
|
14,220
|
|
49,249
|
|
15,994
|
Total comprehensive income
|
|
6,561
|
|
40,686
|
|
35,478
|
|
80,887
|
Condensed Consolidated Interim Statements of Changes in Equity
|
|
Share Capital
|
|
Share-Based
Benefits
Reserve
|
|
Foreign
Currency
Translation
Reserve
|
|
Retained
Earnings
|
|
Total Equity
|
(CDN 000s) (unaudited)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Balance at January 1, 2014
|
|
80,725
|
|
12,927
|
|
7,958
|
|
264,859
|
|
366,469
|
|
Net income
|
|
—
|
|
—
|
|
—
|
|
64,893
|
|
64,893
|
|
Dividends
|
|
—
|
|
—
|
|
—
|
|
(38,845)
|
|
(38,845)
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
15,994
|
|
—
|
|
15,994
|
|
Exercise of stock options
|
|
21,984
|
|
—
|
|
—
|
|
—
|
|
21,984
|
Balance at September 30, 2014
|
|
102,709
|
|
12,927
|
|
23,952
|
|
290,907
|
|
430,495
|
|
Net income
|
|
—
|
|
—
|
|
—
|
|
47,211
|
|
47,211
|
|
Dividends
|
|
—
|
|
—
|
|
—
|
|
(14,156)
|
|
(14,156)
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
8,855
|
|
—
|
|
8,855
|
|
Exercise of stock options
|
|
11,118
|
|
—
|
|
—
|
|
—
|
|
11,118
|
Balance at December 31, 2014
|
|
113,827
|
|
12,927
|
|
32,807
|
|
323,962
|
|
483,523
|
|
Net loss
|
|
—
|
|
—
|
|
—
|
|
(13,771)
|
|
(13,771)
|
|
Dividends
|
|
—
|
|
—
|
|
—
|
|
(42,650)
|
|
(42,650)
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
49,249
|
|
—
|
|
49,249
|
|
Exercise of stock options
|
|
8,230
|
|
(546)
|
|
—
|
|
—
|
|
7,684
|
|
Expense related to vesting of options
|
|
—
|
|
576
|
|
—
|
|
—
|
|
576
|
|
Reclassification of equity settled options
|
|
—
|
|
11,673
|
|
—
|
|
—
|
|
11,673
|
Balance at September 30, 2015
|
|
122,057
|
|
24,630
|
|
82,056
|
|
267,541
|
|
496,284
|
Condensed Consolidated Interim Statements of Cash Flows
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
(CDN 000s) (unaudited)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Cash from (used in) operating activities
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
(18,558)
|
|
26,466
|
|
(13,771)
|
|
64,893
|
Adjustment for non-cash items:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
19,259
|
|
16,411
|
|
61,579
|
|
48,057
|
|
Impairment loss
|
|
26,555
|
|
—
|
|
26,555
|
|
—
|
|
Gain on sale of investment
|
|
—
|
|
—
|
|
(2,290)
|
|
—
|
|
Stock-based compensation
|
|
808
|
|
15,267
|
|
4,596
|
|
40,071
|
|
Deferred income taxes
|
|
(3,488)
|
|
5,145
|
|
(3,057)
|
|
7,754
|
|
Unrealized foreign exchange (gain) loss
|
|
(785)
|
|
402
|
|
2,718
|
|
3,482
|
Funds flow from operations
|
|
23,791
|
|
63,691
|
|
76,330
|
|
164,257
|
Movements in non-cash working capital items:
|
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables
|
|
(2,665)
|
|
(31,241)
|
|
75,519
|
|
(28,352)
|
|
(Increase)/decrease in prepaid expenses
|
|
(2,432)
|
|
(1,553)
|
|
284
|
|
(1,304)
|
|
Increase in income taxes
|
|
188
|
|
10,665
|
|
808
|
|
23,779
|
|
(Decrease)/increase in trade payables, accruals and stock-based compensation liability
|
|
(452)
|
|
11,073
|
|
(21,859)
|
|
18,106
|
|
Effects of exchange rate changes
|
|
6,222
|
|
1,834
|
|
3,864
|
|
834
|
Cash generated from operating activities
|
|
24,652
|
|
54,469
|
|
134,946
|
|
177,320
|
|
Income tax paid
|
|
(8,320)
|
|
(3,711)
|
|
(15,781)
|
|
(6,197)
|
Net cash from operating activities
|
|
16,332
|
|
50,758
|
|
119,165
|
|
171,123
|
Cash flows from (used in) financing activities
|
|
|
|
|
|
|
Proceeds from issuance of common shares
|
|
1,568
|
|
2,925
|
|
5,609
|
|
9,960
|
|
Purchase of stock options
|
|
—
|
|
—
|
|
—
|
|
(2,589)
|
|
Payment of dividends
|
|
(14,238)
|
|
(12,400)
|
|
(42,650)
|
|
(36,257)
|
Net cash used in financing activities
|
|
(12,670)
|
|
(9,475)
|
|
(37,041)
|
|
(28,886)
|
Cash flows (used in) from investing activities
|
|
|
|
|
|
|
Additions to property, plant and equipment and investment in joint venture
|
|
(8,672)
|
|
(37,352)
|
|
(37,702)
|
|
(69,014)
|
|
Development costs
|
|
(2,097)
|
|
(2,358)
|
|
(6,582)
|
|
(5,520)
|
|
Proceeds on disposal of investment and property, plant and equipment
|
|
339
|
|
62
|
|
3,627
|
|
246
|
|
Changes in non-cash working capital
|
|
1,489
|
|
4,972
|
|
(5,764)
|
|
6,332
|
Net cash used in investing activities
|
|
(8,941)
|
|
(34,676)
|
|
(46,421)
|
|
(67,956)
|
Effect of exchange rate on cash and cash equivalents
|
|
8,140
|
|
1,501
|
|
17,554
|
|
1,286
|
Net increase in cash and cash equivalents
|
|
2,861
|
|
8,108
|
|
53,257
|
|
75,567
|
Cash and cash equivalents, beginning of period
|
|
195,254
|
|
156,979
|
|
144,858
|
|
89,520
|
Cash and cash equivalents, end of period
|
|
198,115
|
|
165,087
|
|
198,115
|
|
165,087
|
Operating Segments The Company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). The amounts related to each segment are as follows:
Three Months Ended September 30, 2015
|
Canada
|
|
United States
|
|
International
|
|
Total
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Revenue
|
18,823
|
|
40,151
|
|
9,494
|
|
68,468
|
Operating costs
|
6,256
|
|
17,250
|
|
7,156
|
|
30,662
|
Depreciation and amortization
|
9,447
|
|
7,862
|
|
1,950
|
|
19,259
|
Segment operating profit
|
3,120
|
|
15,039
|
|
388
|
|
18,547
|
Research and development
|
|
|
|
7,288
|
Corporate services
|
|
|
|
5,134
|
Stock-based compensation
|
|
|
|
808
|
Impairment and other expenses
|
|
|
|
28,101
|
Income taxes
|
|
|
|
(4,226)
|
Net Loss
|
|
|
|
(18,558)
|
Capital expenditures
|
8,562
|
|
813
|
|
1,394
|
|
10,769
|
Goodwill
|
—
|
|
24,790
|
|
2,600
|
|
27,390
|
Intangible assets
|
30,175
|
|
698
|
|
1,481
|
|
32,354
|
Segment assets
|
203,411
|
|
291,788
|
|
46,077
|
|
541,276
|
Segment liabilities
|
25,624
|
|
13,435
|
|
5,933
|
|
44,992
|
|
|
|
|
|
Three Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
Revenue
|
38,591
|
|
79,399
|
|
16,051
|
|
134,041
|
Operating costs
|
10,446
|
|
25,865
|
|
7,020
|
|
43,331
|
Depreciation and amortization
|
6,765
|
|
7,746
|
|
1,900
|
|
16,411
|
Segment operating profit
|
21,380
|
|
45,788
|
|
7,131
|
|
74,299
|
Research and development
|
|
|
|
8,599
|
Corporate services
|
|
|
|
6,038
|
Stock-based compensation
|
|
|
|
15,267
|
Other income
|
|
|
|
(17)
|
Income taxes
|
|
|
|
17,946
|
Net Income
|
|
|
|
26,466
|
Capital expenditures
|
25,279
|
|
13,146
|
|
1,223
|
|
39,648
|
Goodwill
|
—
|
|
20,744
|
|
2,600
|
|
23,344
|
Intangible assets
|
32,579
|
|
6,091
|
|
2,218
|
|
40,888
|
Segment assets
|
191,771
|
|
309,172
|
|
70,479
|
|
571,422
|
Segment liabilities
|
84,541
|
|
44,777
|
|
11,609
|
|
140,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015
|
Canada
|
|
United States
|
|
International
|
|
Total
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Revenue
|
57,423
|
|
136,144
|
|
31,743
|
|
225,310
|
Operating costs
|
21,959
|
|
61,600
|
|
22,723
|
|
106,282
|
Depreciation and amortization
|
28,408
|
|
25,874
|
|
7,297
|
|
61,579
|
Segment operating profit
|
7,056
|
|
48,670
|
|
1,723
|
|
57,449
|
Research and development
|
|
|
|
25,431
|
Corporate services
|
|
|
|
15,040
|
Stock-based compensation
|
|
|
|
4,596
|
Impairment and other expenses
|
|
|
|
27,373
|
Income taxes
|
|
|
|
(1,220)
|
Net Loss
|
|
|
|
(13,771)
|
Capital expenditures
|
19,467
|
|
15,982
|
|
8,835
|
|
44,284
|
Goodwill
|
—
|
|
24,790
|
|
2,600
|
|
27,390
|
Intangible assets
|
30,175
|
|
698
|
|
1,481
|
|
32,354
|
Segment assets
|
203,411
|
|
291,788
|
|
46,077
|
|
541,276
|
Segment liabilities
|
25,624
|
|
13,435
|
|
5,933
|
|
44,992
|
|
|
|
|
|
Nine Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
Revenue
|
106,290
|
|
215,293
|
|
39,483
|
|
361,066
|
Operating costs
|
30,836
|
|
72,467
|
|
20,365
|
|
123,668
|
Depreciation and amortization
|
19,160
|
|
23,439
|
|
5,458
|
|
48,057
|
Segment operating profit
|
56,294
|
|
119,387
|
|
13,660
|
|
189,341
|
Research and development
|
|
|
|
24,774
|
Corporate services
|
|
|
|
16,229
|
Stock-based compensation
|
|
|
|
40,071
|
Other expenses
|
|
|
|
3,837
|
Income taxes
|
|
|
|
39,537
|
Net lncome
|
|
|
|
64,893
|
Capital expenditures
|
35,168
|
|
33,848
|
|
5,272
|
|
74,288
|
Goodwill
|
—
|
|
20,744
|
|
2,600
|
|
23,344
|
Intangible assets
|
32,579
|
|
6,091
|
|
2,218
|
|
40,888
|
Segment assets
|
191,771
|
|
309,172
|
|
70,479
|
|
571,422
|
Segment liabilities
|
84,541
|
|
44,777
|
|
11,609
|
|
140,927
|
Impairment and Other Expenses (Income)
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Foreign exchange loss (gain)
|
904
|
|
(682)
|
|
(1,555)
|
|
2,227
|
Impairment loss
|
26,555
|
|
—
|
|
26,555
|
|
—
|
Gain on sale of investment
|
—
|
|
—
|
|
(2,290)
|
|
—
|
Restructuring costs
|
—
|
|
—
|
|
2,572
|
|
—
|
Other
|
642
|
|
665
|
|
2,091
|
|
1,610
|
Other expenses (income)
|
28,101
|
|
(17)
|
|
27,373
|
|
3,837
|
In 2014, the Company reviewed the level of rental equipment deployed in each respective business unit versus the anticipated decline in usage rates of such equipment due to the reduction in drilling activity as a result of the drop in oil and gas prices. In the third quarter of 2015 management concluded that drilling activity is likely to be at depressed levels for a longer period of time than originally anticipated and this resulted in the company updating its assumptions on equipment usage. This current review identified additional excess equipment based upon management's best estimate of drilling activity in 2016. The net book value of this excess equipment, totaling $26,555, of which $7,683 relates to the Canadian operating segment and $18,872 relates to the US operating segment, was recorded as a non-cash impairment loss in the third quarter of 2015.
In response to the current business environment, the Company reduced its staffing levels during the second quarter of 2015 and recorded a restructuring charge of $2,572.
During the first quarter of 2015, the Company disposed of its investment in a small, privately held company and realized a gain of $2,290.
Incentive Plan Liabilities In May 2015, shareholders' approved a modification of the Option Plan to eliminate the ability for the option holder to settle options for cash. As a result of this change;
- The grant date fair value, which is still calculated using the Black-Scholes option pricing model, is no longer revalued at the end of each reporting period, and
- The stock-based compensation liability of $11,700 ($10,900 recorded as a current liability and $800 recorded as a non-current liability) relating to the stock options was reclassified to contributed surplus.
Pason Systems Inc. Pason Systems Inc. is a leading global provider of specialized data management systems for drilling rigs. Our solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, enable collaboration between the rig and the office. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.
Certain information regarding the Company contained herein may constitute forward-looking information under applicable securities law. The words "anticipate", "expect", "believe", "may", "should", "will", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information and statements. Forward-looking statements in this document may include statements, express or implied regarding the anticipated business prospects and financial performance of Pason; expectations or projections about future strategies and goals for growth and expansion; expected and future cash flows and revenues; and expected impact of future commitments. These forward-looking statements are based upon various underlying factors and assumptions, including the state of the economy and the oil and gas exploration and production business, in particular; the Company's business prospects and opportunities; and estimates of the financial and operational performance of Pason.
Forward-looking information and statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking information and statements. Risk factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of Pason to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of Pason's assets and businesses, the price of energy commodities, competitive factors in the energy industry, changes in laws and regulations affecting Pason's businesses, technological developments, and general economic conditions.
Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such forward looking statements, although considered reasonable by management as of the date hereof, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
Additional information on risks and uncertainties and other factors that could affect Pason's operations or financial results are included in Pason's reports on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or through Pason's website (www.pason.com). Furthermore, any forward looking statements contained in this news release are made as of the date of this news release, and Pason does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.
SOURCE Pason Systems Inc.
about Pason Systems Inc., visit the company's website at www.pason.com or contact: Marcel Kessler, President and CEO, 403-301-3400, marcel.kessler@pason.com; Jon Faber, Chief Financial Officer, 403-301-3400, jon.faber@pason.comCopyright CNW Group 2015
Source: Canada Newswire
(November 4, 2015 - 5:00 PM EST)
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