CALGARY,
AB, Aug. 10, 2022 /CNW/ - Pason Systems Inc.
("Pason" or the "Company") (TSX: PSI) announced today its 2022
second quarter results and the declaration of a quarterly dividend.
The following news release should be read in conjunction with the
Company's Management Discussion and Analysis ("MD&A"), the
unaudited Interim Condensed Consolidated Financial Statements and
related notes for the three and six months ended June 30, 2022, as well as the Annual Information
Form for the year ended December 31,
2021. All of these documents are available on SEDAR at
www.sedar.com.
Financial Highlights
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
2021
|
Change
|
2022
|
2021
|
Change
|
(CDN 000s, except per
share data)
|
($)
|
($)
|
( %)
|
($)
|
($)
|
( %)
|
North American
Revenue
|
59,637
|
34,928
|
71
|
121,637
|
69,507
|
75
|
International
Revenue
|
12,311
|
7,809
|
58
|
23,002
|
14,873
|
55
|
Solar and Energy
Storage Revenue
|
1,660
|
856
|
94
|
3,437
|
1,768
|
94
|
Total
Revenue
|
73,608
|
43,593
|
69
|
148,076
|
86,148
|
72
|
EBITDA
(1)
|
31,673
|
14,984
|
111
|
66,359
|
30,657
|
116
|
Adjusted EBITDA
(1)
|
30,962
|
12,786
|
142
|
64,335
|
25,956
|
148
|
As a % of
revenue
|
42.1
|
29.3
|
1,280
bps
|
43.4
|
30.1
|
1,330
bps
|
Funds flow from
operations
|
27,242
|
14,662
|
86
|
52,946
|
28,392
|
86
|
Per share –
basic
|
0.33
|
0.18
|
87
|
0.64
|
0.34
|
90
|
Per share –
diluted
|
0.33
|
0.18
|
87
|
0.64
|
0.34
|
90
|
Cash from operating
activities
|
25,679
|
9,841
|
161
|
53,729
|
20,926
|
157
|
Capital expenditures
(2)
|
6,727
|
4,520
|
49
|
11,191
|
6,369
|
76
|
Free cash flow
(1)
|
19,135
|
5,684
|
237
|
42,717
|
14,860
|
187
|
Cash dividends declared
(per share)
|
0.08
|
0.05
|
60
|
0.16
|
0.10
|
60
|
Net income
|
17,992
|
4,880
|
269
|
35,993
|
8,871
|
306
|
Net income attributable
to Pason
|
18,540
|
5,307
|
249
|
37,113
|
9,622
|
286
|
Per share –
basic
|
0.23
|
0.06
|
283
|
0.45
|
0.12
|
277
|
Per share –
diluted
|
0.22
|
0.06
|
267
|
0.45
|
0.12
|
277
|
|
(1) Non-GAAP financial
measures are defined under Non-GAAP Financial Measures in the
Company's Management Discussion and Analysis.
|
|
(2) Includes additions
to property plant, and equipment and development costs from
Pason's Condensed Consolidated Interim Statement of Cash
Flows
|
As at
|
June 30,
2022
|
December 31,
2021
|
Change
|
(CDN 000s)
|
($)
|
($)
|
( %)
|
Cash and cash
equivalents
|
186,950
|
158,283
|
18
|
Working
capital
|
201,729
|
184,083
|
10
|
Total interest bearing
debt
|
—
|
—
|
—
|
Shares outstanding end
of period (#)
|
82,130,025
|
82,194,051
|
—
|
Pason's financial results for the three and six months ended
June 30, 2022, reflect improved industry conditions, the
Company's strong competitive positioning, prudent balance sheet,
and operating leverage. Financial results have improved
significantly compared to the comparative periods in 2021.
Pason generated $73.6 million in
revenue in the second quarter of 2022, representing a 69% increase
from the $43.6 million generated in
the second quarter of 2021 as drilling activity in Pason's
operating regions continued to improve. With this increase in
revenue, Pason generated $31.0
million in Adjusted EBITDA, or 42.1% of revenue in the
second quarter of 2022, compared to $12.8
million in the second quarter of 2021, or 29.3% of revenue.
While the Company incurred incremental expenses to support
increased activity levels, and further faced inflationary effects
on certain operating costs, second quarter results continue to
demonstrate the Company's strong operating leverage through
improved industry conditions. As a result, the Company generated
net income attributable to Pason of $18.5
million ($0.23 per share) in
the second quarter of 2022 compared to net income attributable to
Pason of $5.3 million ($0.06 per share) in the corresponding period of
2021.
Industry conditions in North
America continued to steadily improve in the second quarter
of 2022, with a 58% increase in industry activity compared to the
comparative period in 2021. For the fourth consecutive quarter, the
North American business unit outpaced the improvement in industry
activity, generating $59.6 million of
revenue in the second quarter of 2022, a 71% increase from
$34.9 million in the comparative
period of 2021. Revenue per Industry Day was $801 in Q2 2022, a 10% increase from the
comparable period in 2021. The year over year increase is due to a
combination of factors, including increased adoption of certain
products, and improvement in pricing conditions from the
challenging environment that existed during the COVID-19 related
downturn. Furthermore, both revenue and Revenue per Industry Day
for the North American business unit in the second quarter of 2022
benefited from a shorter Canadian break-up in activity levels,
which was more pronounced in the second quarter of 2021.
The International business unit generated $12.3 million of revenue in the second quarter of
2022 compared to $7.8 million in the
comparative period of 2021. The year over year increase of 58% is
due to increased industry activity in the international markets
that the company serves and higher levels of revenue generated per
drilling day with improved product adoption.
Revenue generated by the Solar and Energy Storage business unit
was $1.7 million, an increase of 94%
from the comparative period in 2021. The increase in revenue is
primarily due to the commissioning of control systems and sales of
related hardware. Quarterly revenue for the Solar and Energy
Storage business unit will fluctuate with timing of commissioning
of control system projects.
Sequentially, Q2 2022 revenue of $73.6
million decreased only 1% from the $74.5 million generated in Q1 2022 as the effects
of the seasonal slowdown in Canadian drilling activity in the
second quarter were mostly offset by continued growth in the
Company's other end markets. Similarly, Adjusted EBITDA was
$30.9 million in the second quarter
of 2022, compared to $33.4 million in
the first quarter of 2022. While the Company's cost structure
remains primarily fixed, Pason continues to make investments for
further increases in activity levels, while managing inflationary
effects on certain elements of the Company's cost structure. The
Company recorded net income attributable to Pason in the second
quarter of 2022 of $18.5 million
($0.23 per share) compared to net
income attributable to Pason of $18.6
million ($0.23 per share) in
the first quarter of 2022. Second quarter net income benefited from
lower depreciation and amortization expense, as well as lower stock
based compensation expense.
For the six month period ended June 30,
2022, Pason generated $148.1
million of revenue, a 72% increase from $86.2 million recorded in the corresponding 2021
period. Adjusted EBITDA for the six months ended June 30, 2022 was $64.3
million or 43.4% of revenue, compared to $26.0 million, or 30.1% of revenue in the first
six months of 2021. Net income attributable to Pason in the six
months ended June 30, 2022 was
$37.1 million ($0.45 per share), up from $9.6 million ($0.12
per share) in the comparative 2021 period. A comparison of year to
date results reflects improved industry conditions, higher levels
of revenue generated per operating day, and strong operating
leverage.
Pason's balance sheet remains strong, with no interest bearing
debt and $187.0 million in cash and
cash equivalents as at June 30, 2022,
compared to $158.3 million at
December 31, 2021. During the second
quarter of 2022, Pason generated $25.7
million in net cash from operating activities (Q2 2021:
$9.8 million) as the Company's
operating results improved and while the Company managed required
investments in working capital while revenue levels grew.
During the second quarter of 2022, Pason incurred $6.7 million of capital expenditures which
represents rental equipment additions to meet activity levels, as
well as investments associated with ongoing refresh of the
Company's fleet and technology platform. Resulting Free Cash Flow
generated in Q2 2022 was $19.1 million compared to $5.7 million generated in the second quarter of
2021. In the second quarter of 2022, Pason returned
$8.1 million to shareholders, through
the Company's quarterly dividend for $6.6
million and $1.5 million in
share repurchases.
Pason's second quarter results continue to reinforce the
investments made in critical technology and service capabilities
through the pandemic related downturn, putting the Company in a
position of strength with a prudent balance sheet and significant
operating leverage as activity levels recover.
President's Message
Pason's President and Chief Executive Officer Jon Faber stated:
"Pason delivered excellent operational and financial results
again in the second quarter of 2022. Our strong competitive
position and leading technology and service offering drove a 69%
year-over-year increase in Pason's consolidated revenue,
outperforming a 58% increase in North American land drilling
activity. Prudent management of our operating expenses and capital
expenditures drove increases in Adjusted EBITDA and free cash flow
of 142% and 237% respectively."
"North American land drilling continued to steadily grow
throughout the second quarter, despite the effects of a short
Canadian spring break-up. In fact, in the 103 weeks since
activity troughed in August of 2020, the US land drilling count has
posted only 7 weekly declines, and have grown 59% since their
lowest point. International markets have also seen continued
growth. Increased drilling activity, together with strong
market share, higher levels of product adoption, and more
favourable pricing conditions all contributed to consolidated
quarterly revenue of $73.6 million,
up $30.0 million from the same period
a year ago. While down sequentially from the first quarter
due to the seasonal effects of the Canadian winter drilling season,
North American Revenue per Industry Day again topped the
$800 level in the quarter.
International Business unit revenue increased by 58% year-over-year
to $12.3 million. Revenue from
our Solar and Energy Storage segment of $1.7
million was up 94% from the prior year period."
"Adjusted EBITDA in the second quarter totaled $31.0 million, up from $12.7 million in the second quarter of 2021, and
represented Adjusted EBITDA margins of 42.1% in the quarter.
Pason's second quarter revenue and Adjusted EBITDA were nearly
identical to those of the second quarter of 2019, despite the fact
that North American land drilling activity was 23% lower in the
second quarter of 2022 as compared to the 2019 comparable
period. Net income attributable to Pason for the second
quarter was $0.23 per share, up from
$0.06 per share a year ago."
"We continue to navigate difficult global supply chain
conditions, which have increased lead times and made visibility
around equipment deliveries more challenging. We continue to
expect 2022 capital expenditures to total approximately
$30 million, with $11.2 million in capital expenditures recorded in
the first half of the year. As noted in our first quarter
report, we are strategically increasing our inventory of consumable
supplies and equipment components further in advance of anticipated
repairs and field consumption. While this has an impact on
near-term working capital requirements, it enables us to respond to
continued industry growth and to maintain the product and service
advantages which underpin our leading competitive position.
Free cash flow for the second quarter totaled $19.1 million."
"Our capital allocation priorities remain unchanged. We are
investing in capital expenditures and working capital that allow us
to generate continued growth and profitability within our core
drilling-related business. We are pursuing additional revenue
growth not directly tied to North American land drilling through
Energy Toolbase (ETB), which focuses on the solar and energy
storage market, and our minority investment in Intelligent Wellhead
Systems (IWS), which participates in the oil and gas completions
market. We are committed to returning capital to our shareholders
through our regular quarterly dividend, which we are maintaining at
$0.08 per share, and share
repurchases."
"We maintain a balance sheet that allows us to both withstand
the inevitable volatility of North American land drilling and to
make growth-related investments. At the end of the first quarter,
we had $187 million in cash and cash
equivalents and $201 million of
positive working capital."
"Macroeconomic conditions have become more challenging as
central banks attempt to bring down high prevailing levels of
inflation by raising interest rates, while trying to avoid putting
economies into recession. The world is wrestling with a
global energy crisis with significant shortages and elevated prices
in many countries; at the same time, geopolitical instability has
placed an increased focus and attention on where commodities are
sourced. Oil prices have become more volatile as traders
weigh the implications of supply shortfalls against the potential
demand impacts from an economic slowdown."
"Despite that backdrop, our outlook for continued steady growth
in North American land drilling is based on a review of market
fundamentals. In previous cycles, high oil prices have led to
significantly oversupplied markets. In the current situation,
however, major sources of supply are below pre-pandemic levels and
trending lower. US storage levels of crude oil and petroleum
products are at levels last seen in 2008. US land production
remains almost 10% below pre-pandemic levels. The inventory of
drilled but uncompleted wells ("DUCs") in the US has decreased for
24 consecutive months to its lowest level in more than 9 years; the
pace of decline has slowed, suggesting the DUC inventory may be
plateauing at a minimum level. There is a finite limit to how much
supply can come from drawing down on storage and uncompleted well
inventories. Meeting global demand for oil which is similar to
pre-pandemic levels will require new drilling. As a result, we
expect land drilling activity to steadily grow over the coming
quarters."
"Pason is well equipped to provide drilling data and
technologies that are being used by companies in their automation
and analytics efforts as they seek to develop energy resources in a
profitable and responsible manner" concluded Mr. Faber.
Quarterly Dividend
Pason announced today that the Board of Directors have declared
a quarterly dividend of eight cents
(C$0.08) per share on the company's
common shares. The dividend will be paid on September 29, 2022, to shareholders of record at
the close of business on September 15,
2022.
Second Quarter Conference
Call
Pason will be conducting a conference call for interested
analysts, brokers, investors, and media representatives to review
its 2022 second quarter results at 9:00 a.m.
(MDT) on Thursday, August 11, 2022. The conference call
dial-in numbers are 1-888-664-6383 or 1-416-764-8650, and the call
will be simultaneously audio webcast via: www.pason.com/webcast.
You can access the fourteen-day replay by dialing 1-888-390-0541 or
1-416-764-8677, using password 433604#. An archived audio webcast
of the conference call will also be available on Pason's website at
www.pason.com/investors.
Forward Looking
Information
Certain statements contained herein constitute "forward-looking
statements" and/or "forward-looking information" under applicable
securities laws (collectively referred to as "forward-looking
statements"). Forward‐looking statements can generally be
identified by the words "anticipate", "expect", "believe", "may",
"could", "should", "will", "estimate", "project", "intend", "plan",
"outlook", "forecast" or expressions of a similar nature suggesting
a future outcome or outlook.
Without limiting the foregoing, this document includes, but is
not limited to, the following forward‐looking statements: the
Company's growth strategy and related schedules; divergence in
activity levels between the geographic regions in which we operate;
demand fluctuations for our products and services; the Company's
ability to increase or maintain market share; projected future
value, forecast operating and financial results; planned capital
expenditures; expected product performance and adoption, including
the timing, growth and profitability thereof; potential dividends
and dividend growth strategy; future use and development of
technology; our financial ability to meet long-term commitments not
included in liabilities; the collectability of accounts receivable;
the application of critical accounting estimates and judgements;
treatment under governmental regulatory and taxation regimes; and
projected increasing shareholder value.
These forward-looking statements reflect the current views of
Pason with respect to future events and operating performance as of
the date of this document. They are subject to known and unknown
risks, uncertainties, assumptions, and other factors that could
cause actual results to be materially different from results that
are expressed or implied by such forward-looking statements.
Although we believe that these forward-looking statements are
reasonable based on the information available on the date such
statements are made and processes used to prepare the information,
such statements are not guarantees of future performance and
readers are cautioned against placing undue reliance on
forward-looking statements. By their nature, these statements
involve a variety of assumptions, known and unknown risks and
uncertainties and other factors, which may cause actual results,
levels of activity and achievements to differ materially from those
expressed or implied by such statements. Such risks and
uncertainties include, but are not limited to: the state of the
economy; volatility in industry activity levels and resulting
customer expenditures on exploration and production activities;
customer demand for existing and new products; the industry shift
towards more efficient drilling activity and technology to assist
in that efficiency; the impact of competition; the loss of key
customers; the loss of key personnel; cybersecurity risks; reliance
on proprietary technology and ability to protect the Company's
proprietary technologies; changes to government regulations
(including those related to safety, environmental, or taxation);
the impact of extreme weather events and seasonality on our
suppliers and on customer operations; and war, terrorism,
pandemics, social or political unrest that disrupts global
markets.
These risks, uncertainties and assumptions include but are not
limited to those discussed in Pason's Annual Information Form for
the year ended December 31, 2021
under the heading, "Risk and Uncertainty," in our management's
discussion and analysis for the year ended December 31, 2021, and in our other filings with
Canadian securities regulators. These documents are 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).
Forward-looking statements contained in this document are
expressly qualified by this cautionary statement. Except to the
extent required by applicable law, Pason assumes no obligation to
publicly update or revise any forward-looking statements made in
this document or otherwise, whether as a result of new information,
future events or otherwise.
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, web-based information management, and analytics,
enable collaboration between the rig and the office. Through our
subsidiary, Energy Toolbase (ETB), we provide products and services
for the solar power and energy storage industry. ETB's solutions
enable project developers to model, control and monitor economics
and performance of solar energy and storage projects. Pason's
common shares trade on the Toronto Stock Exchange under the symbol
PSI.
For more information about Pason Systems Inc., visit the
company's website at www.pason.com or contact
investorrelations@pason.com.
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).
SOURCE Pason Systems Inc.