PASON SYSTEMS $15.76 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.0 million; Market cap: $1.3 billion; Dividend yield: 2.8%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia.
In the three months ended June 30, 2012, Pason’s revenue rose 29.8%, to $81.1 million from $62.4 million a year earlier. Cash flow rose 31.5%, to $30.1 million, or $0.37 a share, from $22.9 million, or $0.28.
Even with declining oil prices and continued low gas prices, drilling activity rose 6% in Canada and the U.S. in the latest quarter, with a combined 188,291 active days and a rig count of 2,069, compared to 177,791 days and 1,954 rigs a year earlier.
The company’s systems are installed on 97% of all active land-based rigs in Canada and 57% of the landbased rigs in the U.S. But there is still lots of room for international expansion. Operators are also upgrading their equipment, creating demand for new gear like Pason’s hazardous gas alarm system.
Pason holds cash of $138.6 million, or $1.69 a share, and has no debt. It raised its semi-annual dividend by 10% with the July payment, to $0.22 from $0.20. The shares now yield 2.8%.
The company is heavily reliant on the resource sector, but its revenue and cash flow should keep rising as oil and gas drilling continues to increase.
Pason Systems is still a buy.
