PASON SYSTEMS $18.98 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.6 billion; Dividend yield: 2.7%) has lost a patent dispute with its main competitor involving its AutoDriller product, which runs drilling operations more accurately and efficiently. The judgment awards the competitor $52.9 million of damages.
Pason rents equipment for monitoring and managing land-based oil rigs. It also provides communication systems that companies use to remotely collect data from their drilling operations. Pason serves oil and gas firms and drilling contractors in Canada, the U.S., Mexico and Argentina.
In the quarter ended March 31, 2013, revenue fell 5.1%, to $109.3 million from $115.1 million a year earlier. Strong international sales were offset by slower activity in the U.S. and Canada. Cash flow per share fell 7.9%, to $0.58 from $0.63. Pason holds cash of $168.9 million, or $2.06 a share, and has no debt.
Pason shares fell less than 3% in the wake of the ruling. That’s mainly because the company has already set aside $53.1 million to cover the judgment. As well, AutoDriller’s patent expired on April 19, 2013, so Pason can keep selling it without risking more lawsuits.
The company plans to appeal the ruling. But either way, its outlook remains positive despite an uncertain near-term outlook for North American drilling. The shares trade at just 9.8 times Pason’s forecast 2013 cash flow per share. They yield 2.7%.
Pason Systems is still a buy.
