Recommendation: Speculative Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 27 Mar, 25 | PSI | Speculative Buy | CAD 13.54 | CAD 14.217 | CAD 15.212 | 8 days | 12.3% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Pason Systems Inc., together with its subsidiaries, provides instrumentation and data management systems for drilling rigs in Canada, the United States, and internationally. The company provides Electronic Drilling Recorder, which provides real-time drilling data to rig site personnel; DataHub with Pason Live, which is used as the central repository for data and reports captured at the rigs for real-time; and DataLink that provides automated in-house databases, third-party analytics platforms, remote geosteering, and other remote services. It offers AutoDriller to maximize the rate of penetration and bit life; internet solutions, such as auto-aiming satellite dishes, data modems, and bandwidth management software; DAS, a rotary drilling automation and optimization software; Electronic Choke Actuator that controls the choke valve; Gas Analyzer that provides real-time compositional gas analysis; Hazardous Gas Alarm System that detects the presence of hazardous gases; Pit Volume Totalizer, which monitors mud volumes and flow rates during drilling, tripping, and casing operations; and Toolface Control, a directional automation software. In addition, the company provides phone, chat, field, and drilling optimization support, as well as proactive monitoring and office support for data integration. It serves drilling contractors and other oilfield service companies. Pason Systems Inc. was founded in 1978 and is headquartered in Calgary, Canada.
Solar and Energy Storage Growth – Revenue grew 49% year-over-year in Q4 2024, reaching CAD 7.2 million, marking a new quarterly record
Revenue Growth – Full-year revenue increased 12% to CAD 414.1 million, despite a 10% decline in North American drilling activity
Lower Adjusted EBITDA Margin – Adjusted EBITDA margin declined from 46.4% in 2023 to 39.1% in 2024, due to lower-margin contributions from newer business segments
Free Cash Flow Decline – CAD 54.1 million in Free Cash Flow in 2024, a 44% decrease from CAD 97.0 million in 2023, due to increased capital expenditures
Pason’s financial performance and growth prospects are subject to fluctuations in oil and gas industry activity, particularly North American drilling and completions demand, which directly impact revenue generation and profitability
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 13.54 | 12.13 | 14.217 | 15.212 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Revenue Growth and Market Outperformance
Pason Corporation demonstrated resilience in 2024 despite challenging conditions in the oilfield services sector. The company generated CAD 107.6 million in consolidated revenue in the fourth quarter of 2024, a 15% increase compared to CAD 93.3 million in the corresponding period of 2023. This growth outpaced North American drilling activity, which declined by 3%. For the full year, Pason recorded CAD 414.1 million in revenue, reflecting a 12% increase from CAD 369.3 million in 2023, despite a 10% reduction in North American land drilling activity. The company’s North American Drilling segment achieved Revenue per Industry Day of CAD 1,025, an 8% increase year-over-year, driven by higher product adoption and improved price realization.
Segment Performance and Expansion into Completions
Pason’s North American Drilling business unit contributed CAD 71.8 million in revenue during Q4 2024, up 2% year-over-year, despite declining industry activity. The newly established Completions segment, following the IWS acquisition on January 1, 2024, generated CAD 13.6 million in revenue in Q4, with Revenue per IWS Day of CAD 5,668. International Drilling revenue, however, declined from CAD 17.9 million in Q4 2023 to CAD 15.0 million in Q4 2024 due to the absence of non-recurring foreign exchange gains from its Argentinian operations. Meanwhile, the Solar and Energy Storage segment set a new quarterly record, generating CAD 7.2 million in revenue, a 49% increase year-over-year.
Profitability and EBITDA Trends
Pason reported CAD 42.1 million in Adjusted EBITDA in Q4 2024, representing 39.1% of revenue, compared to CAD 38.9 million or 41.7% of revenue in Q4 2023. The lower margin reflects the increased contributions from the Completions and Solar and Energy Storage segments, both of which are in early stages of growth. Annual Adjusted EBITDA for 2024 was CAD 161.8 million, a 6% decline from CAD 171.5 million in 2023, as lower-margin segments impacted overall profitability. However, net income rose to CAD 16.9 million (CAD 0.21 per share) in Q4 2024, a significant increase from CAD 8.5 million (CAD 0.11 per share) in Q4 2023, primarily due to reduced foreign exchange losses.
Capital Investments and Cash Flow
Pason’s capital expenditures increased significantly, reaching CAD 69.1 million in 2024, compared to CAD 38.0 million in 2023, primarily due to investments in its Completions segment and technology upgrades, including the Pason Mud Analyzer. Free Cash Flow declined to CAD 54.1 million, a 44% drop from CAD 97.0 million in 2023, reflecting these higher capital investments. The company ended 2024 with CAD 80.8 million in cash, down from CAD 171.8 million at the end of 2023, following the CAD 88.2 million IWS acquisition and repayment of CAD 13.3 million in assumed debt.
Shareholder Returns and Future Outlook
Pason returned CAD 51.4 million to shareholders in 2024, comprising CAD 41.4 million in dividends and CAD 10.0 million in share repurchases. The company maintained its quarterly dividend at CAD 0.13 per share and signaled flexibility for additional share repurchases. Looking ahead, Pason expects industry activity in 2025 to remain at 2024 levels, with continued growth anticipated in the Completions and Solar and Energy Storage segments. The company plans to invest CAD 65 million in capital expenditures in 2025, focusing on expanding its completions business and advancing drilling-related technologies.
Strategic Focus and Industry Adaptation
Pason is leveraging its expertise in automation, data aggregation, and analytics to enhance both its drilling and completions services. The company aims to expand its market presence as customers increasingly adopt real-time operating centers and artificial intelligence applications in well construction. However, Pason acknowledges the macroeconomic volatility and geopolitical uncertainties that could impact operations in various international markets. Despite these challenges, the company remains committed to disciplined capital allocation, industry-leading product innovation, and maximizing shareholder value.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Speculative Buy’ recommendation has been given on Pason Systems Inc (TSX: PSI) at the closing market price of USD 13.54, as on March 26, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Energy Industry: Oil & Gas Equipment & Services
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| PSI Pason Systems Inc. |
0.25 2.25% | 11.35 | 10.38 | 12.05 | 2.93 | 2.43 | 2.78 | 7.51 |
| TVK Terravest Capital Inc |
10.81 7.32% | 158.47 | 32.79 | 27.10 | 2.58 | 6.17 | 2.87 | 13.46 |
| CEU CES Energy Solutions Corp |
0.14 2.22% | 6.21 | 11.07 | 10.94 | 0.90 | 2.79 | 1.09 | 7.24 |
| EFX Enerflex Ltd. |
0.10 1.13% | 9.37 | - | 12.29 | 0.53 | 0.88 | 0.71 | 6.75 |
| MATR Mattr Corp |
0.10 1.02% | 9.94 | 32.06 | 14.24 | 1.11 | 1.39 | 1.20 | 10.49 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 26,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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