Pason Systems Aktie

The content of today's call are protected by copyright and may not be reproduced without the prior written consent of Pason Systems Inc. Please note, the advisory is located at the end of the press release issued by Pason Systems yesterday, which would describe forward-looking information. Certain information about the company that is discussed on today's call may constitute forward-looking information. Additional information about Pason Systems, including the risk factors relevant to the company can be found on its annual information form. Thank you, and good morning, everyone. My name is Kelsey, and I will be your conference operator for today's call. At this time, I would like to welcome everyone to the Pason Systems Inc. First Quarter 2026 Earnings Call. [Operator Instructions] Thank you. Ms. Celine Boston, CFO, you may begin your conference.

Thank you, Kelsey. Good morning, everyone, and thank you for attending Pason's 2026 First Quarter Conference Call. I'm joined on today's call by Jon Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the first quarter. Jon will then provide a brief perspective on the outlook for the industry and for Pason and we'll then take questions. Pason generated consolidated revenue of $102.4 million in the first quarter of 2026, a 9% decrease from $113.2 million in the first quarter of 2025. The year-over-year decline reflects lower drilling and completions industry activity in North America, along with negative impact of a weaker U.S. dollar relative to the Canadian dollar on our U.S. dollar-sourced revenue. On this revenue, we generated $38.2 million in adjusted EBITDA or 37.3% of revenue.

I'll now walk through each of our 4 reporting segments, starting with North American Drilling. Industry conditions in North America were more challenging in comparison to a year ago. As a reminder, industry rig counts fell after meaningful tariff announcements out of the U.S. administration on April 2, 2025. Since that decline, rig counts have remained relatively stable through the last 4 quarters. However, when comparing Q1 2026 results with Q1 2025 results, rig counts in both the U.S. and Canada were below prior year levels and industry drilling days were down 6% year-over-year. Against that backdrop, our North American Drilling segment generated revenue of $69.8 million, an 8% decline from $75.8 million in the first quarter of 2025.

Revenue per Industry Day was $1,046 compared to $1,067 in the prior year quarter, a 2% decrease driven primarily by foreign exchange. While operating expenses declined slightly year-over-year with strong discipline around costs, segment gross profit was $41.7 million compared to $46.8 million a year ago as a result of the more challenging industry conditions over the segment's mostly fixed cost base. International Drilling generated $11.7 million of revenue in the first quarter compared to $14 million in the same period of last year. The decline reflects 2 factors: our largest customer in Argentina shifted focus from conventional to unconventional drilling, which has reduced the active rigs during that transition and foreign exchange headwinds on U.S. dollar lift revenue.

Operating expenses fell 22% to $5.7 million on lower activity and segment gross profit was $5 million compared to $5.8 million in the prior year. Our Completions segment generated $15 million of revenue, a 6% decline from $16 million in the prior year but achieved against a 21% decline in active U.S. frac spreads, which represents meaningful outperformance relative to industry activity. IWS averaged 28 active jobs in the quarter compared to 32 in Q1 of 2025 and up from 23 in Q4 of 2025. The Revenue per IWS Day was $5,883, a 7% increase year-over-year despite the negative effect of foreign exchange, reflecting a more complex technology mix being adopted by our customers. We continue to invest in the technology platform for completions, which in a daily rental business model shows up in advanced revenue.

As such, gross profit or loss for the segment includes depreciation and amortization expense of $7.5 million on this continued investment, which includes $2.2 million of amortization on intangibles acquired in the IWS transaction. Our Solar and Energy Storage segment generated $5.9 million of revenue, a 21% decrease from $7.4 million in Q1 of 2025. As we've noted in the past, revenue in this segment will continue to fluctuate with the timing of control system deliveries. For context, Q4 of 2025 was a record quarter for the segment with $16.2 million of revenue. Pason continued to demonstrate strong cost discipline in the first quarter with many fixed cash operating costs declining slightly year-over-year. Notably, SG&A was $10.1 million, down 6% year-over-year.

Resulting adjusted EBITDA of $38.2 million compared to $45.2 million generated in the first quarter of 2025 with lower revenue generated from the company's drilling and completions segments over the company's mostly fixed cost base. Net income attributable to Pason was $13 million or $0.17 per share compared to $20 million or $0.25 per share in the prior year period and was impacted by lower adjusted EBITDA along with higher levels of depreciation and amortization expense with ongoing investments in the company's technology offering. Cash from operating activities was $20.9 million compared to $39.9 million in the prior year reflecting the lower adjusted EBITDA and higher cash taxes paid for amounts owing under the renewed advanced pricing arrangement finalized in Q4 of 2025.

Net capital expenditures were $12.4 million, down from $16.7 million in Q1 of 2025 due to timing of purchases. Resulting free cash flow was $8.5 million compared to $23.2 million in Q1 of 2025. We returned $13.5 million to shareholders during the quarter, $10.1 million through our quarterly dividends of $0.13 per share and $3.4 million through share repurchases. We ended the quarter with $73.5 million in total cash, $97.9 million of working capital and no interest-bearing debt. In summary, our Q1 results reflect a more challenging industry environment but our business continues to demonstrate the durability that comes from a leading market position, a largely fixed cost base and a strong balance sheet. We remain well positioned to support continued growth across our segments and to return meaningful capital to shareholders. With that, I'll turn the call over to Jon for his comments on our outlook.

Thank you, Celine. Let me turn to how we see the operating environment and where we're headed. The U.S. land rig count has stayed in a fairly tight band between 525 and 535 rigs since mid-2025. As we have said before, we believe that Pason can grow revenue and earnings in a meaningful way without needing a step-up in North American land drilling activity. Our medium-term goal has not changed. We are targeting a doubling of revenue from 2023 levels from our oil and gas well construction activities over a 5- to 7-year horizon. That growth is expected to come from 5 places. First, scaling our completions business; second, increasing adoption and improving price realization of our established drilling products and services. Third, bringing compelling new technologies to the drilling and completions markets with the mud analyzer being the most current example.

Fourth, expanding our international revenue, particularly as more work shifts towards unconventional drilling and completions. And fifth, addressing data management opportunities in adjacent well construction activities that we believe the industry has underserved. We are pleased with the progress that we are making in each of these areas. In completions, slowing activity from some of our existing customers has been offset by new customer wins and deploying technologies aimed at more complex jobs. The data demands that come from the rapid spread of artificial intelligence are a tailwind, both for our core drilling products and for new product opportunities in completions.

Uptake of the mud analyzer continues to build, and we are working on additional mud analysis products that broaden the set of drilling operations that we can serve. Internationally, as customers move toward more unconventional development, we see a path to wider product adoption across more of our product portfolio over the medium term. We are also building a presence within certain surface rig operations and are tailoring our products and support to fit the unique requirements of that market. Yesterday, at our Annual General Meeting, I took a few minutes to speak to some of the foundational principles of Pason. I spoke of the power of simplicity, the importance of discipline and the benefits of compounding technology deployed simply. That has been our slogan and our operating philosophy for many years.

The technologies that ultimately get the broadest use in the market are the ones that take complex problems and solve them with products that are intuitive and simple in the hands of the user. Simplicity also shapes how we think about scaling the business. We are investing to streamline and simplify our product and service offerings so that the operating and capital cost per job comes down over time. Simplifying our business also means staying focused on areas where we have a distinctive and durable competitive advantage. We played the long game by concentrating where our unique capabilities can generate significant free cash flow and attractive returns over time. We are disciplined in our operating and capital costs.

The benefits of operating leverage are greatest when we carefully manage our fixed cost base. Our capital expenditures are increasing as we invest in building out our completions business but we only do so with high expected returns on capital on addition to investments. We expect 2026 capital expenditures to be between $60 million and $70 million. We currently anticipate full year spending to come in near the lower end of that range, and we will continue to monitor our plans as industry conditions and our competitive position evolve. In completions in particular, we are adding new customers at an accelerating rate. Average job size is moving up and more customer activity is shifting toward the complex jobs that utilize our newest technologies.

Any M&A activities that surface have to compete against the expected returns from reinvesting in our own business or buying back our own shares. Today, the highest expected returns we see continue to come from organic investment in our business. Focusing on generating valuable products and service for our customers in areas where we have a unique and distinctive advantage and being disciplined on our costs allows us to outpace underlying North American land drilling activity. Continued outperformance over time leads to strong financial performance through the benefits of compounding. We continue to build our business with a focus on ensuring that we have the foundation for continued growth and compounding over the medium and longer term.

As we generate additional free cash flow, we look to allocate capital responsibly between shareholder returns and growth-oriented investments. On capital allocation, our framework is unchanged. We balance the discipline and predictability of our regular quarterly dividend, which we are maintaining at $0.13 per share, with the flexibility to invest organically and to repurchase shares both of which we evaluate through the lens of expected returns on capital. We are also mindful of potential supply chain disruptions and inflationary pressures tied to ongoing U.S. trade dynamics as well as tensions in the Middle East. The effective closing of the Strait of Hormuz has materially tightened global oil and LNG supply concerns of an oil glut from earlier in the year have faded.

As the long end of the oil futures curve has strengthened, we are starting to see producers accelerate capital programs and contract incremental rigs. We are well positioned to respond as activity picks up. The benefits of our leading market share and high operating leverage tend to be most pronounced when activity is rising. Uncertainty is likely to stay with us for a while. Our focus is on delivering exceptional performance in the areas within our control, extending our service and technology advantages, investing in growth opportunities that are not directly available to shareholders, keeping a strong balance sheet and returning capital to shareholders in a disciplined way. simplicity, discipline and compounding have shaped Pason for decades and we believe they continue to position us well for the opportunities ahead. And with that, we would be happy to take your questions.

[Operator Instructions] At this moment, there are no further questions. I would like to turn the call back over to Mr. Jon Faber, you may continue.

Thank you very much for taking the time to join us this morning. We appreciate your continued interest and your support. And we'll look forward to speaking with you again following our second quarter results after our August release. If you have any further questions in the meantime, Celine and I will always welcome your calls and we look forward to talking. Thank you very much, and have a great day.

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day, everyone.

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pason Systems, Inc.'s Fourth Quarter 2025 Earnings Call. [Operator Instructions] The contents of today's call are protected by copyright and may not be reproduced without the prior written consent of Pason Systems, Inc. Please note the advisories located at the end of the press release issued by Pason Systems yesterday, which describe forward-looking information.

Certain information about the company that is discussed on today's call may constitute forward-looking information. Additional information about Pason Systems, including the risk factors relevant to the company, can be found in its annual information form. Celine Boston, CFO, you may begin your conference.

Thanks, Joanna, and good morning, everyone. Thanks for attending Pason's 2025 Fourth Quarter Conference Call. I'm joined on today's call by Jon Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the fourth quarter and for the full year 2025.

Jon will then provide a brief perspective on the outlook for the industry and for Pason, and we'll then take questions. Pason's results in 2025 demonstrate the resilience of our business model through lower industry activity. In 2025, Pason generated $419 million in consolidated revenue 1% higher than revenue generated in 2024, even through -- even though there were declines in industry activity in both drilling and completions markets. Despite a 6% decline in North American drilling activity, our North American Drilling segment generated $275 million of revenue and achieved a record annual revenue per industry day of $1.053 up 3% year-over-year.

In Completions, Pason generated $59 million in revenue, a 12% increase from revenue generated in the segment 2024 despite a 24% decline in active frac spreads in the U.S. during that time. Our International drilling segment also saw challenging industry conditions and a strategic shift by a large customer in Argentina impacted revenue generated of $52 million in 2025, which was down from $60 million in 2024.

Based on solar and energy storage segment grew 87% year-over-year to $33.7 million in revenue generated driven by increased control system sales, particularly in the fourth quarter. Adjusted EBITDA was $153.4 million in 2025 or 37% of revenue compared to $161.8 million or 39% of revenue in 2024, reflecting lower activity levels in Pason's drilling segments as well as more revenue generated in 2025 from earlier stage segments at lower margins.

The company reported net income attributable to Pason of $53.2 million or $0.68 per share in 2025 compared to $121.5 million or $1.53 per share recorded in the prior year period. This primarily reflects the nonrecurring noncash gain recorded in 2024 related to the revaluation of our previously held equity interest in IWS.

Pason generated $117.7 million in cash from operations in 2025, only a 4% decline from $123.2 million generated in 2024 benefiting from strong working capital management through more challenging industry conditions. In 2025, Pason invested $54.3 million in net capital expenditures compared to $69.1 million in 2024.

Resulting free cash flow in 2025 was $63.3 million, a 17% increase from $54.1 million generated in 2024. With this free cash flow, Pason returned $62.7 million to shareholders through the quarterly dividend of $40.7 million and $22 million of share repurchases, while ending the year with a strong balance sheet and $77 million in total cash as of December 31, 2025.

Now turning to the fourth quarter. Pason generated consolidated revenue of $109 million and adjusted EBITDA of $38.1 million or 35% of revenue in the fourth quarter of 2025. Pason's fourth quarter results include a record quarterly results for the company's solar and energy storage segment with $16.2 million generated in revenue by Energy Toolbase.

As a reminder, revenue in this segment will fluctuate based on the timing of control system deliveries. The North American drilling industry continued to be challenging in Q4 of 2025 with reductions in both U.S. and Canadian land rig counts when compared to the prior year period.

North American land drilling activity fell by 6% from the fourth quarter of 2024 to the fourth quarter of 2025. During that time, Pason held revenue for Industry Day consistent at $1,044. Industry conditions for Completions activity in North America also continued to be challenging in the fourth quarter of 2025 with active frac spreads in the U.S. declining by 23% from this prior year comparative period.

Against this backdrop, the company's completion segment generated $13 million of revenue, which represents only a 5% decrease from $13.6 million generated in the fourth quarter of 2024, significantly outpacing industry conditions. Within our Solar and Energy Storage segment, operating expenses increased with the record level of sales given the variable cost nature of the segments.

While within our drilling and Completion segment, operating expenses remain mostly fixed in nature, and the company continued to focus on disciplined cost management in the context of lower industry activity. Pason generated $38 million in adjusted EBITDA or 35% of revenue in the fourth quarter of 2025 compared to $42 million or 39% of revenue in the fourth quarter of 2024.

Current quarter adjusted EBITDA reflects the impact of more challenging industry conditions on the company's drilling and completions revenue over a mostly fixed cost base. And further, a comparison of adjusted EBITDA margins year-over-year reflects higher levels of revenue generated by the company's Solar and Energy Storage segment at lower margins.

We continue to maintain a strong balance sheet, ending the quarter with total cash, including short-term investments of $77 million and no interest-bearing debt. In the fourth quarter of 2025, net capital expenditures were $12 million, which includes investments in building out our [ valve ] management and automation technology within completion and the ongoing investments in our drilling-related technology platform. Free cash flow in the fourth quarter of 2025 was $16.1 million, only slightly down from $17.6 million generated in the same quarter in 2024 despite lower industry activity levels.

With this free cash flow, we returned $13.1 million to shareholders, $10.1 million through our quarterly dividend and $3 million through our share repurchase program. In summary, 2025 was defined by challenging industry conditions across both drilling and Completions markets. Through this environment, though, we achieved record annual revenue per Industry Day in our North American drilling segment.

We significantly outperformed industry conditions in our earlier stage completion segment. We increased free cash flow year-over-year, all of which was returned to shareholders through dividends and share repurchases, and we maintained a strong balance sheet. We remain very well positioned as we enter 2026.

I'll now turn over the call to Jon.

Thank you Celine. Pason's 2025 financial results represented the eighth consecutive year for Pason's consolidated revenue growth outpace change in North American land drilling activity. Over that time period, we have strengthened our competitive position in North America, grown our international business and entered the completions in solar and energy storage markets. .

This demonstrates that our growth prospects are not solely reliant on increases in North American land drilling activity. In 2025, consolidated revenue grew by 1% despite North American drilling declining by 6%. Notably, more than 20% of consolidated revenue for the year was contributed from our nondrilling segments, namely Completions and Solar and Energy Storage.

The higher revenue contribution from these earlier-stage segments impacts consolidated margins in the short term, and we anticipate margins will improve as revenue grows in these segments. The compound effect of continued outperformance has been significant. Over the past 10 years, Pason's consolidated revenue has increased by 47% despite a 35% decline in the North American land rig count. Notwithstanding the margin effects of the revenue contribution from earlier-stage segments, our 2025 adjusted EBITDA margins of 37% were higher than 2015 margins and over the 10-year period, we have reduced our share count by 7%, returned over 560 million to shareholders through share -- dividends and share repurchases.

And we completed the acquisition of Intelligent Wellhead Systems with no dilution to shareholders. In our drilling-related business where North American revenue per Industry Day of $1,053 represented the highest annual result in Pason's history, we continue to focus on delivering innovative products, best-in-class service and exceptional support to our customers.

We look to increase both product adoption and price realization over time through delivering expanded features and functionality in both existing and new products. In our Completions segment, we were able to offset activity reductions among larger incumbent customers through the addition of new customers, resulting in a 12% revenue growth annually as compared to a 24% reduction in the average number of active U.S. frac spreads during the year. We have narrowed our focus in the market by shifting away from jobs, which utilize only a small number of ancillary products.

This results in a reduction in active or IWS active jobs. At the same time, revenue per IWS state increases as we focus on larger jobs, which are more closely aligned with our unique equipment and capabilities and more profitable. In our International Drilling segment, a 14% revenue decrease in the year was largely the result of an operational shift of a large customer in Argentina away from conventional drilling toward more unconventional development.

As unconventional drilling becomes a focus in international markets, we anticipate opportunities to achieve greater adoption of our more advanced technology, including those for the Completions market. Our Solar and Energy Storage segment posted an 87% increase in revenue from 2025 -- in 2025 to $33.7 million as a result of a record number of deliveries of energy storage control systems.

With pending changes in the regulatory environment for renewable energy project developers, we have maintained a strong pipeline of new project opportunities. As a reminder, revenue from our solar and energy storage segment can vary significantly based on the timing of deliveries of energy storage control systems. We expect industry conditions to remain relatively flat over the next few quarters, driven by ongoing macroeconomic uncertainty and concerns about the potential for oversupplied oil markets.

Increasing adoption of existing products and rolling out new products are both significantly more difficult in the current environment. We see, however, several supportive industry trends that should provide tailwinds to our efforts over the medium to longer term. Artificial intelligence benefits Pason as a result of increased demand for both high-quality data and power.

Our position as the leading provider of drilling data and our efforts to expand our data management capabilities to the completions market, serves us well as AI technologies drive increasing demand for data as inputs to the artificial intelligence models being deployed. The anticipated growth in demand for natural gas as a source for baseload power for data centers is expected to result in increases in natural gas-directed drilling activity.

Technology has played an essential role in driving efficiency improvements in drilling and completions operations, and we expect customers will look for further efficiency gains, driving greater demand for data and technology. We also anticipate that over time, the efficiency gains from technology will see diminishing returns, while geological degradation will accelerate as top-tier locations are drilled resulting in additional drilling and Completions activity to see in production.

Pason also benefits from the additional data and technology requirements associated with increasing complexity of drilling and completions operations. Over time, we anticipate that overall decline rates for global oil and gas production will increase, driving higher levels of drilling and completions activity as a result of more natural gas-directed drilling, more offshore development and unconventional drilling, which have higher decline rates than oil-directed, onshore and conventional drilling.

Our capital allocation priorities are unchanged and are driven by a focus on return on invested capital. We are making investments in areas where we can generate high returns on capital, which are not directly available to shareholders in the market, and we are returning excess capital to shareholders in a disciplined and flexible manner.

Our highest expected returns on capital continue to come from the organic investments we are making to generate additional free cash flow in our existing businesses. Our experience through previous cycles has been that maintaining investments focused on technology development and service quality through periods of uncertainty provides the greatest opportunity to enhance our competitive position.

2025 capital expenditures of $54.3 million came in below the low end of our previously provided range of $55 million to $60 million and we anticipate our 2026 capital program will be broadly in line with 2025 levels at between $55 million and $60 million.

We evaluate our capital program with a focus on increasing revenue, generating free cash flow and creating value for shareholders over time rather than simply in response to prevailing near-term industry conditions. We will continue to pursue shareholder returns over time through our regular quarterly dividend, which we are maintaining a $0.13 per share and share repurchases. This combination of shareholder returns provides disciplined returns to shareholders over time while retaining flexibility to adjust our capital allocation during times of changing industry conditions.

Our priorities in navigating the current environment of uncertainty are centered on expanding our service and technology advantages, maintaining a strong balance sheet and returning capital to shareholders in a disciplined and flexible manner. And we would now be happy to take any questions you might have.

Ladies and gentlemen, we will now begin the question-and-answer session [Operator Instructions]. The first question comes from Aaron MacNeil with TD Cowen.

In the North America -- in the North American drilling market, you mentioned the revenue per Industry Day outperformance over the last 8 years. Based on the granular data that you see, has the outperformance in 2025 been a function of rig mix as the rig count declines, you get sort of higher quality revenue per Industry Day -- or are same-store sales basically growing based on new product adoption. I'm sure it's a bit of both. But I guess I'm wondering if the rig count either stabilizes in 2026 or increases, is it possible that you could see or be negatively impacted as maybe incremental rigs don't have the same kit that some of the ones do today?

Yes. Good question, Aaron. To your earlier or to your comment, it is always a mix of both. But I would say more of it would be, as you categorized it same-store sales and increased adoption of products. And that's true on both some of the new product side, but also on the existing product side. And so I think our expectation would be that we had a flattish environment that, that metric would be probably the same to slightly up this year based on how we would see it today.

Okay. And just to maybe as my follow-up, a bit more details on that. Like -- is this the Mud Analyzer or is it other products? Like what's sort of driving that growth?

Well, I think the Mud Analyzer is the one that probably gets the most attention, right from ourselves and investors candidly. But it's not the only one. There's always a portfolio of products. There are some things that we have done that I would classify as kind of lower revenue per unit, but a lot more units going out. Mud Analyzer would be a higher dollar per unit with less units going out. But it's been a combination of a few things on the new product side and then adoption on the existing as well.

Fair enough. Maybe I'll sneak one more in. Obviously, I got asked a question about the solar business this quarter, given the strength big picture, how are you thinking about that business in the context of the Pason portfolio? And what's sort of the end game for you with it?

Sure. So that business is a really good business as evidenced by the performance it's had. There's been a couple of things that have been pretty helpful for that business in the last year in particular, but even the last couple of years. I would say the competitive landscape in that industry has shifted in a way that would be to the positive for Energy Toolbase.

And there's been some changes on the regulatory environment and some coming changes in the regulatory environment for renewable projects, which has caused people to probably accelerate some things on the project side to sort of remain captured under the existing regulations. So that's all been positive. But longer term, we think it's a great business. The question will become over time, how much is it consistent with our focus to say, look, at the end of the day, what we are best at is providing data that helps people make decisions around well construction activities in the oil and gas market.

And so that becomes less clear over time, Aaron. And so we like the business a lot. We think it's excellent what it does. The question is whether it fits with a different set of capabilities than what the existing and core Pason business does.

[Operator Instructions] We have no further questions in queue. I will turn the call back over to Jon Faber for closing remarks.

Thanks very much, Joanna. We do appreciate the time. Those of you taken on a Friday morning to join today's call. This is not a unique opportunity to ask questions to the management team. If you have questions, certainly don't hesitate to reach out to Celine or myself at any point, and we'd be happy to discuss further. And otherwise, we look forward to talking to you following the release of our first quarter results, which will happen in May. So take care, and we'll talk to you in a few months.

This concludes the conference. Thank you, everyone. You may now disconnect.

The contents of today's call are protected by copyright and may not be reproduced without the prior written consent of Pason Systems Inc. Certain information about the company that is discussed on today's call may constitute forward-looking information. Additional information about Pason Systems, including the risk factors relevant to the company can be found in its annual information form.

Good morning. My name is Andrew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pason Systems Inc.'s Third Quarter 2025 Earnings Call. [Operator Instructions]

Celine Boston, CFO. You may begin your conference.

Thanks, Andrew. Good morning, everyone, and thank you for attending Pason's 2025 Third Quarter Conference Call. I'm joined on today's call by Jon Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the third quarter. Jon will then provide a brief perspective on the outlook for the industry and for Pason, and we'll then take questions.

Pason's results in the third quarter of 2025 continues to demonstrate the resilience in our business model through very challenging industry conditions. Pason generated consolidated revenue of $101 million and adjusted EBITDA of $38.5 million or 38.1% of revenue in the third quarter of 2025. In our North American drilling segment, Canadian drilling activity increased through the third quarter as is seasonally expected after spring breakup. However, at a more moderate pace than the increases seen in the third quarter of 2024, resulting in a 15% decline in Canadian industry drilling activity year-over-year.

U.S. drilling activity fell slightly through the third quarter, resulting in a 9% decline in overall North American industry drilling activity in Q3 2025 versus the prior year comparative period. Despite this decline, revenue in the segment only decreased by 7% year-over-year. In this challenging environment, Pason grew revenue per industry day by 1% to a new quarterly record level of $1,071 as the company continues to make progress with growing product adoption across its technology offering.

Within the North American drilling segment, Pason generates a higher revenue per industry day with Canadian activity as compared to U.S. activity. In the third quarter of 2025, Canadian activity represented a lower percentage of total when compared to Q3 of 2024, and this muted the growth seen in consolidated revenue per industry day year-over-year. The segment's operating expenses remained mostly fixed in nature and fell by 6% year-over-year as the company focuses on disciplined cost management in the context of more challenging industry conditions and has seen lower levels of repair expenses, which can fluctuate with revenue levels.

Resulting segment gross profit of $42.2 million was consistent as a percentage of revenue at 61% when compared to Q3 of 2024 despite the more challenging industry conditions. Continuing from earlier this year, our International Drilling segment faced headwinds in the third quarter with a larger customer in Argentina reducing activity levels through a pending shift in operational focus away from conventional wealth towards more unconventional drilling.

The segment generated $12.5 million in quarterly revenue and $5.2 million in segment gross profit in the third quarter. Operating expenses for the segment are mostly fixed and came down by 11% year-over-year as the segment remains focused on disciplined cost management during a period of lower activity levels. Even more pronounced in our drilling segments, industry conditions for completions were very challenging through the third quarter of 2025 with several of IWS' existing customers beginning to slow their number of active frac spreads.

In the third quarter of 2025, IWS had 30 active jobs, up from 28 in the prior year comparative period despite a 27% decline in active frac fleets in the U.S. Revenue per IWS Day also grew year-over-year by 11%. Revenue per IWS Day will fluctuate depending on the mix of technology adopted amongst new and existing customers going forward. Reported revenue for the segment was $14.6 million, up from $12.5 million in the third quarter of 2024 which represents a 17% increase against industry activity that fell by 27% during that time.

Gross loss of $1.2 million for the segment represents operating expense investments made for the segment's current stage of growth, along with $7.6 million in depreciation and amortization expense associated with the property and equipment and intangible assets acquired on and since January 1, 2024.

Our solar and energy storage segment generated $5.1 million in quarterly revenue, an increase of 30% from the 2024 comparative period with the timing on deliveries of control system sales driving the difference year-over-year. As we've noted in previous calls, the segment's revenue will continue to fluctuate with timing of these deliveries going forward.

Sequentially, Pason's results were mostly impacted by the seasonal increase in Canadian drilling activity partially offset by further reductions in U.S. drilling and completions, resulting in a 5% increase in revenue quarter-over-quarter. Demonstrating the company's mostly fixed cost base and resulting operating leverage, revenue grew by $4.5 million quarter-over-quarter and adjusted EBITDA grew by $7 million at that time.

Net income attributable to Pason for the third quarter of 2025 was $12.5 million or $0.16 per share, down from $24.2 million and $0.30 per share in the third quarter of 2024 reflecting lower levels of industry activity year-over-year and higher levels of depreciation and stock-based compensation expense. We continue to maintain a prudent balance sheet ending the quarter with total cash, including short-term investments of $75.6 million and no interest-bearing debt. In the third quarter of 2025, net capital expenditures were $10.7 million, which includes investments in building out our valve management and automation technology offering within Completions and the ongoing investments in our drilling-related technology platform.

Free cash flow in the third quarter of 2025 was $18.7 million compared to $16.7 million in the third quarter of 2024 reflecting lower levels of capital expenditures and working capital investments year-over-year. With this free cash flow, we returned $13.1 million to shareholders, $10.1 million through our quarterly dividend and $3 million through our share repurchase program. Year-to-date, we've returned $49.6 million to shareholders through our quarterly dividend totaling $30.6 million and $19 million in share repurchases. In summary, we remain very well positioned in the face of challenging industry conditions.

I will now turn the call over to Jon for his comments on our outlook.

Thank you, Celine. Our third quarter financial and operating results again demonstrated the continued strength of Pason's competitive position even in challenging industry conditions. Revenue from our North American Drilling segment decreased by 7% year-over-year despite a 9% decrease in North American land drilling activity over the same period. International drilling saw an 18% decline in revenue resulting from an operational shift of a large customer in Argentina away from conventional assets.

Our Completions segment grew revenue 17% year-over-year from the third quarter of 2024 despite a 27% decrease in industry activity. Solar and Energy Storage segment revenue increased 30% year-over-year in the quarter on the strength of increased control system project deliveries. Adjusted EBITDA margins compressed slightly from 2024 levels as a result of the reduction in consolidated revenue and a higher contribution of revenue from the Completions and Solar and Energy storage segments where segment margins are lower given their current stage of development. We expect margins in these segments to expand over time as revenues increase.

The third quarter of 2025 marked more than 20 consecutive quarters across a wide range of industry conditions in which the change in Pason's consolidated revenue outpaced the change in North American land rig counts. This track record speaks to the progress that we have made in reducing the correlation between our financial performance and underlying industry activity. The compound effect of outperformance over time has been significant. In the 6-year time period between the third quarter of 2019 and the third quarter of 2025, Pason's consolidated revenue has increased by 40% while North American land rig counts have decreased by 32%, representing a spread of more than 70%.

Over that same 6-year time period, we have reduced our share count by 8.5%, completed the acquisition of Intelligent Wellhead Systems with no dilution to shareholders and paid over $200 million in dividends to shareholders through free cash flow generated within the business. When we completed the acquisition of the remainder of Intelligent Wellhead Systems at the start of 2024, we believe we have the opportunity to double Pason's revenue from 2023 levels. We continue to believe this opportunity exists over the next 5 to 7 years, even if industry activity remains near current levels.

To do so, we are focused on executing against a number of priorities. We will build on our competitive position in the North American land drilling market. Our focus is on delivering on innovative products, best-in-class service and exceptional customer support in order to earn the ongoing trust and confidence of our customers. We also look to offer expanded features and enhanced functionality in our existing products and to develop new products that provide additional benefits for customers.

We are expanding our presence in the Completions market with our valve management and automation technologies, and we are working to develop compelling data management products for completions that leverage Pason's decades of experience in the drilling industry.

We look to grow our international revenue, particularly as unconventional drilling becomes a focus in international markets, we anticipate opportunities to achieve greater adoption of our more advanced technologies, including those for the completions market. The path to our medium- to longer-term growth aspirations is unlikely to be linear. In the near term, we expect ongoing economic uncertainty and concerns about the potential for oversupplied oil markets to result in the challenging industry conditions.

Increasing adoption of existing products and rolling out new products are both significantly more difficult in the current environment. The near-term trajectory of our completions revenue is more closely tied to the activity levels of particular customers rather than the overall market. Newer products and services will likely benefit over time from revenue acceleration that comes from a growing market presence and awareness. We see several supportive industry trends that should provide tailwinds to our efforts over the medium to longer term.

Pason stands to benefit from the growing proliferation of artificial intelligence. Our position as the leading provider of drilling data and our efforts to expand our data management capabilities to the completions market serve us well as AI technologies drive increased demand for data as inputs to the models being deployed. The anticipated growth in demand for natural gas as a source of baseload power for data centers is expected to result in increases in natural gas-directed drilling activity. Artificial intelligence tools also play a role in our product development efforts and in improving the efficiency of our own business operations.

Technology has played an essential role in driving efficiency improvements in Drilling and Completions operations and we expect customers to look for further efficiency gains, driving greater demand for data and technology. Pason also benefits from the additional data and technology requirements associated with the increasing complexity of Drilling and Completions operations.

Over time, we anticipate overall decline rates for global oil and gas production to increase, driving higher levels of drilling and completions activity as a result of more natural gas-directed drilling, more offshore development and more unconventional drilling, which have higher decline rates than oil-directed onshore and conventional drilling.

Our capital allocation priorities are unchanged, and they are driven by a focus on return on invested capital. We are making investments in areas where we can generate high returns on capital, which are not directly available to shareholders in the market and we are returning excess capital to shareholders in a disciplined, flexible manner. Our highest returns on capital continue to come from the organic investments we are making to continue the growth of our Completions business coupled with the ongoing rollout of the Mud Analyzer in our drilling-related business.

With the slowdown of industry activity, we anticipate our 2025 capital program will total between $55 million and $60 million, and we expect a similar level of capital investment in 2026. We evaluate our capital program with a focus on increasing revenue, generating free cash flow and creating value for shareholders over time rather than simply in response to prevailing near-term industry conditions. We will continue to pursue shareholder returns over time through our regular quarterly dividend, which we are maintaining at $0.13 per share and share repurchases.

This combination of shareholder returns provide disciplined returns to shareholders over time while retaining flexibility to adjust our capital allocation during times of changes in industry conditions. Our balance sheet remains strong. At September 30, we had $75.6 million in total cash, including short-term investments and positive working capital of $111.9 million.

At this point, we would be happy to take any questions that you might have.

[Operator Instructions] Your first question is from Keith Mackey from RBC Capital Markets.

Just the first question on the capital spend for this year and next year, kind of maintaining around that $55 million to $60 million level. Can you just talk about maybe I know it's Mud Analyzer and Completions weighted for anything beyond general maintenance. But can you talk about the mix of spending this year and next year? Will it be the exact same types of products that you're building? Or will it move on to a different stage of what you're actually spending the capital on related to those 2 products? Just curious for some more color on the growth CapEx for next year.

Yes. So I would say, similar level as you think about 2026 in comparison to 2025. We talked about in previous calls, we would have said roughly $25 million of the CapEx that we saw for 2025 goes towards growth-related investments in completions and expectations of growth into 2026 and beyond. And I would say that's a similar level that you can expect in terms of split in 2026. .

And then on the drilling side, which would be the balance of that $55 million to $60 million, the majority of that CapEx actually would relate to the refresh investments that we're making on our existing hardware platform as we continue to look towards opportunities to grow product adoption and improve price realization on our existing technology base there.

Okay. Got it. And can you just maybe talk a little bit more about the completion data management projects? How are you inserting yourself, I guess, in the product development life cycle, what kind of things are customers asking you for or looking to do as they use more of these IWS products?

Keith, I'll speak at a pretty high level at this point because we're still sort of in the early days of getting that sort of built out. But I think what is clear to us is that there are at least some parameters from the drilling process which could be helpful for somebody who's involved in the Completions process to understand perhaps what the rock properties might look like, which might help them think about how a fracture might propagate and so being able to make some of that information available during the completions process would be an example of an area where we think we're uniquely positioned having access to both the Drilling and Completions data sets.

Okay. Got it. And maybe just one final one, if I could. Jon, can you talk about a little bit more about the growth drivers that you see in the target to or potential to double revenue from 2023 levels in 5 to 7 years? If industry activity stays roughly where it is now, what are sort of the general buckets of improvement that you'd see to be able to double that revenue?

Yes, sure. So I guess I kind of break it into a few things. There's obviously within the core drilling business, we've got an established track record over 15 to 20 years of growing revenue per industry day in the order of 6% to 7% compounded over time. And when we look at simply kind of inflationary effects of pricing over time, increased adoption of data-driven technologies related to people doing more with our automation and intelligence. And when we look at the rollout products like a Mud Analyzer, we're pretty confident that we can continue that sort of a track record in the drilling-related business.

In the Completions side, we see, of course, opportunities just for all players in the industry to grow by as a result of people using more technology of the type we're offering in the Completions market. So we think there's sort of a broad-based technology adoption story that all participants would benefit from. And then as I would have referenced earlier, we think we may have some unique opportunities in that space related to the fact that we have access to both the Drilling and Completions data, and making those kind of available to customers in a uniform way.

There's some ancillary services that happen around Drilling and Completions that probably would also stand to benefit from some data management capabilities which stand-alone have maybe been not attractive to people independently the drilling market or the completions market by participating in both markets, those sorts of opportunities we would think we would benefit from.

And then in the international business, as I mentioned, we moved to more unconventionals, that tends to drive higher-value products from our product offering, things that are impacting drilling performance more directly. And so we think there's opportunities to grow on the international side as well. So at a high level, those are sort of the areas where we see growth. And as we said, it's probably a 5 to 7 years sort of a time frame, and it requires execution and hard work and focus on the things that we can be most impactful with.

Your next question is from Aaron MacNeil from TD Cowen.

I want to sort of build on Keith's last question. Obviously nice to see those longer-term ambitions. How do you suggest we sort of evaluate the success or failure of these initiatives in real time? And what sort of milestones would you point us to over the next couple of years?

Yes. Unfortunately, Aaron, these are very intentionally medium to longer-term priorities that we're talking about because they're nonlinear. It's a little bit easier to establish very near-term measurable things for you to evaluate against when you're talking about doing things you're already doing in a market that's already adopting this type of technology. And so because we're talking about, in a lot of cases, new things that are ramping into the industry, some of it, if you're honest, in the short term is much more around capability development, streamlining the product offerings to be able to scale in a more profitable manner. And those things are a little bit less directly visible.

So we will certainly provide commentary on an ongoing basis around things we're doing in each of those sort of broad areas to ensure that we're moving them all forward. But it's not obviously that you're going to have very specific line items in our financials to point to in the next 12, 18, 24 months as interim measures when we're building towards where we need to be in 5 to 7 years as an outcome.

It could be operational milestones as well, though, like if you're developing a new product or et cetera, like is there anything maybe not in the financials, but something more than qualitative that you could point to?

Well, I think we will provide comments on an ongoing basis about the types of things that we are working on to establish the ability to hit those objectives.

Yes. Fair enough. Sorry to needle you. But maybe one more question on IWS. Presumably, you'll have some capacity expansions next year. How do you think of line of sight in terms of having homes for that incremental equipment today?

Well, when we look at the equipment, like a lot of what we're talking about on that capital build and Celine talks about CapEx, a lot of that's based on conversations with customers around what they expect to do going into 2026 type of a world. So I think as you can see from lots of folks in the completions market, the expectation in the fourth quarter, probably always is that it's lower than the third quarter. You hear things in Completions around white space, budget exhaustion and terms maybe those of us from the drilling world don't hear quite as often. But certainly hear lots of talk about what people plan to do early into 2026. And so we are certainly building with visibility towards where we think that equipment would go to work.

Your next question is from Sean Mitchell from Daniel Energy Partners.

Just wanted to hit on the Completion side, maybe a little follow-up or color around, as you see the E&P consolidation and maybe a structural shift in completion design and strategies going from zipper to simul-fracs. How has that evolution really influencing your completions business in terms of utilization cycle times, customer engagement, maybe more sophisticated or a different kind of technology demand. Can you provide any color on that, that would be great.

Yes, you bet. In completions as with drilling, increased complexity, certainly increases the value proposition of the types of products that we're bringing to market. So when you're talking about ensuring that you can manage a more complex operation efficiently and very importantly, safely the types of technologies that we're deploying to those space become -- I don't say exponential that probably is overstating it, but it's significantly more important as you start adding more valves to the equation. And so that certainly is a driver of increased demand for the product and the value proposition resonates increasingly on a safety and efficiency perspective when you start to talk about more complex types of fracs happening.

The other side of the question you asked around more consolidation. One of the things that we see is certainly a desire from customers to do things consistently across their operations and ensuring they're deploying standard operating procedures. And so a number of the technologies we offer to that market are really around ensuring consistent workflows and standard operating procedures are being followed as well. And so as you get larger, more sophisticated companies looking to do more complex operations, they are driving more standardization and how they do things, and that would also be a net benefit to things we do on the completion side.

Got it. And then maybe one more. Just as you think to expand internationally, where do you see the best opportunity set on the international front?

Well, certainly, Argentina is an opportunity in terms of it being one of our larger markets today. And so they're looking to do. We've talked a lot about part of the reason the revenue in the international decline is because of a shift to unconventionals. And so that shift to unconventionals starts to drive a lot more of a product offering from the drilling side, but also earlier enthusiasm for things around the Completion side. And then the Middle East, there's quite a bit of talk around unconventionals as well. There's opportunities for us there as well. So I'd point to those 2 specifically, not to say exclusively, but I think those two come top of mind if you think about kind of opportunities in the near term.

[Operator Instructions] There are no further questions at this time. Mr. Faber, please proceed with closing remarks.

Thank you, Andrew, and thanks to those who joined us for this morning's call. As always, we appreciate your interest. We appreciate the questions and your support. If you do have other questions, you certainly are welcome to connect with Celine or myself at any point. And otherwise, we wish you a very good day and weekend.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.

The contents of today's call are protected by copyright and may not be reproduced without the prior written consent of Pason Systems Inc. Please note the advisory is located at the end of the press release issued by Pason Systems yesterday, which describe forward-looking information. Certain information about the company that is discussed on today's call may constitute forward-looking information.

Additional information about Pason Systems including the risks factors relevant to the company, in its annual information form. Thank you.

Good morning, my name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pason Systems Inc.'s Second Quarter 2025 Earnings Call. [Operator Instructions]

Celine Boston, Chief Financial Officer. You may begin your conference.

Thank you. Good morning, and thank you for attending Pason's 2025 Second Quarter Conference Call. I'm joined on today's call by Jon Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the second quarter. Jon will then provide a brief perspective on the outlook for the industry and for Pason, and we will then take questions.

I'm pleased to report on Pason's second quarter 2025 results, which continue to demonstrate the resilience in our business through challenging industry conditions. Pason generated consolidated revenue of $96.4 million in the second quarter of 2025, a 1% increase from the $95.9 million generated in the second quarter of 2024 and despite more challenging industry conditions.

With this revenue, Pason generated $31.6 million in adjusted EBITDA or 32.7% of revenue which compares to $33.1 million or 34.6% of revenue generated a second quarter of 2024. From a segment performance perspective, in our North American Drilling segment. Canadian drilling activity fell throughout the second quarter as the seasonally expected through spring breakup, which coupled with reductions in U.S. drilling activity resulted in a 5% decline in North American industry drilling year-over-year.

In this challenging environment, Pason continued to generate growth in revenue per industry day and the metric grew 3% year-over-year. As a reminder to listeners, revenue per industry day is a representation of the company's market share position pricing and product adoption across North America and will also be impacted by changes in the U.S. dollar compared to the Canadian dollar, which moved in an unfavorable way during the second quarter with a weakening U.S. dollar.

Revenue in the North American Drilling segment only fell by 2% year-over-year, outpacing the 5% decline seen in industry activity. The segment's operating expenses remained mostly fixed in nature and fell by 6% year-over-year as the company focuses on disciplined cost management in the context of more challenging industry conditions. Resulting segment gross profit of $34 million was flat to the level generated in the same quarter in 2024 despite the 2% decline in revenue and the 5% reduction in industry activity.

Continuing from the first quarter of this year, our International Drilling segment faced headwinds in the second quarter with a larger customer in Argentina, reducing activity levels through a pending shift and operational focus away from conventional wells towards more inventional drilling. The segment generated $13.6 million in quarterly revenue and $6.4 million in segment gross profit in the second quarter.

Operating expenses for the segment are mostly fixed and came down by 5% year-over-year as the segment remains focused on disciplined management of operating costs during a period of lower activity levels. In our Completions segment, IWS had 33 active jobs, up from 32 in the first quarter and 29 in the second quarter of 2024, while industry activity levels fell in both of those comparative periods.

In that time, the Completions segment maintained revenue per IWS Day at relatively flat levels generating $5,069 per day in the second quarter. Revenue per IWS Day will fluctuate depending on the mix of technology adopted amongst existing customers and further will be impacted by foreign exchange fluctuations between the U.S. and Canadian dollar, which when comparing sequential results for the Completions segment had a negative effect.

Reported revenue for the segment was $15.3 million, up from $13.7 million in the second quarter of 2024, which represents a 12% increase against industry activity that fell by 25% during that same time.

Gross profit for the segment of $1.2 million represents operating expense investments made for the segment's current stage of growth, along with $6.2 million in depreciation and amortization expense associated with the property and equipment and intangible assets acquired on and since January 1, 2024.

Our solar and energy storage segment generated $5 million in quarterly revenue, an increase of 58% from the 2024 comparative period, with the timing on deliveries of control system sales driving the difference year-over-year. As we've noted in previous calls, the segment's revenue will continue to fluctuate with timing of these deliveries going forward.

Sequentially, Pason's results were mostly impacted by the seasonal decline in Canadian drilling activity, along with further reductions in U.S. drilling activity and a weaker U.S. dollar in the second quarter. All of which impacted revenue levels over the company's mostly fixed cost base. Revenue of $96.4 million in the second quarter compares to revenue of $113.2 million in the first quarter. Similarly, adjusted EBITDA was $31.6 million in the second quarter compared to $45.2 million in the first quarter.

Net income attributable to Pason for the second quarter of 2025 was $12.6 million or $0.16 per share, up from $10.9 million ending $0.14 per share in the second quarter of 2024, reflecting lower levels of adjusted EBITDA that were more than offset by lower stock-based compensation expense. We continue to maintain a prudent balance sheet, ending the quarter with total cash, including short-term investments of $69.3 million and no interest-bearing debt.

In the second quarter of 2025, net capital expenditures were $15 million, which includes investments in building out our valve management and automation technology offering within completions and the ongoing investments in our drilling-related technology platform. Free cash flow in the second quarter of 2025 was $5.3 million compared to $8 million in the second quarter of 2024, reflecting the more challenging industry conditions year-over-year.

With this free cash flow and our cash balance, we returned $20.2 million to shareholders in the second quarter, $10.2 million through our quarterly dividend and $10 million through our share repurchase program.

In summary, we remain very well positioned in the face of challenging conditions. I will now turn the call over to Jon for his comments on our outlook.

Thank you, Celine.

Our second quarter financial and operating results demonstrated the continued strength of Pason's strong competitive position even in challenging industry conditions. Revenue from our North American Drilling segment decreased by 2% year-over-year despite a 5% decrease in North American land drilling activity over the same period. Revenue per industry day grew 3% year-over-year to $1,026 per day in the quarter. In our International Drilling segment, the operational shift of a large customer in Argentina away from conventional assets resulted in an 11% year-over-year decrease in revenue.

It is worth noting that the revenue associated with the conventional drilling activity in Argentina had a low margin profile. And as the customer increases its unconventional drilling activity, we anticipate greater adoption of higher-value products and a more attractive margin profile. Our Completions segment again posted significant outperformance in comparison to underlying industry activity. Revenue from our Completions segment grew 12% from the second quarter of 2024 despite a 25% decrease in the reported number of active frac spreads in the United States.

Our average number of IWS active jobs increased by 14% year-over-year, while revenue per IWS Day held strong at $5,069 per day. As we have noted in previous calls, as we continue to grow our customer base in the Completions segment, we expect that revenue per IWS day will fluctuate based on customer mix. In our Solar and Energy Storage segment, Energy Toolbase revenue increased 58% year-over-year from 2024 levels to $5 million in the second quarter on the strength of increased control system project deliveries.

Adjusted EBITDA for the quarter totaled $31.6 million was down 5% from 2024 levels while an adjusted EBITDA margin of 32.7% was lower than the prior year, owing to higher revenue contribution from the Completions and Solar and Energy Storage segment, where segment margins are lower given their current stage of development. We expect margins in these segments to expand over time as revenues increase.

Geopolitical factors continue to dominate the headlines with ongoing trade negotiations and changing tariff policies unwinding of OPEC+ production cuts and concerns about economic growth, creating significant uncertainty in economic outlooks. As a result, we have seen customers make adjustments to their capital programs in response to the uncertainty, despite the fact that WTI oil prices have held relatively steady in the mid-$60 per barrel range.

A significant portion of current activity is directed at maintaining current production levels rather than growth, and we continue to believe that maintenance capital is among the highest capital allocation priorities of most producers.

The outlook for natural gas is more favorable than it has been for many years, driven by LNG project development and increased power demand. Since the start of 2025, the gas-directed U.S. land rig count has increased by 22% despite the overall market slowing by 8%. We expect Pason to continue to outpace industry activity as both our Drilling and Completions businesses benefit from increasing complexity in Drilling and Completions operations.

As customers continue to pursue automation and analytics efforts, including leveraging artificial intelligence applications and the establishment of real-time operating centers, Access to consistent, reliable, high-quality data is increasingly important for both Drilling and Completions operations.

Pason's experience over more than 4 decades and serving the data needs of the drilling market provides us with the ability to make meaningful advancements in helping customers access data across the entire well construction process. The gains that we have made in increasing North American revenue per industry day in our Drilling segment and in expanding our customer base while maintaining strong revenue from IWS Day in our Completions business should translate into continued outperformance against industry conditions.

Our capital allocation priorities are driven by a focus on return on invested capital. Our highest expected return on capital continue to come from the organic investments we are making to continue the growth of our Completions segment, coupled with the ongoing rollout of the Mud Analyzer in our Drilling-related business. With the slowdown of industry activity, we anticipate our 2025 capital program will be lower than the $65 million originally planned and we now expect our full year capital expenditures to total between $55 million and $60 million for the year.

We evaluate our capital program with a focus on increasing revenue, generating free cash flow and creating value for shareholders over time rather than simply in response to prevailing near-term industry conditions. We will continue to pursue shareholder returns over time through our regular quarterly dividend and share repurchases. This combination of shareholder returns provides disciplined return to shareholders over time. while retaining flexibility to adjust our capital allocation during times of changes in industry conditions.

We are maintaining our quarterly dividend of $0.13 per share and we are deploying additional capital beyond the requirements of organic investments and regular dividends to share repurchases. Our balance sheet remains strong. At June 30, we had $69.3 million in total cash, including short-term investments and positive working capital of $104.8 million.

And we would now be happy to take any questions.

[Operator Instructions] Our first question today will come from Keith MacKey, RBC Capital Markets.

Just wanted to start out on Completions. Job count looks like it was up slightly, sequentially while the U.S. industry frac count was down and continuing to go down further in Q3.

Can you just talk about the trajectory of your -- where you'd expect your job count to go? The other thing that we hear more is a bit of a divergence in the outlook for oil-directed drilling and completion activity versus gas-directed drilling and completion activity. Do you expect that dynamic to help bolster the overall job count as we go through the second half of the year?

Just any color on those items that you can provide would be helpful.

Yes. Sure, Keith. I think it's important when you think about job count kind of maybe separate in how we think about existing customers and new customers.

On the existing customer side, we continue to have a really strong position with our customers, though many of them have slowed their activity over time. And so our ability to hold and grow job count has largely come from adding new customers to more than offset existing customers slowing their activities.

So to the extent that we continue to add new customers, we think that will continue to be additive to job count. We don't know that we'll see much more in terms of slowdown from some of the existing customers. We made reference over the last year, I think, to the fact that some of our larger customers historically. We're a little bit more gas focused and they would have slowed their activity down quite a bit a year or 18 months ago. And so to answer the second question there, Keith has gas activity comes back. We would expect that to help on the side of growth from existing customers to bringing activity back to their programs.

Got it. And can you translate that into how you'd expect your job count to trend over the second half of the year versus maybe the industry type of frac count or markers there?

Well, I think when you just think about the commercial requirements to secure a new customer and go through the process of getting set up for the first job it probably becomes harder and harder over time to significantly outpace what the underlying industry does. We think we will continue to outpace the industry. But the significant performance does become more challenging if you're doing it with additions of 1 or 2 jobs with new customers.

So it will really be a question of how much some of those existing customers layer on more activity in addition to the adding new customers.

Got it. And just turning to Argentina. Can you talk a little bit more about the dynamic of customers shifting from conventional to unconventional?

How can you be so confident that you'll -- that unconventional activity will come to Pason. Are these the same rigs that are just moving areas? Or are these new rigs that you think you'll also get a portion of? Maybe just a little bit more color on how you see that dynamic playing out as well as the trajectory for Argentina over the next 2 to 3 quarters to the extent you can?

Yes. There's a question around the confidence of getting the unconventional activity really comes down to the question of who the customer is in the future on those 2 different asset bases. So when we talk about transitioning the activity, what we're seeing is the large customers selling assets with conventional drilling.

And those assets have much lower revenue opportunities candidly keep they're probably not assets that we're interested in working on and the types of revenue they generated if it's not part of a portfolio of assets for a larger company that has also the unconventional side. So in the short term, what that means is that as those assets are sold off, that is revenue that we are happy to forgo.

And it also means that we continue to have some operating costs to service the remaining assets while the portfolio is being sold. Over time, because the large customer we have all of their work, we would anticipate that we will continue to have the lion's share of the work. We're all in the work as they continue to do things on the unconventional side. And that does draw a different set of the product suite that is higher valued at a much better margin profile.

Understood. Do you have a sense of timing of when some of that unconventional drilling might ramp up?

We're starting to see it ramping up now, but it will take time for it to match the same type of revenue level that you would see from the -- just the revenue dollars associated with a high volume of low revenue rigs, right?

So it might actually take 18, 24 months or more for the overall revenue to kind of come back to what you would maybe see in Argentina, but certainly wouldn't take that measure of time for the margin when you start to talk about the types of opportunities you have in that space.

Our next question today comes from Aaron MacNeil, TD Cowen.

On IWS, just building on Keith's question, can you give us a sense of your job capacity today based on equipment that's ready for service? And what type of supply additions are being contemplated in the current capital program? And then just from a broader market perspective, how do you think about the IWS technology as well as competing technologies in terms of how much they've saturated that sort of multi-frac market?

Sure. On there, it's a little tricky to give you an estimate of job count capacity only because the profile of jobs can be dramatically different. In terms of the types and quantity of different pieces of equipment required.

So I think all I can really say is that we are quite comfortable that the capital program that we're now forecasting for 2025. And we feel quite comfortable in our ability to continue to outpace what the underlying industry does. But it is going to require capital to match because more jobs are taking more equipment over time, not less. And so that's probably all I can really directionally say the question of capacity.

The second part of the question, you'll have to trigger my memory where you're going, Aaron?

Yes. Just thinking about market saturation, like for IWS as well as competing technologies?

Yes, sure. I think our view is there's still lots of run road for where the overall opportunity exists for automation in the completion space. So I think for IWS and other folks competing in the market, there's going to be -- the biggest tailwind for all of us is going to be the continued adoption of automation technologies.

And I think one of the things we felt has been an advantage we've had in the drilling space for a lot of years. which translates as well the completion side is the fact that we can work with a variety of different providers. And so when customers choose to use a variety of providers, either on the drilling side, drillers or pressure control providers on the completion side, those are always opportunities for us. So we think we'll continue to have lots of opportunity, but there's a tailwind for all participants in that industry around greater adoption of technology, in particular, automation.

Got you. Maybe I'll just reframe the first question. I didn't want to get too specific. But like are you operating at capacity today or do you have underutilized capacity? And like what I guess, capacity additions are you adding, I guess, in any way you'd want to frame it in terms of like percentage of fleet growth or asset growth or I don't know.

Yes. Again, I'm not trying to avoid the question here. It's just a little bit tricky to address, right? I think it's fair to say we're probably operating at capacity for more complex types of jobs. And with some additional capacity available or underutilized on things that are simpler types of jobs, but it's a different profile of equipment.

So really on the mix of the types of jobs you're looking at in terms of whether there's capital required or not.

Got you. Okay. And then maybe a similar sort of line of questioning on the Mud Analyzer. I just haven't had an update in a while.

How are you thinking about market demand, potential market saturation levels and your ability to price the product?

Yes. So I think similar to what we would have said last quarter, the challenges on the Mud Analyzer for kind of more rapid scaling over rollout really are sort of twofold. There are some technical things that we're working through to deal with some technical challenges around things like lost circulation materials and people's operating processes.

And then there is the question for folks who have not had this data available historically, how to use that data. And so there are some investments we are making on the operational side to help customers understand how they might use the data to drive their drilling programs.

[Operator Instructions] Our next question today comes from Sean Mitchell from Daniel Energy Partners.

Maybe in IWS, I know that revenue per day can vary depending on mix of technology adapted by your customers. But is there a big difference between oil versus gas completions in terms of technology adoption by your customers?

We don't really see a difference oil versus gas on the technology that we would be applying on the completion side. There are probably more difference if I want to, Sean, on the drilling side where there are certain products that become more applicable as your drilling at deeper depths, which you typically are on the gas side. Probably less of a question on the types of completions products we have, where you see a difference.

There are no further questions at this time. I will now turn the call over to Jon. Please continue.

Great. Thank you very much, Amy, and thank you all of those who have joined the call this morning. We do understand that our calls sometimes compete with other calls, so thanks for taking time to join ours. We certainly appreciate your interest. If you do have follow-up questions, or if you're picking up a recording or a transcript later and you have questions, certainly do reach out to Celine or myself at any point, and we'd be happy to follow up.

Have a terrific day, and we will look forward to talking again following our third quarter results.

This concludes the conference. Thank you, everyone. You may now disconnect.