Thanks, Grant. Good morning and thank you for attending Pason's 2022 first quarter conference call.

I am 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 will then take questions. We're very proud of our first-quarter results, which not only reflect a continuation of improved industry conditions, but also reflect our strong competitive positioning, significant operating leverage and pristine balance sheet.

As we look back to the first quarter of last year, we came into 2021 with recovering industry activity levels in most of our operating regions. Particularly in North America, we saw land drilling grow off the lows experienced in the third quarter of 2020.

Since then, activity levels have continued to grow as we saw 57% improvement in average North American land rig count in the first quarter of 2022 in comparison to the first quarter of 2021. Within that landscape, the company maintained its leading competitive position in North America and continue to benefit from improved pricing conditions and comparisons in a challenging environment throughout the downturn.

Accordingly, revenue per industry day in North America grew by 16% year-over-year from CAD720 in the first quarter of 2021 to CAD835 in the current quarter, representing the fourth consecutive quarter of sequential growth and a new record quarterly level for the company. This is also a result that is well ahead of the CAD738 generated during pre-pandemic activity levels in the first quarter of 2020.

It is worth noting that revenue per industry day in North America will fluctuate with the seasonality effects of drilling activity in Canada. Both revenue per industry day and reported revenue benefited from a strong winter drilling season in Canada in the first quarter.

Pason generated consolidated revenue of CAD74.5 million in Q1 of 2022 at 75% improvement over the first quarter of last year. North American revenue was CAD62 million for the first quarter, 79% improvement from the first quarter of last year and a result that outpaced the improvement in underlying industry conditions.

Activity levels in international end markets also improved and revenue generated by the international business was CAD10.7 million in the first quarter, a 51% improvement from the first quarter of 2021. Energy Toolbase, our emerging business in the solar energy storage market continues to make progress.

This segment generated CAD1.8 million in the first quarter of 2022, the highest quarterly level of revenue achieved for this segment and a 95% improvement from the levels seen in the first quarter of 2021. Reported revenue for Energy Toolbase begins to incorporate revenue generated by control systems and related hardware sales.

Pason generated CAD33.4 million in consolidated adjusted EBITDA in the first quarter of 2022, a significant improvement from the CAD30.2 million generated in the first quarter of last year and a result that represents 44.8% of revenue. As the industry recovers and our outlook remains positive, we will continue to make investments and incur certain costs in anticipation of future revenue increases.

Primarily, as it relates to equipment repairs and people. Further, we continue to grapple with difficulties in predicting timing on deliveries of capital from purchases.

And as a result, our remaining especially proactive with repairs of existing fleet and technology, which will impact adjusted EBITDA margins throughout the remainder of 2022. And that said, when we compare the first quarter of 2022 to our results in the first quarter of 2020, prior to the drastic fall in activity levels, we are very proud of the fact that was 15% less North American land rig, we have generated the same amount of revenue and adjusted EBITDA.

Many of our operating costs remain fixed in nature and our first quarter results demonstrate our operating leverage with 79% incremental adjusted EBITDA margin sequentially and 63% year-over-year. As we've previously communicated, incremental margins will fluctuate as the industry recovers and incurred certain costs in anticipation of future revenue increases.

Further, as we return to pre-pandemic adjusted EBITDA margins, the seasonality effects of the Canadian drilling industry will impact adjusted EBITDA margins in the coming quarters like we've seen in prior years. As such, we expect that our first quarter adjusted EBITDA margins will be on the higher end of the expected range in the coming quarters.

Net income attributable to Pason for the three months ended March 31, 2022 was CAD18.6 million or CAD0.23 per share, a significant increase from the CAD4.3 million or CAD0.05 per share generated in the first quarter of 2021. Our balance sheet remains strong and incredibly well positioned with CAD173 million in cash and cash equivalents at the end of the quarter and no interest-bearing debt.

We continue to make investments in our core business to support increased levels of activity. In the first quarter of 2022, Pason spent CAD4.5 million in capital expenditures relating to maintaining and refreshing our existing technology.

Also as revenue levels have increased, we've made corresponding investments in working capital, while remaining diligently focused on maintaining strong collection trends. Further in the first quarter, Pason collected a long time outstanding receivable from the IRS in the amount of CAD12.5 million.

Resulting free cash flow in the first quarter was CAD23.6 million, a 157% improvement from the 9.2 generated in the first quarter of 2021. Pason returned CAD8 million to shareholders through dividends and share repurchases during the first quarter, which reflected our increased quarterly dividend level of CAD0.08 per share.

In summary, we are very proud of our first-quarter results, which reflect our leading market presence, our strong operating leverage through improving activity levels and our pristine balance sheet. We continue to be in a position of excellent competitive and financial strength.

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

Thank you, Celine. As Celine noted, our first quarter financial results reflected both the continuation of the growth in industrial activity that we have seen since the industry bottomed in the third quarter of 2020, as well as Pason's continued strong competitive position.

Pason's North American Revenue per Industry day of CAD835 in the quarter marked the first time in the company's history that this important metric broke through the CAD800 level. It is worth noting that both industry activity and Revenue per Industry Day are favorably impacted by a higher proportion of drilling activity in Canada during the Canadian winter drilling season.

We expect that activity will continue to grow in the US and international markets in the coming quarters, while the second quarter will be seasonally weaker in Canada. Pason is well positioned to participate in the industry's growth, as customers increasingly look to utilize data to improve their operational performance through the use of automation and analytics technologies.

Our confidence in continued industry growth in the short to medium term is rooted in a review of supply and demand fundamentals. Global oil demand has largely recovered to pre-pandemic levels.

While there are growing concerns about weakening demand from COVID-19 lockdowns in China, high prevailing levels of inflation and the potential impacts from central banks moving to raise interest rates, supply indicators continue to point to more significant shortages. Supply has to come from the inventory of previously produced oil sitting in storage, either in the form of refined products or crude oil awaiting refinement, from current production -- from new production from wellbores that have already been drilled and which are awaiting completion or from newly drilled wells.

The US oil storage levels of crude and petroleum products are currently sitting at their lowest levels since the end of 2008 and with 26 days of refinery demand cover, crude oil days of supply is down 20% from a year ago. The United States recently announced a plan to release up to 1 million barrels a day from the Strategic Petroleum Reserve for up to 6 months in response to elevated oil prices, putting further pressure on storage levels.

If that plan were fully implemented, the strategic petroleum reserve would be drawn down to its lowest level since 1984. Oil production in the United States remains approximately 10% below pre-pandemic levels.

The inventory of drilled but uncompleted wells has now decreased every month for the past 21 consecutive months and is at the lowest level it has been in more than 8 years. While the US land drilling rig count has increased by approximately 20% year-to-date, it remains approximately 25% below the 2019 average rig count.

Supply and demand fundamentals are constructive for oil prices and drilling activity in the coming quarters. A significant supply response seems unlikely given current challenges around the availability of labor, supply chain disruptions and underinvestment in larger long-term development projects over the past five years.

We believe that hydrocarbons will play an important role in helping meet the world's growing energy demand for many years, alongside the continued development of alternative and renewable technologies. In our solar and energy storage efforts, we are seeing revenue increases as the control system installations are commissioned and our pipeline of projects continues to grow.

Across our business, we will make the necessary investments to position ourselves to realize future revenue gains. Our operating costs, most notably, personnel and equipment repairs will see increases as a result of anticipated further activity gains and prevailing inflation rates.

We will invest in research and development efforts that drive continued market share and pricing improvements, as we deliver additional value and functionality for customers. We continue to plan to spend approximately CAD30 million in capital expenditures in 2022, the global supply chain shortages and disruptions are impacting delivery schedules.

We will continue to evaluate our capital programs in the context of future opportunities to evolve our product and service offering, while navigating continued supply chain challenges. We are pursuing opportunities to mitigate the impact of supply chain disruptions by strategically increasing our inventory of equipment components and parts, further in advance of anticipated repairs and equipment builds.

This will impact near-term working capital requirements, while enabling us to be responsive to continued industry growth and to maintain the product and service advantages, which underpin our leading competitive position. Our balance sheet remains strong and our free cash flow generation continues to improve.

We will continue to allocate capital by making investments in maintaining our leadership position in our existing drilling-related markets, positioning ourselves for future growth in new and growing markets and returning capital to shareholders. We remain committed to returning capital to shareholders through our regular quarterly dividend, which we are maintaining at CAD0.08 per share and through share repurchases.

We are focused on ensuring that Pason is an innovative, profitable and responsible company. And we would now be happy to take any questions you might have.

Good morning, Jon and Celine. Congrats on another solid quarter here and thanks for taking my questions.

John, in your prepared remarks there, you just touched on the possibility of increasing inventory of equipment components to help navigate the supply chain disruption. Would you foresee that as likely becoming as a sort of a new normal, as a buffer against potential future disruptions or do you think once bottlenecks and availability issues moderate, you've sort of revert to business as usual?

I think we would revert us, the supply chain situation normalized, if we guess we'd have to see what that normalized environment looks like, right? So what we're really talking about here, is taking a longer period of time for our view of how much equipment we need to be ready to suppliers through repair or new builds.

And just kind of using a longer planning window, and as the supply chain situation improves, we would shrink the planning window back to the historical time period we would have used.

Got you. And you sort of have a -- like a rough dollar value in mind as it would relate to your current business level?

I think we have a sense here that it's probably going to be in the order of -- I'll call it initially CAD10 million to CAD15 million. Now the question of course is, when we can actually receive the parts that we order.

I think so, how much will actually hit the balance sheet will be a function of the delivery schedules, which is tremendously difficult to forecast. So it's not immediately clear exactly when that will hit, but that's kind of -- where we think we're sort of headed towards here.

Got it, got it. That's helpful color.

Appreciate that. Switching gears, you often touch on what kind of rig count you're currently structured for?

I appreciate that it's still a relatively small portion of the overall top line, but given the recent growth of the solar and energy storage segment. I was wondering, if you could provide some similar color around the current structure of that business.

As it continues to grow, how much you think, you could push that with the existing structure and at what level I guess, you think you would think about taking measures to increase capacity?

Yes. Interesting question, Mike.

When we look at the core drilling-related business, of course, we use an 18 to 24 month view of what the rig count might due to a sort of plan. While we need capacity-wise from an operating perspective, if you think about equipment and people primarily.

Much of the business on the Energy Toolbase side are much of the capacity is technology related. We certainly have a growing operational team as we work to commission more projects.

But I would say it's probably a little bit early for us to think about sort of a forecast for the overall industry and informing the capacity levels that the capacity levels are more informed by the growth we're seeing, right? And so with that control system business, the growth is going to be a function of the installed base of energy storage assets that are out there.

And so part of what we're doing in that business is, helping get more energy storage assets out there and layering our control systems on top of that. But it's so early stage in that industry and in that business that is not really a function of what the overall industry is doing as much as our growth rate that informs capacity questions.

Got it, got it. That's helpful way of, I'm thinking about it.

I appreciate you taking my questions. I'll turn it back and jump in the queue.

Thanks.

Yes, so as Celine like how you pointed out that Q1 essentially match the first quarter of 2020 certainly from a revenue and EBITDA standpoint. I know there have been some differences in the mix between the Canadian and US rig count across those two quarters.

But what else is there that might maybe suggest the underlying EBITDA generation potential of the business, the business has changed versus two years ago?

Yes, good question. Keith, I think the key driver is a couple of things.

I think if you think about top-line revenue today we see there is a significant improvement over the last years we've talked a little bit about the fact that a lot of that is mixed market share driven, and to the point where we've achieved record market share levels for the company, which we've been able to sustain us. I think from a cost structure perspective, if you look at the difference between the first quarter of 2020 and the first quarter of 2022, thinking back to preferred 2020, although it was a reflection of higher activity levels, even afford some new COVID 19 spreading are widened.

I think there is lots of uncertainty around a kind of near-term outlook for the industry, with some talks around some pricing wars on Russia and [technical difficulty]. I think within that landscape, we were already kind of in a tightening of cost structure scenario.

Where that in contrast, in this quarter we're looking at kind of building cost based note for a more positive outlook, which it would be about it now actually more impressive that we're back to pre-pandemic margins in this context.

Got it. And how about the international margins in that context?

Cash gross margins in that segment pretty strong this quarter. How should we be thinking about that going forward?

Yes. The international business is, say the cost structure we were able to take some costs out of there.

As we went through the pandemic. While we will see cost increases come back as a result of activity continuing to increase in most of those international markets.

I don't think there's anything abnormal that I would sort of point to as any expectation other than regular additions to the costs as the revenue side grows.

Got it. And one final one, certainly a strong cash balance and have had so for quite some time.

With industry activity, margins expanding, when maybe does cash build take a backseat to some other uses of cash, whether it be increased shareholder returns, acquisition, organic growth or other?

So I think your question, maybe a little bit, Keith. The cash field isn't a priority, I think cash field is a function of your ability to execute ideas you have in a specific time, right?

So when you look at -- the first priority for capital allocation is always first and foremost to make sure that the existing drilling-related business maximizes its performance in the sphere of opportunity that it has. And so I think in that area we've probably been challenged to make the investments we would want to buy some of these supply chain concerns.

So we'll make some investments both on the inventory side to try to address some of those and some of our aspirations on kind of new equipment builds have probably been slower than we might have hoped, as a result of the supply chain side. We've always sort of said, if we saw opportunities either organically or inorganically to add value to shareholders, we would look at those and the timing of those and the -- both the identification and the pursuit of those is always a little bit uncertain right?

So, there is always a bit of a cash build effect while you're looking at opportunities. And then we continue to prioritize return to shareholders both through the regular dividend and through share repurchases, albeit at a lower percentage of overall free cash flow than historically, we would have talked about this I think in the last few quarters, with a view towards having capital available for pursuing opportunities.

Got it. Maybe just one follow-up on that, if would ask it, in a slightly different way.

Do you have a minimum cash balance in mind or is it, as you say just an output of how the business is going?

Well, we would have a minimum cash balance in mind if the business didn't change in any way, shape or form but, when you're looking at opportunities to do things that may change the profile of the business, right. So I think historically, we've said for the business today as it is.

We believe it should be a net cash business, because there is very significant operating leverage and it's probably somewhere in the order of CAD50 million to CAD75 million that you would want for the existing business to withstand the volatility of the industry. Beyond that, it's a question of what is the profile of the business in terms of what's the appropriate capital structure.

Good morning, everyone. So I mean you had some good commentary on the gross margin front in terms of having to be more proactive with R&M.

I'm just trying to figure out between that inflation, I mean, was there much of a factor in Q1 results or say, if we were at similar activity levels later in the year, we're going to see some degradation versus Q1?

Yes, it's a good question, Cole. We've said in recent quarters, we will be incurring more costs.

I mean, particularly as it relates to repairs. We did see repair costs in the first quarter, but I'd say, probably not to the extend that we were hoping and some of that's just the difficulty of timing predictability on repair cost of those have -- those are impacted similarly to capital expenditures by supply chain challenges that we're seeing across all sectors.

So there will be some catch-up in the coming quarters on repair costs. So I mean what I'll say it's probably hard to envision that will match first-quarter margins in the next couple of quarters and then especially when you layer on the seasonality effect of the Canadian business as well.

Okay, perfect. That's helpful, thanks.

And so some commentary around the larger revenue number from pricing gains, product adoption, market share gains or maintenance. So I'm just wondering, can you sort of rank those in order of magnitude or was it kind of fairly equal across the board?

It's always a function of all of those. I would say, bigger driver likely came from what we would think of as kind of revenue per EDR day, most of the market share if you think about this quarter like clearly the market share has gotten to the highest level in the company's history.

And we've been able to consolidate and hold on to those gains. But it's probably a function more of a more favorable pricing environment, but also a more favorable adoption environment.

So one of the things we see in significant downturns is that, people will get buy with a little bit less equipment and we sort of get a re-adoption effect on some of the existing equipment in addition to the adoption of new products. So I'd say it's probably been more a function of both a more favorable pricing environment and adoption environment, as things get better.

Okay, great, that's helpful, thanks. And coming back to some of the comments on supply chains and labor, we've obviously heard this from a number of your peers and I mean the general message seems to be that it's might moderate growth, but it's not going to fully stop it.

I mean, is that sort of consistent with how you're thinking about your business?

I think it's very consistent with how we think about it. And in fact the greatest moderator today feels like it might be the labor for some of our customers, right.

Equipment supply chain, we probably have a different challenge in some of our customers simply because we have a competition for much more technology types of equipment and components. But I would say that the overall industry growth rate is moderated at this point, I think by the labor availability, particularly for some of our customers.

Good morning, Jon and Celine, congrats on the strong quarter.

Thanks, John.

Just on your revenue per day number, can you maybe quantify how much of the increase is due to pricing increases versus same market share of product adoption?

So I think I'd just reference back to the answer just provided call, but probably a little bit more came from the things that drive revenue per day kind of bottom more favorable pricing and adoption environment more so than market share in this quarter. We've sort of held onto the market share gains we've had, but we're probably a little bit flatter on the market share side and a little more coming from pricing and adoption.

Great. I'm going to stick with pricing here.

In the previous quarter, you kind of spoke to still being below pre-pandemic levels are, where we at now relative to pre-pandemic or even relative to prior peak activity levels?

It's always a little bit tricky to say, because you're looking at for the realized price you're getting and the number of pieces of equipment that people are taking in and that's really how we think about the revenue per day more so than independently versus less price. Clearly, the pricing environment has become more favorable, we've been able to get back to closer prices that we would have seen before, but it's always a function of both of those.

Got it. And sorry to keep harping on this right.

That we're hearing from some new drilling peers that they can push pricing from here despite pretty significant increases lately is, is this also the case for Pason?

Well, it's never been the case for us, John that we look to push it as far as we can, because of the environment rate we've always tried to be quite disciplined both in terms of prices going up and prices going down. And we've looked more so to deliver additional benefits and features for customers.

I do think all supply or service sectors and frankly probably cross the entire economy is going to have to look to see prices go higher as a result of just prevailing inflation rate, the cost of business is going higher. But I don't think we would look to sort of exploiting an opportunity, more so than keep pace with the -- what's going on inflation-wise and then deliver additional features and functionality for customers for more price.

Thanks so much. I appreciate you taking the time to join our call this morning.

As always, we appreciate your interest and your support. If you have any further questions feel free to reach out to Celine or myself and otherwise we'll look forward to speaking to you after the second quarter.