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Essential Energy Services Announces Record First Quarter EBITDA and Declares Quarterly Dividend

CALGARY, ALBERTA--(Marketwired - May 7, 2013) - Essential Energy Services Ltd. (ESN.TO) ("Essential" or the "Company") announces first quarter EBITDA(1) of $33.4 million compared to $32.8 million in the first quarter of 2012. "These results validate Essential's business model with our focus on horizontal completions and oil production work. Well servicing and downhole tools both had a very strong winter," said Garnet Amundson, President and CEO. "Our 2013 first quarter EBITDA record was especially rewarding considering that general oilfield service conditions were slower than last year and our current results exclude the benefit of our former drilling division which historically had strong EBITDA performance in the first quarter."

SELECTED INFORMATION      
 
  For the three months ended March 31,  
(Thousands of dollars, except per share amounts and percentages)  2013   2012*  
   
Revenue $ 120,519   $ 118,182  
   
Gross margin $ 37,832   $ 36,740  
  Gross margin %   31 %   31 %
             
EBITDA(1) from continuing operations $ 33,426   $ 32,755  
  EBITDA % (1)   28 %   28 %
             
Funds flow from continuing operations (1) $ 29,278   $ 29,060  
  Per share - basic (1) $ 0.24   $ 0.24  
  Per share - diluted (1) $ 0.23   $ 0.23  
   
Total assets $ 436,301   $ 430,674  
Total long-term debt $ 35,603   $ 57,238  
   
Utilization            
  Deep coil tubing rigs   110 %   102 %
  Service rigs   69 %   68 %
   
Equipment fleet **            
  Deep coil tubing rigs   25     25  
  Service rigs   56     58  
               
(i) Certain comparative amounts have been reclassified to conform to the current period's presentation.
(ii) Fleet data represents the number of units at the end of a period.
(iii) Essential committed to a plan to divest of its Colombian operations. This resulted in various changes to the presentation of financial information for the current and comparative periods. The operating results and cash flows from continuing operations do not include the results of the Colombian operations. Operating results for the Colombian operations have been reclassified as discontinued operations and cash flows have been reclassified as net cash flows incurred by discontinued operations for the current and all comparative periods.
   
(1) Refer to "Non-IFRS Measures" section for further information.

Q1 2013 HIGHLIGHTS - ESSENTIAL

  • Coil Well Service - Essential's coil well service business experienced strong demand for deep coil tubing and pumping services relative to the prior year. The significant growth in revenue was attributable to increased demand for Essential's coil well services working on the Bakken and Montney plays. Deep coil tubing utilization of 110% increased 8 percentage points quarter-over-quarter from the prior year, outperforming industry completion statistics which showed flat well completion activity quarter-over-quarter.
  • Service Rigs - Service rig utilization remained strong at 69% which was consistent with 2012 performance. Demand for services remained high, particularly for Essential's three service rigs operating 24 hours a day on steam-assisted gravity drainage ("SAGD") wells.
  • Downhole Tools & Rentals - The downhole tools & rentals segment had a very strong first quarter as the Tryton multi-stage fracturing system ("Tryton MSFS") benefited from continued growth quarter-over-quarter from the new tools introduced in the latter part of 2012.
  • Capital - Equipment fabricators made significant progress during the quarter in building the equipment planned for 2013 delivery. In March 2013, Essential commissioned one mobile free standing, all-period double service rig purpose-built to work on SAGD wells. Essential took delivery of two nitrogen pumpers in the earlier part of the second quarter. 

INDUSTRY OVERVIEW

During the first quarter of 2013, activity in the Canadian oil and gas industry was below the first quarter of 2012, but improved sequentially from the fourth quarter of 2012 as a result of the seasonally busy winter drilling period. Well completion count and drilling rig utilization, both indicators of overall oilfield service activity levels in the Western Canadian Sedimentary Basin ("WCSB"), were down year-over-year. Well completion counts were relatively flat with a 1 percentage point decline compared to 2012 and drilling rig utilization was 61% compared to 68% in 2012. Much of the uncertainty surrounding macroeconomic factors which impacted the latter part of 2012 still existed in the first quarter of 2013 as fundamentals were largely unchanged. The price differential between the Western Canadian Select ("WCS") crude oil and West Texas Intermediate ("WTI") benchmark remained high for the current quarter. 2013 activity in the first quarter benefited from a longer winter operating season due to colder weather extending beyond mid-March and sustained crude oil prices averaging above US$90/bbl.

Well service activity in the WCSB continues to be driven by horizontal drilling, completion and stimulation of oil and liquids-rich natural gas plays. The industry continues to focus on horizontal wells which typically require more investment capital and increased rig time per well due to their depth and complexity compared to conventional vertical wells.

SEGMENT RESULTS - WELL SERVICING  
   
  Three months ended
 March 31,
 
(Thousands of dollars, except percentages) 2013   2012  
Revenue            
  Coil Well Service* $ 49,621   $ 42,414  
  Service Rigs **   33,556     33,311  
  Other ***   -     7,206  
Total revenue   83,177     82,931  
   
Operating expenses   56,042     56,437  
Gross margin $ 27,135   $ 26,494  
  Gross margin %   33 %   32 %
   
Utilization ****            
  Deep Coil Tubing Rigs                    
    Utilization       110 %       102 %
    Operating hours       24,765         23,236  
     
  Service Rigs                    
    Utilization       69 %       68 %
    Operating hours       34,364         35,188  
                         
(i) Includes revenue from coil tubing rigs, nitrogen and fluid pumpers and other ancillary equipment.
(ii) Includes revenue from service rigs and rod rigs. Comparative amounts have been reclassified to conform to current period's presentation.
(iii) Other revenue included revenue from Essential's hybrid drilling operation until it was disposed of in November 2012.
(iv) Utilization is calculated using a 10 hour day.

Coil well service revenue experienced improved operating performance during the first quarter of 2013 as compared to the same period in the prior year as the demand for services was particularly strong in the Bakken oil play in Saskatchewan and Manitoba and in the Montney play in northern Alberta and British Columbia. Masted coil tubing revenue increased quarter-over-quarter as a result of the deep coil tubing reel trailer commissioned in the latter part of 2012 and an increase in coil tubing cycle charges and ancillary charges. Deep conventional coil tubing revenue increased as customers took advantage of the prolonged cold weather and continued service work in northern Alberta and British Columbia. Coil well service pumper revenue also increased from the addition of six new pumpers since the first quarter in 2012 and the training and recruiting initiatives undertaken in the latter part of 2012 which enabled Essential to crew additional pumpers. Revenue per hour for coil well service equipment increased due to the mix of services provided.

Service rigs maintained strong utilization during the first quarter of 2013 consistent with the same period in the prior year as demand for services remained high, particularly for Essential's three service rigs operating 24 hours a day on SAGD wells and service rigs operating in northern Alberta. Revenue per hour in the first quarter of 2013 increased due to the mix of services provided including the increase in SAGD work and associated rentals.

SEGMENT RESULTS - DOWNHOLE TOOLS & RENTALS  
   
  Three months ended
March 31,
 
(Thousands of dollars, except percentages) 2013   2012  
   
Revenue            
  Downhole Tools & Rentals $ 37,342   $ 33,570  
  Other*   -     1,681  
   
Total revenue   37,342     35,251  
   
Operating expenses   24,374     23,738  
   
Gross margin $ 12,968   $ 11,513  
  Gross margin %   35 %   33 %
   
Downhole Tools & Rentals Revenue - % of total            
  Tryton MSFS   60 %   47 %
  Conventional Tools & Rentals   40 %   53 %
(i) Other revenue includes Essential's wireline business which was disposed of in February 2012.

Essential's downhole tools & rentals business focuses on oil and liquids-rich natural gas plays by providing production and completion tools and rentals for horizontal and vertical wells. Operations for this segment are well placed geographically across many of the active oil plays in the WCSB.

Downhole tools & rentals revenue increased during the first quarter as compared to the same period in the prior year due to the continued growth of the Tryton MSFS business and strong customer acceptance of the new MSFS tools introduced in the last half of 2012. The new tools provide an innovative, cost effective alternative to customers completing long reach horizontal wells.

Gross margin increased on a quarter-over-quarter basis due to improved tool procurement efficiencies and the disposal of the wireline business, which historically generated lower margins compared to the ongoing operations of the segment.

General and administrative  
   
  Three months ended
March 31,
 
(Thousands of dollars, except percentages) 2013   2012  
General and administrative expenses $4,406   $3,985  
  As a% of revenue 4 % 3 %

General and administrative expenses are comprised of wages, professional fees, office space and other administrative costs incurred at the corporate and operations level. General and administrative expenses were higher in the first quarter of 2013 due to increased staffing costs, professional fees and infrastructure costs compared to the first quarter of 2012.

COLOMBIA OPERATIONS

In March 2013 Essential announced it is in the process of disposing of its Colombian operations. Essential continues to seek buyers for the assets. Two rod rigs will continue to operate until their contracts expire in the second quarter 2013.

FINANCIAL RESOURCES AND LIQUIDITY  
   
WORKING CAPITAL(1)  
   
  As at   As at  
  March 31   December 31  
(Thousands of dollars, except ratios) 2013   2012  
   
Current assets $ 125,931   $ 95,840  
Current liabilities, excluding current portion of long-term debt   (49,221 )   (37,594 )
   
Working capital $ 76,710   $ 58,246  
   
Working capital ratio   2.6:1     2.5:1  
   
   
EQUIPMENT EXPENDITURES AND FLEET            
             
    Three months ended
   March 31,
 
(Thousands of dollars)   2013     2012  
   
Well Servicing $ 6,142   $ 8,903  
Downhole Tools & Rentals   444     823  
Corporate   238     464  
Total equipment expenditures   6,824     10,190  
   
Less proceeds on disposal of property and equipment   (540 )   (7,318 )
Net equipment expenditures(1) $ 6,284   $ 2,872  

During the first quarter of 2013, Essential's equipment expenditures of $6.8 million were primarily directed towards progress payments for the 2013 capital builds and maintenance capital expenditures. During the first quarter of 2013, Essential commissioned one mobile free standing, all-period double service rig purpose-built to work on SAGD wells.

  Three months ended
  March 31,
(Thousands of dollars)  2013  2012
 
Growth capital(1) $ 4,766 $ 6,088
Maintenance capital(1)   2,048   4,102
Total equipment expenditures $ 6,824 $ 10,190

Essential's 2013 capital spending budget of $45 million is comprised of $32 million of growth (1) capital and $13 million of maintenance (1) capital.

The following table shows the expected in-service dates of the major equipment being built over the remainder of 2013:

    Expected In-Service Date
  Quantity 2013
Deep masted coil tubing rigs 4 Q3(2),Q4(2)
Deep coil tubing rig converted from intermediate 1 Q2
Nitrogen pumpers 2 Q2 (2)
Double rod rig 1 Q4
Double service rigs - mobile free standing, all-period 3 Q2(1), Q4(2)
(two of these are purpose-built for SAGD wells)    

Compared to the capital budget announced in December 2012, Essential has cancelled one double service rig and will build one double rod rig.

During the first quarter, Essential removed two masted coil tubing rigs from service. These two rigs, the last rigs of their kind in Essential's fleet, were among the first masted coil tubing rigs built for use in the WCSB. These rigs have nominal net book value and/or sales proceeds, and Essential expects to dismantle this equipment. The remainder of the deep coil tubing fleet is relatively new and, as of March 31, 2013, the average age of the deep coil tubing fleet is 4 years from construction or most recent recertification date.

OUTLOOK

After spring break-up, Essential expects that oilfield service activity will be similar to 2012. Global economic concerns are still prevalent, impacting the stability of oil prices, and while there has been some recent improvement in the oil price differential, longer-term infrastructure solutions are still required. A colder winter has reduced natural gas storage levels and the NYMEX price for natural gas has recently risen above US $4/mmbtu. There is longer-term optimism with certain foreign investment focused on the Montney and Horn River natural gas basins to develop the reserves to provide gas to the proposed liquefied natural gas ("LNG") export facilities in British Columbia. Such development would increase the demand for oilfield services to complete these wells.

Essential's $45 million capital spending budget is focused on building deep masted coil tubing rigs and double service rigs capable of SAGD operations to meet customer demand. Essential has four deep masted coil tubing rigs under construction, expected to be delivered in 2013. These rigs will have an increased reel capacity for longer and larger diameter coil. Two of these are classified as Generation III and two are Generation IV rigs. While Essential's current masted rigs can reach up to 5,500 meters with 2" coil, the Generation III rigs are designed to reach 5,700 meters with 2 3/8" coil and the Generation IV rigs will reach 6,400 meters with 2 5/8" coil. Essential's deep coil tubing reel trailer is a non-masted prototype of the Generation IV rig and has been successfully operating on deeper wells since the end of 2012. These state-of-the-art rigs are being built to meet the growing demand for oilfield service equipment to complete and produce longer, deeper and more complex wells.

While Essential remains focused on the WCSB, it has recently started exploring prospects to organically expand operations into the United States with downhole tools. The United States offers the opportunity for continued growth with services that Essential has a unique expertise and strong reputation with customers for completing and producing horizontal wells.

Essential has a very strong balance sheet with $36 million of debt outstanding on May 7, 2013 and debt to EBITDA of 0.5x. Management remains focused on the core services of well servicing with coil tubing, service rigs and downhole tools and rentals.

QUARTERLY DIVIDEND

The cash dividend for the period April 1, 2013 to June 30, 2013 has been set at $0.025 per share. The dividend will be paid on July 15, 2013 to shareholders of record on June 28, 2013. The ex-dividend date is June 26, 2013.

The first quarter Management's Discussion and Analysis and Financial Statements are available on Essential's website at www.essentialenergy.ca and on SEDAR at www.sedar.com.

SUMMARY OF QUARTERLY DATA                              
   
(Thousands of dollars, except Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,   June 30,  
per share amounts and percentages) 2013   2012   2012   2012   2012   2011   2011   2011  
   
Well Servicing:                                
  Coil Well Service 49,621   41,228   33,857   18,697   42,414   43,945   36,349   9,871  
  Service Rigs 33,556   26,012   20,552   15,564   33,311   28,118   23,939   11,835  
  Other* -   786   2,762   1,069   7,206   4,677   4,178   1,297  
Total well servicing 83,177   68,026   57,171   35,330   82,931   76,740   64,466   23,003  
   
Downhole Tools & Rentals** 37,342   27,989   26,342   15,540   35,251   32,115   33,316   17,115  
   
Total revenue 120,519   96,015   83,513   50,870   118,182   108,855   97,782   40,118  
   
Gross margin 37,832   27,039   23,012   3,904   36,740   35,498   31,203   3,334  
  Gross margin % 31 % 28 % 28 % 8 % 31 % 33 % 32 % 8 %
   
EBITDA(1) 33,426   22,368   19,261   (42 ) 32,755   31,733   27,570   449  
  EBITDA %(1) 28 % 23 % 23 % 0 % 28 % 29 % 28 % 1 %
   
Continuing operations                                
  Net income (loss) 19,205   8,050   8,343   (5,453 ) 19,823   17,082   14,020   (5,388 )
  Per share - basic and diluted $0.15   $0.06   $0.07   $(0.04 ) $0.16   $0.14   $0.11   $(0.06 )
   
Net income (loss) attributable to shareholders of Essential  
18,627
 
 
 
678
 
 
 
8,660
 
 
 
(5,923
 
)
 
18,893
 
 
 
17,559
 
 
 
13,678
 
 
 
(6,364
 
)
  Per share - basic and diluted $0.15   $0.01   $0.07   $(0.05 ) $0.15   $0.14   $0.11   $(0.07 )
   
Total assets 436,301   406,853   415,653   393,377   430,674   421,500   411,204   371,017  
Total long-term debt 35,603   35,563   50,474   41,198   57,238   63,486   79,230   63,459  
   
Utilization ***                                
  Coil tubing rigs - deep 110 % 95 % 79 % 32 % 102 % 111 % 104 % 37 %
  Coil tubing rigs - other 15 % 16 % 15 % 7 % 25 % 30 % 25 % 18 %
  Pumpers 73 % 57 % 50 % 33 % 69 % 71 % 50 % 23 %
  Service rigs 69 % 54 % 45 % 34 % 68 % 59 % 54 % 27 %
Operating Hours                                
  Coil tubing rigs - deep 24,765   22,777   18,301   7,262   23,236   23,524   21,938   3,638  
  Coil tubing rigs - other 2,511   2,757   2,819   1,596   5,494   6,778   5,813   3,805  
  Pumpers 20,481   15,328   11,919   7,504   13,865   13,008   9,594   2,978  
  Service rigs 34,364   27,310   22,632   16,183   35,188   31,005   28,201   13,229  
Downhole Tools & Rentals - revenue % of total                              
  Tryton MSFS 60 % 51 % 52 % 40 % 47 % 47 % 54 % 45 %
  Conventional Tools & Rentals 40 % 49 % 48 % 60 % 53 % 53 % 46 % 55 %
   
Equipment fleet ****                                
Canada                                
  Coil tubing rigs - deep 25   27   26   25   25   25   23   23  
  Coil tubing rigs - other 19   19   19   20   24   24   25   25  
  Service rigs 56   55   55   53   58   57   57   58  
  Nitrogen pumpers 13   13   10   10   10   10   9   8  
  Fluid pumpers 18   18   16   16   15   15   12   6  
  Rod rigs 14   14   14   14   14   14   14   14  
(i) Other revenue included revenue from Essential's hybrid drilling operation until it was disposed of in November 2012.
(ii) Revenue for Downhole Tools & Rentals included revenue from Essential's wireline business which was disposed of in February 2012.
(iii) Utilization is calculated using a 10 hour day.
(iv) Fleet data represents the number of units at the end of the period.

Over the past two years, Essential has improved its fleet through the acquisition of Technicoil, the purchase of new equipment, the disposal of under-utilized equipment and ongoing maintenance of its existing fleet. Spending has focused primarily on expanding the depth capacity and service capabilities of the well servicing operations.

ESSENTIAL ENERGY SERVICES LTD.      
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION      
(Unaudited)      
   As at    As at  
   March 31   December 31  
(Thousands)  2013    2012  
Assets            
Current            
  Trade and other accounts receivable $ 101,822   $ 71,835  
  Inventories   21,461     20,699  
  Prepayments   2,648     3,306  
    125,931     95,840  
Non-current            
  Property and equipment   212,215     211,304  
  Intangible assets   34,990     36,555  
  Goodwill   55,014     55,014  
    302,219     302,873  
Assets held for sale   8,151     8,140  
Total assets $ 436,301   $ 406,853  
   
Liabilities            
Current            
  Bank indebtedness $ 4,403   $ 1,835  
  Trade and other payables   39,616     32,354  
  Dividends payable   3,102     3,100  
  Income taxes payable   2,100     305  
    49,221     37,594  
Non-current            
  Long-term debt   35,603     35,563  
  Deferred tax liabilities   31,726     29,560  
    67,329     65,123  
Liabilities held for sale   1,458     1,731  
   
Total liabilities   118,008     104,448  
Equity            
  Share capital   258,886     258,772  
  Retained earnings   53,801     38,276  
  Other reserves   5,642     5,363  
  Equity attributable to shareholders of Essential   318,329     302,411  
   
Non-controlling interest   (36 )   (6 )
Total equity   318,293     302,405  
Total liabilities and equity $ 436,301   $ 406,853  
   
ESSENTIAL ENERGY SERVICES LTD.  
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME  
(Unaudited)  
  For the three months ended March 31  
(Thousands, except per share amounts) 2013   2012  
   
Revenue $ 120,519   $ 118,182  
Operating expenses   82,687     81,442  
Gross margin   37,832     36,740  
   
General and administrative expenses   4,406     3,985  
    33,426     32,755  
Depreciation and amortization   7,044     7,079  
Share-based compensation   343     491  
Other income   (133 )   (1,243 )
Operating profit from continuing operations   26,172     26,428  
   
Finance costs   376     632  
Net income before income tax from continuing operations   25,796     25,796  
Current income tax expense   4,425     3,716  
Deferred income tax expense   2,166     2,257  
Total income tax expense   6,591     5,973  
   
Net income from continuing operations   19,205     19,823  
   
Net loss from discontinued operations, net of tax   (607 )   (1,093 )
   
Net income   18,598     18,730  
   
Unrealized foreign exchange gain (loss) on discontinued operations   (31 )   1,009  
Other comprehensive income (loss) from discontinued operations   (31 )   1,009  
   
Comprehensive income   18,567     19,739  
   
Net income (loss) attributable to:            
  Shareholders of Essential $ 18,627   $ 18,893  
  Non-controlling interest   (29 )   (163 )
  $ 18,598   $ 18,730  
   
Comprehensive income (loss) attributable to:            
  Shareholders of Essential $ 18,597   $ 19,758  
  Non-controlling interest   (30 )   (19 )
  $ 18,567   $ 19,739  
   
Net income per share from continuing operations            
  Basic and diluted, attributable to shareholders of Essential $ 0.15   $ 0.16  
Net income per share            
  Basic and diluted, attributable to shareholders of Essential $ 0.15   $ 0.15  
Comprehensive income per share            
  Basic and diluted, attributable to shareholders of Essential $ 0.15   $ 0.16  
   
ESSENTIAL ENERGY SERVICES LTD.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
  For the three months ended March 31  
(Thousands) 2013   2012  
   
Operating activities:  
   
Net income from continuing operations $ 19,205   $ 19,823  
Non-cash adjustments to reconcile net income for the year to operating cash flow:            
  Depreciation and amortization   7,044     7,079  
  Deferred income tax expense   2,166     2,257  
  Share-based compensation   343     491  
  Provision (recovery) for impairment of trade accounts receivable   250     (342 )
  Finance costs   376     632  
  Gain on disposal of assets   (106 )   (880 )
Operating cash flow before changes in working capital   29,278     29,060  
Change in non-cash operating working capital:            
  Trade and other accounts receivable before provision   (31,159 )   (7,825 )
  Inventories   (762 )   (2,200 )
  Prepayments   658     288  
  Trade and other accounts payable   7,262     (6,485 )
  Current taxes payable   1,795     (1,620 )
Net cash provided by operating activities from continuing operations   7,072     11,218  
   
   
Investing activities:            
  Purchase of property and equipment & intangibles   (6,824 )   (10,190 )
  Proceeds on disposal of equipment   540     7,318  
Net cash used in investing activities from continuing operations   (6,284 )   (2,872 )
   
Financing activities:            
  Increase (decrease) in long-term debt   40     (5,575 )
  Proceeds on exercise of share options   88     445  
  Common shares repurchase   (8 )   -  
  Dividends paid   (3,100 )   -  
  Finance costs   (376 )   (632 )
Net cash used in financing activities from continuing operations   (3,356 )   (5,762 )
   
Net increase (decrease) in cash   (2,568 )   2,584  
Net decrease in cash, discontinued operations   -     (987 )
Cash, beginning balance, discontinued operations   -     1,268  
Bank indebtedness, beginning of the period   (1,835 )   (1,105 )
Cash (bank indebtedness), end of the period $ (4,403 ) $ 1,760  
   
Supplemental cash flow information            
Cash taxes paid $ 2,630   $ 5,336  
(1) Non-IFRS Measures

Throughout this news release, certain terms that are not specifically defined in IFRS are used to analyze Essential's operations. In addition to the primary measures of net earnings and net earnings per share in accordance with IFRS, Essential believes that certain measures not recognized under IFRS assist both Essential and the reader in assessing performance and understanding Essential's results. Each of these measures provides the reader with additional insight into Essential's ability to fund principal debt repayments and capital programs. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net earnings and net earnings per share as calculated in accordance with IFRS.

EBITDA (Earnings before finance costs, income taxes, equity taxes, depreciation, amortization, transaction costs, non-controlling interest earnings, losses or gains on disposal of equipment, results of discontinued operations and share-based compensation) - This measure is considered an indicator of Essential's ability to generate funds flow in order to fund required working capital, service debt and fund capital programs.

EBITDA % - This measure is considered an indicator of Essential's ability to generate funds flow as calculated by EBITDA divided by revenue.

Funds flow or funds flow from operations - This measure is an indicator of Essential's ability to generate funds flow in order to fund working capital, principal debt repayments and capital programs. Funds flow or funds flow from operations is defined as cash flow from operations before changes in non-cash operating working capital. This measure is useful in assessing Essential's operational cash flow as it provides cash generated in the period excluding the timing of non-cash operating working capital. This reflects the ability of the operations of Essential to meet the above noted funding requirements.

Working capital - Working capital is calculated as current assets less current liabilities.

Growth capital - Growth capital is capital spending which is intended to result in incremental increases in revenue. Growth capital is considered to be a key measure as it represents the total expenditures on equipment expected to add incremental revenues and funds flow to Essential.

Maintenance capital - Equipment additions that are incurred in order to refurbish or replace previously acquired equipment less proceeds on the disposal of retired equipment. Such additions do not provide incremental increases in revenue. Maintenance capital is a key component in understanding the sustainability of Essential's business as cash resources retained within Essential must be sufficient to meet maintenance capital needs to replenish the assets for future cash generation.

Net equipment expenditures - This measure is equipment expenditures less proceeds on the disposal of equipment. Essential uses net equipment expenditures to assess net cash flows related to the financing of Essential's oilfield services equipment.

ABOUT ESSENTIAL

Essential is a growth-oriented, dividend paying corporation that provides oilfield services to producers in western Canada for producing wells and new drilling activity. Essential operates the largest coil tubing well service fleet in Canada with 44 coil tubing rigs and a fleet of 56 service rigs. Essential also sells, rents and services downhole tools and equipment including the Tryton Multi-Stage Fracturing System. Further information can be found at www.essentialenergy.ca.

FORWARD-LOOKING STATEMENTS AND INFORMATION

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, this news release contains forward-looking statements including expectations regarding capital spending, in-service timing of new equipment, demand for new equipment, expectations of future cash flow and earnings, expectations with respect to the demand for and price of oil and liquids-rich natural gas, expectations regarding the future areas of development in the WCSB, the level and type of drilling activity, completion activity, work-over activity, production activity and required oilfield services in the WCSB, expectations regarding the business, operations and revenues of the Company in addition to general economic conditions, expectations regarding Essential's ability to meet the changing needs of the WCSB market, expectations regarding the capital spending plans of E&P companies, expectations for Essential's positioning for the future, expectations that oilfield service activity after spring break-up will be similar to 2012, expectations related to infrastructure uncertainties, expectations that development of possible LNG projects on the West Coast will increase the demand for oilfield services, expectations to operate Essential's rod rigs in Colombia until their current contracts expire, expectations of 2013 financial performance in Colombia, anticipated timing of the shut-down of Colombian operations, anticipated proceeds from asset sales in Colombia, anticipated shut-down and disposal costs of Colombian operations, expectations of the opportunity for growth through expansion into the United States and expectations for the payment of a dividend on July 15, 2013.

Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that such statements and information will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the risks associated with the oilfield services sector (e.g. demand, pricing and terms for oilfield services; current and expected oil and natural gas prices; exploration and development costs and delays; reserves discovery and decline rates; pipeline and transportation capacity; weather, health, safety and environmental risks); integration of acquisitions, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures and changes in legislation, including but not limited to tax laws, royalties, incentive programs and environmental regulations; stock market volatility and the inability to access sufficient capital from external and internal sources; the ability of the Company's subsidiaries to enforce legal rights in foreign jurisdictions; general economic, market or business conditions; global economic events; changes to Essential's financial position and cash flow; the availability of qualified personnel, management or other key inputs; currency exchange fluctuations; changes in political and security stability; risks and other unforeseen conditions associated with the sale of the Colombian business; risks associated with government regulations and environmental health and safety matters and other unforeseen conditions which could impact the use of equipment and services supplied by Essential in Colombia; risks and uncertainty related to distribution and pipeline constraints; and other unforeseen conditions which could impact the use of services supplied by the Company. Accordingly, readers should not place undue reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect the Company's financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) for the Company. The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

FIRST QUARTER 2013 EARNINGS CONFERENCE CALL AND WEBCAST

Essential has scheduled a conference call and webcast to begin at 10:00 am MT (12:00 pm ET) on Wednesday, May 8, 2013.

The conference call dial in numbers are 416-340-2217 or 866-696-5910, passcode 9707065.

An archived recording of the conference call will be available approximately one hour after the completion of the call until May 22, 2013 by dialing 905-694-9451 or 800-408-3053, passcode 3011022.

A live webcast of the conference call will be accessible on Essential's website at www.essentialenergy.ca by selecting "Investors" and "Events and Presentations". Shortly after the live webcast, an archived version will be available for approximately 30 days.