Essential Energy Services Announces Second Quarter Results and Increases the Quarterly Dividend

Marketwired
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CALGARY, ALBERTA--(Marketwired - Aug 7, 2013) - Essential Energy Services Ltd. (ESN.TO) ("Essential" or the "Company") announces second quarter results and an increase in the quarterly dividend.

INCREASED QUARTERLY DIVIDEND

Essential is pleased to announce an increase in the quarterly dividend from $0.025 per share to $0.03 per share. This is a 20% increase that reflects Essential's strong financial position and positive view of the future.

The cash dividend for the period July 1, 2013 to September 30, 2013 has been set at $0.03 per share. The dividend will be paid on October 15, 2013 to shareholders of record on September 30, 2013. The ex-dividend date is September 26, 2013.

SECOND QUARTER RESULTS

After reporting record EBITDA(1) in the first quarter of 2013, Essential reports EBITDA of $(5.2) million in the second quarter of 2013 and $28.3 million year-to-date. "It has been well publicized that weather in western Canada during the second quarter was very unfavorable for oilfield services," said Garnet Amundson, President and CEO. "Essential's deep coil tubing fleet was particularly affected by adverse moisture conditions restricting our ability to work. We expect all of our operations to be back on track for the remainder of the year."

SELECTED INFORMATION

Three months ended

Six months ended

June 30,

June 30,

(Thousands, except per share amounts)

2013

2012*

2013

2012*

Revenue

$

38,417

$

50,870

$

158,936

$

169,052

Gross margin

$

(1,310)

$

3,904

$

36,521

$

40,643

Gross margin %

(3)%

8%

23%

24%

EBITDA(1) from continuing operations

$

(5,171)

$

(42)

$

28,254

$

32,713

EBITDA % (1)

(13)%

0%

18%

19%

Net income (loss) continuing operations

$

(8,958)

$

(5,453)

$

10,247

$

14,369

Per share - basic and diluted

$

(0.07)

$

(0.04)

$

0.08

$

0.11

Total assets

$

380,728

$

393,377

$

380,728

$

393,377

Total long-term debt

$

14,592

$

41,198

$

14,592

$

41,198

Utilization

Deep coil tubing rigs

18%

32%

64%

67%

Service rigs

28%

34%

48%

51%

Equipment fleet **

Deep coil tubing rigs

25

25

25

25

Service rigs

56

53

56

53

* Certain comparative amounts have been reclassified to conform to the current period's presentation.

** Fleet data represents the number of units at the end of a period.

1 Refer to "Non-IFRS Measures" section for further information.

HIGHLIGHTS - SECOND QUARTER 2013

Revenue for the second quarter of 2013 was $38.4 million, a decrease of $12.5 million compared to the second quarter of 2012.

  • Coil Well Service - Essential's coil well service business experienced a decline in revenue relative to prior year due to abnormally wet conditions which extended spring break-up preventing equipment from returning to work. Deep coil tubing utilization was limited to 18% given the restrictions on moving heavy equipment due to road bans. In the comparative period of 2012, Essential also had two customer projects that did not recur in 2013.

  • Service Rigs - Service rig revenue was relatively unchanged compared to prior year despite the wet conditions and the net addition of three service rigs to the fleet. Service rig utilization at 28% decreased from prior year. Demand continued for Essential's service rigs operating on steam-assisted gravity drainage ("SAGD") wells contributing to incremental revenue in 2013.

  • Downhole Tools & Rentals - Revenue for downhole tools & rentals remained relatively flat during the second quarter of 2013 compared to prior year, performing well in a challenging industry environment in which drilling rig utilization decreased 18% quarter-over-quarter.

EBITDA for the second quarter of 2013 was a loss of $5.2 million, a decrease of $5.1 million from 2012. The decrease was mainly attributable to lower utilization in the coil well service business and the greater impact on margins of operating costs incurred relative to revenue. Certain expenses associated with labour, maintaining equipment and service locations, infrastructure and administration have a fixed cost component, negatively impacting operating margins during periods of low activity. A portion of these operating costs normally incurred near the end of the first quarter were pushed into the second quarter of 2013 due to the extended winter season.

Essential's capital program remains on target. During the second quarter, Essential commissioned one mobile free standing, all period double service rig which is SAGD capable. Essential also took delivery of two nitrogen pumpers in the second quarter.

INDUSTRY OVERVIEW

The seasonal decline in activity associated with spring break-up was more pronounced in the second quarter of 2013 as activity in the Western Canadian Sedimentary Basin ("WCSB") was significantly below prior year levels. The second quarter of 2013 experienced particularly wet conditions due to melting of elevated snowpacks at the completion of the winter season and heavy rainfall throughout most of the second quarter. These factors impacted ground moisture, limiting access to well sites and delaying activity in June, when oilfield equipment typically returns to work.

Drilling rig utilization, number of wells drilled and well completion count, all indicators of overall activity in the WCSB, were down quarter-over-quarter compared to prior year as persistent wet conditions limited access to well sites. Compared to the second quarter 2012, drilling rig utilization decreased 18%, the number of wells drilled decreased by 13% and well completion count decreased 20%.

SEGMENT RESULTS - WELL SERVICING

Three months ended

Six months ended

June 30,

June 30,

(Thousands, except percentages)

2013

2012

2013

2012

Revenue

Coil Well Service (i)

$

9,433

$

18,697

$

59,054

$

61,111

Service Rigs (ii)

14,732

15,564

48,288

48,875

Other (iii)

-

1,069

-

8,275

Total revenue

24,165

35,330

107,342

118,261

Operating expenses

28,298

36,117

84,340

92,554

Gross margin

$

(4,133)

$

(787)

$

23,002

$

25,707

Gross margin %

(17)%

(2)%

21%

22%

Utilization (iv)

Deep Coil Tubing Rigs

Utilization

18%

32%

64%

67%

Operating hours

4,125

7,262

28,890

30,498

Service Rigs

Utilization

28%

34%

48%

51%

Operating hours

14,234

16,183

48,598

51,371

Equipment fleet (v)

Coil tubing rigs - deep

25

25

25

25

Coil tubing rigs - other

19

20

19

20

Service rigs

56

53

56

53

Nitrogen pumpers

15

10

15

10

Fluid pumpers

18

16

18

16

Rod rigs

14

14

14

14

(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.

(v) Fleet data represents the number of units at the end of the period.

Coil well service revenue decreased during the second quarter of 2013 compared to the same period in the prior year due to persistent wet conditions in Alberta throughout most of the second quarter and the melting of heavy snowpacks at the end of the winter season. Deep coil tubing utilization, below prior year levels, shows a similar trend to the decline in industry drilling rig utilization and well completion count quarter-over-quarter. In the comparative period of 2012, Essential's coil well service revenue and deep coil tubing utilization also included two customer projects which accounted for more than half of the quarter-over-quarter revenue reduction. Revenue per hour for coil well service decreased from prior year due to a change in the mix of services provided.

Service rig operations performed well during the second quarter of 2013 compared to the prior year despite unfavourable industry conditions which saw a 20% decrease in industry well completion activity. Production work opportunities were also adversely impacted by the wet conditions. Although wet conditions and lower activity negatively impacted many areas of the WCSB, revenue per hour in the second quarter of 2013 increased from prior year due to the mix of services provided, including an increase in SAGD revenue.

Well servicing revenue decreased on a year-to-date basis in 2013 compared to 2012 primarily due to the disposal of the drilling rig operations in November 2012.

Operating expenses were lower in the second quarter of 2013 compared to the same period in the prior year mainly as a result of lower variable operating costs which fluctuate based on activity. During the second quarter of 2013, Essential continued to incur fixed operating costs associated with retaining key personnel and maintaining equipment and service locations. These costs tend to negatively impact operating margins during periods of low activity. In comparison to the second quarter of 2012, Essential absorbed higher repairs and maintenance costs as a result of the extended winter operating season in the first quarter of 2013 which delayed the start of its spring maintenance program until April 2013.

Operating expenses for the six months ended June 30, 2013 were lower compared to the prior year as a result of lower variable operating costs which fluctuate based on activity.

SEGMENT RESULTS - DOWNHOLE TOOLS & RENTALS

Three months ended

Six months ended

June 30,

June 30,

(Thousands, except percentages)

2013

2012

2013

2012

Revenue

Downhole Tools & Rentals

$

14,252

$

15,540

$

51,594

$

49,110

Other*

-

-

-

1,681

Total revenue

14,252

15,540

51,594

50,791

Operating expenses

10,641

10,277

35,015

34,015

Gross margin

$

3,611

$

5,263

$

16,579

$

16,776

Gross margin %

25%

34%

32%

33%

Downhole Tools & Rentals Revenue - % of total

Tryton MSFS

40%

40%

54%

45%

Conventional Tools & Rentals

60%

60%

46%

55%

* Other revenue consists of Essential's wireline business which was disposed of in February 2012.

From a revenue perspective, the downhole tools & rentals segment performed well during the second quarter of 2013 compared to the same period in the prior year despite wet conditions which resulted in an 18% decrease in drilling rig utilization quarter-over-quarter. Revenue for the higher margin conventional tubular rentals business decreased quarter-over-quarter due to the decline in industry drilling rig activity.

Downhole tools & rentals revenue increased on a year-to-date basis in 2013 compared to 2012 as a result of first quarter Tryton Multi Stage Fracturing System ("Tryton MSFS") activity which was much stronger during the busy winter drilling season.

Operating expenses increased on a quarter-over-quarter basis due in part to start-up costs related to the expansion of the downhole tools operations into the United States without any corresponding increase in revenue as the business is in the pre-operating phase.

GENERAL AND ADMINISTRATIVE

Three months ended

Six months ended

June 30,

June 30,

(Thousands of dollars, except percentages)

2013

2012

2013

2012

General and administrative expenses

$

3,861

$

3,946

$

8,267

$

7,930

As a % of revenue

10%

8%

5%

5%

General and administrative expenses are comprised of wages, professional fees, office space and other administrative costs incurred at the corporate and operation levels. General and administrative expenses in the second quarter of 2013 were comparable to 2012, although as a percentage of revenue, expenses increased due to lower activity in the second quarter of 2013. Year-over-year general and administrative expenses were higher due to increased staffing, professional fees and infrastructure costs.

DISCONTINUED OPERATIONS

Essential ceased operating activities in Colombia in early July 2013, with the conclusion of its final contractual obligations. During the second quarter of 2013, Essential re-assessed the estimated net realizable value of oilfield service equipment in Colombia, and a further $2.4 million loss on revaluation was taken. This loss reflects the deterioration in the Colombian oilfield services market. As of August 7, 2013, Essential has received $1.1 million in cash proceeds from the sales of Colombian assets to date.

FINANCIAL RESOURCES AND LIQUIDITY

WORKING CAPITAL(1)

As at

As at

June 30,

December 31,

(Thousands of dollars, except ratios)

2013

2012

Current assets

$

68,063

$

95,840

Current liabilities, excluding current portion of long-term debt

(30,116)

(37,594)

Working capital

$

37,947

$

58,246

Working capital ratio

2.3:1

2.5:1

EQUIPMENT EXPENDITURES AND FLEET ADDITIONS

Three months ended

Six months ended

June 30,

June 30,

(Thousands of dollars)

2013

2012

2013

2012

Well Servicing

$

10,365

$

11,731

$

16,508

$

20,634

Downhole Tools & Rentals

1,297

400

1,741

1,222

Corporate

218

245

455

710

Total equipment expenditures

11,880

12,376

18,704

22,566

Less proceeds on disposal of property and equipment

(186)

(797)

(726)

(8,115)

Net equipment expenditures(1)

$

11,694

$

11,579

$

17,978

$

14,451

During the three and six months ended June 30, 2013, Essential's equipment expenditures of $11.9 million and $18.7 million, respectively, were primarily progress payments for the 2013 capital builds and maintenance capital expenditures.

During the six months ended June 30, 2013, Essential commissioned the following assets to its fleet:

  • Two mobile free standing, all period double service rigs which are SAGD capable, one in each of the first and second quarters, respectively, and;

  • Two nitrogen pumpers in the second quarter.

Essential classifies its equipment expenditures as growth capital(1) and maintenance capital(1):

Three months ended

Six months ended

June 30,

June 30,

(Thousands of dollars)

2013

2012

2013

2012

Growth capital(1)

$

8,576

$

9,545

$

13,352

$

15,633

Maintenance capital(1)

3,304

2,831

5,352

6,933

Total equipment expenditures

$

11,880

$

12,376

$

18,704

$

22,566

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. Capital spending remains on track for 2013.

As previously disclosed, Essential has commitments to build three deep Generation III coil tubing rigs with a fabrication company that has been having significant issues meeting delivery deadlines. When Essential announced its 2013 capital budget, one of those deep coil tubing rigs was included in the delivery expectations for 2013 and two were not. The first rig is currently in the final stages of commissioning and is expected to be ready for work in September 2013. Unfortunately, the fabricator is still unable to provide firm delivery timing for the other two rigs. Deposits on these remaining two rigs are approximately $3.6 million. Essential continues to work with the fabricator to determine the outcome of these two rigs.

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(1),Q4(3)

Deep coil tubing rig converted from intermediate

1

Q3

Double rod rig

1

Q3

Double service rigs - mobile free standing, all-period

2

Q3(2)

(one is SAGD capable)

OUTLOOK

After a very slow second quarter, Canadian oilfield services demand has returned to levels normal for this time of year and similar to last year. With horizontal well development continuing to lead drilling activity, Essential expects to benefit from demand for its growing fleet of deep coil tubing rigs and its downhole tool business. There continues to be longer-term optimism with investment focused on the Montney, Horn River and the Duvernay 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 Essential's oilfield services to complete these wells.

The expansion of Essential's deep masted coil tubing fleet is on track with one deep masted coil tubing rig expected in service in the third quarter and three in the fourth quarter. These state-of-the-art deep rigs are well-suited for work in the Montney, Horn River and the Duvernay basins, which again are the primary gas basins to provide feedstock for the anticipated LNG export facilities.

Essential is in the process of organically expanding its downhole tool operations into the United States. Pre-operating activities remain on track and operations are expected to commence in the third quarter.

Essential has a very strong balance sheet with $29.1 million of debt outstanding on August 7, 2013 and debt to EBITDA of 0.4x. Early in 2012, Essential implemented a quarterly dividend of $0.025 per quarter. Reflecting the Company's financial strength and positive view of the future, the dividend has been increased by 20% to $0.03 per quarter, effective with the third quarter dividend, payable in October.

The second 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

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

(Thousands, except per share amounts)

2013

2013

2012

2012

2012

2012

2011

2011

Well Servicing:

Coil Well Service

9,433

49,621

41,228

33,857

18,697

42,414

43,945

36,349

Service Rigs

14,732

33,556

26,012

20,552

15,564

33,311

28,118

23,939

Other*

-

-

786

2,762

1,069

7,206

4,677

4,178

Total well servicing

24,165

83,177

68,026

57,171

35,330

82,931

76,740

64,466

Downhole Tools & Rentals**

14,252

37,342

27,989

26,342

15,540

35,251

32,115

33,316

Total revenue

38,417

120,519

96,015

83,513

50,870

118,182

108,855

97,782

Gross margin

(1,310)

37,832

27,039

23,012

3,904

36,740

35,498

31,203

Gross margin %

(3)%

31%

28%

28%

8%

31%

33%

32%

EBITDA(1)

(5,171)

33,426

22,368

19,261

(42)

32,755

31,733

27,570

EBITDA %(1)

(13)%

28%

23%

23%

0%

28%

29%

28%

Continuing operations

Net income (loss)

(8,958)

19,205

8,050

8,343

(5,453)

19,823

17,082

14,020

Per share - basic and diluted

$(0.07)

$0.15

$0.06

$0.07

$(0.04)

$0.16

$0.14

$0.11

Net income (loss) attributable

to shareholders of Essential

(11,501)

18,627

678

8,660

(5,923)

18,893

17,559

13,678

Per share - basic and diluted

$(0.09)

$0.15

$0.01

$0.07

$(0.05)

$0.15

$0.14

$0.11

Total assets

380,728

436,301

406,853

415,653

393,377

430,674

421,500

411,204

Total long-term debt

14,592

35,603

35,563

50,474

41,198

57,238

63,486

79,230

Utilization ***

Coil tubing rigs - deep

18%

110%

95%

79%

32%

102%

111%

104%

Coil tubing rigs - other

7%

15%

16%

15%

7%

25%

30%

25%

Pumpers

14%

73%

57%

50%

33%

69%

71%

50%

Service rigs

28%

69%

54%

45%

34%

68%

59%

54%

Operating Hours

Coil tubing rigs - deep

4,125

24,765

22,777

18,301

7,262

23,236

23,524

21,938

Coil tubing rigs - other

1,185

2,511

2,757

2,819

1,596

5,494

6,778

5,813

Pumpers

4,241

20,481

15,328

11,919

7,504

13,865

13,008

9,594

Service rigs

14,234

34,364

27,310

22,632

16,183

35,188

31,005

28,201

Downhole Tools & Rentals - revenue % of total

Tryton MSFS

40%

60%

51%

52%

40%

47%

47%

54%

Conventional Tools & Rentals

60%

40%

49%

48%

60%

53%

53%

46%

Equipment fleet ****

Canada

Coil tubing rigs - deep

25

25

27

26

25

25

25

23

Coil tubing rigs - other

19

19

19

19

20

24

24

25

Service rigs

56

56

55

55

53

58

57

57

Nitrogen pumpers

15

13

13

10

10

10

10

9

Fluid pumpers

18

18

18

16

16

15

15

12

Rod rigs

14

14

14

14

14

14

14

14

* Other revenue included revenue from Essential's hybrid drilling operation until it was disposed of in November 2012.

** Revenue for Downhole Tools & Rentals included revenue from Essential's wireline business which was disposed of in February 2012.

*** Utilization is calculated using a 10 hour day.

**** Fleet data represents the number of units at the end of the period.

ESSENTIAL ENERGY SERVICES LTD.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(unaudited)

As at

As at

June 30

December 31

(Thousands)

2013

2012

Assets

Current

Trade and other receivables

$

40,386

$

71,835

Inventories

24,917

20,699

Prepayments

2,760

3,306

68,063

95,840

Non-current

Property and equipment

219,107

211,304

Intangible assets

33,553

36,555

Goodwill

55,014

55,014

307,674

302,873

Assets held for sale

4,991

8,140

Total assets

$

380,728

$

406,853

Liabilities

Current

Bank indebtedness

$

1,338

$

1,835

Trade and other payables

25,652

32,354

Dividends payable

3,126

3,100

Income taxes payable

-

305

30,116

37,594

Non-current

Long-term debt

14,592

35,563

Deferred tax liabilities

29,618

29,560

44,210

65,123

Liabilities held for sale

1,071

1,731

Total liabilities

75,397

104,448

Equity

Share capital

261,180

258,772

Retained earnings

39,175

38,276

Other reserves

5,154

5,363

Equity attributable to shareholders of Essential

305,509

302,411

Non-controlling interest

(178)

(6)

Total equity

305,331

302,405

Total liabilities and equity

$

380,728

$

406,853

ESSENTIAL ENERGY SERVICES LTD.

CONSOLIDATED STATEMENT OF NET INCOME AND COMPREHENSIVE INCOME

(unaudited)

For the three months ended

For the six months ended

June 30

June 30

(Thousands, except per share amounts)

2013

2012

2013

2012

Revenue

$

38,417

$

50,870

$

158,936

$

169,052

Operating expenses

39,727

46,966

122,415

128,409

Gross margin

(1,310)

3,904

36,521

40,643

General and administrative expenses

3,861

3,946

8,267

7,930

(5,171)

(42)

28,254

32,713

Depreciation and amortization

6,006

6,120

13,050

13,199

Share-based compensation

269

444

612

935

Other (income) expense

187

23

53

(1,219)

Operating profit (loss) from continuing operations

(11,633)

6,629

14,539

19,798

Finance costs

402

558

778

1,191

Earnings (loss) before income taxes from continuing operations

(12,035)

(7,187)

13,761

18,607

Income taxes

Current expense (recovery)

(969)

(1,248)

3,456

2,468

Deferred expense (recovery)

(2,108)

(486)

58

1,770

Total income tax expense (recovery)

(3,077)

(1,734)

3,514

4,238

Net income (loss) from continuing operations

$

(8,958)

$

(5,453)

$

10,247

$

14,369

Net loss from discontinued operations, net of tax

(2,678)

(554)

(3,285)

(1,645)

Net Income (loss)

$

(11,636)

$

(6,007)

$

6,962

$

12,724

Unrealized foreign exchange gain (loss)

on discontinued operations

(156)

(2)

(187)

1,007

Other comprehensive income (loss)

from discontinued operations

(156)

(2)

(187)

1,007

Comprehensive income (loss)

$

(11,792)

$

(6,009)

$

6,775

$

13,731

Net income (loss) attributable to:

Shareholders of Essential

$

(11,501)

$

(5,923)

$

7,126

$

12,971

Non-controlling interest

(135)

(84)

(164)

(247)

$

(11,636)

$

(6,007)

$

6,962

$

12,724

Comprehensive income (loss) attributable to:

Shareholders of Essential

$

(11,650)

$

(5,913)

$

6,947

$

13,846

Non-controlling interest

(142)

(96)

(172)

(115)

$

(11,792)

$

(6,009)

$

6,775

$

13,731

Net income (loss) per share from continuing operations

Basic and diluted, attributable to shareholders of Essential

$

(0.07)

$

(0.04)

$

0.08

$

0.11

Net income (loss) per share

Basic and diluted, attributable to shareholders of Essential

$

(0.09)

$

(0.05)

$

0.06

$

0.10

Comprehensive income (loss) per share

Basic and diluted, attributable to shareholders of Essential

$

(0.09)

$

(0.05)

$

0.06

$

0.11

ESSENTIAL ENERGY SERVICES LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

For the six months ended

June 30

(Thousands)

2013

2012

Operating activities:

Net income from continuing operations

$

10,247

$

14,369

Non-cash adjustments to reconcile

net income to net cash flow:

Depreciation and amortization

13,050

13,199

Deferred income tax expense

58

1,770

Share-based compensation

612

935

Provision (recovery) for impairment of trade receivables

280

(312)

Finance costs

778

1,191

(Gain) loss on disposal of assets

64

(490)

Operating cash flow before changes in working capital

25,089

30,662

Changes in working capital:

Decrease in trade and other receivables before provision

31,326

35,924

Increase in inventories

(4,218)

(3,494)

(Increase) decrease in prepayments

547

(1,038)

Decrease in income taxes payable

(1,374)

(5,927)

Decrease in trade and other accounts payables

(9,476)

(18,227)

Net cash flows from operating activities

41,894

37,900

Investing activities:

Purchase of property and equipment & intangibles

(18,704)

(22,566)

Non-cash investing working capital in trade and other accounts payable

2,774

186

Proceeds on disposal of equipment

726

8,115

Net cash flows used in investing activities

(15,204)

(14,265)

Financing activities:

Repayment of long-term debt

(20,971)

(21,615)

Dividends paid

(6,227)

(3,094)

Issuance of share capital, net of costs

2,187

520

Repurchase of shares

(421)

-

Finance costs

(778)

(1,191)

Net cash flows used in financing activities

(26,210)

(25,380)

Foreign exchange gain (loss) on cash held in a foreign currency

17

(20)

Net increase (decrease) in cash

497

(1,765)

Net decrease in cash, discontinued operations

-

(1,114)

Cash, beginning balance, discontinued operations

-

1,269

Bank indebtedness, beginning of period

(1,835)

(1,105)

Bank indebtedness, end of period

$

(1,338)

$

(2,715)

Supplemental cash flow information

Cash taxes paid

$

4,830

$

8,516

Cash interest and standby fees paid

645

1,020

(1)Non-IFRS Measures

Throughout this press 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, 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 press 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 press release contains forward-looking statements including expectations regarding capital spending, in-service timing of new equipment, demand for new equipment, expectations for operating activity for the remainder of the year, 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 programs of E&P companies, expectations for Essential's positioning for the future, expectations related to infrastructure uncertainties, expectations that development of possible LNG projects on the west coast will increase the demand for oilfield services, anticipated proceeds from asset sales in Colombia, anticipated shut-down and disposal costs of Colombian operations, expectations of the net realizable value of the Colombian assets, expectations of the opportunity for growth through expansion into the United States and the timing to commence operations.

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 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 press 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.

SECOND 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 Thursday, August 8, 2013.

The conference call dial in numbers are 416-695-7806 or 888-789-9572, passcode 7312337.

An archived recording of the conference call will be available approximately one hour after the completion of the call until August 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.

The TSX has neither approved nor disapproved the contents of this news release.

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