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


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

CALGARY, ALBERTA -- (Marketwired) -- 05/07/13 -- Essential Energy Services Ltd. (TSX:ESN) ("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(i) 
----------------------------------------------------------------------------
                                                                            
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  $      0.2
3 
                                                                            
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 (ii)                                                        
  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(i)                                   $ 49,621  $ 42,414 
  Service Rigs (ii)                                        33,556    33,311 
  Other (iii)                                                   -     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 (iv)                                                            
  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(i)                                                      -     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 ha s 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, 
per share amounts and percentages)       2013      2012      2012      2012 
----------------------------------------------------------------------------
                                                                            
Well Servicing:                                                             
  Coil Well Service                    49,621    41,228    33,857    18,697 
  Service Rigs                         33,556    26,012    20,552    15,564 
  Other(i)                                  -       786     2,762     1,069 
----------------------------------------------------------------------------
Total well servicing                   83,177    68,026    57,171    35,330 
                                                                            
Downhole Tools & Rentals(ii)           37,342    27,989    26,342    15,540 
----------------------------------------------------------------------------
                                                                            
Total revenue                         120,519    96,015    83,513    50,870 
----------------------------------------------------------------------------
                                                                            
Gross margin                           37,832    27,039    23,012     3,904 
  Gross margin %                           31%       28%       28%        8%
                                                                            
EBITDA(1)                              33,426    22,368    19,261       (42)
  EBITDA %(1)                              28%       23%       23%        0%
                                                                            
Continuing operations                                                       
  Net income (loss)                    19,205     8,050     8,343    (5,453)
  Per share - basic and diluted         $0.15     $0.06     $0.07    $(0.04)
                                                                            
Net income (loss) attributable to                                           
 shareholders of Essential             18,627       678     8,660    (5,923)
  Per share - basic and diluted         $0.15     $0.01     $0.07    $(0.05)
                                                                            
Total assets                          436,301   406,853   415,653   393,377 
Total long-term debt                   35,603    35,563    50,474    41,198 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Utilization (iii)                                                           
  Coil tubing rigs - deep                 110%       95%       79%       32%
  Coil tubing rigs - other                 15%       16%       15%        7%
  Pumpers                                  73%       57%       50%       33%
  Service rigs                             69%       54%       45%       34%
Operating Hours                                                             
  Coil tubing rigs - deep              24,765    22,777    18,301     7,262 
  Coil tubing rigs - other              2,511     2,757     2,819     1,596 
  Pumpers                              20,481    15,328    11,919     7,504 
  Service rigs                         34,364    27,310    22,632    16,183 
Downhole Tools & Rentals - revenue % of total                               
  Tryton MSFS                              60%       51%       52%       40%
  Conventional Tools & Rentals             40%       49%       48%       60%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Equipment fleet (iv)                                                        
Canada                                                                      
  Coil tubing rigs - deep                  25        27        26        25 
  Coil tubing rigs - other                 19        19        19        20 
  Service rigs                             56        55        55        53 
  Nitrogen pumpers                         13        13        10        10 
  Fluid pumpers                            18        18        16        16 
  Rod rigs                                 14        14        14        14 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
SUMMARY OF QUARTERLY DATA                                                   
                                                                            
(Thousands of dollars, except         Mar 31,   Dec 31,   Sep 30,  June 30, 
per share amounts and percentages)       2012      2011      2011      2011 
----------------------------------------------------------------------------
                                                                            
Well Servicing:                                                             
  Coil Well Service                    42,414    43,945    36,349     9,871 
  Service Rigs                        
 33,311    28,118    23,939    11,835 
  Other(i)                              7,206     4,677     4,178     1,297 
----------------------------------------------------------------------------
Total well servicing                   82,931    76,740    64,466    23,003 
                                                                            
Downhole Tools & Rentals(ii)           35,251    32,115    33,316    17,115 
----------------------------------------------------------------------------
                                                                            
Total revenue                         118,182   108,855    97,782    40,118 
----------------------------------------------------------------------------
                                                                            
Gross margin                           36,740    35,498    31,203     3,334 
  Gross margin %                           31%       33%       32%        8%
                                                                            
EBITDA(1)                              32,755    31,733    27,570       449 
  EBITDA %(1)                              28%       29%       28%        1%
                                                                            
Continuing operations                                                       
  Net income (loss)                    19,823    17,082    14,020    (5,388)
  Per share - basic and diluted         $0.16     $0.14     $0.11    $(0.06)
                                                                            
Net income (loss) attributable to                                           
 shareholders of Essential             18,893    17,559    13,678    (6,364)
  Per share - basic and diluted         $0.15     $0.14     $0.11    $(0.07)
                                                                            
Total assets                          430,674   421,500   411,204   371,017 
Total long-term debt                   57,238    63,486    79,230    63,459 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Utilization (iii)                                                           
  Coil tubing rigs - deep                 102%      111%      104%       37%
  Coil tubing rigs - other                 25%       30%       25%       18%
  Pumpers                                  69%       71%       50%       23%
  Service rigs                             68%       59%       54%       27%
Operating Hours                                                             
  Coil tubing rigs - deep              23,236    23,524    21,938     3,638 
  Coil tubing rigs - other              5,494     6,778     5,813     3,805 
  Pumpers                              13,865    13,008     9,594     2,978 
  Service rigs                         35,188    31,005    28,201    13,229 
Downhole Tools & Rentals - revenue %                                        
 of total                                                                   
  Tryton MSFS                              47%       47%       54%       45%
  Conventional Tools & Rentals             53%       53%       46%       55%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Equipment fleet (iv)                                                        
Canada                                                                      
  Coil tubing rigs - deep                  25        25        23        23 
  Coil tubing rigs - other                 24        24        25        25 
  Service rigs                             58        57        57        58 
  Nitrogen pumpers                         10        10         9         8 
  Fluid pumpers                            15        15        12         6 
  Rod rigs                                 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)
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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 mainten ance 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.

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

Contacts: Essential Energy Services Ltd. Garnet K. Amundson President and CEO (403) 513-7272 service@essentialenergy.ca

Essential Energy Services Ltd. Karen Perasalo Investor Relations (403) 513-7272 service@essentialenergy.ca www.essentialenergy.ca

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