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Essential Energy Services Announces Fourth Quarter and Year End Results and Declares Quarterly Dividend

CALGARY, ALBERTA -- (Marketwired) -- 03/06/14 -- Essential Energy Services Ltd. (TSX:ESN) ("Essential" or the "Company") announces fourth quarter EBITDA(1) of $20.7 million, down from $22.4 million in the fourth quarter of 2012. For the year, EBITDA(1) of $66.1 million in 2013 is down from $74.3 million in 2012. From an industry perspective, 2013 activity was fairly flat to 2012. Essential's decrease in EBITDA(1) for the year is primarily due to the absence of contribution from the disposed drilling rig operation, start-up costs related to expansion of the downhole tools operations into the United States, lower utilization primarily in conventional coil well service and the prolonged spring break-up in 2013.


SELECTED INFORMATION                                                        
(Thousands of dollars, except per share, percentages & fleet data)          
                                                                            
                                      Three months ended          Year ended
                                            December 31,        December 31,
                                          2013      2012      2013      2012
----------------------------------------------------------------------------
                                                                            
Revenue                               $ 92,823  $ 96,015  $336,269  $348,580
                                                                            
Gross margin                          $ 25,332  $ 27,039  $ 83,268  $ 90,695
  Gross margin %                           27%       28%       25%       26%
EBITDA(1) from continuing operations  $ 20,705  $ 22,368  $ 66,092  $ 74,342
  EBITDA % (1)                             22%       23%       20%       21%
Funds flow from continuing                                                  
 operations(1)                        $ 14,783  $ 19,859  $ 56,037  $ 68,198
  Per share - basic (1)               $   0.12  $   0.16  $   0.45  $   0.55
  Per share - diluted (1)             $   0.12  $   0.16  $   0.44  $   0.54
                                                                            
Total assets                          $423,963  $406,853  $423,963  $406,853
Total long-term debt                  $ 39,027  $ 35,563  $ 39,027  $ 35,563
                                                                            
Utilization                                                                 
  Deep coil tubing rigs                    74%       95%       69%       77%
  Service rigs                             53%       54%       50%       50%
                                                                            
Equipment fleet                                                             
  Masted deep coil tubing rigs              15        16        15        16
  Conventional deep coil tubing rigs        12        11        12        11
  Service rigs                              55        55        55        55


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

HIGHLIGHTS

Highlights for Fourth Quarter 2013

Revenue for the fourth quarter of 2013 was $92.8 million, a $3.2 million decrease compared to the same period in 2012.


--  Coil Well Service - Essential's coil well service revenue declined
    compared to the prior quarter due to lower utilization. Masted deep coil
    tubing utilization of 107% was below prior quarter utilization of 113%
    due to extreme winter conditions across the Western Canadian Sedimentary
    Basin ("WCSB") in early December which affected the ability of equipment
    to work.
    Conventional deep coil tubing utilization was significantly below prior
    quarter. 
--  Service Rigs - Service rig revenue was consistent compared to the same
    period in the prior quarter, with utilization at 53% compared to 54% in
    2012. Essential continued to experience strong utilization for the three
    service rigs working on steam-assisted gravity drainage ("SAGD") wells.

--  Downhole Tools & Rentals - Downhole tools & rentals performed well in
    the fourth quarter due to increased revenue from both the Canadian
    Tryton Multi-stage Fracturing System ("Tryton MSFS®") and conventional
    tools and rentals service lines.

EBITDA for the fourth quarter of 2013 was $20.7 million, a decrease of $1.7 million from 2012. The decrease was due to lower utilization in coil well service, additional labour and travel costs incurred while equipment was shut-down due to extreme cold weather, additional labour costs for crews in preparation for the delivery of new deep masted coil tubing rigs, and start-up costs related to the expansion of downhole tools into the United States.

Highlights for 2013 Year

For the year ended 2013, Essential continued to strengthen its core service capabilities and position itself to meet the rising demand for completing complex, long-reach horizontal wells. In 2013, Essential:


--  Made progress in expanding its masted deep coil tubing fleet. In the
    third quarter, one Generation III rig was delivered. During the fourth
    quarter, progress was made in the construction of three additional
    masted deep coil tubing rigs, one Generation III and two Generation IV
    rigs. Two of these rigs, one Generation III and one Generation IV, will
    be delivered in the first quarter of 2014, while the third rig will be
    delivered in the second quarter of 2014. These new masted deep coil
    tubing rigs have the capability to work on long-reach horizontal wells
    and are well-suited to work in deep, high pressure basins, including the
    Montney, Horn River and Duvernay. 
--  Continued to invest in its service rig fleet adding four mobile free
    standing, double service rigs, three of which are SAGD capable. 
--  Expanded downhole tools into the United States, with three field
    locations in Texas and Oklahoma. 
--  Completed its exit from Colombia.

® MSFS is a registered trademark of Essential Energy Services Ltd.

Revenue for the year ended December 31, 2013 was $336.3 million, a decrease of $12.3 million compared to 2012. Downhole tools & rentals revenue increased compared to prior year. This was offset by a decline in coil well service revenue due to lower utilization of the deep coil tubing fleet. Revenue in 2013 was also lower due to the prolonged spring break-up in 2013 and disposal in 2012 of the drilling rig and wireline operations, which contributed a combined $13.5 million in revenue for the prior year.

EBITDA for the year ended December 31, 2013 was $66.1 million, a decrease of $8.3 million from the same period in 2012. The decline in EBITDA is primarily due to the absence of the contribution in the prior year from the drilling rig operation, start-up costs related to the expansion of downhole tools into the United States, lower utilization in coil well service and the prolonged spring break-up in 2013.

INDUSTRY OVERVIEW

Activity in the fourth quarter and for the year ended 2013 closely mirrored 2012 for the same periods. During the fourth quarter of 2013, drilling rig utilization and the number of wells drilled were slightly ahead of prior quarter, while well completions were down. Compared to the fourth quarter 2012, drilling rig utilization increased 3 percentage points, the number of wells drilled increased by 2%, while well completion count decreased by 11%. For the year, drilling rig utilization decreased 2 percentage points, the number of wells drilled was flat, and well completion counts decreased 8% compared to 2012. Drilling rig utilization, wells drilled and completion activity are all indicators of overall oilfield activity in the WCSB.

Well service activity in the WCSB continues to be driven by horizontal drilling, completion and stimulation of oil and liquids-rich natural gas wells. 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                                            
                                                                            
                                                                            
(Thousands of dollars, except         Three months ended          Year ended
 percentages, fleet                         December 31,        December 31,
 & hours)                                 2013      2012      2013      2012
----------------------------------------------------------------------------
                                                                            
Revenue                                                                     
  Coil Well Service (i)               $ 36,150  $ 41,228  $128,241  $136,196
  Service Rigs (ii)                     25,593    26,012    97,751    95,439
  Other (iii)                                -       786         -    11,823
----------------------------------------------------------------------------
                                                                            
Total revenue                           61,743    68,026   225,992   243,458
                                                                            
Operating expenses                      45,269    48,564   171,992   182,655
----------------------------------------------------------------------------
                                                                            
Gross margin                          $ 16,474  $ 19,462  $ 54,000  $ 60,803
  Gross margin %                           27%       29%       24%       25%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Utilization (iv)                                                            
  Deep Coil Tubing Rigs                                                     
    Utilization                            74%       95%       69%       77%
    Operating hours                     18,257    22,777    64,870    71,576
  Service Rigs                                                              
    Utilization                            53%       54%       50%       50%
    Operating hours                     26,557    27,310   100,241   101,313
                                                                            
Equipment fleet (v)                                                         
  Masted deep coil tubing rigs              15        16        15        16
  Conventional deep coil tubing rigs        12        11        12        11
  Service rigs                              55        55        55        55
  Nitrogen pumpers                          14        13        14        13
  Fluid pumpers                             18        18        18        18
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 in 2012 represents revenue from Essential's drilling    
      operation which 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 fourth quarter of 2013 compared to the same period in 2012. Essential's masted deep coil tubing utilization was down quarter-over-quarter at 107% compared to 113% in 2012. Industry well completions decreased 11% in the same period. Masted deep coil tubing utilization was negatively impacted by extreme winter conditions in early December and lower activity at the end of December. Colder than normal weather impacted the ability of equipment to work and resulted in a temporary shut-down of operations. Conventional deep coil tubing revenue was below the prior quarter as extreme cold weather, lower activity by certain key customers and increased competition in the less technical two inch conventional coil tubing market adversely impacted utilization. Conventional deep coil tubing utilization was down quarter-over-quarter at 32% compared to 67% in 2012. The revenue decrease was partially offset by increased revenue from Essential's fluid and nitrogen pumpers due to increased crew availability and better integration with the deep coil tubing fleet in the fourth quarter 2013. Revenue per hour for coil tubing rigs was consistent with prior quarter.

Service rig revenue in the fourth quarter of 2013 was comparable to the prior quarter. Service rig utilization was higher than the prior quarter for the three service rigs operating on SAGD wells as demand for services remained high. Revenue per hour in the fourth quarter of 2013 was comparable to the prior quarter.

Gross margin percentage for well servicing in the fourth quarter of 2013 was negatively impacted by lower utilization and higher operating costs compared to the prior quarter. These additional operating costs were a result of the extreme winter conditions where labour and travel costs were incurred during the shutdown of equipment as crews were retained at customer sites during the cold period with no corresponding revenue. Additional labour costs were also incurred to expand and retain crews in preparation for the delivery of the new deep masted coil tubing rigs.

Coil well service revenue decreased in 2013 compared to 2012 due to extreme winter weather conditions in the fourth quarter and reduced activity in conventional deep coil tubing during the second half of 2013. Conventional deep coil tubing utilization was down significantly due to lower activity from certain key customers and increased competition. Masted deep coil tubing utilization was 97%, comparable to prior year. Service rig revenue for 2013 was comparable to the prior year. Year-over-year well service revenue and gross margins were also down due to the disposal of the drilling rig business in 2012 and the prolonged spring break-up in 2013.


SEGMENT RESULTS - DOWNHOLE TOOLS & RENTALS                                  
----------------------------------------------------------------------------
                                                                            
                                      Three months ended          Year ended
                                            December 31,        December 31,
(Thousands of dollars, except                                               
 percentages)                             2013      2012      2013   2012(i)
----------------------------------------------------------------------------
                                                                            
Revenue                               $ 31,560  $ 27,989  $111,339  $105,122
                                                                            
Operating expenses                      20,907    18,115    75,446    69,717
----------------------------------------------------------------------------
                                                                            
Gross margin                          $ 10,653  $  9,874  $ 35,893  $ 35,405
  Gross margin %                           34%       35%       32%       34%
Downhole Tools & Rentals Revenue-                                           
 revenue % of total                                                         
  Tryton MSFS®                           55%       51%       55%       48%
  Conventional Tools & Rentals             45%       49%       45%       52%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Revenue for the year ended December 31, 2012 includes wireline          
    operations which were disposed of on February 2, 2012.                  

During the fourth quarter of 2013, downhole tools & rentals revenue increased compared to the same quarter in the prior year. Revenue improved quarter-over-quarter in both the Canadian Tryton MSFS® and conventional tools and rentals service lines.

Downhole tools & rentals revenue increased on a year-to-date basis in 2013 compared to 2012 as a result of an increased contribution from the Canadian Tryton MSFS® product, offset by a decline in Canadian conventional tools and rentals revenue. Conventional tools and rentals revenue increased in the second half of 2013 compared to the second half of 2012, after declining compared to 2012 in the first half of the year. Demand for Essential's Tryton MSFS® product remained strong throughout the year due to quality service and innovative product design. Tryton MSFS® provides customers with cost- effective solutions for multi-stage horizontal well completions.

Essential's United States conventional downhole tools operation generated revenue in the fourth quarter of 2013, which was less than operating costs, resulting in a modest reduction in the division's gross margin during the quarter. United States operations commenced late in the third quarter of 2013.

A Statement of Claim was filed on October 23, 2013 by Packers Plus Energy Services Inc. against Essential in Canadian Federal Court which alleges products and methods associated with the Tryton MSFS® infringe a patent issued to Packers Plus Energy Services Inc. The Company filed its Statement of Defence and Counterclaim on November 22, 2013. Essential believes that the suit is without merit and is defending against the allegations. Proceedings of this nature can take years to resolve through the court process.


GENERAL AND ADMINISTRATIVE                                                  
                                                                            
                                      Three months ended          Year ended
                                            December 31,        December 31,
(Thousands of dollars, except                                               
 percentages)                             2013      2012      2013      2012
----------------------------------------------------------------------------
                                                                            
General and administrative expenses   $  4,627  $  4,671  $ 17,176  $ 16,353
  As a % of revenue                         5%        5%        5%        5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

General and administrative expenses are comprised of wages, professional fees, office space and other administrative costs incurred at corporate and operational levels. General and administrative expenses remain in line with management's target of five percent of revenue.


OTHER EXPENSE                                                               
                                                                            
                                      Three months ended          Year ended
                                            December 31,        December 31,
(Thousands of dollars)                    2013      2012      2013      2012
----------------------------------------------------------------------------
                                                                            
Other expense                         $    839  $  2,750  $  4,385  $  1,648
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Other expense for the year ended December 31, 2013 includes a $3.6 million expense for the write-off of deposits on two coil tubing rigs as the supplier was placed into receivership in September 2013. The remaining balance relates to losses on the sale of fixed assets sold during the period.


INCOME TAXES                                                                
                                      Three months ended          Year ended
                                            December 31,        December 31,
(Thousands of dollars)                   2013       2012     2013       2012
----------------------------------------------------------------------------
                                                                            
Current income tax expense            $ 5,655   $  2,475  $10,508   $  6,567
Deferred income tax expense                                                 
 (recovery)                            (3,734)     1,354   (3,200)     4,959
----------------------------------------------------------------------------
                                                                            
Total income tax expense              $ 1,921   $  3,829  $ 7,308   $ 11,526
----------------------------------------------------------------------------
----------------------------------------------------------------------------

During the fourth quarter of 2013, Essential simplified its legal entity structure which resulted in the elimination of the partnership tax deferral. The overall effective tax rate decreased for the year and in the fourth quarter of 2013 due to the realization of previously unrecognized losses.


FINANCIAL RESOURCES AND LIQUIDITY                                           
WORKING CAPITAL                                                             
                                                                            
                                                          As at             
                                                       December 31,         
(Thousands of dollars, except ratios)                   2013           2012 
----------------------------------------------------------------------------
                                                                            
Current assets                                      $107,945       $ 95,840 
Current liabilities, excluding current portion                              
 of long-term debt                                   (45,419)       (37,594)
----------------------------------------------------------------------------
                                                                            
Working capital                                     $ 62,526       $ 58,246 
----------------------------------------------------------------------------
                                                                            
Working capital ratio                                  2.4:1          2.5:1 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CREDIT FACILITY

Essential's credit facility with its banking syndicate is comprised of a $100 million revolving term loan facility with a $35 million accordion feature available on lender's consent. The revolving term loan facility matures on May 30, 2014, is renewable at the lender's consent and is secured by a general security agreement over the Company's assets. To the extent the revolving term loan facility is not renewed, debt payments would be required over a two year period based on a three year amortization schedule. At December 31, 2013, the maximum of $100 million under the revolving facility was available to Essential.

The following table outlines the repayments, excluding interest, in the event that the credit facility is not renewed.


                                                              
                                                         As at
                                                  December 31,
(Thousands of dollars)                                    2013
--------------------------------------------------------------
                                                              
Repayments are required as follows:                           
  Within one year                               $        7,530
  Between one and two years                             13,033
  Between two and three years                           18,464
--------------------------------------------------------------
                                                $       39,027
--------------------------------------------------------------
--------------------------------------------------------------

As at December 31, 2013, all financial debt covenants were satisfied and all banking requirements were up-to-date. Essential does not currently anticipate any financial resource or liquidity issues to restrict its future operating, investing or financing activities and does not anticipate any issues with renewal of the credit facility in 2014. On March 5, 2014, Essential had long-term debt outstanding of $44.7 million.


EQUIPMENT EXPENDITURES AND FLEET ADDITIONS                                  
                                                                            
                                     Three months ended          Year ended 
                                           December 31,        December 31, 
(Thousands of dollars)                   2013      2012      2013      2012 
----------------------------------------------------------------------------
                                                                            
  Well Servicing                     $ 13,539  $ 15,764  $ 41,227  $ 46,799 
  Downhole Tools & Rentals              1,460     2,690     3,785     4,071 
  Corporate                               643        67     1,588       892 
----------------------------------------------------------------------------
Total equipment expenditures           15,642    18,521    46,600    51,762 
----------------------------------------------------------------------------
                                                                            
Less proceeds on disposal of                                                
 property  and equipment               (1,056)  (16,592)   (2,657)  (24,876)
----------------------------------------------------------------------------
Net equipment expenditures(1)        $ 14,586  $  1,930  $ 43,943  $ 26,886 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

During the fourth quarter 2013, three masted deep coil tubing rigs were expected to be delivered, one Generation III and two Generation IV rigs. Two of these rigs will be delivered in the first quarter of 2014 and the third rig is expected in the second quarter of 2014. On a year-to-date basis, equipment expenditures of $46.6 million were below expectations of $50.0 million due to the masted coil tubing delivery delays.

Throughout 2013, Essential commissioned the following assets:


--  One Generation III masted deep coil tubing rig in the third quarter; 
--  Two nitrogen pumpers in the second quarter; 
--  Four mobile free standing, double service rigs (three of which are SAGD
    capable), one in each of the first and second quarters and two in the
    fourth quarter; and 
--  One double rod rig in the fourth quarter.

Essential classifies its equipment expenditures as growth capital(1) and    
maintenance capital(1):                                                     
                                                                            
                                      Three months ended          Year ended
                                            December 31,        December 31,
(Thousands of dollars)                    2013      2012      2013      2012
----------------------------------------------------------------------------
  Growth capital(1)                   $ 10,251  $ 16,251  $ 31,650  $ 38,169
  Maintenance capital(1)                 5,391     2,270    14,950    13,593
----------------------------------------------------------------------------
Total equipment expenditures          $ 15,642  $ 18,521  $ 46,600  $ 51,762
----------------------------------------------------------------------------

Essential's 2014 capital budget, announced in October 2013, of $50 million is comprised of $33 million in growth capital and $17 million of maintenance capital. Essential's 2014 growth capital spending plan consists primarily of four masted deep coil tubing rigs, one quintiplex fluid pumper, one rod rig and rental equipment. In addition, $3 million of anticipated 2013 capital spending was deferred into 2014 due to the masted coil tubing delivery delays.

In 2012, Essential divested of its wireline and drilling rig operations for proceeds of $7.5 million and $16.8 million, respectively.

The Company believes that it has access to sufficient funds through internally generated cash flows and from undrawn committed credit facilities to meet current spending needs.

The following table shows the expected dates of the major equipment being built over 2014:


                                                              Expected Dates
                                                  Quantity        2014 /2015
----------------------------------------------------------------------------
                                                                            
Deep masted coil tubing rigs (delayed Q4                                    
 2013 builds)                                         3(i)          Q1(2),Q2
Deep masted coil tubing rigs                             4    Q3(2),Q4,Q2'15
Quintiplex fluid pumper                                  1                Q3
Double rod rig                                           1                Q4
----------------------------------------------------------------------------
(i) These equipment builds relate to Essential's 2013 capital budget.       

OUTLOOK

Demand in well servicing continues to be driven by oil wells and horizontal completions, with an increasing shift to deeper, more complex wells. Industry trends in 2014 support Essential's strategy of introducing deeper, larger diameter masted coil tubing rigs. Essential is well positioned to benefit from the rising demand to complete complex, long-reach horizontal wells. Delivery delays impacting Essential's ability to utilize new masted coil tubing rigs, combined with associated incremental costs for commissioning, crews and training, are expected to adversely impact earnings in the first quarter of 2014. Activity in 2014 started off slower than 2013. The strength of the first quarter is dependent on the timing of spring breakup which impacts the duration of the winter drilling season.

The Petroleum Services Association of Canada is forecasting consistent activity expectations year-over- year compared to 2013. Generally speaking, exploration and production ("E&P") capital budgets for 2014 are consistent with 2013. Essential believes there are reasons for optimism for the second half of the year including: a weaker Canadian dollar which would increase E&P cash flows, improved access to equity capital markets for E&P companies and the rising price of natural gas.

While the longer term outlook still remains positive for the development of proposed liquefied natural gas ("LNG") projects in British Columbia, anticipated development has been delayed beyond initial 2014 expected timeframes. Development of the Montney, Horn River and Duvernay basins for LNG export is expected to increase the demand for oilfield services, including the demand for Essential's deep coil tubing and downhole tools & rentals.

The $50 million equipment expansion program for 2014 will add significant growth to Essential's masted deep coil tubing fleet. In addition to the two masted deep coil Generation III rigs that Essential has already taken delivery of, Essential expects to take delivery of one additional masted deep coil Generation III and four Generation IV rigs in 2014.

With the growing number of horizontal oil wells in recent years, the industry has been expecting an increase in demand for service rigs to perform work-over services on these wells. This demand has not yet materialized possibly due to new technologies prolonging primary production and/or capital allocation decisions made by E&P companies. Essential believes, in time, these wells will require work- over services, increasing the demand for service rigs. With Essential's investment in its service rig fleet, the Company expects to benefit from this potential demand.

Essential continues to expand its downhole tool operations in the southern United States, which it started in 2013, and expects to be cash flow positive in 2014.

Essential has a very strong balance sheet with $44.7 million of debt outstanding on March 5, 2014 and a debt to 2013 EBITDA ratio of 0.7x. Essential is well positioned to take advantage of future growth opportunities.

QUARTERLY DIVIDEND

The cash dividend for the period January 1, 2014 to March 31, 2014 has been set at $0.03 per share. The dividend will be paid on April 15, 2014 to shareholders of record on March 31, 2014. The ex-dividend date is March 27, 2014.

The 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.

(1)Non-IFRS Measures

Throughout this news release, certain terms that are not specifically defined in International Financial Reporting Standards ("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, capital programs and pay dividends. 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, which includes both equity-settled and cash-settled transactions) - This measure is considered an indicator of Essential's ability to generate funds flow in order to fund required working capital, service debt, fund capital programs and pay dividends.

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, capital programs and pay dividends. 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.


SUMMARY OF QUARTERLY DATA                                                   
                                                                            
(Thousands of dollars, except per                                           
 share amounts, percentages and       Dec 31,  Sept 30,   Jun 30,   Mar 31, 
 fleet data)                             2013      2013      2013      2013 
----------------------------------------------------------------------------
                                                                            
Well Servicing:                                                             
  Coil Well Service                    36,150    33,037     9,433    49,621 
  Service Rigs                         25,593    23,870    14,732    33,556 
  Other (i)                                 -         -         -         - 
----------------------------------------------------------------------------
Total well servicing                   61,743    56,907    24,165    83,177 
Downhole Tools & Rentals (ii)          31,560    28,185    14,252    37,342 
                                                                            
Inter-segment eliminations               (480)     (582)        -         - 
----------------------------------------------------------------------------
                                                                            
Total revenue                          92,823    84,510    38,417   120,519 
----------------------------------------------------------------------------
                                                                            
Gross margin                           25,332    21,414    (1,310)   37,832 
  Gross margin %                          27%       25%      (3)%       31% 
EBITDA(1)                              20,705    17,132    (5,171)   33,426 
  EBITDA %(1)                             22%       20%     (13)%       28% 
Continuing operations                                                       
  Net income (loss)                     9,478     4,292    (8,958)   19,205 
  Per share - basic and diluted         $0.07     $0.03    $(0.07)    $0.15 
                                                                            
Net income (loss) attributable  to                                          
 shareholders of Essential             11,126     3,843   (11,501)   18,627 
  Per share - basic and diluted         $0.09     $0.03    $(0.09)    $0.15 
                                                                            
Total assets                          423,963   409,613   380,728   436,301 
Total long-term debt                   39,027    40,484    14,592    35,603 
----------------------------------------------------------------------------
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Utilization (iii)                                                           
  Coil tubing rigs - deep                 74%       73%       18%      110% 
  Pumpers                                 55%       47%       14%       73% 
  Service rigs                            53%       50%       28%       69% 
Operating Hours                                                             
  Coil tubing rigs - deep              18,257    17,724     4,125    24,765 
  Pumpers                              16,612    14,418     4,241    20,481 
  Service rigs                         26,557    25,084    14,234    34,364 
Downhole Tools & Rentals - revenue %                                        
 of total                                                                   
  Tryton MSFS®                          55%       55%       40%       60% 
  Conventional Tools & Rentals            45%       45%       60%       40% 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Equipment fleet (iv)                                                        
Canada                                                                      
  Masted deep coil tubing rigs             15        15        14        14 
  Conventional deep coil tubing rigs       12        12        11        11 
  Coil tubing rigs - other                 18        18        19        19 
  Service rigs                             55        54        56        56 
  Nitrogen pumpers                         14        15        15        13 
  Fluid pumpers                            18        18        18        18 
  Rod rigs                                 13        12        14        14 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

SUMMARY OF QUARTERLY DATA                                                   
                                                                            
(Thousands of dollars, except per                                           
 share amounts, percentages and       Dec 31,   Sep 30,   Jun 30,   Mar 31, 
 fleet data)                             2012      2012      2012      2012 
----------------------------------------------------------------------------
                                                                            
Well Servicing:                                                             
  Coil Well Service                    41,228    33,857    18,697    42,414 
  Service Rigs                         26,012    20,552    15,564    33,311 
  Other (i)                               786     2,762     1,069     7,206 
----------------------------------------------------------------------------
Total well servicing                   68,026    57,171    35,330    82,931 
Downhole Tools & Rentals (ii)          27,989    26,342    15,540    35,251 
                                                                            
Inter-segment eliminations                  -         -         -         - 
----------------------------------------------------------------------------
                                                                            
Total revenue                          96,015    83,513    50,870   118,182 
----------------------------------------------------------------------------
                                                                            
Gross margin                           27,039    23,012     3,904    36,740 
  Gross margin %                          28%       28%        8%       31% 
EBITDA(1)                              22,368    19,261       (42)   32,755 
  EBITDA %(1)                             23%       23%        0%       28% 
Continuing operations                                                       
  Net income (loss)                     8,050     8,343    (5,453)   19,823 
  Per share - basic and diluted         $0.06     $0.07    $(0.04)    $0.16 
                                                                            
Net income (loss) attributable  to                                          
 shareholders of Essential                678     8,660    (5,923)   18,893 
  Per share - basic and diluted         $0.01     $0.07    $(0.05)    $0.15 
                                                                            
Total assets                          406,853   415,653   393,377   430,674 
Total long-term debt                   35,563    50,474    41,198    57,238 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Utilization (iii)                                                           
  Coil tubing rigs - deep                 95%       79%       32%      102% 
  Pumpers                                 57%       50%       33%       69% 
  Service rigs                            54%       45%       34%       68% 
Operating Hours                                                             
  Coil tubing rigs - deep              22,777    18,301     7,262    23,236 
  Pumpers                              15,328    11,919     7,504    13,865 
  Service rigs                         27,310    22,632    16,183    35,188 
Downhole Tools & Rentals - revenue %                                        
 of total                                                                   
  Tryton MSFS®                          51%       52%       40%       47% 
  Conventional Tools & Rentals            49%       48%       60%       53% 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Equipment fleet (iv)                                                        
Canada                                                                      
  Masted deep coil tubing rigs             16        16        16        16 
  Conventional deep coil tubing rigs       11        10         9         9 
  Coil tubing rigs - other                 19        19        20        24 
  Service rigs                             55        55        53        58 
  Nitrogen pumpers                         13        10        10        10 
  Fluid pumpers                            18        16        16        15 
  Rod rigs                                 14        14        14        14 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i)   Other revenue included revenue from Essential's drilling operation    
      until its disposal 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.   
                                                                            
ESSENTIAL ENERGY SERVICES LTD.                                              
CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                
                                                                      As at 
                                                                December 31 
(Thousands)                                             2013           2012 
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current                                                                     
  Trade and other accounts receivable              $  76,640      $  71,835 
  Inventories                                         27,979         20,699 
  Prepayments                                          3,326          3,306 
----------------------------------------------------------------------------
                                                     107,945         95,840 
----------------------------------------------------------------------------
                                                                            
Non-current                                                                 
  Property and equipment                             230,292        211,304 
  Intangible assets                                   30,712         36,555 
  Goodwill                                            55,014         55,014 
----------------------------------------------------------------------------
                                                     316,018        302,873 
Assets held for sale                                       -          8,140 
----------------------------------------------------------------------------
                                                                            
Total assets                                       $ 423,963      $ 406,853 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities                                                                 
Current                                                                     
  Bank indebtedness                                $   2,112      $   1,835 
  Trade and other payables                            36,161         32,354 
  Dividends payable                                    3,765          3,100 
  Income taxes payable                                 3,381            305 
  Current portion of long-term debt                    7,603              - 
----------------------------------------------------------------------------
                                                      53,022         37,594 
----------------------------------------------------------------------------
                                                                            
Non-current                                                                 
  Long-term debt                                      31,424         35,563 
  Deferred tax liabilities                            26,360         29,560 
----------------------------------------------------------------------------
                                                      57,784         65,123 
Liabilities held for sale                                  -          1,731 
----------------------------------------------------------------------------
                                                                            
Total liabilities                                    110,806        104,448 
----------------------------------------------------------------------------
                                                                            
Equity                                                                      
  Share capital                                      262,177        258,772 
  Retained earnings                                   46,622         38,276 
  Other reserves                                       4,358          5,363 
----------------------------------------------------------------------------
  Equity attributable to shareholders of                                    
   Essential                                         313,157        302,411 
                                                                            
Non-controlling interest                                   -             (6)
----------------------------------------------------------------------------
Total equity                                         313,157        302,405 
----------------------------------------------------------------------------
                                                                            
Total liabilities and equity                       $ 423,963      $ 406,853 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
ESSENTIAL ENERGY SERVICES LTD.                                              
CONSOLIDATED STATEMENT OF NET INCOME AND COMPREHENSIVE INCOME               
                                                                            
                                                        For the years ended 
                                                                December 31 
(Thousands, except per share amounts)                   2013           2012 
----------------------------------------------------------------------------
                                                                            
Revenue                                            $ 336,269      $ 348,580 
                                                                            
Operating expenses                                   253,001        257,885 
----------------------------------------------------------------------------
Gross margin                                          83,268         90,695 
                                                                            
General and administrative expenses                   17,176         16,353 
----------------------------------------------------------------------------
                                                      66,092         74,342 
Depreciation and amortization                         26,710         26,325 
Share-based compensation                               2,038          1,902 
Other expense                                          4,385          1,648 
----------------------------------------------------------------------------
Operating profit from continuing operations           32,959         44,467 
Finance costs                                          1,634          2,177 
----------------------------------------------------------------------------
Net income before income tax from continuing                                
 operations                                           31,325         42,290 
                                                                            
Current income tax expense                            10,508          6,567 
Deferred income tax expense (recovery)                (3,200)         4,959 
----------------------------------------------------------------------------
Total income tax expense                               7,308         11,526 
----------------------------------------------------------------------------
                                                                            
Net income from continuing operations                 24,017         30,764 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Loss from discontinued operations, net of tax         (2,110)        (8,901)
----------------------------------------------------------------------------
                                                                            
Net income                                            21,907         21,863 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Unrealized foreign exchange loss from                                       
 continuing operations                                   (54)             - 
Unrealized foreign exchange gain (loss) from                                
 discontinued operations                                (224)         1,431 
Reclassification of foreign exchange from                                   
 discontinued operations                                (664)             - 
----------------------------------------------------------------------------
Other comprehensive income (loss)                       (942)         1,431 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Comprehensive income                                  20,965         23,294 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income (loss) attributable to:                                          
  Shareholders of Essential                        $  22,095      $  22,308 
  Non-controlling interest                              (188)          (445)
----------------------------------------------------------------------------
                                                   $  21,907      $  21,863 
----------------------------------------------------------------------------
                                                                            
Comprehensive income (loss) attributable to:                                
  Shareholders of Essential                        $  21,153      $  23,669 
  Non-controlling interest                              (188)          (375)
----------------------------------------------------------------------------
                                                   $  20,965      $  23,294 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income per share from continuing                                        
 operations                                                                 
  Basic and diluted, attributable to                                        
   shareholders of Essential                       $    0.19      $    0.25 
Net income per share                                                        
  Basic, attributable to shareholders of                                    
   Essential                                       $    0.18      $    0.18 
  Diluted, attributable to shareholders of                                  
   Essential                                       $    0.17      $    0.18 
Comprehensive income per share                                              
  Basic and diluted, attributable to                                        
   shareholders of Essential                       $    0.17      $    0.19 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
ESSENTIAL ENERGY SERVICES LTD.                                              
CONSOLIDATED STATEMENT OF CASH FLOWS                                        
                                                        For the years ended 
                                                                December 31 
(Thousands)                                             2013           2012 
----------------------------------------------------------------------------
                                                                            
Operating activities:                                                       
                                                                            
Net income from continuing operations              $  24,017      $  30,764 
                                                                            
Non-cash adjustments to reconcile net income                                
 for the year to operating cash flow:                                       
  Depreciation and amortization                       26,710         26,325 
  Deferred income tax expense (recovery)              (3,200)         4,959 
  Share-based compensation                             1,177          1,902 
  Provision (recovery) for impairment of trade                              
   accounts receivable                                   810            (87)
  Finance costs                                        1,634          2,177 
  Write-off of vendor deposit                          3,567              - 
  Loss on disposal of assets                           1,322          2,158 
----------------------------------------------------------------------------
Operating cash flow before changes in working                               
 capital                                              56,037         68,198 
Change in non-cash operating working capital:                               
  Trade and other accounts receivable before                                
   provision                                          (6,708)        10,556 
  Inventories                                         (7,280)        (2,879)
  Prepayments                                            (20)          (531)
  Trade and other accounts payable                    (2,358)        (9,987)
  Current taxes payable                                4,119         (4,822)
----------------------------------------------------------------------------
Net cash provided by operating activities from                              
 continuing operations                                43,790         60,535 
----------------------------------------------------------------------------
                                                                            
Investing activities:                                                       
  Purchase of property, equipment and                                       
   intangibles                                       (46,600)       (51,762)
  Non-cash investing working capital in trade                               
   and other accounts payable                          5,873          3,567 
  Proceeds on disposal of equipment                    2,657         24,876 
  Proceeds from sale of assets held for sale           3,063              - 
----------------------------------------------------------------------------
Net cash used in investing activities from                                  
 continuing operations                               (35,007)       (23,319)
----------------------------------------------------------------------------
                                                                            
Financing activities:                                                       
  Borrowings (repayment) in long-term debt             3,464        (27,251)
  Proceeds from exercise of share options              3,389            695 
  Repurchase of shares                                (1,226)             - 
  Dividends paid                                     (13,083)        (9,290)
  Finance costs                                       (1,634)        (2,177)
----------------------------------------------------------------------------
Net cash used in financing activities from                                  
 continuing operations                                (9,090)       (38,023)
----------------------------------------------------------------------------
                                                                            
Foreign exchange loss gain on cash held in a                                
 foreign currency                                         30             77 
----------------------------------------------------------------------------
                                                                            
Net decrease in cash                                    (277)          (730)
Bank indebtedness, beginning balance,                                       
 discontinued operations                                   -         (1,269)
Cash (bank indebtedness), beginning of the                                  
 year                                                 (1,835)           164 
----------------------------------------------------------------------------
Bank indebtedness, end of year                     $  (2,112)     $  (1,835)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Supplemental cash flow information                                          
Cash taxes paid                                    $   6,370      $  11,506 
Cash interest and standby fees paid                    1,402          1,897 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2013 FOURTH QUARTER AND YEAR END EARNINGS CONFERENCE CALL AND WEBCAST

Essential has scheduled a conference call and webcast at 10:00 am MT (12:00 pm ET) on March 6, 2014.

The conference call dial in numbers are 416-340-2217 or 866-696-5910, passcode 7179989.

An archived recording of the conference call will be available approximately one hour after completion of the call until March 22, 2014 by dialing 905-694-9451 or 800-408-3053, passcode 1051594.

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.

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 46 coil tubing rigs and a fleet of 55 service rigs. Essential also sells, rents and services downhole tools and equipment including the Tryton Multi-Stage Fracturing System (Tryton MSFS®). 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", "budget", "scheduled", "forecast" 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, future cash flow and earnings, 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, the business, operations and revenues of the Company in addition to general economic conditions, Essential's ability to meet the changing needs of the WCSB market, the capital spending programs of E&P companies, Essential's positioning for the future, the second half of 2014 may include: a weaker Canadian dollar which would increase E&P cash flows, improved access to equity capital markets for E&P companies and rising natural gas prices, development of the Montney, Horn River and Duvernay basins for LNG export is expected to increase the demand for oilfield services (including the demand for Essential's deep coil tubing and downhole tools & rentals), the addition of the new masted deep coil tubing rigs will position Essential to benefit from the rising demand to complete complex, long-reach horizontal wells, horizontal oil wells will require work-over services thereby increasing the demand for service rigs, the downhole tool operations in the United States will be cash flow positive in 2014, the new generation masted deep coil tubing rigs have the capability to work on long-reach horizontal wells and are well-suited to work in deep, high pressure basins including the Montney, Horn River and Duvernay, Essential does not anticipate any financial resource or liquidity issues to restrict its future operating, investing or financing activities, and does not anticipate any issues with renewal of the credit facility in 2014.

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 performance and results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: known and unknown risks, including those set forth under "Risks and Uncertainties" in this news release, 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 and forward-looking information. 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 operations and financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website at 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.

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

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