Mr. Blair Goertzen reports

ENERFLEX REPORTS SECOND QUARTER 2014 FINANCIAL RESULTS AND ANNOUNCES QUARTERLY DIVIDEND

Enerflex Ltd. has released its financial and operating results for the three and six months ended June 30, 2014.

During the second quarter of 2014, there have been continuing positive market developments in liquids-rich plays in Canada and the United States, in the Alberta oil sands, and electric power opportunities. The company has also seen encouraging signs relative to liquefied natural gas projects in Canada, the United States and Australasia regions. Enerflex has successfully converted these positive market developments into increased bookings in the second quarter of 2014 compared with 2013, building on momentum established in the first quarter of 2014. Sequentially, bookings have increased by $176.4-million in the second quarter of 2014 when compared with the first quarter of 2014, resulting in an increased backlog of $867.9-million at June 30, 2014.

On June 30, 2014, Enerflex completed the acquisition of the international contract compression and processing, as well as the aftermarket services business of Axip Energy Services LP for approximately $430-million (U.S.) in cash, including closing purchase price adjustments. Axip, with its international contract compression and processing business, and aftermarket service, is a leading provider of global energy services. Headquartered in Houston, Tex., Axip has 173 employees with operations in Argentina, Brazil, Colombia, Mexico, Peru, Indonesia, Malaysia, Thailand and Bahrain. Axip's energy infrastructure assets include a 448-unit compression fleet totalling approximately 285,000 horsepower, and gas treating facilities in Mexico, Argentina and Peru. All members of the current Axip international senior management team have stayed with the business. The acquisition did not include Axip's U.S. assets.

The company's results from operations will include the results of the Axip business beginning July 1, 2014, because of the closing date of June 30, 2014, for the acquisition. Only the statement of financial position for the acquired business has therefore been included at June 30, 2014, including the determination of any asset and liability adjustments required as a result of the allocation of the purchase price.

Enerflex reported earnings, normalized for one-time transaction costs expensed as part of the acquisition, and the related tax impacts of $24.9-million, or 33 cents per share, for the second quarter of 2014 and $30.0-million, or 38 cents per share, for the first six months of 2014, compared with net earnings of $18.4-million, or 24 cents per share, and $33.8-million, or 44 cents per share, respectively, for the same periods in 2013. Normalized net earnings were higher in the second quarter of 2014 on higher gross margin, and higher earnings from associates and joint ventures, partially offset by higher selling, general and administrative (SG&A), and income tax expenses. For the six months ended June 30, 2014, normalized net earnings were lower due to higher SG&A and income tax expenses, partially offset by higher gross margin, and earnings from associates and joint ventures.

The company's financial results for the quarter were in line with expectations and improved on the same period last year. The results on a year-to-date basis are below expectations, largely as a result of previously disclosed cost increases in the international segment during the first quarter of 2014 and the related impact on gross margin. Where the cost increases have been customer driven, variation claims have been submitted and are being vigorously pursued. For the six months ended June 30, 2014, results for the Canada and Northern United States, and Southern U.S. and Latin America segments have improved. Overall results normalized for one-time transaction expenses associated with the acquisition, which are included in SG&A and income tax expense, further improved for the second quarter and were in line with the prior year when looking at the first six months of 2014.

In July, 2014, Enerflex was provided with the letter of intent for one new project in the MENA (Middle East, North Africe) region and one in the Latin American region. The project in MENA is for the rental of compression trains, and for the provision of on-site operations, maintenance and services for a period of 48 months. The project in Latin America is for the rental of compressor units, and the associated operations and maintenance services for a period of 48 months. Coupled with a rental contract won earlier in the year in the MENA region for the rental of compressors, and the associated operations and maintenance for a period of 24 months, the total horsepower that will be deployed to these three projects is approximately 60,000 horsepower. Lastly, Enerflex was successful in renewing a large service contract in the Australasia region for an initial contract term of 36 to 48 months, providing parts, service and technical support.

During the second quarter, Enerflex continued to achieve or exceed most of its 2014 strategic objectives, progressing toward the goal of generating 35 per cent to 40 per cent recurring revenue on a trailing 12-month basis. The Axip acquisition will drive acceleration in the achievement of this goal. In terms of safety management objectives, Enerflex is ahead of its strategic objective of reducing its company-wide total recordable injury rate to 1.8 with a rate of 1.6 at the end of June, 41 per cent below the rate at June 30, 2013. The company continues to work toward its strategic objective of a 10-per-cent earnings before interest and taxes (EBIT) margin, but has seen EBIT as a percentage of revenue, also calculated on a trailing 12-month basis, fall compared with the same periods last year, largely as a result of the cost increases in the international segment and increases in SG&A. Successful variation claims, coupled with the EBIT benefit of the acquisition, should drive an increase in EBIT margin percentage over the remainder of 2014. The EBIT percentage normalized for one-time transaction expenses associated with the acquisition was 8.7 per cent for the second quarter of 2014 and 5.7 per cent when calculated on a trailing 12-month basis. The EBIT percentages for the comparable periods in 2013 were 8.7 per cent for the quarter and 8.0 per cent on a trailing 12-month basis, respectively.

"The company exited 2013 with strong backlog levels and continued to see excellent booking activity through the second quarter of 2014, with second quarter booking levels almost $180-million higher, sequentially, than the first quarter of 2014. The recent Axip acquisition is consistent with Enerflex's objective of increasing recurring revenue streams and expanding geographic markets while supporting the company's strategy of being a global supplier of turnkey energy solutions through compression, processing and electric power equipment sales, and aftermarket services," said J. Blair Goertzen, Enerflex's president and chief executive officer. "The improving market dynamics, coupled with our recent acquisition have enabled the company to capitalize on recent rental opportunities in MENA and Latin America that have arisen and are expected to continue. After first half year results that were adversely affected by cost increases previously anticipated and communicated, we would expect to deliver stronger results through 2014, as the higher opening backlog is converted to revenue, and as the company continues to deliver improved recurring revenue from its service and rental business."

                         FINANCIAL HIGHLIGHTS
          (In millions, except per share and percentages)

                Three months ended June 30, Six months ended June 30,
                            2014      2013             2014     2013    

Revenue                $   446.1 $   311.0         $  778.5 $  664.3
Gross margin                86.0      64.4            137.3    125.4
Gross margin %              19.3%     20.7%            17.6%    18.9%
EBIT                        30.5      27.1             40.5     49.9
EBIT %                       6.8%      8.7%             5.2%     7.5%
Normalized EBIT             38.6      27.1             49.6     49.9
Normalized EBIT %            8.7%      8.7%             6.4%     7.5%
Net earnings (loss)
Continuing                  11.1      18.4             15.2     33.8
Discontinued                   -      (1.2)               -     (1.7)
Normalized net
earnings                    24.9      18.4             30.0     33.8
Earnings (loss) per
share
Continuing                  0.14      0.24             0.19     0.44
Discontinued                   -     (0.02)               -    (0.02)
Normalized net
earnings per share          0.33      0.24             0.38     0.42
Bookings                   414.3     317.5            652.2    506.8
Backlog                    867.9     697.8            867.9    697.8

Work on an international project in Oman continued to experience customer-driven scope and design variations during the first half of 2014. For the first six months of 2014, cost increases resulted in a corresponding decrease in gross margin of $17.6-million. With the project largely complete at the end of June, 2014, the risk of further margin deterioration is significantly reduced. The company has submitted and continues to pursue variation claims for cost increases on the project and expects resolution during the second half of 2014. Variation claims are filed once forecast costs on a fixed-price project exceed budgeted costs, as a result of increased scope or design changes to the project, which are common for engineering, procurement and construction contracts. To the extent that these cost increases are subsequently recovered through approved variation claims from customers, revenue will be recognized in the corresponding period. This results in volatility in gross margins for the international segment as additional costs are recognized as incurred on these projects, while revenue resulting from variation claims is recognized in the period that claims are approved.

Segmented financial results

Revenue for the second quarter and first six months of 2014 was $446.1-million and $778.5-million, respectively, representing increases of $135.1-million and $114.2-million compared with the same periods in 2013. The increases were due to higher revenue in the Canada and Northern U.S., and Southern U.S. and Latin America segments, partially offset for the six months ended June 30, 2014, by lower international segment revenue.

Canada and Northern U.S. segment revenue increased by $61.0-million during the second quarter of 2014 and by $82.9-million for the first six months of 2014, on account of increased engineered systems revenue due to higher backlog, and higher service revenue coming from increased parts and engine sales, which was partially offset by lower rental revenue resulting from a decrease in the total horsepower under rental contracts.

Southern U.S. and Latin America segment revenue increased by $71.9-million in the second quarter of 2014 and by $75.2-million for the first six months of 2014, as a result of higher engineered systems revenue due to higher opening backlog, and higher service revenue on increased service calls and parts sales, compared with the same periods in 2013.

International segment revenue increased by $2.1-million in the second quarter of 2014 and decreased by $44.0-million in the first six months of 2014. The increase in the second quarter of 2014 was a result of higher service revenue, partially offset by lower engineered systems and rental revenues compared with the same period in 2013. For the six months ended June 30, 2014, the decrease was on account of lower engineered systems revenue due to lower opening backlog, particularly in the Australasia and MENA regions, and lower rental revenue, partially offset by an increase in service revenue as a result of increased activity in the Australasia and MENA regions.

Gross margin for the second quarter of 2014 was $86.0-million, or 19.3 per cent of revenue, compared with $64.4-million, or 20.7 per cent of revenue, for the same period in 2013. The gross margin for the first six months of 2014 was $137.3-million, or 17.6 per cent of revenue, as compared with $125.4-million, or 18.9 per cent of revenue, for the same period of 2013. The increases were due to higher gross margin in the Canada and Northern U.S., and Southern U.S. and Latin America segments, partially offset by lower gross margin in the international segment.

The increase in gross margin in Canada and the Northern U.S. was due to the positive impact of higher revenue, lower warranty expense and stronger plant utilization, partially offset by lower project margins. The higher gross margin in the Southern U.S. and Latin America segment was due to higher revenues, improved project margins and improved plant utilization, and for the six months ended June 30, 2014, partially offset by lower warranty releases. In the international segment, for the second quarter, lower gross margin was due to lower project margins, partially offset by slightly higher revenues and the corresponding impact on gross margin. Despite generally higher project margins in the first six months of 2014 in the international segment, the lower gross margin was driven primarily by cost increases on the Oman project due to scope and design variations, and schedule delays. In addition, lower revenues negatively impacted gross margin.

During the second quarter of 2014, Enerflex recorded bookings of $414.3-million compared with $317.5-million during the same period in 2013, an increase of $96.8-million. During the six months ended June 30, 2014, bookings were $652.2-million compared with $506.8-million during the same period in 2013, an increase of $145.4-million. The increase in the second quarter of 2014 was due to higher bookings in the Southern U.S. and Latin America, partially offset by lower Canada and Northern U.S. segment bookings. For the six months ended June 30, 2014, bookings were higher in all segments. Enerflex finished the second quarter with a backlog of $867.9-million, compared with $697.8-million at the end of the second quarter of 2013, an increase of $170.1-million, or 24.4 per cent. Sequentially, backlog has increased by $73.9-million since Dec. 31, 2013.

Subsequent to the end of the second quarter of 2014, Enerflex declared a quarterly dividend of 7.5 cents per share, payable on Oct. 3, 2014, to shareholders of record on Aug. 27, 2014.

We seek Safe Harbor.