Mr. J. Blair Goertzen reports

ENERFLEX ANNOUNCES STRATEGIC ACQUISITION OF A US BASED CONTRACT COMPRESSION BUSINESS FOR U$106 MILLION

Enerflex Ltd., through its U.S. entity Enerflex Energy Systems Inc., has entered into a definitive agreement to acquire the compression business of Mesa Compression LLC for $106-million (U.S.) in cash, subject to certain purchase price adjustments.

Highlights:

• Adds compression fleet of approximately 112,000 horsepower generating stable, repeatable and high-margin revenue and increases Enerflex's global contract compression fleet to over 600,000 horsepower;
• Increases Enerflex's geographic footprint and concentration of revenue in the Permian and Scoop/Stack basins within the United States -- one of the fastest-growing natural gas markets;
• Aligns and supports Enerflex's strategic goal of increasing ownership of natural-gas-handling assets;
• Increases service and rental revenue in the United States and moves Enerflex closer to its strategic objective of 35 per cent to 40 per cent of recurring revenue;
• Business generated revenue of approximately $25.7-million (U.S.) for the year ended Dec. 31, 2016;
• Transaction will be financed through drawings on the company's credit facility and cash on hand, resulting in a ratio of net debt to trailing-12-month earnings before interest, taxes, depreciation and amortization of 1.8 times at closing;
• Transaction is expected to be immediately accretive to earnings per share.

The transaction is consistent with Enerflex's objective of increasing recurring revenue streams and expanding in the U.S. market while supporting the company's strategy of being a global supplier of turnkey energy solutions through compression, processing and electric power equipment sales, aftermarket service, and contract operations.

"This acquisition provides Enerflex with an established and growing contract compression platform in the USA with attractive margins and recurring revenue. It accelerates our ability to deliver full-cycle contract services in the region and provides Enerflex with increased coverage in the Permian and Scoop/Stack basins," said J. Blair Goertzen, Enerflex's president and chief executive officer. "The strategic fit between both organizations, the talented resources, as well as the growth opportunities, will enhance the company's position in the contract compression business."

Key highlights:

• Adds a strong contract compression operations management team currently led by Al Lavenue, president and general manager of Mesa. Mr. Lavenue is an industry veteran within the natural gas compression service market and brings over three decades of expertise with a proven record of profitable growth. Mr. Lavenue will join Enerflex's U.S. management team as senior vice-president and will be responsible for the expansion and growth of the rentals business in the region;
• Increases recurring revenue, gross margin and EBITDA; contracted compression and maintenance businesses are highly profitable and provide stable, predictable and repeatable cash flow;
• Significantly increases the size and scale of the U.S. rental product and service offering, including gas lift compression solutions;
• Rental fleet and operations are positioned in growth-oriented basins -- the Permian and the Scoop/Stack;
• Provides meaningful cross-sell fabrication revenue opportunities through expanded presence;
• The purchase price represents an acquisition multiple of 8.0 times 2016 EBITDA, after adjusting for certain non-recurring revenues and costs, which will not be required for the business going forward. Enerflex expects the transaction to be immediately accretive to earnings per share.

Acquired business

Headquartered in Oklahoma City, Okla., Mesa's business has 55 employees with operations in Oklahoma, Texas and New Mexico. The business consists of 689 compression packages totalling approximately 112,000 horsepower, running at utilization levels above 85 per cent and having an average fleet age of approximately seven years. All members of the current Mesa senior operations team will stay with the business following the closing of the acquisition. For the year ended Dec. 31, 2016, combined revenue was $25.7-million (U.S.).

"Mesa Compression's employees and management are excited to be joining Enerflex and continue to grow this business," said Al Lavenue, Mesa Compression's president and general manager. "Enerflex's global reputation as a high-quality and innovative supplier to the oil and natural gas industry, combined with Mesa's track record as a leader in providing excellent, reliable and safe contract compression services, enhances the ability to significantly expand across the USA and into new areas where we can grow our market share by leveraging these combined products and resources."

Financing of the transaction

The acquisition will be financed through a combination of cash on hand and drawings on the existing $775-million syndicated credit facility, which is co-led by Toronto-Dominion Bank and Scotiabank. At closing, Enerflex's expected ratio of pro forma net debt to trailing-12-month EBITDA will be approximately 1.8 times. As at March 31, 2017, Enerflex had cash on hand of approximately $157-million.

Closing of the acquisition and other information

Closing of the acquisition is subject to certain conditions, including receipt of several regulatory and third party approvals, and is not expected to occur before July 31, 2017.

About Enerflex Ltd.

Enerflex is a single-source supplier of natural gas compression, oil and gas processing, refrigeration systems, and electric power generation equipment plus related engineering and mechanical service expertise. The company's broad in-house resources provide the capability to engineer, design, manufacture, construct, commission and service hydrocarbon-handling systems. Enerflex's expertise encompasses field production facilities, compression and natural-gas-processing plants, refrigeration systems, and electric power equipment servicing the natural gas production industry.

Enerflex, its subsidiaries, interests in associates and joint ventures operate in Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Mexico, Peru, Australia, the United Kingdom, the United Arab Emirates, Oman, Bahrain, Indonesia, Malaysia and Thailand.

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