Mr. Garnet Amundson reports

ESSENTIAL ENERGY SERVICES ANNOUNCES 2015 CAPITAL BUDGET

Essential Energy Services Ltd. has set a 2015 capital budget of $21-million, comprising $13-million of growth capital and $8-million of maintenance capital.

"In light of expectations for an industry slowdown in 2015, we have set a conservative capital budget," said Garnet Amundson, president and chief executive officer of Essential. "Despite relatively low capital spending in 2015, with the recent equipment additions and equipment expected in 2015, we will experience significant growth in our fleet of masted coil-tubing rigs that are suitable for completion and production work on some of the industry's longest horizontal wells. As 2015 progresses, we will monitor industry activity and may adjust the capital program as appropriate."

The $13-million growth capital will be primarily focused on completing and putting into service four Generation IV masted coil-tubing rigs that are part of Essential's long-term coil-tubing build program. The rigs are expected to go into service as follows: one late in the first quarter of 2015, two in the third quarter of 2015 and one in the first quarter of 2016. The 2015 maintenance capital of $8-million is lower than the 2014 anticipated spend of $14-million. As activity is anticipated to be slower in 2015, scheduled maintenance is expected to be reduced.

Long-term masted coil-tubing build program

Essential has a long-term build program aimed at increasing the size and depth capacity of the masted coil-tubing fleet. To date, the company has added three Generation III and two Generation IV masted coil-tubing rigs. Upon completion of the 2015 capital spending program, it is anticipated that Essential will have a total of three Generation III and six Generation IV rigs. Essential has decided to defer one Generation III rig (previously expected in service in third quarter 2015) and two Generation IV rigs (previously expected in service in 2016). Essential has arranged with the equipment fabricators to defer completion of the equipment until a later, undetermined date.

The Generation III and Generation IV 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, Bakken, Duvernay and Horn River. With a coil diameter of 2-3/8ths inches, the Generation III rigs can reach 6,300 metres, and the Generation IV rigs can reach 7,900 metres.

2014 capital spending and fleet rationalization

Essential's 2014 capital spending expectation has decreased slightly from $47-million to $46-million. This is expected to comprise $32-million for growth capital and $14-million for maintenance capital.

In the fourth quarter of 2014, Essential parked 12 conventional coil-tubing rigs due to low utilization including: five shallow, five intermediate and two deep conventional coil-tubing rigs. These rigs have a shallower depth capacity and historically operated at much lower utilization than the masted coil-tubing rigs.

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