Mr. Garnet Amundson reports

ESSENTIAL ENERGY SERVICES TO BE ACQUIRED BY ELEMENT TECHNICAL SERVICES

Essential Energy Services Ltd. has entered into a definitive amalgamation agreement with Element Technical Services Inc. under which Element, through a wholly owned subsidiary, will acquire all of the issued and outstanding common shares of Essential for a purchase price of 40 cents per Essential share, payable in cash. Element is a privately held entity that has fracturing and coiled tubing operations in Western Canada and the United States.

Garnet Amundson, president and chief executive officer of Essential, commented: "We have successfully led Essential and its predecessor entities through almost two decades of turbulent oil field service industry and capital markets dynamics. Throughout this long history, we have strived to maximize value for stakeholders of our business. As a part of our normal course of business, and in particular over the past seven years, Essential has actively evaluated and explored numerous opportunities, culminating in this transaction with Element. We believe this transaction provides compelling value for Essential's shareholders and enhanced product offerings to Essential's customers."

Strategic rationale -- attractive value for essential shareholders:

• The consideration implies an enterprise value for Essential of approximately $77.7-million, including all transaction-related expenses. The resulting transaction metric is estimated to be 4.1 times trailing 12-month EBITDAS (earnings before interest, taxes, depreciation and amortization) as of June 30, 2023.

All-cash premium to market trading price:

• The consideration represents a premium of approximately 12 per cent to Essential's 20-day volume-weighted average trading price on the Toronto Stock Exchange and a premium of approximately 10 per cent to Essential's closing price as of close of markets on Sept. 14, 2023.

The amalgamation agreement and approvals

Element will, among other things, through 2544592 Alberta Ltd. (Subco), a wholly owned subsidiary of Element, acquire all of the Essential shares by way of a statutory amalgamation. Pursuant to the terms of the amalgamation agreement, Essential will amalgamate with Subco, with the amalgamated entity (Amalco) becoming a wholly owned subsidiary of Element. Subject to the terms of the amalgamation agreement, each holder of Essential shares (other than any Essential shareholder who validly exercises dissent rights in relation to the amalgamation) will, upon completion of the amalgamation, receive one redeemable preferred share of Amalco for each Essential share held by such Essential shareholder and the Amalco redeemable preferred shares will each be immediately redeemed for 40 cents in cash.

The company will seek approval of the amalgamation by the Essential shareholders at a special meeting expected to be held on or about Nov. 7, 2023. The amalgamation requires the approval of:

1. 66-2/3 per cent of the votes cast by the Essential shareholders present in person or by proxy at the special meeting;
2. If required, a majority of the votes cast by Essential shareholders in person or represented by proxy at the special meeting, after excluding the votes cast by those Essential shareholders whose votes are required to be excluded in accordance with Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions.

Upon closing of the amalgamation, it is expected that the Essential shares will be delisted from the TSX and Amalco will apply to cease to be a reporting issuer under applicable securities laws. The amalgamation is subject to various closing conditions, including the required Essential shareholder approvals at the special meeting, the approval of the TSX, and certain regulatory and other approvals customary in transactions of this nature.

The amalgamation agreement contains customary representations and warranties of each party and interim operational covenants of Essential. The amalgamation agreement also provides for, among other things, customary board support and non-solicitation covenants, subject to a fiduciary out for unsolicited superior proposals in favour of Essential and a provision for the right to match superior proposals in favour of Element.

The amalgamation agreement provides for a non-completion fee of $5.5-million payable in the event that the amalgamation is not completed or is terminated by Essential or Element in certain circumstances, including if Essential enters into an agreement with respect to a superior proposal or if Essential's board of directors withdraws or modifies its recommendation with respect to the amalgamation.

All of the directors and executive officers of Essential, representing approximately 3.1 per cent of the issued and outstanding Essential shares, have entered into support agreements pursuant to which they have agreed to vote such Essential shares in favour of the amalgamation, subject to the provisions of such support agreements.

Further details with respect to the amalgamation will be included in the information circular to be mailed to Essential shareholders in connection with the special meeting. The special meeting is expected to be held on or around Nov. 7, 2023, with closing of the amalgamation to occur thereafter upon satisfaction of all conditions precedent, currently anticipated to occur in mid-November, 2023. A copy of the amalgamation agreement and the information circular will be filed on Essential's SEDAR+ profile.

Recommendation of the Essential board

Through discussions with the company's financial and legal advisers, and after considering the fairness opinion (as defined below), Essential's board of directors has unanimously determined: (i) that the transactions contemplated by the amalgamation agreement are in the best interests of Essential; and (ii) to recommend that Essential shareholders vote in favour of the amalgamation.

Advisers

Peters & Co. Ltd. is acting as exclusive financial adviser to Essential in connection with the amalgamation and has provided a verbal fairness opinion to Essential's board of directors to the effect that, as at the date of such fairness opinion and based upon and subject to the assumptions, limitations and qualifications to be set forth in the written opinion of Peters & Co., the consideration to be received by Essential shareholders pursuant to the amalgamation is fair, from a financial point of view, to Essential shareholders.

Fasken Martineau DuMoulin LLP is acting as legal counsel to Essential.

We seek Safe Harbor.