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Essential Energy Services Announces Second Quarter Financial Results

CALGARY, Alberta, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Essential Energy Services Ltd. (TSX: ESN) (“Essential” or the “Company”) announces second quarter financial results.


 For the three months endedFor the six months ended
(in thousands of dollars exceptJune 30,June 30,
per share and percentages)2021 2020 2021 2020 
Revenue$22,441 $10,955  $ 52,591 $52,378 
Gross margin 5,291  876  12,029  9,294 
Gross margin % 24% 8% 23% 18%
EBITDAS (1) 3,429  (492) 8,317  5,392 
EBITDAS % 15% (4%) 16% 10%
Net loss⁽ⁱ⁾$(5,019)$(6,030) $ (7,612) $ (11,055)
Per share - basic and diluted$(0.04)$(0.04)$(0.05)$(0.08)
Operating hours        
Coil tubing rigs 7,414  3,060  16,043  16,073 
Pumpers 9,647  3,712  21,250  19,604 
  As at June 30,
  2021 2020 
Working capital (1)    $47,670 $44,408 
Cash     11,627  5,664 
Long-term debt     301  665 
(i) The six months ended June 30, 2020 includes an impairment of $10.3 million. 
1 Refer to “Non-IFRS Measures” section for further information.


During the second quarter of 2021, industry activity and commodity prices significantly improved compared to the second quarter of 2020. The year-over-year improvement was mainly due to the disruptive impact of the COVID-19 pandemic and lower oil prices in 2020, which severely impacted industry activity. While Canadian exploration and production (“E&P”) companies have realized benefits from higher commodity prices, their incremental cash flow has generally not translated into significantly larger capital programs, which has limited improvement in oilfield service activity.

The price of West Texas Intermediate (“WTI”) oil exceeded US$70 per barrel in the latter portion of the quarter, the highest prices since late 2018 and a significant improvement from US$28 per barrel, the average price during the second quarter of 2020. Canadian natural gas prices (“AECO”) averaged $2.96 per gigajoule during the second quarter of 2021, pricing not seen since the end of 2014.


Revenue for the three months ended June 30, 2021 was $22.4 million, $11.5 million higher than the second quarter of 2020 due to significantly higher activity as a result of improved industry conditions. The year-over-year improvement in second quarter activity was due, in large part, to improving activity after the devastating effect that the COVID-19 pandemic, and associated demand destruction, combined with low oil prices, had on activity in the second quarter of 2020.

Management is pleased to report second quarter EBITDAS(1) of $3.4 million, $3.9 million higher than negative $0.5 million EBITDAS(1) reported in the same prior year quarter. Significantly higher activity and a continued focus on cost management resulted in stronger EBITDAS(1) for the quarter. Essential received $2.1 million of benefits under the Canadian Emergency Wage Subsidy, Canadian Emergency Rent Subsidy, the Employee Retention Tax Credit program in the U.S., and the Paycheque Protection Program in the U.S. (collectively, “Government Subsidy Programs”), compared to $2.6 million included in the same prior year period. Second quarter EBITDAS(1) percentage improved to 15% compared to negative 4% in the second quarter of 2020.

For the six months ended June 30, 2021, Essential reported revenue of $52.6 million, relatively in-line with the same prior year period. For the six months ended June 30, 2021, EBITDAS(1) was $8.3 million, $2.9 million higher than the prior year, due to ongoing cost management and benefits received under Government Subsidy Programs.

Cash and Working Capital

At June 30, 2021, Essential was in a strong financial position with cash, net of long-term debt, of $11.3 million and working capital(1) of $47.7 million. On August 5, 2021 Essential had $10.0 million of cash, net of long-term debt.


Segment Results – Essential Coil Well Service

 For the three months endedFor the six months ended
 June 30,June 30,
(in thousands of dollars, except percentages, hours and fleet data)2021 2020 2021 2020 
Revenue$13,355 $6,116 $29,211 $30,655 
Operating expenses 10,028  4,618  22,175  23,344 
Gross margin$3,327 $1,498 $7,036 $7,311 
Gross margin % 25% 24% 24% 24%
Operating hours        
Coil tubing rigs 7,414  3,060  16,043  16,073 
Pumpers 9,647  3,712  21,250  19,604 
Active equipment fleet (i)        
Coil tubing rigs 12  8  12  8 
Fluid pumpers 9  8  9  8 
Nitrogen pumpers 4  4  4  4 
Total equipment fleet (i)        
Coil tubing rigs 29  29  29  29 
Fluid pumpers 17  19  17  19 
Nitrogen pumpers 8  8  8  8 
(i) Fleet data represents the number of units at the end of the period. Crewed equipment is less than active equipment.

Essential Coil Well Service (“ECWS”) revenue for the second quarter of 2021 was $13.4 million, an increase of $7.2 million compared to the same prior year period, due to significantly higher activity. Second quarter 2021 activity also benefited from drier weather conditions, compared to typical second quarter conditions where wet weather tends to limit activity. In comparison, second quarter 2020 results were impacted by a drastic reduction in activity as customers scaled back spending with the onset of COVID-19 and the decline of oil prices. Revenue per operating hour was lower than the same prior year period due to mix of work and competitive pricing pressure. On a sequential basis, revenue per operating hour was flat compared to the first quarter of 2021.

Gross margin for the second quarter of 2021 was $3.3 million, significantly higher than the same prior year period mainly due to increased activity and a continued focus on cost management. Second quarter 2020 also included severance costs. Gross margin in both the current quarter and prior year period was supported by benefits received under Government Subsidy Programs. Second quarter 2021 gross margin percentage was 25%, consistent with 24% in the second quarter of 2020.

On a year-to-date basis, ECWS revenue was $29.2 million, $1.4 million lower than the same prior year period. Operating hours increased 5%, ahead of the 22% decline in industry well completions. Activity in the first quarter of 2021 started off slow but significantly improved by the end of the second quarter of 2021. In contrast, 2020 started with stronger first quarter activity and ended with a historically slow second quarter. The result was year-to-date revenue being relatively in-line with the same prior year period. Gross margin was 24% in the current year, consistent with the comparative prior year period. Benefits received under Government Subsidy Programs and cost management, offset slightly by lower revenue per operating hour, preserved gross margin percentage of 24% in the current period.

Segment Results – Tryton

(in thousands of dollars, except percentages)

For the three months endedFor the six months ended
June 30,June 30,
2021 2020 2021 2020 
Revenue$9,086 $4,839 $23,380 $21,723 
Operating expenses 6,884  5,085  17,990  19,059 
Gross margin$2,202 $(246)$5,390 $2,664 
Gross margin % 24% (5%) 23% 12%
Tryton revenue - % of revenue        
Tryton MSFS® 10% 34% 25% 35%
Conventional Tools & Rentals 90% 66% 75% 65%

Second quarter 2021 Tryton revenue was $9.1 million, an increase of $4.2 million compared to the same prior year period due to an increase in conventional tool activity as a result of increased customer spending on production, abandonment and wellsite restoration activities. The second quarter of 2020 reflected a significant reduction in customers’ capital spending due to the onset of COVID-19 and low oil prices. Canadian conventional tool activity also benefited in the current quarter from the federally funded site rehabilitation programs which were not active until the latter part of 2020. Second quarter 2021 Multi-Stage Fracturing System (“MSFS®”) activity was below the prior year quarter due to delay in customer completion programs which resulted in reduced MSFS® revenue in the current quarter. Implications of customer spending patterns for MSFS® activities are more noticeable within discrete quarters. Pricing continued to be competitive.

Gross margin for the second quarter of 2021 was $2.2 million due to increased activity and a continued focus on cost management, significantly higher than the negative gross margin in the second quarter 2020. Second quarter 2020 also included severance costs. Gross margin in both quarters was supported by benefits received under Government Subsidy Programs. Second quarter 2021 gross margin percentage was 24%, a significant improvement from second quarter 2020 gross margin percentage of negative 5%.

On a year-to-date basis, Tryton revenue was $23.4 million, $1.7 million higher than the six months ended June 30, 2020 due to increased activity in the current year. Higher activity and benefits received under Government Subsidy Programs resulted in an increase in gross margin in the current year. As a percentage of revenue, gross margin improved to 23%, compared to 12% in the same prior year period.

Equipment Expenditures

(in thousands of dollars)

For the three months endedFor the six months ended
June 30,June 30,
2021 2020 2021 2020 
ECWS$979 $71 $3,159 $810 
Tryton 227  12  291  578 
Corporate 14  30  14  30 
Total equipment expenditures 1,220  113  3,464  1,418 
Less proceeds on disposal of equipment$(283)$(833)$(586)$(1,311)
Net equipment expenditures (proceeds) (1)$937 $(720)$2,878 $107 

Essential classifies its equipment expenditures as growth capital(1) and maintenance capital(1):

(in thousands of dollars)

For the three months endedFor the six months ended
June 30,June 30,
Growth capital (1)$331$-$1,994$-
Maintenance capital (1) 889 113 1,470 1,418
Total equipment expenditures $ 1,220$113$3,464$1,418

For the first six months of 2021, the majority of Essential’s capital spending related to the acquisition of two quintuplex pumpers, which are currently being refurbished and expected to go into service by end of the third quarter of 2021. The remaining equipment expenditures were focused on maintenance activities.

Essential’s 2021 capital budget remains unchanged at $5.4 million. The 2021 capital budget is expected to be funded with cash and operational cash flow.


The price of WTI and AECO continued their upward trajectory in the second quarter and the forward curves for each is encouraging through the remainder of 2021 and into 2022. Commodity price-driven E&P company cash flow increases have been significant but have generally been applied to debt reduction and returning cash to shareholders through dividends and share repurchases. This is expected to continue in the foreseeable future. E&P capital reinvestment ratios in Canada (capital spending as a percentage of cash flow) are setting up to be much lower in 2021 than the past ten years.

The oilfield service industry is expected to improve in the second half of the year and more significantly into 2022. Although cash flows are improving for E&P companies, these companies have expressed reluctance to agree to improved pricing for oilfield service companies. Current oilfield service pricing may not be adequate to support the expansion of crews and active equipment for oilfield services that will be required if E&P companies choose to significantly increase their capital budgets and activity. In a recovery market, specialized service fleets, including the deep coil tubing industry fleet in western Canada where Essential is a leading service provider, could quickly see service demand outpace supply under these challenging pricing conditions.

Essential anticipates activity improvement in the second half of 2021, but E&P and competitor responses will likely preclude implementation of meaningful service price increases until at least early 2022. As the post-COVID-19 economic recovery continues, inflation and cost increases for wages, recruiting, fuel and inventory will increase Essential‘s cost structure in the second half of 2021. Further, the benefit of Essential’s COVID-19-related government subsidies is expected to be significantly reduced in the back half of 2021, compared to that experienced since the pandemic began in early 2020.

ECWS entered the third quarter of 2021 with the industry’s largest active and total deep coil tubing fleet. This includes ECWS’s eight coil tubing rigs with capacity greater than 6,500 meters, which the Company estimates is more than one third of the Canadian industry fleet for this specialized completions equipment. With the addition of two quintuplex fluid pumpers by the end of the third quarter of 2021, ECWS’s active fleet will include 12 coil tubing rigs and 11 fluid pumpers. ECWS is not currently crewing this entire active fleet and is recruiting and striving to retain existing employees to build crewing capacity in a tight and challenged labor market. Maintenance of an active fleet above what is currently crewed allows customers to have access to preferred, efficient equipment for differing completion techniques and formation/well pad needs.

In the second half of 2021, Tryton expects to experience activity improvement in its MSFS® completion products, primarily through its ball & seat and Composite Bridge Plug (for “Plug & Perf”) technologies. Conventional downhole tool activity in Tryton’s Canadian and U.S. operations are expected to continue to demonstrate gradual improvement. Canadian abandonment and restoration activity related to the government site rehabilitation programs is expected to become less significant to Tryton as customers redirect their well restoration to specific Alberta policy-driven programs that are outside of Tryton’s service offerings.

Essential is well-positioned to benefit from the anticipated upcoming industry recovery cycle. Essential’s strengths include its well-trained workforce, industry leading coil-tubing fleet and value-adding downhole tool technologies. As industry activity improves, Essential will focus on important environmental, social and governance (“ESG”) initiatives, maintaining its strong financial position and development of its cash flow generating businesses. On August 5, 2021, cash, net of long-term debt, was $10.0 million. The value and importance of Essential’s ongoing cash positive position is a strategic advantage as the industry transitions into a period of expected growth. Essential’s net cash position is expected to provide sufficient liquidity and financial flexibility to fund its 2021 capital budget and allow the Company to meet financial commitments through the end of 2021.

The Management’s Discussion and Analysis and Financial Statements for the second quarter ended June 30, 2021 are available on Essential’s website at and on SEDAR at

(1)Non-IFRS Measures
Throughout this news release, certain terms that are not specifically defined under International Financial Reporting Standards (“IFRS”) are used to analyze Essential’s operations. In addition to the primary measures of net loss and net loss 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 and capital programs. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net loss and net loss per share as calculated in accordance with IFRS.

EBITDAS – EBITDAS is earnings before finance costs, income taxes, depreciation, amortization, transaction costs, losses or gains on disposal, write-down of assets, impairment loss, foreign exchange gains or losses, and share-based compensation, which includes both equity-settled and cash-settled transactions. These adjustments are relevant as they provide another measure which is considered an indicator of Essential’s results from its principal business activities.

Growth capital – Growth capital is capital spending which is intended to result in incremental revenue.

Maintenance capital – Maintenance capital is capital spending that is incurred in order to refurbish, replace or extend the life of existing equipment.

Net equipment expenditures – This measure is equipment expenditures less proceeds on the disposal of equipment. Essential uses net equipment expenditures to describe net cash outflows related to managing Essential’s property and equipment.

Working capital – Working capital is calculated as current assets less current liabilities.


 As at
 As at
 June 30,
 December 31,
(in thousands of dollars)2021 2020 
Cash$11,627 $6,082 
Trade and other accounts receivable 18,642  22,026 
Inventory 31,506  32,157 
Prepayments and deposits 2,850  1,625 
  64,625  61,890 
Property and equipment 84,883  89,460 
Right-of-use lease asset 8,108  8,513 
  92,991  97,973 
Total assets$157,616 $159,863 
Trade and other accounts payable$10,702 $8,905 
Share-based compensation 1,904  1,369 
Income taxes payable  -   25 
Current portion of lease liability 4,349  4,089 
  16,955  14,388 
Share-based compensation 6,784  3,443 
Long-term debt 301  53 
Long-term lease liability 6,861  7,801 
  13,946  11,297 
Total liabilities 30,901  25,685 
Share capital 272,732  272,732 
Deficit (152,822) (145,210)
Other reserves 6,805  6,656 
Total equity 126,715  134,178 
Total liabilities and equity$157,616 $159,863 


 For the three months endedFor the six months ended
 June 30,June 30,
(in thousands of dollars, except per share amounts) 2021  2020  2021  2020 
Revenue$22,441 $10,955 $52,591 $52,378 
Operating expenses 17,150  10,079  40,562  43,084 
Gross margin 5,291  876  12,029  9,294 
General and administrative expenses1,862  1,368  3,712  3,902 
Depreciation and amortization 4,448  5,653  9,261  9,567 
Share-based compensation expense (recovery)3,641  615  5,950  (1,065)
Impairment loss -   -   -   10,293 
Other expense (income) 133  516  260  (1,071)
Operating loss (4,793) (7,276) (7,154) (12,332)
Finance costs 224  454  455  848 
Loss before taxes (5,017) (7,730) (7,609) (13,180)
Current income tax expense  2   1  3  2 
Deferred income tax recovery  -   (1,701)  -   (2,127)
Income tax expense (recovery) 2  (1,700) 3  (2,125)
Net loss (5,019) (6,030) (7,612) (11,055)
Unrealized foreign exchange gain (loss) 78  212  144  (57)
Comprehensive loss$(4,941)$(5,818)$(7,468)$(11,112)
Net loss per share
Basic and diluted$(0.04)$(0.04)$(0.05)$(0.08)
Comprehensive loss per share        
Basic and diluted$(0.03)$(0.04)$(0.05)$(0.08)


 For the six months ended
 June 30,
(in thousands of dollars) 2021  2020 
Operating Activities:    
Net loss$(7,612)$(11,055)
Non-cash adjustments to reconcile net loss to operating cash flow:    
Depreciation and amortization 9,261  9,567 
Deferred income tax recovery  -   (2,127)
Share-based compensation 5  11 
(Recovery) provision for impairment of trade receivable (50) 400 
Finance costs  455   848 
Impairment loss  -   10,293 
Gain on disposal of assets (72) (264)
Funds flow 1,987  7,673 
Changes in non-cash operating working capital:    
Trade and other accounts receivable before provision 3,603  13,115 
Inventory 607  2,416 
Income taxes payable (25) (34)
Prepayments and deposits (1,225) (609)
Trade and other accounts payable 1,646  (6,538)
Share-based compensation 3,876  (2,237)
Net cash provided by operating activities 10,469  13,786 
Investing Activities:    
Purchase of property, equipment and intangible assets (3,464) (1,418)
Non-cash investing working capital in trade and other accounts payable 151  (278)
Proceeds on disposal of equipment 586  1,311 
Net cash used in investing activities (2,727) (385)
Financing Activities:    
Increase (decrease) in long-term debt  248   (6,085)
Finance costs paid (123) (208)
Payments of lease liability (2,310) (2,301)
Net cash used in financing activities (2,185) (8,594)
Foreign exchange (loss) gain on cash held in a foreign currency (12) 11 
Net increase in cash 5,545  4,818 
Cash, beginning of period 6,082  846 
Cash, end of period$11,627 $5,664 


This news release contains “forward-looking statements” and “forward-looking information” (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of material factors, assumptions, risks and uncertainties, many of which are beyond the control of the Company.

Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “anticipates”, “believes”, “focus”, “typically”, “maintain”, “intends”, “estimates”, “continues”, “future”, “outlook” and similar expressions, or are events or conditions that “will”, “would”, “may”, “likely”, “could”, “should”, “can”, “typically”, “traditionally” or “tends to” occur or be achieved. This news release contains forward-looking statements, pertaining to, among other things, the following: Essential’s capital spending budget, expectations of how it will be funded and in-service timing; the current and potential impacts of the COVID-19 pandemic and the Government Subsidy Programs; general economic activity; oil and natural gas industry and oilfield services sector activity and outlook; the impact of E&P cashflow increases, the deployment of incremental cash flow, the potential for E&P capital spending increases and the potential benefits to Essential; oilfield service pricing, including the possible implications of current pricing on future growth, the potential for improvement in pricing, the timing and implications; the Company’s capital management strategy and financial position; the impact of Company measures implemented in response to the COVID-19 pandemic; Essential’s strengths, focus, outlook, activity levels, cost structure, active and inactive equipment, market share, recruiting efforts and crew counts; the government funded site rehabilitation programs and the decreased significance to Tryton; and Essential’s liquidity and ability to meet its financial commitments through the end of 2021.

The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Essential including, without limitation: the potential impact of the COVID-19 pandemic on Essential; oil and natural gas industry exploration and development and the geographic region of such activity; that Essential will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; availability of debt and/or equity sources to fund Essential's capital and operating requirements as needed; and certain cost assumptions.

Although the Company believes that the material factors, expectations and assumptions expressed in such forward-looking statements are reasonable based on information available to it on the date such statements are made, undue reliance should not be placed on the forward-looking statements because the Company can give no assurances that such statements and information will prove to be correct and such statements are not guarantees of future performance. Since forward-looking statements 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 in the Company’s Annual Information Form (“AIF”) (a copy of which can be found under Essential’s profile on SEDAR at; a significant expansion of COVID-19 pandemic and the impacts thereof; the risks associated with the oilfield services sector, including 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, market 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 including those in the event of an epidemic, natural disaster or other event; global economic events; changes to Essential’s financial position and cash flow, and the higher degree of uncertainty related to the estimates and judgements made in the preparation of financial statements; the availability of qualified personnel, management or other key inputs; currency exchange fluctuations; changes in political and security stability; potential industry developments; and other unforeseen conditions which could impact the use of services supplied by the Company. Accordingly, readers should not place undue importance or reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive and should refer to “Risk Factors” set out in the AIF.

Statements, including forward-looking statements, contained in this news release are made as of the date they are given and the Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

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 under Essential’s profile on SEDAR at


Essential provides oilfield services to oil and natural gas producers, primarily in western Canada. Essential offers completion, production and wellsite restoration services to a diverse customer base. Services are offered with coil tubing, fluid and nitrogen pumping and the sale and rental of downhole tools and equipment. Essential offers one of the largest coil tubing fleets in Canada. Further information can be found at

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

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

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CONTACT: For further information, please contact:

Garnet K. Amundson
President and CEO
Phone: (403) 513-7272