Schachter Energy ConferenceGarnet Amundson, President & CEO
September 29, 2018
DisclaimerFORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements and forward-looking information regarding Essential Energy Services Ltd. (the “Corporation” or
“Essential”) within the meaning of applicable securities laws. In particular, this presentation contains forward-looking statements including expectations
regarding 2018 capital spending and in-service timing; expectations regarding success of the Gen IV deep coil rig retrofit and the estimated cost of potential
future retrofits in 2019/2020; expectations regarding Essential’s businesses/service lines, areas of growth, opportunities, activity, pricing, cost structure and
its adaptability to industry change, outlook, market share and the ability to increase market share, competition, competitive advantages, operations,
services offered and the demand for those services, ability to meet customer inventory requirements; expectation the steel tariffs will not slow availability
of coil tubing string supply; the advantages of low debt; expectation that low debt provides Essential with greater control over its future, provides growth
potential and enables Essential to invest in people, equipment and working capital; free cash flow is expected to reduce debt in 2018; expectations
regarding industry activity including that markets will improve in 2019 and 2020, demand for completion-related services, industry deep coil supply and
returns, the ability for ECWS to grow the deep coil and pumping capacity and be ready if industry demand for deep coil grows; potential for an LNG facility
in Canada; and expectations with regard to Essential’s advantages. By their nature, forward-looking statements and information involve known and
unknown risks and uncertainties that may cause actual results to differ materially from those anticipated. Many of these factors and risks are described
under the heading “Risk Factors” in the Corporation’s Annual Information Form for the year ended December 31, 2017 and the Corporation’s other filings
on record with the securities regulatory authorities, which may be accessed through the SEDAR website (www.sedar.com). Although the Corporation
believes the expectations and assumptions on which such forward-looking statements and information are based are reasonable, the Corporation can not
provide assurance these expectations will prove to be correct. Accordingly, readers should not place undue reliance on the forward-looking statements and
are cautioned that the foregoing factors are not exhaustive. The forward-looking statements and information contained in this presentation are made as of
the date hereof and the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise, unless so required by applicable securities laws. This presentation contains an EV/2019 EBITDAS
measure based on analyst consensus estimates for EBITDAS as of a particular point in time. The Corporation includes this measure for reference only and
not for the purpose of endorsement. The estimates underlying the EBITDAS estimate reflect the views of the analysts and may not reflect the views of
management of the Corporation as at the point in time when the applicable estimate was given or as of the date of this presentation.
NON-IFRS MEASURESThroughout this presentation, certain terms used are not measures recognized by International Financial Reporting Standards (“IFRS”) and do not have
standardized meanings prescribed by IFRS including:
• EBITDAS – earnings before finance costs, income taxes, depreciation, amortization, transaction costs, losses or gains on disposal of equipment, write-
down of assets, impairment loss, foreign exchange gains or losses and share-based compensation, which includes both equity-settled and cash-
settled transactions. Calculated for continuing operations.
• Working capital – current assets less current liabilities.
These measures may not be consistent with the calculations of other companies.
® MSFS is a registered trademark of Essential Energy Services Ltd.
2
Essential Energy Services
3
We deliver oil and gas services for E&P customers as they complete,
work-over and abandon wells
Completions: the process of preparing a well for production after it has been
drilled
Work-overs: the repair or stimulation of an existing producing well to restore,
prolong or enhance production
Abandonments: the process to permanently close off a well when it is no longer
used for production
Essential Energy Services
4
We deliver oil and gas services for E&P customers as they complete,
work-over and abandon wells
What: our equipment and crews are hired by E&P companies to get their
production out of the ground in an efficient and cost-effective manner
Where: primarily western Canada; with tool operations in the U.S.
Commodity exposure: oil, liquids-rich gas, natural gas - we service them all
ECWS
Coil Tubing Rigs
Fluid Pumpers
Nitrogen Pumpers
Tryton Tools
MSFS® Tools
Conventional Tools
Rentals
5
Our Vision
Safe People and Service Delivery
Customer Well Production
High Quality Equipment
SAFE PRODUCTION
6
Where We Operate
Canada: The key basins including the Montney, Duvernay, Bakken,
Cardium and Viking
U.S.: The Permian, Eagle Ford
and Anadarko basins
7
Company History
2005• Builders Energy Services Trust IPO (BET.UN)
2006• Essential Energy Services Trust spun-out from Avenir Diversified (ESN.UN)
2008
• Essential and Builders merger, continued as Essential (ESN.UN); industry downturn began
2010• Conversion to a Corporation (ESN); industry fundamentals improved
2011• Acquisition of Technicoil (TEC) expanded the coil tubing fleet
2014• Industry downturn began
2016• Asset swap with Precision Drilling (service rigs exchanged for coil tubing rigs and cash)
2017• First signs of industry recovery
8
The WCSB – An Evolving Industry
2005• 24,769 wells drilled; primarily shallow; 26% oil/ 74% gas; 10% horizontal
2009• 8,417 wells drilled; 49% oil/ 51% gas; 29% horizontal
2013• 11,068 wells drilled; 83% oil/ 17% gas; 70% horizontal
2017• 7,100 wells drilled; 75% oil/ 25% gas; 85% horizontal
2018• 6,900 forecast wells drilled (PSAC Jul 31/18)
9
A Track Record of M&A Success
• 3 public company events (IPO, ESN.UN/BET.UN merger, TEC acquisition)
• 21 private company acquisitions and integrations – primarily 2005 to 2008 as
the former Builders Energy Services Trust
• 8 service line dispositions - to attain focus and adjust to industry evolution
• Growth potential
• Free cash flow expected to reduce debt in 2018
The Essential Advantage
10
• Skilled workforce; success in recruiting
• 440 employees at Jun 30/18
• An optimal choice to service the Duvernay, Montney, Viking, Cardium and Bakken plays
• Largest deep coil tubing fleet in Canada (“ECWS”)
• An innovative tool business (“Tryton”)
Essential People
Industry Leading Equipment/Services
Low Debt
• Long-term customer relationships; diversity
• Equipment and crews for deeper, longer horizontal wells
Customers and Targeted Work
• Lean organization – cost efficient operations
• Cost structure adapts quickly to industry changes
Variable Cost Structure
Segment Overview
11
ECWS Tryton
• Completion, stimulation and work-
over services for a variety of well
depths including deep, long-reach
horizontal wells
• Coil tubing rigs
• Fluid and nitrogen pumpers
• Canadian operations
• Multi-stage frac system (MSFS®)
tools – completions work on
horizontal wells
• Conventional downhole tools –
production and abandonment work
• Rentals – including specialty drill
pipe and BOP’s
• Canadian and U.S. operations
Segment Overview - Data
12
ECWS Tryton
Jun 30/18
Employees 300
Fixed assets (NBV) $115 MM
Working capital $22 MM
Jun 30/18
Employees 115
Fixed assets (NBV) $23 MM
Working capital $38 MM
TRYTON
$10 MM
ECWS
$8 MM
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Where Gross Margin is Generated
TRYTON
$45 MMECWS
$53 MM
H1/18 Revenue: $98 MM H1/18 Gross Margin: $17 MM(1)
(1) Chart excludes centralized operations overhead costs of $1 MM.
Gross Margin as a % of
RevenueH1/18 H1/17
ECWS 15% 16%
Tryton 22% 24%
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Financial and Operating Results – H1/18
6 Months Annual
($ millions) H1/18 H1/17 2017
Essential
Revenue $98 $84 $176
Gross margin $17 $16 $32
EBITDAS $11 $9 $19
Long-term debt $19 $13 $18
Tryton Revenue Split
MSFS® 47% 53% 49%
Conventional
Tools & Rentals53% 47% 51%
H1/18 H1/17 2017
ECWS Operating Hours
Coil Tubing Rigs 25,481 23,459 48,425
Pumpers 33,675 28,182 60,857
0%
5%
10%
15%
20%
25%
Total
Revenue
ECWS Hours ECWS
Revenue
Tryton
Revenue
Growth % – H1/18 vs H1/17
Improved results compared to H1/17
Corporate Snapshot
15
(1) Based on Sep 4/18 market capitalization and Jun 30/18 debt.
(2) Based on Sep 4/18 market capitalization, Jun 30/18 debt and Sep 4/18 analyst consensus.
(3) Based on Sep 4/18 share price and Jun 30/18 book value of shareholders’ equity less intangible assets.
Sep 4/18
Trading Price
52 Week Range
$0.49
$0.47 - $0.82
Market Capitalization $70 million
Long-term Debt (Jun 30/18) $19 million
Enterprise Value(1) $89 million
EV/2019 EBITDAS(2) 3.1x
Price/Book(3) 0.4x
Ownership – Institutional and Geographic
16
(1) Source: TSX InfoSuite.
Reported Institutional Ownership(1): Sep 4/18
Edgepoint Investment Group 11%
Franklin Bissett Investment Management 6%
Mackenzie Investments 5%
I.G. Investment Management 3%
Other 4%
Total 29%
Geographic Ownership: May/18
Canada 83%
U.S. 16%
Other 1%
Total 100%
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Management Team and Ownership
TitleYears of
ServiceKey Areas of Responsibility
Garnet Amundson (1) President, CEO, Board
Member, Found of Builders14 CEO and COO duties
Allan Mowbray VP, Finance & CFO 7 Financial disclosure and controls, banking, tax
Jeff NewmanSenior VP, Business
Development11 Corporate M&A, litigation, insurance, IT
Eldon HeckVP, Downhole Tools &
Rentals13 Downhole Tools & Rentals, sales
Karen PerasaloVP, Investor Relations &
Corporate Secretary12 IR, corporate secretary, capital markets, banking
(1) Mr. Amundson owns 875K shares; he has never sold a share.
Management and Board of Director ownership: 2%
Essential’s Top 10 Customers
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• Top 10 represents 60 – 65% of our revenue (H1/18 and 2017 full year)
• Proud to include names like:
• Customers are looking for:
o The right technology for the task
o Crew competency and continuity
o Stable pricing
o Efficiencies (e.g. wiperless milling)
o Strong safety record (e.g. low TRIF)
Tourmaline Murphy Oil
Seven Generations NuVista Energy
ARC Resources Yangarra Resources
Kelt Exploration Crescent Point Energy
Velvet Energy Husky Energy
Diverse group of customers
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Customer Diversification
0%
5%
10%
15%
A B C D E F G H I J
% o
f R
ev
en
ue
by
Cu
sto
me
r
H1/18 2017
• H1/18 Essential worked for 460 customers; 485 in 2017 (full year)
• Top 10 customers H1/18 and 2017 (full year) represent 60 to 65% of revenue
• H1/18 and 2017 (full year) no single customer accounted for more than 15% of
revenue
• Customer payment cycle is typically 70 to 90 days
The Businesses:
ECWS and Tryton
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ECWS – Coil Tubing Rigs
Masted Coil Tubing Rig
Coil Tubing - Completions & Work-Overs
22
• The number of long-reach horizontal wells increases the demand for Essential’s
coil tubing rigs
• In the well completion phase, coil tubing rigs are used for:
Pre-Fracturing
Confirmation runs
Placement of tools to isolate a portion of the well
during facturing
Fracturing
Frac-thru coil
Annular fracturing
Convey and actuate sliding sleeve tools
“Plug-and-perf” operations
Post-Fracturing
Confirmation runs
Cleanouts
Mill-out/drill-out ball and seat systems
• In the post completion phase, coil tubing rigs are used for work-overs and abandonments
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Coil Tubing Fleet - Deeper Dive
At Jun 30/18
Total
Fleet
Active
Fleet
Reach/
Depth
(m at 2 ⅜”)
Target Market
Gen I 4 2 2,700 Cleanouts
Gen II 14 9 4,500 Bakken, Cardium, Montney, Viking
Gen III 8 8 6,500 Montney, Duvernay
Gen IV(1) 4 2 7,000+ Montney, Duvernay
Total 30 21
(1) Includes retrofit rig expected in-service Sep 30/18
Fleet menu to meet variety of customer requirements
• Rigs will be activated as demand dictates through the CVIP process (Commercial
Vehicle Inspection Program) and by adding crews
• The number of active rigs that are crewed and working varies with demand
• Masted and conventional rigs
• Gen III rigs experience the greatest demand
Coil Tubing - Fleet and Size
24
Gen I Gen II Gen III Gen IV
Number of rigs at Jun 30/18:
(Total: 30)4 14 8 4
Coil Diameter:
1 1/2” 8,150 m - - -
1 3/4” 5,580 m - - -
2” 4,500 m 5,500 m 8,400 m -
2 3/8” 2,700 m 4,500 m 6,500 m 7,000 m+
2 5/8” - 3,500 m 5,200 m 6,700 m
2 7/8” - 2,700 m 4,300 m 5,300 m
Injector capacity60,000 lbs,
80,000 lbs100,000 lbs 130,000 lbs
130,000 lbs,
160,000 lbs
Coil Tubing Demand
25
• Currently the most active plays in the WCSB include the Duvernay and the
Montney
• Many of these wells are deeper, horizontal, often high pressure and complex
• Gen III and Gen IV rigs are best-suited for these regions
• Require skilled, experienced crews with a focus on safety
Record Depths:
ECWS: coil completion 7,100 m with a Gen IV rig (2 ⅜” coil)
Industry (WCSB): deepest well drilled 7,848 m
Coil tubing sector (WCSB): deepest coil completion is under 7,500 m
Demand for deep coil tubing rigs has been growing
Milling Frac
Seats/Bridge Plugs
44%
Fracturing with Coil
30%
Cleanout 12%
Stage Tool/Debris
Sub Milling 8%
Other 6%
ECWS Job Types
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H1/18
Fracturing with Coil: third party fracturing equipment working in conjunction with an Essential coil tubing
rig. This includes fracturing through coil or annular coil fracturing with a sliding sleeve system.
Other: includes logging and camera work, fishing, cementing and other work.
Gen IV Retrofit Program
27
• First retrofit expected in-service Sep 30/18
• Suitable for Montney and Duvernay deep wells
• Features include:
o Conventional rig with 15 foot or 16 foot reels using a 130K or 160K injector
o NOV “quick change” reel system for efficiency and safety
o 7,200 m of 2 ⅜” coil tubing - transported on the rig
o 9,400 m of 2 ⅜” coil tubing - trucked separately on a support trailer
o Industry leading programmable, Siemens-based, electric over hydraulic controls for
safety, efficiency and data capture
If industry demand for deep coil grows in 2019 and 2020, ECWS will be ready
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Fluid Pumpers
• Maintain downhole circulation
• Provide ancillary acid or solvent treatments
• Inject friction reducers or chemicals into the wellbore
• Often paired with our coil tubing fleet
• Stand alone pump down work, pre-fracture testing and frac support work
Quintuplex Fluid Pumper
Fluid Pumping Fleet
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Single
Triplex
Single
Triplex
Twin
Triplex
Twin
Quintuplex
Number of rigs at Jun 30/18
(Total: 20)2 1 8 9
Horsepower (hp) 1 x 600 1 x 600 2 x 660
2 x 800
2 x 1,000
2 x 1,500
Pumping pressure (psi) 10,000 15,000 10,000 15,000
• Demand has been increasing for the quintuplex fluid pumpers as wells are
getting deeper and higher pressure
• ECWS added two new quintuplex pumpers in H1/18
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Nitrogen Pumpers
Nitrogen Pumper
• Pump inert nitrogen gas into the wellbore for stimulation or work-over
operations
• Purge the coil tubing of fluids once the coil tubing work has been completed
• ECWS has 7 nitrogen pumpers
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ECWS - Replacement Cost of Assets
$ million per rig (1)
Coil Tubing Rigs:
Gen II 3.0
Gen III 4.5
Gen IV (2) 6.0
Fluid Pumpers:
Twin 1.5
Quintuplex 2.5
(1) Replace with new assets with similar capacity.
(2) Prior to the Gen IV retrofit cost.
32
Tryton – Downhole Tools and Rentals
MSFS®: Composite Bridge Plug
MSFS®: Ball & Seat balls
MSFS®: Ball & Seat
“cut-away”
33
Tryton – Services Offered
MSFS® Tools
• Completions-focused
• Tools that allow producers to
isolate and fracture intervals of
horizontal sections of a well
separately and continuously
• Primarily provided in Canada
Conventional Tools
• Completion, production and
abandonment operations
• Includes conventional packers,
tubing anchors, bridge plugs,
cement retainers and related
accessories
• Canadian and U.S. operations
Tryton Rentals
• Drilling focused
• Offers a broad range of oilfield
equipment including specialty drill
pipe, blowout preventers, specialty
equipment for steam-assisted
gravity drainage wells
• Canadian operations
34
Tryton – Inventory
Inventory is Critical to Success
• Tryton inventory value at Jun 30/18: $29 million
• Ability to meet customer requirements on a timely basis with long lead
time specialty items
• Conventional tools: diverse well histories, locations and pressures require a
diverse inventory
• Evolving market requires careful product management
• Tryton has a broad base of tool manufacturers – in Canada and the U.S.
35
Tryton – Tool Diversity for Growth
MSFS® Tools – Growing the Number of Choices
• Ball & Seat o Continues to be the most common method
• V-sleeveo Unlimited number of stages; coil actuated
o Q1/18: completed a 53-stage job in a single tool run in the Cardium
• Composite bridge plugo Unlimited number of stages; quick to mill-out
• Hybrid MSFS® – ball & seat plus composite bridge plugo Q1/18: completed two 90-stage MSFS® jobs in the Montney – including the
deepest well drilled to-date in western Canada at 7,848 m
36
Tryton – Markets
Key Stations and Markets
• Whitecourt and Grande Prairie: MSFS® and conventional tools; Montney
and Duvernay
• Lloydminster: Conventional tools for abandonments, heavy oil
• High Level: Conventional tools; sole supplier
• Red Deer: MSFS® and conventional tools
• Drayton Valley: MSFS® and conventional tools; Cardium
• International exports
Essential:
Capital Spending and Low Debt
38
Essential - Capital Spending Overview
Annual 2018 2017 2016
($ millions) Forecast Actual Actual
Growth $7 $11 $8
Maintenance 11 9 3
Total $18 $20 $11
Focus of 2018 Growth Spending:
• Gen IV coil tubing rig retrofit
• Two quintuplex fluid pumpers
• One N2 pumper
• A set of high pressure (15K) BOP’s
39
Advantages of Low Debt
$0
$10
$20
$30
$40
$50
$60
$ m
illio
ns
Debt
Q4/14 Q4/16Q4/15 Q2/18(1)Q4/17
• Greater control over
our financial future
• Working capital
financing
• Ability to grow by re-
investing operating
cash flow
• Able to grow deep coil
and pumping in 2019
and 2020 as markets
improve
(1) Working capital at Jun 30/18 ($54 million) was well in excess of debt ($19 million).
Q2
/18
Wo
rkin
g C
ap
ita
l
Looking Forward
Strategic Considerations
Outlook – Industry and Essential
41
Industry:
• Oil prices (WTI) have improved E&P cash flows; the impact on spending
budgets in H2/18 and 2019 is uncertain – some industry analysts forecast
increased activity
• Continued demand for completion-related services – longer laterals and
increased frac stages per well; deeper coil tubing, higher pressure pumping
and downhole tool solutions
• The industry continues to be hindered by political and regulatory
concerns/uncertainty and market access constraints
• Potential LNG facility in Canada
• J. Schachter scenario: U.S. $100/barrel oil (WTI) and $4/mcf AECO natural gas
Essential:
• Focus on increasing market share with new/better offerings to meet customer
demand for deeper and more complex wells
• Service price increases not anticipated in the near term – stronger industry
activity required
Canada - Deep Coil Market Considerations
42
• Industry fleet: number of “relevant”
deep/large diameter coil tubing rigs is
small relative to the number of drilling
rigs and services rigs
• Pricing has been flat (and still below
2014), which discourages investment in
new rigs
• We are watching the impact of rising
costs (e.g. fuel and coil tubing strings) –
customer dialogue
• Pad work and “steady work” allows
pricing and cost efficiencies
• Steel tariffs on U.S. coil tubing strings
(primary supplier) will increase costs;
hopefully will not slow availability of
supply
Canada - Coil and Pumping Competition
43
• Fraccers in Canada (Trican, Calfrac, STEP) often, but not always, supply their
own coil tubing rigs in the current slow market
• International fraccers (Haliburton, BJ-Baker and Schlumberger) typically do
not have coil tubing rigs in Canada
• Coil tubing companies (public and private) are struggling – as we are – to
make a proper return in Canada given weak pricing
• Some of the competition’s equipment is leaving Canada or shutting down –
this could create future “tightness” in deep coil supply if industry spending
increases
44
Essential – Upside in 2019 and 2020
ECWS:
• First Gen IV retrofit proves the design and engineering
• Four additional Gen IV retrofits and a reel trailer retrofit can be added
• Estimated cost of potential 2019/2020 retrofits is $7 million – similar to the
cost of one new deep coil tubing rig build
• Reel trailer can operate with Gen II’s to “deepen” their capacity
• Opportunity to add new quintuplex fluid pumpers and nitrogen pumpers to
pair with deep coil rigs
Tryton:
• Expand market share with innovative/incremental MSFS® tools; customers
can choose the tool best suited for wellbore characteristics and preference
Low debt allows re-investment in our business with free cash flow
• Low multiple compared to the sector: EV/EBITDAS and Price/Book
• Enables investment in people, equipment, working capital
• Credit facility renewed to June 2021
• Highly variable cost structure; margin compression due to limited price increases
• New MSFS® tools provide customers a choice
• Low capital intensity; historically high margins
• Suitable for complex, long-reach horizontal wells
• Fleet capacity can be increased and “deepened” if market demand warrants
Why Invest in Essential?
45
Innovative Tool Business
Variable Cost Structure
Low Debt
Valuation
Industry Leading Coil/Pump Division
Essential on site near Grande Prairie
Questions / Discussion
Garnet AmundsonPresident, Chief Executive Officer & Director
Karen PerasaloInvestor Relations
1100, 250 – 2nd Street SW
Calgary, Alberta T2P 0C1
(403) 513-7272
www.essentialenergy.ca
TSX:ESN