With the capital spending noted above, total 2011 spending is anticipated to be $56 million.

The capital spending increase reflects Essential's confidence in the oilfield services sector and its focus on well servicing through coil tubing and service rigs. Essential expects to fund the capital spending with operating cash flow and its credit facility.

COLOMBIA UPDATE

Essential has signed two contracts with Ecopetrol S.A. (Ecopetrol) in Colombia: a multi-service contract (the "Multi-service Contract") and a pilot contract (the "Pilot Contract"). Execution of these contracts reaffirms Essential's opportunities in Colombia and its ability to provide oilfield services to the largest hydrocarbon producer in Colombia.

In May, 2011, Essential began providing well stimulation services under the Multi-service Contract using its coil tubing and nitrogen pumping equipment. Essential is one of five international oilfield service contractors selected by Ecopetrol to provide coil tubing and nitrogen services under a multi-service contract. Essential is also eligible to provide wireline and downhole tools under this contract. The total value of the contract will be determined by the value of the work programs offered by Ecopetrol and accepted by Essential. This is an open ended contract with no pre-set contracting limit. It is effective for the remainder of 2011 and is extendible for an additional two years at the option of Ecopetrol.

The Pilot Contract is a unique arrangement offered exclusively to Essential to implement its Canadian-style oilfield services and pricing model to provide well servicing using service rigs, rod rigs and a continuous rod injector in any of Ecopetrol's operating regions in Colombia. Initial services will focus on well abandonment programs and pump changes. Essential expects to begin providing work under this contract early in Q3/2011. The level of work generated will be determined based on the number of work orders offered by Ecopetrol and accepted by Essential.

In addition, Essential is in discussions with private operators with respect to further business opportunities in the mid Magdalena Basin. There are more than 70 different exploration and production companies in Colombia. Many of these operating companies have aggressive production targets in the mid Magdalena Basin, in close proximity to Essential's operating base. Production optimization will be a key component to increasing productivity in this area.

Tags: Essential Energy Services