Tom Simons - President and Chief Executive Officer Craig Nieboer - Chief Financial Officer

Jason Sawatzky - Altacorp Capital Brian Purdy - GHS Canada Kevin Lo - First Energy Chris Currie - Milford Capital Todd Garman - Cormack

: Good morning Ladies and Gentlemen and welcome to the Canadian Energy Services and Technology Corp First Quarter 2013 conference call and webcast. As a reminder, this conference is being recorded Thursday, May 9, 2013. On the call today is Mr. Thomas Simons, President and Chief Executive Officer of Canadian Energy Services and Mr. Craig Nieboer, Chief Financial Officer of Canadian Energy Services. I would now like to turn the meeting over to Mr. Craig Nieboer. Please go ahead Mr. Nieboer.

Good morning everyone and thank you for attending today’s call. Just before we start I would like to note that in our commentary today there will be forward-looking financial information and that the actual results may differ materially from the expected results due to various risk factors and assumptions. These have been summarized in our AIF dated March 28, 2013 that is available under our corporate profile on SEDAR. Certain financial measures that we refer to today too are not recognized in a current generally accepted accounting policies and principles and for a description and definition of these please see our first quarter MD&A. At this time I’ll turn it over to Tom Simons, our President and CEO.

Well good morning and thank you to those on the call. This morning I’ll provide an operations update for the quarter, Craig will provide a financial update, and then together we’ll take questions. To start, we are very pleased that all business segments in CES performed very well in the quarter. The obvious highlight of the quarter is the JACAM acquisition. Of course we’re very pleased that JACAM diversifies the company into a provider of oilfield chemicals at every point in the life cycle of a well. We think it’s important to note that we’re not a reseller. We manufacture or are basic in making the consumable chemicals that we sell and then provide our expertise on their application. Q1 EBITDA more than doubled from Q4. Our absolute or total gross margin for the quarter was a record high in the history of the company. In Canada the drilling fluid business was strong across all major oil plays being drilled by our customers. That would include the Bakken, the Cardium, the Viking. Heavy oil horizontal work and the oil sands/SAGD were very busy and we continue to have good activity in those markets in Q2. Gas and liquids saw the biggest contribution come from the (Motagny?). We brought a new salt system to market this winter, broke it out with kind of a sponsor or anchor client, and then introduced it to new customers. This technology is saving our customers money and it’s winning CES new work. Clear Environmental continues to be an industry leader in Canada in its space and it made a very nice contribution in the quarter, continues to be busy in Q2. PureChem, our two year old organic entry into the production and specialty chemical space in Canada, reached a critical mass in Q1 to become profitable. We’re seeing nice early wins from the introduction of JACAM products like SuperCorr, a patented corrosion inhibitor, to our Canadian customers. We’re also having some nice wins through our relationship with Tervita. Going forward in Canada, we feel better about the quarter or the Canadian market than we did 12 months ago. We brought new technology to our customers, we made inroads with some significant new customers, and we like Clear and PureChem’s upside in the Canadian market for the balance of the year. In the U.S. we are pleased to report that we re-established ourselves nicely in the drilling fluid space. We had big gains in the Eagle Ford, the Mississippi line through the Mega transaction, and good continued contribution from the northeast U.S. so in the Marcellus and the Utica. Our areas of focus going forward are going to be in West Texas. We’re focused on the Permian and the Delaware Basin. We think that those are going to be growth markets at a macro level for drilling fluids and production and specialty chemicals. As those plays are turned sideways to be fracked the need for high graded drilling fluids, for solutions through science after the fact when the well is on production, we think those markets are going up and that’s a place that we’re focused on becoming a player in and growing our business. JACAM had a fine month in March and more importantly integration has been going very well. Their people have worked diligently with us to integrate finance and safety and very importantly we’re working as one company already to create new sales and vertically integrate the drilling fluid side of the business so augmenting PureChem in Canada as I mentioned through products like SuperCorr, the patented corrosion inhibitor that we brought into the Canadian market already. Going forward in the U.S. we see growth on an absolute basis and geographically in the drilling fluid space. We also see further significant wins for JACAM in the U.S. We believe the increased reach and profile of the combined and expanded entity will create new customers and allow us to grow with our existing customers. We think our ability to solve problems through science and then because we’re basic or backward integrated in manufacturing the consumable chemical we sell, we think that’s unique and we think that’s a winning formula. To summarize, we’re very pleased with the significant improvement from Q4 to Q1, more than a double in earnings. All parts of the business are contributing and performing well. And we’re fairly optimistic about the balance of the year and very excited about our longer term prospects now that we’re fully diversified and basic or backward integrated in the consumable materials that we supply our customers. I will now turn over the financial update to Craig Nieboer.

Good morning again everyone. I don’t intend to go into too much great detail. All the information is provided in both our press release, our financial statements, and our Q1 MD&A but I will hit on a few highlights. Gross revenue for the quarter $149.3 million. The gross margin achieved from that $38.1 million, as Tom mentioned, a record gross margin achievement for the company. The margin on that was 25% which is starting to creep up from what we achieved in Q4 of 23%. Historically we’ve been between the 25% and 30% gross margin number. We see that our strategy to vertically integrate the company is starting to pay dividends on the gross margin achieved in the business. EBITDA for the quarter $23.6 million. As Tom mentioned, you know, 2.3 times what we achieved in Q4 showing that our business model is robust and we’ve rebounded from a tough quarter in Q4. The revenue contributions from the different geographical segments for Canada $67.4 million, for the United States $81.9 million from a revenue contribution perspective, and net income for the company just under $10 million at $9.95 million. The balance sheet continues to remain strong. At March 31, our working capital surplus was $140 million excluding the bridge loan facility. The bridge loan was taken out post quarter with the very successful three times over subscribed $225 million high yield note offering that we issued that was closed in April, a 7.375% piece of paper. To note, our after-tax cost of that interest is 2.3% based on some restructuring that we completed at the end of 2012. Seven year, four year no call paper which puts us in a very strong financial position from a financial flexibility perspective as we go forward. From the guidance that we issued in March we are reiterating that guidance in our numbers based on Q1 results and what we see at this stage. The revenue guidance for the year is $580 million to $620 million range and the EBITDA guidance for the business is $95 million to $105 million. The dividend that was also declared yesterday at 5-1/2 cents, we as always will manage that dividend and the balance sheet very carefully. Based on the financial flexibility that we have on the business, based on the guidance that we have given that we are reiterating, we think we have lots of financial flexibility going forward. Payout ratio for the quarter was 57%. Based on the guidance we see payout ratio being in the range just under - somewhere between 55% and 60% for the year so we have lots of financial flexibility for the business as we go forward. Capital expansion spend in the quarter was $9 million, maintenance was $826,000 which is in line with what we’ve told the market for the - what we should expect for the year. G&A a little higher than we’ve had in previous quarters. A lot of that is based on the expansion of the business. Included in that was one-time cash costs of $1.3 million related to the reorganization and the transactions that we completed. In addition, a lot of the difference has been an increase in the non-cash costs that we’ve run through G&A including amortization and stock based compensation. G&A without the one-time cash costs of $1.3 million would have been $20 million for the quarter of 13% of gross revenue. At this time I guess we would open this up to the audience for questions from the floor.

(Operator Instructions) The first question comes from the line of Jason Sawatzky from Altacorp Capital. Please go ahead. Jason Sawatzky - Altacorp Capital: Hey, good morning guys.

Hey Jason. Jason Sawatzky - Altacorp Capital: Hey Tom, I’m just wondering if you guys are starting to see higher JACAM production chemical sales just given, you know, CE’s focus on the sales marketing and clients, you know, service end of it. Are you starting to see that translate right now into higher production chemical sales?

Well, it’s early days, Jason, but we’re certainly, you know, not just integrating safety, finance, admin, we’re taking customers to Sterling, we’re bringing their molecules into the Canadian market. So yes I think through the balance of the year we’ll accelerate sales there but it’s not an overnight thing. And to remind everyone, that is not a fast ramp business like drilling. You don’t haul a semi load of materials to a rig and create $100,000 of revenue in weeks. You take drums and totes and truckloads to pump jacks. The difference of course is that they go down the well for 20 or 30 years. But yes, we’re driving new sales, we’re committed to that. That’s obviously we think a big piece of our future. Jason Sawatzky - Altacorp Capital: Okay. And then just in terms of the, you know, you talked about this before but immediate growth opportunities for JACAM. Is that still, you know, U.S. northeast, Eagle Ford, and have you started to move in those areas with the production chemicals or it’s still too early?

We’re introducing sort of the expanded or diversified CES story to existing customers. We’re trying to drive wholesale sales so products that can go out in truckload or rail car quantity to services, even to work outside in North America potentially. So it’s early but we’re bringing customers through there and we’re taking our story to them and we’re pretty confident that it’s going to create new revenue. Jason Sawatzky - Altacorp Capital: Okay great.

We have brought their materials, Jason, into the Canadian market and as I commented they have a - JACAM has a patented product line called SuperCorr and we have had good early results with that in Canada. It can be applied down hole to prevent failure of the well due to corrosion. That has been a big door opener for JACAM as they built out their business say in the U.S. Bakken. So that’s the product that we’ve already had success with in the Canadian market. Jason Sawatzky - Altacorp Capital: So now that you’ve brought SuperCorr up are you guys intending to bring up similar products or additional ones in the near term or how do you look at that?

Yes JACAM has a product line that’s pushing 500 products. You know, the day we closed the transaction March 1, PureChem had a product line that, you know, maybe was 100. So you’ve got a bigger toolbox, you’ve got 30 years of history, you’ve got a 10,000 square foot lab to back you up. So you problem solve and then put the molecule down the hole. Jason Sawatzky - Altacorp Capital: Okay. Yes so just shifting gears just to Canadian drilling fluids, I’m just curious on the marketing agreement that you had with or that you signed with Tervita. Are you guys starting to see any increased business or opportunities around that?

Yes we are. We have - we’re not going to name names of customers but we’ve penetrated one of the bigger operators in the basin because of that relationship. So we’re enjoying working with Tervita and we think certain customers will see value in that. Jason Sawatzky - Altacorp Capital: Great. Okay thanks guys, that’s it for me.

Thank you. The next question comes from the line of Brian Purdy from GHS Canada. Please go ahead. Brian Purdy - GHS Canada: Good morning guys, congratulations on the quarter.

Thanks, Brian. Brian Purdy - GHS Canada: You know, after the JACAM acquisition, you know, you guys were obviously talking about some new markets for the products there, you know, getting into maybe the fracturing fluids and other areas. I’m just wondering if you’re able to comment on any progress in getting into some of these newer areas.

Yes we’re selling specialty chemical into southeast Saskatchewan to pressure pumping companies and we’re selling them in the lower 48. You know, you might hear this term a few times, Brian, it’s early days for that. But specifically the products that prevent scale, they treat bacteria, they treat corrosion, and we’re basic in those products and we can specialize them to the reservoir. So yes we’re making some wins there and we think long term that’s going to be a nice piece of the business. Brian Purdy - GHS Canada: Okay. In terms of the guidance, you know, I got it you guys are, you know, being fairly conservative. I’m just wondering if, you know, what you need to see happen over the next quarter or months to make you change that view.

Well if, you know, the business falls off because commodity prices crash, I mean, we’ll put our hand up and speak to that. As far as increasing it, I think it’s just a function of time, Brian. We’re going to be conservative on guidance like we’re conservative with the dividend. When we’re as sure as we can be then we may change things but for today we think those numbers are reasonable. Brian Purdy - GHS Canada: Okay. And in terms of market share, I mean, year over year you guys are down a little bit in Canada. You know, I’m just wondering if you see that trend reversing. You mentioned, you know, a large customer being penetrated. You know, what’s your assessment of the Canadian drilling fluids market these days?

Tervita, the technology they brought over when we acquired their drilling fluids group, their people, they have increased our presence significantly in the oil sands market. We’re definitely the leader in that space, we’re the leader in the heavy oil market. And I think if those markets and oil continue to be drilled hard (Brian) we’re going to be somewhere around 25% to 30%. If LNG, if that ignites drilling in northwest Alberta, northeast BC, we’re very confident that we’ll do very well in that space. We had a nice contribution as usual from the (Motagny). If that picks up, you know, I think maybe we can do a little better but I think overall that 25% to 30% is going to be where we track. But we think the watermark potentially goes up. It certainly looks better to me today than it did a year ago. I don’t see operators feeling like services have been ripping them off and obviously gas prices are better. The industry is figuring out how to get oil out of the basin. The amount of oil moving by rail keeps going up every day which we actually see as a market we can sell our products into. We’ve been talking with an industrial manufacturer of rail cars about providing corrosion prevention materials to them and know how H2S scavenger, paraffin scavenger. So, you know, we think that’s an opportunity for us but in Canada, 25% to 30%. Brian Purdy - GHS Canada: Okay. I mean, does - do you feel your share is higher or lower in a particular area? I mean, I know you guys have had a long history in deep gas in Canada. I mean, if gas comes back does that help your market share or are you pretty much market weight in all the areas?

I think we’re - maybe we outperform a little bit in the deeper work because of some unique technology we have like Seal-AX. We brought a new salt system to the market that’s - when it’s applied properly and used in the right place taking days off wells for people. I think if deep gas goes we probably - we see a benefit even if we just stay where we are. The revenue per day on those jobs is so prolific that it will drive revenue and earnings growth. Brian Purdy - GHS Canada: Okay great. All right I’ll leave it there.

Okay thanks, Brian.

Thank you. (Operator Instructions) The next question comes from the line of Kevin Lo from First Energy. Please proceed. Kevin Lo - First Energy: Hey folks.

Hey Kevin, how are you doing? Kevin Lo - First Energy: Great. I’m just looking at the U.S. numbers and you guys have really great growth for the quarter, you know, especially in light of reduced drilling in the U.S. Can you kind of talk about how much of that you think is because of your new products and whatnot and how much of that is, you know, based on just areas that you are strong in being more active?

I think it’s a combination like always as a service company, Kevin. Some of it is products, some of it is relationship, some of it is us making the right strategic call on where to focus. The big win for us has come in the Eagle Ford. Those wells are quite prolific for us. They take a lot of fluid to drill them. They lose a lot of drilling fluid down hole while they’re drilled. The best operators are drilling with oil based mud -- when I say best operators, who drills the wells for the least amount of money. So that’s a win for them and it’s a win for us. So I think it’s a combination of things. Kevin Lo - First Energy: Okay great. The other thing is just, you know, from a housekeeping point of view can you give us a little guidance on taxes and what the tax rates could be for 2013?

It’s going to be a blended rate based on obviously the United States and Canada. U.S. marginal tax rates are roughly 38% and Canadian tax rates are roughly just over 25% on the margin. With our new tax structure that we put in place, we do have some shield available in our cross border transactions. So, you know, for ourselves, you know, it’s going to be somewhere around the 30% rate more than likely based on the mix of business and maybe slightly lower but it depends on the mix of generated earnings on the U.S. side versus Canada. Kevin Lo - First Energy: Okay great. I’m sorry, one last thing. Following the (unintelligible) acquisition and all the assets you acquired, can you kind of talk about how much your depreciation run rate should be?

Obviously with - we’re just finalizing the purchase price allocation so the split between intangibles and goodwill will have a big effect on that number. Off the top of my head I don’t even know the number and I’d have to look it up. I’ll have to get back to you, Kevin, I don’t remember the number off the top of my head. Kevin Lo - First Energy: Okay great, thanks guys.

Thank you. The next question comes from the line of Chris Currie from Milford Capital. Please go ahead. Chris Currie - Milford Capital: Thank you Operator, thanks for the call. I had a question, it’s been somewhat answered but perhaps maybe a different one - a difficult one to quantify. I’m wondering, you know, if the natural gas price continues to go up, can you give me some sense of if people start going after more dry gas wells does that present much of an opportunity for you guys?

Yes Chris. I think it materially does. Eighteen months ago we had 50 to 60 jobs working the Marcellus. Today we have 25 jobs in the northeast U.S. It makes a very nice contribution to our business. But if that, I think, you know, if there is sustained gas north of $4, if it ever touches $5, I think that play turns back on because of course the operators net back because of where that gas is so high. So that could be a nice win for us in that environment. I think it probably increases activity in one of our strong places now and that would be the Eagle Ford. Guys are drilling for liquids there, but there’s lots of gas that comes with it. And the higher the gas price, the better for everyone. And in Canada I think higher gas prices would accelerate what we do in the (Motagny). I think it could bring Corn River back on to a degree. And if the Duvernay goes somewhere those wells for us are very prolific, they’re very deep, very tough to drill. If the drilling fluids are not applied almost perfectly, the well costs can skyrocket. So what we do I would argue, is the most critical service on location and from a revenue per day basis, it’s very good. And we have significant experience in it both in terms of getting the build section cased so getting pipe in the ground and then how to drill the lateral section. So yes I’d say higher gas prices are, you know, sustained at $4 and north of that, they would have a material impact on our business to the positive. Chris Currie - Milford Capital: Great thank you.

Thank you. (Operator Instructions) The next question comes from the line of Todd Garman from Cormack. Please proceed. Todd Garman - Cormack: Good morning. I’m wondering could you give us a little bit of insight in terms of whether or not you think you will add rigs in the Marcellus in the second half of the year here based on your conversation with clients now?

I think the rig count has to go up for us to do that (Todd). There’s a couple of places that we might be able to take work away. We aren’t counting on that in our guidance but if the market goes up then I think we’ll go up with it. Todd Garman – Cormack: And so you haven’t seen any or don’t have any signs now of your clients thinking about adding rigs to their northeast U.S. rig count then?

Not today. You know, last fall I spent a bunch of time in the northeast with customers and the magic number they all talked about was 4. How long it has to be there, you know, I’m unsure Todd, obviously a while. We haven’t seen a big improvement there. Todd Garman - Cormack: Okay, if they did decide to add rigs what do you think directionally the impact on your average fluids day rate in the U.S. would be just directionally? Do you think it increases if all the other things are held constant in terms of mix?

It goes up. You require high density to drill that play. And all of it is drilled with synthetic oil based mud which is one of the, you know, sort of unique expertises that we have as a company. So the fluid is not built out of diesel or distillate so the cost of that highly refined oil is much greater and the amount of chemical it takes to turn that oil into a drilling fluid is greater than diesel. So it’s a win for us if that market goes up for sure. The revenue per day there is the highest we’ve had in the U.S. Todd Garman - Cormack: Okay and then on the margin side of things, is it realistic to assume or to think about an improvement in the margin levels in any Marcellus work should it transpire based on chemicals you can now supply internally or is that a little too optimistic?

No I think it’s reasonable. There’s certainly mine materials like barite that go into that but by the end of the year we will lower our cost of goods on barite through the mill that we’re building in Corpus Christi. And, you know, we’re starting to thread the chemicals into the drilling fluid business that are coming out of Kansas instead of us buying from other companies. So yes, there would be a bit of margin pickup. And I think what’s somewhat easing, Todd is the relentless price pressure that was going on when gas was $2 and the operator thought that services were the only people making money. Todd Garman - Cormack: Right, okay.

They’re not looking for us to raise rates, but it’s not quite as high pressure. Todd Garman - Cormack: Okay. And then if we switch over to the Permian and the Delaware Basins, same question on mix. What do you think directionally the impact on average drilling fluids revenue per day in the U.S. would be absent an improvement in the Marcellus rig count? So what do those wells look like for you guys do you think if you start to add them there?

Well we have virtually no presence today so anything we get there is largely incremental. We have a handful of rigs. But what attracts us to that part of the market is they’re drilling for oil, they don’t have differentials, and the market is pretty early in terms of adaptation of going horizontal. So our intelligence from customers, from people in your business is that operators are going to turn those wells sideways to frack them. We think that people that do it are going to make money, they’re going to have cash flow, and they’re probably going to have access to money in the equity markets. And when they turn those wells sideways they need to go from water based muds to oil based muds to make it more like an assembly line rather than a crap shoot when you drill. So that’s a win for everybody in our space so we need to be in that market. Todd Garman - Cormack: Okay and again just trying to get a sense of the direction, I understand that any incremental rigs that you may add there would be just that but directionally do you think it adds to average revenues per day?

No, I think it’s probably consistent with what we do. Todd Garman – Cormack: Okay.

It’s not worse, it’s not better, it’s like drilling in the Eagle Ford. And each play will be slightly different but the key is whether it’s horizontal or vertical. Todd Garman - Cormack: Okay that’s all I’ve got, thank you very much.

Thanks, Todd.

Thank you. It appears at this time that there are no further questions on the phone lines.

Okay Operator, thank you to all the callers. We appreciate your time. If you’d like any additional information, Craig and I are as usual available. Thank you.

Thank you. Ladies and Gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a good day.