Essential Energy Services Trust

Essential Energy Services Trust

March 05, 2007 17:15 ET

Essential Energy Services Trust Provides 2006 Tax Information

CALGARY, ALBERTA--(CCNMatthews - March 5, 2007) - Essential Energy Services Trust ("Essential" or the "Trust") (TSX:ESN.UN) is pleased to provide 2006 income tax information to Canadian and U.S. resident unitholders of Essential.

The information contained herein is intended to provide information for 2006 income tax reporting for Canadian and U.S. resident individual unitholders of Essential. It is not exhaustive of all income tax considerations and is not intended to constitute legal or tax advice to any holder of Essential trust units. Unitholders should consult their own legal or tax advisors as to their particular tax consequences of holding Essential trust units.

Summary of Monthly Distributions

The calculations below have been completed on an accrual basis from the date of spin-out from Avenir Diversified Income Trust ("Avenir") on May 31, 2006 up to and including the December 2006 distribution paid on January 15, 2007. Distributions paid for this period totaled $0.581 per unit.

Cash Taxable Return
Distribution Income of Capital
Per Unit Per Unit Per Unit
Record Date Payment Date ($Cdn) ($Cdn) ($Cdn)

June 30, 2006 July 17, 2006 $ 0.083 $ 0.078 $ 0.005
July 31, 2006 August 15, 2006 $ 0.083 $ 0.078 $ 0.005
August 31, 2006 September 15, 2006 $ 0.083 $ 0.078 $ 0.005
September 29, 2006 October 13, 2006 $ 0.083 $ 0.078 $ 0.005
October 31, 2006 November 15, 2006 $ 0.083 $ 0.078 $ 0.005
November 30, 2006 December 15, 2006 $ 0.083 $ 0.078 $ 0.005
December 29, 2006 January 15, 2007 $ 0.083 $ 0.078 $ 0.005

Total paid (on an accrual basis) $ 0.581 $ 0.546 $ 0.035

2006 Canadian Unitholder Tax Information

Essential has determined that for Canadian unitholders, distributions paid in 2006 are to be 94% taxable income and 6% return of capital.

Canadian unitholders holding their Essential trust units in a Registered Retirement Savings Plan ("RRSP"), Registered Retirement Income Fund ("RRIF"), Registered Education Savings Plan ("RESP") or Deferred Profit Savings Plan ("DPSP") should not report any income related to distributions on their 2006 income tax return.

Unitholders holding their units outside such plans will receive a T3 Supplementary Information slip ("T3"), postmarked on or before March 31, 2007. Essential's Canadian unitholders who hold their units directly should receive a T3 from the Trust's transfer agent, Olympia Trust Company. Unitholders that hold their units through a broker or other intermediary should receive a T3 directly from their broker or intermediary and not from the transfer agent. Unitholders are required to report the taxable portion of distributions as "Other Income" on their 2006 income tax return.

2006 U.S. Unitholder Tax Information

After consultation with its U.S. tax advisors, the Trust believes that for U.S. federal income tax purposes, the units of the Trust will more likely than not be properly classified as equity, rather than debt, in a corporation and Essential understands that individual U.S. unitholders will treat the entire amount of the distributions as qualified dividends. As such, the distributions made during 2006 that are considered dividends, should qualify for the reduced rate of tax applicable to certain capital gains.

Adjusted Cost Base of Essential Trust Units for Avenir Unitholders of Record on May 30, 2006

The spin-out of Avenir's Energy Services Division was similar to a special distribution in the form of units of Essential Energy Services Trust. The amount of the distribution received in respect of each Avenir unit held by an Avenir unitholder was equal to the fair market value of the Essential units received by such unitholder. The finalized fair market value of an Essential unit was determined to be C$8.89 and this amount becomes the adjusted cost base of each Essential unit received in the spin-out. Please note that this final adjusted cost base is slightly different than the original preliminary estimate provided in Avenir's June 7, 2006 press release. Each Avenir unitholder, on the basis of receiving one Essential unit for every two Avenir units held, effectively received a distribution equal to C$4.445 (1/2 of C$8.89).

For Avenir's Canadian Unitholders:

Of this Essential special distribution:

43.5% or C$1.935 is return of capital and reduces the adjusted cost base of your Avenir units;

56.5% or C$2.51 is a capital gain and is subject to 2006 capital gains tax treatment.

For Avenir's U.S. Unitholders:

As stated in Avenir's press release dated February 28, 2007, Avenir is currently determining the U.S. tax characteristics of the 2006 special distribution of Essential trust units for U.S. unitholders and will provide this information prior to March 31, 2007. Please refer to any future press releases that Avenir may publish with respect to this matter.

Essential is an energy service trust that provides a range of essential production services to oil and gas producers across western Canada from northeast British Columbia to southwest Sasktachewan including service rigs, coil tubing, rod rigs, swab rigs, vacuum truck, pressure truck, tank truck, hydro-vac, steaming and hot oiling along with other related services. Essential focuses on post drilling production maintenance and enhancement services to ensure stable cash flows for Essential unitholders.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

Forward-Looking Statements: Certain information set forth in this press release, including a discussion of future plans and operations, contains forward looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, environmental risks industry competition, availability of qualified personnel and management, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. Actual results, performance or achievement could differ materially from those expressed in or implied by these forward-looking statements.

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Essential Energy Services Trust
    James Burns
    Chief Executive Officer
    (403) 263-6778
    (403) 263-6737 (FAX)
    Essential Energy Services Trust
    Duncan Au
    Chief Financial Officer
    (403) 263-6778
    (403) 263-6737 (FAX)
    Essential Energy Services Trust
    Suite 950, 330 - 5th Avenue SW
    Calgary, Alberta T2P 0L4