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ENTREC CORPORATION ANNOUNCES 2017 FIRST QUARTER FINANCIAL RESULTS

May 10, 2017

Acheson, Alberta, Canada – ENTREC Corporation (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, today announced financial results for the first quarter ended March 31, 2017.

 Three Months Ended

$ thousands, except per share amounts and margin percentMarch 31 2017March 31 2016
Revenue37,29830,613
Gross profit5,5595,282
Gross margin14.9%17.3%
Adjusted EBITDA(1)2,2811,417
Margin(1)6.1%4.6%
Per share(1)0.020.01
Adjusted net loss(1)(3,683)(6,273)
Per share(1)(0.03)(0.06)
Net loss(3,404)(4,814)
Per share – basic(0.03)(0.04)
Per share – diluted(0.03)(0.04)

As expected, the operating environment for ENTREC’s industry continued to be very challenging in the first quarter of 2017. The economic downturn, which first began in late 2014, has caused lower activity levels in the oil and gas industry as well as competitive pricing pressures that have arisen due to an over-supplied market. ENTREC continues to estimate that its pricing has been reduced by more than 25% on average since the oil and gas downturn first began.

Despite these macro-headwinds, ENTREC did return to growth in the first quarter of 2017. Revenue increased by 22% to $37.3 million in the quarter ended March 31, 2017 from $30.6 million in 2016.

The revenue increase in the first quarter of 2017 was a direct result of significant growth from ENTREC’s operations in the United States. U.S. revenue increased to $9.7 million in the first quarter of 2017 from just $2.6 million last year. The Company’s recent expansion into the Permian Basin of western Texas, along with higher activity levels from ENTREC’s North Dakota operations were the primary drivers of this growth.

ENTREC’s revenue in Canada was relatively flat. The Company benefited from an increase in revenue from several sectors, including conventional oil and gas, oil sands maintenance, repair and operation (MRO), as well as mining and power. However, offsetting the higher revenue was a significant decline in oil sands construction activity as a number of large oil sands construction projects ramped down over the past year. The Company expects oil sands construction-related activity to continue to be weak over the next few years.

Gross margin declined to 14.9% from 17.3% last year due to changes in revenue mix and higher 3rd party contractor revenue. The changes in revenue mix included lower revenue from crawler and rough terrain cranes (which are typically ENTREC’s highest margin services) and higher revenue from transportation services, which typically generate lower margins than crane services. In addition, the gross margin generated from the Company’s start-up operation in the Permian Basin of western Texas was lower than the margins from other regions.

With the higher revenue in the first quarter of 2017, adjusted EBITDA improved to $2.3 million from $1.4 million in 2016 and adjusted net loss improved to $3.7 million from $6.3 million last year.

Business Outlook

“Our outlook for the remainder of 2017 and 2018 is improving,” said John M. Stevens, ENTREC’s President and CEO. “Assuming the price of oil can continue to stabilize and increase as the year progresses, we could see higher industry activity levels that should result in meaningful customer pricing improvements. These improvements, together with executing on our strategy to grow through geographic and industry diversification, should result in further improvements in our financial results.”

The company expects that revenue from its recent expansion into the Permian Basin of western Texas will grow significantly in 2017. As oil prices recover, this area has become one of the first regions in North America to experience higher oilfield activity levels due to lower production costs for producers. In the first quarter of 2017, ENTREC also experienced growth from its operations serving the oil and gas industry in the Bakken region of North Dakota and the Western Canadian Sedimentary Basin. As oil prices improve, the Company could see further growth in industry activity levels.

ENTREC is continuing to grow its presence in the market for MRO work in the Alberta oil sands region. This work represents a growing market and is typically less susceptible to changes in near-term commodity prices. MRO work could contribute to 30-35% of the Company’s Canadian revenue in fiscal 2017 and continue to grow in 2018.

Revenue from power projects is also increasing as 2017 progresses. ENTREC’s recent expansion into Manitoba and Newfoundland & Labrador is strongly positioning the Company to capture more power- related opportunities. In addition, ENTREC is targeting a number of infrastructure projects, which along with increased power work, is further diversifying its revenue outside oil & gas.

“Despite the various growth areas identified above, our overall outlook continues to be cautious as there remains significant uncertainty as to the magnitude and timing of any future recovery in activity levels and customer pricing in the oil and gas industry,” said Mr. Stevens. “However, we remain cautiously optimistic that we will achieve growth in many of our end markets over the next year and that revenue in fiscal 2017 will be higher than 2016”.

“Over the longer-term, our competitive position continues to be positive. We are well-positioned geographically, with a complete range of crane and specialized transportation services in each of our key markets in Canada, North Dakota, and Texas. We also continue to be the industry leader in customer service, employee engagement and safety, which will be key contributors to our success in the long-term,” added Mr. Stevens.

A complete set of ENTREC’s most recent financial statements and Management’s Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company’s website (www.entrec.com).

About ENTREC

ENTREC is a heavy haul transportation and crane solutions provider to the oil and natural gas, construction, petrochemical, mining and power generation industries. ENTREC is listed on the Toronto Stock Exchange under the symbol ENT.

Non-IFRS Financial Measures

Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, loss (gain) on disposal of property, plant and equipment, foreign exchange loss (gain) on long-term debt, loss (gain) on embedded derivatives and convertible debentures, share-based compensation, bargain purchase gains, impairment of long-lived assets, and non-recurring business acquisition and integration costs. We believe that, in addition to net income, adjusted EBITDA is a useful measure as it provides an indication of the financial results generated by our principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions and before certain non-cash expenses such as depreciation, amortization, loss (gain) on disposal of property, plant and equipment, share-based compensation, bargain purchase gains, and impairment of long-lived assets. Adjusted EBITDA also illustrates what our adjusted EBITDA is, excluding the effect of non-recurring business acquisition and integration costs. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue. Per share amounts are calculated as adjusted EBITDA divided by the basic weighted average number of shares outstanding during the period.

Adjusted net (loss) income is calculated excluding the after-tax amortization of acquisition-related intangible assets, impairment of long-lived assets, notional interest accretion expense arising from our Debentures, loss (gain) on embedded derivatives and convertible debentures, foreign exchange loss (gain) on long-term debt, bargain purchase gain, and gain on extinguishment of convertible debentures. These exclusions represent non-cash items the Company does not consider indicative of ongoing business performance. ENTREC also believes the elimination of amortization of acquisition-related intangible assets provides management and investors an improved view of its business results by providing a degree of comparability to internally developed intangible assets for which the related costs are expensed as incurred. Adjusted loss per share is calculated as adjusted net loss divided by the basic weighted average number of shares outstanding during the applicable period.

Please see ENTREC’s Management Discussion & Analysis for the three months ended March 31, 2017 for reconciliations of each of adjusted EBITDA and adjusted net loss to net loss, the most directly comparable financial measure calculated and presented in accordance with IFRS.

Forward-looking Statements

This press release contains forward-looking statements which reflect ENTREC’s current beliefs and are based on information currently available to ENTREC. These statements require ENTREC to make assumptions it believes are reasonable and are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond ENTREC’s control.

Examples of forward-looking statements in this press release and the key assumptions and risk factors involved in such statements include, but are not limited to the following: (i) ENTREC’s belief that it could see higher activity levels in its business as the year progresses that should result in meaningful customer pricing improvements and that these improvements, together with executing on its strategy to grow through geographic and industry diversification, should result in further improvements in its financial results. This belief is subject to the assumption that oil prices will be high enough in 2017 to encourage additional spending by oil and gas companies. The risks most likely to affect this growth include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (ii) ENTREC’s anticipation that its revenue from the Permian Basin region of western Texas will grow significantly in 2017. This expectation is subject to the assumption that oil prices will be sustained at a level that will allow oil producers in the region to achieve sufficient economic returns in order to increase their activity levels. The risks most likely to affect the Company’s revenue growth from this region include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iii) ENTREC’s expectation that it could see further growth in industry activity levels in the Bakken region of North Dakota and in the Western Canadian Sedimentary Basin. This expectation is subject to the assumption that oil prices will be high enough in 2017 to encourage additional spending by oil and gas companies in these regions. The risks most likely to affect its revenue growth from this region include volatility of the oil and natural gas sector, economy and cyclicality, and competition; (iv) ENTREC’s belief that MRO work in the Alberta oil sands region represents a growing market, will be less susceptible to changes in near-term commodity prices, and could contribute to 30-35% of the Company’s Canadian revenue in fiscal 2017 and continue to grow in 2018. This belief is based on the assumption that MRO customers will continue to utilize ENTREC’s services for their ongoing operational activities in the Alberta oil sands and that these activity levels will increase from 2016. The risks most likely to affect this assumption include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition; (v) ENTREC’s anticipation that revenue from power and infrastructure projects will also increase as 2017 progresses and that it is strongly positioned to capture more power-related opportunities. This belief is subject to a number of risks and uncertainties, including economy and cyclicality and competition; (vi) ENTREC’s expectation that construction-related activity in the Alberta oil sands will be weak over the next few years. This expectation is based on the assumption that low oil prices will deter oil and gas companies from making large construction investments in the Alberta oil sands region; and (vii)ENTREC’s cautious optimism that revenue in fiscal 2017 will be higher than 2016. This belief is based on the assumption the Company is able to achieve revenue growth from many of its end markets in 2017 and is subject to a number of risks. The risks most likely to affect this assumption include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, and competition;

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, ENTREC. These forward-looking statements are made as of the date of this press release. Except as required by applicable securities legislation, ENTREC assumes no obligation to update publicly or revise any forward-looking statements to reflect subsequent information, events, or circumstances.

For further information, please contact:

John M. Stevens – President & CEO

Telephone: (780) 960-5625

Jason Vandenberg – CFO

Telephone: (780) 960-5630

www.entrec.com

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