Mr. James Horvath reports

LONESTAR WEST ANNOUNCES Q2 2015 FINANCIAL RESULTS

Lonestar West Inc. has released the financial results for the three-month and six-month periods ended June 30, 2015.

Highlights for the three months ended June 30, 2015, include:

• Revenues increased 11.4 per cent to $10,643,600 from $9,555,922 in the previous-year equivalent period.
• Gross margin (1) increased to 18.7 per cent from 18.2 per cent in the previous-year equivalent period.
• Normalized EBITDAC (2) decreased 27.7 per cent to $584,432 from $808,682 in the previous-year equivalent period.
• Normalized EBITDAC (3) per basic share decreased 41.2 per cent to two cents from 3.4 cents in the previous-year equivalent period.
• Loss before taxes was $673,742, an increase of $496,749 in comparison with loss before taxes of $176,993 in the previous-year equivalent period.
• Net loss for the period was $781,970, an increase of $649,226 in comparison with a net loss of $132,744 in the previous-year equivalent period.

The company achieved normalized EBITDAC of $584,432 for the quarter ended June 30, 2015, which is a decrease from $808,682 for the prior-year equivalent period. The normalized EBITDAC margin was 5.5 per cent for the quarter ended June 30, 2015, as compared with 8.5 per cent for the prior-year comparable period. The decrease in EBITDAC is due primarily to higher selling, general and administrative expenses, which offset higher revenues and gross margin for the period. The higher selling, general and administrative expenses were due primarily to $402,808 of bad debt expense recorded during the period, on account of outstanding accounts receivable balances where the collections of certain accounts has been determined to be unlikely.

Highlights for the six months ended June 30, 2015, include:

• Revenues increased 13.7 per cent to $23,956,581 from $21,074,881 in the previous-year equivalent period.
• Gross margin (1) increased to 22.6 per cent from 22.1 per cent in the previous-year equivalent period.
• Normalized EBITDAC (2) decreased 3.6 per cent to $2,827,139 from $2,933,376 in the previous-year equivalent period.
• Normalized EBITDAC (3) per basic share decreased 24.2 per cent to 9.7 cents from 12.8 cents in the previous-year equivalent period.
• Loss before taxes was $295,515, a decrease of $1,231,461 in comparison with income before taxes of $935,946 in the previous-year equivalent period.
• Loss for the period was $571,005, a decrease of $1,272,965 in comparison with net earnings of $701,960 in the previous-year equivalent period.

The company achieved normalized EBITDAC of $2,827,139 for the six-month period ended June 30, 2015, which is a decrease from $2,933,376 for the prior-year equivalent period. The normalized EBITDAC margin was 11.8 per cent for the six-month period ended June 30, 2015, as compared with 13.9 per cent for the prior-year comparable period. The decrease in EBITDAC is due primarily to higher selling, general and administrative expenses, which offset higher revenues and gross margin for the period. The higher selling, general and administrative expenses were due primarily to the $402,808 of bad debt expense recorded during the period as referenced previously.

"The company is pleased with the growth in both revenue and gross margin percentage, considering the ongoing depressed commodity prices in the second quarter of fiscal 2015," commented James Horvath, president and chief executive officer of Lonestar. "Our growth strategy in the United States has contributed to the increase in revenue, and we will continue to focus on expanding these underserviced areas. The second quarter EBITDAC was adversely impacted by the depressed energy market, along with bad debt expense recorded during the period. Management is focused on improving our credit and collections process and other internal processes with the addition of an experienced chief financial officer."

The company has been successful in executing its planned growth strategy with three transformational acquisitions and organic expansion throughout the southern United States, which has positioned Lonestar as a major hydrovac and vacuum services provider in North America. The company recently announced the Hewitt Specialty Services LLC acquisition, providing a base to service the Cushing, Okla., region to complement its existing base in Elk City, Okla., and provide an expanded presence in the south-central United States.

The company's fleet remained at 152 units from March 31, 2015, to June 30, 2015. Since that time, eight units have been added, including six units added on a short-term rental basis as part of the Hewitt acquisition, for a total of 160 units.

Notes

(1) Gross margin is calculated as gross profit as a percentage of revenues.

(2) This news release contains the term EBITDAC as presented and does not have any standardized meaning prescribed by international financial reporting standards (IFRS), and, therefore, it may not be comparable with the calculation of similar measures for other entities. Management uses EBITDAC to analyze the operating performance of the business. EBITDAC as presented is not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. It is defined as earnings before interest, taxes, depreciation, amortization, and stock-based compensation, excluding foreign exchange gains or losses that are primarily related to the U.S.-dollar activities of the company and can vary significantly depending on exchange rate fluctuations, which are beyond the control of the company.

(3) EBITDAC per share is calculated as EBITDAC divided by the weighted average shares outstanding for the period.

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