Mr. James Horvath reports

LONESTAR WEST ANNOUNCES 2016 YEAR END FINANCIAL RESULTS

Lonestar West Inc. has released the financial results for the year ended Dec. 31, 2016.

Key points for the year ended Dec. 31, 2016 include:

• Revenues decreased by 15.2 per cent to $42,641,196 for the year ended Dec. 31, 2016, from $50,304,204 in the prior-year comparable period.
• Gross margin (1) was 15.8 per cent for the year ended Dec. 31, 2016, compared with 20.2 per cent for the prior-year comparable period.
• Normalized EBITDAC (earnings before interest, taxes, depreciation, amortization and stock-based compensation excluding foreign exchange gains or losses, which 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) (2) was $1,191,588 or 2.8 per cent for the year ended Dec. 31, 2016, compared with $4,400,657 or 8.7 per cent for the prior-year comparable period.
• Normalized EBITDAC (3) per basic share decreased to four cents for the year ended Dec. 31, 2016, compared with 15 cents in the prior-year comparable period.
• A contingent loss of $450,000 (U.S.) was recorded as the result of an excise tax audit.
• Loss before taxes was $7,104,217 for the year ended Dec. 31, 2016, compared with a loss before taxes of $6,372,370 in the prior-year comparable period.
• Net loss for the year ended Dec. 31, 2016, was $8,350,844, compared with a net loss of $6,372,370 in the prior-year comparable period.

The company reported normalized EBITDAC (2) of $1,191,588 for the year ended Dec. 31, 2016, which is a decrease from $4,400,657 for the prior-year comparable period. The decrease in normalized EBITDAC is due primarily to a significant decrease in revenue offset by a marginal decrease in operating expenses. Other factors that directly impacted the revenues were a delay in contract negotiations with a major account in the United States, and the continued impact of the wildfires in Fort McMurray, Alta., that occurred in the second quarter of the year.

Key points for the three months ended Dec. 31, 2016, include:

The company reported negative normalized EBITDAC (2) of ($1,042,388) for the three-month period ended Dec. 31, 2016, which is a decrease from $11,107 for the prior-year equivalent period. The decrease in normalized EBITDAC for the three-month period ended Dec. 31, 2016, is related primarily to a lower gross margin resulting from a more competitive operating environment. In addition, there were costs associated with the closure and reorganization of bases that were not performing.

"Results for the fourth quarter were disappointing. Significant cost-cutting was partially completed, but the additional selling, general and administration expenses, and the continued decline of the revenue offset the impact of the cuts we made," commented James Horvath, president of Lonestar. "We are focused on working towards our goal of returning the business to its historical operating and profit margins. This includes continued cost-cutting into Q1 of 2017. The company has also reduced the number of bases in the U.S., and we will continue to direct our business development activities on expanding in our most profitable locations."

About Lonestar West Inc.

Based in Sylvan Lake, Alta., Lonestar West operates a fleet of 140 hydrovac, vacuum and auxiliary units throughout Western Canada, Ontario, California and the southeastern United States. It is focused on profitably expanding its HVAC services to become a major competitor in the North American market.

Notes

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

(2) This news release contains the term normalized EBITDAC as presented, and EBITDAC does not have any standardized meaning prescribed by international financial reporting standards and therefore it may not be comparable with the calculation of similar measures for other entities. Management uses normalized EBITDAC to analyze the operating performance of the business. Normalized 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, which 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) Normalized EBITDAC per share is calculated as normalized EBITDAC divided by the weighted-average shares outstanding for the period.

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