Third QUARTER 2018 For the three and nine months ended September 30, 2018

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1 Third QUARTER For the three and nine months ended September 30, This Management s Discussion and Analysis (MD&A) for ENTREC Corporation ( ENTREC, the Company, we, us or our ) was prepared as of November 7, to assist readers in understanding our financial performance for the three and nine months ended September 30,. This MD&A should be read in conjunction with the accompanying unaudited interim consolidated financial statements for the three and nine months ended September 30, and the notes contained therein. In addition, this MD&A should be read in conjunction with our MD&A and audited consolidated financial statements for the year ended December 31, prepared in accordance with International Financial Reporting Standards (IFRS). Our consolidated financial statements are presented in Canadian dollars, our functional currency. This MD&A contains forward-looking statements. Please see Note Regarding Forward-Looking Statements for a discussion of the risks, uncertainties and assumptions used to develop our forward-looking statements. This MD&A also refers to certain non-ifrs financial measures that we present to assist users in assessing our performance. Non- IFRS financial measures do not have any standard meaning under IFRS and may not be comparable to similar measures presented by other issuers. These measures are identified and described under Non-IFRS Financial Measures. Accounting principles applied under IFRS require us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We believe our estimates and assumptions are reasonable based on the information available at the time that these estimates and assumptions are made. Actual results may differ from these estimates. Additional information on ENTREC, including our most recently filed annual information form dated March 6, and audited consolidated financial statements, is available on the System for Electronic Document Analysis and Retrieval (SEDAR) website at Our Business We are a heavy haul transportation and crane solutions provider to the oil and natural gas, construction, petrochemical, mining and power generation industries. Operating from 11 locations throughout western Canada, North Dakota, Colorado and Texas, we currently employ approximately 600 employees and operate a fleet of 190 cranes, 750 multi-wheeled trailers and 190 tractors, as well as 375 lines of specialized platform trailers. Our crane fleet consists of rough-terrain cranes, mobile cranes, crawlers, carry decks and picker trucks. Our tractor and trailer fleet consists of tractor units, winch trucks, and a wide range of conventional heavy haul trailer units. Our common shares trade on the Toronto Stock Exchange (TSX) under the trading symbol ENT. TSX: ENT Page 1

2 Third Quarter Selected Financial Information $ thousands, except per share amounts and margin percent Three Months Ended Nine Months Ended Revenue 43,400 36, , ,888 Gross profit 8,709 6,373 20,772 18,027 Gross margin 20.1% 17.4% 16.3% 16.4% Adjusted EBITDA (1) 5,164 2,795 10,217 7,767 Adjusted EBITDA margin (1) 11.9% 7.6% 8.0% 7.1% Per share (1) Adjusted net loss (1) (1,291) (3,432) (9,194) (10,996) Per share (1) (0.01) (0.03) (0.08) (0.10) Net loss (192) (3,768) (9,706) (11,387) Per share basic (0.00) (0.03) (0.09) (0.10) Per share diluted (0.00) (0.03) (0.09) (0.10) Cash provided by operating activities 1,265 (3,368) 227 (4,250) Funds from operations (1) 2, ,382 2,308 Per share (1) Basic weighted average shares outstanding 109, , , ,516 Total shares outstanding 109, , , ,562 As at $ thousands Dec 31 Working capital (1) 29,193 27,052 Total assets 217, ,496 Total liabilities 181, ,705 Shareholders equity 35,831 44,791 Net tangible asset value (1) 60,993 66,798 Note: (1) Identified and defined under Non-IFRS Financial Measures. Business Highlights Revenue for the quarter ended September 30, increased by 18% to $43.4 million from $36.7 million in, reflecting significant revenue growth from our operations in the United States; Adjusted EBITDA increased to $5.2 million in Q3 from $2.8 million in, while adjusted net loss decreased to $1.3 million from $3.4 million a year earlier; and On October 1,, we acquired Capstan Hauling Ltd. based in Grande Prairie, Alberta. TSX: ENT Page 2

3 Third Quarter Overall Performance, Strategy and Outlook Revenue for the three months ended September 30, increased by 18% to $43.4 million from $36.7 million in due to significant growth from our operations in the United States. Our US revenue increased by 54% to $21.8 million in from $14.2 million last year and now represents 50% of our consolidated revenue. Higher activity levels related to oil and natural gas in North Dakota, along with improved customer pricing, were the largest drivers of this growth. In addition, our recent expansion into Colorado generated additional revenue of $2.6 million in the quarter. Our revenue in Canada was relatively flat in the quarter, declining to $21.6 million in Q3 from $22.5 million last year. On a year-to-date basis, revenue increased by 16% to $127.4 million from $109.9 million in due to higher activity levels within our US operations. Our US revenue increased by 54% to $57.2 million in the first nine months of from $37.1 million in. Revenue in Canada declined slightly to $70.2 million during the nine months ended September 30, from $72.8 million last year. This decline was caused from slower activity levels related to conventional oil and gas, which was due to both less construction project activity as well as lower spending on upstream activities by our customers. Offsetting a portion of the revenue decline in Canada for the nine month period was higher revenue related to oil sands MRO work. Adjusted EBITDA increased to $5.2 million in the third quarter of from $2.8 million last year due to the higher revenue and an improved gross margin. The higher revenue and margins also caused our adjusted net loss to improve to $1.3 million from $3.4 million last year. On a year-to-date basis, adjusted EBITDA increased to $10.2 million from $7.8 million last year. Strategy and Outlook Overall, our strategy to grow our business through geographic and industry diversification will be focused on the following initiatives as we move into 2019: Significantly expanding our business in the United States; Obtaining additional MRO work with existing and new clients; Pursuing construction project work related to LNG, pipelines, infrastructure, power generation, and other industries; Cross-selling crane services and specialized transportation services to existing clients; and Acquiring new customers through a continued focus on safety and customer service. United States The outlook for our US business continues to be very positive as we move into Growing demand for our services in a recovering oil and gas sector has led to both increased activity levels as well as higher customer pricing. Assuming oil prices can be maintained at current levels or increase further in 2019, we should continue to see higher industry activity levels in the United States that should result in further improvements in profitability. In the fall of, we expanded our operations into Colorado. Our new operations in Colorado are focused on supporting several industries, including the oil and gas sector, and other general construction. We are currently experiencing strong growth in this region. TSX: ENT Page 3

4 Third Quarter Despite strong demand for our services, the profitability of our Texas operations has been severely hampered in by high operating costs and labour shortages. We are executing a strategy to improve our profitability in this region in the fourth quarter of. In October, we established our own employee accommodation facilities to house current and future staff. We are also supporting our Texas operations with additional employees from other regions. Canada Due to macro-economic factors and low natural gas prices, our outlook for the oil and natural gas industry in western Canada has been very cautious. These macro-economic factors include pipeline constraints, which have contributed to significant discounts in the market price for the oil produced in western Canada compared with other jurisdictions, as well as rising carbon taxes and increasing regulatory requirements to achieve government approvals for large industrial projects. However, our outlook for western Canada is beginning to improve. First, we expect revenue from our MRO work in the Alberta oil sands region will continue to be steady throughout the remainder of and into fiscal Second, LNG Canada s positive final investment decision on its $40 Billion liquefied natural gas (LNG) project in Kitimat, B.C. is very positive for the natural gas industry in Canada and for ENTREC. We expect to benefit from this project in a number of ways, including: Construction. We expect to benefit from both direct and indirect construction activity in the Kitimat region to support construction of the LNG facility and supporting infrastructure. Having been based in Terrace and Kitimat for the past 30 years, we have a very strong local presence in the region; Pipelines. We expect to benefit from both direct and indirect activity related to the construction of pipelines and supporting infrastructure, which will feed natural gas to LNG Canada s terminal; and Exploration and Production. We expect to benefit from an anticipated increase in natural gas exploration and production activity in north-west Alberta and north-east B.C., which will be required to support LNG Canada s natural gas needs. Capstan Hauling Inc. ( Capstan ) We are also pleased to have completed our acquisition of Capstan on October 1,. Based in Grande Prairie, Alberta, Capstan is a leading provider of heavy haul transportation services to the oil and natural gas industry in north-west Alberta and north-east B.C. Capstan has approximately 45 employees and lease operators and operates an extensive equipment fleet valued in excess of $9.0 million. Capstan s fleet consists of mobile cranes, picker trucks, winch trucks and a wide variety of multi-wheeled trailers. With LNG Canada s recent final investment decision to construct a LNG facility in Kitimat, this acquisition is very timely for ENTREC. Capstan also has a very strong reputation for customer service and when combined with our existing operations in the region, we will be well positioned to benefit from improving market fundamentals. In conjunction with the acquisition, we also merged our Grande Prairie oilfield transportation division with Capstan and will operate the combined business under the Capstan brand. The shareholders of Capstan have also retained a large ownership interest in the combined business post-acquisition and the existing Capstan management will lead and manage the combined business going forward. TSX: ENT Page 4

5 Third Quarter The aggregate consideration paid at closing consisted of: (i) the issuance of common shares in a subsidiary of ENTREC at a value of $4.0 million; (ii) a promissory note of $3.0 million bearing interest at an annual rate of 5.00% and due September 30, 2023; and (iii) cash of $10.0 million less outstanding debt and finance lease obligations at closing and less certain holdback amounts. The final purchase price remains subject to adjustment based on Capstan s working capital as at September 30, as well as other post-closing adjustments. The target working capital balance is $3.7 million. Also included in the acquisition of Capstan was real estate assets valued at approximately $6.0 million. We are currently pursuing a sale-leaseback transaction related to the real estate assets. In conjunction with the acquisition, Current Financial Corp., a non-arm s length party, provided a bridge financing loan to us in the amount of $3.5 million. The bridge financing loan was incurred to help temporarily finance the acquisition of Capstan until such time as we are able to complete our planned sale lease-back of the Capstan real estate. Pursuant to the terms of the lenders approval of the acquisition, we are required to complete the sale lease-back by December 31, or a later date as mutually agreed. The common shares of a subsidiary of ENTREC that were issued to the vendors will be presented as a minority interest in our consolidated statement of financial position. In addition, subject to the approval of the TSX at the time of conversion, and based on the fair market value at the time of conversion, these common shares are convertible into common shares of ENTREC at the greater of: (i) the 10 day weighted average trading price of ENTREC common shares on the TSX at the time of conversion and (ii) $0.40 per share. Overall outlook 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 western Canada, North Dakota, Colorado, 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. Results of Operations Revenue $ thousands Three Months Ended Nine Months Ended Sept30 Revenue related to owned/leased equipment fleet Cranes 22,022 15,612 58,765 44,358 Automotive equipment 10,162 9,466 29,310 30,248 Trailers 2,530 2,670 8,156 8,261 Other equipment ,501 2,452 35,476 28,549 98,732 85,319 Labour revenue (not directly applied to equipment) 1,859 3,744 8,975 9,422 3 rd party revenue (contractor / permitting / wire lifting) 5,509 3,558 16,901 12,707 Other revenue ,780 2,440 Total revenue 43,400 36, , ,888 TSX: ENT Page 5

6 Third Quarter Revenue for the three months ended September 30, increased by 18% to $43.4 million from $36.7 million in due to significant growth from our operations in the United States. Our US revenue increased by 54% to $21.8 million in from $14.2 million last year. Higher activity levels related to oil and natural gas in North Dakota, along with improved customer pricing, were the largest drivers of this growth. In addition, our recent expansion into Colorado generated additional revenue of $2.6 million in the quarter. Our revenue in Canada was relatively flat in the quarter, declining to $21.6 million in Q3 from $22.5 million last year. On a year-to-date basis, revenue increased by 16% to $127.4 million from $109.9 million in due to higher activity levels within our US operations. Our US revenue increased by 54% to $57.2 million in the first nine months of from $37.1 million in. Revenue in Canada declined slightly to $70.2 million during the nine months ended September 30, from $72.8 million last year. This decline was caused from slower activity levels related to conventional oil and gas, which was due to both less construction project activity as well as lower spending on upstream activities by our customers. Offsetting a portion of the revenue decline in Canada for the nine month period was higher revenue related to oil sands MRO work. Crane revenue increased to $22.0 million for the quarter ended September 30, from $15.6 million in. Likewise, on a year-to-date basis, crane revenue increased to $58.8 million in from $44.4 million last year. These increases were caused from higher revenue from our mobile cranes servicing the oil and gas industry in the United States. This higher revenue was due to both strong utilization and from adding additional mobile cranes to our fleet in. Mobile cranes were added from capital expenditures as well as from 3 rd party crane rentals. The majority of our crane rentals are under rent-to-own ( RPO ) arrangements whereby we have the option to acquire the cranes in the future and apply a large portion of our previous rental payments against the purchase price. Transportation revenue generated from our automotive fleet during the three months ended September 30, increased to $10.2 million from $9.5 million in. During the nine months ended September 30,, revenue from our automotive fleet declined slightly to $29.3 million from $30.2 million last year. While activity levels related to our oilfield transportation services in the United States have increased in, this increase was offset by a decline in activity levels in Canada. Revenue from our trailer fleet of $2.5 million and $8.2 million, respectively, for the three and nine months ended September 30, was comparable to the revenues reported for the same periods in. 3 rd party contractor, wire lifting and permitting revenue increased to $5.5 million for the three months ended September 30, from $3.6 million last year. Likewise, for the nine months ended September 30,, 3 rd party revenues increased to $16.9 million from $12.7 million last year. In, we generated significantly higher revenue from transportation permits required during the spring break up period in North Dakota. In addition, we generated higher revenue from 3 rd party contractors in Texas to support customer demand for our oilfield transportation services in the region. Also contributing to the higher 3 rd party contractor revenue in Q3 was additional revenue of $0.6 million related to a construction project on the US Gulf Coast that was completed in March (see Related Party Transactions section for additional information). Direct Costs and Gross Profit $ thousands, except margin % Three Months Ended Nine Months Ended Revenue 43,400 36, , ,888 Direct costs 34,691 30, ,616 91,861 Gross profit 8,709 6,373 20,772 18,027 Gross margin 20.1% 17.4% 16.3% 16.4% TSX: ENT Page 6

7 Third Quarter Our direct costs include both variable components (such as labour, fuel, and third-party costs such as wire lifting, permitting, hired pilots, lease operators and subcontractors) as well as fixed costs that change little from period to period. Certain variable costs, such as wire lifting expenses, are typically billed to our customers on a cost-plus basis. Fixed direct costs include lease and rental costs, insurance and licensing, indirect labour, and operations salaries, among other items. Direct costs consisted of the following main components: $ thousands Three Months Ended Nine Months Ended % Rev % Rev % Rev % Rev Direct labour 13, % 12, % 39, % 36, % Equipment costs 9, % 7, % 28, % 23, % 3 rd party contractor, permitting and wire lifting 4, % 3, % 17, % 12, % Shop rental, indirect labour and other indirect costs 6, % 6, % 20, % 19, % Total 34, % 30, % 106, % 91, % Quarter review Higher revenue during the three months ended September 30, caused gross profit to increase to $8.7 million from $6.4 million in. Gross margin, as a percentage of revenue, also increased to 20.1% from 17.4% last year. Our gross margin was impacted by the following factors: Direct labour. Direct labour declined to 31.1% of revenue in the third quarter of from 33.3% of revenue in. This decline was driven from changes in revenue mix as we generated higher revenue from 3 rd party contractors in Q3 as well as more revenue from cranes services. In addition, higher customer pricing in the United States also contributed to the decline in direct labour percentage. Equipment costs. Equipment costs increased to $9.8 million in the third quarter of from $7.9 million in due to higher equipment rental and fuel costs, which were incurred to support increased activity levels. Equipment costs as a percentage of revenue also increased from the prior year due to higher equipment rental costs, which increased to $1.4 million in Q3 from just $0.3 million last year. The majority of our equipment rental expense relates to additional cranes we acquired under RPO arrangements over the past year to support our growth in the United States. 3 rd party costs. 3 rd party contracting, permitting and wire lifting costs increased in the third quarter of from the prior year as we incurred higher 3 rd party transportation costs in Texas to support customer demand for our oilfield transportation services in the region. Shop rental, indirect labour and other indirect costs. Shop rental, indirect labour and other indirect costs decreased slightly to $6.5 million in the third quarter of from $6.7 million in. In addition, as a result of the relatively fixed nature of these expenditures, shop rental, indirect labour and other indirect costs decreased to 14.9% of revenue in from 18.4% of revenue in due to our revenue growth over the past year. TSX: ENT Page 7

8 Third Quarter Nine-month review Gross profit during the nine months ended September 30, increased to $20.8 million from $18.0 million in. Gross margin, as a percentage of revenue of 16.3% year-to-date in was consistent with the 16.4% margin reported last year. Several factors contributed to the changes in gross margin. The biggest factor that negatively impacted the gross margin in was a net loss provision (the JV Driver Loss Provision ) of $1.3 million incurred for the nine months ended September 30, related to a construction project on the US Gulf Coast (see Related Party Transactions for additional information). Excluding this contract loss, gross profit would have increased to 22.1 million or 17.4% of revenue for the nine months ended September 30,. Other factors affecting the gross margin included: Direct labour. Direct labour declined to 31.4% of revenue in the first nine months of from 33.4% of revenue in. This decline was driven by a change in revenue mix towards more crane services in as well as from increased customer pricing in the United States. Equipment costs. Equipment costs increased to $28.4 million during the nine months ended September 30, from $23.3 million in due to higher equipment rental and fuel costs, which were incurred to support increased activity levels. Equipment costs as a percentage of revenue also increased to 22.3% of revenue in from 21.2% of revenue last year due to higher equipment rental costs, which increased to $3.1 million in from just $0.6 million last year. The majority of our equipment rental expense relates to additional cranes we acquired under RPO arrangements over the past year to support our growth in the United States. In addition, higher fuel prices caused our fuel costs to increase to 7.3% of revenue in from 6.5% of revenue last year. A portion of the fuel cost increase was attributable to an increase in the Alberta carbon tax levy on January 1,. 3 rd party costs. 3 rd party contracting, permitting and wire lifting costs increased significantly in the first nine months of from the prior year. In, we incurred significantly higher transportation permitting costs in North Dakota due to increased activity levels during the typical spring road ban restriction period. In addition, we incurred higher 3 rd party contractor costs in Texas to support customer demand for our oilfield transportation services in the region as well as 3 rd party crane costs associated with a construction project on the US Gulf Coast. Shop rental, indirect labour and other indirect costs. Shop rental, indirect labour and other indirect costs increased to $20.6 million during the nine months ended September 30, from $19.7 million in. Over the past year, we incurred incremental shop rental and other operating costs associated with growth in our US operations. However, as a result of the relatively fixed nature of these expenditures, shop rental, indirect labour and other indirect costs declined to 16.2% of revenue in from 17.9% of revenue in due to our revenue growth over the past year. General and Administrative (G&A) Expenses $ thousands Three Months Ended Nine Months Ended General and administrative expenses 3,819 3,743 10,829 10,535 % of revenue 8.8% 10.2% 8.5% 9.6% G&A expenses were $3.8 million for the quarter ended September 30,, which was very similar to the $3.7 million expense we reported in the prior year. On a year-to-date basis, G&A expenses increased slightly to $10.8 million from $10.5 million last year. The increase on a year-to-date basis was driven primarily by growth in our operations in the United States over the past year, including our expansion into Colorado in the fall of. TSX: ENT Page 8

9 Third Quarter In addition, G&A expenses for the three and nine months ended September 30, included business acquisition and integration costs of $0.3 million (three and nine months ended September 30, - $0.2 million and $0.3 million, respectively). The costs incurred in Q3 primarily related to the acquisition of Capstan and integration of our transportation division in Grande Prairie with Capstan. Excluding the business acquisition and integration costs, G&A expenses in the third quarter of would have been $3.5 million compared to $3.6 million in. On a year-to-date basis, G&A expenses, excluding the business acquisition and integration costs, would have been $10.6 million compared to $10.3 million in. Adjusted EBITDA $ thousands Three Months Ended Nine Months Ended Adjusted EBITDA (1) 5,164 2,795 10,217 7,767 % of revenue 11.9% 7.6% 8.0% 7.1% Note: (1) Identified and defined under Non-IFRS Financial Measures. Due to the higher revenue and gross margin, adjusted EBITDA increased to $5.2 million in the quarter ended September 30, from $2.8 million last year. As a percentage of revenue, adjusted EBITDA margin also increased to 11.9% from 7.6% last year. On a year-to-date basis, higher revenue also caused adjusted EBITDA to increase to $10.2 million or 8.0% of revenue from $7.8 million or 7.1% of revenue in. However, partially offsetting the higher adjusted EBITDA was the JV Driver Loss Provision of $1.3 million incurred in related to a construction project on the US Gulf Coast that was completed in Q1 (see Related Party Transactions section for additional information). Excluding this loss, adjusted EBITDA would have been $11.5 million for the nine months ended September 30,. Depreciation and Amortization $ thousands Three Months Ended Nine Months Ended Depreciation of property, plant and equipment 4,872 5,158 14,886 16,025 Amortization of intangible assets Total 4,893 5,278 15,089 16,510 During the three and nine months ended September 30, we incurred depreciation of property, plant and equipment of $4.9 million and $14.9 million, respectively. These costs were lower than in the comparative periods in due to dispositions of under-utilized equipment over the past 12 months. Amortization of intangible assets during the three and nine months ended September 30, also declined from the prior year as certain intangible assets related to non-compete agreements were fully amortized. Segment Contribution Our activities are conducted in two geographic segments: Canada and the United States. All activities in both segments are related to the provision of heavy haul transportation and crane services to the oil and natural gas, construction, petrochemical, mining and power generation industries. TSX: ENT Page 9

10 Third Quarter Direct costs and general and administrative expenses directly attributable to the two operating segments are included as operating expenses for these segments. There are no significant inter-segment revenues. Segment contribution represents earnings before income taxes for each operating segment prior to unallocated corporate items. We use segment contribution as a key measure to analyze the financial performance of our geographic business segments. $ thousands Three Months Ended Nine Months Ended Contribution by segment: Canada (471) (173) (1,339) (973) United States 2, , Total segment contribution (loss) 2, ,179 (120) Less: unallocated items: Corporate costs 2,510 2,748 7,122 8,413 Amortization of intangible assets Share-based compensation Loss (gain) on disposal of property, plant and equipment 121 (204) 90 (346) Finance items 934 2,250 7,644 5,479 Loss before income taxes (1,156) (4,849) (13,188) (14,667) Quarter review Segment contribution from Canada was negative in the third quarter of as our Canadian business continued to be hampered by low customer pricing and tight operating margins, which was due to the weak overall demand for crane and heavy haul transportation services and an on-going surplus of equipment in the western Canadian crane and heavy haul market. Segment contribution from the United States increased to $3.0 million in Q3 from $0.4 million last year. Significantly higher revenue in North Dakota and Colorado, along with improved customer pricing in North Dakota, were the primary drivers of this increase. Offsetting a portion of the increase in Q3 were operating losses we incurred in our Texas operations during the quarter. Higher operating costs and labour shortages in the region contributed to the loss. Unallocated corporate costs declined to $2.5 million in Q3 from $2.7 million in. Cost reduction initiatives over the past year, including reductions in personnel and other corporate costs, caused a portion of the decrease. In addition, changes in how certain costs were allocated to the operating segments also contributed to the reduction. Nine-month review Segment loss in Canada for the nine months ended September 30, increased from the prior year due to a decrease in revenue from this segment. Offsetting a portion of the impact of the lower revenue was lower depreciation expense, which declined to $11.2 million in from $13.8 million last year. This decline was caused from the disposal of under-utilized equipment, including transfers of equipment to the United States, over the past year. TSX: ENT Page 10

11 Third Quarter Segment contribution from the United States for the nine months ended September 30, increased to $3.5 million from $0.9 million last year due to higher revenue and improved gross margins. The higher gross margin was caused from both higher customer pricing and better absorption of the fixed components of our operating costs. Offsetting a portion of the improvement year-to-date in was the JV Driver Loss Provision of $1.3 million incurred in relation to a construction project on the US Gulf that was completed in Q1 (see Related Party Transactions section for additional information). Excluding this loss, segment contribution would have been $4.8 million for the nine months ended September 30,. Unallocated corporate costs declined to $7.1 million for the nine months ended September 30, from $8.4 million in. Cost reduction initiatives over the past year, including reductions in personnel and other corporate costs, caused a portion of the decrease. In addition, changes in how certain costs were allocated to the operating segments also contributed to the reduction. Share-based Compensation $ thousands Three Months Ended Nine Months Ended Share-based compensation Share-based compensation represents the fair value compensation cost associated with share options and restricted shares. The notes to the accompanying unaudited interim consolidated financial statements for the three and nine months ended September 30, provide a detailed discussion of our share options and restricted shares. The smaller expense incurred year-to-date in fiscal was due to a lower share price applied in calculating the fair value and corresponding stock-based compensation for our issued options and restricted shares. Loss (Gain) on Disposal of Property, Plant and Equipment $ thousands Three Months Ended Nine Months Ended Loss (gain) on disposal of property, plant and equipment 121 (204) 90 (346) We disposed of property, plant and equipment for net proceeds of $4.3 million during the nine months ended September 30,, which resulted in a loss on disposal of $90 thousand. In the comparative nine months ended September 30,, we disposed of property, plant and equipment for net proceeds of $7.4 million, which resulted in a gain on disposal of $0.3 million. These dispositions were all incurred in the normal course of operations. TSX: ENT Page 11

12 Third Quarter Finance Items $ thousands Three Months Ended Nine Months Ended Interest long-term debt 1,961 1,329 5,670 3,654 Interest convertible debentures ,326 2,641 Interest obligations under finance lease Interest bank indebtedness and other short-term obligations Foreign exchange gain on long-term debt (1,837) - (378) (856) Total 934 2,250 7,644 5,479 Interest on long-term debt for the three and nine months ended September 30, increased from the prior year due to higher interest rates and higher debt balances outstanding. Over the past 18 months, the Bank of Canada increased its key interest rate by a total of 125 basis points, which caused corresponding increases to the interest rates applicable to our long-term debt. In addition, following the amendment and extension to our senior secured asset-based credit facility (the ABL Facility ) in October, the credit spread applicable to the bank prime, CDOR, or LIBOR rates on our debt increased. The average effective interest rate on our long-term debt at September 30, was 5.42% compared to 3.94% at September 30,. The interest on convertible debentures arises from our outstanding $21.8 million principal of unsecured convertible debentures (the Debentures ). The decrease in interest expense in fiscal was due to a $3.5 million repayment of the principal balance of the Debentures in November. A large portion of our ABL Facility was carried in USD over the past year. Therefore, as a result of fluctuations in the US dollar during each of these periods, we recognized a foreign exchange gain on long-term debt of $1.8 million and $0.4 million (three and nine months ended September 30, - $nil and a gain of $0.9 million), respectively, during the three and nine months ended September 30,. We carry a large portion of our ABL Facility in USD to hedge against future decreases in our excess borrowing capacity that may be caused by a decline in the USD. As the market value for the majority of our equipment is generally valued in US dollars, the orderly liquidation value of our fleet is impacted by changes in the value of the USD. Additional information regarding our debt facilities is provided under Debt and Contractual Obligations. Income Taxes For the three months ended September 30,, income tax expense recovery was $1.0 million, representing an effective income tax rate of 83.4% on a loss before income taxes of $1.2 million. For the nine months ended September 30,, income tax recovery was $3.5 million, representing an effective tax rate of 26.4% on a loss before income taxes of $13.2 million. Although our statutory combined federal-provincial corporate income tax rate in Alberta is currently 27.0%, our actual effective rate was impacted by various items, including non-deductible expenses such as share-based compensation, rate adjustments for income in other provincial and foreign jurisdictions, and capital gains. The high effective income tax recovery rate in the third quarter of was primarily attributable to the foreign exchange gain on long-term debt recognized in Q3 (treated as a capital gain for income tax purposes) as well as from earnings generated from our US operations. No income tax expense was recognized related to our US operations in Q3 as the taxable income was fully offset by tax loss carry-forwards and other deductible temporary differences in our U.S. subsidiary that were not previously recognized. TSX: ENT Page 12

13 Third Quarter For the three months ended September 30,, income tax expense recovery was $1.1 million, representing an effective income tax rate of 22.3% on a loss before income taxes of $4.8 million. For the nine months ended September 30,, income tax recovery was $3.3 million, representing an effective tax rate of 22.4% on a loss before income taxes of $14.7 million. The lower effective income tax recovery rate in was primarily attributable to not recognizing a deferred income tax recovery related to tax losses and other deductible temporary differences in our U.S. subsidiary. Income tax provisions, including current and deferred income tax assets and liabilities, require estimates and interpretations of federal and provincial income tax rules and regulations, and judgments as to their interpretation and application to our specific situation. Therefore, it is possible the ultimate value of our income tax assets and liabilities could change in the future and these changes could have a material effect on our consolidated financial statements. Net Loss and Loss per Share $ thousands, except for per share amounts Three Months Ended Nine Months Ended Sept30 Net loss (192) (3,768) (9,706) (11,387) Basic and diluted weighted average number of shares 109, , , ,516 Loss per share - basic (0.00) (0.03) (0.09) (0.10) Loss per share - diluted (0.00) (0.03) (0.09) (0.10) We generated a net loss of $0.2 million or $0.00 per share during the three months ended September 30, compared with a net loss of $3.8 million or $0.03 per share in. The significant improvement in was attributable to higher revenue and adjusted EBITDA, as well as lower depreciation expense and a $1.8 million foreign exchange gain on long-term debt. During the nine months ended September 30, we incurred a net loss of $9.7 million, compared to a net loss of $11.4 million in. Contributing to the lower net loss was higher revenue and lower depreciation expense yearto-date in. Summary of Quarterly Data $ thousands, except per share amounts Sept June March Dec Sept June March Dec 2016 Revenue 43,400 43,921 40,067 38,798 36,665 35,925 37,298 30,027 Adjusted EBITDA (1) 5,164 4, ,811 2,795 2,691 2, Adjusted net loss (1) (1,291) (2,685) (5,217) (2,660) (3,432) (3,878) (3,683) (8,707) Net loss (192) (4,436) (5,078) (2,929) (3,768) (4,215) (3,404) (10,791) Adjusted loss per share (1) (2) (0.01) (0.02) (0.05) (0.02) (0.03) (0.04) (0.03) (0.08) Loss per share basic (2) (0.00) (0.04) (0.05) (0.03) (0.03) (0.04) (0.03) (0.10) Loss per share diluted (2) (0.00) (0.04) (0.05) (0.03) (0.03) (0.04) (0.03) (0.10) Notes: (1) Identified and defined under Non-IFRS Financial Measures. (2) Quarterly loss per share is not additive and may not equal the annual loss per share reported. This is due to the effect of shares issued during the year on the basic weighted average number outstanding. TSX: ENT Page 13

14 Third Quarter Revenue declined slightly to $43.4 million in the quarter ended September 30, from $43.9 million in the previous quarter ended June 30 th. Higher revenue from our US operations was offset by a revenue decline in Canada, which was negatively impacted by weaker activity levels related to heavy haul transportation services. Despite the lower revenue, adjusted EBITDA and adjusted net loss improved in the 3 rd quarter due to a higher gross margin as well as a $0.6 million revenue recovery related to the JV Driver Loss Provision that was originally recognized in Q1. Revenue increased by 10% to $43.9 million in the quarter ended June 30, from $40.1 million in the previous quarter ended March 31, due to higher revenue in the United States. Revenue from our US operations increased to $19.1 million from $16.3 million last quarter due to higher utilization of our mobile cranes servicing the oil and gas industry. The higher revenue, combined with a higher gross margin, caused a corresponding improvement in adjusted EBITDA and adjusted net loss in the quarter. Also contributing to the positive variance from Q1 was the JV Driver Loss Provision of $1.9 million that was incurred in the previous quarter ended March 31,. Revenue for the quarter ended March 31, increased by 3% to $40.1 million from $38.8 million in the previous quarter ended December 31, due to higher revenue in Canada. Revenue from our Canadian operations increased by $1.2 million to $23.7 million in Q1 as a result of higher activity levels in oil sands MRO. Revenue from our US operations remained consistent at $16.3 million in Q1. The JV Driver Loss Provision, which reduced our US revenue by $1.9 million in the quarter, was fully offset by higher activity levels in the recovering oil and gas sector as well as our expansion into the state of Colorado. Due to the JV Driver Loss Provision and higher general and administrative expenses in Q1, we experienced a lower adjusted EBITDA and higher adjusted net loss in the quarter, compared to Q4. Revenue increased by 6% to $38.8 million in the quarter ended December 31, from the previous quarter ended September 30, due to growth from our US operations. Revenue from our US operations increased by $2.1 million or 15% from the previous quarter. The higher revenue, combined with an increased gross margin in Q4, caused adjusted EBITDA to increase and our adjusted net loss to decline from the previous quarter. Revenue in the three months ended September 30, increased slightly from the previous quarter ended June 30, due to growth from our US operations. The higher revenue also contributed to slightly higher adjusted EBITDA and a lower adjusted net loss in the quarter. Revenue decreased slightly to $35.9 million in the quarter ended June 30, from $37.3 million in the previous quarter ended March 31,. This decline was primarily attributable to our seasonal spring break-up period in our second quarters when the spring snow melt and wet conditions make the ground unstable and less capable of supporting vehicles with heavy loads. Despite the lower revenue, adjusted EBITDA increased from the prior quarter due to improving gross margins from our US operations and lower sub-contractor expenses. Adjusted net loss increased slightly in the second quarter of due to a loss on disposal of property, plant and equipment of $0.4 million compared to a gain of $0.6 million in the prior quarter ended March 31,. Revenue for the quarter ended March 31, increased by 24% to $37.3 million from $30.0 million in the previous quarter ended December 31, With higher crude oil prices, we experienced higher activity levels for our crane and transportation services supporting oil and gas exploration and production activities in both Canada and the United States. Due to the higher revenue, we also experienced higher adjusted EBITDA and a lower adjusted net loss in the quarter. In addition, we had also incurred an incremental $3.6 million increase in our income tax provision in the previous quarter ended December 31, 2016 due to not recognizing any deferred tax assets related to our U.S. subsidiary. Our operations follow a slightly seasonal pattern, with revenue traditionally being lower in the three months ended June 30 and three months ended December 31 than in the other quarters. Due to this seasonality, revenue and net (loss) income reported in an individual quarter may not proportionately reflect revenue and net (loss) income on an annual basis. TSX: ENT Page 14

15 Third Quarter Financial Condition and Liquidity As at $ thousands, except working capital ratio Dec 31 Current assets 44,436 39,424 Total assets 217, ,496 Current liabilities 15,243 12,372 Total liabilities 181, ,705 Shareholders equity 35,831 44,791 Working capital (1) 29,193 27,052 Working capital ratio (1) Nine months ended $ thousands Cash provided by (used in) operating activities 227 (4,250) Funds from operations (1) 2,382 2,308 Note: (1) Identified and defined under Non-IFRS Financial Measures. Working Capital Working capital was $29.2 million at September 30, compared to $27.1 million at December 31,. The increase of $2.1 million resulted primarily from an increase in accounts receivable during the nine months ended September 30,, which was caused from higher revenue. Funds from Operations and Cash Provided by Operating Activities We generated positive funds from operations of $2.4 million during the nine months ended September 30, compared with $2.3 million in. Higher adjusted EBITDA in was offset by higher interest and current income tax expense. Cash provided by operating activities during the nine months ended September 30, was $0.2 million as our positive funds from operations was reduced by an increase in our non-cash working capital requirements. Similarly, in the comparative nine months ended September 30,, higher working capital requirements resulted in negative cash provided by operating activities of $4.3 million. Investing Activities We acquired $4.2 million in property, plant and equipment during the nine months ended September 30, as part of our capital expenditure program. These expenditures included a mobile crane and trailers to support our US growth as well as light duty trucks to replace older units in our fleet. Total capital expenditures for the year ending December 31, are currently expected to range between $5.0 million and $6.0 million. Our capital expenditures in 2019 will again primarily relate to crane and transportation equipment to support our planned growth in the United States. These expenditures will include the acquisition of mobile cranes that we are currently renting under rent-to-own (RPO) agreements. With a relatively new fleet, we will continue to incur only minimal maintenance capital expenditures for the foreseeable future. TSX: ENT Page 15

16 Third Quarter Proceeds on the disposal of property, plant and equipment during the nine months ended September 30, was $4.3 million. As we move into 2019, we will continue to pursue the sale of under-utilized equipment. We will focus these selling efforts on private sales and brokered transactions rather than relying on auction sales, where suitable sale prices for specialized equipment can be difficult to achieve. The actual net proceeds we achieve from the sale of equipment will be subject to a number of factors including our ability to obtain sales prices acceptable to us and changes in customer demand for our services and equipment. Debt and Contractual Obligations Long-term Debt We have a $172.5 million senior secured asset-based credit facility (the ABL Facility ) with a syndicate of lenders led by Wells Fargo Capital Finance Corporation Canada. We utilize the ABL Facility to fund our capital expenditures and business acquisitions and for general corporate purposes. The ABL Facility requires payments of interest only until its maturity on October 10, The ABL Facility is also subject to a requirement that ENTREC s convertible debentures due June 30, 2021 be repaid or extended prior to March 31, If the convertible debentures are not repaid or extended prior to March 31, 2021, the maturity date of the ABL Facility will also be March 31, We may prepay all or any part of the ABL Facility at any time. Amounts borrowed bear interest, at bank prime, CDOR or LIBOR rates, plus a credit spread based on a sliding scale, determined by our excess borrowing capacity. A standby fee is calculated at the rate of 0.25% per annum on the facility s unused portion. At September 30,, the cash interest rate on the ABL Facility was 5.23% (effective rate including unamortized initial transaction costs 5.42%). The ABL Facility is collateralized by substantially all of our assets, including our accounts receivable and property, plant and equipment. The ABL Facility is subject to compliance with financial covenants. We are required to maintain a minimum excess borrowing capacity of $15.0 million at all times. In addition, we are also subject to a springing fixed charge coverage ratio ( FCCR ) covenant of 1.0x and a springing capital expenditure covenant, which limits our annual capital expenditures to 120% of annual plan, should our excess borrowing capacity decline to an amount below the lesser of: (i) 12.5% of our total borrowing capacity or (ii) 12.5% of the total ABL Facility of $172.5 million. We are also subject to the capital expenditure covenant and restricted from paying dividends or repurchasing common shares should our FCCR ratio not exceed 1.0x. The total amount available under the ABL Facility is calculated from the value of our accounts receivable and property, plant and equipment. Eligible equipment utilized in the borrowing base calculation is valued by a third party appraiser and is included in the borrowing base at an amount equal to 85% of net orderly liquidation value. At September 30,, based on our fleet and accounts receivable at that date, the borrowing base under the ABL Facility was $158.9 million. The borrowing base calculation at September 30, included the equipment and accounts receivable we acquired in the acquisition of Capstan. Based on borrowings and letters of credit utilized at September 30,, we had an excess borrowing capacity of $22.8 million. As the excess borrowing capacity exceeded $19.9 million or 12.5% of the borrowing base, we were not subject to the FCCR covenant at September 30,. At September 30,, our excess borrowing capacity of $22.8 million exceeded this threshold by $2.9 million. At September 30,, our excess borrowing capacity also exceeded the minimum $15.0 million requirement. TSX: ENT Page 16

17 Third Quarter The definition of FCCR is in accordance with the lending agreement and is calculated based on the lender s interpretation, which may not be equal to individual financial statement figures. FCCR is calculated on a trailing 12- month basis and is defined in the lending agreement to be the ratio of EBITDA ( Bank EBITDA ) to fixed charges ( Fixed Charges ). Bank EBITDA is defined in the lending agreement to be net income (loss) before extraordinary gains and losses, interest income and expense, gains and losses on disposals of property, plant and equipment and other long lived assets, income taxes, depreciation and amortization, non-cash share-based compensation, unrealized risk management or foreign exchange losses, losses on the revaluation of embedded derivatives, and impairments of property, plant and equipment, intangible assets and goodwill. Fixed Charges is defined in the lending agreement to be the sum of interest expense, schedule principal payments of indebtedness, unfunded capital expenditures, cash dividends and distributions, and current income taxes. A calculation of the springing FCCR covenant ratio follows: Trailing 12 months ended $ thousands, except ratio Dec 31 Adjusted EBITDA for financial reporting purposes 14,028 11,578 Deduct: Business acquisition and integrations costs (282) (283) Bank EBITDA 13,746 11,295 Fixed Charges 9,806 7,508 FCCR 1.40x 1.50x At September 30,, our FCCR of 1.40x exceeded the FCCR springing covenant level of 1.0x. Under the terms of the ABL Facility, we are also restricted from voluntarily prepaying subordinated debt obligations exceeding $1.0 million, paying dividends or repurchasing common shares, and completing business acquisitions exceeding $10.0 million in any calendar year should our excess borrowing capacity not exceed the levels of $43.1 million, $38.8 million, and $30.2 million, respectively. With an excess borrowing base capacity of $22.8 million, we were restricted from these activities at September 30,. The lenders may approve exceptions to these restrictions upon mutual agreement with ENTREC. In March, we converted $100 million CAD of funds drawn under our ABL Facility into USD to hedge against decreases in our excess borrowing capacity resulting from potential future decreases in the USD. As the market value for the majority of our equipment is generally valued in US dollars, the orderly liquidation value of our fleet is impacted by changes in the value of the USD. Our excess borrowing capacity will also be impacted by future changes in the liquidation value of our equipment fleet. The last appraisal of our equipment fleet was completed at September 30,. Our excess borrowing capacity of $22.8 million at September 30, was comparable to the $23.8 million excess amount reported at December 31, as the current valuations of our equipment fleet remained similar to the prior year. TSX: ENT Page 17