For the three and nine months ended September 30,...

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three and nine months ended

September 30, 2016

Management’s Discussion and Analysis

Aveda Transportation and Energy Services Inc. – Three and nine months ended September 30, 2016

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Section 1: Description of the Business ....................................................................................................... 3

Section 2: Key Performance Indicators ...................................................................................................... 4

Section 3: Overall Performance ................................................................................................................. 4

Section 4: Selected Financial Information for the Three Months Ended September 30, 2016 ................. 5

Section 5: Results of Operations for the Three Months Ended September 30, 2016 ................................ 6

Section 6: Selected Financial Information for the Nine Months Ended September 30, 2016 ................. 10

Section 7: Results of Operations for the Nine Months Ended September 30, 2016 ............................... 11

Section 8: Non-IFRS Measures ................................................................................................................. 14

Section 9: Summary of Quarterly Results ................................................................................................ 16

Section 10: Liquidity and Capital Resources............................................................................................... 16

Section 11: Seasonality of Business ........................................................................................................... 19

Section 12: Adoption of New Accounting Pronouncements ...................................................................... 19

Section 13: Critical Accounting Estimates .................................................................................................. 19

Section 14: Risks and Uncertainties ........................................................................................................... 19

Section 15: Outlook .................................................................................................................................... 19

Section 16: Forward Looking Statements .................................................................................................. 20



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This Management’s Discussion and Analysis (“MD&A”) for Aveda Transportation and Energy Services Inc. (“Aveda” or the “Company”) for the three and nine month period ended September 30, 2016 should be read in conjunction with the Company’s (i) audited consolidated financial statements and accompanying notes for the year ended December 31, 2015 (“Annual Financial Statements”), together with the MD&A thereon (“2015 MD&A”), and (ii) the unaudited condensed consolidated interim financial statements (“Interim Financial Statements”) which are available at www.sedar.com and on the Company’s website at www.avedaenergy.com. All dollar amounts are in Canadian dollars unless otherwise indicated.

The Board of Directors carries out its responsibility for review of the disclosure in this MD&A principally through its Audit Committee, comprised of three directors, one of whom is independent. The Audit Committee reviews this disclosure and recommends its approval to the Board of Directors. This MD&A has been approved by the Board of Directors.

The Company reports on certain non-IFRS measures that are used by management to evaluate the performance of the business. Since non-IFRS measures do not have a standardized meaning, securities regulators require that non-IFRS measures be clearly defined and qualified, reconciled to the nearest IFRS measure, and be given no more prominence than the closest IFRS measures. The definition, calculation, and reconciliation of the non-IFRS measures are provided in the section “Reconciliation of non-IFRS Measure” in this MD&A.

Aveda is publicly traded on the TSX Venture Exchange under the symbol AVE.

This MD&A contains statements that are not historical facts and are forward looking statements (see "Forward Looking Statements" below).

This MD&A is dated as at November 7, 2016.

Section 1: Description of the Business Aveda earns revenue predominantly by providing specialized transportation services required for the drilling exploration, development and production of petroleum resources in the Western Canadian Sedimentary Basin (“WCSB”) and in the United States of America (“US”) principally in and around the states of Texas, North Dakota and Oklahoma. Transportation services are provided using assets which are owned by the Company, or through sub-contractors who own their equipment and are contracted by the Company during times of peak demand. Transportation services include both the equipment necessary to move the load as well as a trained, professional driver capable of securing, moving and manipulating the load to its destination.

Aveda’s rental operations include the rental of tanks, mats, pickers, light towers, well-site shacks and other equipment necessary for oilfield operations.

Aveda was incorporated in 1994 as a private company to serve the oil and gas industry. In the spring of 2006 the Company went public on the TSX Venture Exchange. Aveda has major operations in Calgary, AB, Leduc, AB, Edson, AB, Pleasanton, TX, Midland, TX, Pecos, TX, Marshall, TX, Williston, ND and Oklahoma City, OK.

For more information on Aveda please visit www.avedaenergy.com.

http://www.sedar.com/

http://www.avedaenergy.com/

http://www.avedaenergy.com/



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Section 2: Key Performance Indicators Aveda monitors a number of key performance indicators including those set out below:

Revenue provides an overall indication of success and progress toward achieving growing market

share;

Earnings Per Share measures the return to shareholders and also allows management to assess

whether acquisitions are accretive to earnings;

Standardized EBITDA is earnings before interest, taxes, depreciation and amortization;

Adjusted EBITDA1 is Standardized EBITDA, excluding foreign exchange gains or losses which are

primarily related to the US dollar activities of the Company and can vary significantly depending

on exchange rate fluctuations, which are beyond the control of the Company, and write downs of

intangible assets, goodwill impairment, financing costs, gains or losses on disposal of assets, stock

based compensation, fees and expenses on settlement of debt and losses on extinguishment of

debt, acquisition earn out adjustments, and gain or loss on business combination; and

Adjusted EBITDA per Share1 is Adjusted EBITDA1 divided by the weighted average number of

shares outstanding for the period.

Section 3: Overall Performance

2016 THIRD QUARTER BUSINESS HIGHLIGHTS

Driven by lower rig counts, revenue for the three months ended September 30, 2016 decreased

by $3.2 million to $21.0 million, compared with revenue of $24.1 million for the same period in

2015. However, compared to the second quarter of 2016, rig counts have rebounded slightly but

revenue increased by 134% from $8.9 million to $21.0 million;

Despite the fact that year-over-year revenue for the third quarter of 2016 decreased by $3.2

million, gross profit excluding depreciation and amortization1 increased by almost $4.0 million to

$2.9 million and Adjusted EBITDA1 increased by almost $7.0 million to $0.1 million;

Generated net loss for the three months ended September 30, 2016 of $5.6 million, compared to

a net loss of $20.1 million for the same period in 2015. Loss per share was $0.30 compared to

$1.05 in the comparative period;

Aveda expanded its operational footprint by opening a new rig moving branch in Pecos, Texas;

The Company also expanded into the highway hauling industry and opened a location in

Jacksonville, Florida with power units; and



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(2) Net asset value per share is used in this MD&A by management to determine the Company’s equity book value on a per share basis.

This ratio is calculated by dividing total equity of $33.2 million at June 30, 2016 divided by common shares outstanding of 19.1 million.

Notes:

(1) See Section 8: Non-IFRS Measures.

(2) Net asset value per share is used in this MD&A by management to determine the Company’s equity book value on a per share basis.

This ratio is calculated by dividing total equity of $28.1 million at September 30, 2016 divided by common shares outstanding of 19.1

million.

Aveda ended the quarter with a net asset value per share2 of $1.47, $9.6 million in working capital

with a working capital ratio of 2.0, and undrawn cash availability of $37.7 million on its senior debt

facility.

2016 NINE MONTHS ENDED SEPTEMBER 30 BUSINESS HIGHLIGHTS

Due to the factors discussed above, as compared to 2015, revenue for the nine months ended

September 30, 2016 declined by 50% to $41.9 million, compared with revenue of $83.8 million

for the same period in 2015;

Generated net loss for the nine months ended September 30, 2016 of $25.7 million, compared to

$15.4 million for the same period in 2015. Loss per share was $1.35 compared to $0.80 in the

comparative period;

Generated an Adjusted EBITDA1 loss for the nine months ended September 30, 2016 of $7.5

million, compared with $4.4 million for the same period in 2015; and

The Company rebuilt most of its senior management team with the hiring of a new President &

CEO, Vice-President of US Operations and a Vice-President of Canadian Operations who all have

long-standing customer relationships and are focused on both profitable revenue generation and

cost management.

Section 4: Selected Financial Information for the Three Months Ended September 30, 2016

(in thousands, except per share and ratio amounts)

2016 2015

$ Change 2015 -

2016

% Change 2015

- 2016

Revenue 20,955 24,113 (3,158) -13.1%

Gross profit (loss)1(1,563) (6,373) 4,810 75.5%

Gross margin (loss) -7.5% -26.4% N/A N/A

Gross profit (loss) excluding depreciation and amortization12,905 (991) 3,896 393.1%

Gross margin (loss) excluding depreciation and amortization 13.9% -4.1% N/A N/A

Adjusted EBITDA (loss)171 (6,648) 6,719 101.1%

Adjusted EBITDA (loss)1 as a percentage of revenue 0.3% -27.6% N/A N/A

Net loss (5,645) (20,121) 14,476 71.9%

Net loss as a percentage of revenue -26.9% -83.4% N/A N/A

Adjusted EBITDA (loss) per share - (0.35) 0.35 100.0%

Earnings per share - basic and diluted (0.30) (1.05) 0.75 71.4%



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Notes:


Revenue declined by $3.2 million as compared to the third quarter of 2015 because: 1) the rig count in the areas in which the Company operates in was approximately 35% lower in 2016 compared to 2015; and 2) the Company has put forth a concerted effort to only take on jobs where it could at least cover 100% of the variable costs associated with each job. However, as a result of the focus on which jobs Aveda would accept along with prudent cost management, the Company’s gross profit excluding depreciation and amortization1 expenses increased by almost $4.0 million and Adjusted EBITDA increased by almost $7.0 million compared to the same period in the prior year. Net loss in the third quarter of 2016 decreased significantly by $14.5 million as compared to 2015.

Section 5: Results of Operations for the Three Months Ended September 30, 2016

REVENUE The following table provides a breakdown of the Company’s revenue by geography for the three months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Canada 1,665 3,712 (2,047) -55.1%

United States 19,290 20,401 (1,111) -5.4%

20,955 24,113 (3,158) -13.1%

8%

92%

2016

Canada United States

15%

85%

2015


Q3, 2016 Q3, 2015 Change September 30, 2016 June 30, 2016 Change

Alberta 81 109 -28 113 46 67

Pleasanton, TX* 36 100 -64 36 35 1

Midland, TX* 149 203 -54 159 122 37

Williston, ND* 28 69 -41 30 26 4

Oklahoma City, OK* 60 79 -19 64 54 10

Marshall, TX* 24 29 -5 24 24 0

*Rig Count within 100 mile radius of the operating terminal

Average Rig Count Rig Count as of:

Compared to the third quarter of 2015, the rig count declined in the third quarter of 2016 in all regions. Average rig count for the three months of 2016 were substantially below the average experienced in 2015.



7 Notes:


However, as compared to second quarter of 2016, rig counts increased in most regions in which the Company operates. Revenue for the quarter decreased as compared to the same period of the prior year by 13% from $24.1 million in 2015 to $21.0 million in 2016. However, as rig counts have experienced a slight rise in the third quarter of 2016 as compared to the second quarter of 2016, Aveda’s revenue has grown significantly over that time period in the US due to a concentrated marketing effort supported by improved operational execution. Aveda increased its revenue in the third quarter of 2016 as compared to the second quarter of 2016 by 134% from $8.9 million to $21.0 million. Due to the factors discussed, in the third quarter of 2016 as compared to the same period of 2015, Aveda’s US operations decreased revenue by $1.1 million. However, as compared to the second quarter of 2016, Aveda’s US revenue in the third quarter of 2016 increased by $11.4 million or 144%. As rig counts are improving, the Company expects to see a significant portion of its growth coming from the United States; particularly in the Permian Basin where Aveda opened a new branch in Pecos, Texas in the third quarter of 2016. Compared to the third quarter of 2015, revenue in the WCSB declined by $2.0 million from $3.7 million in 2015 to $1.7 million in 2016. However, when comparing third quarter 2016 revenue to the second quarter of 2016, revenue in the WCSB increased by $0.6 million or 60%. The overall business climate in Canada is expected to continue to be challenging through the end of 2016 and into 2017. During the quarter, revenue from the use of third party subcontractors was $6.6 million compared to $6.9 million in 2015. The average utilization rate for the three months ended June 2016 was 18% (29% in 2015) for power units and 6% (10% in 2015) for rental units. Utilization rates do not include equipment held for future sale or expansion. During the quarter ended September 30, 2016, the Company increased its active equipment count by 31 power units. These units were transferred out of the power units held for future sale or expansion.

EXPENSES The following table sets forth total expenses by function and as a percentage of revenue for the three months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Direct operating 22,518 30,486 (7,968) -26.1%

Selling and administrative 2,877 5,944 (3,067) -51.6%

25,395 36,430 (11,035) -30.3%

% of total revenue 2016 2015

Direct operating 107.5% 126.4%

Selling and administrative 13.7% 24.7%

121.2% 151.1% Direct Operating Expenses

Direct operating expenses for the third quarter of 2016 decreased by $8.0 million, from $30.5 million in 2015 to $22.5 million in 2016. As discussed above, gross margin excluding depreciation and amortization1 increased significantly from negative 4% in 2015 to 14% in the current period as the Company was



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selective in the types of jobs it accepted and through prudent cost management. Management believes there is further opportunity to optimize revenue and costs in the quarters ahead.

Selling and Administrative Expenses

Selling and administrative expenses at $2.9 million for the quarter decreased by $3.1 million as compared to the same period in 2015 and $0.7 million as compared to the second quarter of 2016. The Company has taken aggressive steps to reduce all expenses in order to weather the current operating environment. The Company anticipates fourth quarter selling and administrative expenses of $2.9 million to $3.5 million.

FINANCE COSTS The following table sets forth the Company’s finance cost and foreign exchange gains and losses for the three months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Finance costs and interest expenses 1,364 1,454 (90) -6.2%

Foreign exchange loss (gains) (43) (253) 210 -83.0%

1,321 1,201 120 10.0%

Finance costs and interest expenses are related to the Company’s long-term debt and note payable. Please see Section 10 of this MD&A for further information.

INCOME TAXES The following table sets forth the Company’s income tax expense (recovery) for the three months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Current tax expense (recovery) (66) 55 (121) -220.0%

Deferred tax recovery - (9,141) 9,141 -100.0%

(66) (9,086) 9,020 -99.3%

Income tax expense relates entirely to income earned or loss generated in the United States.



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NET LOSS The following table sets forth the Company’s net loss for the three months ended September 30, 2016 and 2015:

(in thousands)

2016 2015

$ Change 2015

- 2016

% Change

2015 - 2016

Net loss (5,645) (20,121) 14,476 -71.9%

Percentage of revenue -26.9% -83.4%

The Company generated a net loss of $5.6 million in the third quarter of 2016 as compared to $20.1 million in the third quarter of 2015.

ADJUSTED EBITDA1 The following table sets forth the Company’s Adjusted EBITDA1 for the three months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change

2015 - 2016

Adjusted EBITDA1 (loss) 71 (6,648) 6,719 -101.1%

Percentage of revenue 0.3% -27.6% Adjusted EBITDA1 for the third quarter of 2016 improved by almost $7.0 million to $0.1 million compared with an Adjusted EBITDA1 loss of $6.6 million in 2015 due to the factors discussed above.



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Section 6: Selected Financial Information for the Nine Months Ended September 30, 2016

(in thousands, except per share and ratio amounts)

2016 2015

$ Change

2015 - 2016

% Change

2015 -

2016

Revenue 41,886 83,770 (41,884) -50.0%

Gross profit (loss)1(10,930) (4,774) (6,156) -128.9%

Gross margin -26.1% -5.7% N/A N/A

Gross profit (loss) excluding depreciation and amortization12,577 9,615 (7,038) -73.2%

Gross margin excluding depreciation and amortization 6.2% 11.5% N/A N/A

Adjusted EBITDA (loss)1(7,539) (4,439) (3,100) -69.8%

Adjusted EBITDA (loss)1 as a percentage of revenue -18.0% -5.3% N/A N/A

Net income (loss) (25,696) (15,370) (10,326) -67.2%

Net income (loss) as a percentage of revenue -61.3% -18.3% N/A N/A

Adjusted EBITDA1 (loss) per share (0.40) (0.23) (0.17) -73.9%

Earnings (loss) per share - basic and diluted (1.35) (0.80) (0.55) -68.8%

Current ratio22.0 2.2 (0.2) -9.1%

Debt to equity ratio33.0 1.1 1.9 172.7%

Total assets 120,817 153,224 (32,407) -21.2%

Total long-term debt383,248 71,740 11,508 16.0%

Notes:


(2) Current ratio calculated as current assets divided by current liabilities.

(3) Debt includes loans and borrowings as per their carrying amounts on the balance sheet. Revenue has decreased by 50% or $41.9 million compared to the same period in the prior year due to the factors discussed above. The Company posted revenue of $41.9 million, an Adjusted EBITDA loss1 of $7.5 million and a net loss of $25.7 million in the nine months ended September 30, 2016.



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Section 7: Results of Operations for the Nine Months Ended September 30, 2016

REVENUE The following table provides a breakdown of the Company’s revenue by geography for the nine months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Canada 4,890 10,155 (5,265) -51.8%

United States 36,996 73,615 (36,619) -49.7%

41,886 83,770 (41,884) -50.0%

12%

88%

2016


12%

88%

2015


Q3, 2016 Q3, 2015 Change September 30, 2016 December 31, 2015 Change

Alberta 73 132 -59 113 56 57

Pleasanton, TX* 44 142 -98 36 77 -41

Midland, TX* 133 242 -109 159 175 -16

Williston, ND* 31 93 -62 30 52 -22

Oklahoma City, OK* 62 87 -25 64 73 -9

Marshall, TX* 26 32 -6 24 25 -1

*Rig Count within 100 mile radius of the operating terminal

Average Rig Count Rig Count as of:

Significant declines in oil prices led to drastic declines in rig counts across all of the Company’s operating regions as the table above demonstrates. The decline in demand had a negative effect on revenue and profitability as previously discussed. The Company’s US operation has been steadily gaining market share despite the drastic decline in rig counts due to the Company’s diverse geographical presence. Various competitors in the US have shut down their operations, the curtailment of various competitors has allowed the Company to gain additional market share. However, competition remains fierce resulting in significant pricing pressure, thus having a negative impact on the Company’s profitability.



12 Notes:


Total revenue decreased by approximately 50% from $83.8 million in 2015 to $41.9 million in 2016. US revenue decreased by $36.6 million or 50% to $37.0 million from $73.6 million in the prior year period. Revenue in Canada declined by 52% to $4.9 million. In the nine months ended September 30, 2016, outsourced revenue was $10.4 million compared to $21.2 million in the same period of prior year. The average utilization rate for the nine months ended September 30, 2016 was 14% (35% in 2015) for power units and 6% (12% in 2015) for rental units. Utilization rates do not include equipment held for future sale or expansion.

EXPENSES The following table sets forth total expenses by function and as a percentage of revenue for the nine months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Direct operating 52,816 88,544 (35,728) -40.4%

Selling and administrative 10,362 14,881 (4,519) -30.4%

63,178 103,425 (40,247) -38.9%

% of total revenue 2016 2015

Direct operating 126.1% 105.7%

Selling and administrative 24.7% 17.8%

150.8% 123.5% Direct Operating Expenses Direct operating expenses for the nine months ended September 30, 2016 decreased by $35.7 million from $88.5 million in 2015 to $52.8 million. Gross margin excluding depreciation and amortization1 decreased from approximately 12% in 2015 to 6% in the current year period. As discussed above, the decrease in margin is due to the current intense competitive environment in order to win bids. Selling and Administrative Expenses Selling and administrative expenses for the nine months ended September 30, 2016 were lower by $4.5 million compared to 2015. To the extent possible, the Company continues to reduce selling and administrative expenses to align with activity levels.



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FINANCE COSTS The following table sets forth the Company’s finance cost and foreign exchange gains and losses for the nine months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Finance costs and interest expense 4,314 4,319 (5) -0.1%

Foreign exchange losses (gains) 53 (273) 326 -119.4%

4,367 4,046 321 7.9%

Finance costs and interest expense for the nine months ended September 30, 2016 were relatively flat as compared to 2015. Included in the 2015 amount is a one-time finance costs of $1.3 million related to the Acquisition. The 2016 finance costs and interest expense reflect higher interest expense related to the Company having higher debt levels as compared to 2015.

INCOME TAXES The following table sets forth the Company’s income tax expense for the nine months ended September 30, 2016 and 2015:

(in thousands)

2016 2015

$ Change 2015

- 2016

% Change 2015

- 2016

Current tax expense 11 289 (278) -96.2%

Deferred tax expense - (13,127) 13,127 -100.0%

11 (12,838) 12,849 -100.1% Income tax expense (recovery) relates entirely to income earned or net loss generated in the United States.

NET LOSS The following table sets forth the Company’s net loss for the nine months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change

2015 - 2016

Net loss (25,696) (15,370) (10,326) 67.2%

Percentage of revenue -61.3% -18.3% The Company generated a net loss of $25.7 million in 2016 compared to a net loss of $15.4 million in 2015. Accordingly, Aveda’s loss per share for the nine months ended September 30, 2016 was $1.35 compared to $0.80 in the comparative period.



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Notes:

ADJUSTED EBITDA1

The following table sets forth the Company’s adjusted EBITDA (loss)1 for the nine months ended September 30, 2016 and 2015: (in thousands)

2016 2015

$ Change 2015

- 2016

% Change

2015 - 2016

Adjusted EBITDA (loss)1 (7,539) (4,439) (3,100) 69.8%

Percentage of revenue -18.0% -5.3% Adjusted EBITDA loss1 for 2016 was $7.5 million compared with $4.4 million in 2015 due to the factors discussed above.

Section 8: Non-IFRS Measures This MD&A contains the terms "EBITDA", "Adjusted EBITDA", “gross profit” “gross profit margin”, “gross profit excluding depreciation and amortization”, “gross margin excluding depreciation and amortization”, and “Net asset value per share” which do not have any standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Management uses EBITDA, Adjusted EBITDA, gross profit, gross profit margin, gross profit excluding depreciation and amortization, and gross margin excluding depreciation and amortization to analyze the operating performance of the business. These non-IFRS measures presented are not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.

This MD&A contains the terms "cash flow", "working capital" and "working capital ratio", which do not have any standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. As an indicator of the Company's performance, cash flow should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Company considers cash flow to be a key measure as it demonstrates the Company's underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Cash flow is determined by adding back changes in non-cash operating working capital to cash from operating activities. Management calculates working capital as current assets less current liabilities and uses this measure to analyze operating performance and leverage.



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The following table provides a reconciliation of net income to Adjusted EBITDA for the nine and three months ended September 30, 2016 and 2015:

(in thousands)

Nine months

ended

September 30,

2016

Nine months

ended

September 30,

2015

Three months

ended

September 30,

2016

Three months

ended

September 30,

2015

Net income (loss) (25,696) (15,370) (5,645) (20,121)

Add (deduct):

Finance costs and interest expense 4,314 4,319 1,364 1,454

Foreign exchange (gains) loss 53 (273) (43) (253)

Income tax expense 11 (12,838) (66) (9,086)

Depreciation and amortization 13,783 14,711 4,558 5,491

Loss (gain) on disposal of assets 26 (26) (50) 15

Stock based compensation (30) 505 (47) 178

Intangible assets and goodwill impairment - 14,352 14,352

Gain on acquisition, net of acquisition costs - (9,819) 1,322

Adjusted EBITDA (loss) (7,539) (4,439) 71 (6,648) Gross profit is used in this MD&A by management to facilitate the readers’ understanding of the Company’s efficiency at using input costs to generate revenue. Gross profit excluding depreciation and amortization is used to facilitate the readers’ understanding of the Company’s gross profit without the impact of prior capital allocation decisions and accounting estimates associated with rates used for depreciation and amortization.

The following table provides a reconciliation of gross profit and gross profit excluding depreciation and amortization for the nine and three months ended September 30, 2016 and 2015:

(in thousands)

Nine

months

ended

September

30, 2016

Nine

months

ended

September

30, 2015

Three months

ended

September

30, 2016

Three months

ended

September

30, 2015

Revenue 41,886 83,770 20,955 24,113

Less direct operating expenses 52,816 88,544 22,518 30,486

Gross profit (loss) (10,930) (4,774) (1,563) (6,373)

Addback depreciation and amortization included in direct

operating expenses 13,507 14,389 4,468 5,382

Gross profit (loss) excluding depreciation and amortization 2,577 9,615 2,905 (991)



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Section 9: Summary of Quarterly Results The following table provides a summary of certain key financial information for Aveda for the last eight quarters:

(in thousands, except per share amounts) 2014

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

Revenue 20,955 8,920 12,011 17,545 24,113 23,021 36,636 45,893

Adjusted EBITDA (loss) 71 (3,745) (3,865) (6,271) (6,648) (2,177) 4,386 8,335

Adjusted EBITDA as a % of revenue 0.3% -42.0% -32.2% -35.7% -27.6% -9.5% 12.0% 18.2%

EBITDA per share - basic 0.00 (0.20) (0.20) (0.33) (0.35) (0.11) 0.22 0.42

Income (loss) (5,645) (9,758) (10,293) (11,171) (20,121) 5,890 (1,139) 656

Income (loss) as a % of revenue -26.9% -109.4% -85.7% -63.7% -83.4% 25.6% -3.1% 1.4%

Earnings (loss) per share - basic and diluted (0.30) (0.51) (0.54) (0.59) (1.05) 0.31 (0.06) 0.03

Weighted average shares - basic 19,079 19,079 19,079 19,079 19,079 19,079 19,619 19,921

Weighted average shares - diluted 19,079 19,079 19,079 19,079 19,079 19,140 19,619 20,199

20152016

Section 10: Liquidity and Capital Resources

NET WORKING CAPITAL The following table presents summarized working capital information as at September 30, 2016 and 2015:

(in thousands) 2016 2015

$ Change 2015

- 2016

% Change

2015 - 2016

Current assets 19,048 27,526 (8,478) -30.8%

Current liabilities 9,479 12,498 (3,019) -24.2%

Working capital 9,569 15,028 (5,459) -36.3%

Working capital ratio 2.0 2.2 During the nine months ended September 30, 2016, the Company used cash in operating activities of $14.6 million and invested $1.3 million for the purchase and upgrading of equipment. Aveda also sold redundant assets for net proceeds $2.1 million. As a result, the Company borrowed $13.9 million on its senior revolving credit facility.

LIQUIDITY The Company operates in a cyclical industry, has no contracts that guarantee future revenue and has incurred operating loss over the past several quarters due to the considerable decline in oilfield activity given the current commodity price environment.

The Company has loan commitments related to its bank borrowing and note payable, where under certain conditions these facilities may be payable immediately upon demand by its lenders. Most notably, the Company is required to have available $25.0 million of undrawn borrowings on its bank facility as the



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financial covenants under the facility are waived if the undrawn amount is in excess of $25.0 million. The Company currently does not comply with certain of the financial covenants, however, it has no impact on the Company as the undrawn amount of the bank borrowing at September 30, 2016 was $37.7 million.

The Company’s bank lines are based in part on the appraised value of the long-term assets. The current market environment is putting continued downward pressure on appraised values, which could negatively impact the borrowing base and the amount of lending capacity available to the Company.

Should operating losses persist the Company will be required to continue to draw on its existing bank lines, seek alternative sources of cash or further adjust operations to manage through the current industry environment. At September 30, 2016, the Company had approximately $37.7 million in undrawn availability on its senior credit facility. As such, the Company expects to have sufficient liquidity to meet its financial obligations in 2016. Aveda has entered into discussions with its existing banking syndicate to extend its bank lines to position the Company for growth beyond 2017. While there is no guarantee that the Company’s bank lines will be extended on terms that are acceptable to the Company, Aveda has a good relationship with its banking syndicate and is optimistic about the outcome of the discussions.

COVENANTS AND DEBT The Company’s senior debt facility’s financial covenant tests are waived as long as Undrawn Availability (as defined in the Facility Agreement) is greater than $25.0 million. As at September 30, 2016, the Undrawn Availability was approximately $37.7 million, therefore financial covenant tests were waived. As per the Facility Agreement, three equipment appraisals are done each year commissioned by the agent of the senior debt facility. The most recent appraisal report dated September 29, 2016, showed the Company’s equipment fair market value was $114.1 million, gross orderly liquidation value was $96.2 million, and the forced liquidation value was $79.8 million. The appraisal report does not include the Company’s land, building, leaseholds and computer equipment. The Company’s net book value of all fixed assets including land, building, leaseholds and computer equipment on the balance sheet at September 30, 2016 was $101.2 million. The covenant tests the Company will be expected to comply with, should the undrawn balance of senior credit facility fall below $25.0 million are:

1. The Company is required to maintain Fixed Charge Coverage Ratio (the ratio of Fixed Charge as defined in the Facility Agreement divided by previous twelve months’ Adjusted EBITDA1) of not less than 1.25:1 at the end of each fiscal quarter for the four consecutive fiscal quarters;

2. The Company is required to maintain a Total Leverage Ratio (the ratio of Total Leverage as defined in the Facility Agreement divided by previous twelve months’ Adjusted EBITDA1) of not greater than 3.00:1;

3. The Company cannot make annual expenditure or commitments for Capital Expenditure (as defined in the Facility Agreement) in excess of $25.0 million; and

4. In addition to the financial covenants listed above, the Company is restricted from seeking additional financing, selling assets, making acquisitions or making distributions to shareholders without the consent of the agent.



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Should covenants have not been waived, the Company would not have complied with its Fixed Charge Coverage Ratio or Total Leverage Ratio at September 30, 2016. The Company also has a US$27.0 million note payable related to the Acquisition (“Note”). The Note requires the Company to issue its annual financial statements without a going concern note. Should the Company include a going concern note in its financial statements, both the senior secured credit facility and Note could be due on demand. The Note further requires that the orderly liquidation value of the Collateral (as defined in the agreement for the Note) should be in excess of the Indebtedness (as defined in the agreement for the Note) of the Company. Should the orderly liquidation value of the Collateral of the Company’s assets fall below the Indebtedness of the Company, both the senior secured credit facility and Note could be due on demand.

OPERATING ACTIVITIES Aveda used cash in operating activities of $14.6 million for the nine months ended September 30, 2016, compared to cash generated in operating activities of $12.7 million in 2015. The change in non-cash balances relating to operations in 2016 was a usage of cash of $2.7 million in the current period compared to $25.2 million generated in the prior year period.

INVESTING ACTIVITIES Total consideration for purchase and upgrading of assets was $1.3 million, the Company generated cash from the disposal of assets of $2.1 million.

FINANCING ACTIVITIES During the nine months ended September 30, 2016, the Company borrowed $13.9 million on its senior debt facility.

OUTSTANDING SHARE DATA The following data is as of the date of this MD&A, unless otherwise noted.

The Company is authorized to issue an unlimited number of voting common shares and preferred shares. There are 19.1 million common shares outstanding.

The Company has a stock option plan for employees, directors and consultants. A total of 1.9 million shares are reserved under this plan. Options granted generally vest over a three-year period. As of September 30, 2016, 1.2 million options were outstanding with a weighted average exercise price of $1.70 per share. The Company also announced on August 27, 2015 that subject to approval by the TSX Venture Exchange ("TSXV") and ratification by the Company's shareholders at the 2016 Annual General Meeting of shareholders (the "AGM") the board has approved a restricted share unit plan for employees (the "RSU Plan") and a deferred share unit plan for directors (the "DSU Plan"). Subject to the above approvals, 93,300 restricted share units ("RSUs") have been granted to employees and 129,700 deferred share units have been granted to directors ("DSUs").



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On a fully diluted basis, if all DSUs and RSUs were converted and options exercised for common shares, the total number of common shares issued and outstanding would be approximately 20.5 million.

Section 11: Seasonality of Business There are factors causing quarterly variances that may not be reflective of the Company’s future performance. The Company's earnings generally follow the seasonal activity pattern of western Canada's and North Dakota’s oil and gas industry because of the significance of its operations in these regions. The oil and gas industry in western Canada and North Dakota are typically more active during the winter months as the movement of heavy equipment over frozen ground is generally easier. Rain through the spring, summer and fall reduces activity levels because of the weather’s effect on ground conditions and consequently its load bearing capacity. In addition to the impact of rain, thawing ground in the spring tends to make the ground unstable. During this thawing period governments frequently implement restrictions on moving heavy loads on public roadways. This period is often referred to as “spring break-up”. The Company’s operations in other parts of the United States are generally less affected by weather and are less seasonal by nature. As a result of these seasonal variations, quarterly operating results should not be relied upon as any indication of results for any future period.

Section 12: Adoption of New Accounting Pronouncements A description of new Canadian GAAP pronouncements can be found on page 22 of the 2015 MD&A.

Section 13: Critical Accounting Estimates This MD&A summarized the Company’s financial condition and results of operations and is based upon its Interim Financial Statements, which have been prepared in accordance with Canadian GAAP and comply with IAS 34 Interim Financial Reporting. The Interim Financial Statements require management to select significant accounting policies and make certain critical accounting estimates that affect the reported assets, liabilities, revenue and expenses. A description of the Company’s critical accounting estimates can be found beginning on page 23 of the 2015 MD&A. As at September 30, 2016, the Company’s critical accounting estimates have not changed significantly from such description.

Section 14: Risks and Uncertainties A description of principal risks and uncertainties can be found beginning on page 25 of the 2015 MD&A. As at September 30, 2016, these business risks and uncertainties have not changed significantly from those descriptions.

Section 15: Outlook Aveda earns revenue primarily by providing specialized transportation services to companies engaged in the exploration, development and production of petroleum resources. As a result, demand for Aveda’s transportation services is generally linked to the economic conditions of the energy industry and the level of drilling activity in the WCSB and US.



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Although the first 3 quarters of 2016 have been challenging, the Company has been steadily improving its performance and most recently was able to generate positive Adjusted EBITDA in the third quarter of 2016. Relative to the first half of 2016, both oil and natural gas prices have rebounded and rig counts in both Canada and the United States have risen in the third and fourth quarters of 2016. Activity levels, particularly in the United States are starting to increase. The Company restructured its senior leadership team in the first half of 2016 with individuals that have extensive relationships in the oil and gas sector. Through these relationships, the Company is being invited to participate in an increased amount of bid activity. In the second quarter of 2016, the Company had temporarily shuttered its operations in the northeastern United States. Most recently, the Company has begun discussions with several customers who are considering expanding their drilling programs in the northeastern United States. Through these discussions, the Company is optimistic that it will resume operations in the northeastern United States in the fourth quarter of 2016 or the early part of 2017. Based on the information above, Aveda management believes that we are at an inflection point in the rig moving industry. Aveda in particular has a significant opportunity to benefit from this because we have:

1) The most diversified geographic footprint in the North American rig moving market; 2) A blue-chip customer base that will increase drilling activity as oil prices continue to rebound; 3) A large fleet of trucking equipment that is underutilized. As such, the Company can grow without

incurring significant capital expenditures for new trucks; 4) A talented dedicated work force; 5) A reputation for being a market leader in the rig moving industry; and 6) A management team with a significant amount of experience and relationships to capitalize on

the opportunities ahead.

Section 16: Forward Looking Statements Certain information and statements contained in this MD&A, including, but not limited to, (i) statements that contain words such as "anticipate", "could", "expect", "seek", "may", "intend", "will", "believe", "should", "project", "forecast", "plan" and similar expressions, including the negatives thereof, (ii) statements that are based on current expectations and estimates about the markets in which the Company operates, and (iii) statements of belief, intentions and expectations about developments, results and events that will or may occur in the future, may constitute “forward-looking information” and "forward-looking statements" (collectively, “forward-looking statements”) as such terms are defined under applicable security laws and are based on certain assumptions and analysis made by the Company’s management. Forward-looking statements contained in this MD&A specifically include, but are not limited to, statements with respect to future capital expenditures, including the amount, nature and timing thereof; oil and natural gas prices and demand; other development trends within the oil and natural gas industry; business strategy; expansion and growth of the Company's business and operations including the Company's market share and position in the oilfield service market; and other such matters.

The forward-looking statements contained in this MD&A reflect material factors, expectations and assumptions including, without limitation: (i) oil and natural gas production levels throughout Canada and the United States; (ii) commodity prices and interest rates; (iii) capital expenditure programs and other expenditures; (iv) supply and demand for oil and natural gas and associated oilfield services; (v) expectations regarding the Company's ability to raise capital and to increase its equipment fleets through



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acquisitions and manufacture; (vi) schedules and timing of certain projects and the Company’s strategy for growth; (vii) the Company’s future operating and financial results; (viii) the Company’s ability to retain and hire qualified personnel; and (ix) treatment under governmental regulatory regimes and tax, environmental and other laws; (x) the exchange rate in effect between Canadian and US currency.

Financial outlook information contained in this MD&A about prospective results of operations, financial position or cash flows may constitute “future oriented financial information”, is based on assumptions about future events, is given as at the date hereof and including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this MD&A should not be used for purposes other than for which it is disclosed herein.

Such forward-looking statements and financial outlook information are subject to important risks and uncertainties, which are difficult to predict and that may affect the Company's operations, including but not limited to the impact of general economic conditions in Canada and the United States; industry conditions, including the adoption of new environmental, safety and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and natural gas prices; oil and natural gas product supply and demand; risks inherent in the Company's ability to generate sufficient cash flow from operations to meet its current and future obligations; increased competition; the lack of availability of qualified personnel or labour unrest; fluctuation in foreign exchange or interest rates; stock market volatility; opportunities available to or pursued by the Company and other factors, many of which are beyond the control of the Company. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and financial outlook information, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements and financial outlook information will transpire or occur, or if any of them do transpire or occur, what benefits the Company will derive therefrom. Accordingly, readers should not place undue reliance upon any of the forward-looking information and financial outlook information set out in this MD&A. All of the forward-looking statements in this MD&A are expressly qualified in their entirety by this cautionary statement and made only as of the date hereof. Except as required under applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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