Conference Call
Management will hold a conference call today, Wednesday, May
18th at 9:00 am EST to discuss the contents of this release.
The call can be accessed by dialing: 1-877-407-9205 or
International: 1-201-689-8054
North American Energy Partners Inc. ("NAEP" or "the Company")
(TSX: NOA) (NYSE: NOA) today announced that it expects to take a
writedown of $40 million to $45 million in its financial results
for the fiscal year ended March 31, 2011 related to the long-term
overburden removal contract between its subsidiary North American
Construction Group Inc. ("NACG") and Canadian Natural Resources
Limited ("Canadian Natural") for the Horizon Oil Sands ("Horizon")
mine near Fort McMurray, Alberta. This writedown would be applied
primarily to reduce unbilled revenue and is expected to reduce net
income by $30 million to $34 million for the same period.
The contract with Canadian Natural includes certain escalation
indices, determined at the time of the initial negotiations, which
were intended to adjust pricing annually to reflect changes in
economic conditions over the 10-year term of the contract. The
contract specifically states that the indices were not intended to
benefit either party at the expense of the other party and includes
a mechanism for reviewing the indices if they are deemed to be no
longer representative of the actual changes in the market over
time. NAEP believes that the actual inflationary environment in
Fort McMurray has varied significantly versus the indices per the
contract. NACG has met with Canadian Natural and formed a joint
working group that will be responsible for identifying indices that
will more closely reflect the inflationary conditions that have
occurred in the market place.
"NACG expects this group to deliver its recommendations by
August 31, 2011 and that the new indices will apply both
prospectively and retrospectively. At that time, if the indices are
adjusted as expected, part or all of the amount written down in
fiscal 2011 may be recognized as profit," said Rod Ruston,
President and CEO of NAEP. "Our intention is to arrive at a fair
outcome within the terms of the contact and we believe the approach
taken by Canadian Natural in regard to the issue demonstrates their
support for that outcome," added Mr. Ruston.
"We value our relationship with Canadian Natural and take pride
in the fact that we have met all the major milestones we committed
to under this contract," Mr. Ruston said. "We are a company with a
long history of positive, long-term customer relationships. We do
not expect any impact from this issue on our other business
operations."
If the parties are not able to agree upon the appropriate
adjustments, a further writedown may be required in respect of all
or a portion of unbilled revenue related to this contract, of up to
$72 million. In this event, NACG will pursue any remedies it may
have available.
As a result of the writedown, NAEP is not in compliance with
certain covenants under its credit facility and NAEP is working
with its lenders to obtain an amendment in connection with such
covenants. The lead bank in the syndicate has already provided
conditional approval of this waiver.
Operations at Canadian Natural
As a result of a fire at Canadian Natural's Horizon primary
upgrading facility in January 2011, oil production at Horizon was
suspended.
"While we continue with overburden removal at the site, we
anticipate that production levels could be affected during the
repair period," said Rod Ruston. "Should this occur, we may have
the opportunity to remove equipment from this site to work on other
projects in the region. This equipment relocation may allow us to
replace some of the lost revenue through higher margin work at
other locations in Fort McMurray."
"Given our recently announced contract wins at Shell and
Syncrude and the expected signing of a new five-year contract with
Suncor covering overburden, site reclamation and light civil
construction, the availability of this equipment in the short term
could be a valuable addition to our general contract fleet," added
Ruston.
The Canadian Natural contract, which is NAEP's single largest
long-term contract, represented approximately 23.4% of NAEP's
consolidated revenue for the 12 months ended December 31, 2010. The
gross profit on this project represented 9.7% of the consolidated
gross profit for the 12 months ended December 31, 2010.
About the Company
North American Energy Partners Inc. (www.naepi.ca) is one of the
largest providers of heavy construction, mining, piling and
pipeline services in western Canada. For more than 50 years, NAEP
has provided services to large oil, natural gas and resource
companies, with a principal focus on the Canadian oil sands. The
Company maintains one of the largest independently owned equipment
fleets in the region.
Forward Looking Statements
The information provided in this release contains
forward-looking statements. Forward-looking statements include
statements preceded by, followed by or that include the words
"may", "could", "would", "should", "believe", "expect",
"anticipate", "plan", "estimate", "target", 'project", "intend",
"continue", "further" or similar expressions. Actual results could
differ materially from those contemplated by such forward-looking
statements as a result of any number of factors and uncertainties,
many of which are beyond our control. Examples of forward looking
information in this release include, but are not limited to, the
working group delivering appropriate adjustments to the indices by
August 31, 2011 and that if appropriate adjustments are delivered,
part or all amount written down may be recognized as profit; the
expectation that overburden production levels could be affected
during the repair period at the Horizon site; the expectation that
there will be opportunities to move equipment from the Canadian
Natural site to other projects in the region; and our expectation
to sign a new five year contract with Suncor covering overburden,
site reclamation and light civil construction . The material
factors or assumptions used to develop such forward-looking
statements and the risks and uncertainties that could cause a
actual results to differ materially from those contemplated by such
forward-looking statements include our ability, through the working
group, to come to an agreement with Canadian Natural on appropriate
adjustments and that work on other projects in the region will
require additional equipment, and that we will successfully
conclude negotiations with Suncor with respect to the new five year
contract..:
These factors are not intended to represent a complete list of
the factors that could affect the Company. See the risk factors
highlighted in materials filed with the securities regulatory
authorities in the United States and Canada from time to time,
including but not limited to the most recent Management's
Discussion and Analysis filed respectively in the United States and
Canada. Undue reliance should not be placed upon forward-looking
statements and we undertake no obligation, other than those
required by applicable law, to update or revise those
statements.
For more complete information about us you should read our
disclosure documents that we have filed with the SEC and the CSA.
You may obtain these documents for free by visiting EDGAR on the
SEC website at www.sec.gov or on the CSA website at
www.sedar.com.
Contacts: North American Energy Partners Inc. Kevin Rowand
Director, Investor Relations & Strategic Planning (780)
960-4531 (780) 960-7103 (FAX) krowand@nacg.ca
North American Construct... (NYSE:NOA)
Historical Stock Chart
From Jun 2024 to Jul 2024
North American Construct... (NYSE:NOA)
Historical Stock Chart
From Jul 2023 to Jul 2024