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North American Energy Partners Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

North American Energy Partners Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

North American Energy Partners Inc. (NOA)

F4Q10 (Qtr End 03/31/10) Earnings Call

June 10, 2010 9:00 am ET

Executives

Kevin Rowand – Director, Strategic Planning and IR

Rod Ruston – President & CEO

David Blackley – CFO

Analysts

Matt Duncan – Stephens

Ben Cherniavsky – Raymond James Financials

Greg McLeish – GMP Securities

Kalpesh Patel – Jefferies & Co.

Todd Garman – Peters & Co.

Tatiana Thibodeau – Clear Bridge Advisors

Presentation

Operator

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Good morning ladies and gentlemen. Welcome to the North American Energy Partners’ fiscal 2010 fourth quarter earnings call. At this time all participants are in a listen-only mode. Following management’s prepared remarks, there will be an opportunity for analysts, shareholders and bondholders to ask questions. The media may monitor this call in a listen-only mode. They are free to quote any member of management but they are asked not to quote remarks from any other participant without that participant’s permission. I advise participants this call is also being webcast concurrently on the Company’s Web site at nacg.ca.

I will now like to turn the conference over to Kevin Rowand, Director, Strategic Planning & Investor Relations of North American Energy Partners, Inc. Please go ahead, sir.

Kevin Rowand

Good morning ladies and gentlemen and thank you for joining us. On this morning’s call we will discuss our financial results for the three and twelve months ended March 31, 2010. All amounts are in Canadian dollars.

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Participating on the call are Rod Ruston, President and CEO, David Blackley, CFO, Chris Yellowega, Vice President Operations, and Bernie Robert, Vice President Corporate Affairs & Business Strategy.

Before I turn the call over to Rod, I would like to remind everyone that statements made during our prepared remarks or in the Q&A portion of the conference call, with reference to management’s expectations or predictions of the future are forward-looking statements.

All statements made today which are not statements of historical fact are considered to be forward-looking statements. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information.

The business prospects of North American Energy Partners are subject to a number of risks and uncertainties that may cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information.

For more information about these risks, uncertainties and assumptions, please refer to our

March 31st, 2010 Management’s Discussion and Analysis, which is available on

SEDAR and EDGAR. As previously mentioned, management will not provide financial guidance.

At this time, I will turn the call over to our CEO, Rod Ruston.

Rod Ruston

Thank you, Kevin and good morning ladies and gentlemen. Thank you for joining us today. We achieved strong operating results in fiscal 2010, generating a 122 million of consolidated EBITDA despite significant economic challenges. Just as importantly, fiscal 2010 gave us the opportunity to demonstrate the robust long-term nature of the oil sands in general at our business in particular

Despite uncertain economic conditions and the low oil price environment, our oil sands customers continue to run their plants at or near full capacity as we expected they would. This resulted in a steady demand for our extensive range of mining services which in turn help mitigate the impact of the downturn in our construction-related business.

Out of adversity comes opportunity. And this was certainly the case in fiscal 2010. The challenging conditions created an opportunity to work more closely with our customers in order to improve planning and reduce costs. Our demonstrated commitment to safety, excellence, cost reduction and strong project execution culminated in three major contract renewals, two of which provided for increase scope of services.

To give you some examples, we renewed our services agreement with Shell and we’re able to offer this plant improved pricing as a result of extending this contract to a three-year term and identifying a base load of scope within the contract.

Early in the year, we either initiated mining services with Suncor under an agreement to provide a fleet of fully maintained mining equipment to supplement Suncor’s home fleet. In December 2009, Suncor renewed this agreement for an additional 12 months and requested larger size haul dredge

thereby increasing the capacity.

More recently, we renewed outside services agreement with Syncrude in November 2010 and we continue to provide overburden removal services to Canadian Natural under our 10-year contract. So in other words, we were providing a carrying services to every operational mine site in the oil sands throughout fiscal 2010.

We are the only mining infrastructure contractor that can say that and it is a peak competitive advantage for us. It enabled us to provide valuable, operational flexibility to our customers and it brings considerable stability to our own operations.

Some of our competitors have not been so fortunate and were fallen by the wayside as competition in the market escalated over the past year. While we also felt the impact of the slowing economy in some parts of our business, overall, our oil sands business model has proven to be very sustainable.

Now, looking briefly at the segment results. Heavy Construction and Mining revenue was up 29% during the fourth quarter and down 7% on the full year basis compared to same period last year. This was largely driven by the 29% increase in recurring services revenue during the fourth quarter and a 12% increase on a full year basis.

The growth in our recurring services revenue reflects increased activity in Shell’s sites under our new three-year master services contract. It also reflect increased mine services to support Suncor along with increasing activity at CNRL, as we returned to planned production levels under our ten-year overburden removal contract.

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