North American Energy Partners Inc. Announces Results for the Fourth Quarter Ended December 31, 2017

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EDMONTON, Alberta, Feb. 13, 2018 (GLOBE NEWSWIRE) -- North American Energy Partners Inc. (“NAEP” or “the Company”) (TSX:NOA) (NYSE:NOA) today announced results for the fourth quarter ended December 31, 2017.

Martin Ferron, Chairman and Chief Executive Officer of the Company stated, “Although the weather could have been kinder to us, we were pleased to achieve a strong end to a solidly profitable year, in which we grew revenue and EBITDA by 37% and 24% respectively, above 2016 levels.”

Additionally Mr. Ferron commented, “Currently we are flat out busy on three oil sands mines, one coal mine and a copper mine, with a larger than usual rental fleet needed to satisfy increased customer requirements. Based on bidding levels, we expect another robust year for earthworks, supplemented by heightened demand for seasonal heavy construction work. In this healthy operating environment, we have added confidence in meeting our financial growth targets for 2018.”

The Company has prepared its consolidated financial statements in conformity with accounting principles generally accepted in the United States (US GAAP). Unless otherwise specified, all dollar amounts discussed are in Canadian dollars. Please see the Company’s Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2017, for further detail on the matters discussed in this release.

On February 13, 2018 the NAEP Board of Directors declared a quarterly dividend (the “Dividend”) of two Canadian cents ($0.02) per common share, payable to common shareholders of record at the close of business on March 6, 2018.  The Dividend will be paid on April 6, 2018 and is an eligible dividend for Canadian income tax purposes.

(1) See “Non-GAAP Financial Measures”. A reconciliation of net income (loss) to EBIT, EBITDA, Consolidated EBITDA, and Adjusted EBITDA in the section titled “Non-GAAP Financial Measures”.

For the three months ended December 31, 2017, revenue was $82.0 million, up from $62.2 million in the same period last year. The increase in revenue was a result of an earlier ramp up of the Company’s expanded winter work programs at the Mildred Lake and Millennium mines coupled with the award of an early-works heavy civil construction project at the Kearl mine. Contributing to the stronger results in the quarter was mine support services activity at the Fording River coal mine in southeast British Columbia, the start of a three year mine support services contract at the Highland Valley copper mine in central British Columbia and the wrap-up of a site development project by the Dene North Site Services partnership at the Aurora mine. The Company’s ability to take on these stronger volumes was aided by the expansion of its heavy haul fleet capacity with the investment in growth capital earlier in the year, as the Company acquired certain used heavy equipment pieces from a competitor exiting the large earthworks marketplace and it further leveraged its prior year capital investment in equipment technology that expanded the haul capacity of certain of its existing heavy haul trucks.

This increased activity in the quarter more than offset a reduction, compared to the previous period, in heavy civil construction work at the Mildred Lake and Aurora mines, lower mine support volumes at the Kearl mine and the completion of a site development project at the Red Chris copper mine in northern British Columbia.

For the three months ended December 31, 2017, gross profit was $12.0 million or 14.6% of revenue, up from a gross profit of $6.4 million or 10.3% of revenue during the same period last year. The higher gross profit in the current period was driven by the higher volume of activity in the quarter coupled with improved productivity on the Company’s winter works programs at the Mildred Lake and Millennium mines with the earlier onset of winter conditions, compared to last year. Equipment costs as a percent of revenue were consistent between the two periods, despite the expansion of active project sites, which included a large heavy equipment fleet located at the Fording River coal mine, the mobilization of an equipment fleet to the Highland Valley copper mine and the demobilization of the equipment fleet from the Red Chris copper mine.

For the three months ended December 31, 2017, depreciation was $11.9 million, or 14.4% of revenue, down from $12.7 million, or 20.4% of revenue in the same period last year. The current period decrease in depreciation as a percent of revenue is starting to reflect the benefits the Company is realizing from its recent program of securing quality used equipment at discounted prices from sellers looking to exit the market place, while also leveraging its strong maintenance expertise and programs to extend the expected lives of the current fleet.

For the three months ended December 31, 2017, operating income was $4.5 million, compared to operating loss of $1.2 million during the same period last year. G&A expense (excluding stock-based compensation expense) was $5.7 million for the three months ended December 31, 2017, up from $5.0 million in the same period last year, reflecting the timing of accruals for short-term incentive plan costs recorded in the quarter, compared to the previous year.

Stock-based compensation expense decreased $1.1 million compared to the prior year primarily as a result of the effect of the previous year's more significant upward movement in share price and its effect on the carrying value of the liability classified award plans.

For the three months ended December 31, 2017, net income was $2.5 million (basic income per share of $0.10 and diluted income per share of $0.09), compared to a net loss of $0.5 million (basic and diluted loss per share of $0.02) during the same period last year. The previous period's net loss included $1.4 million in other income generated from the sale of other current assets.

Total interest expense was $2.0 million during the three months ended December 31, 2017, up from $1.1 million in the same period last year.  The Company recorded $0.6 million, in interest during the three months ended December 31, 2017 on its March 31, 2017 issued $40.0 million Convertible Debentures. Interest on the Company’s credit facilities during the three months ended December 31, 2017 remained comparable to the corresponding prior year period. Interest on capital lease obligations of $0.7 million during the three months December 31, 2017, was slightly higher than corresponding prior year period. The higher expense in the current period was primarily due to an increase in the Company’s assets under capital lease during the year.

For the three months ended December 31, 2017, the Company recorded no current income tax expense and a deferred income tax expense of $0.1 million, providing a total income tax expense of $0.1 million. This compares to a combined income tax benefit of $0.4 million recorded for the same period last year.

Income tax as a percentage of taxable income for the three months ended December 31, 2017 differs from the statutory rates of 27.0% primarily due to temporary differences resulting from the non-taxable portion of capital gains and permanent differences resulting from stock-based compensation. Income tax as a percentage of taxable income for the three months ended December 31, 2016 differs from the statutory rate of 27.0% primarily due to temporary differences resulting from the non-taxable portion of capital gains and permanent differences resulting from stock-based compensation and book to filing differences.

The Company has just completed the first year of a three year organic growth plan that is targeting a minimum of a 15% compound growth in revenue and EBITDA over that three year period. The Company’s strategy to achieve that growth is to:

Despite the very adverse impact of a severe plant fire at one of the Company’s busiest work sites in 2017, the Company actually achieved 37% and 24% growth in revenue and EBITDA respectively, for the full year. The Company is also on track to achieve its growth objectives for 2018 and 2019, with this very positive outlook supported by:

Overall the Company is very encouraged by this bright outlook and are even more confident about meeting its growth targets, while maintaining a strong balance sheet.

This release contains non-GAAP financial measures. A non-GAAP financial measure is generally defined by the Canadian regulatory authorities as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be adjusted in the most comparable GAAP measures. In this release, non-GAAP financial measures are used, such as “gross profit”, “gross profit margin”, “EBIT”, “EBITDA”, “Consolidated EBITDA”, and “Adjusted EBITDA”.

“Gross profit” is defined as revenue less: project costs, equipment costs, and depreciation.

The Company believes that gross profit is a meaningful measure of the business as it portrays results before general and administrative overheads costs, amortization of intangible assets and the gain or loss on disposal of property, plant and equipment and assets held for sale. Management reviews gross profit to determine the profitability of operating activities, including equipment ownership charges and to determine whether resources, plant and equipment are being allocated effectively.

The Company will often identify a relevant financial metric as a percentage of revenue and refer to this as a margin for that financial metric. “Margin” is defined as the financial number as a percent of total reported revenue. Examples where NAEP uses this reference and related calculation are in relation to “gross profit margin”, “operating income margin”, “net income (loss) margin”, “EBIT margin”, “Consolidated EBITDA margin” or “Adjusted EBITDA margin”.

NAEP believes that presenting relevant financial metrics as a percentage of revenue is a meaningful measure of its business as it provides the performance of the financial metric in the context of the performance of revenue. Management reviews margins as part of its financial metrics to assess the relative performance of its results.

"EBIT" is defined as net income (loss) before interest expense and income taxes.

"EBITDA" is defined as net income (loss) before interest expense, income taxes, depreciation and amortization.

"Consolidated EBITDA" is defined as EBITDA, excluding the effects of unrealized foreign exchange gain or loss, realized and unrealized gain or loss on derivative financial instruments, non-cash (equity classified) stock-based compensation expense, gain or loss on disposal of property, plant and equipment, gain or loss on disposal of assets held for sale and certain other non-cash items included in the calculation of net income (loss).

The Company believes that Consolidated EBITDA is a meaningful measure of business performance because it excludes interest, income taxes, depreciation, amortization and the effect of certain gains and losses and certain non-cash items that are not directly related to the operating performance of the Company’s business. Management reviews Consolidated EBITDA to determine whether property, plant and equipment are being allocated efficiently. In addition, the Company believes that Adjusted EBITDA is a meaningful measure as it excludes the financial statement impact of changes in the carrying value of the liability classified award plans as a result of movement of our share price.

As EBIT, EBITDA, Consolidated EBITDA, and Adjusted EBITDA are non-GAAP financial measures, the Company’s computations of EBIT, EBITDA, Consolidated EBITDA, and Adjusted EBITDA may vary from others in the industry. EBIT, EBITDA, Consolidated EBITDA, and Adjusted EBITDA should not be considered as alternatives to operating income or net income as measures of operating performance or cash flows and have important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under US GAAP. A reconciliation of Net income (loss) to EBIT, EBITDA, Consolidated EBITDA and Adjusted EBITDA is as follows:

The information provided in this release contains forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “expect”, “may”, “could”, “believe”, “anticipate”, “continue”, “should”, “estimate”, “potential”, “likely”, “target” or similar expressions.  Forward looking statements include the statements that the Company expects another robust year for earthworks, supplemented by heightened demand for seasonal heavy construction work, that it expects to meet its financial growth targets for 2018, that its new maintenance facility should be fully up and running by very early 2019 and that such facility will have a cash payback on investment within approximately 5 years, expects to be able to achieve our objective of a minimum 15% compound growth in revenue and EBITDA over the period of our three year organic growth plan while maintaining a strong balance sheet, believes it can achieve that growth through its stated strategy, expects that customers will continue to use economies of scale in production to lower oil sands operating costs per barrel, believes that the two large earthworks jobs we are executing in the winter season will have volumes roughly 10% higher than last year, that the combined value of the work could exceed $90.0 million and will likely continue to benefit all of the first quarter of 2018, expects that the new Fort Hills oil sands mine will provide a direct benefit in terms of incremental demand for our services and an indirect benefit from the overall tightening of heavy equipment supply, expects that there will be meaningful heavy construction activity for the summer season of 2018, expects that we will remain on the Fording River coal mine site well into the first half of 2018, expects that revenue at the Highland Valley copper mine will increase over the work duration, believes that we will be successful on several bids for further natural resource related contracts, both in Canada and the USA, in 2018 and 2019, expects that we will be successful at pre-qualifying to bid major infrastructure projects, and believes that our initiative of leveraging our core equipment maintenance competence into work for third parties could have a discernible impact on our 2018 results and that the external maintenance business could eventually provide more than $30.0 million in annual revenue stream for us.

The material factors or assumptions used to develop the above forward-looking statements include, and the risks and uncertainties to which such forward-looking statements are subject, are highlighted in the Company’s Management’s Discussion and Analysis (“MD&A”) for the quarter ended June 30, 2017. 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 NAEP’s control.  Undue reliance should not be placed upon forward-looking statements and NAEP undertakes no obligation, other than those required by applicable law, to update or revise those statements. For more complete information about NAEP, you should read the Company’s disclosure documents filed with the SEC and the CSA. You may obtain these documents for free by visiting EDGAR on the SEC website at or on the CSA website at .

North American Energy Partners Inc. () is the premier provider of heavy construction and mining services in Canada. For more than 50 years, NAEP has provided services to large oil, natural gas and resource companies. The Company maintains one of the largest independently owned equipment fleets in the region.

For further information contact:

David Brunetta, CPA, CMADirector; Finance, Investor Relations, Information Technology and TreasuryNorth American Energy Partners Inc.(780) 969-5574www.nacg.ca

More news and information about North American Energy Partners, Inc.

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Globe Newswire: 21:10 GMT Tuesday 13th February 2018

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