North American Energy Partners Inc.
TSX : NOA
NYSE : NOA

North American Energy Partners Inc.

June 09, 2009 17:30 ET

North American Energy Partners Announces Fiscal 2009 and Fourth Quarter Results

EDMONTON, ALBERTA--(Marketwire - June 9, 2009) - North American Energy Partners Inc. ("NAEP" or "the Company") (TSX:NOA)(NYSE:NOA) today announced results for the 12 months and three months ended March 31, 2009.

Unless otherwise specified, all dollar amounts discussed are in Canadian dollars.



Consolidated Financial Highlights

Three Months
Year Ended March 31, Ended March 31,
2008
(dollars in thousands) 2009 2008 2009 restated(1)
------------------------- ----------- ---------- ----------- -----------
Revenue $ 972,536 $ 989,696 $ 174,700 $ 323,600
Gross profit $ 175,305 $ 163,317 $ 32,464 $ 62,573
Gross profit margin 18.0% 16.5% 18.6% 19.3%
Impairment of goodwill $ 176,200 $ - $ 143,447 $ -
Operating (loss) income $ (81,712) $ 92,397 $ (129,483) $ 42,581
Net (loss) income $ (139,515) $ 39,784 $ (142,690) $ 20,484

Consolidated EBITDA (2) $ 146,046 $ 135,094 $ 25,191 $ 55,435
Capital spending $ 94,139 $ 57,779 $ 9,244 $ 6,213
Cash and cash equivalents $ 98,880 $ 31,863 $ 98,880 $ 31,863

(1) See "Restatement March 31, 2008" at the end of this release.

(2) For a definition of Consolidated EBITDA (as defined within the
revolving credit agreement) and reconciliation to net (loss) income,
see "Non-GAAP Financial Measures" at the end of this release.


"We turned in strong operating performance in fiscal 2009, achieving revenue of $972.5 million and the best gross profit and Consolidated EBITDA results in our history," said Rod Ruston, President and CEO. "The strength of our first three quarters played a significant role in these results, as did continuing strong demand for the recurring services that support our customers' ongoing oil sands mining operations. Our solid operating performance, coupled with prudent cash management, resulted in a cash balance of $98.9 million at March 31, 2009, compared to $31.9 million a year ago."

"As we expected, our revenue for the three months ended March 31, 2009 was lower than in the same period last year but our gross profit margin performance remained solid," added Mr. Ruston.

The change in revenue resulted from a combination of factors, including a market-related reduction in oil sands development and commercial and industrial construction activity, the absence of a major pipeline project to replace the completed TMX project and a deferment of work on a long-term overburden removal contract. This deferment was due to a delay in the client's project start-up schedule and was not related to the changed economic environment. NAEP began to mobilize equipment back to the site on April 1, 2009 following the successful commissioning of Canadian Natural's Horizon project.

"Despite the overburden contract impact and the overall reduction in revenue, our recurring services revenues remained stable during the fourth quarter, reflecting the strength in this part of our business," said Mr. Ruston.

While underlying profit performance was stable and cash balance continued to improve, the Company recorded a fourth quarter net loss of $142.7 million, primarily as a result of a $143.4 million goodwill impairment charge. This non-cash charge reflects weaker energy industry conditions, a decline in the Company's market capitalization largely attributable to the weak stock market and the accounting requirements that prevail under such conditions.

Said Mr. Ruston, "Industrial and commercial construction continues to be affected by the depressed economic environment. However, some projects are still proceeding as evidenced by recent contract wins in our Heavy Construction and Mining and Piling groups. These contracts, due to start in the second quarter, have a total value of more than $65 million and include our Heavy Construction and Mining segment's first entry into the Saskatchewan industrial construction market."

"Looking ahead, we anticipate some variability in our recurring services business through the first half of fiscal 2010, however, we expect to see growth resume in the second half. In addition, we are beginning to see improvements in oil sands industry fundamentals, which support our longer-term positive outlook for all aspects of our oil sands business," said Mr. Ruston.



Consolidated Results for the Year Ended March 31, 2009

Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Revenue $ 972,536 $ 989,696 $ (17,160)


For the year ended March 31, 2009, consolidated revenue declined by 1.7% to $972.5 million, reflecting the impact of lower business activity in the fourth quarter.



Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Gross profit $ 175,305 $ 163,317 $ 11,988
Gross profit margin 18.0% 16.5%


Gross profit for the year ended March 31, 2009, increased 7.3% to $175.3 million as a result of an increase in gross profit margin to 18.0%, from 16.5% a year ago. The margin improvement primarily reflects the Pipeline segment's return to profitability in the first half of fiscal 2009, the partial recovery of losses incurred on a Pipeline contract in a previous year and improvements in the cost of tires for large trucks.



Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Operating (loss) income $ (81,712) $ 92,397 $ (174,109)
Operating margin -8.4% 9.3%


The Company reported an operating loss of $81.7 million for the year ended March 31, 2009, compared to operating income of $92.4 million last year. This change reflects the combined negative impact of $176.2 million in goodwill impairment charges, including the fourth quarter charge discussed above and a third quarter charge related to the Pipeline segment. Excluding the impact of these goodwill impairment charges, operating income would have been $94.5 million or 9.7% of revenue, compared to $92.4 million or 9.3% of revenue, in the prior year. This improvement reflects higher gross profit, partially offset by higher general and administrative (G&A) expense. For the year ended March 31, 2009, G&A expense increased to $74.4 million or 7.7% percent of revenue, from $69.7 million or 7.0% of revenue in the prior year. The $4.7 million increase was driven by higher staffing levels needed to support increased operations activity, as well as inflationary pressures in the oil sands through the first three quarters. This was partially offset by the benefits of cost-cutting initiatives implemented in the fourth quarter and process improvements implemented earlier in the year.



(dollars in thousands, Year Ended March 31,
except per share amounts) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Net (loss) income $ (139,515) $ 39,784 $ (179,299)
Per share information:
Net (loss) income - basic $ (3.87) $ 1.11 $ (4.98)
Net (loss) income - diluted $ (3.87) $ 1.08 $ (4.95)


The Company reported a full-year net loss of $139.5 million (diluted loss per share of $3.87) for the year ended March 31, 2009, compared to net income of $39.8 million (diluted income per share of $1.08) last year. The year-over-year change reflects the negative impact of non-cash items including the goodwill impairment charges and the net impact of unrealized foreign exchange losses and unrealized derivative financial instruments gains. This was partially offset by strong operating performance and a one-time cash gain of $3.8 million, net of tax, in other income resulting from the cancellation of the US dollar rate swap. Excluding the non-cash items, diluted income per share would have been $1.35 for the year ended March 31, 2009, compared to $1.23 last year.



Consolidated Results for the Three Months Ended March 31, 2009

Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Revenue $ 174,700 $ 323,600 $ (148,900)


For the three months ended March 31, 2009, consolidated revenue was $174.7 million, compared to $323.6 million in the same period last year. The $148.9 million decrease primarily reflects reduced activity in commercial and industrial construction, the deferral on the overburden removal contract during the customer's start up phase and a sharp decline in Pipeline segment revenues following completion of the TMX pipeline project in the previous quarter.



Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Gross profit $ 32,464 $ 62,573 $ (30,109)
Gross profit margin 18.6% 19.3%


Gross profit for the three months ended March 31, 2009 was $32.5 million compared to $62.6 million in the same period last year, reflecting lower volumes and a slightly lower gross profit margin of 18.6%, compared to 19.3% last year. The year-over-year gross profit margin reduction primarily reflects lower Piling segment margins.



Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Operating (loss) income $ (129,483) $ 42,581 $ (172,064)
Operating margin -74.1% 13.2%


An operating loss of $129.5 million for the three months ended March 31, 2009 resulted from the $143.4 million goodwill impairment charge. Excluding the impact of the impairment charge, operating income would have been $13.9 million or 8.0% of revenue for the three months ended March 31, 2009, compared to $42.6 million or 13.2% of revenue in the same period last year.

G&A costs were $16.7 million for the three months ended March 31, 2009, down from $20.7 million in the same period in the prior year. G&A for the current period reflects the benefits of cost-cutting initiatives implemented in the quarter and process improvements implemented earlier in the year.



(dollars in thousands, Three Months Ended March 31,
except per share amounts) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Net (loss) income $ (142,690) $ 20,484 $ (163,174)
Per share information:
Net (loss) income - basic $ (3.96) $ 0.57 $ (4.53)
Net (loss) income - diluted $ (3.96) $ 0.56 $ (4.52)


A net loss of $142.7 million (diluted loss per share of $3.96) was recorded for the three months ended March 31, 2009, compared to net income of $20.5 million (diluted income per share of $0.56) during the same period last year. The net loss resulted from the impact of non-cash items, including the goodwill impairment charge as well as the net impact of unrealized foreign exchange losses and unrealized derivative financial instruments gains. Excluding these non-cash items, diluted income per share would have been $0.06 for the three months ended March 31, 2009, compared to $0.65 in the same period last year.

Segment Results



Heavy Construction and Mining

Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 716,053 $ 626,582 $ 89,471
Segment profit $ 115,698 $ 105,378 $ 10,320
Profit margin 16.2% 16.8%


For the year ended March 31, 2009, Heavy Construction and Mining revenue increased to $716.1 million, representing a year-over-year increase of 14.3%. Recurring services represented 73% of segment revenues for the 2009 year, compared to 60% last year. Segment margin decreased to 16.2% from 16.8%, primarily reflecting the negative impact of production challenges on a single project.



Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 151,952 $ 195,442 $ (43,490)
Segment profit $ 29,282 $ 36,747 $ (7,465)
Profit margin 19.3% 18.8%


For the three months ended March 31, 2009, revenue from the Heavy Construction and Mining segment was $152.0 million, compared to $195.4 million in the same period last year. The $43.5 million decrease primarily reflects delays to Suncor's Voyageur project and Petro-Canada's Fort Hills project, as well as deferral on the overburden removal contract with Canadian Natural. These volume reductions were partially offset by strong demand for recurring site services work at Albian's Jackpine Mine and Muskeg River Mine.

Recurring services continued to be a significant contributor to the Company's revenues. For the three months ended March 31, 2009, recurring services represented $133.2 million or 88% of Heavy Construction and Mining segment revenue, compared to $126.0 million or 65% in the same period last year, despite the impact of the overburden removal contract deferral in the current year.

Margin on the Heavy Construction and Mining revenue increased to 19.3%, from 18.8% last year, reflecting the increased percentage of higher-margin site services work in the revenue mix, as well as the positive impact of project close-out activities during the current year period.



Piling

Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 155,076 $ 162,397 $ (7,321)
Segment profit $ 38,776 $ 45,362 $ (6,586)
Profit margin 25.0% 27.9%


For the year ended March 31, 2009, Piling revenue was $155.1 million compared to $162.4 million last year. This change reflects declining activity levels in the western Canadian commercial construction market. Segment margin was 25.0% compared to 27.9% last year, reflecting an increased proportion of lower-margin, lower-risk, time-and-materials projects in the current year.



Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 22,367 $ 40,699 $ (18,332)
Segment profit $ 6,331 $ 13,637 $ (7,306)
Profit margin 28.3% 33.5%


For the three months ended March 31, 2009, Piling segment revenue was $22.4 million, compared to $40.7 million during the same period last year. Weaker conditions in the commercial and industrial construction sectors were the key factor in this decline. Segment margins also declined to 28.3%, from 33.5% last year, reflecting margin pressure due to weaker market conditions in the current year and a larger proportion of high-margin, fixed-price contracts last year. The margin decrease was partially offset by the positive impact of project close-out activities in the three months ended March 31, 2009.



Pipeline

Year Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 101,407 $ 200,717 $ (99,310)
Segment profit $ 22,470 $ 25,465 $ (2,995)
Profit margin 22.2% 12.7%


For the year ended March 31, 2009, Pipeline revenues were $101.4 million, compared to $200.7 million a year ago, reflecting completion of the TMX Anchor Loop project in the third quarter. However, margins improved to 22.2% from 12.7% last year as final change orders for the TMX project were processed at the end of the project. In comparing the annual Pipeline margin results, it is important to note that margins last year were negatively impacted by the recognition of $2.0 million in previously unrecognized costs related to a fixed-priced contract. Margins for the year ended March 31, 2009 have subsequently benefited from the realization of $5.3 million in related claims revenue. Excluding the impact of these items, margins for the current year would have been 16.9%, compared to 13.7% a year ago.



Three Months Ended March 31,
(dollars in thousands) 2009 2008 Change
------------------------------ ------------ ----------- -----------
Segment revenue $ 381 $ 87,459 $ (87,078)
Segment profit $ 6 $ 11,311 $ (11,305)
Profit margin 1.6% 12.9%


Successful completion of the TMX Anchor Loop project in October 2008 led to a steep decline in Pipeline activity in the three months ended March 31, 2009. Pipeline revenue was $0.4 million, compared to $87.5 million a year ago when the TMX project was operating at a peak activity level.

Organizational Changes

NAEP today announced that Peter Dodd, Chief Financial Officer, will retire on June 10, 2009 and has accepted an invitation to join the Company's Board of Directors upon his retirement. David Blackley, currently Vice President Finance, will succeed Peter Dodd as Chief Financial Officer.

Said Mr. Ruston, "Peter Dodd has played a major role in helping us manage rapid growth and acquire a new level of financial sophistication. We are delighted that we will continue to benefit from his wise counsel as a member of the board. We are also fortunate to have a highly capable and respected financial executive in place who can immediately assume the CFO position following Peter's retirement. David brings seasoned financial acumen and an impressive array of accomplishments to his new position. He has the right leadership and financial skills to support our strategic goals going forward."

Mr. Blackley joined NAEP in early 2008, having previously served as Vice President Finance of Lafarge North America's Aggregates and Concrete division. A Chartered Accountant, he holds a Bachelor of Commerce from Rhodes University in South Africa.

Executive Office to Move to Calgary

NAEP also today announced that it will move its executive offices to Calgary effective July 1, 2009. The move, which involves the relocation of approximately five executives and support staff, is being undertaken to position senior executives closer to customers. The balance of NAEP's head office operations will remain in Acheson, Alberta.

Outlook

With investment in new oil sands development constrained by macro-economic conditions and some near-term variability anticipated in recurring services revenue, management's expectations for the first half of fiscal 2010 remain cautious. Overall, however, the Company is beginning to see positive developments that improve the longer-term outlook.

In the area of oil sands project development, the Company believes that reductions in project costs and a gradual strengthening of oil prices are creating a more attractive environment for investment. Imperial Oil Ltd.'s approval of the Kearl project is an example of this. In addition, the announced merger between Suncor and Petro-Canada is expected to have a positive impact on oil sands investment by creating a single entity with the resources to support large capital projects.

On the recurring services front, management expects to see growth resuming in the second half of fiscal 2010 as a result of increased volumes under service agreements and a gradual ramp up of service on the Company's overburden removal contract with Canadian Natural. The Company began to mobilize equipment back to the Horizon project on April 1, 2009 and expects volumes to gradually return to normal levels over the next two quarters. Demand for recurring services is largely unaffected by changes in oil prices as operational oil sands mines must operate at full capacity in order to defray the high fixed cost and maintain low unit costs. Furthermore, demand for recurring services typically grows as new mines come on-line and maturing mines expand their geographic footprint.

The near-term outlook for the industrial construction market has also improved marginally with several small contract wins, including the Heavy Construction and Mining segment's first entry into the Saskatchewan industrial construction market. In addition, the Company recently opened an office in Toronto, Ontario and is actively bidding piling work in this market, which is expected to benefit from $32.5 billion in announced federal and provincial government spending over the next two years.

While these are positive developments, commercial and industrial construction activity in Canada remains well below 2007 and 2008. In addition, with the TMX project completed, Pipeline revenues are expected to be significantly below fiscal 2008 and 2009 levels. The Pipeline division continues to review new opportunities to replace this revenue but does not expect to be involved in a major pipeline project in the near term.

Working through the current market conditions, the Company intends to continue leveraging its strong market position, high-quality equipment fleet and experienced management team to secure profitable business. Further strengthening of the balance sheet through careful management of capital spending, working capital management and tight cost control will also remain a priority.

Conference Call and Webcast

Management will hold a conference call and webcast to discuss its fourth-quarter and full fiscal-year financial results tomorrow, Wednesday, June 10, 2009, at 8:30 am Eastern time.

The call can be accessed by dialing:

Toll free: 1-877-407-9205 or International: 1-201-689-8054

A replay will be available through July 10, 2009 by dialing:

Toll Free: 1-877-660-6853 International: 1-201-612-7415 (Account: 286 Conference ID: 324880)



Consolidated Balance Sheets
As at March 31
(in thousands of Canadian dollars)

---------------------------------------------------------------------------
2009 2008
---------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 98,880 $ 31,863
Accounts receivable 78,323 167,010
Unbilled revenue 55,907 70,883
Inventories 11,814 110
Prepaid expenses and deposits 4,781 9,300
Other assets ---- 3,703
Future income taxes 7,033 8,217
---------------------------------------------------------------------------
256,738 291,086
Future income taxes 12,432 18,199
Assets held for sale 2,760 1,074
Prepaid expenses and deposits 3,504 ----
Plant and equipment 329,705 281,039
Goodwill 23,872 200,072
Intangible assets 1,041 2,128
---------------------------------------------------------------------------
$ 630,052 $ 793,598
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 56,204 $ 113,143
Accrued liabilities 52,135 45,078
Billings in excess of costs incurred and
estimated earnings on uncompleted contracts 2,155 4,772
Current portion of capital lease obligations 5,409 4,733
Current portion of derivative financial
instruments 11,439 4,720
Future income taxes 7,749 10,907
---------------------------------------------------------------------------
135,091 183,353
Deferred lease inducements 836 941
Capital lease obligations 12,075 10,043
Senior notes 252,899 198,245
Director deferred stock unit liability 546 190
Derivative financial instruments 50,562 93,019
Asset retirement obligation 386 ----
Future income taxes 30,220 24,443
---------------------------------------------------------------------------
482,615 510,234
---------------------------------------------------------------------------
Shareholders' equity:
Common shares (authorized - unlimited number
of voting and non-voting common shares; issued
and outstanding - March 31, 2009 - 36,038,476
voting common shares (March 31, 2008 -
35,929,476 voting common shares) 299,973 298,436
Contributed surplus 5,275 4,215
Deficit (157,811) (19,287)
---------------------------------------------------------------------------
147,437 283,364
---------------------------------------------------------------------------
$ 630,052 $ 793,598
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Consolidated Statements of Operations, Comprehensive (Loss) Income and
Deficit
For the years ended March 31
(in thousands of Canadian dollars, except per share amounts)

--------------------------------------------------------------------------
2009 2008 2007
--------------------------------------------------------------------------
Revenue $ 972,536 $ 989,696 $ 629,446
Project costs 505,026 592,458 363,930
Equipment costs 210,520 174,873 122,306
Equipment operating lease expense 43,583 22,319 19,740
Depreciation 38,102 36,729 31,034
--------------------------------------------------------------------------
Gross profit 175,305 163,317 92,436
General and administrative costs 74,405 69,670 39,769
Loss on disposal of plant and equipment 5,325 179 959
Amortization of intangible assets 1,087 1,071 582
Impairment of goodwill 176,200 ---- ----
--------------------------------------------------------------------------
Operating (loss) income before
the undernoted (81,712) 92,397 51,126
Interest expense, net 27,450 27,019 37,249
Foreign exchange loss (gain) 46,666 (25,442) (5,044)
Realized and unrealized (gain) loss on
derivative financial instruments (25,081) 34,075 (196)
Gain on repurchase of NACG Preferred Corp.
Series A preferred shares ---- ---- (9,400)
Loss on extinguishment of debt ---- ---- 10,935
Other income (5,955) (418) (904)
--------------------------------------------------------------------------
(Loss) income before income taxes (124,792) 57,163 18,486
Current income taxes 5,546 80 (2,975)
Future income taxes 9,177 17,299 382
--------------------------------------------------------------------------
Net (loss) income and comprehensive
(loss) income for the year (139,515) 39,784 21,079
Deficit, beginning of period - as
previously reported (19,287) (55,526) (76,546)
Change in accounting policy related
to financial instruments ---- (3,545) ----
Change in accounting policy related
to inventories 991 ---- ----
Premium on repurchase of common shares ---- ---- (59)
--------------------------------------------------------------------------
Deficit, end of period $ (157,811) $ (19,287) $ (55,526)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net (loss) income per share - basic $ (3.87) $ 1.11 $ 0.87
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net (loss) income per share - diluted $ (3.87) $ 1.08 $ 0.83
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Consolidated Statements of Cash Flows
For the years ended March 31
(in thousands of Canadian dollars)

--------------------------------------------------------------------------
Cash provided by (used in): 2009 2008 2007
--------------------------------------------------------------------------
Operating activities:
Net (loss) income for the year $ (139,515) $ 39,784 $ 21,079
Items not affecting cash:
Depreciation 38,102 36,729 31,034
Write-down of other assets to
replacement cost ---- 1,845 695
Amortization of intangible assets 1,087 1,071 582
Impairment of goodwill 176,200 ---- ----
Amortization of deferred lease
inducements (105) (104) ----
Amortization of bond issue costs,
premiums and financing costs 808 838 3,436
Loss on disposal of plant and equipment 5,325 179 959
Unrealized foreign exchange loss (gain)
on senior notes 45,860 (24,788) (5,017)
Unrealized change in the fair value of
derivative financial instruments (27,752) 31,406 (2,748)
Stock-based compensation expense 2,251 1,991 2,101
Gain on repurchase of NACG Preferred Corp.
Series A preferred shares ---- ---- (8,000)
Loss on extinguishment of debt ---- ---- 10,680
Change in redemption value and accretion
of redeemable preferred shares ---- ---- 3,114
Accretion of asset retirement obligation 155 ---- ----
Future income taxes 9,177 17,299 382
Net changes in non-cash working capital 46,192 (8,753) (57,072)
--------------------------------------------------------------------------
157,785 97,497 1,225
--------------------------------------------------------------------------
Investing activities:
Acquisition, net of cash acquired ---- (1,581) (1,517)
Purchase of plant and equipment (94,139) (57,779) (110,019)
Additions to assets held for sale (2,035) (3,499) ----
Proceeds on disposal of plant
and equipment 11,164 6,862 3,564
Proceeds of disposal of assets
held for sale 325 10,200 ----
Net changes in non-cash working capital (630) (2,835) 7,922
--------------------------------------------------------------------------
(85,315) (48,632) (100,050)
--------------------------------------------------------------------------
Financing activities:
(Decrease) increase in revolving
credit facility ---- (20,500) 20,500
Repayment of 9% senior secured notes ---- ---- (74,748)
Repurchase of NAEPI Series A
preferred shares ---- ---- (1,000)
Repurchase of NACG Preferred Corp.
Series A preferred shares ---- ---- (27,000)
Cash settlement of stock options ---- (581) ----
Stock options exercised 703 1,627 139
Financing costs ---- (776) (1,346)
Repayment of capital lease obligations (6,156) (3,762) (6,033)
Issue of common shares ---- ---- 171,165
Share issue costs ---- ---- (18,582)
Repurchase of common shares for
cancellation ---- ---- (84)
--------------------------------------------------------------------------
(5,453) (23,992) 63,011
--------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 67,017 24,873 (35,814)
Cash and cash equivalents, beginning
of year 31,863 6,990 42,804
--------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 98,880 $ 31,863 $ 6,990
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Restatement March 31, 2008

In preparing the financial statements for the year ended March 31, 2008, we determined that the previously issued interim unaudited consolidated financial statements for the three and nine months ended December 31, 2007 did not properly account for an embedded derivative with respect to price escalation features in a supplier maintenance contract. We recorded the full fiscal year accounting treatment of the embedded derivative in the three month period ended March 31, 2008. Subsequently, for each interim unaudited consolidated financial statement during the current fiscal year we have restated the prior year three month period to reflect the proper embedded derivative accounting in the appropriate prior period. The restatement of the three months ended March 31, 2008 will be the final prior three month period restatement required for this issue.

The embedded derivative has been measured at fair value and included in derivative financial instruments on the consolidated balance sheet with changes in fair value recognized in net income. The impact of this restatement is an adjustment, for the three month period ended March 31, 2008, to unrealized income on derivative financial instruments and income tax expense. This resulted in a reduction to net income of $2.2 million (restated as net income of $20.5 million), a reduction to basic earnings per share of $0.06 per share (restated as $0.57 earnings per share) and a reduction to diluted earnings per share of $0.06 per share (restated as $0.56 earnings per share). There is no adjustment to the full-year period ended March 31, 2008 nor is there an adjustment required to the Audited Consolidated Balance Sheet for the year ended March 31, 2008.

Non-GAAP Financial Measures

This release contains non-GAAP financial measures. These measures do not have standardized meanings under Canadian GAAP or US GAAP and are therefore unlikely to be comparable to similar measures used by other companies. The non-GAAP financial measure disclosed by the Company in this press release is Consolidated EBITDA (as defined within the revolving credit agreement). The Company provides a reconciliation of Consolidated EBITDA to net (loss) income reported in accordance with Canadian GAAP below. Investors and readers are encouraged to review the reconciliation of this non-GAAP financial measure to reported net (loss) income.

Consolidated EBITDA (as defined within the revolving credit agreement)

Consolidated EBITDA is a measure defined by our revolving credit agreement. This measure is defined as EBITDA (which is calculated as net income before interest, income taxes, depreciation and amortization) excluding the effects of unrealized foreign exchange gain or loss, realized and unrealized gain or loss on derivative financial instruments, non-cash stock-based compensation expense, gain or loss on disposal of plant and equipment and certain other non-cash items included in the calculation of net income. Our revolving credit agreement requires us to maintain a minimum interest coverage ratio and a maximum senior leverage ratio, which are calculated using Consolidated EBITDA. Non-compliance with these financial covenants could result in our being required to immediately repay all amounts outstanding under our revolving credit facility. Consolidated EBITDA should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows as a measure of liquidity. Consolidated EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under Canadian GAAP or US GAAP. For example, Consolidated EBITDA:

- does not reflect cash expenditures or requirements for capital expenditures or capital commitments;

- does not reflect changes in cash requirements for our working capital needs;

- does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on debt;

- excludes tax payments that represent a reduction in cash available to the Company; and

- does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

Consolidated EBITDA also excludes unrealized foreign exchange gains and losses and realized and unrealized gains and losses on derivative financial instruments, which, in the case of unrealized losses, may ultimately result in a liability that will need to be paid and in the case of realized losses, represents an actual use of cash during the period. Our use of the term "Consolidated EBITDA (as defined within the revolving credit agreement)" replaces the term "Consolidate EBITDA (per bank)" used in prior filings. The definition of Consolidated EBITDA has not changed.

A reconciliation of net (loss) income to Consolidated EBITDA (as defined within the revolving credit agreement) is as follows:



Three Months
Year Ended March 31, Ended March 31,
2008
(dollars in thousands) 2009 2008 2009 restated(1)
----------------------- ----------- ----------- ----------- -----------
Net (loss) income $ (139,515) $ 39,784 $ (142,690) $ 20,484
Adjustments:
Interest expense $ 27,450 $ 27,019 $ 7,787 $ 6,686
Income taxes $ 14,723 $ 17,379 $ 2,354 $ 10,399
Depreciation $ 38,102 $ 36,729 $ 9,074 $ 12,550
Amortization of
intangible assets $ 1,087 $ 1,071 $ 265 $ 305
Unrealized foreign
exchange loss (gain)
on senior notes $ 45,860 $ (24,788) $ 7,035 $ 7,838
Realized and
unrealized (gain)
loss on derivative
financial
instruments $ (25,081) $ 34,075 $ (3,910) $ (2,615)
Loss (gain) on
disposal of plant
and equipment $ 5,325 $ 179 $ 1,547 $ (990)
Stock-based
compensation $ 2,251 $ 1,991 $ 448 $ 968
Director deferred
stock unit expense $ (356) $ (190) $ (166) $ (190)
Write down of other
assets to
replacement cost $ - $ 1,845 $ - $ -
Impairment of goodwill $ 176,200 $ - $ 143,447 $ -
----------- ----------- ----------- -----------
Consolidated EBITDA $ 146,046 $ 135,094 $ 25,191 $ 55,435
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(as defined in the revolving credit agreement)


Forward-Looking Information

This release contains forward-looking information that is based on expectations and estimates as of the date of this document. Forward-looking information is information that is subject to known and unknown risks and other factors that may cause future actions, conditions or events to differ materially from the anticipated actions, conditions or events expressed or implied by such forward-looking information. Forward-looking information is information that does not relate strictly to historical or current facts and can be identified by the use of the future tense or other forward-looking words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "should", "may", "objective", "projection", "forecast", "continue", "strategy", "position" or the negative of those terms or other variations of them or comparable terminology. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to vary from those expressed or implied in the forward-looking information in this document.

Examples of such forward-looking information in this document include but are not limited to the following, each of which is subject to significant risks and uncertainties and is based on a number of assumptions which may prove to be incorrect:

(A) information related to the level of activity in the Company's key markets and demand for the Company's services, including (1) demand for recurring services business being variable through the first half of fiscal 2010 with growth resuming in the second half, (2) reductions in project costs and the gradual strengthening of oil prices creating a more attractive environment for investment, (3) the announced merger between Suncor and Petro-Canada having a positive impact on oil sands investment, (4) expected increased volumes under the Company's service agreements and (5) the Ontario market benefiting from government spending; is subject to the risks and uncertainties that; there could be a further downturn in the Canadian energy industry due to fluctuations in oil prices, anticipated major projects in the oil sands may or may not materialize due to changes in the long term view of oil prices, insufficient pipeline upgrading and refining capacity and/or insufficient governmental infrastructure to support the growth in the oil sands region could cause customers to delay, reduce or cancel plans to construct new oil sands projects or expand existing projects, cost overruns by customers on their projects may cause customers to terminate future projects and projects funded by government spending may not materialize; and is based on the assumption that long-term views of the economic viability of oil sands projects will not significantly change; and

(B) information related to the future performance of the Company, including (1) a gradual ramp up of service on the Company's overburden removal contract with volumes expected to gradually return to normal levels over the next two quarters, (2) the Pipeline segment revenues expected to be below fiscal 2008 and fiscal 2009 levels, (3) management's ability to continue leveraging the Company's strong market position, high quality equipment fleet and experienced management team to secure profitable business and (4) management's ability to continue strengthening the balance sheet; is subject to the risks and uncertainties that; the Company may be unsuccessful when new projects are tendered, the Company could lose a customer and suffer a significant reduction in business, the Company may be exposed to losses when estimates of project costs are lower than actual costs or work is delayed due to weather-related factors, the Company may be unable to attract qualified personnel, the Company may be unable to obtain equipment and tires, the Company may not be able to secure financing at a reasonable cost for equipment purchases; and is based on the assumptions that the Company is successful in the bidding process, the Company can continue to execute profitably under its contracts and the Company can secure financing for equipment purchases.

While management anticipates that subsequent events and developments may cause its views to change, the Company does not intend to update this forward-looking information, except as required by applicable securities laws. This forward-looking information represents management's views as of the date of this document and such information should not be relied upon as representing their views as of any date subsequent to the date of this document. The Company has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. 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.

For more complete information about NAEP, you should read the disclosure documents filed with the United States Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA). You may obtain these documents for free by visiting the IDEA System on the SEC website at www.sec.gov or SEDAR on the CSA website at www.sedar.com.

About the Company

North American Energy Partners Inc. (www.nacg.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. NAEP maintains one of the largest independently owned equipment fleets in the region.

Contact Information