Good morning, ladies and gentlemen, and welcome to the North American Construction Group Earnings Call for the quarter ended September 30, 2018. [Operator Instructions]. The media may monitor this call in listen-only mode. They are fee to quote any member of management, but they are asked not to quote remarks from any other participant without that participant's permission. I will now turn the conference over to David Brunetta, Director of Investor Relations.

Good morning, everyone, and thank you for joining us. Welcome to the North American Construction Group's 2018 Third Quarter Conference Call. I would like to remind everyone that today's comments contain forward-looking information. Additionally, our actual results may differ materially from expected results because of various risk factors and assumptions. For more information about our results, please refer to our September 30, 2018 management's discussion and analysis, which is available on SEDAR and EDGAR. On today's call, Jason Veenstra, Executive Vice President and CFO, will begin by reviewing our third quarter results; Martin Ferron, Chairman and CEO, will then provide his comments on our outlook and strategy. Also with us on the call today are Joe Lambert, President and Chief Operating Officer; Barry Palmer, Vice President of Operations; and Rob Butler, Vice President of Finance. After management's prepared remarks, there will be a question-and-answer session. I now turn the call over to Jason.

Thanks, David, and good morning, everyone. As mentioned, I'll provide a summarized financial overview of Q3 results, and I'll close with some brief commentary on the expected closings of the Nuna and Aecon transactions. Starting with the financials. Top line revenue for the quarter was $84.9 million, $15 million higher than 2017. This 21% increase year-over-year is indicative of strong activity in the oil sands was driven by the mine site work at the Millennium, Mildred Lake and Kearl mines. This revenue illustrates the producers' relentless focus on throughput, as they drive down their overall cost per barrel. The Q3 revenue of $85 million was achieved despite the abnormally wet weather we experienced, which negatively affected our operating hours, specifically the earthworks and overburden work at Millennium and Mildred Lake. Of note, the increased overburden removal demand at Mildred Lake was performed under the announced term contract related to the long-term master services agreement. The higher volumes at Kearl were achieved through both heavy civil construction as well as core mine service activity. Outside the oil sands, civil constructions at the Highland Valley Copper mine from our three year contract continued to generate steady revenue. For comparative purposes, 2017 revenue included work at the Fording River coal mine, which was completed in the first quarter this year and civil construction revenue at the Red Chris Copper mine, which was completed at the end of 2017. Another factor in our positive year-over-year revenue trend is the increased work generated from external maintenance services. Martin will expand on this topic in his remarks as it relates to our new facility, but demand continues to grow for our cost-effective and reliable heavy equipment service offering. Moving to the expense side. Depreciation was $10.9 million for the quarter or 12.9% of revenue. From a…

Thanks, Jason, and a very good morning to everyone. Before I get into the meat of my prepared remarks, I would like to clear up some possible confusion around a section of my press release quote, which states that, we hope to post a strong outcome for Q4 similar to last year. Before we recently announced two significant acquisitions, the consensus EBITDA estimate to Q4 was $18 million, which is a number we posted last year. If we achieve that again this year, despite additional one-off acquisition related costs, we will have produced $91.5 million of EBITDA for 2018, as Jason just mentioned. This represents a 45% year-over-year growth rate, which is triple our target rate, after we also grew EBITDA by 24% in 2017. I hope that nobody will be disappointed by this pace of growth. And we also stated in the press release that we anticipate both acquisitions to close in Q4. To add further clarity, the first one could close as early as tomorrow and the second one, perhaps by December 1. However, it is difficult to assess incremental EBITDA numbers until we know a date certain. And so my press release quote implies no extra EBITDA. Clearly, when the deals do close, we can better assess the EBITDA impact on Q4, but I contend that we should perhaps fully focus on 2019 and 2020 outcomes. Okay, with that said, I'm now going to cover three topics today. Earnings per share, EPS, senior debt-to-EBITDA ratio and stock-based compensation. On EPS, pretty much exactly 6 months ago on the Q1 earnings call, I forecasted basic earnings could reach $1 a share, possibly as early as 2020. This piqued interest in the investment community, as I believe the statement put us on the map as a profitable company. Well,…

[Operator Instructions]. Your first question comes from the line of Yuri Lynk from Canaccord Genuity.

Martin, can we talk a bit about the term contracts that were signed back in June? And how those are proceeding thus far, understanding it's early days. And how do we think about those going forward in terms of maybe remind us how many customers have signed term contracts? And how many more are likely to sign those agreements?

Yes, sure Yuri, I'll try and provide some more color. As you know, we haven't got that many oil sands customers. We did sign two term contracts with one of them, earlier this year. And those are going extremely well. I think the customers are very happy with our performance. So that potentially will drive additional such arrangements with them, but we're also talking to one other customer at this juncture about a more significant term arrangement. It's early days in those discussions, but they should proceed fairly quickly such that we hope, as I said in my prepared remarks, to announce something by the end of the year. Is that sufficient?

Yes, and just -- is the main benefit to the company on the pricing? Or is it just the visibility and the ability to manage around other jobs and maintenance on the equipment?

Yes, the main benefit to us is in the planning. If you're doing the spot work all the time, it's difficult to scheduling your maintenance for example, you don't do the work you'd like to in some periods, so having the ability to plan the work over an extended period could drive incremental margin for us without any need for increased price.

Okay. Sounds good. Last question for me, and I'll turn it over. Can you talk about the opportunity that LNG Canada may present? And if you were a betting man, what are the odds that you might be doing some work on that project?

We're waiting for the packages to arrive for us to look at. We understand that the design has changed significantly since we provided budget pricing. So it's too early to say, the extent of the scope we might be taking on. But I think, the work is going to be highly competitive though. And we'll be looking to earn our usual margin on any work that we bid. So it'll be competitive, but we'll give it a shot and see how that goes, Yuri.

Your next question comes from the line of Maxim Sytchev from National Bank Financial.

Martin, I was wondering, if you don't mind, maybe providing an update on the Competition Bureau looking at the purchase of the Aecon assets, just any color. And maybe any communication that you're having right now with the regulators?

Yes, all I can say there, Max, is that we've submitted the required documentation, notices, et cetera, and we're hopeful that we'll get a positive response by the end of the waiting period or before the end of the waiting period. That's all I can say at this point.

Okay, fair enough. And then in terms of the scaling up of the opportunity for equipment maintenance for outside clients, Martin, do my mind -- I think right now, you're mentioning you have five clients. I mean I think that compares relative to three a couple of quarters ago. Do you mind maybe commenting on the uptake for that particular service?

We're still around the same number of customers, but we've been getting a lot of people coming to walk through, inspect the new facility, and we expect that to generate a lot more interest, lot more activity. People are super impressed as we are with the way that facility has turned out. I think that'll lead to incremental demand in the short term. Also, don't forget as I mentioned in my remarks, the timing is great in terms of getting the hands on the Aecon assets because we'll have to do some NOA upgrades, rebuilds there to get that fleet back to full working capacity.

Do you have an estimate of the amount that you will have to spend on that fleet to bring it to -- I don't know, if it is the right way to think about it, to sort of NOA levels, but maybe to sort of optimum capacity utilization on those assets?

Yes, we're marking $15 million to $20 million here in the next 6 months.

And is this going to be expensed, or is it going to be capitalized?

That'll be a capitalized number.

Okay. And then actually -- while we're on the topic of CapEx, do you mind maybe commenting on what we should expect, if you have those numbers in front of you, for CapEx next year both in terms of maintenance and growth if it's possible?

Yes, so in terms of sustaining capital, with the three pieces of our business now, although, we won't talk about three pieces. It'll be an integrated budget. We're looking on a sustaining-only basis, around $80 million. Growth, we're not looking at much right now because it's kind of full fledge here lately. So I would just focus on the $80 million for the time being, and with your EBITDA estimates for the year, no cost taxes, I think you will easily come to the conclusion that we can delever as planned.

Yes, for sure. And then, some of the questions I am getting right now from investors is just in terms of the ability to take on incremental work, so you feel that if you are successful, let's say on LNG or some of the infrastructure-related opportunities, that you have enough fleet be able to undertake all these contracts?

Yes, we think we can get access to additional fleet of the nature required to do that work. We're still looking for used equipment, although, the supply is drying up somewhat. But we made some nice buys during the downturn. You see that in our numbers already, and we'd like to think that we can take on that extra work.

Your next question comes from the line of Ben Cherniavsky from Raymond James.

My questions actually were just along the lines of what Maxim just asked. But I guess, maybe to elaborate on that, I am wondering if you can just maybe tell us a little more about the intent of the Aecon asset purchase, like how that strategically helps you where they weren't able to utilize those assets as profitably? I assume, some of it has to do with the maintenance facility which you guys just talked about and the extra capacity it gives you, but what does this do for you that they couldn't do with the assets?

Yes, I think, there's been a lot of talk, publications on comparison of their performance against ours. To be honest, we didn't even look at that performance when we decided to make the acquisition. We just wanted to get our hands on the assets, because we thought that we could match our own performance with those new assets over time. And I think if you've been watching us as I know you have, Ben, over the last 5, 6 years, you know the improvements that we've made. So since the assets will be on exactly the same sites, working for the same customers in the same conditions as our present fleet, we think that we can achieve the same performance with them. The customers appear very happy with that situation because they know that our way of working brings extra productivity. I am not being critical of the vendor there, but I'm just saying that the customers think that we can get more out of the assets and therefore, they're very pleased to see us get our hands on them. I don't know if that's helpful, but that's the way we look at it.

So it just comes down to an operating philosophy and practices that you think you're -- and I guess because this is what you do versus it being one of many things that Aecon does, you do it better?

Yes, we're entirely focused on this. It's what we do, right? Whereas you say, they're focused on many other things, and I'm sure they're great as those things.

[Operator Instructions]. Your next question comes from the line of Glenn Primack [ph] from Promus Holdings.

Great commentary, especially concerning the equity dilution. I wish there were more management teams that expressed a similar view. Regarding the, you big oil sands customers, how much do you think that they outsource today to vendors such as yourself? And can that move higher?

It's difficult to give exact numbers there Glenn, [ph] but clearly the operators who have large fleets of equipment themselves do a lot of work. So they certainly handle all of the oil, which we think accounts for around 50% of the total earth that's moved to produce a barrel. And then they do on occasions, some of the other activities like overburden removal. So they, right now, do a fair amount of the work themselves. And that seems to be a cultural factor. That's what they like to do. So over time, as we grow and show them how we can maintain and operate equipments, we might have the opportunity to change that cultural thinking, but I would say that's a few years away. So for the time being, we're just focused on doing the best with our fleet and supporting our customers to make them successful.

Okay, great. So even without any additional, call it, outsourcing or share from those major customers with the asset purchase that you've made, I don't know, looking out another 12 to 15 months or so, the multiple you paid for these assets are probably worth a lot less than what's written on the press release paper, that's basically the sales, right? You're going to be utilizing more of them.

Yes, I would hope that's safe to assume. But don't forget too, as we've said many times, volumes are increasing generally. Our customers are looking to put as many barrels through their production facility as entirely possible. So that's driving volumes for us too.

Your next question comes from the line of Devin Schilling from PI Financial.

Martin, just a quick update on some of the other infrastructure projects that you guys are shortlisted for? I guess just in regards to timing for these projects, when we might hear some more info, both the flood mitigation and the gravel road project? It'd be great.

Well, the gravel road project in the Northwest territories, we think we might hear something in the next few weeks. We are 1 of 3 bidders, and I think we put a strong footfall, so hopeful. But you can never tell in these situations obviously. The flood mitigation project is held up through environmental pressures, but we hope to be getting back to bidding that maybe next year. And then we are looking for work on other resource plays as well as infrastructure projects, and we have several bids in-house to address those. These are term arrangements, where we would secure incremental equipment for long-term contracts, so that's the type of opportunity we're looking for rather than short-term projects that would require us to take equipment from the oil sands.

Okay, great. And I guess with the NCIB running its course here, is there any plan to renew it in 2019 here going forward? Or are you guys going to be redeploying that cash to pay down some of this new debt?

Yes. Our initial focus will be on deleveraging. But you can never say never, depends on what happens with the stock price, right? We've been active buyers of the stock for many years, and if we don't get the right sort of level in the market at a certain point next year, we'll look at it again in terms of renewing an NCIB. We'll see.

There are no further questions at this time. Mr. Ferron, I turn the call back over to you.

Well, thank you, Melissa. And thanks to everybody who call in today. We look forward to speaking to you next time.

Thank you. This concludes the North American Construction Group Conference Call. You may now disconnect.