Good morning, ladies and gentlemen. Welcome to the North American Construction Group Earnings Call for the First Quarter Ending March 31, 2019. [Operator Instructions] The media may monitor this call in a listen-only mode. They are free to quote any member of management but are asked not to quote remarks from any other participant without that participant’s permission. I would now like to turn the conference over to David Brunetta, Director of Investor Relations.

Good morning, Denise and thank you everyone for joining us. Welcome to the North American Construction Group’s 2019 first 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 March 31, 2019 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 the first 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; and Barry Palmer, Senior Vice President of Operations. After management’s prepared remarks, there will be a question-and-answer session. I now turn the call over to Jason.

Thanks, David. Good morning, everyone. As mentioned, I will provide a summarized financial overview of our Q1 results and close with some brief commentary on our new debentures and our current leverage. Starting with the top line, revenue for the quarter of $186 million was $72 million above 2018, but could have been noticeably higher had it not been for the abrupt arrival of the 2019 spring breakup in the oil sands in mid-March. Year-over-year growth of 63% is largely due to the fleet acquired in Q4 of 2018, which provided new work at the Fort Hills and Aurora mines as well as significant incremental work at the Millennium mine. Organic scope and volume growth was also significant at the Kearl mine as we continue to expand our presence at that mine site. Our share of revenue from the Nuna Group of Companies was not material for the quarter but did contribute slightly to the year-over-year increase, given this acquisition also occurred in Q4 2018. Steady and consistent increases in our external maintenance services and the Dene North joint venture were offset by the year-over-year decreases from the Highland Valley Copper and Fording River mine in BC. Moving to the expense side where we always start with capital depreciation, given it’s a reflection of the operating hours we put on our heavy equipment and their components. During the quarter, depreciation was $29.3 million or 15.7% of revenue, which is proportionally up from $18.2 million compared to last year as it was the same as a percentage of revenue. This 16% of revenue is higher than our current trend of 14% or less. The higher percentage, when comparing to the trend, reflects the initial impact of initial component depreciation of the new fleet as well as the operational challenges experienced in…

Thanks Jason and a very good morning to everyone. Just as I was very pleased with the financial results of Q1 in both 2017 and 2018, I am delighted with our financial performance in this reporting period. All things considered to print over $50 million of EBITDA for the quarter was excellent performance and exceeded our expectations. I have been involved in the reporting of quarterly results of different public companies for over 20 years now. And I can attest that this particular quarter was by far the trickiest one to attempt to predict the outcome of. Recall that we closed two acquisitions in late Q4 2018 and we knew that the heavy equipment fleet that came with the second deal would take time and capital to reach our standards of maintenance and operability. Therefore, due to the high volume of oil available, we had to take a larger than usual proportion of gear on rental until we could make headway fix in the down acquired equipments. Also as Jason mentioned, the weather conditions were especially tough this year with a brutally cold February, followed by an early and abrupt arrival of spring breakup in mid-March. The extreme cold of February made it very difficult to catch up on the high volume of in-field repairs and maintenance that faced us. While the early start of spring caused us to curtail some winter earthworks programs and likely reduced our revenue opportunity by around $20 million. Additionally again as Jason mentioned, we only achieved breakeven gross profit levels on two assumed legacy contracts on new mine sites. This situation was caused by onerous contract terms, including pricing and especially very poor condition of the acquired equipment on the site. Fortunately, these two contracts will soon be behind us, with one ending and…

Thank you. [Operator Instructions] Your first question comes from Yuri Lynk with Canaccord. Your line is open.

Hi, good morning gentlemen.

Good morning Yuri.

Good morning Martin, good quarter and that spurs a different question on just some clarity on your outlook, you mentioned the quarter was – could have been better and I think you are able to catch up on some of that – some of the work in future quarters, but I think you didn’t change the overall percent of increase [indiscernible] just could you clarify, are you reading guidance for the full year…?

Yes. You are breaking up a bit Yuri, but right at the end of my prepared remarks, I said that $52.4 million will be 30% ish of our EBITDA for the year. So that notches up the estimate I believe for the full year.

[Operator Instructions] Your next question comes from Daine Biluk with CIBC World Markets. Your line is open.

Good morning everyone.

Good morning Daine.

So I guess to start things off, considering the pretty substantial backlog you guys have built up until now, how do you think about your mix between contracted work and call it spot work going forward? I’m just trying to get a sense of what capacity or willingness you have right now to sign additional contracts?

Yes, great question. Again, I tried to address part of that in my prepared remarks. It differs by site, but in some situations, the term contract that we have, we think will only represent about 50% of the work we do on that site over the next few years. You know the customer will still call off spot work just as they did previously especially for construction activity in summer. So, the backlog as I mentioned is more of a floor than a ceiling to our expectations. As far as capacity is concerned, you know, we are pretty busy on the sites that we’re working on. We have been adding some incremental pieces of equipment to take on more work because it’s there and that’s part of the growth capital that we talked about. So, as long as customers are willing to give us long-term contracts that provide decent returns, and by decent, I mean, very good returns, then I think we’d like to satisfy them and do as much work for them as possible.

Got it, okay, that’s very helpful. I guess, maybe, as a follow on to that, for you to sign incremental contracts, would rates have to be better than what the current backlog would be at or would – if they would – call it spot pricing, would that be enough for you to sign some more longer-term agreements?

Yes. I think for us, we’d be fine on it. The more work we do, we spread our overhead over it and we’d make better returns overall, right.

Got it. Perfect, okay. Can you give a bit of an update on your Highland Valley Copper mine contract? And specifically, any sense or early indications on whether you think the contract will be extended beyond the initial term this summer?

Joe?

This is Joe, Daine. It finishes it up this year. We’ve had some initial discussions, but we don’t anticipate it’s going to progress for the 2-year option period, but that can change, we’ll have those discussions over the summer. We’ve got plans right now to fully integrate that fleet back into our work we’re doing right now. It’s not a large portion of our fleet.

Got it. Okay, great, perfect. Thank you. And then, I guess, maybe just last one for me. With some of the gross spending that you have earmarked for this year, is that largely being directed at fleet expansions or would any of that be going to any other line items?

No, it’s mainly fleet expansions, let’s say, to satisfy increased customer demand.

Okay, perfect. That is everything for me. Appreciate the color guys. I’ll turn it back.

Thank you, Daine.

Your next question comes from Maxim Sytchev with National Bank Financial. Your line is open.

Hi, good morning.

Good morning, Max.

Martin, I was wondering if you don’t mind maybe commenting on the prospects for the summer construction work for your core clients?

Yes. I think very promising. Construction has been the slowest part of our work to come back after the 2014 downturn in the oil price, a lot of it was deferred or canceled. So, we’ve been seeing more and more every year of it coming back. But this year, we’re also seeing a very large construction project in terms of the Mildred Lake expansion project that probably won’t impact too much 2019, but certainly gives us a lot of confidence in what can happen in 2020 and beyond as this is a very big construction project, which we hope to participate in. But apart from that, there’s plenty of other smaller construction projects especially at Fort Hills for example, which we hope to participate in this year whereas we didn’t last year.

Right. Yes, because in your new presentation, it looks like construction services was – I’m just ballparking like maybe 7% of your EBITDA generation or revenue generation in 2018, so we should expect this to grow obviously in ‘19, right?

Yes, for sure. And – but even further into 2020 and beyond, I think.

Right, okay, no, that’s very helpful. And then last question on Nuna. Just do you mind maybe expanding a little bit on a going-to-market strategy with this asset specifically because I assume, you’re going to be leveraging their existing relationships with your new fleet capability? So, do you mind maybe expanding a little bit on that and the type of opportunities you’re bidding on right now?

Yes. I mentioned one project that we’re bidding together. It’s for a term contract, 5 years I believe, on a different resource to oil is what I can say at this point, in a northern location as you would expect. And Nuna on their own could only maybe address 60% of that world scope. But bidding it together, we can address 100%, because part of it is needing a heavy fleet that we can bring to the table. So, I think we put a compelling offer to the customer to do all the work, which I think they prefer one party to do. So, hopefully, without lifting too far ahead, I’m hopeful that we can secure that as a first demonstration of revenue synergies that this platform can generate.

For sure. And Martin, is there a timeframe when you will know on your side if you’re successful or not on this endeavor?

This quarter.

This quarter. 2Q [ph].

Q2 calendar, okay. And then sorry, one last question, just from a cash flow perspective, how should we think about the working capital contribution in 2019, because I think right now, we’re modeling a slight drag in this year, how are you guys thinking internally on non-cash working capital?

Hi, Max, it’s Jason here. I would model flat frankly for a full- year expectation. We collected some receivables late in December of 2018 sort of a little bit ahead of schedule, but we have the ability to do that again in December of this year. So obviously, we had some pretty big swings here at the end of March, but I would expect year-over-year things to be flat.

Okay, very helpful. Thank you very much. That’s it for me.

Thanks, Max.

And your next question comes from Devin Schilling with PI Financial. Your line is open.

Hi.

Good morning, Devin.

Should we be expecting a full Q2 contribution from Nuna or when does this work really expected to ramping up?

Yes. I think Nuna’s work is very seasonal, right, as you perhaps can expect based on where they work. So, we’re expecting a good contribution in Q2 and an even better one in Q3. That’s the way, historically, their EBITDA has been generated. We believe their Q1 contribution this year pretty well matches what it would have been last year, so no real changes there. Everything’s on track for them to participate in Q2, yes.

Okay. No, that’s great. I guess moving on, I guess, maybe provide a bit of an update of where you guys are at on your progress with the planned maintenance on the acquired fleet and maybe, I guess when we should expect this initiative to be completed?

Yes. We always thought it was going to take us the full-year this year to really get that fleet up and running to our expectations. So, we obviously did a fair bit in Q1 as best we could, but we’ll do more now for the balance of the year, ready for Q1 next year. I’m really excited about our opportunity then because our fleet will be operational and we’ll have less rental gear and we’ll be firing on all cylinders. So, balance of the year to fix it all, but there’s a lot to do, right? So, but we’ll be ready by Q1 next year.

Okay, perfect. Thanks. I’ll jump back in the queue.

Thank you, Devin.

There are no further questions queued up at this time. I’ll turn the call back over to Mr. Ferron.

Well, I appreciate everybody joining us today for Q1. We’ve got some really exciting times ahead. I’m looking forward to Q2 and beyond, so hope to talk with you again then. Thank you.

Thank you. This concludes the North American Construction Group conference call. You may now disconnect.