Good morning, ladies and gentlemen. Welcome to North American Energy Partners Earnings Call for the Second Quarter ended June 30th, 2016. 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 that this call is also being webcast concurrently on the company's website at nacg.ca.

I'll now turn the conference over to David Brunetta, Director of Investor Relations at North American Energy Partners Incorporated. Please go ahead, sir..

Thanks, Blair. Good morning to everyone and thank you joining us. Welcome to the North American Energy Partners 2016 second 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, uncertainties and assumption. During this call any reference by management to EBITDA indicates consolidated EBITDA as defined in our financial statements and earnings release.

For more information about our results, please refer to our June 30, 2016 management's discussion and analysis which is available on SEDAR and EDGAR. On today call, Rob Butler, VP of Finance will first review our second quarter results. Martin Ferron, President and CEO; will then provide his comments on our strategy and outlook.

After management's prepared section, there will be a question-and-answer session. I will now turn the call over to Rob..

Thank you, David. Good morning, everyone. Let's now review your consolidated results for the second quarter ended June 30, 2016 compared to the quarter ended June 30, 2015. It was this time last quarter that we talked about the Northern Alberta wildfire in the May 3 evacuation of the town of Fort McMurray.

At that time our focus was ensuring that all employees were evacuated safely. The severity of this disaster was only just becoming clear. The wildfire consumed roughly 590,000 hectares of forest, spanning across Alberta and into Saskatchewan, destroying more than 2,400 homes and buildings in its path.

Also with wildfire most our sand producers curtailed operations or initiated a shutdown of their site and processing operations. We began our return to work at the Kearl mine within two weeks as this mine was furthest from the effects of the wildfire and access was by air.

Our return to work at mine sites closer to Fort McMurray was delayed to near the end of the quarter, as road access remained restricted while the provincial government focused on coordinating the return of Fort McMurray residents. We did not suffer any significant property equipment damage as a result to the wild fire.

However we are in discussions with our insurance providers regarding coverage for cost incurred during the shutdown. Our second quarter results did not include any anticipated benefits from our insurance coverage.

With the evacuation of varying dates that we are able to return to work, our revenue for the second quarter was $24.2 million, significantly than the $64.4 million we performed last year.

We continue to see our summer mine support activities at our customer site ramping up at slower than expected levels as our customers focus on restarting their operations.

Prior year activity included continuing work on mine development project at the Kearl mine, mine services and haul road construction work at the Mildred Lake, Aurora and Millennium mines complimented by overburden removal activity at the Millennium and Horizon mines.

The Horizon mine overburden removal activity in the prior period marked the end of the long-term overburden removal contract with the customer. Gross profit for the current quarter was $2.1 million 8.8% of revenue, down from gross profit of $4.6 million or 7.1% of revenue earned last year.

The lower gross profit was primarily driven by the significantly lower revenue in the current period, fixed equipment and project costs that could not be reduced during the aforementioned work stoppage and the $500,000 million cost of the disaster relief payment we made to support our employees during this time.

The 1.7% gross profit margin improvement in the current quarter compared to the prior year, was a result of the below normal amount of preventative maintenance and repair activity typically performed during the quarter to prepare our equipment fleet for summer work complimented by temporary cost savings initiatives implemented during the wildfire shutdown.

For the three months ended June 30, 2016, depreciation was $5.5 million, down from $8.1 million in the same period last year.

Depreciation was 22.8% of revenue in the quarter compared to 12.5% of revenue in the prior year which was higher than normal due to the nature of certain asset groups that are depreciated on a straight-line basis over time, not on a units of production basis.

This resulted in depreciation being recorded against these types of asset groups during the wildfire shutdown Operating loss for the current quarter was f $5.3 million, compared to an operating loss of $0.8 last year. G&A expense, excluding stock-based comp was $4.9 million for the quarter, down from $5.1 million for the same period last year.

The current quarter G&A benefits realized from prior cost savings initiatives were partially offset by an increase in our short-term incentive plan costs compared to the prior year.

Stock-based compensation expense increased $1.6 million compared to the prior year driven by an increase in the share price during the current quarter We recorded a net loss of $4.9 million in the current quarter with a basic and diluted loss per share of $0.16, compared to last year’s net loss of $4.1 million with the basic and diluted loss per share of $0.13.

Total interest expense was $1.6 million for the current quarter, down from $2.6 million last year, primarily due to the partial redemption of the Series 1 Debentures between the two periods. We recorded a $1.9 million net income tax benefit in the current period compared to the $0.8 million net income tax expense recorded last year.

The prior year was affected by the reversal of temporary timing differences and the increase in the province of Alberta's corporate tax rate, causing an adjustment to our deferred tax assets and liabilities for the new provincial rate. Of note, we ended the quarter with $32.7 million of cash on hand.

On n April 4, 2016, we signed the first amending agreement our credit facility with its existing banking syndicate, which allowed us to redeem up to $10 million of Series 1 Debentures, while also increasing our capital lease limit under the credit facility from $75 million to $90 million.

On April 27, 2016, we redeemed approximately $9.9 million of our Series 1 Debentures. In May 2016, we completed a normal course issuer bid for the purchase and cancellation of almost 1.7 million voting common shares in the United States primarily on the New York Stock Exchange.

And on August 2, 2016 we announced our intention to commence no more course issue bidding candidate through facilities of the Toronto Stock Exchange to purchase up to approximately 1.1 million of voting common shares. That summarizes our second quarter results. I will now turn the call over to Martin for his remarks..

Thank you. And good morning to everyone. As Rob just explained the devastating wildfire as it swept through the Wood Buffalo area was a dominant factor during the quarter. We were expecting a slow period due to spring break-up and the enduring cyclical down turn in the oil price and that were customer spending.

However the fire added a whole new degree of difficulty to already tough times and yet we still manage to post positive EBITDA. This was achieved despite virtually no activity on two of our three busiest work sites for two thirds of the quarter. I am very pleased and proud of the way we handled the extreme adversity of the quarter.

We proactively enable evacuation of our personal and their families in the region and thankfully all are safe and we suffered only minor equipment damage. We then stepped up and made discretionary disaster release payment worth of thousand dollars to around 500 affected few personal, union and non-union and covered the income tax burden on that.

Our hourly employees already hard hit by the oil industry downturn, we're very appreciative with this move. And we'll return the favor many [indiscernible] future hard work and commitment. The positive EBITDA was then produced by making a very best from the little work we had while switching off as much indirect cost as possible.

We will close our corporate office down for two weeks providing staff two week off and return for the userfication [ph] allowance for the rest close here. Our work execution continues to be first rate as evidenced further receive by second major safety role this year, this time from the Alberta mine safety association.

Despite of the fires we are $4.7 million of EBITDA, ahead of the level achieved that this time last year. We've also reduced net debt by over $10 million since the start of the year, even after buying back nearly 2.3 million shares for cancellation treasury repurposes.

In contrast as eight of the 14 companies and our published peer group completed highly dilutive equity offerings in this down turn and two others will likely do the same if they could.

Unfortunately the wildfire will have an negative affect on our Q3 performance but some of our customers will have less cash to spend on summer construction work, also other key work sites is slower to pre-activity levels.

This situation will probably offset by a contribution from a very timely revenue diversification success and the form of the construction projects at the Red Chris copper mine in British Colombia.

For the full year of 2016 we are still targeting on EBITDA levels similar to achieve last year, as we expect a more normal winter work program starting in Q4. The balance of the EBITDA for the year will then be distributed on a roughly 30%, 70% distribution across Q3 and Q4.

For 2017 and beyond we remain optimistic and excited on basis that we believe that the oil industry down turn is much new to the end and beginning with the overall oil price momentum be into the upside, much work has been deferred on the existing oil size mines that will have to be addressed at some point, production at the new Fort Hills mine is slated to start up next year, which provides meaningful incremental opportunities for us.

Our revenue diversification efforts are beginning to pay off and we expect further progress from here, supporting different resource plays A.G., Gold and addressing infrastructure projects that have very significant work volumes. Our balance sheet is strong and we believe that we have a segment leading cost structure.

Now since our stock price is still discounting and much blip the future then I just portrayed, in fact portrayed as a distressed asset, as Rob mentioned we will conduct a further NCIB for almost 1.1 million shares this will commence next Monday.

In the phase of whatever life throws at us, down turn on natural disaster we remain totally committed to improve in the long-term wealth of our shareholders. With that, I'd like to turn the call back to the operator, Blair. Thank you..

Thank you. [Operator Instructions] The first question comes from the line of Ben Cherniavsky from Raymond James. Your line is open..

Hi guys, good work in a tough situation. I am wondering just if you could comment a little bit on some of the in-sourcing that’s being going on in the oil sands [indiscernible] in their quarter they've seen in the maintenance business I recognize you guys are accustomed more to customer – comparable.

But just wondering if you are seeing a similar situation in the actual reports to the oil sands that companies are in sourcing and whether or not you are doing your on in sourcing on the maintenance business and your fleet as well?.

I wouldn’t say that we are noticing an increasing in sourcing Benefit. I think we did notice during the quarter was that while we away from size, obviously the customers if they had any spare resource used that to do things, that perhaps we would normally have done. But I think that’s just normal behavior in the circumstances.

So we are not seeing reduced opportunities from increasing sourcing going forward..

But your customers are obviously looking for any opportunity to save some money, there is still lot of pressure to - I mean if you are not competitive and helping them in this environment they will take the business away?.

I think that’s key Benefit, we are trying really hard to be part of the solution in the oil sands, and I think what we've done with our cost structure, certainly on the earth moving side, NIT particular gives us a cost advantage, its even over the customers own resource at some point..

And have you guys - so have you - I believe you've done some in sourcing with your maintenance fleet is that correct?.

We do most of our own maintenance now, we have done for quite a while and we believe that’s the way to control the cost to the data..

You wouldn’t see that changing then in the near future?.

Absolutely, no..

And just second question or second sort of theme like of my questions, around the general operating environment and the political climate in Alberta recently there was an increase - move to increase the minimum wage, I recognized you guys - most of your people will be paid well above that.

But implications on wage rates and labor negotiations and all those sorts of things, are you - do you see or expect any fallout from that kind of a move?.

Again I don’t believe so, as you mentioned our wage structure is way above minimum. We've got firm agreements in place with our union going forward and I believe we've got that element of our cost well under control. Obviously the operating environment is super tough I know, it’s tough that I know one any operating environment.

But we just continue to find ways to put EBITDA on board and even when we face with another wildfire like we had, we still manage to produce something. So I believe whatever life throws us at we'll continue to perform..

Okay. Thanks very much..

Thank you, Ben..

[Operator Instructions] The next question comes from the line of Maxim Sytchev from National Bank Financial. Your line is open..

Hi. Good morning, gentlemen..

Hey, Max..

Just a brief question, Martin, you briefly touched on Fort Hills being potential opportunity, obviously as that mine ramps up, I am just wondering if maybe you can comment on that and fully realize it so, potential competitive situation, but maybe in terms of timing when you could see any potential sort of positive delivery fact on that site, is it you know, an early or late 2017 event, just want to get the timing right?.

Yes, we're still in the middle of negotiating new MSA with the customer mine, so I have to be a little cautious - remarked passed. And that’s been delayed because of the fire too. I think September 1 is the date willing to start hopefully.

But we're expecting work to ramp up, I am here too excited for Fort Hill next year and potentially 2018 could be a really busy over there. So that’s way the volumes have been presented to us, if you add that to what we're expecting from the other customers, I think it will make a meaningful difference..

Right.

And when you talk about the deferred work in your prepared remarks is this on sort of summer construction side, or is it more in the maintenance side or both and if you could maybe try to quantify this, I know that’s a tough exercise obviously to do?.

It’s clearly on the construction side of things. A lot of that work is been deferred. But its – even on the earth moving side of things too Max, Reclamation is a particular example. Customers are being - delaying us as far as possible. But we think at a certain point those volumes will come back, even as early as Q4 perhaps.

And again that will help us get through this year and have a good start in next. I can't really talk about volumes because we haven’t seen numbers yet, but an increase over what we saw last year I would think..

Right.

And just wanted to confirm that when you were talking the back half EBITDA split, its 37, you are right for kind of Q3, Q4?.

Yes, that’s kind of the way I see it, with Q3 obviously still being impacted by the fire and the downturn more and then Q4 getting back to normal..

Right and then maybe the last question just Martin in terms of revenue diversification and your ability to address the infrastructure opportunities, maybe any incremental color on that end market if possible?.

Yes, we're targeting project that have high volume, obviously that plays to our strength. We have a more direct import into the project. There were couple in particular, flood remediation projects, one here in Alberta and one in North America, which we're trying very hard.

I think we'll be pre-qualifying for the second here in the next quarter, bidding it soon afterwards hopefully. And where the Canadian cost structure in North America and maybe we have reasonable chance for that.

We're certainly going to give it good shot and we're talking about our plus $500 million earthworks, program, so would make a meaningful difference to our efforts here..

Okay. Excellent. So that’s it from me. Thank you very much..

Thank you, Max..

There no further questions at this time. I'll turn the call back over to Mr. Ferron for closing remarks..

Well, thanks everybody for joining us today. We look forward to talking to you again in the near future. Thanks..

Thank you. This concludes North American Energy Partners conference call. You may now disconnect..