Q1 2025 North American Construction Group Ltd Earnings Call
Good morning, ladies and gentlemen, welcome to the North American Construction Group Conference call regarding the first quarter ended March start to 1025.
At this time all participants are in listen only mode. Following management's prepared remarks, there will be an opportunity for analysts and shareholders and bondholders to ask questions.
The media May monitor this call in listen only mode.
Oh physical any member of management, but they are asked not to go too much from any other participant without the participants permission.
The company wishes to confirm that today's comments.
Forward looking information and actual results could differ materially from a conclusion forecast or projection contained in that forward looking information.
Certain material factors or assumptions were applied in jobin conclusions or in making forecasts or projections that are reflected in the forward looking information.
Additional information about those material factors is contained in the company's most recent management discussion and analysis.
Analysis, which is available on SEDAR and Edgar as well as on the company's website at N E. C. G. That's E. I'll now turn the conference over to Joe Lambert, Our President and CEO. Please go ahead.
Thanks, Jennifer.
Joe Lambert: Hey, everyone and thanks for joining our call today I'm going to start with a brief overview of our Q1 2025 operational performance.
Before I hand, it over to Jason for the financials.
And then I'll conclude with the operational priorities a review of our growth opportunities in Australia, and the infrastructure markets are expanding bid pipeline or backlog.
Speaker Change: Our outlook for the remainder of 2025 before taking your questions.
Joe Lambert: On slide three.
Joe Lambert: Our Q1 trailing 12 month total recordable rate of 0.3 or four improves upon our Q4 results and remains better than our industry, leading target frequency of 0.5.
Joe Lambert: We continue to advance our systems and training with key focus on human and organizational performance principles, commonly called Hap and look to continue the trend where their ultimate goal of getting everyone home safe.
Joe Lambert: On slide four.
Joe Lambert: We highlight some of the major achievements of Q1.
Joe Lambert: While we struggled to overcome the weather impacts to our business, we were able to achieve some meaningful accomplishments, we expanded our heavy equipment fleet in Australia by over 10% boosting capacity to meet growing demand in Canada. The oil sands, we achieved an impressive 60% equipment utilization rate in the quarter with February facing at 70%.
Joe Lambert: Reflecting our focus on operational efficiency.
Joe Lambert: Early stage development in heavy civil infrastructure work began at a copper major copper mine in new South Wales positioning us for long term value in the critical minerals sector.
Joe Lambert: Argo project continued advanced surpassing 65% completion with final construction now underway in Q2.
Joe Lambert: Financially, we reached a new milestone with trailing 12 months combined revenue hitting a record $1 5 billion.
Joe Lambert: Our disciplined management approach kept administrative costs at three 9% meeting our internal targets <unk>.
Joe Lambert: Additionally, our parts and component supply and services agreement with venting delivered a full quarter of impact effectively combining our in house capabilities with their expertise to drive in bromine costs and equipment utilization.
Joe Lambert: Moving on to slide five.
Joe Lambert: You can see that the Q1 utilization of 68% were the same in both Canada and Australia.
Joe Lambert: Our Canadian fleet and improved our best quarterly utilization since the winter of 2020, two 2023 and while we expect the Canadian utilization dropped modestly in Q2, we also fully expect it to trend back up approaching our 75% target by year end.
Joe Lambert: Australia took a major hit in Q1 due to rain impact, but we remain confident in our ability to hit our target range of 85% in late Q2 early Q3.
Joe Lambert: With that I'll hand, it over to Jason for the Q1 financials.
Joe Lambert: Yeah.
Jason: Thanks, Joe and good morning, everyone.
Jason: Starting on slide seven the headline EBITDA number of $100 million and a correlated 25, 5% margin were both negatively impacted by the weather.
Jason: Australia, and Canada, which Joe mentioned and will be reviewed in the next slide.
Jason: We included a comment here about our steady growth since the second quarter of 'twenty 'twenty, four which are which was our weakest revenue quarter post the <unk> acquisition.
Jason: We generated $330 million of combined revenue in that quarter after absorbing a 25% reduction in Canada for the first quarter.
Jason: Since that time, our combined revenue has been steadily climbing and the $392 million of revenue this quarter, representing an overall increase of 18%, but importantly, when just looking at Australia, and Canada represents a 25% increase in just three quarters and we're looking one.
Jason: Level further the Canadian operations posted an encouraging top line of $178 million this quarter, which is impressively, 45% higher than the second quarter of 2024.
Jason: Moving to slide eight.
Jason: And our combined revenue and gross profit.
Jason: Mckellar group and D J trading, which we combine a heavy equipment, Australia and our results were up 20 $24 million on a quarter, which was impacted by heavy rains in February and March and during which mckellar posted equipment utilization of 68%.
Jason: Their lowest mark since acquisition.
Jason: The reason for the quarter over quarter increase.
Jason: Is due to the 25% increase in fleet capacity since March of last year with 10% of that increase coming since you're at.
Jason: This top line positive variance was further bolstered by higher revenue in the Oilsands region and as previously mentioned was importantly, and.
And significantly up from the fourth quarter.
Jason: Our share of revenue generated in the first quarter by joint ventures was consistent with last year as higher scopes and the Furthermore, I project were mostly offset by lower scopes within the unit group of companies as well as the discontinuation of the Brexit by joint venture.
Jason: Before getting into the weather our reported combined gross profit margin of 13, 2%.
Jason: It was impacted by unusually high early component failures in Canada.
Jason: We have adjusted for in the adjusted EBITDA margins.
Jason: Excluding these abnormally high component failures, which we have addressed through the reorganization of our component supply approach overall combined gross profit was approximately 14%.
Jason: And Canada is gross profit margin was approximately 8%.
Jason: As mentioned the weather significantly impacted gross margins with the dual impacts of lower top line revenue not covering overheads and the increased costs incurred during idle time.
Jason: In Australia, the consistent rain resulted in poor utilization as equipment remained parked for a significant amount of time, particularly at the Carmichael mine and this was compounded by increased costs incurred for sleep site cleanup and dewatering activities.
Jason: In Canada February was the month that had the most serious impacted operations with the extreme cold requiring both equipment to be idle for extended periods of time as well as the incurrence of cost to keep personnel and equipment more.
Jason: All told it is estimated based on historical precedent that the weather impacted gross margins by between five and 7% in the quarter.
Jason: Moving to slide nine.
Jason: Q1, EBITDA essentially matched last year as the revenue increase was fully offset by operational challenges.
Jason: I've mentioned, the 25, 5% margin we achieved reflected the weather we were required to operate through.
Jason: This margin level is not indicative of where we see our business operating at with cumulative EBITDA margin since the Mckellar acquisition at 29%, which covers over $2 billion in revenue and an eventful 18 month timeframe.
Jason: Included in EBITDA, and a general and administrative expenses of $11 $1 million in the quarter and equivalent to three 3% of reported revenue, which is below the 4% target we set for ourselves.
Jason: Going from EBITDA to EBIT.
Jason: We expect depreciation equivalent to 16% of combined revenue, which is much higher than the 14% posted in 2020 for Q4 and reflects the high.
Jason: Hours incurred in Canada, particularly in February.
Jason: Again, this 16% is much higher than our expected run rate moving forward given we've been at approximately 14% since the Mckellar acquisition in 2023 Q4.
Jason: And we fully expect 2025 to finish in that range.
Jason: Yeah.
Jason: Adjusted earnings per share for the quarter of 52 sets reflects the steady EBITDA performance, but was significantly impacted by the $11 million of increased depreciation.
Jason: Which is equivalent to <unk> 30 per share.
Jason: Interest and taxes were generally consistent with last year and the average cash interest rate for Q4 was 6%.
Jason: Moving to slide 10, I'll briefly summarize our cash flow net cash provided by operations prior to working capital of $76 million was generated by the business reflect the EBITDA performance net of cash interest paid.
Jason: Free cash flow usage was impacted by our Frontloaded capital maintenance programs as well as a $25 million draw on working capital accounts.
Jason: Moving to slide 11.
Jason: Net debt levels ended the quarter at $867 million, an increase of $11 million in the quarter as the free cash flow usage and growth spending required debt financing, but was mostly offset by the $73 million of debentures that were converted into shares.
Jason: During the quarter.
Jason: Net debt and senior a senior secured debt leverage ended at two two times and one eight times.
Jason: Of note and subsequent to quarter end, we issued $225 million of 775% senior unsecured notes.
Jason: Which had no impact on net debt leverage ratio, but decreases pro forma senior debt leverage to one three times.
Jason: ROIC of 10, 6% as at March 31 decreased more than a percentage point in the quarter as the high depreciation and capital spending in the quarter with with normalized levels, having resulted in an approximate 12% ROIC.
Jason: As we get the full trailing 12 benefit of the increased Australia fleet.
Jason: With the Fargo project, achieving certain financial milestones, we expect to see a trend back to our company target of 15%.
Joe Lambert: With that I'll pass the call back to Joe.
Joe Lambert: Thanks, Jason.
Joe Lambert: On slide 13, we highlight our 2025 priorities.
Joe Lambert: These priorities remain unchanged safety is our social license to operate and our moral obligation to our employees and will forever be our highest priority.
Joe Lambert: Equipment is our largest most controllable costs and high utilization drives return on capital and financial performance.
Joe Lambert: Geographic and commodity George location is both our growth engine and an opportunity to engage underutilized assets and increase the stability and consistency of our business.
Joe Lambert: Customer satisfaction, especially with our Queensland in Alberta markets in which we have worked continuously for many decades is what drives our expectations for 100% renewal rates in those markets and opportunities to increase scope with expected increase in client production forecast.
Joe Lambert: As we have grown we've also relied on expanded and upgraded systems to increase their management information cost monitoring and ability to enter new markets such as unit rate work in Australia, which we have had recent success, where they were when it smooth startup of the copper mine in new South Wales.
Joe Lambert: Lastly, we continue to look to improve and expand our internal maintenance skills.
Joe Lambert: To improve our internal costs and also to expand our revenue streams through external customers.
Joe Lambert: As I've stated previously we believe our in house component Rebuilds home machine rebuilds, telematics and strategic partnerships with OEM dealer will provide increasing opportunities for external maintenance sales.
Joe Lambert: I don't have the slide specifically on tariffs, but it's this is as good places any declared five.
Joe Lambert: We have had two vendors identify increases in costs due to tariffs one of the U S engine manufacturer good advise them of 3% to 4% increase due to tariffs, which isn't far beyond normal expected annual increases.
Joe Lambert: The other is a U S based tire manufacturer for our ultra class truck tires, which has a 25% tariff increase in pricing.
Joe Lambert: While we researching other suppliers there are limited ultra class tire manufacturers.
Joe Lambert: Overall, we expect the tariffs to potentially raise our internal cost less than one half of 1% over the next year or so should the tariffs remain in place. We continue to monitor the potential impact of U S tariffs, but at this point believe its negligible.
Joe Lambert: On slide 14, we highlight the growing civil infrastructure spend in our key markets of the U S, Canada and Australia.
Joe Lambert: <unk> infrastructure energy transition climate, resiliency and tariff threats pushing nations to seek more resource independents are all driving what we believe is a vastly growing opportunity in the civil infrastructure markets.
Joe Lambert: We see the desire speed for development also lowering their rates for contractors the growing opportunity in lower risk is why we believe we can build our infrastructure business to about 25% of our overall business in the next three years.
Speaker Change: We have a new executive members, starting with us in a couple of months and she will be leading our infrastructure business and what we see as an exciting area for growth stay tuned as we provide more information and analysis on this expanding infrastructure market over the summer.
Speaker Change: On slide 15, we highlight what we believe is our biggest organic growth opportunity going forward and that is our continued expansion in Australia.
Speaker Change: Yesterday in contractor marketplaces, massive and growing Western Australia in particular is 50% of the active minds in the entire country and we have less than a 1% share of that market.
Speaker Change: We are just starting to see initial tender packages and budgetary proposals coming out of Western Australia and believe we will begin to receive Rfps in late Q2 early Q3 for 2026 project starts.
Speaker Change: Slide 16 highlights the strong bid pipeline of $15 billion with a massive increase around 4 billion and our upcoming infrastructure opportunities. The addition of a major equipment operated labor supply tender and Oilsands continued strong activity in diversified resources in Canada, and a couple of major opt.
Speaker Change: <unk> for early renewal extensions and expansions with our existing Queensland clients in Australia.
Speaker Change: We have had a 100% success rate in renewals with our cleans and clients and look to continue that trend.
Speaker Change: Moving to slide 17.
Speaker Change: With the Q1 typical quarterly backlog consumption, our pro forma backlog now sits at $3 2 billion and it is a decrease of about 300 million from our year end 2020 for backlog.
Speaker Change: With the previously mentioned activity level in our bid pipeline, we expect our backlog to hit a record 4 billion mid year, this year and demonstrate increasing geographic and resource diversification.
Speaker Change: On slide 18, we have provided our outlook for 2025 when unchanged key metrics from year end.
Speaker Change: We believe we can make up for the Q1 weather impacts in both Australia and Canada over the course of the year and expect the summer construction activity in North America will be busy particularly in Q3.
Speaker Change: We also expect that the growth assets, we have added into Australian operations will be fully operational by the beginning of Q3, providing what we will be another busy second half of our year.
Speaker Change: Lastly regarding capital allocation going forward, we have been active and are in CIB, having purchased and canceled 250000 shares since inception to quarter end, demonstrating our commitment to shareholder focused allocation, we have increased liquidity with our high yield raise which gives us confidence to continue investing in our N G I b and.
Speaker Change: This fund should we need to sell our remaining convertible debt with cash which is now a current liability.
Speaker Change: The high yield also provides additional funding should we need letters of credit for future infrastructure bids or find other high return investment opportunities.
Speaker Change: Q1 weather dragged down or start of the year, but we see great opportunities improved financial performance and continued shareholder friendly investments going forward.
Speaker Change: With that I'll open up for any questions you may have.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Do you have a question. Please press star followed by the one on your telephone keypad.
Speaker Change: We'll hear it from the Jan has been leased and should you wish to cancel your request. Please press star followed by the team.
Speaker Change: If you're using a speaker phone please lift the handset before pressing Amy.
Speaker Change: One moment. Please for your first question.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Your first question comes from the line of Adam Italian MA from Thompson Davis. Please go ahead.
Adam Italian: Hey, good morning, guys good.
Speaker Change: Morning, Adam.
Speaker Change: Can you help us a little bit thinking about seasonality for the rest of the year I'm curious.
Speaker Change: How are you guys think Q2 my trend versus Q1 from the topline and EBITDA perspective.
Speaker Change: Yeah, I can take that one Adam or we actually see topline and EBITDA being quite consistent with Q1, the oil sands is seasonally slower.
Speaker Change: It's less of an impact.
Speaker Change: And our more diversified business, but we see it.
Speaker Change: Utilization USAA is coming down a little bit.
Speaker Change: But with lower depreciation we see on the EPS side.
A nice increase in Q2 so.
Speaker Change: Topline and EBITDA consistent with Q1.
Joe Lambert: Great and then Joe can you just expand you talked about.
Joe Lambert: A new hire on the infrastructure side and just maybe what you stand for.
Joe Lambert: A large infrastructure bidding in the U S and Canada.
Joe Lambert: Yeah predominantly what were looking at recently has been a big increase in P. Threes in the U S and the ones. We're looking at are there.
Joe Lambert: A couple of dozen actually it's it's all around energy transition in climate resiliency. So theres quite a few pumped hydro projects, we're seeing quite a few dam construction levy raises around flooding we.
Joe Lambert: We see a lot of water retention in the Western U S. A.
Joe Lambert: And.
Joe Lambert: So we've really just got into the business development side of this which is the big ads you're seeing them. Those are all three projects about half of them or are the U S. Corvette engineers and yeah. We've got out but we think is a great leader for that business and in our overall business development.
Joe Lambert: Starting here.
Joe Lambert: The beginning of July so.
Joe Lambert: We think those are great opportunities, we also see them as lower risk in the form of contracts that are coming out so most.
Joe Lambert: Most of the stuff Youll see on our bid chart is actually from the at the <unk> conference in Dallas in the U S and that's really what's driving that part of the business.
Joe Lambert: And is that.
Joe Lambert: Is that in your $4 billion backlog expectation by mid year would that be.
Joe Lambert: No I wouldn't lay everything out there.
Joe Lambert: That wouldn't be in this year at all it's there.
Joe Lambert: They're longer lead times.
Joe Lambert: They would be more in the 2027.
Joe Lambert: Seven kind of range on average.
Joe Lambert: If you look at that Big chart that today, there is a fire furthest to the right on the bid pipeline or are both flood protection jobs from the corps of engineers.
Joe Lambert: There is some potential for some earlier, but that's kind of the timeframe. We're looking at is around 2027 for most of these to kick off.
Joe Lambert: Perfect I'll turn it over thanks guys.
Joe Lambert: Sure.
Speaker Change: Thank you and your next question comes from the line of John Gibson from BMO Capital markets. Please go ahead.
John Gibson: Good morning, guys. Thanks for taking my question.
John Gibson: First I wonder if you could quantify the financial impact of the rainy weather in Australia in Q1.
John Gibson: Yeah.
John Gibson: Yeah.
John Gibson: We've put it out about 5% to 7% of gross profit margin in Australia.
John Gibson: Was your question just on Australia.
John Gibson: Yeah.
John Gibson: Yes, it's about what a normalized quarter would have been oh.
John Gibson: Absent.
John Gibson: The severe weather impact.
John Gibson: Yeah. So.
John Gibson: Kind of in the $10 million range in Australia.
John Gibson: They are normally at about 25%.
John Gibson: Gross profit margin.
John Gibson: Came in at 716 or 17% so.
John Gibson: That kind of order of magnitude.
John Gibson: Okay, Great and then secondly, maybe your Oilsands work continues to improve I guess, what's changed here is that the new.
John Gibson: New contract structures or just a bit of a pickup from some work that was delayed last year.
John Gibson: I think it's very similar top line I think.
John Gibson:
John Gibson: We're getting a bit more efficient in the operations. There. Obviously, we you know Q1, we had a big hit on the cold weather when it gets extremely cold like in that minus 25 or colder you just got at least equipment running because it'd be turned off it's very difficult to get them started again.
John Gibson: You know other other than that I think we're seeing very strong demand.
John Gibson: Q2 is usually our weakest quarter in oil Sands and then.
John Gibson: We think we're going to finish strong there and look forward to the.
John Gibson: The projections for next year, we think with production continuing to increase in oil sands.
John Gibson: And material movements will follow and we.
John Gibson: We see modest growth potential year on year in the oil sands as well.
John Gibson: Okay, great congrats on the solid quarter in light of some tough operating conditions I'll turn it back.
Joe Lambert: Thanks, Joe.
Speaker Change: Thank you and your next question comes from the line of from <unk> <unk>. Please go ahead.
Speaker Change: Hey, good morning, guys hope, you're having a good day.
Speaker Change: Joe and Jason and the whole team. Thank you for your time.
Speaker Change: I was coming through the financials and saw that the subcontractor services increase the good day, it looks like from 59.6 million ballpark $75 6 million.
Speaker Change: Comparing 2020 for Q1 2025 Q1.
Speaker Change: How would you comment on that what was the reason for the increase.
Speaker Change: Yeah. So that's all Australia, driven and we're doing some new work in Australia that requires subcontractor services, particularly at that copper mine.
Speaker Change: In Australia.
Speaker Change: As well as the rainy weather required some services to be brought in the sites that we quoted at a subcontractor so about $18 million of that increase is mccalla related then.
Speaker Change: You know we it is a kind of a run rate that where you would expect to see we are we do enjoy a margin on that sub contractor work. So it's all kind of.
Speaker Change: Part of the different scopes are year over year.
Speaker Change: Okay got it and then my second question is I think that you guys are doing an excellent job as far as management is concerned, but how would you respond to any investors who might be losing confidence in managements ability to execute based on.
Speaker Change: I guess repeated issues related to climate and weather.
Speaker Change: Hi.
Speaker Change: Our job is to deliver.
Speaker Change: To deliver results that we say, we're going to get and so yeah Q1 was a bit.
Speaker Change: Due to weather and we need to deliver into the yearly guidance and that's our expectation.
Speaker Change: I think any market is just I'm expecting you to if you put up a number that you entered or beat it and.
Speaker Change: That's our internal expectations as well.
Speaker Change: Excellent. Thank you guys. So much hope you have a good day.
Speaker Change: Oh man.
Speaker Change: Thank you and your next question comes from the line of Chris Thompson from CIBC. Please go ahead.
Chris Thompson: Hey, good morning, guys.
Speaker Change: Morning, Chris.
Speaker Change: And last quarter, you put out a bit of guidance on the quarterly cadence of EBITDA, you kind of framed it as.
Speaker Change: Percentage of your guidance per quarter, just wondering if you could.
Speaker Change: We reiterate that for us going forward.
Speaker Change: Yeah, Chris just as mentioned in a previous call I think.
Speaker Change: We didn't put that in <unk> shareholder letter. This this quarter, but we do see Q2 looking a lot like Q1 on the EBITDA perspective, I think as far as first half second half the way we see it is on the EBITDA anyway that about 55% being in the second half of the year.
Speaker Change: With 45 in the first half so that's.
Speaker Change: That's kind of the cadence we're seeing right now Q3 will be will be a little bit up on Q4.
Speaker Change: But yeah youre getting into the ones into percentages are at that point.
Speaker Change: Okay.
Speaker Change: And then just with respect to the guidance when you set it back in December.
Speaker Change: These these weather impacts would have been.
Speaker Change: Unforeseeable.
Speaker Change: And you talk about your run rate EBITDA margin being about 3% higher than what you put up in the quarter so that.
Speaker Change: That implies.
Speaker Change: There's there's potential slack in the guide so I'm just wondering like given given the context of that.
Speaker Change: How should we be thinking about the guide.
Speaker Change: Even the range like are you feeling.
Speaker Change: Keep the leading more to the lower end of the range. After after the tough Q1.
Speaker Change: Yeah.
Speaker Change: I guess it depends on how you.
Speaker Change: How do you look at the law of averages Chris I think.
Speaker Change: We're expecting average weather becomes average weather and I think thats a reasonable expectation I you know if you project the weather in Q1 through the rest of the year and generally you know two.
Speaker Change: Two and three are you know, we're obviously not running into idle issues, even if we get rain in Q2 and three.
Speaker Change: We had a colder Q1 do you expect a warmer Q4, I'd love average which suggests L.
Speaker Change: But you know I don't think we project our guidance with any kind of slack or anything else. We we projected midpoint is what we think is our 50% probability number and and in the range, where we think that the volatility of that is so.
Speaker Change: I fully expect to deliver into the range that we have worse than average weather for the year will be in the lower end of it probably.
Speaker Change: Yep.
Speaker Change: We go by the law of averages we forecast an average weather.
Speaker Change: And so I expect we're going to be.
Speaker Change: Close to average one year end.
Speaker Change: Got it Okay, and then just touching on the weather.
Speaker Change: Looking at rainfall data.
Speaker Change: In Queensland, It looks like April was still relatively high versus historic.
Speaker Change: Significantly less rain compared to February and March So I'm just wondering like.
Speaker Change: Do you expect a bit of a gross margin headwind.
Speaker Change: In Australia for part of Q2.
Speaker Change: Or is the general driving trend enough that you're not seeing those kind of impacts.
Speaker Change: Impressive that you are following the Australia, whether that closely but yeah, Chris April started with.
Speaker Change: Some rain continue and do it in Australia.
Speaker Change: We think you know by the end of the quarter and by the by mid year. Those things will average out. It was just a late rainy season in Australia, and a very rainy season, you know, they're measuring rainfalls in feet. That's it's pretty crazy down there, but I mean, yes. There was there was a bit of disruption to the beginning of April, but we think that'll work its way out through the year.
Speaker Change: Okay.
Speaker Change: A very warm warm April in oil sands so.
Speaker Change: Even march and the winter early spring breakup. So I think Q2 looks better in the oil sand side as far as not having to deal with.
Speaker Change: The spring breakup in Q2, because it all kind of occurred in Q1.
Speaker Change: Got it Okay, and then just touching on the oil sand you mentioned that.
Speaker Change: There was.
Speaker Change: Just don't work at Millennium and then.
Speaker Change: Then lower scopes at Fort Hills Im just wondering if you could give us some color on what's driving that.
Speaker Change: I think.
Speaker Change: Quarter over quarter Yeah.
Speaker Change:
Speaker Change: Pretty consistent demand we've moved some some fleet between sites.
Speaker Change: They recently had some.
Speaker Change: Some scheduled shutdowns and turnarounds on specific sites and those usually Cree.
Speaker Change: Create some near term impacts and maybe some shuffling around sites, but overall we're seeing.
Speaker Change: Strong demand for our services across the oil sands.
Speaker Change:
Speaker Change: It's typically a Q2 LOE in the oil sands.
Speaker Change: It will be typical of that and then it starts to ramp up again and a peak in Q4.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Question for me just on the NCI.
Speaker Change: John I'm just wondering.
Speaker Change: Just given where the share price has gone.
Speaker Change: Over the last few months.
Speaker Change: How much flexibility you guys willing to have with respect to your debt targets.
Speaker Change: Okay.
Speaker Change: And you'll be able to acquire in the near term and then maybe sacrifice one of a turn.
Speaker Change: Alright.
Speaker Change: And exchanges, maybe just how you guys are thinking about that.
Speaker Change: At this pricing.
Speaker Change: The return on higher but we think.
Speaker Change: Value.
Speaker Change: Yes, I think we can lean on a little more.
Speaker Change: I don't know.
Speaker Change: Just depends on where it goes.
Speaker Change: Obviously, we have a lot more liquidity.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: And we will look at it opportunistically.
Speaker Change: What.
Speaker Change: Is there any investment right now.
Speaker Change: This is the best investment we have out there.
Speaker Change: Great. Thank you guys.
Speaker Change: Okay.
Speaker Change: Thank you and good night.
Speaker Change: Question comes from the line Stephen Sheldon for Tim.
Speaker Change: Please go ahead.
Stephen Sheldon: Hi, guys good morning.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Well the contracts up for renewal.
Speaker Change: Any updates on these two renewals on timing and maybe expectations.
Speaker Change: Okay.
Speaker Change: Yeah, the first one.
Speaker Change: It's in the middle.
Speaker Change: One.
Speaker Change: It actually is.
Speaker Change: Negotiated early renewal.
Speaker Change: We've been very successful with these devin it like I said before.
Speaker Change: Are you going to be any more successful we've had 100% renewal rate.
Speaker Change: The second one is actually in the bank.
Speaker Change: Which is in the top line there.
Speaker Change: He is an expansion of an existing operation, where we're looking to potentially increase our scope.
Speaker Change: <unk>.
Speaker Change: Michael.
Speaker Change: That one we'll know more towards the end of the year.
Speaker Change: <unk>.
Speaker Change: No one in the middle of the early renewals that you we should go in the next quarter or so.
Speaker Change: And that's that's really the driver for what is going to be any more.
Speaker Change: And our backlog.
Speaker Change: Hum.
Speaker Change: I'm highly confident in our ability and obviously.
Speaker Change: A record of 100% renewal fees that confidence.
Speaker Change: Okay No that's helpful.
Speaker Change: In the past you guys mentioned.
Speaker Change: The opportunity in California that you remain qualify for any updates on that project.
Speaker Change: Yes.
Hello Nap prequel.
Speaker Change: Quite a few other projects.
Speaker Change: Feedback on that.
Speaker Change: The California was looking for California experience and obviously, we haven't gotten a lot of experience that we get a lot of <unk>.
Speaker Change: Building, but we haven't done it in California and.
Speaker Change: So unfortunate that way.
Speaker Change: A weakness in that particular tender.
Speaker Change: You know from what we do.
Speaker Change: We've seen now.
Speaker Change: Larger projects.
Speaker Change: Rajiv like picking up two projects.
Speaker Change: That followed out.
Speaker Change: On infrastructure.
Speaker Change: Infrastructure.
Speaker Change: Bigger it works in the next three years.
Speaker Change: We've added.
Speaker Change: And three or four or five years.
Speaker Change: Which which generate about.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: We want to win every day.
Speaker Change: Obviously that doesn't happen.
Speaker Change: And.
Speaker Change: Many of them are the ones that we just didn't qualify for an.
Speaker Change: No exactly.
Speaker Change: Our focus in the infrastructure side and expansion.
Speaker Change: I look forward to success in that market.
Speaker Change: Yes.
Speaker Change: That's great update I'll jump back in the queue. Thank you.
Speaker Change: Thanks.
Speaker Change: And should you have a question please press star.
Speaker Change: The one on your telephone.
Speaker Change: Your next question comes from the line.
Speaker Change: And then I'll back to Nashville. Please go ahead.
Speaker Change: Hello, Good morning, gentlemen.
Speaker Change: Okay.
Speaker Change: Hi, it's Kevin here on for Matt.
Speaker Change: My question is regarding <unk>.
Speaker Change: She counts.
Speaker Change: You mentioned in the past.
Speaker Change: It's been a bottleneck.
Speaker Change: I'm, just wondering break bulk Korea, Canada and Australia.
Speaker Change: That's still the case and if so how much do you think.
Speaker Change: Sure.
Speaker Change: Richard.
Speaker Change: Utilization targets in both regions.
Speaker Change: Or is the gap, mostly because of weather.
Speaker Change: Starting with the entities that would be because of weather.
Speaker Change: That's great.
Speaker Change: Okay.
Speaker Change: Mary fold in Australia in long term contracts.
Speaker Change: Oh.
Speaker Change: How equipment stays on our sites.
Speaker Change: Consistency of.
Speaker Change: Our labor workforce, especially for skilled labor in the mechanics.
Speaker Change: They've been very successful in in attracting and retaining and maintenance personnel I think skilled trades are an issue around the world, but I think we manage it extremely well in Australia and that's why.
Speaker Change: Between that the high demand in the the whether youll see that utilization target is at 85% and.
Speaker Change: We are very confident that we have been right in that range, obviously, not the last quarter, but before that.
Speaker Change: In Fort Mcmurray, and the oil sands.
Speaker Change: Where we're getting you know when we get into that.
Speaker Change: Close to 70% range and above that means were fulfilled on demand in and getting from 70 75 is the efficiency of our of our skilled labor workforce.
Speaker Change: We've put in systems and processes and developed things like our apprentice program over the years to address this and.
Speaker Change: That now is the time to deliver so as we as you look to get from that you know how.
Speaker Change: <unk> to the mid Seventy's towards the year, and that's really where you're testing your abilities in that and we're confident we've got the systems and the processes in place now and with the high demands there we'll get into that range of utilization. So it's.
Speaker Change: It's not hindering us at any point right now and as we go forward. We think we've got the systems and processes as far as attracting and retaining skilled workforce.
Speaker Change: Place, both in Australia and in Canada.
Speaker Change: Thank you guys. So yeah. That's helpful. That's it for me.
Speaker Change: No worries.
Speaker Change: Thank you there are no further questions at this time I would now hand, the call back to Joe Lambert for any closing remarks.
Speaker Change: Yeah.
Joe Lambert: Well, thank you very much and Jennifer and thanks again, everyone for joining US today, we look forward to providing next update upon our closing of our second quarter results.
Joe Lambert: Thank you and this concludes today's call. Thank you for participating you may all disconnect.
Joe Lambert: [music].