North American Construction Group Ltd. (“NACG”) (TSX:NOA.TO/NYSE:NOA) announced the award of an extended and amended regional services contract by a major producer in the Canadian oil sands region and an outlook for the full year of 2025 along with updated estimates for the fourth quarter of 2024.
Regional Services Contract
The extended and amended contract contemplates the provision of services across various mine sites operated by the producer. The amendment is effective January 1, 2025 with the expiry date extended to January 31, 2029 from January 31, 2027.
The agreement includes committed spend of $500 million spread over the term which is primarily related to heavy equipment rentals but also includes bulk unit rate earthwork scopes. These committed volumes are estimated to represent approximately one-third of total work expected to be performed across the various mine sites including overburden removal, reclamation, civil construction and other heavy equipment scopes.
“This is our first multi-year commitment under this agreement and we look forward to executing on our customer’s expectations and delivering safe, low-cost services. This award reaffirms our alignment with our client’s operating goals and our continued focus on efficiency and costs,” said Joe Lambert, President and CEO of NACG. “This is an important contract for us which, together with our client relationships, well maintained equipment fleet, advancing technology and focus on operational excellence, will provide ample opportunities to grow our oil sands business from the current run rate.”
“We are proud to expand our role within this partnership through this significant contract extension, which underscores our commitment to delivering exceptional value and sustainable growth in the oil sands region," said Jeff Epp, Interim Chief Executive Officer of Mikisew Group. "Our ongoing collaboration with NACG not only strengthens our ability to serve our clients with reliability and efficiency but also reinforces our dedication to supporting the economic development of the Mikisew Cree First Nation and our broader community. We look forward to advancing this partnership with a shared focus on safety, innovation, and operational excellence."
Outlook for 2025
Based on this award, the overall proforma contractual backlog of $3.6 billion and the heavy equipment fleet we own and operate, management has provided the following estimates of key measures and capital allocation for the fourth quarter 2024 and full year 2025.
Key measures
Combined revenue
2024 Q4: $350 to $375m
Full year 2025: $1.4b to $1.6b
Adjusted EBITDA
2024 Q4: $100m to $110m
Full year 2025: $415m to $445m
Sustaining capital
2024 Q4: $55m to $65m
Full year 2025: $180m to $200m
Adjusted earnings per share
2024 Q4: $1.00 to $1.10
Full year 2025: $4.15 to $4.45
Free cash flow
2024 Q4: $45m to $55m
Full year 2025: $130m to $150m
Capital allocation
Growth spending
2024 Q4: $30m to $40m
Full year 2025: $45m to $55m
Net debt leverage
2024 Q4: 2.0x to 2.2x
Full year 2025: Targeting 1.8x
Key measures
- Combined revenue and adjusted EBITDA estimates are based on existing contracts in place with the 2024 fourth quarter estimates impacted by the commencement of certain work scopes in the oil sands region being deferred into the first quarter of 2025.
- Sustaining capital estimates for the fourth quarter of 2024 reflect the front-loaded impact of maintenance costs for a stronger than expected upcoming winter season in Canada.
- Adjusted earnings per share in 2025 is based on EBITDA less existing depreciation and tax rates with interest expense expected to decrease from lower interest rates and debt levels
- Free cash flow in fourth quarter of 2024 reflects the aforementioned factors but also is being impacted by the deferral of joint venture distributions and the expectation of higher accounts receivable at year-end resulting from a projected strong December as well as the discontinuation of a supply chain finance program with a significant customer.
Capital allocation
- Growth spending in early 2025 based on continued investments in Australia required for the contracts awarded in the third quarter of 2024
- Continuation of share purchases under the existing normal-course issuer bid (NCIB) program is based on economic returns to shareholders
- Net debt target of 1.8x by end of 2025 excludes potential debenture conversion and is dependent on the achievement of key measures and activity levels within the share purchase program
“We view the upcoming year as the culmination of seven years of growth and are looking forward to a strong year of project and scope execution,” said Joe Lambert. “We have the contracted backlog in place as well as the equipment and personnel for a full twelve months of efficient and effective operations in Australia, Canada and the United States.”
