North American Construction Group Ltd. Announces Award of Regional Services Contract
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Insights
The announcement of North American Construction Group Ltd.'s (NACG) new contract signifies a substantial increase in their projected backlog, from $2.8 billion to over $3.0 billion. This is a significant indicator of the company's future revenue potential and stability, which could influence investor confidence and the company's stock market performance. The three-year duration of the contract suggests sustained business operations, which is a positive sign for long-term investors. The commitment to additional volumes, potentially adding $25 to $50 million more to the backlog, indicates a growing demand for NACG's services in the Canadian oil sands region.
Moreover, the contract with MNALP reflects NACG's strategic partnership approach and their ability to secure long-term agreements with major producers. This could potentially lead to more contracts in the future, further bolstering the company's market position. The partnership with Mikisew Cree First Nation also highlights NACG's commitment to community engagement and sustainable practices, which are increasingly important to socially conscious investors and can contribute to the company's reputation and brand value.
From a financial perspective, the $225 million contract awarded to NACG provides a clear boost to their contractual backlog, enhancing the company's financial outlook. The backlog serves as a financial cushion that can help the company navigate through economic downturns or unexpected market changes. Given that the contract is effective immediately, it's reasonable to expect a positive impact on NACG's cash flow statements starting from the current fiscal year. The additional commitments expected to be awarded could further increase the company's earnings forecast for the year.
Investors should note that such contracts could also entail upfront capital expenditures for equipment and labor, which may affect short-term profitability. However, the CEO's statement regarding the safe, low-cost and sustainable model suggests that NACG is focused on maintaining operational efficiency, which is pivotal for maintaining profit margins in the construction sector.
The contract not only has implications for NACG but also reflects broader economic trends. The Canadian oil sands are a significant contributor to the country's economy and contracts of this magnitude indicate a robust demand for oil and related services. This could be a sign of a strengthening commodity market, which often correlates with a more extensive economic recovery or growth phase. The involvement of the Mikisew Cree First Nation as a shareholder in MNALP suggests a positive impact on local economies and indigenous communities, aligning with broader economic development goals.
Furthermore, the emphasis on a sustainable operational model by NACG may resonate with the increasing global focus on environmental, social and governance (ESG) factors in investing. Companies that demonstrate a commitment to sustainability are likely to attract a wider investor base, particularly as ESG considerations become more integrated into investment decision-making processes.
ACHESON, Alberta, Jan. 31, 2024 (GLOBE NEWSWIRE) -- North American Construction Group Ltd. (“NACG” or “the Company”) (TSX:NOA.TO/NYSE:NOA) today announced that Mikisew North American Limited Partnership (“MNALP”) has been awarded a three-year regional services contract by a major producer in the Canadian oil sands region. The contract contemplates the provision of services across various mine sites operated by the producer.
The contract is effective immediately with an expiry date of January 30, 2027. Initial committed earthworks volumes in the first year of the agreement provide NACG with
“We are excited to report this award after a comprehensive process with both MNALP and our customer and we look forward to executing on our commitments. I am confident that the safe, low-cost and sustainable model we operate every day was instrumental in MNALP being awarded this scope and will continue to provide competitive advantages and opportunities in the future,” said Joe Lambert, President and CEO of NACG. “This regional contract supports the guidance we recently disclosed for what we expect from our overall business in 2024.”
“We are pleased to celebrate another significant award for Mikisew North American Limited Partnership,” said Dan Gallagher, Chief Executive Officer of Mikisew Group. “This award ensures the equipment investments we have made with NACG will continue to deliver returns for our shareholder, the Mikisew Cree First Nation, well into the future.”
About Mikisew North American Limited Partnership (MNALP)
MNALP is a limited partnership in which NACG has a
About Mikisew Group
Mikisew Group is the Independent Economic Development arm of the Mikisew Cree First Nation. Mikisew Group is comprised of two main operating entities and ten joint venture partnerships including MNALP. These entities service the Canadian oil sands in various capacities including heavy equipment rental, fleet maintenance, transportation, emergency response, catering services, and facilities maintenance. For more information about the Mikisew Group of Companies, visit www.mikisewgroup.com.
About NACG
NACG is one of Canada and Australia’s largest providers of heavy construction and mining services. For more than 70 years, NACG has provided services to the mining, resource, and infrastructure construction markets. For more information about North American Construction Group Ltd., visit www.nacg.ca.
For further information, please contact:
Jason Veenstra, CPA, CA
Chief Financial Officer
North American Construction Group Ltd.
Phone: (780) 948-2009
Email: ir@nacg.ca
The information provided in this release contains forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “expected”, “estimated” or similar expressions, including the anticipated revenues and backlog to be generated by the contract. The material factors or assumptions used to develop the above forward-looking statements and the risks and uncertainties to which such forward-looking statements are subject are highlighted in the Company’s MD&A for the year ended December 31, 2022 and quarter ending September 30, 2023. Actual results could differ materially from those contemplated by such forward-looking statements because of any number of factors and uncertainties, many of which are beyond NACG’s control. Undue reliance should not be placed upon forward-looking statements and NACG undertakes no obligation, other than those required by applicable law, to update or revise those statements. For more complete information about NACG, please read our disclosure documents filed with the SEC and the CSA. These free documents can be obtained by visiting EDGAR on the SEC website at www.sec.gov or on the CSA website at www.sedar.com.
FAQ
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