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NOA

Bear of the Day: North American Energy Partners (NOA)

As OPEC and non-OPEC members continue to produce oil in record volumes despite weak global demand, oil glut is expected to persist in 2016, creating a very challenging environment for energy and related industries.

About the Company

Founded in 1953 and headquartered in Edmonton, Canada, North American Energy Partners ( NOA ) is the corporate parent of North American Construction Group (NACG) and all of the NACG companies. They provide mining and heavy construction services to large oil, natural gas, and resource companies, specializing in the Canadian oil sands region.

They are one of the largest providers of heavy construction and mining services in western Canada and maintain one of the largest independently owned equipment fleets in the region.

Disappointing Q3 Results

Revenue for the quarter was CAD 66.8 million, down from CAD 134.7 million reported a year ago. Gross profit was $7.4 million, or 11% of revenue, down from gross profit of $16.8 million, or 12.5% of revenue reported last year.

Net loss for the quarter was $2.1 million or $0.07 per share, compared to last year's net income of $4.8 million, or $0.13 per share. Results were way short of the Zacks Consensus Estimates.

According to the company, customers cut back deeply on seasonal construction projects during the quarter. They expect the challenging environment to continue for the next several quarters before a recovery starts. Additionally, the newly elected government has implemented an increase in provincial corporate tax and stated an intention to review royalties paid by Alberta's oil and gas industry. This has created a very uncertain situation for the company's clients and their spending plans.

Challenging Environment for Oil Services Companies

Many energy services companies, including this one, are now trading at very attractive valuations after the steep sell-off in recent months. While these companies may regain investor interest once oil shows signs of bottoming out, it is safer to stay away from these for the time being.

Falling Estimates

Due to weak results and challenging outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year are a negative ($0.16) per share and $0.00 per share respectively, down from a negative ($0.09) and $0.10, before the results.

The Bottom Line

Oil Field Services industry is currently ranked 203 out of 265 (Bottom 23%) Zacks industries, reflecting the consequences of the oil price rout. I think it makes sense to avoid oil and related companies till we see any signs of stabilization in the space.

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NORTH AMER EGY (NOA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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