North American Energy (NOA), Canadian Natural (CNQ) Reach Agreement Over Contract Amendment
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North American Energy Partners Inc. (NYSE: NOA) has reached final agreement with Canadian Natural Resources Limited (NYSE: CNQ) on amendments to the long-term overburden removal and mining services contract between Canadian Natural and NAEP's wholly-owned subsidiary, North American Construction Group Inc. ("NACG").
The amending agreement finalizes certain past costs under the original contract, resulting in a payment of $34 million by Canadian Natural to NACG. As a result, NAEP does not expect to record any additional revenue writedown associated with this contract. The $34 million payment will be recorded as an increase in cash and cash equivalents with a corresponding reduction of unbilled revenue on the Company's March 31, 2012 Consolidated Balance Sheet.
The general terms of the original contract related to work scope will remain in place, meaning NACG will continue providing overburden removal and tailings dyke construction services to Canadian Natural. However, these services will now be performed under a revised payment structure that carries less risk than the unit-rate structure it replaces. The new structure ensures a base margin for NACG with the opportunity to enhance margins by meeting mutually agreed upon performance targets.
The amending agreement finalizes certain past costs under the original contract, resulting in a payment of $34 million by Canadian Natural to NACG. As a result, NAEP does not expect to record any additional revenue writedown associated with this contract. The $34 million payment will be recorded as an increase in cash and cash equivalents with a corresponding reduction of unbilled revenue on the Company's March 31, 2012 Consolidated Balance Sheet.
The general terms of the original contract related to work scope will remain in place, meaning NACG will continue providing overburden removal and tailings dyke construction services to Canadian Natural. However, these services will now be performed under a revised payment structure that carries less risk than the unit-rate structure it replaces. The new structure ensures a base margin for NACG with the opportunity to enhance margins by meeting mutually agreed upon performance targets.
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