Form 6-K/A

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): .

As previously disclosed in a Form 6-K filed on October 12, 2005, the Company has reviewed the accounting treatment of the Company’s derivative financial instruments and has concluded that there have been technical deficiencies in the hedge documentation relating to the cross-currency swap and interest rate swap contracts used to manage its foreign exchange risk exposure related to the U.S. dollar denominated 8³/4% senior notes since the inception of the derivative financial contracts on November 26, 2003, which deficiencies could not be corrected retroactively. Therefore, the Company has determined that it is necessary to restate all reported periods after November 26, 2003 to eliminate the impact of hedge accounting. This was accomplished by recognizing the foreign exchange gain or loss relating to the senior notes each period and recording the derivative financial instruments at fair value and the realized and unrealized gains and losses on the derivative instruments each period through the Consolidated Statement of Operations, along with the associated future income tax effects.

As previously disclosed in a Form 6-K filed on December 2, 2005, the Company has reviewed the accounting treatment of certain aspects of the Company’s refinancing transactions which occurred on May 19, 2005. The Company has determined that it is necessary to restate the previously reported accounting treatment of the Series A and Series B mandatorily redeemable preferred shares issued as part of the refinancing transactions. The Company previously recorded the Series A preferred shares at the redemption amount of $1 million. However, the Company determined that since both the amount to be paid and the settlement date related to the Series A mandatorily redeemable preferred shares are fixed, the Series A preferred shares should be measured at the present value of the amount to be paid at settlement, accruing interest expense using the interest rate implicit at inception. In addition, the Company restated the carrying value of the Series B mandatorily redeemable preferred shares to the amount that would be paid if the shares were redeemed at the reporting date, which resulted in an increase in the value of the mandatorily redeemable preferred shares of $41,498 with an equal and corresponding increase in interest expense. The Company has also determined that the financing costs incurred in connection with the issuance of the 9% senior secured notes and the new revolving credit facility as part of the refinancing transactions should have been deferred and amortized over the term of the related financing.

The Company is filing this amended report on Form 6-K/A to reflect the restatement of its interim unaudited consolidated financial statements for the three months ended June 30, 2005. Please see Note 3 to the Interim Consolidated Financial Statements and the “Restatement” section included in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations (Restated), for a detailed discussion of the restatement.

Other than the changes relating to the restatement, the financial statements and related footnotes and the Management’s Discussion and Analysis of Financial Condition and Results of Operations (Restated) included in this Form 6-K/A do not reflect events occurring after the original filing date of the Form 6-K on August 29, 2005.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NORTH AMERICAN ENERGY PARTNERS INC.

By:		/s/ Chris Hayman

Name: Title:		Chris Hayman Vice President, Finance

North American Energy Partners Inc. (the “Company”) was incorporated under the Canada Business Corporations Act on October 17, 2003. The Company had no operations prior to November 26, 2003. The Company completes all forms of civil projects including contract mining, industrial and commercial site development, pipeline and piling installations. The Company is a wholly-owned subsidiary of NACG Preferred Corp. which in turn is a wholly-owned subsidiary of NACG Holdings Inc.

These interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and do not include all of the disclosures normally contained in the Company’s annual consolidated financial statements. Material inter-company transactions and balances are eliminated on consolidation. Material items that give rise to measurement differences to these consolidated financial statements under United States GAAP are outlined in note 19.

These interim consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, NACG Finance LLC and North American Construction Group Inc. (“NACGI”), the Company’s proportionate share of the assets, liabilities, revenues, expenses and cash flows of its joint venture (note 11(f)), and the following subsidiaries:

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Except as noted below, these unaudited interim financial statements follow the same significant accounting policies as described and used in the most recent consolidated annual financial statements for the Company for the year ended March 31, 2005 and should be read in conjunction with those financial statements.

The Company performs the majority of its projects under the following types of contracts: time-and-materials; cost-plus; unit-price; and lump sum. For time-and-materials and cost-plus contracts, revenue is recognized as costs are incurred. Revenue on unit-price and lump sum contracts is recognized on the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total costs. Excluded from costs incurred to date, particularly in the early stages of the contract, are the costs of items that do not relate to performance of our contracted work.

The length of the Company’s contracts varies from less than one year on typical contracts to several years for certain larger contracts. Contract project costs include all direct labour, material, subcontract, and equipment costs and those indirect costs related to contract performance such as indirect labour, supplies, and tools. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in project performance, project conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income that are recognized in the period in which such adjustments are determined. Profit incentives are included in revenue when their realization is reasonably assured.

The asset entitled “unbilled revenue” represents revenue recognized in advance of amounts invoiced. The liability entitled “billings in excess of costs on uncompleted contracts” represents amount invoiced in excess of revenue recognized.

Cash and cash equivalents include cash on hand, bank balances, and short-term investments with maturities of three months or less net of outstanding cheques.

The Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces the receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of time the receivable has been outstanding, specific knowledge of each customer’s financial condition, and historical experience.

Inventory is carried at the lower of cost, on a first-in, first-out basis, and replacement cost, and primarily consists of job materials.

Property, plant and equipment are recorded at cost. Major components of heavy construction equipment in use such as engines, transmissions, and undercarriages are recorded separately. Spare component parts are charged to earnings when they are put into use. Equipment under capital lease is recorded at the present value of minimum lease payments at the inception of the lease. Depreciation is not recorded until an asset is put into service. Depreciation for each category is calculated based on the cost, net of the estimated residual value, over the estimated useful life of the assets on the following bases and annual rates:

The cost of period repairs and maintenance is expensed to the extent that the expenditure serves only to restore the asset to its original condition. Any gain or loss resulting from the sale or retirement of property, plant and equipment is charged to income in the current period.

Goodwill represents the excess purchase price paid by the Company over the fair value of the tangible and identifiable intangible assets and liabilities acquired. Goodwill is not amortized but instead is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit, including goodwill, is compared with its fair value. When the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired and the second step of the impairment test is unnecessary. The second step is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case, the implied fair value of the reporting unit’s goodwill, determined in the same manner as the value of goodwill is determined in a business combination, is compared with its carrying amount to measure the amount of the impairment loss, if any.

The Company tested goodwill for impairment at December 31, 2004 as a result of events and changes in circumstances. The Company conducts its annual assessment of goodwill on January 1 on each year. For the three month period ended June 30, 2005, the Company determined that there is no impairment in the carrying value of goodwill.

Intangible assets acquired include: customer contracts in progress and related relationships, which are being amortized based on the net present value of the estimated period cash flows over the remaining lives of the related contracts; trade names, which are being amortized on a straight-line basis over the

estimated useful life of 10 years; a non-competition agreement, which is being amortized on a straight-line basis over the five-year term of the agreement; and employee arrangements, which are being amortized on a straight-line basis over the three-year term of the arrangement.

Costs relating to the issuance of the senior notes and the revolving credit facility have been deferred and are being amortized on a straight-line basis over the terms of the related debt. Financing costs which have been deferred are immediately written off if the related debt has been extinguished.

Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are reported at the lower of their carrying amount or fair value less costs to sell.

The functional currency of the Company is Canadian dollars. Transactions denominated in foreign currencies are recorded at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities, including long-term debt denominated in U.S. dollars, are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date.

The Company uses derivative financial instruments to manage economic risks from fluctuations in exchange rates and interest rates. These instruments include cross-currency swap agreements and interest rate swap agreements. All such instruments are only used for risk management purposes. Derivative financial instruments are subject to standard credit terms and conditions, financial controls, management and risk monitoring procedures.

A derivative financial instrument must be designated and effective, at inception and on at least a quarterly basis, to be accounted for as a hedge. For cash flow hedges, effectiveness is achieved if the changes in the cash flows of the derivative financial instrument substantially offset the changes in the cash flows of the hedged position and the timing of the cash flows is similar. Effectiveness for fair value hedges is achieved if changes in the fair value of the derivative financial instrument substantially offset changes in the fair value attributable to the hedged item. In the event that a derivative financial instrument does not meet the designation or effectiveness criteria, the derivative financial instrument is accounted for at fair value and realized and unrealized gains and losses on the derivative are recognized in the Consolidated Statement of Operations in accordance with EIC-128, “Accounting for Trading, Speculative or Non-Hedging Derivative Financial Instruments” (“EIC-128”). If a derivative financial instrument which previously qualified for hedge accounting no longer qualifies or is settled or

de-designated, the fair value on that date is deferred and recognized when the corresponding hedged transaction is recognized. Premiums paid or received with respect to derivatives that are hedges are deferred and amortized to income over the term of the hedge.

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is recorded against any future income tax asset if it is more likely than not that the asset will not be realized.

Effective November 26, 2003, the Company adopted the revised CICA Handbook Section 3870, “Stock-Based Compensation” which requires that a fair value method of accounting be applied to all stock-based compensation payments. Under a fair value method (Black-Scholes method), compensation cost is measured at the fair value using the minimum value method at the grant date and is expensed over the award’s vesting period.

Effective January 1, 2004, the Company prospectively adopted the new Canadian accounting standards EIC-141, “Revenue Recognition,” and EIC-142, “Revenue Arrangements with Multiple Deliverables,” which incorporate the principles and guidance under United States generally accepted accounting principles (“U.S. GAAP”) for revenue recognition. No changes to the recognition or classification of revenue were made as a result of the adoption of these standards.

Effective April 1, 2005, the Company amended its accounting policy regarding the recognition of revenue on claims. This change in accounting policy has been applied retroactively. Once contract performance is underway, we often experience changes in conditions, client requirements, specifications, designs, materials and work schedule. Generally, a “change order” will be negotiated with our customer to modify the original contract to approve both the scope and price of the change. Occasionally, however, disagreements arise regarding changes, their nature, measurement, timing and other characteristics that impact costs and revenue under the contract. When a change becomes a point of dispute between our customer and us, we then consider it as a claim.

Costs related to change orders and claims are recognized when they are incurred. Change orders are included in total estimated contract revenue when it is probable that the change order will result

in a bona fide addition to contract value and can be reliably estimated. Prior to April 1, 2005, revenue from claims was included in total estimated contract revenue when awarded or received. After April 1, 2005, claims are included in total estimated contract revenue, only to the extent that contract costs related to the claim have been incurred, when it is probable that the claim will result in a bona fide addition to contract value and can be reliably estimated. Those two conditions are satisfied when (1) the contract or other evidence provides a legal basis for the claim or a legal opinion is obtained providing a reasonable basis to support the claim, (2) additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in our performance, (3) costs associated with the claim are identifiable and reasonable in view of work performed and (4) evidence supporting the claim is objective and verifiable. No profit is recognized on claims until final settlement occurs. This can lead to a situation where costs are recognized in one period and revenue is recognized when customer agreement is obtained or claim resolution occurs, which can be in subsequent periods. Historical claim recoveries should not be considered indicative of future claim recoveries. The change in policy resulted in an increase in revenue and unbilled revenue of $8.1 million for the three months ended June 30, 2005, but did not result in any adjustments to prior periods.

Effective January 1, 2005, the Company prospectively adopted the Canadian Institute of Chartered Accountants’ new Accounting Guideline 15, “Consolidation of Variable Interest Entities” (“VIEs”) (“AcG-15”). VIEs are entities that have insufficient equity at risk to finance their operations without additional subordinated financial support and/or entities whose equity investors lack one or more of the specified essential characteristics of a controlling financial interest. AcG-15 provides specific guidance for determining when an entity is a VIE and who, if anyone, should consolidate the VIE. The Company has determined the joint venture in which it has an investment (note 11(f)) qualifies as a VIE.

Effective January 1, 2005, the Company adopted the new Canadian Accounting Standard EIC-150, “Determining Whether an Arrangement Contains a Lease.” EIC-150 addresses a situation where an entity enters into an arrangement, comprising a transaction that does not take the legal form of a lease but conveys a right to use a tangible asset in return for a payment or series of payments. The Company has determined that it has not currently committed to any arrangements to which this standard would apply.

Effective April 1, 2005, the Company adopted the amended Canadian Accounting Standard EIC-144, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” EIC-144 requires companies to recognize the benefit of non-discretionary rebates for achieving specified cumulative purchasing levels as a reduction of the cost of purchases over the relevant period, provided the rebate is probable and reasonably estimable. Otherwise, the rebates would be recognized as purchasing milestones are achieved. The implementation of this new standard did not have a material impact on the Company’s consolidated financial statements.

In January 2005, the CICA issued Handbook Section 3855, “Financial Instruments – Recognition and Measurement”, Handbook Section 1530, “Comprehensive Income”, and Handbook Section 3865, “Hedges”. The new standards will be effective for interim and annual financial statements commencing in 2007. Earlier adoption is permitted. The new standards will require presentation of a separate statement of comprehensive income under specific circumstances. Foreign exchange gains and losses on the translation of the financial statements of self-sustaining subsidiaries previously recorded in a separate section of shareholder’s equity will be presented in comprehensive income. Derivative financial instruments will be recorded in the balance sheet at fair value and the changes in fair value of derivatives designated as cash flow hedges will be reported in comprehensive income. The Company is currently assessing the impact of the new standards.

In June 2005, the CICA replaced Handbook Section 3830, “Non-monetary Transactions”, with the new Handbook Section 3831, “Non-monetary Transactions”. The requirements of the new standard apply to non-monetary transactions initiated in periods beginning on or after January 1, 2006, though earlier adoption is permitted as of periods beginning on or after July 1, 2005. The standard requires all non-monetary transactions to be measured at fair market value unless:

The Company does not expect the adoption of this standard to have a material impact on its results of operations or financial position.

The Company reviewed the accounting treatment of the Company’s derivative instruments (described in note 14(c)) and concluded that there were technical deficiencies in the hedge documentation relating to the cross-currency swap and interest rate swap contracts used to manage its foreign exchange risk exposure related to the U.S. dollar denominated 8³/4 % senior notes since the inception of the derivative financial

contracts on November 26, 2003, which deficiencies could not be corrected retroactively. Complete and accurate documentation is required to support the effectiveness of the hedge and the use of hedge accounting under the Canadian Institute of Chartered Accountants Accounting Guideline 13, “Hedging Relationships.”

As a result of the deficiencies in the documentation, the Company determined that it was necessary to restate all reported periods after November 26, 2003 to eliminate the impact of hedge accounting. This was accomplished by recognizing the foreign exchange gain or loss relating to the senior notes each period and recording the derivative financial instruments at fair value and the realized and unrealized gains and losses on the derivative instruments each period through the Consolidated Statement of Operations, along with the associated future income tax effects. A valuation allowance of $9.5 million was recorded against the future income tax asset at June 30, 2005 since it is more likely than not the asset will not be realized.

In addition, the Company reviewed the accounting treatment of the Series A and Series B mandatorily redeemable preferred shares issued as part of the refinancing transactions which occurred on May 19, 2005 (note 10(a)). The Company previously recorded the Series A preferred shares at the redemption amount of $1 million. However, the Company determined that since both the amount to be paid and the settlement date related to the Series A mandatorily redeemable preferred shares are fixed, the Series A preferred shares should be measured at the present value of the amount to be paid at settlement, accruing interest expense using the interest rate implicit at inception. These preferred shares were issued to one of the counterparties to the Company’s swap agreements (note 14(c)). Accordingly the Company reduced the initial value of the preferred shares from $1,000 to $321, decreasing financing costs for the current period by $679. In addition, the Company accrued interest expense of $9 and the associated liability was increased in the three months ended June 30, 2005.

The Series B preferred shares were issued to existing non-employee shareholders of the Company’s ultimate parent company, NACG Holdings Inc., for cash consideration of $7.5 million (note 10(a)). Since both the amount to be paid and the settlement date vary based on specified conditions, the Company determined that the Series B mandatorily redeemable preferred shares should be measured initially at fair value and subsequently re-measured at the amount of cash that would be paid based upon the redemption conditions specified in the contract as if settlement occurred at the current reporting date. Any change in the redemption amount from the previous reporting date, in excess of the initial measurement amount, is recorded as interest expense. The Company restated the carrying value of the Series B mandatorily redeemable preferred shares to the amount that would be paid if the shares were redeemed at the reporting date, which resulted in an increase in the value of the mandatorily redeemable preferred shares of $41,498 with an equal and corresponding increase in interest expense.

Finally, the Company has reviewed the accounting treatment of the financing costs incurred in connection with the issuance of the 9% senior secured notes and the new revolving credit facility on May 19, 2005 (note 7). $5,310 of these costs were inappropriately expensed in the period. The Company has concluded that these costs should have been deferred and amortized over the term of the related financing which is up to five years. This adjustment also resulted in a decrease to the valuation allowance of approximately $1.8 million.

As a consequence of these restatements, a valuation allowance of $7.7 million was recorded against the future income tax asset at June 30, 2005 since it is more likely than not the asset will not be realized.

The Company did not violate any covenants under its current debt agreements (note 7 and note 8) as a result of the restatement adjustments.

The impact of the restatements on Consolidated Statements of Operations is as follows:

The impact of the restatements on the Consolidated Statements of Cash Flows is as follows:

The above amounts include $9,570 (March 31, 2005 – $8,637) of assets under capital lease and accumulated depreciation of $2,504 (March 31, 2005 – $1,968) related thereto. During the three months ended June 30, 2005, additions of property, plant and equipment included $981 of assets that were acquired by means of capital leases (three months ended June 30, 2004 – $709). Depreciation of equipment under capital leases of $540 (three months ended June 30, 2004 – $267) is included in depreciation expense.

Amortization of intangible assets of $183 was recorded for the three months ended June 30, 2005 (three months ended June 30, 2004 - $1,430).

For the three months ended June 30, 2005, financing costs of $7,702 were incurred in connection with the issuance of the 9% senior secured notes and the new revolving credit facility (note 7). .$7.381 million was recorded as deferred financing costs and $321 related to the issuance of the Series A mandatorily redeemable preferred shares which was expensed in the period. For the three months ended June 30, 2004, financing costs of $180 were incurred in connection with the issuance of the 8³/4% senior notes and were recorded as deferred financing costs.

In connection with the repayment of the senior secured credit facility in the three months ended June 30, 2005 (note 7(a)), the Company wrote off deferred financing costs of $1,774 (three months ended June 30, 2004 - $nil).

Amortization of deferred financing costs of $672 was recorded for the three months ended June 30, 2005 (three months ended June 30, 2004 - $625).

The Company refers to the revolving credit facility and the term loan collectively as the “senior secured credit facility.”

On May 19, 2005, the Company repaid its entire indebtedness under the senior secured credit facility using the net proceeds from the issuance of the 9% senior secured notes (note 7(b)) and the Series B mandatorily redeemable preferred shares (note 10(a)).

The 8³/4% senior notes were issued on November 26, 2003 in the amount of US$200 million (Canadian $263 million). These notes mature on December 1, 2011 and bear interest at 8³/4% payable semi-annually on June 1 and December 1 of each year.

The 8³/4% senior notes are unsecured senior obligations and rank equally with all other existing and future unsecured and unsubordinated debt and senior to any subordinated debt that may be issued by the Company. The notes are effectively subordinated to all secured debt to the extent of the value of the assets securing such debt.

The 8³/4% senior notes are redeemable at the option of the Company, in whole or in part, at any time on or after: December 1, 2007 at 104.375% of the principal amount; December 1, 2008 at 102.188% of the principal amount; December 1, 2009 at 100.00% of the principal amount; plus, in each case, interest accrued to the redemption date.

The 9% senior secured notes were issued on May 19, 2005 in the amount of US$60.481 million (Canadian $76.345 million). These notes mature on June 1, 2010 and bear interest at 9% payable semi-annually on June 1 and December 1 of each year. The Company has not hedged its exposure to changes in the U.S. to Canadian dollar exchange rate resulting from the issuance of these notes.

The 9% senior secured notes are senior secured obligations and rank senior in right of payment to all existing subordinated debt and the 8³/4% senior notes. They rank equally in right of payment to all existing and future senior debt of the Company. However, the notes are effectively subordinated to the Company’s swap agreements and new revolving credit facility to the extent of the value of the assets securing such debt.

The 9% senior secured notes are redeemable at the option of the Company, in whole or in part, at any time on or after: June 1, 2008 at 104.50% of the principal amount; June 1, 2009 at 102.25% of the principal amount; June 1, 2010 at 100.00% of the principal amount; plus, in each case, interest accrued to the redemption date. At any time, or from time to time, on or before June 1, 2007 the Company may, at its option, use the net cash proceeds of one or more public equity offering, to redeem up to 35% of the principal amount of the 9% senior secured notes at a redemption equal to 109.0% of the principal amount of the 9% senior secured notes redeemed plus accrued and unpaid interest, if any, to the date of redemption; provided that: at least 65% of the principal amount of 9% senior secured notes remains outstanding immediately after any such redemption; and the Company makes such redemption within 90 days after the closing of any such public equity offering. If a change of control occurs, the Company will be required to offer to purchase all or a portion of each holder’s 9% senior secured notes, at a purchase price in cash equal to 101% of the principal amount of notes repurchased plus accrued interest to the date of purchase.

On May 19, 2005, the Company entered into a new revolving credit facility with a syndicate of lenders. The new revolving facility provides for borrowings of up to $40.0 million, subject to borrowing base limitations, under which revolving loans may be made and letters of credit, up to a limit of $30.0 million, may be issued. The facility bears interest at the Canadian prime rate plus 2% or Canadian bankers’ acceptance rate plus 3%. The indebtedness under the revolving credit facility is secured by substantially all of the Company’s assets and those of its subsidiaries, including accounts receivable, inventory and property, plant and equipment, and a pledge of the Company’s capital stock and that of its subsidiaries.

In connection with the new revolving credit facility, the Company was required to amend its existing swap agreements to increase the effective rate of interest on its 8³/4% senior notes from 9.765% to 9.889% (note 14(c)) and issue to one of the counterparties to the swap agreements 1,000 Series A redeemable preferred shares (note 10(a)).

As of June 30, 2005, the Company had no outstanding borrowings under the revolving credit facility and had issued $20.0 million in letters of credit to support bonding requirements and performance guarantees associated with customer contracts. At June 30, 2005, the Company had additional borrowing availability under the revolving credit facility of $5.8 million.

The Company leases a portion of its licensed motor vehicles for which the minimum lease payments due in each of the next five years are summarized as follows:

Advances from parent company of $288 as at June 30, 2005 represent a non-interest bearing note payable to the Company’s ultimate parent, NACG Holdings Inc. The note was transacted in the normal course of operations and recorded at the exchange value and on terms as agreed to by the parties. As the parent company has indicated in writing that it will not demand payment within the next twelve months, this amount has been classified as long-term.

The Series A preferred shares are non-voting and are not entitled to any dividends. The Series A preferred shares are mandatorily redeemable at $1,000 per share on the earlier of (1) December 31, 2011 and (2) an Accelerated Redemption Event, specifically (i) the occurrence of a change in control,

or (ii) if there is an initial public offering of common shares, the later of (a) a consummation of an initial public offering or (b) the date on which all of the Company’s 8³/4% senior notes and the Company’s 9% senior secured notes are no longer outstanding.

The Company may redeem the Series A preferred shares, in whole or in part, at $1,000 per share, at any time.

The Series B preferred shares are non-voting and are entitled to cumulative dividends at an annual rate of 15% of the issue price of each share. No dividends are payable on common shares and other classes of preferred shares (defined as Junior Shares) unless all cumulative dividends have been paid on the Series B preferred shares and the Company declares a Series B preferred share dividend equal to 25% of the Junior Share dividend (except for dividends paid as part of employee and officer arrangements, intercompany administrative charges of up to $1 million annually, and tax sharing arrangements). As long as any Series A preferred shares remain outstanding, and, subject to restrictions contained in the indenture agreements for the 8³/4% senior notes and the 9% senior secured notes, dividends shall not be paid (but shall otherwise accrue) on the Series B preferred shares. Subject to the restrictive covenants contained within the Indenture Agreement for the 9% senior secured notes, the Indenture Agreement for the 8³/4% senior unsecured notes, and the revolving credit facility agreement, the Company may redeem the Series B preferred shares, in whole or in part, at any time.

The payment of dividends and the redemption of the Series B mandatorily redeemable preferred shares are restricted by the indenture agreements governing the Company’s 9% senior secured notes due 2010 and the 8³/4% senior notes due 2011 as well as the Company’s revolving credit facility agreement. Such payments cannot be made by the Company or its subsidiaries unless: (1) the Company is not continuing to and will not default on any clause of the indenture agreements; (2) the Company is able to incur at least $1.00 in additional indebtedness under the indenture; and (3) the aggregate amount of such payments made since the date the notes were issued does not exceed 50% of the consolidated net income (or 100% of consolidated net loss) from January 1, 2004 to the end of the latest fiscal quarter plus 100% of cash proceeds received from the issuance of additional shares since the date the notes were issued (the indenture for 9% senior secured notes specifically excludes the $7.5 million received on the issuance of the Series B mandatorily redeemable preferred shares) plus 100% of the principal amount of any indebtedness converted into or exchanged for equity plus the net cash proceeds received from any public equity offering. The indentures, however, specifically allow for the payment of dividends or redemption of shares for additional shares of the Company or when additional shares are issued concurrently for cash, and allow for such payments to be made, regardless of the previous restrictions, in an amount not to exceed $15 million in the aggregate in the indenture governing the 8³/4% senior notes and $8.5 million in the indenture governing the 9% senior secured notes. Subject to the prior redemption of the Series A preferred shares, the Series B preferred shares are mandatorily redeemable at the earlier of (1) December 31, 2011 and (2) an Accelerated Redemption Event, specifically (i) a change in control or (ii) if there is an initial public offering of common shares, the later of (a) the consummation of the initial public offering or (b) the date when the 8³/4% senior notes and 9% senior secured notes are no longer outstanding.

The redemption price of the Series B preferred shares is an amount equal to the greatest of (i) two times the issue price, less the amount, if any, of dividends previously paid in cash on the Series B preferred shares (ii) an amount, taking into account the amount, if any, of dividends previously paid in cash on the Series B preferred shares, that provides for a 40% rate of return, compounded annually, on the issue price from the date of issuance, which is limited to a redemption price of $100 million; and (iii) an amount equal to 25% of the arm’s length fair market value of the common shares without taking into account the Series B preferred shares, which is limited to a redemption price of $100 million.

The Series A preferred shares were issued to one of the counterparties to the Company’s swap agreements on May 19, 2005 (note 14(c)) in connection with the new revolving credit facility (note 7(c)). These shares are not entitled to accrue or receive dividends and are required to be redeemed for $1.0 million on or before December 31, 2011.

The Series A preferred shares were initially recorded at their fair value on the date of issuance, which was estimated to be $321 based on the present value of the required cash flows using the rate implicit at inception. Each reporting period, the Company will accrete the carrying value to the present value of the redemption amount at the balance sheet date and record the accretion as interest expense. For the three months ended June 30, 2005, the Company recognized $9 of accretion as interest expense. The carrying value of the Series A preferred shares is $330 at June 30, 2005.

On May 19, 2005, the Series B preferred shares were initially issued for cash proceeds of $7.5 million to certain non-employee shareholders, with the agreement that an offer to purchase these Series B preferred shares would also be extended to other existing shareholders of NACG Holdings Inc. on a pro rata basis to their interest in the common shares. The Company will repurchase and cancel for cash consideration of $100 per share an equal number of shares held by the original non-employee shareholders that subscribed to these preferred shares on May 19, 2005.

Each reporting period, the Company is required to measure the Series B mandatorily redeemable preferred shares at the amount of cash that would be paid under the conditions specified in the contract if settlement occurred at the reporting date. At June 30, 2005, management estimates the redemption amount to be $49.0 million. For the three months ended June 30, 2005, interest expense has increased by $41.5 million due to the changes in carrying value of the Series B preferred shares from their initial fair value of $7.5 million to their redemption value of $49.0 million.

Reflective of its normal business, a majority of the Company’s accounts receivable is due from large companies operating in the resource sector. The Company regularly monitors the activity and balances in these accounts to manage its credit risk and provides an allowance for any doubtful accounts.

At June 30, 2005, the following customers represented 10% or more of accounts receivable and unbilled revenue:

“Accounts receivable – holdbacks” represent amounts up to 10% of billings that some of our customers have withheld until completion of the project. The customer is obligated to retain this amount in a lien fund to ensure that subcontractors are paid and to ensure that any remedial or warranty work is performed.

The Company has determined that the joint venture in which it participates is a variable interest entity (“VIE”) as defined by AcG-15 and that the Company is the primary beneficiary. Accordingly, the joint venture has been consolidated on a prospective basis effective January 1, 2005. During the fourth quarter of fiscal 2005, the arrangement of this joint venture has been amended such that the Company is responsible for all of its activities and revenues. As a result, no minority interest has been recorded.

The Company conducts business in three business segments: Mining and Site Preparation, Piling and Pipeline.

The Mining and Site Preparation segment provides mining and site preparation services, including overburden removal and reclamation services, project management and underground utility construction, to a variety of customers throughout Western Canada.

The Piling segment provides deep foundation construction and design build services to a variety of industrial and commercial customers throughout Western Canada.

The Pipeline segment provides both small and large diameter pipeline construction and installation services to energy and industrial clients throughout Western Canada.

The Company’s goodwill was assigned to the Mining and Site Preparation, Piling and Pipeline segments in the amounts of $125,447, $40,349, and $32,753, respectively.

Substantially all of the Company’s assets are located in Western Canada and the activities are carried out throughout the year.

This revenue by major customer was earned in all three business segments: Mining and Site Preparation, Pipeline and Piling.

All related party transactions described below are measured at the exchange amount of consideration established and agreed to by the related parties.

The Sterling Group, L.P. (“Sterling”), Genstar Capital, L.P., Perry Strategic Capital Inc., and Stephens Group, Inc., (the “Sponsors”), entered into an agreement with NACG Holdings Inc. and certain of its subsidiaries, including the Company, to provide consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements, and other matters. As compensation for these services an annual advisory fee of $100 for the three months ended June 30, 2005 (three months ended June 30, 2004 – $100) is payable to the Sponsors, as a group.

On May 19, 2005, 7,500 Series B preferred shares were issued to the Sponsors in exchange for cash of $7.5 million (note 10(a)).

Pursuant to several office lease agreements, for the three months ended June 30, 2005 the Company paid $166 (three months ended June 30, 2004 – $166) to a company owned, indirectly and in part, by one of the Directors.

The Company is exposed to market risks related to interest rate and foreign currency fluctuations. To mitigate these risks, the Company uses derivative financial instruments such as foreign currency and interest rate swap contracts.

The fair values of the Company’s cash and cash equivalents, accounts receivable, unbilled revenue, inventory, prepaid expenses, accounts payable, accrued liabilities, and billings in excess of costs on uncompleted contracts approximate their carrying amounts.

The fair values of the senior notes and capital lease obligations are based on management estimates which are determined by discounting cash flows required under the debt at the interest rate currently estimated to be available for loans with similar terms. Based on these estimates, the fair value of the Company’s capital lease obligations and 9% senior secured notes at June 30, 2005 are not significantly different from their carrying values. The fair value of the 8³/4% senior secured notes as at June 30, 2005 was $210,769 compared to a carrying value of $245,080.

The Company is subject to interest rate risk on the revolving credit facility and capital lease obligations. At June 30, 2005, for each 1% annual fluctuation in the interest rate, the annual cost of financing will change by approximately $68.

The Company also leases equipment (as described in note 15) with a variable lease payment component that is tied to prime rates. At June 30, 2005, for each 1% annual fluctuation in these rates, annual lease expense will change by approximately $274.

The Company has 8³/4% senior notes denominated in U.S. dollars in the amount of US$200 million. In order to reduce its exposure to changes in the U.S. to Canadian dollar exchange rate, the Company, concurrent with the closing of the acquisition on November 26, 2003, entered into a cross-currency swap agreement to manage this foreign currency exposure for both the principal balance due on December 1, 2011 as well as the semi-annual interest payments through the whole period beginning from the issuance date to the maturity date. In conjunction with the cross-currency swap agreement, the Company also entered into a U.S. dollar interest rate swap and a Canadian dollar interest rate swap with the net effect of converting the 8.75% rate payable on the senior notes into a fixed rate of 9.765% for the duration that the senior notes are outstanding. On May 19, 2005 in connection with the Company’s new revolving credit facility, this fixed rate was increased to 9.889% for the remainder of the duration the 8³/4% senior notes are outstanding (note 7(c)). These derivative financial instruments do not qualify for hedge accounting.

The Company has not hedged its exposure to changes in the U.S. to Canadian dollar exchange rate resulting from the issuance of the 9% senior secured notes.

The carrying amount and fair value of the Company’s derivative financial instruments at June 30, 2005 are as follows:

The fair values of the Company’s cross-currency and interest rate swap agreements are based on values quoted by the counterparties to the agreements.

At June 30, 2005, the notional principal amount of the cross-currency swap was US$200 million. The notional principal amounts of the interest rate swaps were US$200 million and Cdn$263 million.

The Company is subject to foreign currency risk on U.S. dollar operating lease commitments as the Company has not entered into a cross-currency swap agreement to hedge this foreign currency exposure.

The annual future minimum lease payments in respect of operating leases for the next five years are as follows:

The Company and its subsidiaries match voluntary contributions made by the employees to their Registered Retirement Savings Plans to a maximum of 5% of base salary for each employee. Contributions made by the Company during the three months ended June 30, 2005 were $93 (three months ended June 30, 2004 – $50).

Under the 2004 Share Option Plan, Directors, Officers, employees and service providers to the Company are eligible to receive stock options to acquire common shares in NACG Holdings Inc. The stock options

expire in ten years or on termination of employment. Options may be exercised at a price determined at the time the option is awarded, and vest as follows: no options vest on the award date and twenty per cent vest on each of the five following award date anniversaries. The maximum number of common shares issuable under this plan may not exceed 92,500, of which 16,258 are still available for issue as at June 30, 2005.

The fair value of each option granted by NACG Holdings Inc. was estimated using the Black-Scholes option-pricing model assuming the following weighted average assumptions: a dividend yield of nil%; a risk-free interest rate of 4.63%; volatility of nil%; and an expected option life of 10 years.

At June 30, 2005, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life are as follows:

The Company recorded $188 of compensation expense related to the stock options in the three months ended June 30, 2005 (three months ended June 30, 2004 – $112) with such amount being credited to contributed surplus.

Certain of the comparative figures have been reclassified to be consistent with the current period’s presentation.

These interim consolidated financial statements have been prepared in accordance with Canadian GAAP which differs in certain respects from U.S. GAAP. For the periods presented herein, material issues that could give rise to measurement differences in the interim consolidated financial statements are as follows:

Restatement related to derivative financial instruments and hedging activities:

As a consequence of the restatement described in note 3 of the interim consolidated financial statements, the Company determined that it was necessary to restate all reported periods after November 26, 2003 to eliminate the use of hedge accounting in accordance with Canadian and U.S. GAAP. As a result, the foreign exchange gain or loss related to the senior notes are recorded each period and the derivative financial instruments are recorded at fair value and the realized and the unrealized gains and losses on derivative financial instruments are recognized as either an increase or decrease in the Company’s Statement of Operations, along with the associated future income tax effects.

As a result of the restatement, there are no measurement or differences related to the accounting for derivative financial instruments under Canadian GAAP in accordance with EIC-128 and U.S. GAAP in accordance with Statement of Financial Accounting Standards No. 133 (“SFAS 133”), as amended.

Statement of Financial Accounting Standards No. 130 (“SFAS 130”), “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income equals net income (loss) for the period as adjusted for all other non-owner changes in shareholders’ equity. SFAS 130 requires that all items that are not required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement. The only components of comprehensive earnings (loss) are the net earnings (loss) for the period.

The Company uses the fair value method of accounting to all stock-based compensation payments under Canadian GAAP. As a result, there are no differences between Canadian GAAP and Statement of Financial Accounting Standards No. 123 (“SFAS 123”).

U.S. GAAP requires capitalization of interest costs as part of the historical cost of acquiring certain qualifying assets that require a period of time to prepare for their intended use. This is not required under Canadian GAAP.

Under Canadian GAAP, the Company defers and amortizes debt issuance costs on a straight-line basis over the stated term of the related debt. Under U.S. GAAP, the Company is required to amortize financing costs over the stated term of the related debt using the effective interest method resulting in a consistent interest rate over the term of the debt in accordance with Accounting Principles Board Opinion No. 12. As a result, the net loss under U.S. GAAP for the three months ended June 30, 2005 would have been reduced by $43 (net of taxes of $nil) using the effective interest method.

The effect of material differences between Canadian and U.S. GAAP on the Company’s reported consolidated net loss is set out below:

The effect of material differences between Canadian and U.S. GAAP on the consolidated shareholder’s equity of the Company is set out below:

In November 2004, the FASB issued Statement on Financial Accounting Standards 151, “Inventory Costs” (“SFAS 151”). This standard requires the allocation of fixed production overhead costs be based on the normal capacity of the production facilities and unallocated overhead costs recognized as an expense in the period incurred. In addition, other items such as abnormal freight, handling costs and wasted materials require treatment as current period charges rather than a portion of the inventory cost. This standard is effective for fiscal 2006 of the Company. The adoption of this standard did not have a material impact on the Company’s financial statements.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. The adoption of this standard did not have a material impact on the Company’s financial statements.

Statement on Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”) requires companies to recognize in the income statement, the grant-date fair value of stock options and other equity-based compensation issued to employees. The fair value of liability-classified awards is remeasured subsequently at each reporting date through the settlement date, while the fair value of equity-classified awards is not subsequently remeasured. The alternative to use the intrinsic value method of APB Opinion 25 is eliminated with this revised standard. The Company is currently evaluating the impact of this revised standard. The revised standard is effective for non-public companies beginning of the first annual reporting period that begins after December 15, 2005, in the case of the Company beginning April 1, 2006. Since the Company uses the minimum value method for purposes of complying with Statement 123, it is required to adopt SFAS 123R prospectively.

Statement on Financial Accounting Standards 153, “Exchanges of Non-monetary Assets – an Amendment of APB Opinion 29” (“SFAS 153”), was issued in December 2004. Accounting Principles Board (“APB”) Opinion 29 is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of assets exchanged. SFAS 153 amends APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. The standard is effective for the Company for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, beginning July 1, 2005 for the Company, The adoption of this standard did not have a material impact on the Company’s financial statements.

In May 2005, the FASB issued Statement on Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”) which replaces Accounting Principles Board Opinions No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements – An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting change and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal year beginning after December 15, 2005 and is required to be adopted by the Company in its fiscal year beginning on April 1, 2006. The Company is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact.

The following discussion should be read in conjunction with the attached restated interim consolidated financial statements for the three months ended June 30, 2005. This document contains forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause future actions, conditions or events to differ materially from the anticipated actions, conditions or events expressed or implied by such forward-looking statements. Forward-looking statements are those that do not relate strictly to historical or current facts, and can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “should,” “may,” “objective,” “projection,” “forecast,” “believes,” “continue,” “strategy,” “position,” or the negative of those terms or other variations of them or comparable terminology. Forward-looking statements included in this document include statements regarding: financial resources; capital spending; the outlook for our business; and our results generally. Factors that could cause actual results to vary from those in the forward-looking statements include: the effectiveness of our internal controls; our ability to comply with the terms of our credit agreement or our indentures, or in the event of our breach of such terms, our ability to receive waivers or amendments from the lenders under our credit agreement or the trustee under our indentures; potential alternative financing arrangements; our ability to continue to bid successfully on new projects and accurately forecast costs associated with unit-price or lump sum contracts; our ability to obtain surety bonds as required by some of our customers; decreases in outsourcing work by our customers; changes in oil and gas prices; shut-downs or cutbacks at major businesses that use our services; changes in laws or regulations, third party relations and approvals, and decisions of courts, regulators and governmental bodies that may adversely affect our business or the business of the customers we serve; our ability to hire and retain a skilled labor force; provincial, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital markets conditions; inflation rates; foreign currency exchange rates; interest rates; weather conditions; the timing and success of business development efforts; and our ability to successfully identify and acquire new businesses and assets and integrate them into our existing operations and the other risk factors set forth herein under “Risk Factors.” You are cautioned not to put undue reliance on any forward-looking statements, and we undertake no obligation to update those statements.

We reviewed the accounting treatment of our derivative financial instruments and concluded that there were technical deficiencies in the hedge documentation relating to the cross-currency swap and interest rate swap contracts used to manage our foreign exchange risk exposure related to the U.S. dollar denominated 8³/4% senior notes since the inception of the derivative financial contracts on November 26, 2003, which deficiencies could not be corrected retroactively. Complete and accurate documentation is required to support the effectiveness of the hedge and the use of hedge accounting under the Canadian Institute of Chartered Accountants Accounting Guideline 13, “Hedging Relationships.”

As a result of the deficiencies in the documentation, we determined that it was necessary to restate all reported periods after November 26, 2003 to eliminate the impact of hedge accounting. This was accomplished by recognizing the foreign exchange gain or loss relating to the senior notes each period and recording the derivative financial instruments at fair value and the realized and unrealized gains and losses on the derivative instruments each period through the Consolidated Statement of Operations, along with the associated future income tax effects. A valuation allowance was recorded against the future income tax asset at June 30, 2005 since it is more likely than not the asset will not be realized.

The resulting accounting does not affect the economic reality of our hedging activities and has no impact on the timing or amount of cash flows related to our 8³/4% senior notes or swap agreements. It does not affect our ability to make required payments on our outstanding debt obligations. Finally, our economic risk measurement strategies have not required amendment.

In addition, we reviewed the accounting treatment of the Series A and Series B mandatorily redeemable preferred shares issued as part of the refinancing transactions which occurred on May 19, 2005. We previously recorded the Series A preferred shares at the redemption amount of $1.0 million. However, we determined that since both the amount to be paid and the settlement date related to the Series A mandatorily redeemable preferred shares are fixed, the Series A preferred shares should be measured at the present value of the amount to be paid at settlement, accruing interest expense using the interest rate implicit at inception. These preferred shares were issued to one of the counterparties to our swap agreements. Accordingly, we reduced the initial value of the preferred shares from $1.0 million to $0.3 million, decreasing financing costs for the current period by $0.7 million. In addition, we accrued interest expense and recorded the increase in the associated liability in the three months ended June 30, 2005.

The Series B preferred shares were issued to existing non-employee shareholders of our ultimate parent company, NACG Holdings Inc., for cash consideration of $7.5 million. Since both the amount to be paid and the settlement date vary based on specified conditions, we determined that the Series B mandatorily redeemable preferred shares should be measured initially at fair value and subsequently re-measured at the amount of cash that would be paid based upon the redemption conditions specified in the contract as if settlement occurred at the current reporting date. Any change in the redemption amount from the previous reporting date, in excess of the initial measurement amount, is recorded as interest expense. We restated the carrying value of the Series B mandatorily redeemable preferred shares to the amount that would be paid if the shares were redeemed at the reporting date, which resulted in an increase in the value of the mandatorily redeemable preferred shares of $41.5 million with an equal and corresponding increase in interest expense.

Finally, we reviewed the accounting treatment of the financing costs incurred in connection with the issuance of the 9% senior secured notes and the new revolving credit facility on May 19, 2005. $5.3 million of these costs were inappropriately expensed in the period. We concluded that these costs should have been deferred and amortized over the term of the related financing which is up to five years. This adjustment also resulted in a decrease to the future income tax asset valuation allowance.

The restatement adjustments did not impact our Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as that measure is defined in our revolving credit facility agreement. Accordingly, we did not violate any covenants of those agreements as a result of the restatement adjustments.

See Note 3 to the interim financial statements included in this report for a detailed summary of the impact of the restatements on our Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets for the period presented.

We provide services primarily to major oil and natural gas, petrochemical, and other natural resource companies operating in western Canada. These services are offered through three operating segments: Mining and Site Preparation, Piling, and Pipeline. The Mining and Site Preparation operating segment is involved in a variety of activities, including: surface mining for oilsands and other natural resources; overburden removal; hauling sand and

gravel; supplying labor and equipment to support customers’ mining operations; construction of infrastructure associated with mining operations and reclamation activities; clearing, stripping, excavating, and grading for mining operations and other general construction projects; and underground utility installation for plant, refinery, and commercial building construction. The Piling operating segment installs all types of driven and drilled piles, caissons, and earth retention and stabilization systems for commercial buildings, industrial projects, and infrastructure projects. The Pipeline operating segment installs transmission and distribution pipe made of steel, plastic, and fiberglass materials in sizes up to, and including, 52 inches in diameter for oil and natural gas transmission.

We have been operating for over 50 years and maintain one of the largest independently-owned equipment fleets in western Canada. In serving our customers, we operate over 450 pieces of heavy construction equipment and over 550 support vehicles. Our fleet size provides flexibility in scheduling and completing contract services on a timely basis and allows us to undertake long-term, large-scale projects with major operators in oilsands development and other energy sectors.

Revenue for the three months ended June 30, 2005 increased by $33.5 million (47.2 percent) from the same period in the prior year primarily due to a number of new mining and site preparation contracts, including the large site preparation and underground utility installation and overburden removal projects for Canadian Natural Resources Ltd. (“CNRL”) and the mining contract for Grande Cache Coal Corporation, and increased piling activity. Revenue from these new projects in the current period more than offset the declines in revenue primarily due to the substantial completion of the Syncrude UE1 piling and site grading contracts, as well as the significant decrease in pipeline activity.

Project costs for the three months ended June 30, 2005 increased by $20.6 million (44.8 percent) from the same period in the prior year primarily due to higher activity levels. As a percentage of revenue, project costs were 63.8% in the three months ended June 30, 2005 as compared to 64.9% in the comparative period. In the prior year, abnormally high costs as a percentage of revenue were incurred on a single large steam assisted gravity drainage site project.

Equipment costs for the three months ended June 30, 2005 increased by $5.5 million (47.8 percent) from the same period in the prior year primarily due to higher operated hours due to increased activity levels and higher hauling costs.

Operating lease expense for the three months ended June 30, 2005 increased by $2.2 million (314.3 percent) from the corresponding period in the prior year primarily due to the addition of new leased equipment to support new projects, including the CNRL site-grading project.

Depreciation expense for the three months ended June 30, 2005 increased by $0.5 million (11.1 percent) from the corresponding period in the prior year. The increase was primarily due to the increase in equipment hours related to higher activity levels, as our heavy equipment fleet is depreciated based on operated hours.

General and administrative expenses increased by $2.2 million (44.0 percent) from the corresponding period in the prior year. The increase was primarily attributable to: higher staff levels; increased salaries; higher consulting costs; and increased accounting and audit fees related to our restatement of two quarters of financial statements from the prior fiscal year.

The amortization of intangible assets in both the current and comparative periods was related to the customer contracts in progress, trade names, non-competition agreement, and employee arrangements that were acquired in the acquisition on November 26, 2003. Substantially all of the cost of the intangible assets has been amortized as of June 30, 2005 as the majority of the cost relates to customer contracts acquired in the acquisition in November 2003 that were amortized at a rapid rate due to their short-term nature.

Interest expense for the three months ended June 30, 2005 increased by $42.6 million (583.6 percent) from the corresponding period in the prior year primarily due to the $41.5 million increase in the redemption value of the Series B mandatorily redeemable preferred shares recorded in the current period. The shares were issued in the current period, so no change in the redemption value was recorded in the prior period. Additionally, interest expense increased in the current period due to the US$60.5 million of 9% senior secured notes issued in the current period and the series of waiver fees to the lenders under our previous senior secured credit facility during the period prior to refinancing.

The foreign exchange loss for the three months ended June 30, 2005 was $1.2 million as compared to a loss of $4.7 million in the comparative period. The foreign exchange losses in both the current and prior periods related primarily to the change in the balance owing on the senior notes and senior secured notes due to the fluctuation in the Canadian dollar-U.S. dollar exchange rate.

Financing costs of $0.3 million were recorded in the current period representing the issuance of the Series A mandatorily redeemable preferred shares. In addition, we wrote off $1.8 million of deferred financing costs related to the previous senior secured credit facility.

A number of factors contribute to variations in our results between periods, such as: weather, customer capital spending on large oilsands and natural gas related projects; our ability to manage our project related business so as to avoid or minimize periods of relative inactivity; and the strength of the western Canadian economy.

The comparative information presented for the fiscal year ended March 31, 2004 is largely the result of operations of Norama Ltd. (“Norama” or the “Predecessor Company”) preceding the acquisition that occurred on November 26, 2003. Included in the comparative information presented for the year ended March 31, 2004 are the results of the Predecessor Company up to November 25, 2003 plus the results of the Successor Company, NAEPI, for the period from November 26, 2003 to March 31, 2004. The information for the periods that occurred after November 25, 2003 may not be directly comparable to the information provided for the pre-acquisition periods as a result of the buy-out of equipment leases and the effect of the revaluation of assets and liabilities to their estimated fair market values in accordance with the application of purchase accounting pursuant to Canadian and United States (“U.S.”) generally accepted accounting principles (“GAAP”).

The higher revenues experienced over the recent two quarters compared to prior periods primarily resulted from new mining and site preparation contracts, including the CNRL site preparation and underground utility installation contracts and Grande Cache Coal mining services contract, and higher activity in the piling division.

We report our operations under three operating segments: Mining and Site Preparation, Piling and Pipeline.

Revenue for the three months ended June 30, 2005 increased by $35.9 million (76.7 percent) from the same period in the prior year primarily due to activity in the current period related to the large site preparation and underground utility installation and overburden removal contracts for CNRL, the mining services contract for Grande Cache Coal Corporation, and various projects for Suncor Energy. Revenue generated by these projects in the current period more than offset the decline in revenue resulting from the substantial completion of the Syncrude UE1 project in the prior year. Revenue of $5.3 million related to claims on the CNRL site preparation and underground utility installation contract and Opti/Nexen Long Lake project was recognized in the period due to the change in accounting policy to allow claims to be recognized when it is determined to be probable that the claim will result in additional contract revenue and the amount can be reliably estimated.

Segment profits for the three months ended June 30, 2005 increased by $8.2 million (234.3 percent) from the comparative period in the prior year due to the higher volume of work in the period and unusually poor results in the comparative period related to two relatively large projects that were completed or substantially completed in the prior year.

Piling revenue for the three months ended June 30, 2005 increased by $6.7 million (50.4 percent) from the comparative prior period primarily due to a higher volume of contracts in the Vancouver, Regina, and Fort McMurray regions due to strong economic activity, as well as the addition of large piling contracts for Flint Infrastructure Services Ltd. and Suncor Energy. This additional work more than offset the loss of revenue generated by the Syncrude UE1 piling contract in the prior period.

Profit for the Piling operating segment decreased by $0.2 million (6.7 percent) for the three months ended June 30, 2005 as compared to the comparative prior period. The higher volume of contracts in the current period was offset by a higher proportion of lower margin driven pile work completed in the current period as compared to the prior period.

Pipeline operating segment revenue for the three months ended June 30, 2005 decreased by $9.1 million (84.3 percent) from the comparative prior period primarily due to a decrease in work performed for our major pipeline customer in the current period.

Profit for this operating segment for the three months ended June 30, 2005 decreased by $1.3 million (81.3 percent) from the comparative prior period primarily as a result of the lower activity in the current period.

At June 30, 2005, we had net working capital of $53.1 million compared to a net working capital position of $41.7 million at March 31, 2005. The increase was primarily due to the issuance of the 9% senior secured notes and $7.5 million of Series B mandatorily redeemable preferred shares in the period, which provided us with funds in excess of those required to repay the senior secured credit facility and pay the related financing costs. These excess funds were used to pay down our trade payables and to make the interest payment on the 8³/4% senior notes. Unbilled revenue increased by $6.7 million (16.3 percent) from March 31, 2005 as a result of the contractual billing terms on several large projects on-going in the period.

Property, plant and equipment increased by $1.0 million at June 30, 2005 from March 31, 2005 primarily due to the expansion of our head office and the on-going construction of a shop to support the maintenance requirements of our 10-year overburden removal project for CNRL. A portion of the increase also resulted from equipment purchases to replace retired equipment. The increase in property, plant and equipment at June 30, 2005 was partially offset by depreciation expense incurred over the period.

The senior secured credit facility balance decreased to $nil at June 30, 2005 from the balance of $61.3 million at March 31, 2005 due to the repayment of all amounts outstanding in the period under this facility using the proceeds from the issuance of our 9% senior secured notes and $7.5 million of Series B mandatorily redeemable preferred shares.

Capital lease obligations, including the current portion, increased by $0.5 million at June 30, 2005 from the balance at March 31, 2005 due to the addition of new leased vehicles to support new projects.

In accordance with Canadian Institute of Chartered Accountants’ Handbook Section 3062, “Goodwill and Other Intangible Assets”, we review our goodwill for impairment annually or whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. We are required to test our goodwill for impairment at the reporting unit level and we have determined that we have three reporting units. The test for goodwill impairment is a two-step process:

We tested goodwill for impairment at December 31, 2004 as a result of events and changes in circumstances. We conduct our annual assessment of goodwill on January 1 on each year. For the three month period ended June 30, 2005, we determined that there is no impairment in the carrying value of goodwill.

Operating activities for the three months ended June 30, 2005 resulted in net usage of cash totalling $16.1 million during the period. This was mainly due to the interest payment made on the 8³/4% senior notes and payment of trade accounts payable in the period. The net usage of cash from operating activities for the three months ended June 30, 2004 was $4.0 million with payment of current liabilities (primarily interest on the 8³/4% senior notes) contributing to the outflow.

During the three months ended June 30, 2005, we invested $1.3 million in sustaining capital expenditures and $4.4 million in growth capital expenditures compared to $1.0 million and $10.4 million, respectively, during the same period in the prior year. In addition, we financed new vehicles by way of capital leases totalling $1.0 million during the three months ended June 30, 2005 compared to $0.7 million during the same period in the prior year. We expect our future sustaining capital expenditures to range from $5.0 million to $7.0 million per year, not including replacement capital expenditures. Sustaining capital expenditures are those that are required to maintain our existing fleet of equipment at its optimum average age. Growth capital expenditures relate to equipment additions required to perform increased sizes or numbers of projects.

Financing activities during the three months ended June 30, 2005 primarily related to the refinancing which occurred in the period. The proceeds from the issuance of the US$60.5 million of 9% senior secured notes and $7.5 million of Series B mandatorily redeemable preferred shares were used to repay the amount outstanding under our senior secured credit facility and to pay the fees and expenses related to the refinancing. Financing activities for the three months ended June 30, 2004 related to payments made on our senior secured credit facility and capital leases.

Our primary uses of cash are to purchase property, plant and equipment, fulfill debt repayment and interest payment obligations, and finance working capital requirements.

Our US$200 million of 8³/4% senior notes were issued concurrent with the acquisition on November 26, 2003 pursuant to a private placement. On October 5, 2004, we registered substantially identical notes with the United States Securities and Exchange Commission and exchanged them for the notes issued in the private placement. As the registration and exchange were not completed within a specified number of days of the original issuance, as required by a registration rights agreement entered into in connection with the original issuance, we were required to pay additional interest to the holders of the notes in the amount of U.S. $0.2 million on the December 1, 2004 scheduled interest payment. There are no principal payments required on the senior notes until maturity.

The foreign currency risk relating to both the principal and interest payments on the 8³/4% senior notes has been managed with a cross-currency swap and interest rate swaps which went into effect concurrent with the issuance. The interest expense of $12.8 million is payable semi-annually in June and December of each year until the notes mature on December 1, 2011. The swap agreements are economic hedges of the changes in the Canadian dollar-U.S. dollar exchange rate, but they do not meet the criteria to qualify for hedge accounting.

Our US$60.5 million of 9% senior secured notes were issued on May 19, 2005 pursuant to a private placement. On July 26, 2005, we registered substantially identical notes with the United States Securities and Exchange Commission and exchanged them for the notes issued in the private placement.

The foreign currency risk relating to both the principal and interest payments on the 9% senior secured notes has not been hedged. The interest expense of US$2.7 million is payable semi-annually in June and December of each year until the notes mature on June 1, 2010.

We maintain a significant equipment and vehicle fleet comprised of units with various remaining useful lives. Once units reach the end of their useful lives, it becomes cost prohibitive to continue to maintain them and, therefore, they must be replaced. As a result, we are continually acquiring new equipment to replace retired units and to expand the fleet to meet growth as new contracts are awarded to us. It is important to adequately maintain the large revenue-producing fleet in order to avoid equipment downtime which can impact our revenue stream and inhibit our ability to satisfactorily perform our contracts. In order to conserve cash, we have financed our recent requirements for large pieces of heavy construction equipment through operating leases. In addition, we continue to lease a portion of our motor vehicle fleet and assumed several heavy equipment operating leases from the Predecessor Company.

Our cash requirements during the three months ended June 30, 2005 increased due to our continued growth through recent contract awards. Our cash requirements for the remainder of the fiscal year consist of lease obligations, interest payment obligations, and working capital requirements as activity levels are expected to increase.

Our principal sources of cash are funds from operations and borrowings under our revolving credit facility. The revolving credit facility provides for borrowings of up to $40.0 million, subject to borrowing base limitations, under which revolving loans may be made and letters of credit, up to a limit of $30.0 million, may be issued. As of June 30, 2005, we had no outstanding borrowings under the revolving credit facility and had issued $20.0 million in letters of credit to support bonding requirements and performance guarantees associated with customer contracts. The borrowing base less first lien exposure on our swap agreements at June 30, 2005 was $5.8 million. In addition we had cash on hand of $13.6 million. The facility bears interest at the Canadian prime rate plus 2% or Canadian bankers’ acceptance rate plus 3%. The indebtedness under the revolving credit facility is secured by substantially all of our assets and those of our subsidiaries, including accounts receivable, inventory and property, plant and equipment, and a pledge of our capital stock and that of our subsidiaries.

On April 27, 2005, Moody’s lowered its rating of our 8³/4% senior notes to Caa1 from B3 and lowered our long-term corporate rating to B3 from B2. In addition, Moody’s assigned a rating of B3 to the new 9% senior secured notes. On May 19, 2005, Standard & Poor’s lowered its rating of our 8³/4% senior notes to CCC+ from B- and our long-term corporate credit rating to B- from B, while assigning a rating of B to our new senior secured notes. The lower credit ratings will have no effect on the interest rates associated with our 8³/4% senior notes or 9% senior secured notes.

The Series B preferred shares were initially issued for cash proceeds of $7.5 million on May 19, 2005 to the Sponsors referred to under “Related Party Transactions” below. Subsequently, on August 31, 2005, we offered and sold $0.9 million of Series B preferred shares to other existing shareholders of our ultimate parent company, NACG Holdings Inc. On November 1, 2005, the proceeds from this subsequent sale were used to repurchase a like amount of Series B preferred shares from the Sponsors, thus the total amount of Series B preferred shares outstanding remained the same. The payment of dividends and the redemption of the shares are restricted by the indenture agreements governing our 8³/4% senior notes and 9% senior secured notes, as well as the agreement governing our revolving credit facility. The redemption amount is the greatest of:

The total redemption amount is limited to $100 million. For additional information on the Series B preferred shares, refer to note 10(a) in our restated interim consolidated financial statements for the three months ended June 30, 2005.

Our principal contractual obligations relate to our long-term debt (senior notes and senior secured notes), Series A and B mandatorily redeemable preferred shares, and capital and operating leases. The following table summarizes our future contractual obligations, excluding interest payments unless otherwise noted, as of June 30, 2005.

Certain of our directors, officers, employees, and service providers have been granted options to purchase common shares of NACG Holdings Inc., our ultimate parent company, under a stock-based compensation plan. The plan and outstanding balances are disclosed in note 17 to our interim consolidated financial statements for the three months ended June 30, 2005.

The Sterling Group, L.P. (“Sterling”), Genstar Capital, L.P., Perry Strategic Capital Inc., and Stephens Group, Inc., (the “Sponsors”), entered into an agreement with NACG Holdings Inc. and certain of its subsidiaries, including us, to provide consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements, and other matters. As compensation for these services an advisory fee of $0.1 million for the three months ended June 30, 2005 (three months ended June 30, 2004 – $0.1 million) is payable to the Sponsors, as a group. Additionally, the $7.5 million of Series B preferred shares were initially issued to the Sponsors..

Pursuant to several office lease agreements, for the three months ended June 30, 2005 we paid $0.2 million (three months ended September 30, 2004 – $0.2 million) to a company owned, indirectly and in part, by one of our Directors.

Certain accounting policies require management to make significant estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of management’s judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements.

Our contracts with customers fall under the following contract types: time-and-materials, unit-price, cost-plus and lump sum. The contracts are generally less than one year in duration although we do have several long-term contracts.

Profit for each type of contract is included in revenue when its realization is reasonably assured. Estimated contract losses are recognized in full when determined. Revenue from change orders, extra work, and variations in the scope of work is recognized after both the costs are incurred or services are provided and realization is assured beyond a reasonable doubt. Revenue from claims is recognized when it is determined to be probable that the claim will result in additional contract revenue and the amount can be reliably estimated. Costs incurred for bidding and obtaining contracts are expensed as incurred.

The accuracy of our revenue and profit recognition in a given period is almost solely dependent on the accuracy of our estimates of the cost to complete each project. Our cost estimates use a detailed “bottom up” approach. We believe our experience allows us to produce materially reliable estimates; however, our projects can be highly complex, and in almost every case, the profit margin estimates for a project will either increase or decrease to some extent from the amount that was originally estimated at the time of bid. Because we have many projects of varying levels of complexity and size in process at any given time, these changes in estimates can offset each other without materially impacting our profitability; however, large changes in cost estimates, particularly in the bigger, more complex projects, can have a significant effect on profitability.

Factors that can contribute to changes in estimates of contract cost and profitability include, without limitation: site conditions that differ from those assumed in the original bid, to the extent that contract remedies are unavailable; the availability and skill level of workers in the geographic location of the project; the availability and proximity of materials; the accuracy of the original bid and subsequent estimates; inclement weather and timing; and coordination issues inherent in all projects. Until we feel we can accurately estimate job profitability, no profit on the related project is recognized. The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins, may cause fluctuations in gross profit between periods, and these fluctuations may be significant.

The most significant estimate in accounting for property, plant and equipment is the expected useful life of the asset and the expected residual value. Most of our property, plant and equipment has a long life which can exceed 20 years with proper repair work and preventative maintenance. Useful life is measured in operated hours, excluding idle hours, and a depreciation rate is calculated for each type of unit. Depreciation expense is determined each day based on actual operated hours.

Another key estimate is the expected cash flows from the use of an asset and the expected disposal proceeds in applying Canadian Institute of Chartered Accountants Handbook Section 3063 “Impairment or Disposal of Long-Lived

Assets” and the revised Section 3475 “Disposal of Long-Lived Assets and Discontinued Operations.” These standards require the recognition of an impairment loss for a long-lived asset to be held and used when changes in circumstances cause its carrying value to exceed the total undiscounted cash flows expected from its use. An impairment loss, if any, is determined as the excess of the carrying value of the asset over its fair value. Equally important is the expected fair value of assets that are available-for-sale.

The parts, shop labor, and overhead costs, which are included in equipment costs on our statement of operations, represent the total cost of operating our equipment and maintaining it in an acceptable condition. It is our policy to expense these costs as they are incurred.

We are required to estimate the redemption value of the Series B mandatorily redeemable preferred shares at each reporting date as if the settlement occurred at that date. When calculating the redemption value, we are required to estimate the arm’s length fair market value of our common shares. The process of determining fair value is subjective and requires management to exercise judgment in making assumptions about future results, including revenue and cash flow projections, and discount rates.

Effective January 1, 2004, we prospectively adopted the new Canadian accounting standards EIC-141, “Revenue Recognition,” and EIC-142, “Revenue Arrangements with Multiple Deliverables,” which incorporate the principles and guidance under United States generally accepted accounting principles (“U.S. GAAP”) for revenue recognition. No changes to the recognition or classification of revenue were made as a result of the adoption of these standards.

Effective April 1, 2005, we amended our accounting policy regarding the recognition of revenue on claims. This change in accounting policy has been applied retroactively. Once contract performance is underway, we often experience changes in conditions, client requirements, specifications, designs, materials and work schedule. Generally, a “change order” will be negotiated with our customer to modify the original contract to approve both the scope and price of the change. Occasionally, however, disagreements arise regarding changes, their nature, measurement, timing and other characteristics that impact costs and revenue under the contract. When a change becomes a point of dispute between our customer and us, we then consider it as a claim.

Costs related to change orders and claims are recognized when they are incurred. Change orders are included in total estimated contract revenue when it is probable that the change order will result in a bona fide addition to contract value and can be reliably estimated. Prior to April 1, 2005, revenue from claims was included in total estimated contract revenue when awarded or received. After April 1, 2005, claims are included in total estimated contract revenue, only to the extent that contract costs related to the claim have been incurred, when it is probable that the claim will result in a bona fide addition to contract value and can be reliably estimated. Those two conditions are satisfied when (1) the contract or other evidence provides a legal basis for the claim or a legal opinion is obtained providing a reasonable basis to support the claim, (2) additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in our performance, (3) costs associated with the claim are

identifiable and reasonable in view of work performed and (4) evidence supporting the claim is objective and verifiable. This can lead to a situation where costs are recognized in one period and revenue, when the above conditions warrant recognition of the claim, occurs in subsequent periods. Historical claim recoveries should not be considered indicative of future claim recoveries. For additional information, refer to note 2(p) in our restated interim consolidated financial statements for the three months ended June 30, 2005.

Effective January 1, 2005, we prospectively adopted the Canadian Institute of Chartered Accountants’ new Accounting Guideline 15, “Consolidation of Variable Interest Entities” (“VIEs”) (“AcG-15”). VIEs are entities that have insufficient equity at risk to finance their operations without additional subordinated financial support and/or entities whose equity investors lack one or more of the specified essential characteristics of a controlling financial interest. AcG-15 provides specific guidance for determining when an entity is a VIE and who, if anyone, should consolidate the VIE. We have determined the joint venture in which we have an investment qualifies as a VIE.

Effective January 1, 2005, we adopted the new Canadian Accounting Standard EIC-150, “Determining Whether an Arrangement Contains a Lease.” EIC-150 addresses a situation where an entity enters into an arrangement, comprising a transaction that does not take the legal form of a lease but conveys a right to use a tangible asset in return for a payment or series of payments. We have determined that we have not currently committed to any arrangements to which this standard would apply.

On April 1, 2005, we adopted the amended Canadian Accounting Standard EIC-144, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” EIC-144 requires companies to recognize the benefit of non-discretionary rebates for achieving specified cumulative purchasing levels as a reduction of the cost of purchases over the relevant period, provided the rebate is probable and reasonably estimable. Otherwise, the rebates would be recognized as purchasing milestones are achieved. The implementation of this new standard did not have a material impact on our consolidated financial statements.

The following recent Canadian accounting pronouncements have not yet been adopted:

In January 2005, the CICA issued Handbook Section 3855, “Financial Instruments – Recognition and Measurement”, Handbook Section 1530, “Comprehensive Income”, and Handbook Section 3865, “Hedges”. The new standards will be effective for interim and annual financial statements commencing in 2007. Earlier adoption is permitted. The new standards will require presentation of a separate statement of comprehensive income under specific circumstances. Foreign exchange gains and losses on the translation of the financial statements of self-sustaining subsidiaries previously recorded in a separate section of shareholder’s equity will be presented in comprehensive income. Derivative financial instruments will be recorded in the balance sheet at fair value and the changes in fair value of derivatives designated as cash flow hedges will be reported in comprehensive income. We are currently assessing the impact of the new standards.

We do not expect the adoption of this standard to have a material impact on our results of operations or financial position.

We rely on a small number of customers from whom we receive a significant amount of our revenues.

We provide our services primarily to a small number of major integrated and independent oil and gas and other natural resources companies operating in western Canada. Revenue from our five largest customers represented approximately 76% of our total revenue for the three months ended June 30, 2005 and those customers are expected to continue to provide a significant percentage of our revenues in the future. Each period any one of our customers may constitute a significant portion of our revenue. For example, for the three months ended June 30, 2005, revenue generated from work for Canadian Natural Resources Ltd. (“CNRL”) constituted approximately 34% of our total revenue due to several large projects with CNRL including the 10-year overburden removal contract and a large site grading contract. We may not be able to replace the work generated by these projects with work from other customers. Our services to our customers are typically provided under contracts with terms ranging from six months to ten years, some of which have terms allowing for automatic or optional renewals of the contract. However, a significant number of our contracts terminate upon completion of the project without having a definite termination date, and the contracts typically allow the customer to reduce or eliminate the work which we are to perform. In addition, the customers may choose not to extend the existing contracts or enter into new contracts. The loss of or significant reduction in business with one or more of these customers could have a material adverse effect on our business.

Lump sum and unit-price contracts with our customers expose us to losses when our estimates of project costs are too low or when we fail to perform within our cost estimates.

Our recent operating results have been adversely affected by losses we have incurred on lump sum and unit-price contracts. The terms of these contracts require us to guarantee the price of the services we provide and assume the risk that our costs to perform the services and provide the materials will be greater than anticipated. Our profitability under such contracts is therefore dependent upon our ability to accurately predict the costs associated with our services. Cost estimating is therefore a critical function that has a major impact on our success or failure. Estimates must be adequately prepared and reviewed because inaccurately prepared bids can result in unsuccessful bids for contracts or losses on contracts actually received.

Not only is our ability to estimate costs important, the costs we actually incur may be affected by a variety of factors, some of which may be beyond our control. Factors that contribute to differences in the costs we actually incur as compared to our estimates and which therefore affect profitability include, without limitation, site conditions which differ from those assumed in the original bid, the availability and skill level of workers in the geographic location of the project, inclement weather, equipment productivity and timing differences that result from actual project starting time as compared to projected starting time and the general coordination of work inherent in all substantial projects we undertake. When we are unable to accurately estimate the costs of lump sum and unit-price contracts, or when we incur unrecoverable cost overruns, some projects will have lower margins than anticipated or incur losses, which adversely impact our results of operations, financial condition and cash flow.

Approximately 63% and 37% of our revenue for the three months ended June 30, 2005 and June 30, 2004, respectively, was derived from lump sum and unit-price contracts. Going forward, the percentage of our revenue derived from lump sum and unit-price contracts is expected to increase as several of our long-term contracts, including the 10-year overburden removal contract for CNRL, are unit-price and/or lump sum contracts. Given the magnitude of the projected revenues from these contracts as compared to the revenues expected to be earned from other contracts, if we underestimated the costs to perform these contracts, or if we were to incur unrecoverable cost overruns on these projects, it is likely that we would be unable to service our debt obligations.

Until we establish and maintain effective internal controls and procedures for financial reporting, we cannot assure you that we will have appropriate procedures in place to eliminate future financial reporting inaccuracies and avoid delays in financial reporting.

We had to restate our financial statements for the first and second quarters of fiscal 2005, primarily due to certain inaccurate expense accruals. During the preparation of our financial statements for the third quarter of fiscal 2005, we discovered a number of invoices recorded in the third quarter which were related to costs actually incurred in the first and second quarters of fiscal 2005. A review of our accounting and control procedures identified a number of deficiencies in our financial reporting processes and internal controls that contributed to several misstated amounts as discussed earlier in this document. We are endeavoring to address these deficiencies. Our auditors have advised us that unless we have appropriate procedures and controls in place with respect to accounting for our contracts and with respect to our purchases and accounts payable, we will not be able to report our results on a timely basis.

We have also had to subsequently restate our financial statements for each period after November 26, 2003 to eliminate the impact of hedge accounting. This was accomplished by recognizing the foreign exchange gain or loss relating to the senior notes each period and recording the derivative financial instruments at fair value and the realized and unrealized gains and losses in the derivative instruments for each period through the Consolidated Statement of Operations, along with the associated future income tax effects.

The financial statements for the first quarter of fiscal 2006 were also required to be restated to correct the accounting for various aspects of the refinancing transactions which occurred on May 19, 2005, including: recording additional liabilities and interest expense surrounding the valuation of the Series B preferred shares issued, discounting the liability associated with the Series A preferred shares issued, and deferring and amortizing most of the transaction costs associated with the new debt issued rather than expensing them in the current period.

While we have evaluated our accounting and control procedures surrounding the causes for the misstatements, we may be unable to implement the changes required to provide accurate and timely operating and financial reports. Failure to do so would cause us to breach the reporting requirements under our revolving credit facility and the indentures governing our 8³/4% senior notes due 2011 and 9% senior secured notes due 2010, as well as have a material adverse effect on our business, financial condition and results of operations. Until we establish and maintain effective internal controls and procedures for financial reporting, we may not have appropriate procedures in place to eliminate financial statement inaccuracies and avoid delays in financial reporting in the future.

If our access to the surety market were to be restricted in the future, or if our demand for surety bonds were to increase significantly, our business could be impaired.

Like all businesses providing similar services, we are at times required to post bid or performance bonds issued by a financial institution known as a surety. The surety industry experiences periods of unsettled and volatile markets, usually in the aftermath of substantial loss exposures or corporate bankruptcies with significant surety exposure. Historically, these types of events have caused reinsurers and sureties to reevaluate their committed levels of underwriting and required returns. As needed in the ordinary course of business, we have been able to secure necessary bonds and we will seek opportunities to expand our surety relationships. However, if for any reason, whether because of our financial condition, our level of secured debt or general conditions in the bond market, our bonding capacity becomes insufficient to satisfy our future bonding requirements, our business could be impaired.

We are dependent upon continued outsourcing by our customers of mining and site preparation services.

Outsourced mining and site preparation services constitute a large portion of the work we perform for our customers. For example, our mining project revenues constituted approximately 26% of our revenues in the three months ended June 30, 2005. The election by one or more of our customers to perform some or all of these services themselves, rather than outsourcing the work to us, could have a material adverse impact on our business.

Changes in oil and gas prices could cause our customers to slow down or curtail their current production and future expansions which would in turn reduce our revenue from those customers.

The profitability and growth of our customers may be impacted by the prices of oil and gas. Prices for oil are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil, market uncertainty and a variety of additional factors beyond our control. Such factors include weather conditions, the condition of the Canadian and U.S. economies, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political stability in the Middle East, increasing foreign demand for oil and gas, war or the threat of war in oil producing regions, the foreign supply of oil and the availability of fuel from alternate sources. In addition, our customers make their major expansion investment decisions based on their long-term outlook for the prices of oil and gas and their profitability based on those prices. If they believe the prices of those commodities will remain at

depressed levels or that their profitability will be adversely affected by fluctuations in currency exchange rates, they may delay or curtail their current expansion plans. Such a delay or curtailment could have a material adverse impact on our financial condition and results of operations.

Our operations are subject to weather-related factors that may cause delays in our completion of projects.

Because our operations are located in western Canada and northern Ontario, we are often subject to extreme weather conditions. While our operations are not significantly affected by normal seasonal weather patterns, extreme weather, including heavy rain and snow, can cause us to delay the completion of a project, which could result in lower margins than estimated.

Insufficient pipeline and refining capacity for heavy crude products could cause our customers to slow down or curtail their current production and future expansions which would, in turn, reduce our revenue from those customers.

While current pipeline capacity is sufficient to transport existing oil sands production to market, future production growth will require increased pipeline capacity. If such increases do not materialize, our customers may be unable to efficiently deliver increased production to market. Additionally, we expect that increases in oil sands production will require added heavy crude oil refinery capacity. Similarly, if such increased capacity or alternative markets do not materialize future growth in demand for our customers’ products could be reduced.

Because most of our customers are located or operate in western Canada, a downturn in the energy industry in western Canada could result in a decrease in the demand for our services by our customers.

Most of our customers are located or operate in western Canada. In the three months ended June 30, 2005, we generated approximately 73% of our operating revenues from the Alberta oil sands. A downturn in the energy industry in western Canada could cause our customers to slow down or curtail their current production and future expansions which would, in turn, reduce our revenue from those customers. Such a delay or curtailment could have a material adverse impact on our financial condition and results of operations.

Shortages of skilled labor, work stoppages or other labor disruptions at our operations or those of our principal customers or service providers could have an adverse effect on our profitability and financial condition.

Our ability to provide high-quality services on a timely basis requires an adequate number of skilled workers such as engineers, trades people and equipment operators. We cannot assure you that we will be able to maintain an adequate skilled labor force or that our labor expenses will not increase. A shortage of skilled labor would require us to curtail our planned internal growth or may require us to use less skilled labor which could adversely affect our ability to perform work.

Substantially all of our hourly employees are subject to collective bargaining agreements to which we are a party or are otherwise subject because of a bargaining relationship with the particular trade union that is a party to the collective bargaining agreement. Any work stoppage resulting from a strike or lockout could have a material adverse effect on our financial condition and results of operations.

In the province of Alberta, collective bargaining in the construction industry is conducted by sector, by registered groups consisting of an employers’ organization, on behalf of the employers, and a defined group of trade unions, on behalf of the unions in that sector. An employers’ organization which has been registered by the Labour Relations Board bargains with the trade unions named in the certificate on behalf of all employers who work in that part of the construction industry described in the certificate with whom the unions have a bargaining relationship. Any collective agreement entered into by the employers’ organization is binding on all such employers. We do not have control over the terms of such agreements but will be bound by these because of the provisions of the Labour Relations Code and the registrations.

In addition, our customers employ workers under other collective bargaining agreements. Any work stoppage or labor disruption at our key customers could significantly reduce the amount of services that we provide.

Our ability to grow our operations in the future is, in part, dependent on our ability to secure tires for our equipment.

Currently, global demand for tires is exceeding the available supply. While we have been able to secure the necessary tires to date to keep our equipment running, there is no guarantee that this will be the case in the future.

Because approximately 80% of the major projects that we pursue are awarded to us based on bid proposals, competitors with lower overhead cost structures may underbid us, subsequently impeding our growth.

Approximately 80% of the major projects that we pursue are awarded to us based on bid proposals. We may compete in the future for these projects against companies that may have substantially greater financial and other resources than we do. Some smaller competitors may have lower overhead cost structures and may be able to provide their services at lower rates than we can. Further, public sector work is often performed by governmental agencies. Our growth may be impacted to the extent that we are unable to successfully bid against these companies.

Cost overruns by our customers on their projects may cause our customers to terminate future projects or expansions which could adversely affect the amount of work we receive from those customers.

Oil sands development projects require substantial capital expenditures. In the past, several of our customers’ projects have experienced significant cost overruns, impacting their returns. As new projects are contemplated or built, if cost overruns continue to challenge our customers, they could reassess future projects and expansions which could adversely affect the amount of work we receive from our customers, causing an adverse effect on our financial condition.

A significant amount of our revenues are generated by providing non-recurring services.

Approximately 73% of our revenue for the three months ended June 30, 2005 was derived from projects which we consider to be non-recurring. This revenue primarily relates to site preparation and piling services provided for the construction of extraction, upgrading and other oil sands mining infrastructure projects. Future revenues from these types of services will depend upon customers expanding existing mines and developing new projects.

Penalty clauses in our customer contracts could expose us to losses if total project costs exceed original estimates or if projects are not completed by specified completion date milestones.

A portion of our revenue is derived from contracts which have performance incentives and penalties depending on the total cost of a project as compared to the original estimate. We could incur significant penalties based on cost overruns. In addition, the total project cost as defined in the contract may include not only our work, but also work performed by other contractors. As a result, we could incur penalties due to work performed by others over which we have no control. We may also incur penalties if projects are not completed by specified completion date milestones. Such penalties, if incurred, could have a significant impact on our profitability under these contracts.

Demand for our services may be adversely impacted by regulations affecting the energy industry.

Our principal customers are energy companies involved in the development of the Alberta oil sands and natural gas production. The operations of these companies, including the mining operations in the oil sands, are subject to or impacted by a wide array of regulations in the jurisdictions where they operate, including those directly impacting mining activities and those indirectly affecting their businesses, such as applicable environmental laws. As a result of changes in regulations and laws relating to the energy production industry including the operation of mines, our customers’ operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with applicable regulations may induce customers to discontinue or limit their operations, and may discourage companies from continuing development activities. As a result, demand for our services could be substantially affected by regulations adversely impacting the energy industry.

Environmental laws and regulations may expose us to liability arising out of our operations or the operations of our customers in and around sensitive environmental areas.

Our operations are subject to numerous environmental protection laws and regulations that are complex and stringent. Contracts with our customers require us to operate in compliance with these laws and regulations. We regularly perform work in and around sensitive environmental areas such as rivers, lakes and forests. Significant fines and penalties may be imposed on us or our customers for non-compliance with environmental laws and regulations, and our contracts generally require us to indemnify our customers for environmental claims suffered by them as a result of our actions. In addition, some environmental laws provide for joint and several strict liability for remediation of releases of hazardous substances, rendering a person liable for environmental damage, without regard to negligence or fault on the part of such person. In addition to potential liabilities that may be incurred in satisfying these requirements, we may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. These laws and regulations may expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts which were in compliance with all applicable laws at the time these acts were performed.

We own, or lease, and operate several properties that have been used for a number of years for the storage and maintenance of equipment and other industrial uses upon which fuel may have been spilled, or hydrocarbons or other wastes which may have been disposed of or released. Any release of substances by us or by third parties who previously operated on these properties may be subject to laws which impose joint and several liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of hazardous substances into the environment. Under such laws, we could be required to remove or remediate previously disposed wastes and clean up contaminated property.

Our projects expose us to potential professional liability, product liability, warranty or other claims.

We install deep foundations in congested areas and provide construction management services for significant projects. Notwithstanding the fact that we will generally not accept liability for consequential damages in our contracts, any catastrophic occurrence in excess of insurance limits at projects where our structures are installed or services are performed could result in significant professional liability, product liability, warranty or other claims against us. Such liabilities could potentially exceed our current insurance coverage and the fees we derive from those services. A partially or completely uninsured claim, if successful and of a significant magnitude, could result in substantial losses.

We may not be able to achieve the expected benefits from any future acquisitions, which would adversely affect our financial condition and results of operations.

We intend to pursue selective acquisitions as a method of expanding our business. If we do not successfully integrate acquisitions, we may not realize anticipated operating advantages and cost savings. The integration of companies that have previously operated separately involves a number of risks, including:

We may not be able to maintain the levels of operating efficiency that acquired companies will have achieved or might achieve separately. Successful integration of each of their operations will depend upon our ability to manage those operations and to eliminate redundant and excess costs. Because of difficulties in combining operations, we may not be able to achieve the cost savings and other size-related benefits that we hoped to achieve after these acquisitions which would harm our financial condition and results of operations.

Aboriginal peoples may make claims against our customers or their projects regarding the lands on which their projects are located.

Aboriginal peoples have claimed aboriginal title and rights to a substantial portion of western Canada. Any claims that may be asserted against our customers, if successful, could have an adverse effect on our customers which may, in turn, negatively impact our business.

We are subject to currency exchange risk as the 8³/4% senior notes and 9% senior secured notes are denominated in U.S. dollars and all of our revenues and most of our expenses are denominated in Canadian dollars. As noted above, we have entered into cross-currency swap and interest rate swap agreements to manage the risk foreign currency risk on the 8³/4% senior notes. The hedging instrument consists of three components: a U.S. dollar interest rate swap: a U.S. dollar-Canadian dollar cross-currency basis swap; and a Canadian dollar interest rate swap that results in us mitigating our exposure to the variability of cash flows caused by currency fluctuations relating to the U.S. $200 million senior notes. The transaction can be cancelled at the counterparty’s option at any time after December 1, 2007 if the counterparty pays a cancellation premium. The premium is equal to 4.375 percent of the U.S. $200 million if exercised between December 1, 2007 and December 1, 2008; 2.1875 percent if exercised between December 1, 2008 and December 1, 2009; and 0.000 percent if cancelled after December 1, 2009. We have not hedged the foreign currency risk on the 9% senior secured notes. Each $0.01 increase or decrease in the U.S. dollar-Canadian dollar exchange rate would change the interest cost on these notes by $0.05 million per year.

We are subject to interest rate risk in connection with our revolving credit facility. The facility bears interest at variable rates based on the Canadian prime rate plus 2 percent or Canadian bankers’ acceptance rate plus 3 percent. Assuming the revolving credit facility is fully drawn at $40 million, excluding the $20 million of outstanding letters of credit at June 30, 2005, each 1.0 percent increase or decrease in the applicable interest rate would change the interest cost by $0.2 million per year. In the future, we may enter into interest rate swaps involving the exchange of floating for fixed rate interest payments, to reduce interest rate volatility.

The rate of inflation has not had a material impact on our operations as many of our contracts contain a provision for annual escalation. If inflation remains at its recent levels, it is not expected to have a material impact on our operations in the foreseeable future.

We have developed a strong business foundation through our relationships with the key organizations in the Fort McMurray oil sands area of Alberta (including Syncrude, CNRL, Suncor, and Opti/Nexen) coupled with long-term mining work at CNRL and Grande Cache Coal. Our ability to build on this solid foundation continues to be enhanced as world economic growth underpins high prices in the resource (particularly coal) and oil and gas industries.

Activity in the Fort McMurray area is very high and given the number of projects that have been publicly announced to commence over the next two years, we expect that activity to increase.

Over the last three months, we have completed refinancing of our debt and injected some equity, the management team has been restructured and a number of initiatives that have strengthened the financial and operating controls have been implemented. These initiatives, coupled with the acquisition of new equipment ideally suited to heavy earth moving in the oil sands area, have strengthened our ability to bid competitively and profitably into the expanding market.

With respect to the Mining and Site Preparation operating segment, we are actively pursuing a strategy of retaining our number one position as an outsource provider of services in the Fort McMurray oil sands area while concurrently reducing risk by bidding into opportunities in other Canadian provinces. At the same time, the Piling operating segment remains a strong business and with the level of construction in the western provinces alone, it is considered likely that the work load will remain high in the foreseeable future. Similarly, while the Pipeline operating segment had reduced activity last year and a low level of activity in the first quarter, the high number of announced projects in this business area also augers well for considerable work in the winter months over the next few years.

The interim consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain material respects from U.S. GAAP. The nature and effect of these differences are set out in note 19 of the interim consolidated financial statements for the three months ended June 30, 2005.


	June 30, 2005			March 31, 2005
	(unaudited) *Restated* *(note 3)*
Assets

Current assets:
Cash and cash equivalents	$	13,612		$	17,922
Accounts receivable (note 11(a))		54,349			57,745
Unbilled revenue		48,151			41,411
Inventory		108			134
Prepaid expenses		2,819			1,862
Future income taxes		9,200			15,100

		128,239			134,174

Property, plant and equipment (note 4)		178,114			177,089
Goodwill		198,549			198,549
Intangible assets, net of accumulated amortization of $16,479 (March 31, 2005 - $16,296) (note 5)		1,319			1,502
Deferred financing costs, net of accumulated amortization of $3,249 (March 31, 2005 - $3,368) (note 6)		20,289			15,354

	$	526,510		$	526,668

Liabilities and Shareholder’s Equity

Current liabilities:
Accounts payable	$	55,457		$	59,090
Accrued liabilities (note 11(b))		7,959			15,201
Billings in excess of costs on uncompleted contracts		478			1,325
Current portion of capital lease obligations (note 8)		1,999			1,771
Future income taxes		9,200			15,100

		75,093			92,487

Senior secured credit facility (note 7(a))		—			61,257
Capital lease obligations (note 8)		5,773			5,454
Senior notes (note 7(b))		319,193			241,920
Derivative financial instruments (note 14(c))		52,310			51,723
Mandatorily redeemable preferred shares (note 10(a))		49,328			—
Advances from parent company (note 9)		288			288

Shareholder’s equity:
Common shares (note 10(b))		127,500			127,500
Contributed surplus (note 17)		822			634
Deficit		(103,797	)		(54,595	)

		24,525			73,539
Commitments (note 15)
United States generally accepted accounting principles (Restated) (note 19)

	$	526,510		$	526,668


	For the three months ended
	June 30, 2005			June 30, 2004
	*Restated* *(note 3)*
Revenue	$	104,359		$	70,860

Project costs		66,546			46,038
Equipment costs		17,014			11,483
Operating lease expense		2,898			719
Depreciation		4,989			4,519

		91,447			62,759

Gross profit		12,912			8,101
General and administrative		7,248			5,040
Loss (gain) on disposal of property, plant and equipment		272			(6	)
Amortization of intangible assets		183			1,430

Operating income		5,209			1,637

Interest expense (note 11(c))		49,863			7,331
Foreign exchange loss		1,221			4,654
Other income		(200	)		(146	)
Financing costs (notes 3 and 6)		2,095			—
Realized and unrealized loss (gain) on derivative financial instruments		1,282			(2,531	)

		54,261			9,308

Loss before income taxes		(49,052	)		(7,671	)
Income taxes:
Current income taxes		150			813
Future income taxes		—			(3,400	)

		150			(2,587	)

Net loss		(49,202	)		(5,084	)
Deficit, beginning of period		(54,595	)		(12,282	)

Deficit, end of period	$	(103,797	)	$	(17,366	)


	For the three months ended
	June 30, 2005			June 30, 2004
	*Restated* *(note 3)*
Cash provided by (used in):

Operating activities:
Net loss for the period	$	(49,202	)	$	(5,084	)
Items not affecting cash:
Depreciation		4,989			4,519
Amortization of intangible assets		183			1,430
Amortization of deferred financing costs (note 6)		672			625
Financing costs (notes 3 and 6)		2,095			—
Loss (gain) on disposal of property, plant and equipment		272			(6	)
Decrease in allowance for doubtful accounts		(67	)		(133	)
Unrealized foreign exchange loss on senior notes		928			4,500
Unrealized loss (gain) on derivative financial instruments		587			(3,186	)
Stock-based compensation expense (note 17)		188			112
Change in redemption value and accretion of mandatorily redeemable preferred shares		41,507			—
Future income taxes		—			(3,400	)
Net changes in non-cash working capital (note 11(e))		(18,280	)		(3,414	)

		(16,128	)		(4,037	)

Investing activities:
Purchase of property, plant and equipment		(5,693	)		(11,369	)
Net changes in non-cash working capital (note 11(e))		2,350			—
Proceeds on disposal of property, plant and equipment		388			104

		(2,955	)		(11,265	)

Financing activities:
Repayment of senior secured credit facility		(61,257	)		(1,500	)
Repayment of capital lease obligations		(434	)		(274	)
Issuance of 9% senior secured notes		76,345			—
Issuance of mandatorily redeemable preferred shares		7,500			—
Financing costs (note 6)		(7,381	)		(180	)

		14,773			(1,954	)

Decrease in cash and cash equivalents		(4,310	)		(17,256	)
Cash and cash equivalents, beginning of period		17,922			36,595

Cash and cash equivalents, end of period	$	13,612		$	19,339


	% owned
• North American Caisson Ltd.	100	%
• North American Construction Ltd.	100	%
• North American Engineering Ltd.	100	%
• North American Enterprises Ltd.	100	%
• North American Industries Inc.	100	%
• North American Mining Inc.	100	%
• North American Maintenance Ltd.	100	%
• North American Pipeline Inc.	100	%
• North American Road Inc.	100	%
• North American Services Inc.	100	%
• North American Site Development Ltd.	100	%
• North American Site Services Inc.	100	%
• Griffiths Pile Driving Inc.	100	%


Asset	Basis	Rate
Heavy equipment	Straight-line	Operating hours
Major component parts in use	Straight-line	Operating hours
Spare component parts	N/A	N/A
Other equipment	Straight-line	10-20%
Licensed motor vehicles	Declining balance	30%
Office and computer equipment	Straight-line	25%
Assets under construction	N/A	N/A


				Restatement adjustments
For the three months ended June 30, 2005	As previously reported			Hedge accounting			Series A preferred shares			Series B preferred shares			Financing costs			As restated
Interest expense	$	9,093		$	(695	)	$	9		$	41,367		$	89		$	49,863
Foreign exchange (gain) loss		(1,939	)		3,160			—			—			—			1,221
Financing costs		8,084			—			(679	)		—			(5,310	)		2,095
Realized and unrealized loss on derivative financial instruments		—			1,282			—			—			—			1,282
Loss before income taxes		(9,829	)		(3,747	)		670			(41,367	)		5,221			(49,052	)
Net loss	$	(9,979	)	$	(3,747	)	$	670		$	(41,367	)	$	5,221		$	(49,202	)


				Restatement adjustments
As at June 30, 2005	As previously reported			Hedge accounting			Series A preferred shares			Series B preferred shares			Financing costs		As restated
Deferred financing costs	$	15,068		$	—		$	—		$	—		$	5,221	$	20,289
Derivative financial instruments		17,920			34,390			—			—			—		52,310
Mandatorily redeemable preferred shares		8,631			—			(670	)		41,367			—		49,328
Deficit	$	(33,931	)	$	(34,390	)	$	670		$	(41,367	)	$	5,221	$	(103,797	)


June 30, 2005	Cost		Accumulated depreciation		Net book value
Heavy equipment	$	166,547	$	20,740	$	145,807
Major component parts in use		4,549		1,415		3,134
Spare component parts		1,068		—		1,068
Other equipment		12,550		2,925		9,625
Licensed motor vehicles		16,717		5,499		11,218
Office and computer equipment		2,533		1,299		1,234
Assets under construction		6,028		—		6,028

	$	209,992	$	31,878	$	178,114


March 31, 2005	Cost		Accumulated depreciation		Net book value
Heavy equipment	$	165,296	$	17,966	$	147,330
Major component parts in use		4,659		1,182		3,477
Spare component parts		841		—		841
Other equipment		12,088		2,473		9,615
Licensed motor vehicles		16,043		4,670		11,373
Office and computer equipment		2,088		791		1,297
Assets under construction		3,156		—		3,156

	$	204,171	$	27,082	$	177,089


Identifiable intangible assets	Cost		Accumulated amortization		Net book value
Customer contracts in progress and related relationships	$	15,323	$	15,323	$	—
Trade names		350		55		295
Non-competition agreement		100		32		68
Employee arrangements		2,025		1,069		956

Balance, June 30, 2005	$	17,798	$	16,479	$	1,319


	June 30, 2005		March 31, 2005
Revolving credit facility	$	—	$	20,007
Term credit facility		—		41,250

	$	—	$	61,257


	June 30, 2005		March 31, 2005
8³/4% senior notes due 2011	$	245,080	$	241,920
9% senior secured notes due 2010		74,113		—

	$	319,193	$	241,920


For the year ending June 30,
2006	$	2,277
2007		2,443
2008		2,092
2009		1,513
2010		201

		8,526
Less: amount representing interest – average rate of 4.88%		754

Present value of minimum capital lease payments		7,772
Less: current portion		1,999

	$	5,773


	Number of Shares	Amount
		*Restated* *(note 3)*
*Series A Preferred Shares*
Outstanding at March 31, 2005	—	$	—
Issued	1,000		321
Accretion	—		9

Outstanding at June 30, 2005	1,000	$	330

*Series B Preferred Shares*
Outstanding at March 31, 2005	—	$	—
Issued	75,000		7,500
Change in redemption amount	—		41,498

Outstanding at June 30, 2005	75,000	$	48,998

*Total Mandatorily Redeemable Preferred Shares*		$	49,328


	Number of Shares	Amount
Outstanding at March 31, 2005	100	$	127,500

Issued	—		—
Redeemed	—		—

Outstanding at June 30, 2005	100	$	127,500


	June 30, 2005			March 31, 2005
Accounts receivable – trade	$	38,105		$	45,379
Accounts receivable – holdbacks		16,285			12,476
Accounts receivable – other		56			54
Allowance for doubtful accounts		(97	)		(164	)

	$	54,349		$	57,745


	June 30, 2005		March 31, 2005
Customer A	10.2	%	8.6	%
Customer B	42.3	%	32.8	%
Customer C	1.8	%	11.0	%


	June 30, 2005		March 31, 2005
Accrued interest payable	$	2,970	$	9,127
Payroll liabilities		3,025		2,283
Income and other taxes		44		1,679
Liabilities related to equipment leases		1,920		2,112

	$	7,959	$	15,201


For the three months ended June 30,	2005		2004
	*Restated* *(note 3)*
Interest on senior notes	$	6,535	$	5,698
Interest on senior secured credit facility		564		692
Interest on capital lease obligations		89		39
Accretion of Series A mandatorily redeemable preferred shares		9		—
Change in redemption value of Series B mandatorily redeemable preferred shares		41,498

Interest on long-term debt		48,695		6,429
Amortization of deferred financing costs		672		625
Other interest		496		277

	$	49,863	$	7,331


	June 30, 2005		March 31, 2005
Assets
Accounts receivable	$	15,298	$	11,749
Unbilled revenue		27,483		20,932

	$	42,781	$	32,681

Liabilities
Accounts payable	$	7,166	$	5,065
Accrued liabilities		309		2,050
Venturer’s equity		35,306		25,566

	$	42,781	$	32,681


For the three months ended June 30, 2005	Mining and Site Preparation		Piling		Pipeline		Total
Revenues from external customers	$	82,637	$	20,030	$	1,692	$	104,359
Depreciation of property, plant and equipment		2,347		432		87		2,866
Segment profits		11,689		2,838		309		14,836
Segment assets		321,492		83,293		39,606		444,391
Expenditures for segment property, plant and equipment		3,115		192		—		3,307


	Carrying amount			Fair value
	*Restated* *(note 3)*
Cross-currency and interest rate swaps	$	(52,310	)	$	(52,310	)


For the year ending June 30,
2006	$	11,015
2007		11,835
2008		7,614
2009		813
2010		307

	$	31,584


	Number of options		Weighted average exercise price $ per share
Outstanding at March 31, 2005	76,242		$	100.00
Granted	—			—
Exercised	—			—
Forfeited	(2,000	)		100.00

Outstanding at June 30, 2005	74,242		$	100.00


	Number of options		Weighted average exercise price $ per share
Outstanding at March 31, 2004	54,130		$	100.00
Granted	24,112			100.00
Exercised	—			—
Forfeited	(2,000	)		100.00

Outstanding at March 31, 2005	76,242		$	100.00


	Options outstanding
Exercise price	Number outstanding	Weighted average remaining contractual life (years)		Weighted average exercise price
$100	74,242	8.6	%	$	100.00


Three months ended June 30,	2005			2004
Net loss based on Canadian GAAP	$	(49,202	)	$	(5,084	)
Capitalized interest		107			—
Amortization using effective interest method		43			—

Net loss based on U.S. GAAP	$	(49,052	)	$	(5,084	)


	June 30, 2005		March 31, 2005
Shareholder’s equity based on Canadian GAAP	$	24,525	$	73,539
Capitalized interest		107		—
Amortization using effective interest method		43		—

Shareholder’s equity based on U.S. GAAP	$	24,675	$	73,539


	Three months ended June 30
(in millions of Canadian dollars)	2005					2004
	*(Restated)¹*
Revenue	$	104.4		*100.0*	%	$	70.9		100.0	%

Project costs		66.6		*63.8*	%		46.0		64.9	%
Equipment costs		17.0		*16.3*	%		11.5		16.2	%
Operating lease expense		2.9		*2.8*	%		0.7		1.0	%
Depreciation		5.0		*4.8*	%		4.5		6.3	%

Gross profit		12.9		*12.4*	%		8.2		11.6	%
General and administrative		7.2		*6.9*	%		5.0		7.1	%
Loss on disposal of property, plant and equipment		0.3		*0.3*	%		—		0.0	%
Amortization of intangible assets		0.2		*0.2*	%		1.4		2.0	%

Operating income		5.2		*5.0*	%		1.8		2.5	%
Interest expense		49.9		*47.8*	%		7.3		10.3	%
Foreign exchange loss		1.2		*1.1*	%		4.7		6.6	%
Other income		(0.2	)	*-0.2*	%		(0.1	)	-0.1	%
Financing costs		2.1		*2.0*	%		—		0.0	%
Realized and unrealized loss (gain) on derivative financial instruments		1.3		*1.2*	%		(2.5	)	-3.5	%

Loss before income taxes	$	(49.1	)	*-47.0*	%	$	(7.6	)	-10.7	%


																						*Predecessor* *Company*
(in millions of Canadian dollars, except equipment hours)	Fiscal Year 2006			Fiscal Year 2005												Fiscal Year 2004
	Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2
	*(Restated¹*
Revenue	$	104.4		$	122.8		$	81.0		$	82.7		$	70.9		$	102.4		$	79.9		$	102.3
Gross profit		12.9			24.0			(5.6	)		9.8			8.1			19.8			6.5			16.8
Net loss		(49.2	)		(0.1	)		(32.4	)		(4.7	)		(5.1	)		(2.6	)		(20.2	)		(0.5	)

Equipment hours		202,327			241,727			191,555			193,205			137,434			188,557			128,153			200,499


	Three months ended June 30
(in millions of Canadian dollars, except equipment hours)	2005				2004
Revenue by operating segment
Mining and Site Preparation	$	82.7	*79.2*	%	$	46.8	66.0	%
Piling		20.0	*19.2*	%		13.3	18.8	%
Pipeline		1.7	*1.6*	%		10.8	15.2	%

Total	$	104.4	*100.0*	%	$	70.9	100.0	%

Profit by operating segment
Mining and Site Preparation	$	11.7	*79.1*	%	$	3.5	43.2	%
Piling		2.8	*18.9*	%		3.0	37.0	%
Pipeline		0.3	*2.0*	%		1.6	19.8	%

Total	$	14.8	*100.0*	%	$	8.1	100.0	%

Equipment hours by operating segment
Mining and Site Preparation		187,951	*92.9*	%		112,417	81.8	%
Piling		9,707	*4.8*	%		15,063	11.0	%
Pipeline		4,669	*2.3*	%		9,954	7.2	%

Total		202,327	*100.0*	%		137,434	100.0	%


	Payments Due by Period
(in millions of Canadian dollars)	Total		2006		2007		2008		2009		2010 and after
Long-term debt	$	319.2	$	—	$	—	$	—	$	—	$	319.2
Mandatorily redeemable preferred shares		50.0		—		—		—		—		50.0
Capital leases (including interest)		8.5		2.3		2.4		2.1		1.5		0.2
Operating leases		31.5		11.0		11.8		7.6		0.8		0.3

Total contractual obligations	$	409.2	$	13.3	$	14.2	$	9.7	$	2.3	$	369.7