Exhibit
99.2
 NORTH AMERICAN ENERGY PARTNERS INC.




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            2




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control
-Integrated Framework
    3




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##### 



§
    
    There was a lack of sufficient accounting and finance personnel with an appropriate
level of technical accounting knowledge and training to properly account for complex and
non-routine transactions and to properly perform review and approval controls within the
period-end financial reporting process;§
    
    A formal process to track claims and unapproved change orders and sufficient
monitoring controls over the completeness and accuracy of forecasts, including the
consideration of project changes subsequent to the end of each reporting period were not
effectively implemented; and§

   
    Controls were not effective in the procurement process to track purchase commitments,
reconcile vendor accounts and accurately accrue costs not invoiced by vendors at each
reporting date.
  Internal ControlIntegrated Framework




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    32,871
    
    
    $
    7,895Accounts receivable (note 5)
    
    
    166,002
    
    
    
    107,344Unbilled revenue (note 6)
    
    
    70,883
    
    
    
    68,709Inventory
    
    
    110
    
    
    
    156Prepaid expenses and deposits (note 7)
    
    
    9,300
    
    
    
    11,932Asset held for sale (note 8)
    
    
    
    
    
    
    8,268Other assets
    
    
    3,703
    
    
    
    10,164Future
income taxes (notes 3(q)(i) and 17)
    
    
    8,217
    
    
    
    14,593291,086
    
    
    
    229,061Future income taxes (note 17)
    
    
    18,199
    
    
    
    14,364Assets held for sale (note 8)
    
    
    1,074
    
    
    
    Plant and equipment (note 9)
    
    
    281,039
    
    
    
    255,963Goodwill
    
    
    200,072
    
    
    
    199,392Intangible assets, net of accumulated amortization of $2,105
(March 31, 2007  $17,608) (notes 3(q)(i) and 10)
    
    
    2,128
    
    
    
    600Deferred financing costs, net of accumulated amortization of $nil (March
31, 2007  $7,595) (notes 3(q)(i) and 11)
    
    
    
    
    
    
    11,356$
    793,598
    
    
    $
    710,736Liabilities and Shareholders EquityCurrent liabilities:Current portion of revolving credit facility (note 12)
    
    $
    
    
    
    $
    20,500Accounts payable
    
    
    113,143
    
    
    
    94,548Accrued liabilities (note 14)
    
    
    45,078
    
    
    
    23,393Billings in excess of costs incurred and estimated earnings on
uncompleted contracts (note 6)
    
    
    4,772
    
    
    
    2,999Current portion of capital lease obligations (note 15)
    
    
    4,733
    
    
    
    3,195Current
portion of derivative financial instruments (notes 20 and 25(b)(i))
    
    
    4,720
    
    
    
    2,669Future
income taxes (notes 3(q)(i) and 17)
    
    
    10,907
    
    
    
    4,154183,353
    
    
    
    151,458Deferred lease inducements (note 13)
    
    
    941
    
    
    
    Capital lease obligations (note 15)
    
    
    10,043
    
    
    
    6,514Senior notes
(notes 3(q)(i) and 16)
    
    
    198,245
    
    
    
    230,580Director
deferred stock unit liability (note 28)
    
    
    190
    
    
    
    Derivative
financial instruments (notes 3(q)(i) and 20 and 25(b)(i))
    
    
    93,019
    
    
    
    58,194Future
income taxes (notes 3(q)(i) and 17)
    
    
    24,443
    
    
    
    19,712510,234
    
    
    
    466,458Shareholders equity:Common shares (authorized 
unlimited number of voting and
non-voting common shares; issued
and outstanding  March 31, 2008
 35,929,476 voting common
shares (March 31, 2007 
35,192,260 voting common shares
and 412,400 non-voting common
shares)) (note 18(b))
    
    
    298,436
    
    
    
    296,198Contributed surplus (note 18(c))
    
    
    4,215
    
    
    
    3,606Deficit
    
    
    (19,287
    )
    
    
    (55,526
    )283,364
    
    
    
    244,278Guarantee (note 23)Commitments (note 26)Canadian and United States accounting policy differences (note 30)$
    793,598
    
    
    $
    710,736
   
 /s/
Ronald A. McIntosh
    

/s/
Allen R. SelloRonald
A. McIntosh, Director
    

Allen
R. Sello, Director
 5




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 2008
    
    2007
    
    2006Revenue
    
    $
    989,696
    
    
    $
    629,446
    
    
    $
    492,237Project costs
    
    
    592,458
    
    
    
    363,930
    
    
    
    308,949Equipment costs
    
    
    174,873
    
    
    
    122,306
    
    
    
    64,832Equipment operating lease expense
    
    
    22,319
    
    
    
    19,740
    
    
    
    16,405Depreciation
    
    
    36,729
    
    
    
    31,034
    
    
    
    21,725Gross profit
    
    
    163,317
    
    
    
    92,436
    
    
    
    80,326General and administrative costs (note 24)
    
    
    69,670
    
    
    
    39,769
    
    
    
    30,903Loss (gain) on disposal of plant and equipment
    
    
    179
    
    
    
    959
    
    
    
    (733
    )Amortization of intangible assets (note 10)
    
    
    1,071
    
    
    
    582
    
    
    
    730Operating income before the undernoted
    
    
    92,397
    
    
    
    51,126
    
    
    
    49,426Interest expense (note 19)
    
    
    27,019
    
    
    
    37,249
    
    
    
    68,776Foreign exchange gain
    
    
    (25,442
    )
    
    
    (5,044
    )
    
    
    (13,953
    )Realized and unrealized loss (gain) on derivative
financial instruments(note 20(a))
    
    
    34,075
    
    
    
    (196
    )
    
    
    14,689Gain on repurchase of NACG Preferred Corp. Series A
preferred shares(notes 2 and 18(a))
    
    
    
    
    
    
    (9,400
    )
    
    
    Loss on extinguishment of debt (notes 2 and 16)
    
    
    
    
    
    
    10,935
    
    
    
    2,095Other income
    
    
    (418
    )
    
    
    (904
    )
    
    
    (977
    )Income (loss) before income taxes
    
    
    57,163
    
    
    
    18,486
    
    
    
    (21,204
    )Income taxes (note 17):Current income taxes
    
    
    80
    
    
    
    (2,975
    )
    
    
    737Future income taxes
    
    
    17,299
    
    
    
    382
    
    
    
    Net income (loss) and comprehensive income (loss) for the
year
    
    
    39,784
    
    
    
    21,079
    
    
    
    (21,941
    )Deficit, beginning of year  as previously stated
    
    
    (55,526
    )
    
    
    (76,546
    )
    
    
    (54,605
    )Change in accounting policy related to financial
instruments (note 3(q)(i))
    
    
    (3,545
    )
    
    
    
    
    
    
    Premium on repurchase of common shares (note 18(b))
    
    
    
    
    
    
    (59
    )
    
    
    Deficit, end of year
    
    $
    (19,287
    )
    
    $
    (55,526
    )
    
    $
    (76,546
    )Net income (loss) per share  basic (note 18(d))
    
    $
    1.11
    
    
    $
    0.87
    
    
    $
    (1.18
    )Net income (loss) per share  diluted (note 18(d))
    
    $
    1.08
    
    
    $
    0.83
    
    
    $
    (1.18
    )
  6




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 2008
    
    2007
    
    2006Cash provided by (used in):Operating activities:Net income (loss) for the period
    
    $
    39,784
    
    
    $
    21,079
    
    
    $
    (21,941
    )Items not affecting cash:Depreciation
    
    
    36,729
    
    
    
    31,034
    
    
    
    21,725Write-down of other assets to replacement cost (note 3(g))
    
    
    1,845
    
    
    
    695
    
    
    
    Amortization of intangible assets
    
    
    1,071
    
    
    
    582
    
    
    
    730Amortization of deferred lease inducements
    
    
    (104
    )
    
    
    
    
    
    
    Amortization
of bond issue costs, premiums and financing costs (notes 3(q)(i) and 19)
    
    
    838
    
    
    
    3,436
    
    
    
    3,338Loss (gain) on disposal of plant and equipment
    
    
    179
    
    
    
    959
    
    
    
    (733
    )Unrealized foreign exchange gain on senior notes
    
    
    (24,788
    )
    
    
    (5,017
    )
    
    
    (14,258
    )Unrealized (gain) loss on derivative financial instruments
    
    
    31,406
    
    
    
    (2,748
    )
    
    
    11,888Stock-based compensation expense (note 28)
    
    
    1,991
    
    
    
    2,101
    
    
    
    923Gain on repurchase of NACG Preferred Corp. Series A
preferred shares (notes 2 and 18(a))
    
    
    
    
    
    
    (8,000
    )
    
    
    Loss on extinguishment of debt (notes 2 and 16)
    
    
    
    
    
    
    10,680
    
    
    
    2,095Change in redemption value and accretion of redeemable
preferred shares
    
    
    
    
    
    
    3,114
    
    
    
    34,722Future income taxes
    
    
    17,299
    
    
    
    382
    
    
    
    Net changes in non-cash working capital (note 21(b))
    
    
    (8,650
    )
    
    
    (56,167
    )
    
    
    (4,788
    )97,600
    
    
    
    2,130
    
    
    
    33,701Investing activities:Acquisition, net of cash acquired (note 4)
    
    
    (1,581
    )
    
    
    (1,517
    )
    
    
    Purchase of plant and equipment
    
    
    (57,779
    )
    
    
    (110,019
    )
    
    
    (28,852
    )Additions to assets held for sale
    
    
    (3,499
    )
    
    
    
    
    
    
    Proceeds on disposal of plant and equipment
    
    
    6,862
    
    
    
    3,564
    
    
    
    5,456Proceeds of disposal of assets held for sale
    
    
    10,200
    
    
    
    
    
    
    
    Net changes in non-cash working capital (note 21(b))
    
    
    (2,835
    )
    
    
    7,922
    
    
    
    1,391(48,632
    )
    
    
    (100,050
    )
    
    
    (22,005
    )Financing activities:(Decrease) increase in revolving credit facility
    
    
    (20,500
    )
    
    
    20,500
    
    
    
    Issue of 9% senior secured notes (note 16)
    
    
    
    
    
    
    
    
    
    
    76,345Repayment of 9% senior secured notes (note 16)
    
    
    
    
    
    
    (74,748
    )
    
    
    Repayment of senior secured credit facility
    
    
    
    
    
    
    
    
    
    
    (61,257
    )Issue of Series B preferred shares (note 18(a)(iii))
    
    
    
    
    
    
    
    
    
    
    8,376Repurchase of Series B preferred shares (notes 2 and 18(a)(iii))
    
    
    
    
    
    
    
    
    
    
    (851
    )Repurchase of NAEPI Series A preferred shares (notes 2 and 18(a)(ii))
    
    
    
    
    
    
    (1,000
    )
    
    
    Repurchase of NACG Preferred Corp. Series A preferred shares (notes 2 and 18(a)(ii))
    
    
    
    
    
    
    (27,000
    )
    
    
    Cash
settlement of stock options (note 18(c))
    
    
    (581
    )
    
    
    
    
    
    
    Financing costs (notes 10 and 11)
    
    
    (776
    )
    
    
    (1,346
    )
    
    
    (7,546
    )Repayment of capital lease obligations
    
    
    (3,762
    )
    
    
    (6,033
    )
    
    
    (2,183
    )Issue of common shares (note 2 and 18(b))
    
    
    1,627
    
    
    
    171,304
    
    
    
    300Share issue costs (notes 2 and 18(b))
    
    
    
    
    
    
    (18,582
    )
    
    
    Repurchase of common shares for cancellation (note 18(b))
    
    
    
    
    
    
    (84
    )
    
    
    (23,992
    )
    
    
    63,011
    
    
    
    13,184Increase (decrease) in cash and cash equivalents
    
    
    24,976
    
    
    
    (34,909
    )
    
    
    24,880Cash and cash equivalents, beginning of year
    
    
    7,895
    
    
    
    42,804
    
    
    
    17,924Cash and cash equivalents, end of year
    
    $
    32,871
    
    
    $
    7,895
    
    
    $
    42,804
  7




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 1.
    
    Nature of operationsNorth American Energy Partners Inc. (the Company), formerly NACG Holdings Inc.
(NACG), was incorporated under the Canada Business Corporations Act on October 17,
2003. On November 26, 2003, the Company purchased all the issued and outstanding
shares of North American Construction Group Inc. (NACGI), including subsidiaries of
NACGI, from Noramac Ltd. which had been operating continuously in Western Canada since
1953. The Company had no operations prior to November 26, 2003. The Company
undertakes several types of projects including heavy construction, industrial and
commercial site development, pipeline and piling installations in Canada.On November 28, 2006, immediately prior to the closing of the initial public offering
(IPO) of common shares in Canada and the United States (note 2), the Company
amalgamated with its wholly-owned subsidiaries, NACG Preferred Corp., and North
American Energy Partners Inc. (NAEPI). The amalgamated entity was continued as North
American Energy Partners Inc. The voting common shares of the new entity, North
American Energy Partners Inc., include the shares offered in the IPO and outstanding
common shares in North American Energy Partners Inc. that were not sold in the
concurrent secondary offering.2.
    
    Re-organization and initial public offeringOn November 28, 2006, prior to the amalgamation referred to in note 1, NACG acquired
the NACG Preferred Corp. Series A preferred shares with a carrying value of $35,000 in
exchange for a promissory note in the amount of $27,000 and the forfeiture of accrued
dividends of $1,400 (note 18(a)). The Company recorded a gain of $9,400 on the
repurchase of the NACG Preferred Corp. Series A preferred shares.On November 28, 2006, prior to the amalgamation referred to in note 1, NACG repurchased
the NAEPI Series A preferred shares for their redemption value of $1,000. NACG also
cancelled the consulting and advisory services agreement with The Sterling Group, L.P.,
Genstar Capital, L.P., Perry Strategic Capital Inc., and SF Holding Corp.
(collectively, the Sponsors), under which NACG had received ongoing consulting and
advisory services with respect to the organization of the companies, employee benefit
and compensation arrangements and other matters. The consideration paid for the
cancellation of the consulting and advisory services agreement on the closing of the
offering was $2,000, which was recorded as general and administrative expense in the
consolidated statement of operations. Under the consulting and advisory services
agreement, the Sponsors also received a fee of $854, which
approximates 0.5% of the aggregate gross
proceeds to NACG from the IPO, which was recorded as a share issue cost.On November 28, 2006, prior to the amalgamation referred to in note 1, each holder of
NAEPI Series B preferred shares received 100 common shares of NACG for each NAEPI
Series B preferred share held as a result of the Company exercising a call option to
acquire the NAEPI Series B preferred shares (note 18(a)). Upon exchange, the carrying
value of the NAEPI Series B preferred shares on the exercise date of $44,682 was
transferred to share capital.On November 28, 2006, the Company completed an IPO for the sale of 8,750,000 common
voting shares for total gross proceeds of $158,549. Net proceeds from the IPO, after
deducting underwriting fees and offering expenses, were $140,850. Subsequent to the
IPO, the underwriters exercised their overallotment option to purchase 687,500
additional voting common shares of the Company for gross proceeds of $12,616. Net
proceeds from the overallotment, after deducting underwriting fees and offering
expenses, were $11,733. Total net proceeds from the IPO and subsequent overallotment
were $152,583 (note 18(b)).
 8




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 The net proceeds from the IPO and subsequent overallotment were used to:
 
    
    repurchase all of the Companys outstanding 9% senior secured notes due 2010
for $74,748 plus accrued interest of $3,027. The notes were redeemed at a premium
of 109.26% resulting in a loss on extinguishment of $6,338. The loss on
extinguishment, along with the write-off of deferred financing fees of $4,342 and
other costs of $255, was recorded as a loss on extinguishment of debt in the
consolidated statement of operations;
    
    repay the promissory note in respect of the repurchase of the NACG Preferred
Corp. Series A preferred shares for $27,000 as described above;
    
    purchase certain equipment leased under operating leases for $44,623;
    
    cancel the consulting and advisory services agreement with the Sponsors for
$2,000; and
    
    for general corporate purposes.
 3.
    
    Significant accounting policies
 a)
    
    Basis of presentationThese consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles (GAAP). Material inter-company
transactions and balances are eliminated on consolidation. Material items that give
rise to measurement differences to the consolidated financial statements under
United States GAAP are outlined in note 30.These consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, North American Construction Group Inc.
(NACGI) and NACG Finance LLC, the
Companys joint venture, Noramac Ventures Inc. and the following 100% owned
subsidiaries of NACGI:
 
    
    North American Caisson Ltd.
    
    
    
    North American Pipeline Inc.
    
    North American Construction Ltd.
    
    
    
    North American Road Inc.
    
    North American Engineering Ltd.
    
    
    
    North American Services Inc.
    
    North American Enterprises Ltd.
    
    
    
    North American Site Development Ltd.
    
    North American Industries Inc.
    
    
    
    North American Site Services Inc.
    
    North American Mining Inc.
    
    
    
    North American Pile Driving Inc.
    
    North American Maintenance Ltd.
 b)
    
    Use of estimatesThe 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.Significant estimates made by management include the assessment of the percentage of
completion on time-and-materials, unit-price or lump-sum contracts (including
estimated total costs and provisions for estimated losses) and the recognition of
claims and change orders on contracts, assumptions used to value financial
instruments, assumptions used to determine the redemption value of redeemable
securities, assumptions used in periodic impairment testing, and estimates and
assumptions used in the
 9




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 determination of the allowance for doubtful accounts and the useful lives of plant
and equipment. Actual results could differ materially from those estimates.The accuracy of the Companys revenue and profit recognition in a given period is
dependent, in part, on the accuracy of our estimates of the cost to complete each
time-and-materials, unit-price, or lump-sum project. Our cost estimates use a
detailed bottom up approach, using inputs such as labour and equipment hours,
detailed drawings and material lists. These estimates are reviewed and updated
monthly. The Company believes our experience allows us to produce materially
reliable estimates. However, our projects can be highly complex. Profit margin
estimates for a project may either increase or decrease to some extent from the
amount that was originally estimated at the time of the related bid. With many
projects of varying levels of complexity and size in process at any given time,
changes in estimates can offset each other without materially impacting our
profitability. Major changes in cost estimates, particularly in larger, more complex
projects, can have a significant effect on profitability.c)
    
    Revenue recognitionThe Company performs its projects under the following types of contracts:
time-and-materials; cost-plus; unit-price; and lump sum. Revenue is recognized as
costs are incurred for time-and-materials and cost-plus service contracts with no
clearly defined scope. Revenue on cost plus, unit-price, lump sum and
time-and-materials contracts with defined scope are recognized using the percentage-of-completion
method, measured by the ratio of costs incurred to date to estimated total costs.
The resulting percent complete methodology is applied to the approved contract value
to determine the revenue recognized. The estimated total cost of the contract and
percent complete is determined based upon estimates made by management. The costs of
items that do not relate to performance of contracted work, particularly in the
early stages of the contract, are excluded from costs incurred to date.The length of the Companys contracts varies from less than one year for 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 revenue that are recognized in the period in which such adjustments are
determined. Profit incentives are included in revenue when their realization is
reasonably assured.Once a project is underway, the Company will often experience changes in conditions,
client requirements, specifications, designs, materials and work schedule.
Generally, a change order will be negotiated with the 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 the Company and a customer, the Company
will then consider it as a claim.Costs related to change orders and claims are recognized when they are incurred.
Revenues related to change orders are included in total estimated contract revenue
when they are approved.
 10




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 Revenues related to unapproved change orders and claims are included in total
estimated contract revenue only to the extent that contract costs related to the
claim have been incurred and when it is probable that the claim will result in:
 
    
    a bona fide addition to contract value; and
    
    revenues can be reliably estimated.
 These two conditions are satisfied when:
 
    
    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;
    
    additional costs incurred were caused by unforeseen circumstances and are
not the result of deficiencies in the Companys performance;
    
    costs associated with the claim are identifiable and reasonable in view
of work performed; and
    
    evidence supporting the claim is objective and verifiable.
 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.Claims revenue recognized was nil for the year ended March 31, 2008 (2007  $14.5
million; 2006  $12.9 million). Claims revenue of
$3.1 million related to prior year claims is included in unbilled
revenue and remains uncollected at the end of the year (2007  $8.4 million).The Companys long-term contracts typically allow its customers to unilaterally
reduce or eliminate the scope of the work as contracted without cause. These
long-term contracts represent higher risk due to uncertainty of total contract value
and estimated costs to complete; therefore, potentially impacting revenue
recognition in future periods.The asset entitled unbilled revenue represents revenue recognized in advance of
amounts invoiced. The liability entitled billings in excess of costs incurred and
estimated earnings on uncompleted contracts represents amounts invoiced in excess
of revenue recognized.d)
    
    Cash and cash equivalentsCash and cash equivalents include cash on hand, bank balances net of outstanding
cheques, and short-term investments with maturities of three months or less when
purchased.e)
    
    Allowance for doubtful accountsThe Company evaluates the probability of collection of accounts receivable and
records an allowance for doubtful accounts, which reduces accounts receivable 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.f)
    
    InventoryInventory is carried at the lower of weighted average cost and replacement cost, and
consists primarily of project materials.
 11




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 g)
    
    Other assetsOther assets consist of tires and spare component parts, and are stated at the lower
of weighted average cost or replacement cost. Other assets are charged to earnings
when they are put into use. A write-down of other assets to reduce other assets to
the lower of weighted average cost or replacement cost of $1,845 (2007  $695) is
included in equipment costs for the year ended March 31, 2008.h)
    
    Plant and equipmentPlant and equipment are recorded at cost. Major components of heavy construction
equipment in use such as engines and transmissions are recorded separately.
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 available for use. 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:
 Asset
    
    Basis
    
    RateHeavy equipment
    
    Straight-line
    
    Operating hoursMajor component parts in use
    
    Straight-line
    
    Operating hoursOther equipment
    
    Straight-line
    
    5  10 yearsLicensed motor vehicles
    
    Declining balance
    
    30%Office and computer equipment
    
    Straight-line
    
    4 yearsBuildings
    
    Straight-line
    
    10 yearsLeasehold improvements
    
    Straight-line
    

Over
shorter of estimated useful life and lease termAssets under capital lease
    
    Declining balance
    
    Over life of lease
 The costs for periodic repairs and maintenance are expensed to the extent the
expenditures serve only to restore the assets to their normal operating condition
without enhancing their service potential or extending their useful lives.i)
    
    GoodwillGoodwill represents the excess purchase price paid by the Company over the fair
value of tangible and identifiable intangible assets and liabilities acquired as a
result of purchasing a business entity. Goodwill is not amortized but instead is
tested for impairment annually or more frequently if events or changes in
circumstances indicate that it may 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 to 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 October 1, 2007 and determined that
there was no impairment in carrying value. During the current year, the Company
changed the date of its annual
 12




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 impairment test for goodwill from December 31 to October 1 of each year. This change
in accounting policy was applied on a retrospective basis and had no impact on the
consolidated financial statements.j)
    
    Intangible assetsIntangible assets include:
 
    
    customer contracts in process 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 and relationships;
    
    trade names, which are being amortized on a straight-line basis over
their estimated useful life of 10 years;
    
    non-competition agreements, which are being amortized on a straight-line
basis between the three and five-year terms of the respective agreements;
    
    financing costs related to the revolving credit facility are
amortized on a straight-line basis over the term of the agreement; and
    
    employee arrangements, which are being amortized on a straight-line basis
over the three-year term of the arrangements.
 k)
    
    Impairment of long-lived assetsLong-lived assets and identifiable intangible assets subject to amortization 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 value of the asset to
future undiscounted cash flows expected to be generated by the asset. If the value
of such asset is considered to be impaired, the impairment loss is recognized in the
amount by which the carrying amount of the asset exceeds the fair value of the
asset, and is charged to depreciation expense.Long-lived assets are classified as held for sale when certain criteria are met,
which include:
 
    
    managements commitment to a plan to sell the assets;
    
    the assets are available for immediate sale in their present condition;
    
    an active program to locate buyers and other actions to sell the
assets have been initiated;
    
    the sale of the assets is probable and their transfer is expected to
qualify for recognition as a completed sale within one year;
    
    the assets are being actively marketed at reasonable prices in relation
to their fair value; and
    
    it is unlikely that significant changes will be made to the plan to sell
the assets or that the plan will be withdrawn.
 Assets to be disposed of by sale are reported at the lower of their carrying amount
or fair value less costs to sell and are included in current assets. These assets
are not depreciated.
 13




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 l)
    
    Foreign currency translationThe functional currency of the Company is Canadian dollars. Transactions
denominated in foreign currencies are recorded at the rate of exchange on 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.m)
    
    Derivative financial instrumentsThe Company uses derivative financial instruments to manage financial risks from
fluctuations in exchange rates and interest rates. These instruments include
cross-currency and interest rate swap agreements as well as embedded price
escalation features in revenue and supplier contracts. All such instruments are only
used for risk management purposes. The Company does not hold or issue derivative
financial instruments for trading or speculative purposes. Derivative financial
instruments are subject to standard credit terms and conditions, financial controls,
management and risk monitoring procedures. These derivative financial instruments
are not designated as hedges for accounting purposes and are recorded at fair value with realized and unrealized gains and losses recognized
in the Consolidated Statement of Operations, Comprehensive Income (Loss) and
Deficit.n)
    
    Income taxesThe Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, future income 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 income 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 income tax assets and liabilities from a change in
tax rates is recognized in income in the period of enactment or substantive
enactment. The Company accrues interest and penalties for uncertain
tax positions in the period in which these uncertainties are
identified. 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.o)
    
    Stockbased compensation planThe Company accounts for all stock-based compensation payments that are settled by
the issuance of equity instruments in accordance with a fair value based method of
accounting. Under this fair value based method, compensation cost is measured using
the Black-Scholes model at the grant date and is expensed on a
straight-line basis over the awards vesting
period, with a corresponding increase to contributed surplus. Upon exercise of a
stock option, share capital is recorded at the sum of proceeds received and the
related amount of contributed surplus.The Company has a Directors Deferred Stock Unit
(DDSU) plan, which is described
in note 28. The measurement of the liability and compensation costs for these awards
is based on the intrinsic value of the award and is recorded as a charge to
operating income over the vesting period of the award. Subsequent changes in the
Companys payment obligation after vesting of the award and prior to the
settlement date are recorded as a charge to operating income in the
period such changes occur.p)
    
    Net income (loss) per shareBasic net income (loss) per share is computed by dividing net earnings (loss)
available to common shareholders by the weighted average number of shares
outstanding during the year (see note 18(d)). Diluted per share amounts are
calculated using the treasury stock and if-converted methods. The treasury stock
method increases the diluted weighted average shares outstanding to include
additional shares from the assumed exercise of stock options, if dilutive. The
number of additional shares is
 14




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 calculated by assuming outstanding in-the-money stock options were exercised
and the proceeds from such exercises, including any unamortized stock-based
compensation cost, were used to acquire shares of common stock at the average market
price during the year. The if-converted method assumes the conversion of
convertible securities at the later of the beginning of the reported period or issue
date, if dilutive.q)
    
    Recently adopted Canadian accounting pronouncements
 i)
    
    Financial instruments  recognition and measurement
 Effective April 1, 2007, the Company adopted the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3855, Financial Instruments  Recognition
and Measurement, and Handbook Section 3865, Hedges. These standards have been
applied retrospectively without restatement as discussed below and, accordingly,
comparative amounts for prior periods have not been restated.CICA Handbook Sections 3855 and 3865 provide guidance on when a financial asset,
financial liability or non-financial derivative is to be recognized on the balance
sheet of the Company and on what basis these assets, liabilities and derivatives
should be valued, including hedging relationships. Under the standards:
 
    
    Financial assets are classified as loans and receivables, held-to-maturity,
held-for-trading or available-for-sale. Loans and receivables are initially
recorded at fair value and subsequent to initial recognition are accounted for
at amortized cost using the effective interest method. Held-to-maturity
classification is restricted to fixed maturity instruments that the Company
intends and is able to hold to maturity and is accounted for on initial
recognition at fair value and subsequent to initial recognition at amortized
cost using the effective interest method. Held-for-trading instruments are
recorded at fair value with changes in fair value reported in net income. The
remaining financial assets are classified as available-for-sale. These are
recorded at fair value with changes in fair value reported in other
comprehensive income until the investment is derecognized or impaired at which time the
amounts would be recorded in net income. On adoption of the standard, the
Company has classified its cash and cash equivalents as held for trading and
accounts receivable and unbilled revenue as loans and receivables. The Company
did not hold any financial assets that were available-for-sale or
held-to-maturity;
    
    Financial liabilities are classified as either held-for-trading or other
financial liabilities. Held-for-trading instruments are recorded at fair value
with changes in fair value reported in net income. Other financial liabilities
are accounted for on initial recognition at fair value and subsequent to
initial recognition at amortized cost using the effective interest method with
gains and losses reported in net income in the period that the liability is
derecognized. The Company has classified its revolving credit facility,
accounts payable, accrued liabilities, and senior
notes as other financial liabilities;
    
    Derivative financial instruments, including non-financial derivatives, are
classified as held-for-trading and measured at fair value unless exempted from
derivative treatment as a normal purchase or sale. Certain derivatives embedded
in other contracts are also measured at fair value.
    
    Section 3865 specifies circumstances under which hedge accounting is
permissible and how hedge accounting is performed. For the periods presented,
the Company did not apply hedge accounting.
    
    The Company elected April 1, 2003 as the transition date for identifying
contracts with embedded derivatives. Transaction costs that are directly
attributable to the acquisition or issue of financial
 15




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 assets or liabilities are accounted for as a part of the respective asset or
liabilitys carrying value at inception.
 In determining the fair value of financial instruments, the Company uses a variety
of methods and assumptions that are based on market conditions and risks existing on
each reporting date. Counterparty confirmations and standard market conventions and
techniques, such as discounted cash flow analysis and option pricing models, are
used to determine the fair value of the Companys financial instruments, including
derivatives. All methods of fair value measurement result in a general
approximation of value and such value may never actually be realized.On April 1, 2007, the Company made the following transitional adjustments to the
consolidated balance sheet to adopt the new standards:
 Increase (decrease)Deferred financing costs
    
    $
    (11,356
    )Intangible assets
    
    
    1,622Long-term future income tax asset
    
    
    3,293Senior notes
    
    
    (12,634
    )Derivative financial instruments
    
    
    9,720Long-term future income tax liability
    
    
    18Opening deficit
    
    
    3,545
 The trade date is used to account for regular way purchase or sale contracts. The
adoption of these standards resulted in the following adjustments as of April 1,
2007 in accordance with the transition provisions:
 
    
    Deferred financing costs related to the issue of the senior notes that were
previously presented as a separate asset on the consolidated balance sheet are
now included in the carrying value of the senior notes and are being amortized
using the effective interest method over the remaining term of the debt. Prior
to April 1, 2007, these deferred financing costs were amortized on a straight
line basis over the term of the debt. As a result of the change in method of
accounting, financing costs were re-measured on April 1, 2007 using the
effective interest method. This re-measurement resulted in a $9,734 decrease
in deferred financing costs, a decrease of $9,815 in senior notes, a decrease
of $63 in opening deficit and an increase of $18 in the future income tax
liability.
    
    Transaction costs incurred in connection with the Companys revolving credit
facility of $1,622 were reclassified from deferred financing costs to
intangible assets on April 1, 2007 and these costs continue to be amortized on
a straight-line basis over the term of the facility.
    
    The Company determined that the issuers early prepayment option included in
the senior notes should be bifurcated from the host contract, along with a
contingent embedded derivative in the senior notes that provide for accelerated
redemption by the holders in certain instances. These embedded derivatives
were measured at fair value at the inception of the senior notes and the
residual amount of the proceeds was allocated to the debt. Changes in fair
value of the embedded derivatives are recognized in net income and the carrying
amount of the senior notes is accreted to par value over the term of the notes
using the effective interest method and is recognized as interest expense. At
transition on April 1, 2007, the Company recorded the fair value of $8,519
 16




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 related to these embedded derivatives and a corresponding decrease in opening
deficit of $7,305, net of future income taxes of $1,214. The impact of the
bifurcation of these embedded derivatives at issuance of the senior notes
resulted in an increase of senior notes of $5,700 and an increase in opening
deficit of $3,963, net of income taxes of $1,737 after applying the effective
interest method to the premium resulting from the bifurcation of these embedded
derivatives on April 1, 2007.
    
    The Company determined that a price escalation feature in a revenue
construction contract is an embedded derivative that is not closely related to
the host contract. The embedded derivative has been measured at fair value and
included in derivative financial instruments on the consolidated balance sheet,
with changes in the fair value recognized in net income. The Company recorded
the fair value of $7,246 related to this embedded derivative on April 1, 2007,
with a corresponding increase in opening deficit of $5,181, net of future
income taxes of $2,065.
    
    The Company identified an additional embedded derivative that is not closely
related to the host contract in the fourth quarter of 2008 with
respect to price escalation features in a supplier contract. The embedded derivative has
been measured at fair value and included in derivative financial instruments on
the consolidated balance sheet, with changes in fair value recognized in net
income. The Company has amended its original transition adjustment disclosed
in the first quarter and recorded the fair value of $2,474 related to this embedded
derivative on April 1, 2007, with corresponding increase in opening deficit of
$1,769, net of future income taxes of $705.
 ii.
    
    Financial instruments  disclosure and presentation
 Effective April 1, 2007, the Company adopted revised CICA Handbook Section 3861,
Financial Instruments  Disclosure and Presentation, which replaces CICA Handbook
Section 3860, Financial Instruments  Disclosure and Presentation, and
establishes standards for presentation of financial instruments and non-financial
derivatives, and identifies information that should be disclosed. The adoption of
this standard did not have a material impact on the Companys consolidated financial
statements.
 iii.
    
    Comprehensive income and equity
 Effective April 1, 2007, the Company adopted CICA Handbook Section 1530,
Comprehensive Income, which establishes standards for the reporting and display of
comprehensive income. The new section defines other comprehensive income to include
revenues, expenses, and gains and losses that, in accordance with primary sources of
GAAP, are recognized in comprehensive income but excluded from net income. The
standard does not address issues of recognition or measurement for comprehensive
income and its components. The adoption of this standard did not have a material
impact on the Companys financial statement presentation in the current year.Effective April 1, 2007, the Company adopted CICA Handbook Section 3251 Equity,
which establishes standards for the presentation of equity and changes in equity
during the reporting period. The requirements in this section are in addition to
those of Section 1530 and recommend that an enterprise should present separately the
following components of equity: retained earnings, accumulated other comprehensive
income, the total for retained earnings and accumulated other comprehensive income,
contributed surplus, share capital and
 17




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 reserves. The adoption of CICA Handbook Section 3251 did not
have an impact on the Companys financial statement presentation in the current
period. The Company currently has no accumulated other comprehensive income
components.
 iv.
    
    Accounting changes
 In July 2006, the CICA revised Handbook Section 1506, Accounting Changes, which
requires that: (1) voluntary changes in accounting policy are made only if they
result in the financial statements providing reliable and more relevant information;
(2) changes in accounting policy are generally applied retrospectively; and (3)
prior period errors are corrected retrospectively. This guidance was adopted by the
Company on April 1, 2007 and did not have a material impact on the consolidated
financial statements.
 v.
    
    Accounting policy choice for transaction costs
 In June 2007, the CICA issued Emerging Issues Committee Abstract No. 166,
Accounting Policy Choice for Transaction Costs (EIC-166). CICA Handbook Section
3855 requires that when an entity acquires a financial asset or incurs a financial
liability classified other than as held-for-trading, it adopts an accounting policy
for transaction costs of either: (a) recognizing all transaction costs in net
income; or (b) adding transaction costs that are directly attributable to the
acquisition or issue of a financial asset or financial liability to the carrying
amount of the financial instrument. EIC- 166 clarifies that the same accounting
policy choice should be made for all similar instruments classified as other than
held-for-trading, but that a different accounting policy choice may be made for
financial instruments that are not similar. As described in note 3(q)(i), the
Companys accounting policy is to add transaction costs that are directly
attributable to the acquisition or issue of a financial asset or financial liability
to the carrying amount of the financial instrument. This guidance was adopted by
the Company on April 1, 2007 and did not have a material impact on the consolidated
financial statements.
 r)
    
    Recent Canadian accounting pronouncements not yet adopted
 i.
    
    Capital disclosures
 In December 2006, the CICA issued Handbook Section 1535, Capital Disclosures.
This standard requires that an entity disclose information that enables users of its
financial statements to evaluate an entitys objectives, policies and processes for
managing capital, including disclosures of any externally imposed capital
requirements and the consequences of non-compliance. The new standard applies to
interim and annual financial statements relating to fiscal years beginning on or
after October 1, 2007, specifically April 1, 2008 for the Company. Disclosures
required by the new standard will be included in the Companys interim and annual
consolidated financial statements commencing April 1, 2008.
 ii.
    
    Financial instruments  disclosure and presentation
 In March 2007, the CICA issued Handbook Section 3862, Financial
InstrumentsDisclosures, which replaces CICA 3861 and provides expanded disclosure
requirements that provide additional detail by financial assets and liability
categories to enhance financial statement users understanding of the significance
of financial instruments to an entitys financial position, performance and cash
flows. This standard harmonizes disclosures with International Financial Reporting
Standards. The standard
 18




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 applies to interim and annual financial statements relating to fiscal years
beginning on or after October 1, 2007, specifically April 1, 2008 for the Company.
Disclosures required by the new standard will be included in the Companys interim
and annual consolidated financial statements commencing April 1, 2008.In March 2007, the CICA issued Handbook Section 3863, Financial
InstrumentsPresentation. This Section establishes standards for presentation of
financial instruments and non-financial derivatives. It deals with the
classification of financial instruments, from the perspective of the issuer, between
liabilities and equity, the classification of related interest, dividends, gains and
losses, and the circumstances in which financial assets and financial liabilities
are offset. This standard harmonizes disclosures with International Financial
Reporting Standards and applies to interim and annual financial statements relating
to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008
for the Company, and is not expected to have a material impact on the
Companys consolidated financial statements.
 iii.
    
    Inventories
 In June 2007, the CICA issued Handbook Section 3031, Inventories to harmonize
accounting for inventories under Canadian GAAP with International Financial
Reporting Standards. This standard requires the measurement of inventories at the
lower of cost and net realizable value and includes guidance on the determination of
cost, including allocation of overheads and other costs to inventory. The standard
also requires the consistent use of either first-in, first out (FIFO) or weighted
average cost formula to measure the cost of other inventories and requires the
reversal of previous write-downs to net realizable value when there is a subsequent
increase in the value of inventories. The new standard applies to interim and
annual financial statements relating to fiscal years beginning on or after January
1, 2008, specifically April 1, 2008 for the Company. The Company is currently
evaluating the impact of this standard.
 iv.
    
    Going concern
 In April 2007, the CICA approved amendments to Handbook Section 1400, General
Standards of Financial Statement Presentation. These amendments require management
to assess an entitys ability to continue as a going concern. When management is
aware of material uncertainties related to events or conditions that may cast doubt
on an entitys ability to continue as a going concern, those uncertainties must be
disclosed. In assessing the appropriateness of the going concern assumption, the
standard requires management to consider all available information about the future,
which is at least, but not limited to, twelve months from the balance sheet date.
The new requirements of the standard are applicable for interim and annual financial
statements relating to fiscal years beginning on or after January 1, 2008,
specifically April 1, 2008 for the Company. The Company is currently evaluating the
impact of this standard.
 v.
    
    Goodwill and intangible assets
 In February 2008, the CICA issued Handbook Section 3064, (CICA 3064) Goodwill and
Intangible Assets. CICA 3064, which replaces Section 3062, Goodwill and Intangible
Assets, and Section 3450, Research and Development Costs, establishes standards for
the recognition, measurement and disclosure of goodwill and intangible assets. The
provisions relating to the definition and initial recognition of intangible assets,
including internally generated intangible assets, are equivalent to the
corresponding provisions of International Financial Reporting Standard IAS 38,
Intangible Assets.
 19




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 This new standard is effective for
the Companys interim and annual consolidated financial statements commencing
April 1, 2009. The Company is currently evaluating the impact of this standard.
 4.
    
    AcquisitionOn May 1, 2007, the Company acquired all of the assets of Active Auger Services 2001
Ltd., a piling company specializing in the design and installation of screw piles in
north central Saskatchewan, for total cash consideration and acquisition costs of
$1,581. The transaction has been accounted for by the purchase method with the
results of operations included in the financial statements from the date of
acquisition. The goodwill acquired is deductible for tax purposes. The purchase
price allocation is as follows:
 Preliminary
    
    FinalNet assets acquired at assigned values:Plant and equipment
    
    $
    700
    
    
    $
    700Intangible assets
    
    
    217
    
    
    
    201Goodwill (assigned to the piling segment)
    
    
    664
    
    
    
    680$
    1,581
    
    
    $
    1,581
 On September 1, 2006, the Company acquired all of the shares of Midwest Foundation
Technologies Ltd., a piling company specializing in the design and installation of
micropile foundations in western Canada, for cash consideration and acquisition costs
totaling $1,646. The transaction has been accounted for by the purchase method with
the results of operations included in the financial statements from the date of
acquisition. The goodwill related to this transaction is not deductible for tax
purposes. The final purchase price allocation is as follows:
 Net assets acquired at assigned values:Working capital (including cash of $129)
    
    $
    170Plant and equipment
    
    
    554Intangible assets
    
    
    410Goodwill (assigned to the piling segment)
    
    
    843Future income tax liability
    
    
    (194
    )Capital lease obligations
    
    
    (137
    )$
    1,646
 5.
    
    Accounts receivable
 March 31,
    
    
    March 31,2008
    
    
    2007Accounts receivable  trade
    
    $
    122,241
    
    
    $
    83,444Accounts receivable  holdbacks
    
    
    34,996
    
    
    
    19,496Income and other taxes receivable
    
    
    2,734
    
    
    
    3,034Accounts receivable  other
    
    
    6,773
    
    
    
    1,458Allowance for doubtful accounts
    
    
    (742
    )
    
    
    (88
    )$
    166,002
    
    
    $
    107,344
 20




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 Accounts receivable  holdbacks represent amounts up to 10% under certain contracts
that the customer is contractually entitled to withhold until completion of the
project or until certain project milestones are achieved.6.
    
    Costs incurred and estimated earnings net of billings on uncompleted contracts
 March 31,
    
    
    March 31,2008
    
    
    2007Costs incurred and estimated earnings on uncompleted contracts
    
    $
    1,037,273
    
    
    $
    742,186Less: billings to date
    
    
    (971,162
    )
    
    
    (676,476
    )$
    66,111
    
    
    $
    65,710
 Costs incurred and estimated earnings net of billings on uncompleted contracts is
presented in the consolidated balance sheets under the following captions:
 March 31,
    
    
    March 31,2008
    
    
    2007Unbilled revenue
    
    $
    70,883
    
    
    $
    68,709Billings in excess of costs incurred
and estimated earnings on uncompleted
contracts
    
    
    (4,772
    )
    
    
    (2,999
    )$
    66,111
    
    
    $
    65,710
 7.
    
    Prepaid expenses and deposits
 March 31,
    
    
    March 31,2008
    
    
    2007Prepaid insurance and property taxes
    
    $
    1,065
    
    
    $
    916Prepaid lease payments
    
    
    6,606
    
    
    
    3,934Deposits on other assets
    
    
    1,629
    
    
    
    7,082$
    9,300
    
    
    $
    11,932
 8.
    
    Asset held for saleIncluded in depreciation expense for the year ended March 31, 2008 is an impairment
charge of $493 (2007  $3,582; 2006  $nil) relating to a decision to dispose of heavy
construction assets in the Heavy Construction & Mining segment. The impairment charge
is the amount by which the carrying value of the related assets exceeded their fair
value less costs to sell. The assets held for sale at March 31, 2008 have been
reclassified from plant and equipment to long-term assets as the assets have not yet
been sold.
 21




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 9.
    
    Plant and equipment
 AccumulatedMarch 31, 2008
    
    Cost
    
    
    depreciation
    
    
    Net book valueHeavy equipment
    
    $
    281,975
    
    
    $
    62,539
    
    
    $
    219,436Major component parts in use
    
    
    12,291
    
    
    
    4,797
    
    
    
    7,494Other equipment
    
    
    17,086
    
    
    
    6,232
    
    
    
    10,854Licensed motor vehicles
    
    
    8,981
    
    
    
    6,110
    
    
    
    2,871Office and computer equipment
    
    
    9,016
    
    
    
    3,479
    
    
    
    5,537Buildings
    
    
    19,530
    
    
    
    3,443
    
    
    
    16,087Leasehold improvements
    
    
    6,272
    
    
    
    1,107
    
    
    
    5,165Assets under capital lease
    
    
    23,271
    
    
    
    9,676
    
    
    
    13,595$
    378,422
    
    
    $
    97,383
    
    
    $
    281,039
 AccumulatedMarch 31, 2007
    
    Cost
    
    
    depreciation
    
    
    Net book valueHeavy equipment
    
    $
    254,643
    
    
    $
    46,609
    
    
    $
    208,034Major component parts in use
    
    
    7,884
    
    
    
    2,489
    
    
    
    5,395Other equipment
    
    
    16,244
    
    
    
    5,641
    
    
    
    10,603Licensed motor vehicles
    
    
    7,998
    
    
    
    4,829
    
    
    
    3,169Office and computer equipment
    
    
    4,836
    
    
    
    2,249
    
    
    
    2,587Buildings
    
    
    16,443
    
    
    
    716
    
    
    
    15,727Leasehold improvements
    
    
    2,992
    
    
    
    664
    
    
    
    2,328Assets under capital lease
    
    
    15,422
    
    
    
    7,302
    
    
    
    8,120$
    326,462
    
    
    $
    70,499
    
    
    $
    255,963
 During the year ended March 31, 2008, additions to plant and equipment included $8,829
of assets that were acquired by means of capital leases (2007  $4,653; 2006 
$5,910). Depreciation of equipment under capital lease of $2,928 (2007  $1,481; 2006
  $2,545) is included in depreciation expense.10.
    
    Intangible assets
 AccumulatedMarch 31, 2008
    
    Cost
    
    
    amortization
    
    
    Net book valueCustomer contracts in
progress and related
relationships
    
    $
    340
    
    
    $
    160
    
    
    $
    180Financing costs
    
    
    3,017
    
    
    
    1,601
    
    
    
    1,416Other intangible assets
    
    
    876
    
    
    
    344
    
    
    
    532$
    4,233
    
    
    $
    2,105
    
    
    $
    2,128
 AccumulatedMarch 31, 2007
    
    Cost
    
    
    amortization
    
    
    Net book valueCustomer contracts in
progress and related
relationships
    
    $
    15,533
    
    
    $
    15,360
    
    
    $
    173Other intangible assets
    
    
    2,675
    
    
    
    2,248
    
    
    
    427$
    18,208
    
    
    $
    17,608
    
    
    $
    600
 22




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 During the year ended March 31, 2008, financing fees totaling $776 paid in connection with an amendment of the revolving credit facility (note 12)
were recorded as financing costs. These costs, together with the existing unamortized financing costs, will be amortized on a straight-line basis over
the term of the amended revolving credit facility consistent with accounting for the amendment of the revolving credit
facility as a modification.Amortization of intangible assets for the year ended
March 31, 2008 was $1,071 (2007  $582; 2006  $730).The estimated amortization expense for future years is as follows:
 For the year ending March 31,2009
    
    $
    1,0882010
    
    
    8622011
    
    
    552012
    
    
    482013 and thereafter
    
    
    75$
    2,128
 11.
    
    Deferred financing costsDeferred financing costs related to the senior notes that were previously presented as
a separate asset on the consolidated balance sheet are now included in the carrying
value of the senior notes (see notes 3(q)(i) and 16). Transaction costs incurred in
connection with the Companys revolving credit facility of $1,622 were reclassified
from deferred financing costs to intangible assets effective April 1, 2007 (notes
3(q)(i) and 10).For the year ended March 31, 2007, fees of $275 were paid to the holders of the 83/4%
senior notes in connection with an amendment of the indenture governing the 83/4% senior
notes (note 16). The amendment has been accounted for as a modification, and the fees
paid to the note holders, together with the existing unamortized deferred financing
costs, were deferred and amortized on a straight-line basis over the remaining term of
the 8 3/4% senior notes.During the year ended March 31, 2007, financing fees totaling $1,071 paid in
connection with amendment of the revolving credit facility (note 12) were recorded as
deferred financing costs. These costs, together with the existing unamortized
deferred financing costs, were deferred and amortized over the term of the amended
revolving credit facility consistent with accounting for the amendment of the
revolving credit facility as a modification.In connection with the retirement of the 9% senior secured notes on November 28, 2006,
the Company wrote off deferred financing costs of $4,342 (notes 2 and 16) during the
year ended March 31, 2007.For the year ended March 31, 2006, financing costs of $7,546 were incurred in
connection with the issue of the 9% senior secured notes and revolving credit facility
and were recorded as deferred financing costs. In addition, financing costs of $321
were incurred in connection with the issue of the NAEPI Series A redeemable preferred
shares and expensed in the year ended March 31, 2006.On May 19, 2005, the Company repaid its entire indebtedness under a previous revolving
credit facility and term loan using the net proceeds from the issue of the 9% senior
secured noted and the NAEPI Series B preferred shares. In connection with the
repayment of the secured credit facility on May 19, 2006, the
 23




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 Company wrote-off deferred financing costs of $1,774 during the year ended March 31, 2006. Amortization
of the deferred financing costs for the year ended March 31, 2007 was $3,436 (2006 
$3,338).12.
    
    Revolving credit facilityOn June 7, 2007, the Company modified its amended and restated credit agreement to
provide for borrowings of up to $125.0 million (previously $55.0 million) under which
revolving loans and letters of credit
may be issued. Based upon the Companys current credit rating, prime rate and swing
line revolving loans under the agreement will bear interest at the Canadian prime rate
plus 0.25% per annum, Canadian bankers acceptances have stamping fees equal to 1.75%
per annum and letters of credit are subject to a fee of 1.25% per
annum. Standby fees are calculated at a rate per annum equal to the applicable pricing margin
applied to the amount by which the amount of the outstanding principal owing to each
lender under the credit facility for each day is less than the commitment of such
lender and accrue daily from the first day to the last day of each fiscal quarter.
In each case, the applicable pricing margin depends on our credit rating.
Interest rates are increased by 2% per annum in excess of the rate otherwise payable
on any amount not paid when due.The credit facility is secured by a first priority lien on substantially all the
Companys existing and after-acquired property and contains certain restrictive
covenants including, but not limited to, incurring additional debt, transferring or
selling assets, making investments including acquisitions or to pay dividends or
redeem shares of capital stock. The Company is also required to meet certain financial
covenants under the new credit agreement. The Company was in
compliance with all the covenants under this agreement as at and
through out the year ended March 31, 2008.As of March 31, 2008, the Company had nil outstanding borrowings under the revolving
credit facility and had issued $20.0 million in letters of credit to support
performance guarantees associated with a customer contract. The Companys unused
borrowing availability under the facility was $105.0 million at March 31, 2008. The
credit facility matures June 7, 2010. During the twelve months ended March 31, 2008,
financing fees of $776, were incurred in connection with the modifications to the
amended and restated credit agreement and were recorded as an intangible asset.As of March 31, 2007, the Company had outstanding borrowings of $20.5 million (2006 
$nil) under the revolving credit facility and had issued $25.0 million in letters of
credit to support performance guarantees associated with customer contracts. The
Companys borrowing availability under the facility was $9.5 million at March 31,
2007.13.
    
    Deferred lease inducementsLease inducements applicable to lease contracts are deferred and amortized as a
reduction of general and administrative costs on a straight-line basis over the lease
term, which includes the initial lease term and renewal periods only where renewal is
determined to be reasonably assured. During the year ended March 31, 2008, the Company
received inducements from a lessor in the form of leasehold improvements to an office
facility of $1,045. Amortization of deferred lease inducements of $104 was recorded
for the year ended March 31, 2008.14.
    
    Accrued liabilities
 March 31,
    
    
    March 31,2008
    
    
    2007Accrued interest payable
    
    $
    8,693
    
    
    $
    8,669Payroll liabilities
    
    
    19,564
    
    
    
    7,484Liabilities related to equipment leases
    
    
    14,617
    
    
    
    7,039Income and other taxes payable
    
    
    2,204
    
    
    
    201$
    45,078
    
    
    $
    23,393
 24




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 15.
    
    Capital lease obligationsThe Companys capital leases primarily relate to licensed motor vehicles. The minimum
lease payments due in each of the next five fiscal years are as follows:
 2009
    
    $
    5,5372010
    
    
    4,6972011
    
    
    3,3352012
    
    
    2,7022013
    
    
    23916,510Less: amount representing interest  weighted average rate of 10.50%
    
    
    1,734Present value of minimum lease payments
    
    
    14,776Less: current portion
    
    
    4,733$
    10,043
 16.
    
    Senior notes
 March 31,
    
    
    March 31,2008
    
    
    200783/4% senior unsecured notes due 2011 ($US)
    
    $
    200,000
    
    
    $
    200,000Unrealized foreign exchange
    
    
    5,574
    
    
    
    30,580Unamortized financing costs and premiums, net
    
    
    (3,059
    )
    
    
    Fair value of embedded prepayment and early
redemption options (note 20(a))
    
    
    (4,270
    )
    
    
    $
    198,245
    
    
    $
    230,580
 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 with interest 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 senior debt and senior to any subordinated debt that may
be issued by the Company or any of its subsidiaries. The notes are effectively
subordinated to all secured debt to the extent of the outstanding amount of 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.If a change of control occurs, the Company will be required to offer to purchase all
or a portion of each holders 83/4% senior notes, at a purchase price in cash equal to
101% of the principal amount of the notes offered for repurchase plus accrued interest
to the date of purchase.As at March 31, 2008, the Companys effective weighted average interest rate on its 8
3/4
senior notes, including the effect of financing costs and premiums, was
approximately 8.94%.
 25




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 On December 21, 2006, the indenture governing the 83/4% senior notes was amended to
remove the requirement to provide reconciliation from Canadian GAAP to United States
GAAP in the Companys interim consolidated financial statements.The Company issued 9% senior secured notes on May 19, 2005 in the amount of US$60.481
million (Canadian $76.345 million). In connection with the IPO (note 2), the Company
repurchased the 9% senior secured notes for $74,748 plus accrued interest of $3,027 on
November 28, 2006. These notes were redeemed at a premium of 109.26% on November 28,
2006 resulting in a loss on extinguishment of $6,338. The loss on settlement, along
with the write-off of deferred financing fees of $4,342 and third party
transaction costs of $255, was recorded as a loss on extinguishment of debt in the
consolidated statement of operations for the year ended March 31, 2007.17.
    
    Income taxesIncome tax provision (recovery) differs from the amount that would be computed by
applying the Federal and provincial statutory income tax rate to income from
continuing operations. The reasons for the differences are as follows:
 Year ended March 31,2008
    
    
    2007
    
    
    2006Income (loss) before income taxes
    
    $
    57,163
    
    
    $
    18,486
    
    
    $
    (21,204
    )Statutory tax rate
    
    
    31.47
    %
    
    
    32.12
    %
    
    
    33.62
    %Expected provision (recovery) at statutory tax rate
    
    $
    17,989
    
    
    $
    5,938
    
    
    $
    (7,129
    )Increase (decrease) related to:Impact of enacted
future statutory income
tax rates
    
    
    (1,287
    )
    
    
    (2,106
    )
    
    
    Change in redemption value and
accretion of redeemable preferred
shares
    
    
    
    
    
    
    1,000
    
    
    
    11,674Change in future income tax
liability, resulting from valuation
allowance
    
    
    
    
    
    
    (5,858
    )
    
    
    (4,097
    )Non-taxable gain on repurchase of
NACG Preferred Corp. Series A
preferred shares
    
    
    
    
    
    
    (3,019
    )
    
    
    Non-deductible financing transactions
    
    
    
    
    
    
    1,196
    
    
    
    Large corporations tax
    
    
    
    
    
    
    (136
    )
    
    
    716Other
    
    
    677
    
    
    
    392
    
    
    
    (427
    )Income tax provision (recovery)
    
    $
    17,379
    
    
    $
    (2,593
    )
    
    $
    737
 Classified as:
 Year ended March 31,2008
    
    
    2007
    
    
    2006Current income taxes
    
    $
    80
    
    
    $
    (2,975
    )
    
    $
    737Future income taxes
    
    
    17,299
    
    
    
    382
    
    
    
    $
    17,379
    
    
    $
    (2,593
    )
    
    $
    737
 26




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 March 31,
    
    
    March 31,2008
    
    
    2007Future income tax assets:Non-capital losses carried forward
    
    $
    19,985
    
    
    $
    23,875Deferred share issue costs
    
    
    3,312
    
    
    
    4,547Deferred premium on senior notes
    
    
    1,002
    
    
    
    1,614Derivative financial instruments
    
    
    8,448
    
    
    
    4,787Unrealized foreign exchange loss on senior notes
    
    
    1,805
    
    
    
    1,730Billings in excess of costs on uncompleted contracts
    
    
    1,402
    
    
    
    963Capital lease obligations
    
    
    3,594
    
    
    
    1,713Intangible assets
    
    
    1,560
    
    
    
    Deferred lease inducements
    
    
    244
    
    
    
    41,352
    
    
    
    39,229Future income tax liabilities:Unbilled revenue and uncertified revenue included in
accounts receivable
    
    
    8,978
    
    
    
    3,751Asset held for sale
    
    
    316
    
    
    
    1,878Accounts receivable  holdbacks
    
    
    10,239
    
    
    
    6,262Plant and equipment
    
    
    27,009
    
    
    
    20,897Deferred financing costs
    
    
    
    
    
    
    1,176Intangible assets
    
    
    568
    
    
    
    174Embedded derivatives and financing costs on senior notes
    
    
    3,176
    
    
    
    50,286
    
    
    
    34,138Net future income taxes
    
    $
    (8,934
    )
    
    $
    5,091
 Classified as:
 March 31,
    
    
    March 31,2008
    
    
    2007Current asset
    
    $
    8,217
    
    
    $
    14,593Long-term asset
    
    
    18,199
    
    
    
    14,364Current liability
    
    
    (10,907
    )
    
    
    (4,154
    )Long-term liability
    
    
    (24,443
    )
    
    
    (19,712
    )$
    (8,934
    )
    
    $
    5,091
 The Company and its subsidiaries file income tax returns in the Canadian federal
jurisdiction, and several provincial jurisdictions. Taxation years
ending 2004 through 2008 in all jurisdictions remain
open for potential examination by the tax authorities.The Company has accrued no
amounts as of April 1, 2007 and March 31, 2008, for uncertain tax positions. Additionally, for the year ended March
31, 2008, the Company has not recognized any amounts in respect of potential interest and penalties
associated with uncertain tax positions.
 27




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 At March 31, 2008, the Company has non-capital losses for income tax purposes of
approximately $68,663 which expire as follows:
 2015
    
    $
    50,8912026
    
    
    9,0002027
    
    
    8,772
 18.
    
    Shares
 a)
    
    Redeemable preferred shares
 i.
    
    NACG Preferred Corp. preferred shares
 Number ofShares
    
    
    AmountIssued and outstanding March 31, 2005
    
    
    35,000
    
    
    $
    35,000Issued and outstanding March 31, 2006
    
    
    35,000
    
    
    
    35,000Repurchased and cancelled
    
    
    (35,000
    )
    
    
    (35,000
    )Issued and outstanding March 31, 2007 and 2008
    
    
    
    
    
    $
    
 NACG Preferred Corp. was authorized to issue an unlimited number of Series A preferred shares. The NACG Preferred Corp. Series A preferred shares accrued dividends at a rate of $80.00 per share annually if earnings before interest, taxes, depreciation and
amortization (EBITDA) for NAEPI was in excess of $75.0 million for the year. The
dividends were payable in cash, additional NACG Preferred Corp. Series A preferred shares, or any combination of cash and shares as determined by the Company. The
number of shares issuable was .001 of a whole NACG Preferred Corp. Series A preferred share for each $1.00 of dividend declared.The NACG Preferred Corp. Series A preferred shares, which were issued in connection
with the acquisition described in note 1 and were recorded at their guaranteed
redemption amount, were redeemable at any time at the option of the Company, and were
required to be redeemed on or before November 26, 2012. On November 28, 2006, the
Company acquired the NACG Preferred Corp. Series A preferred shares for a promissory
note in the amount of $27,000 and accrued dividends of $1,400 at that time were
forfeited resulting in a gain on settlement of $9,400. The promissory note was
subsequently repaid with the proceeds from the IPO as described in note 2.
 ii.
    
    NAEPI Series A preferred shares
 Number ofShares
    
    
    AmountIssued and outstanding March 31, 2005
    
    
    
    
    
    $
    Issued
    
    
    1,000
    
    
    
    321Accretion
    
    
    
    
    
    
    54Issued and outstanding March 31, 2006
    
    
    1,000
    
    
    
    375Accretion
    
    
    
    
    
    
    625Repurchase and cancellation
    
    
    (1,000
    )
    
    
    (1,000
    )Issued and outstanding March 31, 2007 and 2008
    
    
    
    
    
    $
    
 28




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 NAEPI was authorized to issue an unlimited number of Series A preferred shares. The
NAEPI Series A preferred shares were non-voting and were not entitled to any
dividends. The NAEPI Series A preferred shares were 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 of 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 on which all of the Companys 8 3/4% senior
notes and the Companys 9% senior secured notes are no longer outstanding. NAEPI had
the right to redeem the NAEPI Series A preferred shares, in whole or in part, at
$1,000 per share at any time.The NAEPI Series A preferred shares were issued to one of the counterparties to
NAEPIs swap agreements on May 19, 2005 in connection with obtaining a new revolving
credit facility. These shares were not entitled to dividends. The NAEPI Series A
preferred shares were initially recorded at their fair value on the date of issue,
which was estimated to be $321 based on the present value of the required cash flows
using the discount rate implicit at inception. Each reporting period, the accretion
of the carrying value to the present value of the redemption amount at each balance
sheet date was recorded as interest expense. For the year ended March 31, 2007, the
Company recognized $625 of accretion as interest expense (2006  $54).On October 6, 2006, the Board of Directors approved the purchase of the NAEPI Series A
preferred shares for $1,000 effective with the consummation of the IPO (note 2), and
these shares were purchased on November 28, 2006 pursuant to an affiliate purchase
right under the terms of the NAEPI Series A preferred shares. Accordingly, the
Company recorded the additional accretion charge and the extinguishment of the
obligation in the year ended March 31, 2007.
 iii.
    
    NAEPI Series B preferred shares
 Number ofShares
    
    
    AmountIssued and outstanding March 31, 2005
    
    
    
    
    
    $
    Issued
    
    
    83,462
    
    
    
    8,376Repurchased
    
    
    (8,218
    )
    
    
    (851
    )Change in
redemption amount
    
    
    
    
    
    
    34,668Issued and outstanding March 31, 2006
    
    
    75,244
    
    
    
    42,193Accretion
    
    
    
    
    
    
    2,489Repurchase and cancellation
    
    
    (75,244
    )
    
    
    (44,682
    )Issued and outstanding March 31, 2007 and 2008
    
    
    
    
    
    $
    
 NAEPI was authorized to issue an unlimited number of Series B preferred shares. The
NAEPI Series B preferred shares were non-voting and were entitled to cumulative
dividends at an annual rate of 15% of the issue price of each share. No dividends
were payable on NAEPI common shares or other classes of preferred shares (defined as
Junior Shares) unless all cumulative dividends had been paid on the NAEPI Series B
preferred shares and NAEPI declared a NAEPI 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). The payment of dividends and the redemption of the
NAEPI Series B preferred shares were prohibited by the Companys revolving credit
facility agreement. The payment of dividends and the redemption of the NAEPI Series B
preferred shares was also restricted by the indenture agreements governing the
Companys 9% senior secured notes and 83/4% senior notes.
 29




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 7,500 NAEPI Series B preferred shares were issued to non-employee shareholders of the
Company for cash proceeds of $7.5 million on May 19, 2005. The NAEPI Series B
preferred shares were initially issued to certain non-employee shareholders with the
agreement that an offer to purchase these NAEPI Series B preferred shares would also
be extended to other shareholders of the Company on a pro rata basis to their interest
in the common shares of the Company.On June 15, 2005, the NAEPI Series B preferred shares were split 10-for-1.On August 31, 2005, NAEPI issued 8,218 NAEPI Series B preferred shares for cash
consideration of $851 to certain shareholders of the Company as a result of this
offer. On November 1, 2005, NAEPI repurchased and cancelled 8,218 of the NAEPI Series
B preferred shares held by the original non-employee shareholders for cash
consideration of $851.On October 6, 2005, an additional 244 NAEPI Series B preferred shares were issued for
cash consideration of $25.Initially, the redemption price of the NAEPI Series B preferred shares was an amount
equal to the greatest of (i) two times the issue price($1,000), less the amount, if
any, of dividends previously paid in cash on the NAEPI Series B preferred shares; (ii)
an amount, not to exceed $100 million which, after taking into account any dividends
previously paid in cash on such NAEPI Series B preferred shares, provides the holder
with a 40% rate of return, compounded annually, on the issue price from the date of
issue; and (iii) an amount, not to exceed $100 million, which is equal to 25% of the
arms length fair market value of NAEPIs common shares without taking into account
the NAEPI Series B preferred shares.On March 30, 2006, the terms of the NAEPI Series B preferred shares were amended to
eliminate option (iii) from the calculation of the redemption price of the shares.Prior to the amendment to the terms of the NAEPI Series B preferred shares on March
30, 2006, the NAEPI Series B preferred shares were considered mandatorily redeemable
and the Company was required to measure the NAEPI Series B preferred shares at the
amount of cash that would be paid under the conditions specified in the contract if
settlement occurred at each reporting date prior to the amendment. At March 30, 2006,
management estimated the redemption amount to be $42,193. As a result, the Company
has recognized the increase of $34,668 in the carrying value as an increase in
interest expense for the year ended March 31, 2006.Concurrent with the amendment to the NAEPI Series B preferred shares, NACG entered
into a Put/Call Agreement with the holders of the NAEPI Series B preferred shares.
The Put/Call Agreement granted to each holder of the NAEPI Series B preferred shares
the right (the Put/Call Right) to require NACG to exchange each of the holders
NAEPI Series B preferred shares for 100 common shares (on a post-split basis  note
18(b)) of NACG. The Put/Call Right could only be exercised upon delivery by NACG of
an Event Notice, being either: (i) a redemption or purchase call for the redemption
or purchase of the NAEPI Series B preferred shares in connection with (A) a redemption
on December 31, 2011, or (B) an Accelerated Redemption Event (as defined in note
18(a)(ii)); or (ii) a notice in connection with a Liquidation Event (defined as a
liquidation, winding-up or dissolution of NAEPI, whether voluntary or involuntary).The Put/Call Agreement also granted NACG the right to require the holders of the NAEPI
Series B preferred shares to exchange each of their NAEPI Series B preferred shares
for 100 common shares (on a post-split basis  note 18(b)) of NACG upon delivery of a
call notice to shareholders within five business days of an Event Notice.As a result of the March 30, 2006 amendment to the terms of the NAEPI Series B
preferred shares and the concurrent execution of the Put/Call Agreement, the Company
accounted for the amendment as a related
 30




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 party transaction at carrying amount. No value was ascribed to the equity classified
Put/Call Right as it was a related party transaction. The NAEPI Series B preferred shares were being accreted from their carrying value of $42.2 million on the date of
amendment to their redemption value of $69.6 million on December 31, 2011 through a
charge to interest expense using the effective interest method over the period to
December 31, 2011. For the year ended March 31, 2007, the Company recognized $2,489
of interest expense for this accretion.On October 6, 2006, the Board of Directors approved the exercise of the call option to
acquire all of the issued and outstanding NAEPI Series B preferred shares in exchange
for 7,524,400 common shares of NACG and the option was exercised on November 28, 2006.
The Company recorded the exchange by transferring the carrying value of the Series B
preferred shares on the exercise date of $44,682 to common shares.
 b)
    
    Common sharesOn November 3, 2006, the Board of Directors and common shareholders approved a
20-for-1 share split of NACGs voting and non-voting common shares. All
information relating to the exchange of the NAEPI Series B preferred shares (note
18(a)), the issued and outstanding common shares (below), basic and diluted net
income (loss) per share data (note 18(d)), stock options (note 28), and basic and
diluted net income (loss) per share data under U.S. GAAP (note 30) have been
adjusted retroactively to reflect the impact of the share split in these financial
statements. The share split was effective November 3, 2006.Authorized:
 Unlimited number of common voting sharesUnlimited number of common non-voting shares
 Issued and outstanding:
 Number ofShares(1)
    
    AmountCommon voting sharesIssued and outstanding at March 31, 2005
    
    
    18,147,600
    
    
    
    90,738Issued
    
    
    60,000
    
    
    
    300Issued and outstanding at March 31, 2006
    
    
    18,207,600
    
    
    
    91,038Issued upon exercise of stock options
    
    
    27,760
    
    
    
    139Transferred from contributed surplus on exercise of stock options
    
    
    
    
    
    
    52Repurchased and cancelled prior to initial public offering
    
    
    (5,000
    )
    
    
    (25
    )Conversion of NAEPI Series B preferred shares
    
    
    7,524,400
    
    
    
    44,682Initial public offering (note 2)
    
    
    9,437,500
    
    
    
    171,165Share issue costs (net of future income tax recovery of $5,667)
    
    
    
    
    
    
    (12,915
    )Issued and outstanding at March 31, 2007
    
    
    35,192,260
    
    
    
    294,136Issued upon exercise of stock options
    
    
    324,816
    
    
    
    1,627Transferred from contributed surplus on exercise of stock options
    
    
    
    
    
    
    611Conversion of common non voting shares
    
    
    412,400
    
    
    
    2,062Issued and outstanding at March 31, 2008
    
    
    35,929,476
    
    
    $
    298,436Common non-voting sharesIssued and outstanding at March 31, 2007, 2006 and 2005
    
    
    412,400
    
    
    $
    2,062Conversion to common voting shares
    
    
    (412,400
    )
    
    
    (2,062
    )Outstanding at March 31, 2008
    
    
    
    
    
    
    Total common shares at March 31, 2008
    
    
    35,929,476
    
    
    $
    298,436
 (1)
    
    The issued and outstanding common shares have been
retroactively adjusted to reflect the 20-for-1 share split effected on November 3,
2006.
 31




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 
 During the year ended March 31, 2006, 60,000 common voting shares were issued for
cash consideration of $300. During the year ended March 31, 2007, 5,000 common shares were repurchased for cancellation at a cost of $84, of which $25 reduced
share capital and $59 increased the Companys deficit.
 c)
    
    Contributed surplus
 Balance, March 31, 2005
    
    
    634Stock-based compensation (note 28)
    
    
    923Balance, March 31, 2006
    
    
    1,557Stock-based compensation (note 28)
    
    
    2,101Transferred to common shares on exercise of stock options
    
    
    (52
    )Balance, March 31, 2007
    
    $
    3,606Stock-based compensation (note 28)
    
    
    1,801Transferred to common shares on exercise of stock options
    
    
    (611
    )Cash settlement of stock options
    
    
    (581
    )Balance, March 31, 2008
    
    $
    4,215
 d)
    
    Net income (loss) per share
 Year ended March 31,2008
    
    
    2007
    
    
    2006Basic net income (loss) per shareNet income (loss) available to common shareholders
    
    $
    39,784
    
    
    $
    21,079
    
    
    $
    (21,941
    )Weighted average number of common shares
    
    
    35,788,776
    
    
    
    24,352,156
    
    
    
    18,574,800Basic net income (loss) per share
    
    $
    1.11
    
    
    $
    0.87
    
    
    $
    (1.18
    )Diluted net income (loss) per shareNet income (loss) available to common shareholders
    
    $
    39,784
    
    
    $
    21,079
    
    
    $
    (21,941
    )Weighted average number of common shares
    
    
    35,788,776
    
    
    
    24,352,156
    
    
    
    18,574,800Dilutive effect of:Stock options
    
    
    1,126,859
    
    
    
    1,091,751
    
    
    
    Weighted average number of diluted common shares
    
    
    36,915,635
    
    
    
    25,443,907
    
    
    
    18,574,800Diluted net income (loss) per share
    
    $
    1.08
    
    
    $
    0.83
    
    
    $
    (1.18
    )
 32




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 For the year ended March 31, 2008, weighted average stock options of 283,674 (March 31,
2007  98,767) were excluded from the calculation of diluted net income per share
as the options average exercise price was greater than the average market price
of the common shares for the year.For the year ending March 31, 2006, the effect of outstanding stock options and
convertible securities on net loss per share was anti-dilutive. As such, the
effect of outstanding stock options and convertible securities used to calculate
the diluted net loss per share has not been disclosed for this year.
 19.
    
    Interest expense
 Year ended March 31,2008
    
    
    2007
    
    
    2006Interest on senior notes
    
    $
    23,338
    
    
    $
    27,417
    
    
    $
    28,838Interest on capital lease obligations
    
    
    780
    
    
    
    725
    
    
    
    457Interest on
senior secured/revolving credit facility
    
    
    769
    
    
    
    346
    
    
    
    564Interest on NACG Preferred Corp. Series A
preferred shares
    
    
    
    
    
    
    1,400
    
    
    
    Accretion and change in redemption value of
NAEPI Series B preferred shares
    
    
    
    
    
    
    2,489
    
    
    
    34,668Accretion of NAEPI Series A preferred shares
    
    
    
    
    
    
    625
    
    
    
    54Interest on long-term debt
    
    
    24,887
    
    
    
    33,002
    
    
    
    64,581Amortization of deferred financing costs
    
    
    
    
    
    
    3,436
    
    
    
    3,338Amortization of bond issue costs and premiums
    
    
    838
    
    
    
    
    
    
    
    Other interest
    
    
    1,294
    
    
    
    811
    
    
    
    857$
    27,019
    
    
    $
    37,249
    
    
    $
    68,776
 20.
    
    Derivative financial instruments
 a)
    
    Realized and unrealized (gain) loss on derivative financial instruments
 Year ended March 31,2008
    
    
    2007
    
    
2006Realized and unrealized (gain) loss
on cross-currency and interest rate
swaps
    
    $
    23,456
    

    $
    (196
    )

    
    $
    14,689Unrealized loss on embedded price
escalation features in a long-term
revenue construction contract
    
    
    7,575
    

    
    
    

    
    
    Unrealized (gain) on embedded price
escalation features in a long-term
supplier contract
    
    
    (1,205
    )
    


    
  
    

    
    Unrealized loss on embedded prepayment
and early redemption options on senior
notes
    
    
    4,249
    
    


    
    
    

    
    $
    34,075
    
    

    $
    (196
    )


    $
    14,689
 33




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 b)
    
    Fair value of derivative financial instruments
 DerivativefinancialMarch 31, 2008
    
    instruments
    
    
    Senior notesCross-currency and interest rate swaps
    
    $
    81,649
    
    
    $
    Embedded
price escalation features in a long-term
revenue construction contract
    
    
    14,821
    
    
    
    Embedded
price escalation features in a long-term
supplier contract
    
    
    1,269
    
    
    
    Embedded prepayment and early redemption options on
senior notes
    
    
    
    
    
    
    (4,270
    )Total fair value of derivative financial instruments
    
    
    97,739
    
    
    
    (4,270
    )Less: current portion
    
    
    4,720
    
    
    
    $
    93,019
    
    
    $
    (4,270
    )
 DerivativefinancialApril 1, 2007
    
    instruments
    
    
    Senior notesCross-currency and interest rate swaps
    
    $
    60,863
    
    
    $
    Embedded
price escalation features in a long-term
revenue construction contract
    
    
    7,246
    
    
    
    Embedded
price escalation features in a long-term
supplier contract
    
    
    2,474
    
    
    
    Embedded prepayment and early redemption options on
senior notes
    
    
    
    
    
    
    (8,519
    )Total fair value of derivative financial instruments
    
    
    70,583
    
    
    
    (8,519
    )Less: current portion
    
    
    (2,669
    )
    
    
    $
    67,914
    
    
    $
    (8,519
    )
 21.
    
    Other information
 a)
    
    Supplemental cash flow information
 Year ended March 31,2008
    
    
    2007
    
    
    2006Cash paid during the year for:Interest
    
    $
    29,658
    
    
    $
    34,061
    
    
    $
    29,978Income taxes
    
    
    80
    
    
    
    342
    
    
    
    617Cash received during the year for:Interest
    
    
    345
    
    
    
    1,156
    
    
    
    530Income taxes
    
    
    300
    
    
    
    160
    
    
    
    2Non-cash transactions:Acquisition of plant and equipment by
means of capital leases
    
    
    8,829
    
    
    
    4,653
    
    
    
    5,910Lease inducements
    
    
    1,045
    
    
    
    
    
    
    
    Issue of Series A preferred shares
    
    
    
    
    
    
    
    
    
    
    321
 34




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 b)
    
    Net change in non-cash working capital
 Year ended March 31,2008
    
    
    2007
    
    
    2006Operating activities:Accounts receivable
    
    $
    (59,312
    )
    
    $
    (25,278
    )
    
    $
    (9,396
    )Allowance for doubtful accounts
    
    
    654
    
    
    
    18
    
    
    
    (94
    )Unbilled revenue
    
    
    (2,174
    )
    
    
    (39,339
    )
    
    
    (2,083
    )Inventory
    
    
    46
    
    
    
    (99
    )
    
    
    77Prepaid expenses and deposits
    
    
    2,632
    
    
    
    (10,133
    )
    
    
    66Other assets
    
    
    4,616
    
    
    
    (9,855
    )
    
    
    (163
    )Accounts payable
    
    
    21,430
    
    
    
    32,073
    
    
    
    (6,396
    )Accrued liabilities
    
    
    21,685
    
    
    
    (1,429
    )
    
    
    9,402Billings in excess of costs
incurred and estimated
earnings on uncompleted
contracts
    
    
    1,773
    
    
    
    (2,125
    )
    
    
    3,799(8,650
    )
    
    
    (56,167
    )
    
    
    (4,788
    )Investing activities:Accounts payable
    
    $
    (2,835
    )
    
    $
    7,922
    
    
    $
    1,391(2,835
    )
    
    
    7,922
    
    
    
    1,391
 22.
    
    Segmented information
 a)
    
    General overviewThe Company operates in the following reportable business segments, which follow the
organization, management and reporting structure within the Company.
 
    
    Heavy Construction and Mining:The Heavy Construction and Mining 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 Canada.
    
    Piling:The Piling segment provides deep foundation construction and design build
services to a variety of industrial and commercial customers throughout Western
Canada.
    
    Pipeline:The Pipeline segment provides both small and large diameter pipeline
construction and installation services to energy and industrial clients
throughout Western Canada.
 Certain business units of the Company have been aggregated into the Heavy Construction
and Mining segment as they have similar economic characteristics. These business units
are considered to have similar economic characteristics based on
similarities in the nature of the services provided, the customer base and the
similarities in the production process and the resources used to provide these
services.
 35




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 b)
    
    Results by business segment:
 HeavyFor the year ended
    
    ConstructionMarch 31, 2008
    
    and Mining
    
    
    Piling
    
    
    Pipeline
    
    
    TotalRevenues from external customers
    
    $
    626,582
    
    
    $
    162,397
    
    
    $
    200,717
    
    
    $
    989,696Depreciation of plant and equipment
    
    
    23,761
    
    
    
    3,340
    
    
    
    969
    
    
    
    28,070Segment profits
    
    
    105,378
    
    
    
    45,362
    
    
    
    25,465
    
    
    
    176,205Segment assets
    
    
    500,535
    
    
    
    110,288
    
    
    
    88,143
    
    
    
    698,966Expenditures for segment plant and
equipment
    
    
    37,916
    
    
    
    12,945
    
    
    
    5,229
    
    
    
    56,090
 HeavyFor the year ended
    
    ConstructionMarch 31, 2007
    
    and Mining
    
    
    Piling
    
    
    Pipeline
    
    
    TotalRevenues from external customers
    
    $
    473,179
    
    
    $
    109,266
    
    
    $
    47,001
    
    
    $
    629,446Depreciation of plant and equipment
    
    
    21,885
    
    
    
    2,949
    
    
    
    946
    
    
    
    25,780Segment profits
    
    
    71,062
    
    
    
    34,395
    
    
    
    (10,539
    )
    
    
    94,918Segment assets
    
    
    467,315
    
    
    
    93,703
    
    
    
    66,118
    
    
    
    627,136Expenditures for segment plant and
equipment
    
    
    95,829
    
    
    
    8,940
    
    
    
    1,918
    
    
    
    106,687
 HeavyFor the year ended
    
    ConstructionMarch 31, 2006
    
    and Mining
    
    
    Piling
    
    
    Pipeline
    
    
    TotalRevenues from external customers
    
    $
    366,721
    
    
    $
    91,434
    
    
    $
    34,082
    
    
    $
    492,237Depreciation of plant and equipment
    
    
    10,118
    
    
    
    2,543
    
    
    
    1,352
    
    
    
    14,013Segment profits
    
    
    50,730
    
    
    
    22,586
    
    
    
    8,996
    
    
    
    82,312Segment assets
    
    
    327,850
    
    
    
    84,117
    
    
    
    48,804
    
    
    
    460,771Expenditures for segment plant and
equipment
    
    
    25,090
    
    
    
    880
    
    
    
    82
    
    
    
    26,052
 36




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 c)
    
    Reconciliations
 i.
    
    Income (loss) before income taxes
 Year ended March 31,2008
    
    
    2007
    
    
    2006Total profit for reportable segments
    
    $
    176,205
    
    
    $
    94,918
    
    
    $
    82,312Unallocated corporate expenses:General and administrative expense
    
    
    (69,670
    )
    
    
    (39,769
    )
    
    
    (30,903
    )Loss (gain) on disposal of plant and equipment
    
    
    (179
    )
    
    
    (959
    )
    
    
    733Amortization of intangibles
    
    
    (1,071
    )
    
    
    (582
    )
    
    
    (730
    )Interest expense
    
    
    (27,019
    )
    
    
    (37,249
    )
    
    
    (68,776
    )Foreign exchange gain
    
    
    25,442
    
    
    
    5,044
    
    
    
    13,953Realized and unrealized loss (gain) on
derivative financial instruments
    
    
    (34,075
    )
    
    
    196
    
    
    
    (14,689
    )Gain on repurchase of NACG Preferred Corp.
preferred shares
    
    
    
    
    
    
    9,400
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    (10,935
    )
    
    
    (2,095
    )Other income
    
    
    418
    
    
    
    904
    
    
    
    977Unallocated equipment costs (1)
    
    
    (12,888
    )
    
    
    (2,482
    )
    
    
    (1,986
    )Income (loss) before income taxes
    
    $
    57,163
    
    
    $
    18,486
    
    
    $
    (21,204
    )
  ii.
    
    Total assets
 March 31, 2008
    
    
    March 31, 2007Total assets for reportable segments
    
    $
    698,966
    
    
    $
    621,636Corporate assets:Cash
    
    
    32,871
    
    
    
    7,895Plant & equipment
    
    
    26,785
    
    
    
    18,794Future
income taxes
    
    
    26,416
    
    
    
    28,957Other
    
    
    8,560
    
    
    
    33,454Total corporate assets
    
    
    94,632
    
    
    
    89,100Total assets
    
    $
    793,598
    
    
    $
    710,736
 The Companys goodwill is assigned to the Mining and Site Preparation, Piling and
Pipeline segments in the amounts of $125,447, $41,872, and $32,753, respectively.All of the Companys assets are located in Canada and activities are carried out throughout the year.
 iii.
    
    Depreciation of plant and equipment
 Year ended March 31,2008
    
    
    2007
    
    
    2006Total depreciation for reportable segments
    
    $
    28,070
    
    
    $
    25,780
    
    
    $
    14,013Depreciation for corporate assets
    
    
    8,659
    
    
    
    5,254
    
    
    
    7,712Total depreciation
    
    $
    36,729
    
    
    $
    31,034
    
    
    $
    21,725
 37




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 iv.
    
    Capital expenditures for plant and equipment
 Year ended March 31,2008
    
    
    2007
    
    
    2006Total capital expenditures for
reportable segments
    
    $
    56,090
    
    
    $
    106,687
    
    
    $
    26,052Capital expenditures for corporate assets
    
    
    1,689
    
    
    
    3,332
    
    
    
    2,800Total capital expenditures
    
    $
    57,779
    
    
    $
    110,019
    
    
    $
    28,852
 d)
    
    CustomersThe following customers accounted for 10% or more of total revenues:
 Year ended March 31,2008
    
    2007
    
    2006Customer A
    
    
    23
    %
    
    
    16
    %
    
    
    5
    %Customer B
    
    
    19
    %
    
    
    0
    %
    
    
    0
    %Customer C
    
    
    13
    %
    
    
    17
    %
    
    
    32
    %Customer D
    
    
    13
    %
    
    
    12
    %
    
    
    16
    %Customer E
    
    
    13
    %
    
    
    10
    %
    
    
    6
    %Customer F
    
    
    4
    %
    
    
    10
    %
    
    
    2
    %Customer G
    
    
    0
    %
    
    
    4
    %
    
    
    10
    %
 The revenue by major customer was earned in Heavy Construction and Mining, Piling
and Pipeline segments.
 23.
    
    GuaranteeAt March 31, 2008, in connection with a heavy equipment financing agreement, the
Company has guaranteed $18.5 million of debt owed to the equipment manufacturer by a
third party finance company. The Companys guarantee of this indebtedness will expire
when the equipment is commissioned, which is expected to be November 1, 2008. The
Company has determined that the fair value of this financial instrument at inception
and at March 31, 2008 was not significant.24.
    
    Related Party TransactionsThe Company may receive consulting and advisory services provided by the Sponsors
(principals or employees of such Sponsors are directors of the Company) with respect to
the organization of the companies, employee benefit and compensation arrangements, and
other matters, and no fee is charged for these consulting and advisory services.In order for the Sponsors to provide such advice and consulting we provide reports,
financial data and other information. This permits them to consult with and advise our
management on matters relating to our operations, company affairs and finances. In
addition this permits them to visit and inspect any of our
 38




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 properties and facilities.
The transactions are in the normal course of operations and are measured at the
exchange amount of consideration established and agreed to by the related parties.Prior to the reorganization and IPO described in Note 2, the Company had a consulting
and advisory services agreement with the Sponsors, under which the Company and certain
of its subsidiaries received consulting and advisory services with respect to the
organization of the companies, employee benefit and compensation arrangements, and
other matters. An advisory fee of $400 for the year ended March 31, 2007 (2006 -
$400) was paid for these services and was recorded as part of general and
administrative costs in the consolidated statement of operations.On November 28, 2006, upon closing of the IPO described in Note 2, the consulting and
advisory services agreement was cancelled. The consideration paid by the Company on
the closing of the offering to cancel the agreement was $2,000, which was recorded as
part of general and administrative expense during the year ended March 31, 2007. In
addition, the Sponsors also received a fee of $854, 0.5% of the aggregate gross
proceeds to the Company from the IPO, which was recorded as a share issue cost.Pursuant to several office lease agreements, for the year ended March 31, 2007 the
Company paid $572 (2006  $836) to a company owned, indirectly and in part, by one of
the directors. Effective November 28, 2006 the director resigned from the board.
Accordingly, the lease agreement is no longer considered to be with a related party.During the year ended March 31, 2006, 75,000 NAEPI Series B preferred shares (on a
post-split basis  note 18(a)(iii)) were issued to the above Sponsor group in
exchange for cash of $7.5 million (note 18(a)).All related party transactions described above were measured at the exchange amount,
being the consideration established and agreed to by the related parties.25.
    
    Financial instruments and risk management
 a)
    
    Fair value of financial instrumentsThe fair values of the Companys cash and cash equivalents, accounts receivable,
unbilled revenue, accounts payable and accrued liabilities approximate their
carrying amounts due to the relatively short periods to maturity for the
instruments.The fair value of amounts due under the revolving credit facility and capital
lease obligations are based on management estimates which are determined by
discounting cash flows required under the
instruments at the interest rate currently estimated to be available for loans
with similar terms. Based on these estimates, the fair value of amounts due under
the revolving credit facility and the Companys capital lease obligations as at
March 31, 2008 and March 31, 2007 are not significantly different than their
carrying values. The fair value of the 83/4% notes, based upon their year end
trading value as at March 31, 2008, is $209,178 (March 31, 2007  $239,803)
compared to their carrying value of $198,245 (March 31, 2007  $230,580).The methods used to determine fair value of embedded
derivatives are described in note 3(q)(i) and the
method used to determine fair value of cross-currency and interest rate swaps is disclosed in
note 25(b)(i).
 39




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 b)
    
    Risk management
 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.
 i.
    
    Foreign currency risk and derivative financial instruments
 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 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 issue 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
economically converting the 8.75% rate payable on the 83/4% senior notes into a
fixed rate of 9.765% for the duration that the 83/4% senior notes are outstanding.
On May 19, 2005 in connection with the Companys new revolving credit facility at
that time, this fixed rate was increased to 9.889%. These derivative financial
instruments were not designated as a hedge for accounting purposes. At March 31,
2008, the Companys derivative financial instruments are carried on the
consolidated balance sheets at their fair value of $97,739 (March 31, 2007 -
$60,863). 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 March 31, 2008, 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 Canadian $263 million.The Company is also exposed to foreign currency risk on U.S. dollar operating
lease commitments as the Company has not entered into forward foreign exchange
contracts or similar instruments to manage this foreign currency exposure.
 ii.
    
    Interest rate risk
 The Company is exposed to interest rate risk on the revolving credit facility and
its capital lease obligations. The Company does not use derivative financial
instruments to reduce its exposure to these risks.
 iii.
    
    Credit risk
 The Company is exposed to credit risk in the
event of non-payment by customers in connection with its accounts receivable and
unbilled revenue. Reflective of its normal business, a majority of the Companys accounts receivable
are due from large companies operating in the resource sector. The Company
regularly monitors the activities and
balances in these accounts to manage its credit risk and to assess the need for an
allowance for any doubtful accounts.At March 31, 2008 and March 31, 2007, the following customers represented 10% or
more of accounts receivable and unbilled revenue:
 March 31,
    
    
    March 31,2008
    
    
    2007Customer A
    
    
    19
    %
    
    
    10
    %Customer B
    
    
    18
    %
    
    
    0
    %Customer C
    
    
    11
    %
    
    
    7
    %Customer D
    
    
    11
    %
    
    
    0
    %Customer E
    
    
    9
    %
    
    
    9
    %
 40




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##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 26.
    
    CommitmentsThe annual future minimum lease payments in respect of operating leases for the next
five years and thereafter are as follows:
 For the year ending March 31,2009
    
    $
    31,0902010
    
    
    26,0402011
    
    
    16,5272012
    
    
    10,8712013 and thereafter
    
    
    11,510$
    96,038
 27.
    
    Employee benefit plansThe 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 year ended March 31, 2008
were $789 (2007  $645; 2006  $409).28.
    
    Stock-based compensation planUnder the 2004 Amended and Restated Share Option Plan, directors, officers, employees
and certain service providers to the Company are eligible to receive stock options to
acquire voting common shares in the Company. Each stock option provides the right to
acquire one common share in the Company and expires ten years from the grant date 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 percent vest on each subsequent anniversary date.
 Weighted averageNumber of
    
    
    exercise priceoptions (1)
    
    
    $ per share (1)Outstanding at March 31, 2005
    
    
    1,524,840
    
    
    $
    5.00Granted
    
    
    745,520
    
    
    
    5.00Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (204,000
    )
    
    
    (5.00
    )Outstanding at March 31, 2006
    
    
    2,066,360
    
    
    
    5.00Granted
    
    
    315,520
    
    
    
    11.99Exercised
    
    
    (27,760
    )
    
    
    (5.00
    )Forfeited
    
    
    (207,280
    )
    
    
    (5.00
    )Outstanding at March 31, 2007
    
    
    2,146,840
    
    
    
    6.03Granted
    
    
    481,600
    
    
    
    13.80Exercised
    
    
    (324,816
    )
    
    
    (5.00
    )Cancelled (2)
    
    
    (62,760
    )
    
    
    (5.00
    )Forfeited
    
    
    (204,500
    )
    
    
    (11.56
    )Outstanding at March 31, 2008
    
    
    2,036,364
    
    
    $
    7.54
 41




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 (1)
    
    The number of options and the weighted average exercise price per
share have been retroactively adjusted to reflect the impact of the 20-for-1 share
split disclosed in note 18(b).(2)
    
    Options settled for cash.
 The following table summarizes information about stock options outstanding at March
31, 2008:
 Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageaverage
    
    
    exercise
    
    
    
    
    
    
    exerciseExercise price
    
    Number
    
    
    remaining life
    
    
    price ($)
    
    
    Number
    
    
    price ($)$5.00
    
    
    1,478,704
    
    
    7.3 years
    
    $
    5.00
    
    
    
    784,640
    
    
    $
    5.00$16.75
    
    
    87,760
    
    
    9.0 years
    
    $
    16.75
    
    
    
    17,552
    
    
    $
    16.75$13.50
    
    
    305,400
    
    
    8.5 years
    
    $
    13.50
    
    
    
    2,000
    
    
    $
    13.50$15.37
    
    
    89,500
    
    
    9.7 years
    
    $
    15.37
    
    
    
    
    
    
    $
    $13.21
    
    
    75,000
    
    
    9.8 years
    
    $
    13.21
    
    
    
    
    
    
    $
    2,036,364
    
    
    7.9 years
    
    $
    7.54
    
    
    
    804,192
    
    
    $
    5.30
 At March 31, 2008, the weighted average remaining contractual life of outstanding
options is 7.6 years (March 31, 2007 
7.7 years). The Company recorded $1,801 of
compensation expense related to stock options in the year ended March 31, 2008 (2007 -
$2,101; 2006  $923) with such amount being credited to
contributed surplus. At March 31, 2008 the total compensation costs
related to nonvested awards not yet recognized was $5,553 and these
costs are expected to be recognized over a weighted average period of
3.0 years.The fair value of each option granted by the Company was estimated on the grant date
using the Black-Scholes option-pricing model with the following assumptions:
 Year ended March 31,2008
    
    
    2007
    
    
    2006Number of options granted (1)
    
    
    481,600
    
    
    
    315,520
    
    
    
    745,520Weighted average fair value per option granted ($) (1)
    
    
    4.92
    
    
    
    9.91
    
    
    
    3.41Weighted average assumptionsDividend yield
    
    
    nil
    %
    
    
    nil
    %
    
    
    nil
    %Expected volatility
    
    
    38.80
    %
    
    
    24.73
    %
    
    
    nil
    %Risk-free interest rate
    
    
    4.25
    %
    
    
    4.30
    %
    
    
    4.13
    %Expected life (years)
    
    
    6.5
    
    
    
    6.4
    
    
    
    10
 (1)
    
    The number of options and the weighted average fair value per
option granted have been retroactively adjusted to reflect the impact of the 20-for-1
share split disclosed in note 18(b).
 As a result of the filing of a preliminary prospectus on July 21, 2006 with the
various Canadian and U.S. securities commissions in preparation for the public sale of
common shares, the Company is no longer eligible to use the minimum value method for
measuring stock-based compensation. Accordingly, the Company considered the effect of
expected volatility in its assumptions using the Black-Scholes option pricing model
for options granted after this date. The Company determined its expected volatility
based on a
 42




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 statistical analysis of historical volatility for a peer group of
companies, which was prepared by an independent valuation firm.During the year ended March 31, 2007, the Company offered to accelerate the vesting of
222,080 options held by certain members of its Board of Directors, providing for the
options to become immediately exercisable on the condition that such options were
exercised by September 30, 2006. On July 31, 2006, 27,760 options were exercised
pursuant to this offer resulting in additional compensation cost of $24 for the year
ended March 31, 2007. The vesting period remained unchanged for stock options held by
Directors who did not accept the Companys offer.On October 6, 2006, the Company approved the Amended and Restated 2004 Share Option
Plan. The amended plan was approved by the shareholders on November 3, 2006 and
became effective on the closing of the IPO described in note 2. Option grants under
the amended option plan may be made to directors, officers, employees and service
providers selected by the Compensation Committee of the Companys Board of Directors.
The Compensation Committee may provide that any options granted will vest immediately
or in increments over a period of time. Options to be granted under the amended
option plan will have an exercise price of not less than the volume weighted average
trading price of the common shares on the Toronto Stock Exchange or the New York Stock
Exchange at the time of grant. The amended option plan provides that up to 10% of the
Companys issued and outstanding common shares from time to time may be reserved for
issue or issued from treasury under the amended option plan.In the event of certain change of control events as defined in the amended option
plan, all outstanding options will become immediately vested and exercisable. The
amended option plan provides that the Companys Board of Directors can make certain
specified amendments to the option plan subject to receipt of shareholder and
regulatory approval, and further authorizes the Board of Directors to make all other
amendments to the plan, subject only to regulatory approval but without shareholder
approval. The amendments the Board of Directors may make without shareholder approval
include amendments of a housekeeping nature, changes to the vesting provisions of an
option or the option plan, changes to the termination provisions of an option or the
option plan which do not entail an extension beyond the original expiry date, the
discontinuance of the option plan, and the addition of provisions relating to phantom
share units, such as restricted share units and deferred share units which result in
participants receiving cash payments, and the terms governing such features.The amended option plan provides that each option includes a cashless exercise
alternative which provides a holder of an option with the right to elect to receive
cash in lieu of purchasing the number of shares under the option. Notwithstanding
such right, the amended option plan provides that the Company may elect, at its sole
discretion, to net settle the option in common stock.All outstanding options granted under the 2004 Stock Option Plan remained outstanding
after the amended and restated plan became effective.Directors deferred stock unit plan:On November 27, 2007, the Company approved a Directors Deferred Stock Unit (DDSU)
Plan, which became effective January 1, 2008. Under the DDSU Plan, non-employee or
officer directors of the Company shall receive 50% of their annual fixed remuneration
(which is included in general and administrative expenses in the consolidated
statement of operations) in the form of DDSUs and may elect to receive all or a part
of their annual fixed remuneration in excess of 50% in the form of DDSUs. The DDSUs
vest immediately upon grant and are redeemable, in cash, equal to the difference
between the market value of the Companys common stock at maturity and the market
value of the Companys common stock on the grant date (maturity occurs when the
director resigns or retires). DDSUs must be redeemed within 60 days
 43




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 following maturity. Directors, who are not US taxpayers, may elect to defer the
maturity date until a date no later than December 1st of the calendar year following
the year in which the actual maturity date occurred. As at March 31, 2008, an expense
and liability of $190 was recorded relating to 11,807 outstanding units that were
granted during the year.29.
    
    Comparative figuresThe comparative consolidated financial statements have been reclassified from
statements previously presented to conform to the presentation of the current year
consolidated financial statements.30.
    
    United States generally accepted accounting principlesThese consolidated financial statements have been prepared in accordance with Canadian
GAAP, which differs in certain respects from U.S. GAAP. If U.S. GAAP were employed,
the Companys net income (loss) would be adjusted as follows:
 Year ended March 31,(restated
 note 30(d))2008
    
    
    2007
    
    
    2006Net income
(loss)  as reported under Canadian GAAP
    
    $
    39,784
    
    
    $
    21,079
    
    
    $
    (21,941
    )Capitalized interest on assets held for construction (a)
    
    
    
    
    
    
    249
    
    
    
    847Depreciation of capitalized interest (a)
    
    
    (131
    )
    
    
    (143
    )
    
    
    Differences
in accounting for financing costs, discounts and premiums (b)
    
    
    (1,049
    )
    
    
    1,246
    
    
    
    590Difference
in fair value of stock options under US GAAP (c)
    
    
    (136
    )
    
    
    
    
    
    
    Unrealized
(loss) gain on embedded price escalation features in a long-term
revenue construction contract and supplier contract (d)
    
    
    
    
    
    
    526
    
    
    
    (3,449
    )Unrealized
(loss) gain on embedded redemption rights on senior
notes (d)
    
    
    4,000
    
    
    
    348
    
    
    
    (484
    )Difference between accretion of NAEPI Series B preferred shares under
Canadian GAAP and U.S. GAAP (e)
    
    
    
    
    
    
    249
    
    
    
    Income (loss) before income taxes
    
    
    42,468
    
    
    
    23,554
    
    
    
    (24,437
    )Income taxes:Deferred income taxes (f)
    
    
    (119
    )
    
    
    1,816
    
    
    
    Net income (loss)  U.S. GAAP
    
    $
    42,349
    
    
    $
    25,370
    
    
    $
    (24,437
    )Net income (loss) per share  basic  U.S. GAAP (1)
    
    $
    1.18
    
    
    $
    1.04
    
    
    $
    (1.32
    )Net income (loss) per share  diluted  U.S. GAAP (1)
    
    $
    1.15
    
    
    $
    1.00
    
    
    $
    (1.32
    )
 (1)
    
    Basic net income (loss) per share  U.S. GAAP and diluted net income
(loss) per share  U.S. GAAP have been retroactively adjusted to reflect the
Companys 20-for-1 share split effected on November 3, 2006 (see note 18(a)).
 The cumulative effect of material differences between Canadian and U.S. GAAP on the
consolidated shareholders equity of the Company is as follows:
 44




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 (Restated
 note 30(d))March 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2006Shareholders equity (as reported)  Canadian GAAP
    
    $
    283,364
    
    
    $
    244,278
    
    
    $
    18,111Capitalized interest (a)
    
    
    1,096
    
    
    
    1,096
    
    
    
    847Depreciation of capitalized interest (a)
    
    
    (274
    )
    
    
    (143
    )
    
    
    Difference
in accounting for finance costs, discounts and premiums (b)
    
    
    6,217
    
    
    
    1,836
    
    
    
    590Unrealized
loss on embedded price escalation features in a long term revenue
construction contract and supplier contract (d)
    
    
    
    
    
    
    (9,720
    )
    
    
    (10,246
    )Unrealized
loss on embedded redemption rights on senior notes (d)
    
    
    (4,655
    )
    
    
    (136
    )
    
    
    (484
    )Excess of fair value of amended NAEPI Series B preferred
shares over carrying value of original NAEPI Series B
preferred shares (e)
    
    
    
    
    
    
    
    
    
    
    (3,707
    )Deferred
income taxes (f)
    
    
    (1,389
    )
    
    
    1,816
    
    
    
    Shareholders equity  U.S. GAAP
    
    $
    284,359
    
    
    $
    239,027
    
    
    $
    5,111
 A continuity schedule of each component of the Companys shareholders equity under
U.S. GAAP for the year ended March 31, 2008 is as follows:
 Common
    
    
    Contributedshares
    
    
    surplus
    
    
    Deficit
    
    
    TotalMarch 31, 2005, as previously reported
    
    $
    92,800
    
    
    $
    634
    
    
    $
    (54,605
    )
    
    $
    38,829Restatement to record liability for
embedded price escalation features in a
long-term revenue construction contract and supplier contract (d)
    
    
    
    
    
    
    
    
    
    
    (6,797
    )
    
    
    (6,797
    )March 31, 2005, as restated
    
    $
    92,800
    
    
    $
    634
    
    
    $
    (61,402
    )
    
    $
    32,032Net loss, as restated
    
    
    
    
    
    
    
    
    
    
    (24,437
    )
    
    
    (24,437
    )Stock based
compensation
    
    
    
    
    
    
    923
    
    
    
    
    
    
    
    923Share issue
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    300Excess of fair value of amended NAEPI
Series B preferred shares over carrying
value of original NAEPI Series B
preferred shares (e)
    
    
    
    
    
    
    
    
    
    
    (3,707
    )
    
    
    (3,707
    )March 31, 2006
    
    $
    93,100
    
    
    $
    1,557
    
    
    $
    (89,546
    )
    
    $
    5,111Net income, as restated
    
    
    
    
    
    
    
    
    
    
    25,370
    
    
    
    25,370Stock based
compensation
    
    
    
    
    
    
    2,101
    
    
    
    
    
    
    
    2,101Issued upon exercise of stock options
    
    
    139
    
    
    
    
    
    
    
    
    
    
    
    139Share issues
    
    
    171,165
    
    
    
    
    
    
    
    
    
    
    
    171,165Share issue costs
    
    
    (12,915
    )
    
    
    
    
    
    
    
    
    
    
    (12,915
    )Repurchase of common shares
    
    
    (25
    )
    
    
    
    
    
    
    (59
    )
    
    
    (84
    )Conversion of NAEPI Series B preferred
shares (e)
    
    
    48,140
    
    
    
    
    
    
    
    
    
    
    
    48,140Reclassification on exercise of stock
options
    
    
    52
    
    
    
    (52
    )
    
    
    
    
    
    
    March 31, 2007  U.S. GAAP
    
    $
    299,656
    
    
    $
    3,606
    
    
    $
    (64,235
    )
    
    $
    239,027Net income
    
    
    
    
    
    
    
    
    
    
    42,349
    
    
    
    42,349Stock based
compensation (c)
    
    
    
    
    
    
    1,937
    
    
    
    
    
    
    
    1,937Reclassification on exercise of stock
options
    
    
    611
    
    
    
    (611
    )
    
    
    
    
    
    
    Cash settlement of stock options
    
    
    
    
    
    
    (581
    )
    
    
    
    
    
    
    (581
    )Issued upon the exercise of stock options
    
    
    1,627
    
    
    
    
    
    
    
    
    
    
    
    1,627March 31, 2008  U.S. GAAP
    
    $
    301,894
    
    
    $
    4,351
    
    
    $
    (21,886
    )
    
    $
    284,359
 45




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 The areas of material difference between Canadian and U.S. GAAP and their impact on
the Companys consolidated financial statements are described below:
 a)
    
    Capitalization of interestU.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. The capitalized
amount is subject to depreciation in accordance with the Companys policies when
the asset is placed into service.b)
    
    Financing costs, discounts and premiums
 Prior to April 1, 2007, transaction costs incurred in connection with the Companys senior
notes were recorded as a deferred asset under Canadian GAAP and these deferred financing costs were
being amortized on a straight-line basis over the term of the debt. For US GAAP purposes, these
deferred financing costs are being amortized over the term of the related debt using the effective
interest method in accordance with Accounting Principles Board Opinion No. 21 (APB 21).Effective April 1, 2007, the Company adopted CICA Handbook Section 3855, Financial Instruments 
Recognition and Measurement on a retrospective basis without restatement as described in note
3(q)(i). Although Section 3855 also requires the use of the effective interest method to account
for the amortization of finance costs, the requirement to bifurcate the issuers early prepayment
option on issuance of the debt (which is not required under US GAAP)
resulted in an additional premium that is being amortized over the term of the debt under Canadian GAAP. In addition,
foreign denominated transaction costs, discounts and premiums are considered as part of the carrying value of the related
financial liability under Canadian GAAP and are subject to foreign currency gains or losses
resulting from periodic translation procedures as they are treated as a monetary item under
Canadian GAAP. Under US GAAP, foreign denominated transaction costs are considered non-monetary and are not
subject to foreign currency gains and losses resulting from periodic translation procedures.In connection with the adoption of Section 3855, transaction costs incurred in connection with the
Companys revolving credit facility of $1,622 were reclassified from deferred financing costs to
intangible assets on April 1, 2007 under Canadian GAAP and these costs continue to be amortized on
a straight-line basis over the term of the facility. Under U.S. GAAP, the Company continues to
amortize these transaction costs over the stated term of the related debt using the effective
interest method under APB 21.
 46




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 c)
    
    Stock-based compensationUp until April 1, 2006, the Company followed the provisions of Statement of
Financial Accounting Standards No. 123, Stock-Based Compensation for U.S. GAAP
purposes. As the Company uses the fair value method of accounting for all
stock-based compensation payments under Canadian GAAP there were no differences
between Canadian and U.S. GAAP prior to April 1, 2006. On April 1, 2006, the
Company adopted the provisions of Statement of Financial Accounting Standards No.
123(R), Share-Based Payment (SFAS 123R). As the Company used the minimum value
method for purposes of complying with Statement of Financial Accounting Standards
No. 123, it was required to adopt SFAS 123(R) prospectively. Under Canadian GAAP
the Company was permitted to exclude volatility from the
determination of the fair value of stock options granted until the
filing of its initial registration statement relating to the initial
public offering of voting shares on July 21, 2006. As a result,
for options issued between April 1, 2006 and July 21, 2006,
there is a difference between Canadian and U.S. GAAP relating to the
determination of the fair value of options granted.d)
    
    Derivative financial instrumentsEffective April 1, 2007, the Company adopted the CICA Handbook Section 3855,
Financial Instruments  Recognition and Measurement, and Handbook Section 3865,
Hedges.Under Canadian GAAP, the Company determined that the issuers early prepayment
option included in the senior notes should be bifurcated from the host contract,
along with a contingent embedded derivative in the senior notes that provide for
accelerated redemption by the holders in certain instances. These embedded
derivatives were measured at fair value at the inception of the senior notes and the
residual amount of the proceeds was allocated to the debt. Changes in fair value of
the embedded derivatives are recognized in net income and the carrying amount of the
senior notes is accreted to par value over the term of the notes using the effective
interest method and is recognized as interest expense as discussed in
b) above. Prior to April 1, 2007 under
Canadian GAAP, separate accounting of embedded derivatives from the host contract
was not permitted by EIC-117.
 47




---



##### 



NORTH AMERICAN ENERGY PARTNERS INC.
 Under U.S. GAAP, Statement of Financial Accounting Standard No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133) establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts and debt instruments) be
recorded in the balance sheet as either an asset or liability measured at its fair
value. The contingent embedded derivative in the senior notes that provide for
accelerated redemption by the holders in certain instances met the criteria for
bifurcation from the debt contract and separate measurement at fair value. The
embedded derivatives have been measured at fair value and changes
in fair value recorded in net income for all
periods presented. The issuers early prepayment option included in the senior
notes does not meet the criteria as an embedded derivative under SFAS 133 and was
not bifurcated from the host contract and measured at fair value resulting in a U.S.
GAAP difference for all periods presented.On adoption of CICA Handbook Section 3855, Financial Instruments  Recognition
and Measurement, the Company reviewed the accounting treatment of a number of
outstanding contracts and determined that a price escalation feature in a revenue
construction contract and a supplier contract entered into prior to April 1, 2007 contained embedded
derivatives that are not closely related to the host contract under both Canadian and
U.S. GAAP. The Company recorded the fair value of these embedded
derivatives on April 1, 2007 of $9,720, with a corresponding increase in opening deficit of
$6,950, net of future income taxes of $2,770 for Canadian GAAP purposes. The
Company has restated its U.S. GAAP reconciliation to account for these embedded
derivatives since inception of the related contracts resulting in a reduction of
shareholders equity under U.S. GAAP at April 1, 2005 of
$6,797, net of deferred
income taxes of nil. This also resulted in an increase in net loss of
$3,449, net of deferred income taxes of nil for the year ended
March 31, 2006 and an increase in net income of $3,296 for the
year ended March 31, 2007 including a deferred income tax
recovery of $2,770.e)
    
    NAEPI Series B Preferred SharesPrior to the modification of the terms of the NAEPI Series B preferred shares March
30, 2006, there were no differences between Canadian GAAP and U.S. GAAP related to
the NAEPI Series B preferred shares. As a result of the modification of terms of
NAEPIs Series B preferred shares , under Canadian GAAP,
NACG continued to
classify the NAEPI Series B preferred shares as a liability and was accreting the
carrying amount of $42.2 million on the amendment date (March 30, 2006) to their
December 31, 2011 redemption value of $69.6 million using the effective interest
method. Under U.S. GAAP, NACG recognized the fair value of the amended NAEPI
Series B preferred shares as minority interest as such amount was recognized as
temporary equity in the accounts of NAEPI in accordance with EITF Topic D-98 and
recognized a charge of $3.7 million to retained earnings for the difference between
the fair value and the carrying amount of the Series B preferred shares on the
amendment date. Under U.S. GAAP, NACG was accreting the initial fair value
of the amended NAEPI Series B preferred shares of $45.9 million recorded on their
amendment date (March 30, 2006) to the December 31, 2011 redemption value of $69.6
million using the effective interest method, which
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NORTH AMERICAN ENERGY PARTNERS INC.
 was consistent with the treatment of the NAEPI Series B preferred shares as
temporary equity in the financial statements of NAEPI. The accretion charge was
recognized by NACG as a charge to minority interest (as opposed to retained earnings in the
accounts of NAEPI) under US GAAP and interest expense in NACGs financial
statements under Canadian GAAP.On November 28, 2006, NACG exercised a call option to acquire all of the
issued and outstanding NAEPI Series B preferred shares in exchange for 7,524,400
common shares of NACG. For Canadian GAAP purposes, NACG recorded the
exchange by transferring the carrying value of the NAEPI Series B preferred shares
on the exercise date of $44,682 to common shares. For U.S. GAAP purposes, the
conversion has been accounted for as a combination of entities under common control
as all of the shareholders of the NAEPI Series B preferred shares are also common
shareholders of NACG resulting in the reclassification of the carrying value
of the minority interest on the exercise date of $48,140 to common shares.f)
    
    Other mattersThe tax effects of temporary differences under Canadian GAAP are described as future
income taxes in these financial statements whereas such amounts are described as
deferred income taxes under U.S. GAAP.g)
    
    United States accounting pronouncements recently adoptedIn June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN 48) which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. This Interpretation also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition requirements. FIN 48 was
effective for the Companys 2008 fiscal year. The adoption of this standard did not
have a material impact on the Companys financial statements and disclosures required
under the standard are provided in note 17 to the financial statements.In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of
Settlement in FASB Interpretation No. 48, which provides guidance on how an
enterprise should determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax benefits. This FASB Staff
Position is effective upon the initial adoption of FIN 48. The adoption of this
standard did not have a material impact on the Companys financial statements.Statement of Financial Accounting Standards No. 155, Accounting for Certain
Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140 (SFAS
155) was issued February 2006. This Statement is effective for all financial
instruments acquired, issued, or subject to a remeasurement (new basis) event
occurring after the beginning of an entitys first fiscal year that begins after
September 15, 2006. The fair value election provided for in paragraph 4(c) of this
Statement may also be applied upon adoption of this Statement for hybrid financial
instruments that had been bifurcated
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NORTH AMERICAN ENERGY PARTNERS INC.
 under paragraph 12 of Statement 133 prior to the adoption of this Statement.
This states that an entity that initially recognizes a host contract and a derivative
instrument may irrevocably elect to initially and subsequently measure that hybrid
financial instrument, in its entirety, at fair value with changes in fair value
recognized in earnings. SFAS 155 is applicable for all financial instruments
acquired or issued in the Companys 2008 fiscal year. The adoption of this standard
did not have a material impact on the Companys financial statements.h)
    
    Recent United States accounting pronouncements not yet adoptedStatement of Financial Accounting Standards No. 157, Fair Value Measurement
(SFAS 157) was issued September 2006. The Statement provides guidance for using
fair value to measure assets and liabilities. The Statement also expands disclosures
about the extent to which companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair value measurement on
earnings. This Statement applies under other accounting pronouncements that require
or permit fair value measurements. This Statement does not expand the use of fair
value measurements in any new circumstances. Under this Statement, fair value refers
to the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants in the market in which the
entity transacts. SFAS 157 is effective for fair value measurements
and disclosures made by the Company in its fiscal year beginning on April 1, 2008.
The Company is currently evaluating the impact of this standard.Statement of Financial Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159) was issued in February 2007.
The statement permits entities to choose to measure many financial instruments and
certain other items at fair value, providing the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and liabilities differently
without the need to apply hedge accounting provisions. SFAS 159 is effective for
fiscal years beginning after November 15, 2007, specifically April 1, 2008 for the
Company. The Company is currently evaluating the
impact of this standard.Statement of Financial Accounting Standards No. 141R, Business Combinations
(SFAS 141R) was issued December 2007. SFAS No. 141R is effective for the fiscal year
beginning April 1, 2009. The statement establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree, and any goodwill. This statement establishes disclosure requirements that
will enable users of the Companys financial statements to evaluate the nature and
financial effects of the business combination. The Company is currently evaluating
the impact of this standard.Statement of Financial Accounting Standards No. 160 Noncontrolling Interests in
Consolidated Financial Statements-An Amendment of ARB No. 51
(SFAS 160), was issued
December 2007. SFAS 160 is effective for the fiscal year beginning April 1, 2009.
This statement changes the accounting and reporting for ownership interests in
subsidiaries held by parties other than the parent. These non-
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NORTH AMERICAN ENERGY PARTNERS INC.
 controlling interests are to be presented in the consolidated statement of
financial position within equity but separate from the parents equity. The amount
of consolidated net income attributable to the parent and to the non-controlling
interest is to be clearly identified and presented on the face of the consolidated
statement of operations. In addition, this statement establishes standards for a
change in a parents ownership interest in a subsidiary and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
statement also establishes reporting requirements for providing sufficient
disclosures that clearly identify and distinguish between the interests of the parent
and the interests of the non-controlling owners. The Company is currently evaluating
the impact of this standard.Statement of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement 133 (SFAS
161) was issued March 2008.  SFAS 161 is effective for the fiscal year beginning April 1, 2009.  The statement requires
companies with derivative instruments to disclose information about how and why a
company uses derivative instruments, how derivative instruments and related hedged
items are accounted for under Statement 133, and how derivative instruments and related
hedged items affect the companys financial position, financial performance and cash
flows.  The required disclosures include the fair value of derivative instruments and their
gains or losses in tabular format, information about credit-risk-related contingent features
in derivative agreements, counterparty credit risk, and the companys strategies and
objectives for using derivative instruments.  The Statement expands the current disclosure
framework in Statement 133.  The Company is currently evaluating the impact of this
standard.
 51