Newalta's (NWLTF) CEO Al Cadotte on Q2 2014 Results - Earnings Call Transcript

| About: Newalta Corp (NWLTF)
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Newalta Corporation (OTCPK:NWLTF) Q2 2014 Earnings Conference Call August 7, 2014 11:00 AM ET

Executives

Stephanie MacVicar - Director, Investor Relations

Al Cadotte - President, Chief Executive Officer, Director

Mike Borys - Chief Financial Officer, Executive Vice President

Linda Dietsche - Vice President - Finance

Analysts

Rupert Merer - National Bank

Jason Sawatzky - Altacorp Capital

Steve Arthur - RBC Capital Markets

Anoop Prihar - GMP Securities

Brian Butler - Stifel

Raveel Afzaal - Mackie Research Capital

Operator

Good morning ladies and gentleman. Welcome to the Newalta Second Quarter 2014 Conference Call and Webcast. I would now like to turn the call over to Ms. Stephanie MacVicar, Director, Investor Relations. Ms. MacVicar, please go ahead.

Stephanie MacVicar

Thanks, (Inaudible). Welcome to Newalta's conference call for the second quarter of 2014. On the call today, we have Al Cadotte, President and CEO, Mike Borys, Executive Vice President and CFO, Linda Dietsche, Vice President, Finance and Anne Plasterer, Executive Director, Investor Relation.

During the call today, Newalta may make forward-looking statements relating to expected future performance, such statements are based on current views and assumption and are subject to uncertainties, which are different to predict, including expected operating results, industry conditions, the availability of financing alternatives debt service and future capital needs.

Certain financial measures that do not have any standardized meaning prescribed by GAAP will be referred to during this presentation. These measures are identity and defined in Newalta's continuous disclosure document.

Please refer to our continuous disclosure documents as they identify factors which may cause actual results to different materially from any forward looking statements.

With that, I will handle it over to Anne.

Anne M Plasterer

Thank you, Stephanie. For the second quarter of 2014, strong contribution from our growth investments drove a year-over-year improvement of 20% in adjusted EBITDA. Adjusted EBITDA as a percentage of revenue was 22%, up from 20% in 2013. We continue to grow our base of stable cash flow.

Revenue from contracts generated 16% of consolidated revenue on a trailing 12-month basis in Q2 2014 compared to 11% for the same period last year.

Our outlook for the remainder of the year is positive, driven by our growth capital investments and solid market activity levels. Capital investment plans for 2014 remain on track and we are well positioned with the solid balance sheet.

For today's call, Linda will highlight the financial result for the quarter and year-to-date. Mike will discuss capital expenditures and the outlook for the second half of the year, and Al will talk about our strategy and progress of our business plan before we hand it over to question.

Linda Dietsche

Thank you, Anne. For the second quarter of 2014, we delivered strong year-over-year growth. Revenue was up 9% to $213.1 million and adjusted EBITDA increased to 20% to $46 million compared to 2013. Contribution from our growth capital investments in new markets and oilfield, the saving realized from our rationalization plan in industrial and favorable commodity prices drove growth in the quarter.

For the first half of the year, revenue increased 9% to $400.9 million compared to 2013 and adjusted EBITDA was up 18% to $78.1 million.

We recorded a net loss in the quarter of $8.2 million compared to earnings of $4.9 million in the prior year. The loss was the results of higher stock-based compensation, restructuring-related cost and higher net financing charges which were associated with the early redemption of the Series 1 debenture. This was strictly an accounting treatment and does not affect current or future cash flows.

Adjusted net earnings for the quarter were $11.8 million or $0.21 per share compared to $11.9 million or $0.22 per share in the prior year. Year-to-date adjusted net earnings were $22.2 million, 26% higher than the $17.6 million last year. Adjusted SG&A costs were 10% of revenue in the quarter and we expect to be at our historical level of 10% of revenue for the year, based on how we are structured today.

We incurred $1.7 million in restructuring costs, primarily associated with the rationalization plan for the quarter and $6 million year-to-date, with about half of that attributable to staff reduction and the balance to facility closure costs. We are on track to meet annualized savings of $10 million that we identified in the first quarter.

Looking at divisional results, in New Markets quarter and year-to-date revenue increased 27% and 31%, respectively, to $71.1 million and $127.2 million compared to prior year. Gross profit for the quarter and the year-to-date increased 19% and 18%, respectively, to $22.3 million and $36.9 million compared to 2013.

Strong performance both, in the quarter and year-to-date were primarily driven by returns from growth capital investor, particularly from contract to process mature fine tailing or MFT, and the expansion in the U.S.

At the end of Q2, contracts generated 47% of divisional revenue on a trailing 12-month basis compared to 42% a year ago.

In Oilfields revenue was $45.3 million, up 15% in the quarter and $99.6 million year-to-date, up 13% compared to prior year. Gross profit increased 18% and 10% in the quarter and year-to-date, respectively. Performance was driven primarily by increased drilling activity, which resulted in higher waste both processing volume and by improved commodity prices.

Results were also positively impacted by returns from growth capital investments and productivity improvements. Drill site performance continued to improve and we expect utilization rates in the second half of the year to be well above 2013 levels.

In industrial, revenue was down 4% in the quarter and 5% year-to-date to $96.7 million and $174.1 million, respectively. Gross profit improved 18% for the quarter to $14.5 million and 16% year-to-date to $20.9 million.

We realized savings of approximately $1.5 million for the quarter and $2.5 million for the first six months of the year from the rationalization plan. These saving, along with favorable commodity prices were partially offset by lower waste receipts at Stoney Creek.

I will now hand it over to Mike.

Mike Borys

Thanks, Linda. Before I speak to our outlook for the balance of the year, I will review our progress with a strategic review and our capital plan.

In early April, we retained RBC to undertake a full strategic review of the industrial division and we have made solid progress. The confidential information memorandums or CIMS have gone out and as expected there is a lot of interest from potential bidders.

This is a profitable, solid business. Our people have performed to exceptional safety standards and our assets and permits are of top quality. We will continue to explore all potential strategic alternatives for our industrial division, including a possible sale, IPO or spin-off of the division.

We will not comment further on progress until such time as the board has determined the outcome of the process or has otherwise deemed the disclosures appropriate or required.

In view of the potential industrial transaction, we are reviewing our target and business plan for 2015 through 2018, excluding industrial. Our primary goal will be to people and accelerate investments to drive greater growth in New Markets and Oilfield.

In the first half of the year, we spent over 30% of our budgeted capital plan of $180 million and remain on track and spend to our budget in the year. We will also continue to evaluate acquisition opportunities in the U.S to help us further accelerate our growth plan.

Looking to our outlook for 2014, we expect to deliver adjusted EBITDA growth of 20% of a normalized base of $156 million in 2013. Growth capital investments combined with improved commodity prices rationalization initiatives focused primarily on industrial division and reductions in SG&A will drive strong returns and improved results for the year.

Second quarter results set the stage for both, the strong second half and start to 2015. We added two MFT contracts in the second quarter. One with Syncrude to commission their full-scale centrifugation plant at their Mildred Lake operation, which is incremental to our work at their Southwest, sands mine. The second contract is with Shell, to construct the new MFT plant at their Jackpine Mine. We began this work in the second quarter and will continue into the first quarter of 2015.

In the U.S., we commissioned two satellites in the Bakken, in North Dakota and plan to establish three more in the U.S this year, so that we expect to finish the year with six satellites in total in the U.S.

U.S drill site performance improved and we expect to reach our maximum practical equipment utilization rate in the second half of the year, which would be closer to 70% to 75%. Overall, New Markets growth will be driven by on-site contract expansion in the U.S.

In Oilfield, we expect our satellite facilities and steady drilling activities to drive results. Two satellites we commissioned in the second quarter will contribute in the second half and we expect to establish two more satellite facilities through this year.

Full year activity levels at Ville Ste-Catherine and Stoney Creek are expected to be in line with 2013. Stoney Creek volumes can fluctuate with event-based activity and we do expect a recovery in volumes in the second half of 2014.

We expect to finish the year with a total debt to adjusted EBITDA at about 2.5.

I will now hand it over to Al.

Al Cadotte

Thanks Mike. We are making progress in the review of strategic alternatives for industrial as well as in the execution of our growth plans for New Markets and Oilfield.

Second quarter performance and first-half performance were consistent with our plans for 20% growth this year. We also achieved certain milestones which will drive future success. In the quarter, we secured two MFT contracts with Shell and Syncrude, as Mike mentioned. We exited the quarter with four new satellites facilities in operation, two in Western Canada and two in the U.S.

We are well-positioned to extend our track record of profitable growth over the next four years through the dynamic growth of our Canadian Oilfield business, our U.S business and our Heavy Oil business.

The next 12 to 18 months will be a very exciting time at Newalta, and will bring many changes as we set the stage for long-term growth of our business. We have a strong and talented organization and outstanding investment opportunities to generate very attractive returns for our shareholders for many years ahead.

We will now open the call for questions.

Question-and-Answer Session

Operator

Thank You. We will now take questions from the telephone line (Operator Instructions). The first question is from Rupert Merer from National Bank. Please go ahead.

Rupert Merer - National Bank

Hi, Good morning everyone.

Mike Borys

Good Morning.

Rupert Merer - National Bank

Can you give some more color on the two MFT contracts you have signed recently? How do they compare to the contracts that you already signed in the past in size and duration. Do you have any more color on what could happen to the capital we have invested at Mildred Lake already?

Mike Borys

Rupert, it's Mike. The Shell contract, we would anticipate would the similar in size and scope with the first contract. The only caveat I would make is the contract we are referring to is specifically for the construction of the next phase. In terms of how we would anticipate its progress, we would anticipate we are going to continue to build upon a relationship with Shell and have continued to growth.

With respect to Syncrude, this is with respect to the commissioning of their full-scale centrifugation facility at Mildred Lake. It's over above what we already do for Syncrude at their Southwest sands contract or their southwest sand site, so it's premature in terms of speaking to the overall scope of commissioning peak. That's all we really speaking to. I can't give a bit more color. We anticipate work would begin closer to August or in this month 2014.

In terms of number of people, we would expect about 50 people from our end would be involved on-site and would be working on the a commissioning and we would anticipate that would be a six to nine-month period going into 2015 on the a commissioning work.

I would add that for both, Shell and for Syncrude, we are happy with these two new contracts, because it just continues to build upon the worked that we have already been doing within and build upon our relationship with, both Shell and Syncrude.

Rupert Merer - National Bank

In these two cases, it doesn't sound like you will be investing capital. Is that correct?

Mike Borys

We would with Shell. I think that Syncrude given where it is, we are not identifying any capital needs at this point, but with Shell if you think back to the previous contract, we had spoken to approximately $20 million in capital.

Rupert Merer - National Bank

Okay. Then just finally, any update on what could happen to the capital. You have invested at Mildred Lake already?

Mike Borys

That’s the one that southwest sands and again our confidence would remain at the same level they were in previous quarter in terms of what may happen with that work regarding either an expansion or extension of the work we currently doing.

Rupert Merer - National Bank

All right. Excellent. I will get back into the queue. Thank you.

Mike Borys

Great. Thank you.

Operator

Thank you. The following question is from Jason Sawatzky from Altacorp Capital. Please go ahead.

Jason Sawatzky - Altacorp Capital

Hi. Good morning, everyone.

Mike Borys

Hi. Morning

Al Cadotte

Good morning.

Jason Sawatzky - Altacorp Capital

Mike, just to follow-up on Rupert's question there just with respect to Syncrude. I am assuming, obviously, this is just the commissioning, so you still on talks with Syncrude to potentially to operate facilities as well - my understanding?

Mike Borys

Yes. We have been talking with Syncrude for a while, so this is really just the first phase of where we are and what we can speak. Again, we will always have to be careful about not getting ahead of ourselves with respect to whatever agreements we have in place with Syncrude. Again, it’s a very positive sign for us.

Jason Sawatzky - Altacorp Capital

Okay. I am assuming you wouldn't be able to answer the revenue impact from the commissioning or anything like that I am assuming.

Mike Borys

No.

Jason Sawatzky - Altacorp Capital

No. Okay. Then just in terms of, obviously, you are getting these new contracts in the Heavy Oil segment. Just curious as to the type of competition you are seeing in that Heavy Oil segment. Are you seeing a lot of competition in terms of bidding for some of these MFT contracts?

Mike Borys

Yes. I hate to say that we are not, but we really aren't with respect to the work that we are doing with mature fine tailing. We have been working with Syncrude over the last four years. Shell would have been looking at the data, looking at the work that we have accomplished for Syncrude.

You have other MFT producers that are also sharing the data, so I think we are in a good position, so I guess we will never say that we are going to be the only ones ever, but we are in a pretty good position and just building upon the relationships. The work is proving itself out. I mean, we are able to do what we said we were going to do and we just continue to be building upon those relationships.

Jason Sawatzky - Altacorp Capital

Okay. Great. Yes. Go ahead.

Al Cadotte

It's Al. I would just add one other comment that I think these two contracts, we really appreciate the confidence that these customers are showing in our ability to operate our equipment or their equipment on their site.

Jason Sawatzky - Altacorp Capital

Okay. Great. Okay. The rest of my questions have been answered. Thanks guys.

Mike Borys

Thanks.

Operator

Thank you. The following question is from Steve Arthur from RBC Capital Markets. Please go ahead.

Steve Arthur - RBC Capital Markets

Yes. Thank you. Just following up on your comments about your longer term capital plans looking out to 2015-2018, of course, these are still being formulated I assume, but I guess just directionally, when you look at things now similar levels to anticipated levels of capital, which you would have expected before the full year growth, but now committed specifically to a New Markets and Oilfields or any change in outlook in terms of investing more or less based on current markets?

As we look at our business plan, we are mindful of what we are doing with these strategic reviews, so we are looking at accelerating and expanding upon organic growth opportunities for us, so we are looking at it a little bit differently in terms of putting more capital.

We are seeing very good success with when we speak to Heavy Oil, the MFT contracts we have just referred to. We are seeing great success with respect to satellites and oilfield applying our modular processing facility concept and we are very happy with progress we are making in the U.S., so there is a lot of opportunities where we are looking at. Where we are happy with the returns we are seeing on capital and that's having an impact as we look at the business plan and our capital. Yes, I think it's far to say we are looking at it differently.

Steve Arthur - RBC Capital Markets

Okay. Fair enough. I guess just second question. It looks like the restructuring initiatives are being quite effective. When you look at your SG&A expectations, are there further cuts to be made now or most improvements now more driven by growth in the business?

Mike Borys

Yes. I think for 2014, I think for the balance of the year you can expect to see the savings we would have had in Q2 repeat themselves for Q3 and Q4, so we are ahead a bit of run rate. The big event for us will be whatever happens with respect to the industrial division and the impact that will have on our ability to look at rationalizing our comps. The comment I would make is, we do have the balance whatever may happen with respect to industrial against whatever the impact from a potential use of proceeds, so we are very mindful of balancing our current infrastructure against what we may be looking at beyond industrial.

Jason Sawatzky - Altacorp Capital

Understood. Okay. Thanks. I will pass the line for now.

Mike Borys

Okay. Thanks.

Operator

Thank you. The following question is from Anoop Prihar from GMP Securities. Please go ahead.

Anoop Prihar - GMP Securities

Good morning.

Mike Borys

Good morning.

Anoop Prihar - GMP Securities

You listed the fact that the volumes at Stoney Creek in Q2 were a bit lighter than they were on a year-over-year basis. Could you give us a bit of color on that maybe perhaps quantify it and some of the rationale behind that?

Mike Borys

Yes. Stoney Creek, I think about 60% of their volume will be driven by rent-based business and their performance has demonstrated lumpiness, so we never get overly excited about our lighter quarter be it in Q1 or Q2 or other quarters.

For the last three years, I believe, we pretty much maxed out closer to 750,000 metric ton, so at the end of Q2 or for the first half, Stoney Creek was about 100,000 metric tons below the level last year, so in essence pretty much have to double what they have done in the first half, in the second half to achieved the volumes for the full year which they have done in the past.

Again, when we look at our performance, we do know that industrial performance is probably underweighted by the impact of timing from some [others] of Stoney Creek, so we are not concerned. We know it's part of the business that it's really going to be driven by event receipts and that could catch up in Q3 or combination of Q3 and Q4.

Anoop Prihar - GMP Securities

It's fair to say that at this point time you are laying a basically flat year-over-year on the full year basis?

Mike Borys

Yes. Last year was about 730,000 metric tons and our expectations would be at that level.

Anoop Prihar - GMP Securities

Okay. Just lastly, I know you don’t want to talk too much about the industrial, but is it fair to say that you still think this process could be concluded by the end of the count year?

Mike Borys

We haven't actually spoken to timing, so given where we are at, the fact that the [FINs] are out, the work that's been done, the initial expressions of interest that we have heard of, we are happy with where we are at. I can't say that we are overly surprised we knew there would be interest, but we haven't really spoken to timing, so we will let that play out and provide an update when it is appropriate.

Anoop Prihar - GMP Securities

Thank you.

Mike Borys

Operator

Thank you. (Operator Instructions). The following question is from Brian Butler from Stifel. Please go ahead.

Brian Butler - Stifel

Good morning. Thanks for taking my questions. First, just on the rationalization progress, was the majority of majority this $4 million today in the industrial. Then where does the next $6 million come from getting to the $10 million target?

Mike Borys

The bulk of it has been from - when we are referring to the $10 million, it is referring to industrial. The split between the industrial division and SG&A is about $7 million and $3 million, so $7 million would be hitting the division itself. $3 million would be hitting SG&A.

We would anticipate the bulk of it really just running it out. I mean, the actions for the most part have been taken, so to extended that we would have seen, I think, the number was $2.5 million in Q2, you would expect run rate Q3 and Q4 to also similarly be around $2.5 million, $2.6 million per years, so now we are just getting the benefit of the action that we have taking.

Brian Butler - Stifel

Okay Great. On the interest expense, you had - I think it was almost $8 million in finance charges. What's the right way to think of interest expansion in the third quarter and fourth quarter?

Mike Borys

We had there was a quite a bit of noise in the quarter. Actually after looking at some of the earlier analysis reports referring to our earnings per share, I will do a bit of a quick walk-through, which hopefully we can help.

Our earnings per share was negative $0.15 for the quarter. When you think about the embedded derivative non-cash charges, we took $15 million of - it's an accounting non-cash charge. There is no impact on our business. I think most people understand that, so $50 million of associated with embedded derivative, $18 million alone was associated with the Series 1 redemption and then we had with a gain on Series 2.

We had stock-based compensation of $3.5 million, restructuring related costs of $1.7 million, so we had total, and I will called it noise, of $20 million which was about $0.36 per share. That’s how we got to ou adjusted earnings per share of $0.21 over and above that and these are things that would not be repeating itself.

We had call in premium that we would've paid on the Series 1 debentures of $5 million. Then we also had unamortized finance charges write-off, which was related to Series 1, so you had $6.5 million of earnings impact which will not be repeated going forward, so that had another $0.12 impact, so I hate to normalize an adjusted number, but I am going to normalize adjusted earnings per share then would go from $0.21 to $0.33, so that's hopefully how you should be looking at it.

Brian Butler - Stifel

Okay, so the interest expenses has really been running somewhere around, I would guess kind of that, $7.5 million to $8 million range?

Al Cadotte

That yield is a little bit high, so I don't have the latest - but that's probably a little bit high.

Brian Butler - Stifel

Okay. I will stop and maybe go back and refine my math. On the U.S. piece of the business, can you talk about the practical utilization or the max practical utilization being 70% to 75%? Can you give a little color on what you guys view the operating leverage as that incremental utilization improves? What's right way to think about that?

Mike Borys

I am not going to get into the - we will have our own sensitivities in terms of what does an incremental endpoint utilization means to in terms of revenue and flow through, but I think the headline for the U.S is as we have been indicating, we have been staffing up, we are driving greater focus, we are much happier with what have we seen in terms of attraction on the not only on the satellite business, but on the drill site utilization business. So we are much quite happy with coming in at 56% in the quarter that compares to 52% a year ago. We are looking at a substantial improvement in the second half. If we achieve closer to our 70% to 75% that will certainly compare better than I think last year in the second half of the year we were closer to 50%, so we are expecting a bit of a pick up or ramp up in performance compared to prior year just coming from drill site alone.

Brian Butler - Stifel

Okay. On the split between on-site versus the drill site, can you talk about that proving in '15. Can you give a little color on where you are right now and what that means when do you get '15 and on-site is a larger piece. How much larger?

Mike Borys

Yes. Drill site is still bigger now. We reconfirmed that before the end of this year satellite revenues will overtake as the majority over and above the a drill site, so we can reaffirm that we do know that will happen in at the end of this year.

Then moving into next year, as we build more of these satellites, certainly, that will take greater percentage of the overall revenue mix in the U.S. As we provide updates on our business line, at that point we will give greater color on what's those splits will look like.

Brian Butler - Stifel

All right. That’s was all my questions. Thank you.

Mike Borys

Great. Thanks.

Operator

Thank you. The following question is from Raveel Afzaal from Mackie Research Capital. Please go ahead.

Raveel Afzaal - Mackie Research Capital

Hi. Yes. Thank you. Thank you for hosting the call. Just going back to the previous question, could you tell us the percentage of revenues, the U.S revenues coming from drill site versus on-site and satellite in Q1 and Q2? I believe you used to disclose that information?

Mike Borys

We give in our annual report. We provide a rough percentage mix between those components, but I don’t think we actually - I don’t think we necessarily give that detail every quarter, so we provide that approximation. Again if it shifts dramatically then we will update it, but I don't think we actually do give that out.

Raveel Afzaal - Mackie Research Capital

Okay. Thank you. Regarding the satellite facilities, can you please compared and contrast the competitive environment ramp up period and I guess the economics for the facilities in the U.S versus Canada, so I have some reference point here?

The ramp up period in the past we have talked about permitting and construction taking up to 12 months. Commissioning could be another three months ramp-up volume, ramping up to get to a good run rate would be another three months or another quarter. This would applied for both, Canada and the U.S., so by the time that you begin permitting and get to the point where you are at your run rate, contribution could be anywhere from 15 months to 18 months as a range.

We have seeing examples in the U.S., where they accelerated that and we have also seen operational examples where they will take the 18 months or a little bit beyond 18 months to get to that run rate.

We have spoken about the satellites having generally a three-year return or a targeted three-year return, so you kind of get back to about 35% to 40% cash margin expectations when you are at full run rate and we have been able to, I would say we have been able to achieve that and we are happy with progress that we are making.

Raveel Afzaal - Mackie Research Capital

How does that that compared in the U.S. versus Canada? Are you seeing a different sort of a competitive environment in terms of your growth strategy for both markets?

Mike Borys

No. We have the ability to put satellites in both, Western Canada as well into the U.S. With the U.S our focus is on Bakken. We are also looking at Eagle Ford and the Permian. Each of those plays on their own roughly equivalent to the Western Canadian Sedimentary Basin so just in terms of size, so the U.S is still quite a big market for us and we are still a relatively smaller player.

Lots of room for us in the Bakken, that’s where the last two satellites have gone into. Competitive environment in the U.S., I mean you will have some of the same Canadian players that you have here. You have (Inaudible), you have Secure, you have some smaller operators as well, but the beauty of our, I will call it our modular or mobile processing facility concept, as we are able to go in about a third of what a typical full scale facility would cost.

If you think about a facility costing $25 million to $30 million, we are able to go in much quicker with, but it has worked out to be about $8 million to $10 million capital cost for our satellite facilities, so we are able to go in much quicker, we are agile. If we do need to move, we will, but we are not looking at moving in the short-term. We think we do have a good model that we are working within the U.S.

The model can work in Canada as well and we have demonstrated that with the satellites that we have been adding in Western Canada, so it's proven to be a concept for us and we continue to see opportunities in Canada and in the U.S.

Raveel Afzaal - Mackie Research Capital

Perfect and I was waiting for. Thank you for that. Just one more macro question for me, we want to see what is the potential upside in terms of average EBITDA per facility, if you were to see a further up taken the drilling activity in the gassier plays, so could you quantify for us, and just generally, the number of facilities that you have in the oilier plays versus the gassier plays and I am talking about Western Canada over here and what the difference is in the utilization rate for the facilities in the oilier areas versus the gassier areas?

Mike Borys

Wow. I would be impressed if I can answer that.

Raveel Afzaal - Mackie Research Capital

Yes. It's a tough question.

Mike Borys

We are weighted more towards oil. I don’t think I can give you any more color on your question, Raveel.

Raveel Afzaal - Mackie Research Capital

Okay. That’s all for me. Thank you.

Mike Borys

Okay thanks.

Operator

Thank you. We have the follow-up question from Rupert Merer from National Bank. Please go ahead.

Rupert Merer - National Bank

Hi. The CapEx budget calls for another $120 million in the back half of the year. You seem confident that it will be deployed. Can you give us a sense of where you will be spending the capital of the rest of 2014?

Mike Borys

Rupert, again, the bulk of the capital was going toward New Markets, so split between U.S. and Heavy Oil. The way we had split it out is about the two-third one-third split favoring Heavy Oil versus U.S. We will update that depending on wherever the opportunities are.

The capital going towards satellites in the U.S. in Heavy Oil it's obviously going toward the MFT contracts as well as our Fort McMurray facility that we are building, so that's a two-year build for us.

In Oilfield, it will continue to go against completing the satellites we completed in the first half of the year as well the new satellites that we are actually constructing right now in Canada. Again, predominantly satellites both, in the U.S and Canada contract, so those are the areas that we are spending against. We are pretty much sticking to our plan. We are seeing good results from the capital that we have [spent].

Rupert Merer - National Bank

Okay. Thanks. That’s all for me.

Mike Borys

Okay. Thanks.

Operator

Thank you. (Operator Instructions) We have no further questions registered at this time. I would now like to turn the meeting back over to Ms. MacVicar. Please go ahead.

Stephanie MacVicar

Thanks for being with us, everyone, today for the call. A reminder that the taped broadcast is available at newalta.com and we look forward to talking to you again at the end of the quarter. Bye, bye.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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