Good morning. Before we begin this morning's conference call, I would like to take a moment to remind all listeners that today's conference call includes forward-looking statements that involve estimates, judgments, risks and uncertainties that may cause actual results to differ materially from those projected.

The complete text of Shawcor's statement on forward-looking information is included in Section 4 of the first quarter 2019 earnings press release that is available on SEDAR and on the company's website at shawcor.com. I'll now turn it over to Shawcor's CEO, Steve Orr.

Good morning and thank you for joining us on this morning's conference call. Q1 2019 results were marginally lower than we had expected.

Adjusted EBITDA in the first quarter of 2019 was $28 million, an increase of 17% and revenue was flat at $350 million over the fourth quarter of 2018. This quarter's results were supported by continued demand for composite pipe in the United States, girth weld inspection from our diameter pipeline and international projects and a resumption in demand for heat shrink products post the Q4 seasonal slowdown.

In the quarter and as expected, we continue to have cost related to the readiness of pipe coating facilities needed for future work and to pursue projects and international pipe coating activity remains low. However, even though we forecasted softness in Western Canada and we underestimated the weakness in demand for small diameter line pipe coating, joint protection and tubular inspection services in this market.

I'll speak in more detail in a moment but in summary, on the one hand there is increased uncertainty in activity related to drilling completions in North America and how spending will move over the next several quarters, but on the other hand, international and offshore spending is improving and the recovery in these markets is now firmly underway. As a result of these two factors, we expect that Shawcor may see short-term volatility in quarterly results, but that the second half of the year will be an improvement over the first.

Overall, 2019 is still forecasted to be an improvement over 2018 before consideration of the ZCL composite acquisition, but with a softer Q1 and expected, North American upstream related activity uncertain and the always present potential of movements from one quarter to another of pipe coating project revenue there is risk. The priorities for management that will determine the results for 2019 and for the years that follow are very clear.

There are three. First is a dynamic management of the uncertainties and optimization of the base business that Shawcor's expanded portfolio that now that includes ZCL computed.

Second is the building of the backlog and the execution of pipe coating work from clients that have been idle for several years. Third is the capital discipline and actions required to return the balance sheet to the historical level of strength.

I'll now ask Gaston Tano, our CFO to provide some detail on the first quarter financial results.

Thanks Steve. As Steve mentioned earlier, the first quarter results were slightly softer than our expectations.

Revenue in the first quarter decreased by 1% over the fourth quarter of 2018. The pipeline segment revenues decreased by 4% primarily due to lower demand for the company's process service to Western Canada and negative impact from the accounting of hyperinflation for Argentina, partly offset by higher activity in pipe coating and pipe weld inspections in the EMAR regions.

Petrochemical and industrial segment revenues increased by 15% primarily due to higher activity for our heat shrink products particularly in the EMAR and North America region and our wire and cable products in North America. Consolidated revenues in the first quarter of 2019 was slightly lower in the first quarter from a year ago.

This reflects lower revenues in the pipeline segment which declined by 2%, primarily due to lower pipe coating activity in the Asia Pacific and Latin America regions and soft demand for the company's products and services in Western Canada. This was partially offset by higher revenue levels in the US mainly from the continued demand for our composite pipe products, large diameter coating and girth weld inspection services.

Revenue for the petrochemical and industrial segment increased by 8% compared to the prior year first quarter primarily due to higher revenues for heat shrink products particularly in EMAR region and for our wire and cable products in North America. Consolidated gross margins for the first quarter were 28.1% basically in line with the 28.2% recorded in the fourth quarter of 2018, but lower than the 33.3% in the first quarter a year ago.

The pipeline segment gross margin for the first quarter was 27.9% lower than the 33.6% a year ago reflecting lower large project activity in Latin America and lower utilization of our facilities in the EMAR and Asia Pacific regions. The petrochemical and industrial segment gross margins were 29% higher than the 27.9% in the fourth quarter of 2018 and below the gross margin of 31.3% that was reported in the first quarter a year ago.

We expect consolidated margins in the first half of 2019 to continue being negatively impacted by the continued low pipe coating activity in international and offshore markets and higher cost to maintain idle assets, reactive plants and pursue large projects. On a consolidated basis, adjusted EBITDA for the first quarter was $28 million, higher than the $24 million reported in the fourth quarter of 2018.

The current quarter reflects a positive impact of $4.8 million related to new time rules for leases under IFRS 16. The current quarter performance reflects the softer demand for the company's process service in Western Canada, the ongoing investments in the pipe coating business for idle assets and project pursuits and the continued demand in the U.S.

for our composite pipe products and integrity field inspection services. SG&A expenses in the quarter decreased by $5 million compared to the fourth quarter of 2018, primarily due to lower cost for equipment, professional and legal fees and a positive impact of adoption of IFRS 16, partially offset by an increased incentive based compensation.

Adjusted EBITDA for the quarter was 19% lower than the $35 million reported in the first quarter of 2018, the decrease was primarily due to lower pipe coating activity in Asia-Pacific and Latin America regions and a softer demand, the company's proxy service in Western Canada partially offset by the continued demand for a composite pipe products and integrity field inspection services in the U.S. In addition, the current quarter reflects a decrease of $12 million SG&A expenses compared to a year ago primarily due to lower costs for equipment, professional fees, insurance and other items and a positive impact on the adoption of IFRS 16.

Let’s now discuss cash flows for the quarter. Before changes in non-cash working capital, cash provided from operating activities for the first quarter is $19 million, a decline from the $24 million from operating activities in the fourth quarter.

This decrease is primarily due to lower net income partially offset by a change in non-cash items in the quarter compared to the $23 million that was provided from operating activities in the first quarter year-ago. The current quarter is also primarily down to lower net income partially offset by a change in non-cash items in the quarter.

The change in non-cash working capital in the first quarter was net cash outflow of a million compared to an inflow of $27 million the fourth quarter of 2018 and outflow of $52 million in the prior year period. The $1 million cash outflow from working capital in the current quarter is primarily due to higher accounts receivable, contract assets and inventory and negative impact from foreign exchange partially offset by higher accounts payable and lower prepaid.

Cash used in investing activities in the first quarter was $18 million primarily due to capital expansion and property, plant and equipment to support current activity levels and growth in our businesses. During the first quarter, cash used in financing activities was $118 million reflecting the net impact on the repayment of the senior notes of long-term debt, the repayment of lease obligations and the payment of our regular quarterly dividend.

Net cash flow for the first quarter of 2018 was negative $119 million compared to the positive $27 million the fourth quarter of 2018 and negative $41 million a year ago. With respect to the balance sheet, our financial position at the end of the quarter remains positive.

The company's cash and short term investments decreased during the first quarter to $103 million. The decrease is primarily related to the partial cash funding of the repayment of senior notes, long-term debt during the quarter, non-cash working capital at the end of the first quarter was $152 million down from $174 million at the end of the fourth quarter, 2018 primarily relates to recognition of short term lease liabilities under IFRS 16.

During the first quarter, the company closed its new U.S. $500 million four-year senior unsecured revolving credit facility, this facility partially funding the repayment of senior notes long-term debt in the quarter.

As of March 31, 2019 the company had low net debt leverage with long-term debt of $169 million and $38 million of standard letters of credit. With the new facility in place, the company had available unutilized borrowing capacity of over $526 million at the end of the quarter.

I'll now turn it back to Steve for his commentary on the company's outlook.

Thank you, Gaston. Now turning to Q1, in the first quarter of 2019, adjusted EBITDA was marginally softer than management had forecasted.

The quarter saw continued demand in the United States for composite pipes and shale development and girth weld inspection for large diameter pipeline. Additionally, the quarter benefited from girth weld inspection related to international projects that are now in the process of being laid specifically Nord Stream and Barzan and a resumption in demand for heat shrink products post the Q4 yearly seasonal slowdown in automotive.

As we expected, we continue to have costs related to the readiness of pipe coating facility needed for future work and international pipe coating remain relatively unchanged quarter-on-quarter. The small gap in actual versus forecast for the quarter was primarily from weaker than expected drilling and completion activity in Western Canada.

Of note, Q1 is historically a peak quarter for Shawcor’s Western Canadian businesses. But this year it was exceptionally weaker than expected and even below what we experienced in Q4 2018.

In our previous quarter, we communicated our expectation that the full-year 2019 results will be turned by two factors. The first is the continued strength in the base business and the second is the timing of when pipe coating activity will start contributing positively and consistently to the results.

Considering these two factors and the results delivered in Q1, 2019 is still expected to be an improvement over 2018 without consideration of the impact of the ZCL Composites acquisition. 2019 will be a year of two halves, the first half will be lower as it would be impacted by lower activities and costs related to the readiness of pipe coating facilities needed for future work and hindrance from western Canada.

The second half will be much stronger as it will benefit from higher activity in pipe coating, field services and product sales from works secured. I mentioned in the opening comments that the various factors could reduce or increase our results in 2019.

The first and the one that is the most difficult to predict is the next three quarters spending in the United States land market, third-party estimates forecast a reduction of between 5% to 8% year-on-year still very healthy with a stronger second half of the year. However recent discussions with our customers indicate this may not be the case as capital discipline may result in a flat second half and slower alignment between commodity price movements and operator spending which has historically been tightly correlated.

The second factor is the quarterly performance of our pipe coating project business. Specifically, quarterly revenue generation from individual projects that are tied to international and offshore spending.

From all indicators, the industry is finally emerging and spending is happening. The positive indicators include Brent price above $60 per barrel, higher offshore rig utilization rates, the increasing number of projects being sanctioned and the very strong reported increase in orders from offshore services companies this quarter.

Although Shawcor is still on track for awards, the actual quarter in which the revenue is generated can move due to many factors that Shawcor does not control. With success in diversifying the portfolio and line of sight of near-term opportunities for our core pipe coating business, it is now all about execution.

There are three execution priorities. The first priority is the real time management and planned optimization of the book and turn business that makes up our base business.

In 2019, we will leverage progress made in the last two years in demand planning to manage production and inventory placement, capacity planning to capture short lead items and orders and field technical equipment management and internal training to accelerate time to mobilize or redirect field crews. Another part of this optimization priority is the delivery of the synergies and values associated with the ZCL Composites integration.

We’re excited about the combination of ZCL and Shawcor. Cost synergies are now estimated at $8 million on an annualized run rate by the end of the first year, double the $4 million we previously communicated.

Furthermore, 54% of the $8 million or $4.4 million has been secured since the April close. Cost synergies come from the removal of public company expenses and the organization overlap of ZCL with our composite system business as well as from the Greater Shawcor and operational synergies such as those that come from increased buying power and implementing process improvement.

We estimate that the combination of ZCL with Shawcor has increased the addressed market by greater than $500 million for Shawcor and ZCL standalone markets. There are three main opportunities to gain share in this newly available market.

The first is simply using established channels to markets to cross-sell established products. An example of this is a ZCL order we just received for some tanks for a U.S.

pipeline that happened through our Lake Superior Consulting business. The second opportunity is the linking of discrete components of piping, storage, engineering and digital enablement into a differentiating solutions.

Already we’re seeing that in all three of the targeted markets, fuel, water and waste water and oil and gas there are real opportunities. The third opportunity is leveraging Shawcor’s global footprint and worldwide partner network to expand ZCL’s Parabeam license model to more regions.

With a three-year time horizon, we are targeting an additional $35 million or 7% of the additional assessable market of annualized revenue per year. The second execution priority for 2019 is capturing our share of the pipe coating work that awarded in the upcoming quarters and the successful operations of plan that in many cases have got an extended period of time of being idle.

Yesterday, at the Annual Meeting, I presented a slide with 55 projects that are captured in our bid and budgetary that at the end of Q1 was greater than $2.9 billion. This number magnitude and global diversity of projects and the strong underpinning markets for LNG, the offshore and transmission lines is very, very supportive of future strengthening of our pipe coating project leverage business.

In respect to the backlog number at the end of the quarter, the $454 million reported does not include the $30 million related to the recent award to BP Tortue project or the over $150 million of coating work under agreement which is conditional final projects sanctioning, we've been investing in the positioning for future work through retaining talent, qualifying plants and introducing technology. This investment is being made not only to secure our work but also ensure we deliver as promised and mitigate contractual penalties that come from poor execution.

In Q2, we are preparing for the full production of lease in our Mexican Veracruz facility, that will support our results in the second half of the year. The ability to pull several plants together to offer a robust dearest plan was critical in securing the direct award of this work.

However we are pushing to bring Veracruz online and bring it to full production as soon as possible. In doing so, it will allow us to release capacity in the other plants where we now have visible opportunities.

To give you some understanding of the workflow and resources required to start up a sizable pipe coating project, in Q2 the lease to preparation will involve a customer with this plant verification, a full 28 day testing of insulated properties of the actual Veracruz coated project pipe in our test vessel here in Toronto and final plant qualification trial. The third execution priority is the capital discipline and action required to return the balance sheet to historical level of strength.

As expected, the acquisition of ZCL Composites has increased the debt leverage. Although never off the radar in 2019, we will put additional emphasis on working capital and capital expenditures to minimize the cash out.

Additionally, we have been analyzing Shawcor’s assets to determine those that are either non-core or long-term dilutive where we have divestment opportunity. In 2019, we’re moving forward with actions and we expect that before we exit Q3, we will be able to materialize the benefits of actions being taken.

Before we open it up to questions, I’d highlight the following point. Shawcor’s expanded portfolio is diversified and has the potential to be supportive throughout the cycle.

There is expectation that our core business of pipe coating will see substantial increase in activity in the near future and that this activity will continue for several years. Shawcor’s alignment with strong fundamentals has the company well positioned for the long-term.

I’ll now turn the call over to Sylvia the operator to open up for questions you may have for Gaston and I.

Thanks for taking my questions. Congratulations on the quarter guys.

I know it wasn't what you were expecting but looked in line with what we’re looking for. I wanted to start by looking at your added disclosure on the projects you're chasing, so thank you for the new detail on the AGM presentation on those 55 different projects you're chasing globally.

At the top of that slide, you talk about 2019 being the return of pipe coating. Is it too much of a jump here for me to conclude that you assume most if not all of these projects at least those ones in the bid stage will be awarded in 2019?

Yes, Greg. I think it's a big jump to suggest all the ones that are in the big coating list will be awarded.

Yes, there's several of them actually some large ones that are going to a second version of bidding and they won't happen until mid-2020. So they won't happen.

But to that point, the projects that we have here there's 55 of them even as we made the inventory of the projects and the slide was prepared, projects have now and I can call one up in particular, so there's one [indiscernible] the whole strategy of using installation or production chemicals is still up for debate. So I would suggest that one is now a low opportunity call off but there's two other ones that have now come visible that are being fast tracked that I could replace.

So it's a very dynamic slide but I think it does give everybody an indication that there are real projects, the projects not only are a globally diverse but you can certainly see the delta in bid and budgetary where the offshore and transmission lines and LNG percentages are changing and there's a much heavier weighting to offshore and LNG where Shawcor’s technology and plant placement is a real differentiator.

Now on the budgetary side?

Yes, so you’ll see, right. If I was to present this slide even two years ago offshore and LNG probably wouldn't be presented to be in the low single digits.

So both in bid offshore and LNG are strongly represented but in budgetary there is even a higher percentage which gives us the confidence for the future years.

Got it. So if you think about that close to $3 billion in both bid and budgetary, how would you think about the cadence of it coming to market throughout, I suppose 2019, 2020 and then potentially into 2021?

So I think we're going to have a step change in backlog as we go in to 2020. So I think 2020 backlog numbers as we exit 2019 and work in 2020 will be quite strong.

So you're going to see a slug of awards over the next two to three quarters. So there's quite a bit of discussions on the final preparation and then I think you're going to see probably a couple of quarters stalling of several very large projects are probably not going to be awarded until the mid-2020.

So I think you're going to have kind of two cycles here. You're going to see the FIDs that have occurred of course where late cycle, I guess FIDs in about 18 months later we actually start generating revenue but we have ideal when the FID happens we have the picture to work.

So I think by 2020, the volume of work that we have secured pending FID is going to be clear. And so that slug of work is going to go into the backlog and that is at risk but I think at much lower risk and stuff of course that we don't have an agreement with.

And then mid-2020 you're going to see another slug of activity moving forward. I would highlight one other point is that we talked about the backlog and we calculate the backlog very analytically of both in terms of time, when we get the secured work, we have received appeals for the $30 million Tortue.

So I would say there's our backlog and our view that the $30 million that we announced is not at risk. So that is secured work.

And then there is another $150 plus million which is secured but is at risk because it's pending FID. But those projects have a high certainty of going ahead.

Got it. And just diving in on that.

As you mentioned at the commentary regarding $150 million unsanctioned projects currently outside of the backlog because it hasn't been sanctioned yet. Is that the same as the $100 million Australian project that you’re discussing last quarter or is it additive that a different project?

So within the $150 million is $100 million plus project in Australia.

Got it, okay. So that is within the $150 million and then there's more in addition to that $100 million?

Yes, so what is the pending FID is greater than $150 million and included in that is a project of magnitude of $100 million related to gas from Australia.

Got it. And when we look at this potential project roadmap here, how would you describe the competitive landscape with the larger projects in this cycle or series of cycles as opposed to the prior cycles.

And how does Shawcor’s competitive positioning within that competitive landscape stack-up?

It’s a very good question. I think the legacy of pipe coating companies and mostly our competition is regional.

Of never dying and coming back there's a history of that. But I would start first and foremost offshore insulated work, our competitive position is even stronger than it has been before because of the advent of introduction or expansion of technology outside of the region and ULTRA is what I'm pointing to.

So insulated offshore pipelines, we're in a very strong position. And I would go all the way to the other side of the scale on this map that we've presented land transmission lines that only require anti-corrosion coating on fusion bonded.

If we have extreme competitive pressure because of the ability for pipe nodes to do their own coating. So it's kind of two different sides of the spectrum, right.

Got it. And then just the last one from me and then I'll turn it back just a modeling thing in the quarter, you referenced $4.8 million in IFRS impact for EBITDA.

It’s not a good quarterly run rate for the full-year and into 2020 or is there any reason that it should rise or fall from a quarterly perspective?

No, I think that's a good run rate for 2019. And I can't see it change significantly at this point in time for early 2020.

Of course it depends really afterwards about larger projects and mobilizations that will be required and the accounting for those, if we have -- if we need to lease assets for those projects. So there is a project dependent aspect to it, Greg.

That makes sense. Okay, well that's it from me.

Thanks for the clarity. I'll turn it back.

Hi good morning, this is Matthew for Elias. So I just wanted to clarify a little bit on ZCL and I apologize if this has already been mentioned somewhere but in terms of achieving those cost synergies which were outlined to be $8 million in year one.

Is there sort of any one-time costs that we can expect associated with that and roughly what would that be?

There will be one-time costs related to that. As you know we would for [indiscernible] for example and then also for some additional costs that we need to do for changes into other aspects of compensation and the people that would let go, those amounts are probably estimated right now in the range of about $3 million to this point but it is a fluid dynamic as we go through this but we will be highlighting those in our future reporting and highlighting them as non-recurring items.

Okay. So about $3 million at this point.

And you said you'll be highlighting those going forward, will you also be highlighting the synergies achieved to date in your future reporting?

Yes, so we’ve already given you what the synergies to date that we are on an annualized basis of actions that we've already taken is in excess of the $4 million today. So we will, so we’ve given you that perspective in the next call, we will continue to give that when there's material movements to that change.

It’s not -- we’re not going to be talking about every quarter, if there isn’t any material changes from that.

Okay, great. And just one last question from me just switching over to kind of the base business in North America in the book and turn business.

Q1 was a pretty quiet quarter, there was kind of a little bit of a freeze in drilling activity sort of as you go through Q2 and exit kind of Q2, do you see this thawing a little bit, drilling activity picking up in Canada, in the U.S. perhaps?

So I will separate the market because I think optimism on both markets are polar opposites. So I think we've been management's expectation on what Canada even at a low point may do.

So I'm not expecting and we're not forecasting an improvement in Western Canada. In our and very specifically in our businesses of small diameter line pipe coatings, small diameter field joint heat shrink business or our Tubular Inspection Services business.

So those three, we continue to expect now or reforecast now that there won’t be much of a recovery. On the U.S.

land and particularly I think that's the big development that moves or has the ability to go one way or another is the Permian and the Permian is an interesting point right now because most of the operators have hedged their production well in advance, so hedged more than one year's production ahead at $60, so they have cash generation certainty and we don't see them therefore bending as they would have done historically as the commodity price strengthened. So it's a real uncertainty right now, will we see kind of the same flat profile that we saw in Q1.

There's a potential that there may be a pullback or do they actually increase the spending into the second half. It will still be a good market for us but it's just what will be the volatility.

I think as the whole year will be equal to what it was last year. But there may be swings from quarter-to-quarter and we're kind of in this, I say this suspended as we close or as we've finished up April, it was business as usual, May I’m not so sure it will be as strong as April but June is looking okay.

So it’s kind of funny how the quarter will go but I do think there will be volatility related to the Permian as operators figure out what is the capital budget.

Okay, that’s great. Thank you.

Appreciate the color. And I’ll turn it back now.

Thanks.

Well, I’d like to thank everybody for joining the call and both Gaston and I look forward to touching base and discussing the second quarter three months from now. Thank you.