UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from _________________________ to _________________________ |
Commission file number: 001-36246
Civeo Corporation
(Exact name of registrant as specified in its charter)
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British Columbia, Canada | 98-1253716 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
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Three Allen Center, 333 Clay Street, Suite 4980, | 77002 |
Houston, Texas | (Zip Code) |
(Address of principal executive offices) | |
(713) 510-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Shares, no par value | CVEO | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "accelerated filer," "large accelerated filer," "smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer | ☐ | Accelerated Filer | ☒ | Emerging Growth Company | ☐ |
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Non-Accelerated Filer | ☐ | Smaller Reporting Company | ☐☒ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The Registrant had 13,712,66114,745,906 common shares outstanding as of October 21, 2022.23, 2023.
CIVEO CORPORATION
INDEX
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| Page No. |
Part I -- FINANCIAL INFORMATION | |
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Item 1. Financial Statements: | |
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Consolidated Financial Statements | |
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 20222023 and 20212022 | |
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 20222023 and 20212022 | |
Consolidated Balance Sheets – as of September 30, 20222023 (unaudited) and December 31, 20212022 | |
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 20222023 and 20212022 | |
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 20222023 and 20212022 | |
Notes to Unaudited Consolidated Financial Statements | |
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Cautionary Statement Regarding Forward-Looking Statements | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
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Item 4. Controls and Procedures | |
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Part II -- OTHER INFORMATION | |
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Item 1. Legal Proceedings | |
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Item 1A. Risk Factors | |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
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Item 5. Other Information | |
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Item 6. Exhibits | |
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(a) Index of Exhibits | |
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Signature Page | |
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Revenues: | Revenues: | | | | | | | | Revenues: | | | | | | | |
Service and other | Service and other | $ | 177,504 | | | $ | 150,081 | | | $ | 514,328 | | | $ | 419,861 | | Service and other | $ | 183,229 | | | $ | 177,504 | | | $ | 529,172 | | | $ | 514,328 | |
Rental | Rental | 5,785 | | | 4,581 | | | 18,080 | | | 12,185 | | Rental | — | | | 5,785 | | | — | | | 18,080 | |
Product | Product | 938 | | | 401 | | | 2,451 | | | 2,623 | | Product | 343 | | | 938 | | | 834 | | | 2,451 | |
| | 184,227 | | | 155,063 | | | 534,859 | | | 434,669 | | | 183,572 | | | 184,227 | | | 530,006 | | | 534,859 | |
Costs and expenses: | Costs and expenses: | | | | | | | | Costs and expenses: | | | | | | | |
Service and other costs | Service and other costs | 127,955 | | | 107,287 | | | 373,123 | | | 307,198 | | Service and other costs | 130,183 | | | 127,955 | | | 394,953 | | | 373,123 | |
Rental costs | Rental costs | 5,024 | | | 3,892 | | | 14,830 | | | 10,523 | | Rental costs | — | | | 5,024 | | | — | | | 14,830 | |
Product costs | Product costs | 517 | | | 251 | | | 1,439 | | | 1,521 | | Product costs | 113 | | | 517 | | | 282 | | | 1,439 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 17,677 | | | 17,320 | | | 50,572 | | | 46,204 | | Selling, general and administrative expenses | 20,236 | | | 17,677 | | | 52,885 | | | 50,572 | |
Depreciation and amortization expense | Depreciation and amortization expense | 22,608 | | | 20,282 | | | 65,818 | | | 62,928 | | Depreciation and amortization expense | 16,914 | | | 22,608 | | | 59,277 | | | 65,818 | |
Impairment expense | — | | | — | | | — | | | 7,935 | | |
Other operating (income) expense | (339) | | | 21 | | | (187) | | | 122 | | |
| | 173,442 | | | 149,053 | | | 505,595 | | | 436,431 | | |
Operating income (loss) | 10,785 | | | 6,010 | | | 29,264 | | | (1,762) | | |
Other operating expense (income) | | Other operating expense (income) | 87 | | | (339) | | | 302 | | | (187) | |
| | | 167,533 | | | 173,442 | | | 507,699 | | | 505,595 | |
Operating income | | Operating income | 16,039 | | | 10,785 | | | 22,307 | | | 29,264 | |
| Interest expense | Interest expense | (3,001) | | | (3,166) | | | (8,077) | | | (9,929) | | Interest expense | (3,365) | | | (3,001) | | | (10,625) | | | (8,077) | |
Loss on extinguishment of debt | — | | | (416) | | | — | | | (416) | | |
| Interest income | Interest income | 13 | | | — | | | 15 | | | 2 | | Interest income | 44 | | | 13 | | | 126 | | | 15 | |
Other income | 2,179 | | | 364 | | | 4,290 | | | 6,066 | | |
Income (loss) before income taxes | 9,976 | | | 2,792 | | | 25,492 | | | (6,039) | | |
Income tax expense | (3,713) | | | (1,770) | | | (7,091) | | | (2,354) | | |
Net income (loss) | 6,263 | | | 1,022 | | | 18,401 | | | (8,393) | | |
Less: Net income attributable to noncontrolling interest | 546 | | | 478 | | | 1,706 | | | 534 | | |
Net income (loss) attributable to Civeo Corporation | 5,717 | | | 544 | | | 16,695 | | | (8,927) | | |
Other income (expense) | | Other income (expense) | (4,709) | | | 2,179 | | | (1,832) | | | 4,290 | |
Income before income taxes | | Income before income taxes | 8,009 | | | 9,976 | | | 9,976 | | | 25,492 | |
Income tax benefit (expense) | | Income tax benefit (expense) | 1,214 | | | (3,713) | | | (2,897) | | | (7,091) | |
Net income | | Net income | 9,223 | | | 6,263 | | | 7,079 | | | 18,401 | |
Less: Net income (loss) attributable to noncontrolling interest | | Less: Net income (loss) attributable to noncontrolling interest | 201 | | | 546 | | | (53) | | | 1,706 | |
Net income attributable to Civeo Corporation | | Net income attributable to Civeo Corporation | 9,022 | | | 5,717 | | | 7,132 | | | 16,695 | |
Less: Dividends attributable to Class A preferred shares | Less: Dividends attributable to Class A preferred shares | 492 | | | 482 | | | 1,469 | | | 1,440 | | Less: Dividends attributable to Class A preferred shares | — | | | 492 | | | — | | | 1,469 | |
Net income (loss) attributable to Civeo common shareholders | $ | 5,225 | | | $ | 62 | | | $ | 15,226 | | | $ | (10,367) | | |
Net income attributable to Civeo common shareholders | | Net income attributable to Civeo common shareholders | $ | 9,022 | | | $ | 5,225 | | | $ | 7,132 | | | $ | 15,226 | |
| | Per Share Data (see Note 7) | | |
Basic net income (loss) per share attributable to Civeo Corporation common shareholders | $ | 0.32 | | | $ | — | | | $ | 0.92 | | | $ | (0.73) | | |
Per Share Data (see Note 6) | | Per Share Data (see Note 6) | |
Basic net income per share attributable to Civeo Corporation common shareholders | | Basic net income per share attributable to Civeo Corporation common shareholders | $ | 0.61 | | | $ | 0.32 | | | $ | 0.48 | | | $ | 0.92 | |
| Diluted net income (loss) per share attributable to Civeo Corporation common shareholders | $ | 0.32 | | | $ | — | | | $ | 0.91 | | | $ | (0.73) | | |
Diluted net income per share attributable to Civeo Corporation common shareholders | | Diluted net income per share attributable to Civeo Corporation common shareholders | $ | 0.61 | | | $ | 0.32 | | | $ | 0.47 | | | $ | 0.91 | |
| Weighted average number of common shares outstanding: | Weighted average number of common shares outstanding: | | Weighted average number of common shares outstanding: | |
Basic | Basic | 13,932 | | | 14,277 | | | 14,058 | | | 14,255 | | Basic | 14,814 | | | 13,932 | | | 14,980 | | | 14,058 | |
Diluted | Diluted | 14,064 | | | 14,361 | | | 14,220 | | | 14,255 | | Diluted | 14,891 | | | 14,064 | | | 15,051 | | | 14,220 | |
| Dividends per common share | | Dividends per common share | $ | 0.25 | | | $ | — | | | $ | 0.25 | | | $ | — | |
The accompanying notes are an integral part of these financial statements.
CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
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Net income (loss) | $ | 6,263 | | | $ | 1,022 | | | $ | 18,401 | | | $ | (8,393) | |
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Other comprehensive loss, net of taxes: | | | | | | | |
Foreign currency translation adjustment, net of zero taxes | (20,745) | | | (12,217) | | | (32,757) | | | (15,417) | |
Total other comprehensive loss, net of taxes | (20,745) | | | (12,217) | | | (32,757) | | | (15,417) | |
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Comprehensive loss | (14,482) | | | (11,195) | | | (14,356) | | | (23,810) | |
Less: Comprehensive income attributable to noncontrolling interest | 368 | | | 450 | | | 1,474 | | | 488 | |
Comprehensive loss attributable to Civeo Corporation | $ | (14,850) | | | $ | (11,645) | | | $ | (15,830) | | | $ | (24,298) | |
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
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Net income | $ | 9,223 | | | $ | 6,263 | | | $ | 7,079 | | | $ | 18,401 | |
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Other comprehensive loss, net of taxes: | | | | | | | |
Foreign currency translation adjustment, net of zero taxes | (6,795) | | | (20,745) | | | (6,890) | | | (32,757) | |
Total other comprehensive loss, net of taxes | (6,795) | | | (20,745) | | | (6,890) | | | (32,757) | |
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Comprehensive income (loss) | 2,428 | | | (14,482) | | | 189 | | | (14,356) | |
Less: Comprehensive income (loss) attributable to noncontrolling interest | 136 | | | 368 | | | (50) | | | 1,474 | |
Comprehensive income (loss) attributable to Civeo Corporation | $ | 2,292 | | | $ | (14,850) | | | $ | 239 | | | $ | (15,830) | |
The accompanying notes are an integral part of these financial statements.
CIVEO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Excluding Share Amounts)
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
| | (Unaudited) | | | | (Unaudited) | | |
ASSETS | ASSETS | | ASSETS | |
| Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 8,361 | | | $ | 6,282 | | Cash and cash equivalents | $ | 7,817 | | | $ | 7,954 | |
Accounts receivable, net | Accounts receivable, net | 122,280 | | | 114,859 | | Accounts receivable, net | 153,946 | | | 119,755 | |
Inventories | Inventories | 6,984 | | | 6,468 | | Inventories | 6,272 | | | 6,907 | |
Prepaid expenses | Prepaid expenses | 9,487 | | | 6,876 | | Prepaid expenses | 11,158 | | | 7,199 | |
Other current assets | Other current assets | 3,850 | | | 10,946 | | Other current assets | 3,251 | | | 3,081 | |
Assets held for sale | Assets held for sale | 13,759 | | | 11,762 | | Assets held for sale | 8,185 | | | 8,653 | |
Total current assets | Total current assets | 164,721 | | | 157,193 | | Total current assets | 190,629 | | | 153,549 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 309,752 | | | 389,996 | | Property, plant and equipment, net | 263,436 | | | 301,890 | |
Goodwill | Goodwill | 7,322 | | | 8,204 | | Goodwill | 7,290 | | | 7,672 | |
Other intangible assets, net | Other intangible assets, net | 81,997 | | | 93,642 | | Other intangible assets, net | 77,547 | | | 81,747 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 14,267 | | | 18,327 | | Operating lease right-of-use assets | 12,866 | | | 15,722 | |
Other noncurrent assets | Other noncurrent assets | 5,270 | | | 5,372 | | Other noncurrent assets | 4,826 | | | 5,604 | |
Total assets | Total assets | $ | 583,329 | | | $ | 672,734 | | Total assets | $ | 556,594 | | | $ | 566,184 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | $ | 46,225 | | | $ | 49,321 | | Accounts payable | $ | 53,124 | | | $ | 51,087 | |
Accrued liabilities | Accrued liabilities | 32,432 | | | 33,564 | | Accrued liabilities | 48,693 | | | 39,211 | |
Income taxes | Income taxes | 111 | | | 171 | | Income taxes | 173 | | | 178 | |
Current portion of long-term debt | Current portion of long-term debt | 27,964 | | | 30,576 | | Current portion of long-term debt | 7,143 | | | 28,448 | |
Deferred revenue | Deferred revenue | 2,092 | | | 18,479 | | Deferred revenue | 6,884 | | | 991 | |
Other current liabilities | Other current liabilities | 8,900 | | | 4,807 | | Other current liabilities | 9,276 | | | 8,342 | |
Total current liabilities | Total current liabilities | 117,724 | | | 136,918 | | Total current liabilities | 125,293 | | | 128,257 | |
| Long-term debt, less current maturities | Long-term debt, less current maturities | 96,727 | | | 142,602 | | Long-term debt, less current maturities | 95,852 | | | 102,505 | |
Deferred income taxes | Deferred income taxes | 7,344 | | | 896 | | Deferred income taxes | 7,017 | | | 4,778 | |
Operating lease liabilities | Operating lease liabilities | 11,669 | | | 15,429 | | Operating lease liabilities | 10,355 | | | 12,771 | |
Other noncurrent liabilities | Other noncurrent liabilities | 13,668 | | | 13,778 | | Other noncurrent liabilities | 24,114 | | | 14,172 | |
Total liabilities | Total liabilities | 247,132 | | | 309,623 | | Total liabilities | 262,631 | | | 262,483 | |
| Commitments and contingencies (Note 10) | | |
| Shareholders’ Equity: | Shareholders’ Equity: | | Shareholders’ Equity: | |
Preferred shares (Class A Series 1, no par value; 50,000,000 shares authorized, 9,042 shares issued and outstanding, aggregate liquidation preference of $98,907,587 and $97,438,687 as of September 30, 2022 and December 31, 2021, respectively) | 63,410 | | | 61,941 | | |
Common shares (no par value; 46,000,000 shares authorized, 14,079,336 shares and 14,431,819 shares issued, respectively, and 13,712,661 shares and 14,111,221 shares outstanding, respectively) | — | | | — | | |
Preferred shares (Class A Series 1) | | Preferred shares (Class A Series 1) | — | | | — | |
Common shares (no par value; 46,000,000 shares authorized, 15,167,502 shares and 15,584,176 shares issued, respectively, and 14,800,827 shares and 15,217,501 shares outstanding, respectively) | | Common shares (no par value; 46,000,000 shares authorized, 15,167,502 shares and 15,584,176 shares issued, respectively, and 14,800,827 shares and 15,217,501 shares outstanding, respectively) | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 1,585,303 | | | 1,582,442 | | Additional paid-in capital | 1,627,809 | | | 1,624,512 | |
Accumulated deficit | Accumulated deficit | (911,934) | | | (912,951) | | Accumulated deficit | (935,944) | | | (930,123) | |
Common shares held in treasury at cost, 366,675 and 320,598 shares, respectively | (9,063) | | | (8,050) | | |
Common shares held in treasury at cost, 366,675 and 366,675 shares, respectively | | Common shares held in treasury at cost, 366,675 and 366,675 shares, respectively | (9,063) | | | (9,063) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (394,408) | | | (361,883) | | Accumulated other comprehensive loss | (392,080) | | | (385,187) | |
Total Civeo Corporation shareholders’ equity | Total Civeo Corporation shareholders’ equity | 333,308 | | | 361,499 | | Total Civeo Corporation shareholders’ equity | 290,722 | | | 300,139 | |
Noncontrolling interest | Noncontrolling interest | 2,889 | | | 1,612 | | Noncontrolling interest | 3,241 | | | 3,562 | |
Total shareholders’ equity | Total shareholders’ equity | 336,197 | | | 363,111 | | Total shareholders’ equity | 293,963 | | | 303,701 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 583,329 | | | $ | 672,734 | | Total liabilities and shareholders’ equity | $ | 556,594 | | | $ | 566,184 | |
The accompanying notes are an integral part of these financial statements.
CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
(In Thousands)
| | | Attributable to Civeo | | | Attributable to Civeo | |
| | Preferred Shares | | Common Shares | | | | Preferred Shares | | Common Shares | | |
| Amount | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Treasury Shares | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest | | Total Shareholders’ Equity | |
Balance, June 30, 2021 | $ | 60,974 | | | $ | — | | | $ | 1,580,213 | | | $ | (918,156) | | | $ | (8,050) | | | $ | (352,171) | | | $ | 595 | | | $ | 363,405 | | |
Net income | — | | | — | | | — | | | 544 | | | — | | | — | | | 478 | | | 1,022 | | |
Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (12,189) | | | (28) | | | (12,217) | | |
Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (15) | | | (15) | | |
Dividends attributable to Class A preferred shares | 482 | | | — | | | — | | | (482) | | | — | | | — | | | — | | | — | | |
Common shares repurchased | — | | | — | | | — | | | (445) | | | — | | | — | | | — | | | (445) | | |
Share-based compensation | — | | | — | | | 1,035 | | | — | | | — | | | — | | | — | | | 1,035 | | |
Balance, September 30, 2021 | $ | 61,456 | | | $ | — | | | $ | 1,581,248 | | | $ | (918,539) | | | $ | (8,050) | | | $ | (364,360) | | | $ | 1,030 | | | $ | 352,785 | | |
| | | | | | | | | | | | | | | | | | Amount | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Treasury Shares | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest | | Total Shareholders’ Equity |
Balance, June 30, 2022 | Balance, June 30, 2022 | $ | 62,918 | | | $ | — | | | $ | 1,584,416 | | | $ | (903,492) | | | $ | (9,063) | | | $ | (373,841) | | | $ | 2,582 | | | $ | 363,520 | | Balance, June 30, 2022 | $ | 62,918 | | | $ | — | | | $ | 1,584,416 | | | $ | (903,492) | | | $ | (9,063) | | | $ | (373,841) | | | $ | 2,582 | | | $ | 363,520 | |
Net income | Net income | — | | | — | | | — | | | 5,717 | | | — | | | — | | | 546 | | | 6,263 | | Net income | — | | | — | | | — | | | 5,717 | | | — | | | — | | | 546 | | | 6,263 | |
Currency translation adjustment | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (20,567) | | | (178) | | | (20,745) | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (20,567) | | | (178) | | | (20,745) | |
Dividends paid | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (61) | | | (61) | | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (61) | | | (61) | |
Dividends attributable to Class A preferred shares | Dividends attributable to Class A preferred shares | 492 | | | — | | | — | | | (492) | | | — | | | — | | | — | | | — | | Dividends attributable to Class A preferred shares | 492 | | | — | | | — | | | (492) | | | — | | | — | | | — | | | — | |
Common shares repurchased | Common shares repurchased | — | | | — | | | — | | | (13,667) | | | — | | | — | | | — | | | (13,667) | | Common shares repurchased | — | | | — | | | — | | | (13,667) | | | — | | | — | | | — | | | (13,667) | |
Share-based compensation | Share-based compensation | — | | | — | | | 887 | | | — | | | — | | | — | | | — | | | 887 | | Share-based compensation | — | | | — | | | 887 | | | — | | | — | | | — | | | — | | | 887 | |
Balance, September 30, 2022 | Balance, September 30, 2022 | $ | 63,410 | | | $ | — | | | $ | 1,585,303 | | | $ | (911,934) | | | $ | (9,063) | | | $ | (394,408) | | | $ | 2,889 | | | $ | 336,197 | | Balance, September 30, 2022 | $ | 63,410 | | | $ | — | | | $ | 1,585,303 | | | $ | (911,934) | | | $ | (9,063) | | | $ | (394,408) | | | $ | 2,889 | | | $ | 336,197 | |
| Balance, December 31, 2020 | $ | 60,016 | | | $ | — | | | $ | 1,578,315 | | | $ | (907,727) | | | $ | (6,930) | | | $ | (348,989) | | | $ | 672 | | | $ | 375,357 | | |
Net income (loss) | — | | | — | | | — | | | (8,927) | | | — | | | — | | | 534 | | | (8,393) | | |
Balance, June 30, 2023 | | Balance, June 30, 2023 | $ | — | | | $ | — | | | $ | 1,626,556 | | | $ | (939,983) | | | $ | (9,063) | | | $ | (385,350) | | | $ | 3,173 | | | $ | 295,333 | |
Net income | | Net income | — | | | — | | | — | | | 9,022 | | | — | | | — | | | 201 | | | 9,223 | |
Currency translation adjustment | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (15,371) | | | (46) | | | (15,417) | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (6,730) | | | (65) | | | (6,795) | |
Dividends paid | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (130) | | | (130) | | Dividends paid | — | | | — | | | — | | | (3,731) | | | — | | | — | | | (68) | | | (3,799) | |
Dividends attributable to Class A preferred shares | 1,440 | | | — | | | — | | | (1,440) | | | — | | | — | | | — | | | — | | |
Common shares repurchased | Common shares repurchased | — | | | — | | | — | | | (445) | | | — | | | — | | | — | | | (445) | | Common shares repurchased | — | | | — | | | — | | | (1,252) | | | — | | | — | | | — | | | (1,252) | |
Share-based compensation | Share-based compensation | — | | | — | | | 2,933 | | | — | | | (1,120) | | | — | | | — | | | 1,813 | | Share-based compensation | — | | | — | | | 1,253 | | | — | | | — | | | — | | | — | | | 1,253 | |
Balance, September 30, 2021 | $ | 61,456 | | | $ | — | | | $ | 1,581,248 | | | $ | (918,539) | | | $ | (8,050) | | | $ | (364,360) | | | $ | 1,030 | | | $ | 352,785 | | |
Balance, September 30, 2023 | | Balance, September 30, 2023 | $ | — | | | $ | — | | | $ | 1,627,809 | | | $ | (935,944) | | | $ | (9,063) | | | $ | (392,080) | | | $ | 3,241 | | | $ | 293,963 | |
| | Balance, December 31, 2021 | Balance, December 31, 2021 | $ | 61,941 | | | $ | — | | | $ | 1,582,442 | | | $ | (912,951) | | | $ | (8,050) | | | $ | (361,883) | | | $ | 1,612 | | | $ | 363,111 | | Balance, December 31, 2021 | $ | 61,941 | | | $ | — | | | $ | 1,582,442 | | | $ | (912,951) | | | $ | (8,050) | | | $ | (361,883) | | | $ | 1,612 | | | $ | 363,111 | |
Net income | Net income | — | | | — | | | — | | | 16,695 | | | — | | | — | | | 1,706 | | | 18,401 | | Net income | — | | | — | | | — | | | 16,695 | | | — | | | — | | | 1,706 | | | 18,401 | |
Currency translation adjustment | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (32,525) | | | (232) | | | (32,757) | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (32,525) | | | (232) | | | (32,757) | |
Dividends paid | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (197) | | | (197) | | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | (197) | | | (197) | |
Dividends attributable to Class A preferred shares | Dividends attributable to Class A preferred shares | 1,469 | | | — | | | — | | | (1,469) | | | — | | | — | | | — | | | — | | Dividends attributable to Class A preferred shares | 1,469 | | | — | | | — | | | (1,469) | | | — | | | — | | | — | | | — | |
Common shares repurchased | Common shares repurchased | — | | | — | | | — | | | (14,209) | | | — | | | — | | | — | | | (14,209) | | Common shares repurchased | — | | | — | | | — | | | (14,209) | | | — | | | — | | | — | | | (14,209) | |
Share-based compensation | Share-based compensation | — | | | — | | | 2,861 | | | — | | | (1,013) | | | — | | | — | | | 1,848 | | Share-based compensation | — | | | — | | | 2,861 | | | — | | | (1,013) | | | — | | | 1,848 | |
Balance, September 30, 2022 | Balance, September 30, 2022 | $ | 63,410 | | | $ | — | | | $ | 1,585,303 | | | $ | (911,934) | | | $ | (9,063) | | | $ | (394,408) | | | $ | 2,889 | | | $ | 336,197 | | Balance, September 30, 2022 | $ | 63,410 | | | $ | — | | | $ | 1,585,303 | | | $ | (911,934) | | | $ | (9,063) | | | $ | (394,408) | | | $ | 2,889 | | | $ | 336,197 | |
| Balance, December 31, 2022 | | Balance, December 31, 2022 | $ | — | | | $ | — | | | $ | 1,624,512 | | | $ | (930,123) | | | $ | (9,063) | | | $ | (385,187) | | | $ | 3,562 | | | $ | 303,701 | |
Net income (loss) | | Net income (loss) | — | | | — | | | — | | | 7,132 | | | — | | | — | | | (53) | | | 7,079 | |
Currency translation adjustment | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (6,893) | | | 3 | | | (6,890) | |
Dividends paid | | Dividends paid | — | | | — | | | — | | | (3,731) | | | — | | | — | | | (271) | | | (4,002) | |
Common shares repurchased | | Common shares repurchased | — | | | — | | | — | | | (9,222) | | | — | | | — | | | — | | | (9,222) | |
Share-based compensation | | Share-based compensation | — | | | — | | | 3,297 | | | — | | | — | | | — | | | — | | | 3,297 | |
Balance, September 30, 2023 | | Balance, September 30, 2023 | $ | — | | | $ | — | | | $ | 1,627,809 | | | $ | (935,944) | | | $ | (9,063) | | | $ | (392,080) | | | $ | 3,241 | | | $ | 293,963 | |
|
| | | | | | | | | | | |
| Preferred Shares | | Common Shares (in thousands) |
Balance, December 31, 2021 | 9,042 | | | 14,111 | |
Share-based compensation | — | | | 100 | |
Common shares repurchased | — | | | (498) | |
Balance, September 30, 2022 | 9,042 | | | 13,713 | |
| | | | | | | | | | | |
| Preferred Shares | | Common Shares (in thousands) |
Balance, December 31, 2022 | — | | | 15,218 | |
Share-based compensation | — | | | 26 | |
Common shares repurchased | — | | | (443) | |
Balance, September 30, 2023 | — | | | 14,801 | |
The accompanying notes are an integral part of these financial statements.
CIVEO CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income (loss) | $ | 18,401 | | | $ | (8,393) | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
Net income | | Net income | $ | 7,079 | | | $ | 18,401 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 65,818 | | | 62,928 | | Depreciation and amortization | 59,277 | | | 65,818 | |
Impairment charges | — | | | 7,935 | | |
Loss on extinguishment of debt | — | | | 416 | | |
| Deferred income tax expense | Deferred income tax expense | 6,930 | | | 2,105 | | Deferred income tax expense | 2,688 | | | 6,930 | |
Non-cash compensation charge | Non-cash compensation charge | 2,861 | | | 2,933 | | Non-cash compensation charge | 3,297 | | | 2,861 | |
Gains on disposals of assets | (4,069) | | | (2,305) | | |
Losses (gains) on disposals of assets | | Losses (gains) on disposals of assets | 2,264 | | | (4,069) | |
Provision (benefit) for credit losses, net of recoveries | Provision (benefit) for credit losses, net of recoveries | (23) | | | 155 | | Provision (benefit) for credit losses, net of recoveries | 120 | | | (23) | |
Other, net | Other, net | 2,397 | | | 2,436 | | Other, net | 1,900 | | | 2,397 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | Accounts receivable | (19,138) | | | (21,516) | | Accounts receivable | (37,411) | | | (19,138) | |
Inventories | Inventories | (1,557) | | | (193) | | Inventories | 420 | | | (1,557) | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | 3,515 | | | 9,836 | | Accounts payable and accrued liabilities | 4,767 | | | 3,515 | |
Taxes payable | Taxes payable | (62) | | | 61 | | Taxes payable | (5) | | | (62) | |
Other current and noncurrent assets and liabilities, net | Other current and noncurrent assets and liabilities, net | (12,701) | | | 6,843 | | Other current and noncurrent assets and liabilities, net | 12,197 | | | (12,701) | |
Net cash flows provided by operating activities | Net cash flows provided by operating activities | 62,372 | | | 63,241 | | Net cash flows provided by operating activities | 56,593 | | | 62,372 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | Cash flows from investing activities: | |
Capital expenditures | Capital expenditures | (17,466) | | | (9,645) | | Capital expenditures | (21,179) | | | (17,466) | |
| Proceeds from dispositions of property, plant and equipment | Proceeds from dispositions of property, plant and equipment | 11,975 | | | 7,545 | | Proceeds from dispositions of property, plant and equipment | 7,070 | | | 11,975 | |
Other, net | Other, net | 190 | | | — | | Other, net | — | | | 190 | |
Net cash flows used in investing activities | Net cash flows used in investing activities | (5,301) | | | (2,100) | | Net cash flows used in investing activities | (14,109) | | | (5,301) | |
| Cash flows from financing activities: | Cash flows from financing activities: | | Cash flows from financing activities: | |
Revolving credit borrowings | Revolving credit borrowings | 204,951 | | | 367,622 | | Revolving credit borrowings | 172,867 | | | 204,951 | |
Revolving credit repayments | Revolving credit repayments | (219,775) | | | (305,148) | | Revolving credit repayments | (179,599) | | | (219,775) | |
Term loan repayments | Term loan repayments | (23,059) | | | (117,595) | | Term loan repayments | (22,338) | | | (23,059) | |
Debt issuance costs | — | | | (4,407) | | |
| Dividends paid | | Dividends paid | (3,731) | | | — | |
Repurchases of common shares | Repurchases of common shares | (14,209) | | | (445) | | Repurchases of common shares | (9,222) | | | (14,209) | |
Taxes paid on vested shares | Taxes paid on vested shares | (1,013) | | | (1,120) | | Taxes paid on vested shares | — | | | (1,013) | |
Net cash flows used in financing activities | Net cash flows used in financing activities | (53,105) | | | (61,093) | | Net cash flows used in financing activities | (42,023) | | | (53,105) | |
| Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | (1,887) | | | (1,255) | | Effect of exchange rate changes on cash | (598) | | | (1,887) | |
Net change in cash and cash equivalents | Net change in cash and cash equivalents | 2,079 | | | (1,207) | | Net change in cash and cash equivalents | (137) | | | 2,079 | |
Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | 6,282 | | | 6,155 | | Cash and cash equivalents, beginning of period | 7,954 | | | 6,282 | |
| Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 8,361 | | | $ | 4,948 | | Cash and cash equivalents, end of period | $ | 7,817 | | | $ | 8,361 | |
| Non-cash financing activities: | Non-cash financing activities: | | Non-cash financing activities: | |
Preferred dividends paid-in-kind | Preferred dividends paid-in-kind | $ | 1,469 | | | $ | 1,440 | | Preferred dividends paid-in-kind | $ | — | | | $ | 1,469 | |
The accompanying notes are an integral part of these financial statements.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of the Business
We provide hospitality services to the natural resources industry in Canada, Australia and the U.S. Our fullWe provide a suite of hospitality services for our guests, includesincluding lodging, catering and food service, housekeeping and maintenance at accommodation facilities that we or our customers own. In many cases, we provide services that support the day-to-day operations of these facilities, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics. We also offer development activities for workforce accommodation facilities, including site selection, permitting, engineering and design, manufacturing management and site construction, along with providing hospitality services once the facility is constructed. We primarily operate in some of the world’s most active oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore producing regions, and our customers include major and independent oil companies, mining companies, engineering companies and oilfield and mining service companies. We operate in threetwo principal reportable business segments – Canada Australia and the U.S.Australia.
Basis of Presentation
Unless otherwise stated or the context otherwise indicates: (i) all references in these consolidated financial statements to “Civeo,” “us,” “our” or “we” refer to Civeo Corporation and its consolidated subsidiaries; and (ii) all references in this report to “dollars” or “$” are to U.S. dollars.
The accompanying unaudited consolidated financial statements of Civeo have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) has been condensed or omitted pursuant to those rules and regulations. The unaudited consolidated financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year. Certain reclassifications have been made to the 2022 financial information to conform to current year presentation.
The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements.
The unaudited consolidated financial statements included in this report should be read in conjunction with our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
2.REVENUE
The following table disaggregates our revenue by our threetwo reportable segments: Canada Australia and the U.S.,Australia and major categories for the periods indicated (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Canada | Canada | | | | | | | | Canada | | | | | | | |
Accommodation revenues | Accommodation revenues | $ | 72,724 | | | $ | 60,511 | | | $ | 219,349 | | | $ | 176,800 | | Accommodation revenues | $ | 71,417 | | | $ | 72,724 | | | $ | 208,000 | | | $ | 219,349 | |
Mobile facility rental revenues | Mobile facility rental revenues | 25,283 | | | 19,075 | | | 73,359 | | | 38,240 | | Mobile facility rental revenues | 17,314 | | | 25,283 | | | 54,752 | | | 73,359 | |
Food service and other services revenues | Food service and other services revenues | 5,002 | | | 4,471 | | | 15,276 | | | 14,183 | | Food service and other services revenues | 6,413 | | | 5,002 | | | 17,315 | | | 15,276 | |
| Total Canada revenues | Total Canada revenues | 103,009 | | | 84,057 | | | 307,984 | | | 229,223 | | Total Canada revenues | 95,144 | | | 103,009 | | | 280,067 | | | 307,984 | |
| Australia | Australia | | Australia | |
Accommodation revenues | Accommodation revenues | $ | 38,316 | | | $ | 38,104 | | | $ | 114,967 | | | $ | 109,559 | | Accommodation revenues | $ | 46,012 | | | $ | 38,316 | | | $ | 130,953 | | | $ | 114,967 | |
Food service and other services revenues | Food service and other services revenues | 35,489 | | | 27,014 | | | 90,187 | | | 79,215 | | Food service and other services revenues | 41,873 | | | 35,489 | | | 116,465 | | | 90,187 | |
Total Australia revenues | Total Australia revenues | 73,805 | | | 65,118 | | | 205,154 | | | 188,774 | | Total Australia revenues | 87,885 | | | 73,805 | | | 247,418 | | | 205,154 | |
| U.S. | | |
Accommodation revenues | $ | 990 | | | $ | 1,812 | | | $ | 2,244 | | | $ | 4,189 | | |
Mobile facility rental revenues | 5,811 | | | 3,941 | | | 18,128 | | | 10,769 | | |
Manufacturing revenues | 587 | | | 124 | | | 1,286 | | | 1,686 | | |
Food service and other services revenues | 25 | | | 11 | | | 63 | | | 28 | | |
Total U.S. revenues | 7,413 | | | 5,888 | | | 21,721 | | | 16,672 | | |
Other | | Other | |
Other revenues | | Other revenues | $ | 543 | | | $ | 7,413 | | | $ | 2,521 | | | $ | 21,721 | |
| Total other revenues | | Total other revenues | 543 | | | 7,413 | | | 2,521 | | | 21,721 | |
| Total revenues | Total revenues | $ | 184,227 | | | $ | 155,063 | | | $ | 534,859 | | | $ | 434,669 | | Total revenues | $ | 183,572 | | | $ | 184,227 | | | $ | 530,006 | | | $ | 534,859 | |
Our payment terms vary by the type and location of our customer and the products or services offered. The time between invoicing and when our performance obligations are satisfied is not significant. Payment terms are generally within 30 days and in most cases do not extend beyond 60 days. We do not have significant financing components or significant payment terms.
As of September 30, 2022,2023, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue. The table only includes revenue expected to be recognized from contracts where the quantity of service is certain (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the years ending December 31, |
| 2022 | | 2023 | | 2024 | | Thereafter | | Total |
Revenue expected to be recognized as of September 30, 2022 | $ | 41,135 | | | $ | 86,433 | | | $ | 47,742 | | | $ | 297,488 | | | $ | 472,798 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the years ending December 31, |
| 2023 | | 2024 | | 2025 | | Thereafter | | Total |
Revenue expected to be recognized as of September 30, 2023 | $ | 43,646 | | | $ | 151,716 | | | $ | 111,329 | | | $ | 383,980 | | | $ | 690,671 | |
We applied the practical expedient and do not disclose consideration for remaining performance obligations with an original expected duration of one year or less. In addition, we do not estimate revenues expected to be recognized related to unsatisfied performance obligations for contracts without minimum room commitments. The table above represents only a portion of our expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues.
3.IMPAIRMENT CHARGES
Quarter ended June 30, 2021. During the second quarter of 2021, we recorded impairment expense of $7.9 million related to various undeveloped land positions and related permitting costs in Australia. At June 30, 2021, we identified an impairment trigger related to certain of these properties due to the cancellation of a significant thermal coal project in Australia and our negative expectations related to other possible Australian thermal coal projects becoming viable in the near term. Accordingly, the assets were written down to their estimated fair value of $2.4 million.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
4.FAIR VALUE MEASUREMENTS
Our financial instruments consist of cash and cash equivalents, receivables, payables and debt instruments. We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.
As of September 30, 20222023 and December 31, 2021,2022, we believe the carrying value of our floating-rate debt outstanding under our term loans and revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment. We estimated the fair value of our floating-rate term loan and revolving credit facilities using significant other observable inputs, representative of a Level 2 fair value measurement, including terms and credit spreads for these loans. In addition, the estimated fair value of our assets held for sale is based upon Level 2 fair value measurements, which include appraisals and previous negotiations with third parties.
During the second quarter of 2021, we wrote down certain long-lived assets to fair value. Our estimate of the fair value of undeveloped land positions in Australia that were impaired was based on appraisals from third parties.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
See Note 3 – Impairment Charges for further information.
5.4.DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
Additional information regarding selected balance sheet accounts at September 30, 20222023 and December 31, 20212022 is presented below (in thousands):
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Accounts receivable, net: | Accounts receivable, net: | | | | Accounts receivable, net: | | | |
Trade | Trade | $ | 69,833 | | | $ | 75,740 | | Trade | $ | 87,567 | | | $ | 65,563 | |
Unbilled revenue | Unbilled revenue | 51,567 | | | 38,508 | | Unbilled revenue | 64,820 | | | 52,547 | |
Other | Other | 1,184 | | | 972 | | Other | 1,739 | | | 1,944 | |
Total accounts receivable | Total accounts receivable | 122,584 | | | 115,220 | | Total accounts receivable | 154,126 | | | 120,054 | |
Allowance for credit losses | Allowance for credit losses | (304) | | | (361) | | Allowance for credit losses | (180) | | | (299) | |
Total accounts receivable, net | Total accounts receivable, net | $ | 122,280 | | | $ | 114,859 | | Total accounts receivable, net | $ | 153,946 | | | $ | 119,755 | |
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Inventories: | Inventories: | | | | Inventories: | | | |
Finished goods and purchased products | Finished goods and purchased products | $ | 5,586 | | | $ | 5,346 | | Finished goods and purchased products | $ | 4,955 | | | $ | 5,538 | |
Work in process | — | | | 25 | | |
| Raw materials | Raw materials | 1,398 | | | 1,097 | | Raw materials | 1,317 | | | 1,369 | |
Total inventories | Total inventories | $ | 6,984 | | | $ | 6,468 | | Total inventories | $ | 6,272 | | | $ | 6,907 | |
| | | Estimated Useful Life (in years) | | September 30, 2022 | | December 31, 2021 | | Estimated Useful Life (in years) | | September 30, 2023 | | December 31, 2022 |
Property, plant and equipment, net: | Property, plant and equipment, net: | | | | | | | | | | Property, plant and equipment, net: | | | | | | | | | |
Land | Land | | | | | | | $ | 25,896 | | | $ | 30,556 | | Land | | | | | | | $ | 25,888 | | | $ | 25,528 | |
Accommodations assets | Accommodations assets | 3 | | — | | 15 | | 1,426,704 | | | 1,657,577 | | Accommodations assets | 3 | | — | | 15 | | 1,330,164 | | | 1,464,476 | |
Buildings and leasehold improvements | Buildings and leasehold improvements | 7 | | — | | 20 | | 17,260 | | | 24,335 | | Buildings and leasehold improvements | 7 | | — | | 20 | | 15,396 | | | 15,516 | |
Machinery and equipment | Machinery and equipment | 4 | | — | | 15 | | 10,752 | | | 14,983 | | Machinery and equipment | 4 | | — | | 7 | | 12,429 | | | 11,775 | |
Office furniture and equipment | Office furniture and equipment | 3 | | — | | 7 | | 61,187 | | | 63,228 | | Office furniture and equipment | 3 | | — | | 7 | | 64,981 | | | 62,725 | |
Vehicles | Vehicles | 3 | | — | | 5 | | 8,227 | | | 14,578 | | Vehicles | 3 | | — | | 5 | | 9,325 | | | 8,411 | |
Construction in progress | Construction in progress | | | | | | | 9,444 | | | 2,063 | | Construction in progress | | | | | | | 8,902 | | | 1,771 | |
Total property, plant and equipment | Total property, plant and equipment | | | | | | | 1,559,470 | | | 1,807,320 | | Total property, plant and equipment | | | | | | | 1,467,085 | | | 1,590,202 | |
Accumulated depreciation | Accumulated depreciation | | | | | | | (1,249,718) | | | (1,417,324) | | Accumulated depreciation | | | | | | | (1,203,649) | | | (1,288,312) | |
Total property, plant and equipment, net | Total property, plant and equipment, net | | | | | | | $ | 309,752 | | | $ | 389,996 | | Total property, plant and equipment, net | | | | | | | $ | 263,436 | | | $ | 301,890 | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Accrued liabilities: | | | |
Accrued compensation | $ | 27,888 | | | $ | 34,358 | |
Accrued taxes, other than income taxes | 2,988 | | | 2,873 | |
| | | |
Other (1) | 17,817 | | | 1,980 | |
Total accrued liabilities | $ | 48,693 | | | $ | 39,211 | |
(1)The increase in Other accrued liabilities from December 31, 2022 to September 30, 2023 was due to payments received in the third quarter of 2023 from a customer related to an asset sale contract, which are expected to be recognized in the fourth quarter of 2023 and the first quarter of 2024.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Accrued liabilities: | | | |
Accrued compensation | $ | 27,577 | | | $ | 28,877 | |
Accrued taxes, other than income taxes | 2,901 | | | 2,944 | |
| | | |
Other | 1,954 | | | 1,743 | |
Total accrued liabilities | $ | 32,432 | | | $ | 33,564 | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Contract liabilities (Deferred revenue): | | | |
Current contract liabilities (1) | $ | 6,884 | | | $ | 991 | |
Noncurrent contract liabilities (1) | 7,986 | | | — | |
Total contract liabilities (Deferred revenue) | $ | 14,870 | | | $ | 991 | |
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Deferred revenue: | | | |
Contract liabilities | $ | 2,092 | | | $ | 18,479 | |
(1)Current contract liabilities and Noncurrent contract liabilities are included in "Deferred revenue" and "Other noncurrent liabilities," respectively, in our unaudited consolidated balance sheets.
Deferred revenue typically consists of contract liabilities resulting from upfront payments related toreceived before we satisfy the mobilization of mobile assets to service pipeline projects in our Canadian business segment.associated performance obligation. The decreaseincrease in deferred revenue from December 31, 20212022 to September 30, 20222023 was primarily due to the recognition of deferred revenuepayments received from a customer for village enhancements in Australia and a payment received from a customer related to an asset transportation contract, which will all be recognized over the contracted terms of these pipeline projects in Canada.
terms.
6.5.ASSETS AND LIABILITIES HELD FOR SALE
As of September 30, 2022, assets2023 and liabilities held for sale included certain assets and liabilities in our U.S. business segment. As of December 31, 2021,2022, assets and liabilities held for sale included certain assets in our U.S.Canadian business segment and undeveloped land holdings in our Australia business segment.the U.S. These assets and liabilities were recorded at the estimated fair value less costs to sell, which exceeded or equaled their carry values. During the first quarter of 2023, we sold the accommodation assets at our Louisiana location. The land at this location remains in assets held for sale as of September 30, 2023.
During the third quarter of 2023, we entered into a definitive agreement to sell our McClelland Lake Lodge assets for approximately C$49 million, or US$36 million. The related assets had no remaining carrying value. During the third quarter of 2023, we recognized $4.9 million in demobilization costs and received $9.1 million in cash proceeds associated with the sale. We expect to recognize the remaining demobilization costs and the proceeds of the sale in the fourth quarter of 2023 and first quarter of 2024.
The following table summarizes the carrying amount as of September 30, 20222023 and December 31, 20212022 of the assets and liabilities classified as held for sale (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Assets held for sale: | | | |
Assets | | | |
Accounts receivable, net | $ | 1,247 | | | $ | — | |
Inventories | 321 | | — | |
Property, plant and equipment, net | 12,010 | | 11,762 | |
Other noncurrent assets | 181 | | — | |
Total assets held for sale | $ | 13,759 | | | $ | 11,762 | |
| | | |
Liabilities held for sale: | | | |
Liabilities | | | |
Accounts payable | $ | 375 | | | $ | — | |
Accrued liabilities | 470 | | — | |
Deferred revenue | 122 | | — | |
Other current liabilities | 44 | | — | |
Other noncurrent liabilities | 114 | | — | |
Total liabilities held for sale (1) | $ | 1,125 | | | $ | — | |
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
(1)Liabilities held for sale are classified as a current liability on the unaudited consolidated balance sheets, under the caption "Other current liabilities." | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Assets held for sale: | | | |
Property, plant and equipment, net | $ | 8,185 | | | $ | 8,653 | |
Total assets held for sale | $ | 8,185 | | | $ | 8,653 | |
7.6.EARNINGS PER SHARE
We useFor the three and nine months ended September 30, 2023, we calculated our basic earnings per share by dividing net income (loss) attributable to common shareholders, before allocation of earnings to participating earnings by the weighted average number of common shares outstanding. For diluted earnings per share, the basic shares outstanding are adjusted by adding all potentially dilutive securities.
For the three and nine months ended September 30, 2022, a period during which we had participating securities in the form of Class A preferred shares, we used the two-class method to calculate basic and diluted earnings per share because we have participating securities in the form of Class A preferred shares.share. The two-class method requires a proportional share of net income to be allocated between common shares and participating securities. The proportional share to be allocated to participating securities is determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities.
Basic earnings per share is computed under the two-class method by dividing the net income (loss) attributable to common shareholders, after allocation of earnings to participating earnings by the weighted average number of common shares outstanding during the period. Net income attributable to common shareholders, after allocation of earnings to participating
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
earnings represents our net income reduced by an allocation of current period earnings to participating securities as described above. No such adjustment is made during periods with a net loss, as the adjustment would be anti-dilutive.
Diluted earnings per share is computed under the two-class method by dividing diluted net income (loss) attributable to common shareholders, after reallocation adjustment for participating securities by the weighted average number of common shares outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of share-based awards. In addition, we calculate the potential dilutive effect of any outstanding dilutive security under both the two-class method and the “if-converted” method, and we report the more dilutive of the methods as our diluted earnings per share. We also apply the treasury stock method with respect to certain share-based awards in the calculation of diluted earnings per share, if dilutive.
The calculation of earnings per share attributable to Civeo common shareholders is presented below for the periods indicated (in thousands, except per share amounts):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Numerator: | Numerator: | | | | | | | | Numerator: | | | | | | | |
Net income (loss) attributable to Civeo common shareholders | $ | 5,225 | | | $ | 62 | | | $ | 15,226 | | | $ | (10,367) | | |
Net income attributable to Civeo common shareholders, before allocation of earnings to participating securities | | Net income attributable to Civeo common shareholders, before allocation of earnings to participating securities | $ | 9,022 | | | $ | 5,225 | | | $ | 7,132 | | | $ | 15,226 | |
Less: income allocated to participating securities | Less: income allocated to participating securities | (794) | | | (9) | | | (2,297) | | | — | | Less: income allocated to participating securities | — | | | (794) | | | — | | | (2,297) | |
Basic net income (loss) attributable to Civeo Corporation common shareholders | $ | 4,431 | | | $ | 53 | | | $ | 12,929 | | | $ | (10,367) | | |
Net income attributable to Civeo Corporation common shareholders, after allocation of earnings to participating securities | | Net income attributable to Civeo Corporation common shareholders, after allocation of earnings to participating securities | $ | 9,022 | | | $ | 4,431 | | | $ | 7,132 | | | $ | 12,929 | |
Add: undistributed income attributable to participating securities | Add: undistributed income attributable to participating securities | 794 | | | 9 | | | 2,297 | | | — | | Add: undistributed income attributable to participating securities | — | | | 794 | | | — | | | 2,297 | |
Less: undistributed income reallocated to participating securities | Less: undistributed income reallocated to participating securities | (788) | | | (9) | | | (2,275) | | | — | | Less: undistributed income reallocated to participating securities | — | | | (788) | | | — | | | (2,275) | |
Diluted net income (loss) attributable to Civeo Corporation common shareholders | $ | 4,437 | | | $ | 53 | | | $ | 12,951 | | | $ | (10,367) | | |
Diluted net income attributable to Civeo Corporation common shareholders, after reallocation adjustment for participating securities | | Diluted net income attributable to Civeo Corporation common shareholders, after reallocation adjustment for participating securities | $ | 9,022 | | | $ | 4,437 | | | $ | 7,132 | | | $ | 12,951 | |
| Denominator: | Denominator: | | Denominator: | |
Weighted average shares outstanding - basic | Weighted average shares outstanding - basic | 13,932 | | | 14,277 | | | 14,058 | | | 14,255 | | Weighted average shares outstanding - basic | 14,814 | | | 13,932 | | | 14,980 | | | 14,058 | |
Dilutive shares - share-based awards | Dilutive shares - share-based awards | 132 | | | 84 | | | 162 | | | — | | Dilutive shares - share-based awards | 77 | | | 132 | | | 71 | | | 162 | |
Weighted average shares outstanding - diluted | Weighted average shares outstanding - diluted | 14,064 | | | 14,361 | | | 14,220 | | | 14,255 | | Weighted average shares outstanding - diluted | 14,891 | | | 14,064 | | | 15,051 | | | 14,220 | |
| Basic net income (loss) per share attributable to Civeo Corporation common shareholders (1) | $ | 0.32 | | | $ | — | | | $ | 0.92 | | | $ | (0.73) | | |
Basic net income per share attributable to Civeo Corporation common shareholders (1) | | Basic net income per share attributable to Civeo Corporation common shareholders (1) | $ | 0.61 | | | $ | 0.32 | | | $ | 0.48 | | | $ | 0.92 | |
| Diluted net income (loss) per share attributable to Civeo Corporation common shareholders (1) | $ | 0.32 | | | $ | — | | | $ | 0.91 | | | $ | (0.73) | | |
Diluted net income per share attributable to Civeo Corporation common shareholders (1) | | Diluted net income per share attributable to Civeo Corporation common shareholders (1) | $ | 0.61 | | | $ | 0.32 | | | $ | 0.47 | | | $ | 0.91 | |
(1)Computations may reflect rounding adjustments.
The following common share equivalents have been excluded from the calculation of weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented (in millions of shares):
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Share-based awards (1) | Share-based awards (1) | — | | | 0.1 | | | — | | | 0.2 | | Share-based awards (1) | — | | | — | | | — | | | — | |
Preferred shares | Preferred shares | 2.5 | | | 2.4 | | | 2.5 | | | 2.4 | | Preferred shares | — | | | 2.5 | | | — | | | 2.5 | |
(1)Share-based awards for the three and nine months ended September 30, 2023 and September 30, 2022 totaled lessfewer than 0.1 million shares.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
8.7.DEBT
As of September 30, 20222023 and December 31, 2021,2022, long-term debt consisted of the following (in thousands):
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Canadian term loan; weighted average interest rate of 4.7% for the nine month period ended September 30, 2022 | $ | 36,480 | | | $ | 63,104 | | |
Canadian term loan; weighted average interest rate of 8.1% for the nine month period ended September 30, 2023 | | Canadian term loan; weighted average interest rate of 8.1% for the nine month period ended September 30, 2023 | $ | 7,396 | | | $ | 29,532 | |
| U.S. revolving credit facility; weighted average interest rate of 6.3% for the nine month period ended September 30, 2022 | — | | | — | | |
U.S. revolving credit facility; weighted average interest rate of 10.1% for the nine month period ended September 30, 2023 | | U.S. revolving credit facility; weighted average interest rate of 10.1% for the nine month period ended September 30, 2023 | — | | | — | |
| Canadian revolving credit facility; weighted average interest rate of 5.0% for the nine month period ended September 30, 2022 | 83,904 | | | 111,300 | | |
Canadian revolving credit facility; weighted average interest rate of 8.2% for the nine month period ended September 30, 2023 | | Canadian revolving credit facility; weighted average interest rate of 8.2% for the nine month period ended September 30, 2023 | 95,852 | | | 101,147 | |
| Australian revolving credit facility; weighted average interest rate of 3.8% for the nine month period ended September 30, 2022 | 5,832 | | | 726 | | |
Australian revolving credit facility; weighted average interest rate of 6.7% for the nine month period ended September 30, 2023 | | Australian revolving credit facility; weighted average interest rate of 6.7% for the nine month period ended September 30, 2023 | — | | | 1,358 | |
| | 126,216 | | | 175,130 | | | 103,248 | | | 132,037 | |
Less: Unamortized debt issuance costs | Less: Unamortized debt issuance costs | 1,525 | | | 1,952 | | Less: Unamortized debt issuance costs | 253 | | | 1,084 | |
Total debt | Total debt | 124,691 | | | 173,178 | | Total debt | 102,995 | | | 130,953 | |
Less: Current portion of long-term debt, including unamortized debt issuance costs, net | Less: Current portion of long-term debt, including unamortized debt issuance costs, net | 27,964 | | | 30,576 | | Less: Current portion of long-term debt, including unamortized debt issuance costs, net | 7,143 | | | 28,448 | |
Long-term debt, less current maturities | Long-term debt, less current maturities | $ | 96,727 | | | $ | 142,602 | | Long-term debt, less current maturities | $ | 95,852 | | | $ | 102,505 | |
Credit Agreement
As of September 30, 2022,2023, our Credit Agreement (as then amended to date, the Credit Agreement) provided for: (i) a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, allocated as follows: (A) a $10.0 million senior secured revolving credit facility in favor of one of our U.S. subsidiaries, as borrower; (B) a $155.0 million senior secured revolving credit facility in favor of Civeo, as borrower; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a C$100.0 million term loan facility scheduled to be fully repaid on December 31, 2023 in favor of Civeo.
The Credit Agreement was amended effective March 31, 2023 to, among other things, change the benchmark interest rate for certain U.S. dollar-denominated loans in each of the Australian Revolving Facility, Canadian Revolving Facility, and U.S. Revolving Facility from London Inter-Bank Offered Rate to Term Secured Overnight Financing Rate (SOFR).
U.S. dollar amounts outstanding under the facilities provided by the Credit Agreement bear interest at a variable rate equal to the London Inter-Bank Offered Rate (LIBOR)Term SOFR plus a margin of 3.00% to 4.00%, or a base rate plus 2.00% to 3.00%, in each case based on a ratio of our total net debt to Consolidated EBITDA (as defined in the Credit Agreement). Canadian dollar amounts outstanding bear interest at a variable rate equal to a Bankers’ Acceptance Discount Rate (as defined in the Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 3.00% to 4.00%, or a Canadian Prime rate plus a margin of 2.00% to 3.00%, in each case based on a ratio of our total net debt to Consolidated EBITDA. Australian dollar amounts outstanding under the Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 3.00% to 4.00%, based on a ratio of our total net debt to Consolidated EBITDA. The future transitionstransition from LIBOR and CDOR as an interest rate benchmarks arebenchmark is addressed in the Credit Agreement and at such time the transition from (i) LIBORCDOR takes place, an alternate benchmark will be established based on the first alternative of the following, plus a benchmark replacement adjustment, Term SecuredCanadian Overnight FinancingRepo Rate (SOFR), Daily Simple SOFRAverage (CORRA) and an alternative benchmark selected by the administrative agent and the applicable borrowers giving due consideration to any selection or recommendation by a government body or any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time or (ii) CDOR takes place, we will endeavor with the administrative agent to establish an alternate rate of interest to CDOR that gives due consideration to any evolving or then existing convention for similar Canadian Dollar denominated syndicated credit facilities for the replacement of CDOR.Compound CORRA.
The Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict: (i) indebtedness, liens and fundamental changes; (ii) asset sales; (iii) acquisitions of margin stock; (iv) specified acquisitions; (v)(iv) certain restrictive agreements; (vi)(v) transactions with affiliates; and (vii)(vi) investments and other restricted payments, including dividends and other distributions. In addition, we must maintain a minimum interest coverage ratio, defined as the ratio of Consolidatedconsolidated EBITDA to consolidated interest expense, of at least 3.00 to 1.00 and our maximum net leverage ratio, defined as
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
the ratio of total net debt to Consolidated EBITDA, of no greater than 3.00 to 1.00. Following a qualified offering of indebtedness, we will be required to maintain a maximum leverage ratio of no greater than 3.50 to 1.00 and a maximum senior secured ratio less than 2.00 to 1.00.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Each of the factors considered in the calculations of these ratios are defined in the Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt discount amortization, amortization of intangibles and other non-cash charges. We were in compliance with our covenants as of September 30, 2022.2023.
Borrowings under the Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries subject to customary exceptions. The obligations under the Credit Agreement are guaranteed by our significant subsidiaries. As of September 30, 2022,2023, we had seven lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $22.5 million to $52.0 million. As of September 30, 2022,2023, we had outstanding letters of credit of $0.3 million under the U.S. facility, zero under the Australian facility and $1.1 million under the Canadian facility. We also had outstanding bank guarantees of A$0.8 million under the Australian facility.
9.8.INCOME TAXES
Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned.
We operate in three jurisdictions, Canada, Australia and the U.S., where statutory tax rates range from 15% to 30%. Our effective tax rate will vary from period to period based on changes in earnings mix between these different jurisdictions.
We compute our quarterly taxes under the effective tax rate method by applying an anticipated annual effective rate to our year-to-date income, except for significant unusual or extraordinary transactions. Income taxes for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs. As of September 30, 2023 and 2022, the U.S. was considered a loss jurisdiction for tax accounting purposes and was removed from the annual effective tax rate computation for purposes of computing the interim tax provision. As of September 30, 2021, Canada and the U.S. were considered loss jurisdictions for tax accounting purposes and were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.
Our income tax expensebenefit for the three months ended September 30, 20222023 totaled $3.7$1.2 million, or 37.2%(15.2)% of pretax income, compared to income tax expense of $1.8$3.7 million, or 63.4%37.2% of pretax income, for the three months ended September 30, 2021.2022. Our effective tax rate for the three months ended September 30, 2023 and 2022 was impacted by considering the U.S. a loss jurisdiction that was removed from the annual effective tax rate computation for purposes of computing the interim tax provision. For the three months ended September 30, 2021, our effective tax rate was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Additionally, under Accounting Standards Codification 740-270, “Accounting for Income Taxes,” the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter’s year to date provision.
Our income tax expense for the nine months ended September 30, 20222023 totaled $7.1$2.9 million, or 27.8%29.0% of pretax income, compared to income tax expense of $2.4$7.1 million, or (39.0)%27.8% of pretax loss,income, for the nine months ended September 30, 2021.2022. Our effective tax rate for the nine months ended September 30, 2023 and 2022 was impacted by considering the U.S. a loss jurisdiction that was removed from the annual effective tax rate computation for the purposes of computing the interim tax provision. Our effective tax rate for the nine months ended September 2021 was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for the purposes of computing the interim tax provision.
10.9.COMMITMENTS AND CONTINGENCIES
We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including warranty and product liability claims as a result of our products or operations. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
11.10.ACCUMULATED OTHER COMPREHENSIVE LOSS
Our accumulated other comprehensive loss increased $32.5$6.9 million from $361.9$385.2 million at December 31, 20212022 to $394.4$392.1 million at September 30, 2022,2023, as a result of foreign currency exchange rate fluctuations. Changes in other comprehensive loss during the first nine months of 20222023 were primarily driven by the Australian dollar decreasing in value compared to the U.S. dollar and the Canadian dollar decreasingincreasing in value compared to the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$232198 million and A$232211 million, respectively, at September 30, 2022.2023.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
12.11.SHARE REPURCHASESREPURCHASE PROGRAMS AND DIVIDENDS
Share Repurchase Programs
In August 2023, 2022 and 2021, our Board of Directors (Board) authorized a common share repurchase program (the 2021 Share Repurchase Program)programs to repurchase up to 5.0% of our total common shares which arewere issued and outstanding, or approximately 742,000, 685,000 and 715,000 common shares, respectively, over a twelve month period. In August 2022, our Board authorized a new common share repurchase program (the 2022 Share Repurchase Program) to repurchase up to 5.0% of our total common shares which are issued and outstanding, or approximately 685,000 common shares, over a twelve month period. The 2022 Share Repurchase Program and the 2021 Share Repurchase Program are collectively referred to as the "Share Repurchase Programs."
The repurchase authorization allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. We have funded, and intend to continue to fund, repurchases through cash on hand and cash generated from operations. The common shares repurchased under the Share Repurchase Programsshare repurchase programs are cancelled in the periods they are acquired and the payment is accounted for as an increase to accumulated deficit in our Unaudited Consolidated Statements of Changes in Shareholders’ Equity in the period the payment is made.
PursuantThe following table summarizes our common share repurchases pursuant to our 2021 Share Repurchase Program, during the nine months ended September 30, 2022, we repurchased an aggregate of 123,882 of our common shares outstanding at a weighted average price of $28.54share repurchase programs (in thousands, except per share for a total of approximately $3.5 million. We repurchased an aggregate of 341,061 of our common shares outstanding at a weighted average price of $23.98 per share for a total cost of $8.2 million during the twelve month period comprising the 2021 Share Repurchase Program. We have not repurchased any shares under the 2022 Share Repurchase Program as of September 30, 2022.data).
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Dollar-value of shares repurchased | $ | 1,252 | | | $ | 2,997 | | | $ | 9,222 | | | $ | 3,540 | |
Shares repurchased | 62.3 | | | 101.0 | | | 443.2 | | | 123.9 | |
Average price paid per share | $ | 20.05 | | | $ | 29.65 | | | $ | 20.78 | | | $ | 28.54 | |
In addition to the Share Repurchase Programs,share repurchases pursuant to our share repurchase programs, we repurchased 374,753 common shares from a shareholder for approximately $10.7 million during the three months ended September 30, 2022.
Dividends
13.
Our Board declared a quarterly dividend on September 5, 2023 of $0.25 per common share to shareholders of record as of close of business on September 15, 2023. The total cash payment of $3.7 million was paid on September 29, 2023. The dividend is an eligible dividend pursuant to the Income Tax Act (Canada).
12.SHARE-BASED COMPENSATION
Certain key employees and non-employee directors participate in the Amended and Restated 2014 Equity Participation Plan of Civeo Corporation (the Civeo Plan). The Civeo Plan authorizes our Board and the Compensation Committee of our Board to approve grants of options, awards of restricted shares, performance awards, phantom share awards and dividend equivalents, awards of deferred shares, and share payments to our employees and non-employee directors. No more than 2.4 million3,028,667 Civeo common shares are authorized to be issued under the Civeo Plan.
Outstanding Awards
Restricted Share Awards / Restricted Share Units / Deferred Share Awards. On May 18, 2022,17, 2023, we granted 39,03249,598 restricted share and deferred share awards to our non-employee directors, which vest in their entirety on May 17, 2023.15, 2024.
Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended September 30, 20222023 and 20212022 totaled $0.3 million and $0.4$0.3 million, respectively. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the nine months ended September 30, 2023 and 2022 and 2021 totaled $0.9$0.8 million and $1.2$0.9 million, respectively. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during both the three months ended September 30, 2023 and 2022 was zero and 2021 was less than $0.1 million.million, respectively. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the nine months ended September 30, 2023 and 2022 and 2021 was $2.1$0.9 million and $1.5$2.1 million, respectively.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
At September 30, 2022,2023, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $0.6$0.7 million, which is expected to be recognized over a weighted average period of 0.6 years.
Phantom Share Awards. On February 25, 2022,23, 2023, we granted 255,034171,608 phantom share awards under the Civeo Plan, which vest in three equal annual installments beginning on February 25, 2023.23, 2024. We also granted 77,57456,387 phantom share awards under the Canadian Long-Term Incentive Plan, which vest in three equal annual installments beginning on February 25, 2023.23, 2024. Phantom share awards are settled in cash upon vesting.
During the three months ended September 30, 20222023 and 2021,2022, we recognized compensation expense associated with phantom shares totaling $2.3$1.7 million and $2.1$2.3 million, respectively. During the nine months ended September 30, 20222023 and 2021,2022, we recognized compensation expense associated with phantom shares totaling $7.2$4.8 million and $5.0$7.2 million, respectively. At September 30, 2022,2023, unrecognized compensation cost related to phantom shares was $11.7$7.3 million, as remeasured at September 30, 2022,2023, which is expected to be recognized over a weighted average period of 1.91.8 years.
Performance Awards. On February 25, 2022,23, 2023, we granted 122,55585,837 performance awards under the Civeo Plan, which cliff vest in three years on February 25, 202523, 2026 subject to attainment of applicable performance criteria. These awards will be earned in amounts between 0% and 200% of the participant’s target performance share award, based equally on (i) the payout percentage associated with Civeo’s relative total shareholder return rank among a peer group that includes 1716 other companies and (ii) the payout percentage associated with Civeo's cumulative operating cash flow over the performance period relative to a preset target. The portion of the performance awards tied to cumulative operating cash flow includes a performance-based vesting requirement. The fair value of these awards is based on the closing market price of our common shares on the date of grant. We evaluate the probability of achieving the performance criteria throughout the performance period and will adjust share-based compensation expense based on the number of shares expected to vest based on our estimate of the most probable performance outcome.
During the three months ended September 30, 20222023 and 2021,2022, we recognized compensation expense associated with performance share awards totaling $0.6$1.0 million and $0.6 million, respectively. During the nine months ended September 30, 20222023 and 2021,2022, we recognized compensation expense associated with performance share awards totaling $1.9$2.5 million and $1.7$1.9 million, respectively. No performance share awards vested during the three months ended September 30, 20222023 and 2021.2022. The total fair value of performance share awards that vested during the nine months ended September 30, 2023 and 2022 was zero and 2021 was $2.4 million and $1.9 million, respectively. At September 30, 2022,2023, unrecognized compensation cost related to performance sharesshare awards was $4.6 million, which is expected to be recognized over a weighted average period of 2.01.8 years.
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
14.13.SEGMENT AND RELATED INFORMATION
In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, we have identified the following reportable segments: Canada Australia and the U.S.,Australia, which represent our strategic focus on hospitality services and workforce accommodations. Prior to the first quarter of 2023, we presented the U.S. operating segment as a separate reportable segment. Our operating segment in the U.S. no longer meets the reportable segment quantitative thresholds required by GAAP and is included below within the Corporate, other and eliminations category. Prior periods have been updated to be consistent with the presentation for the three and nine months ended September 30, 2023.
Financial information by business segment for each of the three and nine months ended September 30, 20222023 and 20212022 is summarized in the following table (in thousands):
| | | | Total revenues | | Depreciation and amortization | | Operating income (loss) | | Capital expenditures | | Total assets |
Three months ended September 30, 2023 | | Three months ended September 30, 2023 | | | | | | | | | |
Canada | | Canada | $ | 95,144 | | | $ | 9,565 | | | $ | 10,811 | | | $ | 3,006 | | | $ | 745,377 | |
Australia | | Australia | 87,885 | | | 7,181 | | | 9,067 | | | 6,244 | | | 195,315 | |
Corporate, other and eliminations | | Corporate, other and eliminations | 543 | | | 168 | | | (3,839) | | | 212 | | | (384,098) | |
Total | | Total | $ | 183,572 | | | $ | 16,914 | | | $ | 16,039 | | | $ | 9,462 | | | $ | 556,594 | |
| | Total revenues | | Depreciation and amortization | | Operating income (loss) | | Capital expenditures | | Total assets | | | | | | | | | | |
Three months ended September 30, 2022 | Three months ended September 30, 2022 | | | | | | | | | | Three months ended September 30, 2022 | |
Canada | Canada | $ | 103,009 | | | $ | 14,749 | | | $ | 7,846 | | | $ | 3,580 | | | $ | 718,981 | | Canada | $ | 103,009 | | | $ | 14,749 | | | $ | 7,846 | | | $ | 3,580 | | | $ | 718,981 | |
Australia | Australia | 73,805 | | | 7,599 | | | 5,859 | | | 4,921 | | | 191,557 | | Australia | 73,805 | | | 7,599 | | | 5,859 | | | 4,921 | | | 191,557 | |
U.S. | 7,413 | | | 312 | | | (1,690) | | | 286 | | | 20,159 | | |
Corporate and eliminations | — | | | (52) | | | (1,230) | | | 32 | | | (347,368) | | |
Corporate, other and eliminations | | Corporate, other and eliminations | 7,413 | | | 260 | | | (2,920) | | | 318 | | | (327,209) | |
Total | Total | $ | 184,227 | | | $ | 22,608 | | | $ | 10,785 | | | $ | 8,819 | | | $ | 583,329 | | Total | $ | 184,227 | | | $ | 22,608 | | | $ | 10,785 | | | $ | 8,819 | | | $ | 583,329 | |
| Three months ended September 30, 2021 | | |
Nine months ended September 30, 2023 | | Nine months ended September 30, 2023 | |
Canada | Canada | $ | 84,057 | | | $ | 11,511 | | | $ | 6,131 | | | $ | 1,344 | | | $ | 754,223 | | Canada | $ | 280,067 | | | $ | 37,067 | | | $ | 9,486 | | | $ | 7,075 | | | $ | 745,377 | |
Australia | Australia | 65,118 | | | 8,033 | | | 4,422 | | | 1,647 | | | 231,427 | | Australia | 247,418 | | | 22,099 | | | 23,140 | | | 13,373 | | | 195,315 | |
U.S. | 5,888 | | | 567 | | | (2,124) | | | 336 | | | 26,699 | | |
Corporate and eliminations | — | | | 171 | | | (2,419) | | | 62 | | | (328,307) | | |
Corporate, other and eliminations | | Corporate, other and eliminations | 2,521 | | | 111 | | | (10,319) | | | 731 | | | (384,098) | |
Total | Total | $ | 155,063 | | | $ | 20,282 | | | $ | 6,010 | | | $ | 3,389 | | | $ | 684,042 | | Total | $ | 530,006 | | | $ | 59,277 | | | $ | 22,307 | | | $ | 21,179 | | | $ | 556,594 | |
| Nine months ended September 30, 2022 | Nine months ended September 30, 2022 | | Nine months ended September 30, 2022 | |
Canada | Canada | $ | 307,984 | | | $ | 41,344 | | | $ | 23,081 | | | $ | 7,433 | | | $ | 718,981 | | Canada | $ | 307,984 | | | $ | 41,344 | | | $ | 23,081 | | | $ | 7,433 | | | $ | 718,981 | |
Australia | Australia | 205,154 | | | 23,284 | | | 17,446 | | | 8,969 | | | 191,557 | | Australia | 205,154 | | | 23,284 | | | 17,446 | | | 8,969 | | | 191,557 | |
U.S. | 21,721 | | | 1,089 | | | (4,594) | | | 1,010 | | | 20,159 | | |
Corporate and eliminations | — | | | 101 | | | (6,669) | | | 54 | | | (347,368) | | |
Corporate, other and eliminations | | Corporate, other and eliminations | 21,721 | | | 1,190 | | | (11,263) | | | 1,064 | | | (327,209) | |
Total | Total | $ | 534,859 | | | $ | 65,818 | | | $ | 29,264 | | | $ | 17,466 | | | $ | 583,329 | | Total | $ | 534,859 | | | $ | 65,818 | | | $ | 29,264 | | | $ | 17,466 | | | $ | 583,329 | |
| Nine months ended September 30, 2021 | | |
Canada | $ | 229,223 | | | $ | 35,750 | | | $ | 5,924 | | | $ | 3,667 | | | $ | 754,223 | | |
Australia | 188,774 | | | 25,004 | | | 5,073 | | | 4,348 | | | 231,427 | | |
U.S. | 16,672 | | | 1,675 | | | (5,831) | | | 1,187 | | | 26,699 | | |
Corporate and eliminations | — | | | 499 | | | (6,928) | | | 443 | | | (328,307) | | |
Total | $ | 434,669 | | | $ | 62,928 | | | $ | (1,762) | | | $ | 9,645 | | | $ | 684,042 | | |
Cautionary Statement Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “expect,” “anticipate,” “estimate,” “continue,” “believe” or other similar words. The forward-looking statements in this report include, but are not limited to, the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to our expectations about the macroeconomic environment and industry conditions, including the impact of COVID-19 and the response thereto and the volatility in the price of and demand for commodities, as well as our expectations about capital expenditures in 2022 and2023, beliefs with respect to liquidity needs.needs and expectations with respect to share repurchases and dividends. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of known material factors that could affect our results, please refer to “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 20212022 and our subsequent SEC filings. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on these forward-looking statements, which are based only on our current expectations and are not guarantees of future performance. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except to the extent required by applicable law.
In addition, in certain places in this quarterly report, we may refer to reports published by third parties that purport to describe trends or developments in the energy industry. We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q.
Overview and Macroeconomic Environment
We provide hospitality services to the natural resources industry in Canada, Australia and the U.S. Demand for our services can be attributed to two phases of our customers’ projects: (1) the development or construction phase; and (2) the operations or production phase. Historically, initial demand for our hospitality services has been driven by our customers’ capital spending programs related to the construction and development of natural resource projects and associated infrastructure, as well as the exploration for oil and natural gas. Long-term demand for our services has been driven by natural resource production, maintenance and operation of those facilities as well as expansion of those sites. In general, industry capital spending programs are based on the outlook for commodity prices, economic growth, global commodity supply/demand, estimates of resource production and shareholder expectations.the expectations of our customers' shareholders. As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore.ore, and the resultant impact of these commodity price expectations on our customers' spending. Other factors that can affect our business and financial results include the general global economic environment, including inflationary pressures, supply chain disruptions and labor shortages, volatility affecting the banking system and financial markets, availability of capital to the natural resource industry and regulatory changes in Canada, Australia, the U.S. and other markets, including governmental measures introduced to fight climate change or to help slow the spread or mitigate the impact of COVID-19.change.
Our business is predominantly located in northern Alberta, Canada; British Columbia, Canada; Queensland, Australia; and Western Australia. We derive most of our business from natural resource companies who are developing and producing oil sands, met coal, LNG and iron ore resources and, to a lesser extent, other hydrocarbon and mineral resources. In the third quarter of 2022, approximately 60%Approximately 64% of our revenue wasis generated by our lodges in Canada and our villages in Australia. Where traditional accommodations and infrastructure are insufficient, inaccessible or cost ineffective, our lodge and village facilities provide comprehensive hospitality services similar to those found in an urban hotel. We typically contract our facilities to our customers on a fee-per-person-per-dayfee-per-person-per-
day basis that covers lodging and meals and is based on the duration of customer needs,
which can range from several weeks to several years. The remainder of our revenue is generated by our hospitality services at customer-owned locations in Canada and Australia and mobile assets in Canada and the U.S and our lodges in the U.S.Canada.
Generally, our core Canadian oil sands and Australian mining customers make significant, upfront capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years. Consequently, these investments are primarily dependent on those customers’ long-term views of commodity demand and prices.
The spreadDuring 2022 and through the first nine months of COVID-192023, inflationary pressures and the response thereto have negatively impacted the global economy. The actions taken by governments and the private-sector to mitigate the spread of COVID-19 and the risk of infection, including government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies, evolved with the introduction of vaccination efforts in 2021, and may continue to evolve as virus variants have added uncertainty to the continuing global impact. Since the COVID-19 pandemic began, wesupply chain disruptions have been, impacted by increased staff costs as a result of hospitality labor shortages in Australia. This labor shortage has been exacerbated by significantly reduced foreign labor availability and reduced labor mobility in Australia, which has subsequently led to an increased reliance on more expensive temporary labor resources. We continue to closely monitor the COVID-19 situation and have taken measures to help ensure the health and well-being of our employees, guests and contractors, including screening of individuals that enter our facilities, social distancing practices, enhanced cleaning and sanitization efforts, the suspension of nonessential employee travel and implementation of work-from-home policies, where applicable.
In part due to the impact of COVID-19 on the global economy and governmental responses thereto, increasing inflationary pressures are being, experienced worldwide. These pricePrice increases resulting from inflation and supply chain concerns have, and are expected to continue to have, a negative impact on our labor and food costs, as well as consumable costs such as fuel. We are managing inflation risk with negotiated service scope changes and contractual protections.
Global oil prices droppedIn addition to historically low levelsthe macro inflationary impacts on labor costs noted above, during the COVID-19 pandemic, we were, and continue to be, impacted by increased staff costs as a result of hospitality labor shortages in MarchAustralia as government-imposed and April 2020 duevoluntary social distancing and quarantining impacted travel. This labor shortage has been exacerbated by significantly reduced migration in and around Australia affecting labor availability, which has subsequently led to severely reduced global oil demand, high global crude inventory levels, uncertainty around timing and slope of worldwide economic recovery after COVID-19 related economic shut-downs and effectiveness of production cuts by major oil producing countries, such as Saudi Arabia, Russia and the U.S. an increased reliance on more expensive temporary labor resources.
Since this troughhistoric lows in early 2020 during the start of the COVID-19 pandemic, global oil prices increased later in late 2020 and throughout 2021 primarily due to improved global oil demand and lagging global oil supply due to oil production discipline from publicly traded oil producers and OPEC+ countries. These supply/demand dynamics have continued in 2022 and have beenwere exacerbated by the recentongoing conflict between Russia and Russia/Ukraine and related sanctions on Russia, as well as actions taken by OPEC+ to adjust production levels, which are decreasingdecreased global fossil fuel supply even further. This led to a significant increase in global oil prices to above $100 per barrel.barrel in the second quarter of 2022. Severe inflation and rising interest rates in the second half of 2022 led to concerns of an economic recession and lower oil demand which resulted in decreased oil prices through the remainder of 2022 and the first six months of 2023. In response, several governments, includingan effort to support the U.S. government underprice of oil amidst demand concerns, OPEC+ announced additional oil production cuts in April 2023. Further, Saudi Arabia announced voluntary oil production cuts in June 2023, which have been extended through the Biden administration, have begun to releaseend of 2023. These production cuts, coupled with the rising geopolitical risks in the Middle East, resulted in increased oil fromprices in the government controlled strategic reserves.third quarter and early fourth quarter of 2023.
Alberta, Canada. In Canada, Western Canadian Select (WCS) crude is the benchmark price for our oil sands customers. Pricing for WCS is driven by several factors, including the underlying price for West Texas Intermediate (WTI) crude, the availability of transportation infrastructure (consisting of pipelines and crude by railcar), refinery blending requirements and governmental regulation. Historically, WCS has traded at a discount to WTI, creating a “WCS Differential,” due to transportation costs and capacity restrictions to move Canadian heavy oil production to refineries, primarily along the U.S. Gulf Coast. The WCS Differential has varied depending on the extent of transportation capacity availability.
Certain expansionary oil pipeline projects have the potential to both drive incremental demand for mobile assets and to improve take-away capacity for Canadian oil sands producers over the longer term. The Enbridge Line 3 replacement project was completed at the end of 2021 and the Trans Mountain Pipeline (TMX) is currently under construction and continues to progress towards completion. The Canadian federal government acquired the TMX pipeline in 2018, approved the expansion ofrecently announced that the project and is currently working through a revised construction timelineapproximately 90% complete, with mechanical completion expected to adjust for recent delays related to legal challenges,occur at the COVID-19 pandemic, flooding along certain sectionsend of 2023, and the pipeline corridor and seasonal wildfires. As a result,is expected to be in-service in the TMX pipeline construction has been delayed, and there is a risk that there could be future delays. Recent legal issues between the Canadian government and First Nation groups have been resolved for the time being and construction has resumed.first quarter of 2024.
WCS prices in the third quarter of 20222023 averaged $70.70$66.20 per barrel compared to an average of $57.58$70.70 in the third quarter of 2021.2022. The WCS Differential increaseddecreased from $14.12$27.62 per barrel at the end of the fourth quarter of 20212022 to $21.72$18.30 at the end of the third quarter of 2022.2023. As of October 21, 2022,23, 2023, the WTI price was $86.65$61.42 and the WCS price was $58.72,$86.39, resulting in a WCS Differential of $27.93.$24.97
Together with the initial spread of COVID-19, depressed price levels of both WTI and WCS materially impacted 2020 maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services. Customers began increasing production activity in the fourth quarter of 2020 and production capacity has approached pre-
pandemic levels in 2022. Although oil prices reached multi-year highs in the first half of 2022, therethey fluctuated through the second half of 2022 and throughout 2023. There is continued uncertainty around commodity price levels, including the impact of COVID-19, inflationary pressures, actions taken by OPEC+ to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine conflict and rising geopolitical risks in the Middle East, and regulatory implications on such prices, which could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.
We did not renew our expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which expired in June 2023, ten years earlier than originally expected, in order to support our customer’s intent to mine the land where the lodge was located. In addition, the accompanying hospitality services contract at McClelland Lake Lodge expired in July 2023;
however, we will continue to provide hospitality services to the customer at our other owned lodges through January 31, 2024 under a short-term take-or-pay commitment. Our assets are being demobilized and expected to be completely removed from the existing site by February 1, 2024. During the third quarter of 2023, we entered into a definitive agreement to sell our McClelland Lake Lodge assets to a U.S.-based mining project for approximately C$49 million, or US$36 million. We expect to complete the transaction before January 31, 2024, subject to the satisfaction of customary closing conditions. During the third quarter of 2023, we recognized $4.9 million in demobilization costs and received $9.1 million in cash proceeds associated with the sale. We expect to recognize the remaining demobilization costs and the proceeds of the sale in the fourth quarter of 2023 and first quarter of 2024.
British Columbia, Canada. Our Sitka Lodge supports the LNG Canada project and related pipeline projects (see discussion below). From a macroeconomic standpoint, LNG demand has continued to grow, despite the spread of COVID-19, reinforcing the need for the global LNG industry to expand access to natural gas. Evolving government energy policies around the world have amplified support for cleaner energy supply, creating more opportunities for natural gas and LNG. The conflict between Russia and Russia/Ukraine has further highlighted the need for secure natural gas supply globally, particularly in Europe. Accordingly, additional investment in LNG supply will be needed to meet the resulting expected long-term LNG demand growth.
Currently, Western Canada does not have any operational LNG export facilities. LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility). British Columbia LNG activity and related pipeline projects are a material driver of activity for our Sitka Lodge, as well as for our mobile assets, which are contracted to serve designated portions of the related pipeline construction activity. The actual timing of when revenue is realized from the Coastal GasLink (CGL) pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, such as protest blockades or COVID-19. OurWhile our current expectation is that the majority of our contracted commitments associated with the CGL pipeline project will be completed in 2023. Anythe fourth quarter of 2023, any new delays in facility or pipeline construction may result in extensions to these dates.
In late March 2020, LNGC announced steps being taken to reduce the spread of COVID-19, including reduction of the workforce at the project site to essential personnel only. In late December 2020, British Columbia’s public health officer issued a health order limiting workforce size at all large industrial projects across the province, including LNGC. These actions resulted in reduced occupancy at our Sitka Lodge beginning in the second quarter of 2020. British Columbia's public health order was phased out in the second quarter of 2021. It was replaced with less restrictive requirements focused on monitoring, allowing workforces to return to their optimal sizes, which increased occupancy at our Sitka Lodge in the second half of 2021 and into 2022.
Australia. In Australia, 82%84% of our rooms are located in the Bowen Basin of Queensland, Australia and primarily serve met coal mines in that region. Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the level of global steel production, which decreasedincreased by 5.1% through August 20220.2% for the first eight months of 2023 compared to the same period of 2021. Analysts forecast steel production for 2022 to remain subdued for2022. The marginal increase year-over-year was the full year when compared to 2021, as a result of weaknessstronger production from both China and India in the Chinese residential sectorJuly and slowing global growth due to inflationary pressures.August. As of October 21, 2022,23, 2023, met coal spot prices were $285$342.00 per metric tonne. Steel output is forecast to improve marginally through 2024, with large infrastructure rollouts in a number of major economies including the U.S. and India.
The Chinese embargo on Australian coal continues. However, Australian met coal producers have found new markets, including India and Europe, for their premium product. This led to a rebalancing of the market globally in 2021, with China relying on domestic production along with increased met coal imports from the U.S., Canada and Mongolia. With the historical backdrop of strong steel demand and met coal supply constraints, the spot price for met coal surged to record highs through the second half of 2021 into early 2022. Since theFollowing historic highs in early 2022, met coal prices have since stabilized and were further supported in the first half of 2023 with seasonal weather-related supply interruptions in Australia offset by weakening steel demand.Australia. In September 2023, met coal prices increased to over $300 per tonne, as truck and port disruptions resulted in extremely tight supply from Australia. Analysts forecast the current stablemet coal prices to rise inremain near $300 per tonne during the fourth quarter 2022of 2023 due to highersupply limitations in Australia. Downward pressure on prices is still possible in the short term if demand in India and supply pressure related La Niña impacts in Australia’s production. Analysts are forecasting prices to remain close to $250 into 2023, though volatility with both supply and demand drivers could impact prices and drive them higher or lower.China worsens.
Civeo's activity in Western Australia is driven primarily by iron ore production, which is a key steel-making ingredient. ThroughIron ore prices have stabilized in 2023 after fluctuating in the second half of 2021, with forced cuts in Chinese steel production, prices retreated from the peaks experienced in mid-2021. Iron ore prices remained stable through early 2022 and fell to just below $100 during the third quarter of 2022 with a slowdown in steel production.2022. As of October 20, 2022,23, 2023, iron ore spot prices were $87.84$112.04 per metric tonne. Analysts anticipate that infrastructure-led construction activityforecast Chinese steel production in China2023 to be at similar levels to 2022 and other large world economies will continue to stabilize prices at current levels, though residential activityexpect forecast iron ore pricing in China remains subdued. Analysts forecast pricing through 2023 to remain between $90$100 and $110.$115.
U.S.Other. In September,the first quarter of 2023, we sold our U.S. Acadian Acres lodge assets. In addition, in the second half of 2022, we sold both our U.S. wellsite services business.and offshore businesses. Our remaining U.S. business supports offshore oil and gas activities in the Gulf of Mexico, completion activity in the Bakken and construction and turnaround work in the Louisiana industrial area. All these activities are primarily tied to WTI oil prices in the U.S. market. In 2020, theBakken. U.S. oil rig count and associated completion activity decreased due to COVID-19 and the global oil price decline discussed above. Only 267 oil rigs were active at the end of 2020. With the recovery of oil prices, oil rig count and drilling activity have recovered substantially, with 604 oil rigs active at the end of the third quarter 2022. The increase in the U.S. rig count and oil prices has only resulted in slight increases to U.S. oil production from an average of 11.3 million barrels per day in 2021 to an average of 11.8 million barrels per day at the end of July 2022. As of October 21, 2022, there were 612 active oil rigs in the U.S. (as measured by Bakerhughes.com). U.S. oil drilling and completion activity will continue to be impacted by oil prices, pipeline capacity, federal energy policies and availability of capital to support exploration and production (E&P) drilling and completion plans. In addition, consolidation among our E&P customer base in the U.S. has historically created short-term spending and activity dislocations. Should the current trend of industry consolidation continue, we may see activity, utilization and occupancy declines in the near term.
Recent Commodity Prices. Recent WTI crude, WCS crude, met coal and iron ore pricing trends are as follows:
| | | | Average Price (1) | | | Average Price (1) |
Quarter ended | Quarter ended | | WTI Crude (per bbl) | | WCS Crude (per bbl) | | Hard Coking Coal (Met Coal) (per tonne) | | Iron Ore (per tonne) | Quarter ended | | WTI Crude (per bbl) | | WCS Crude (per bbl) | | Hard Coking Coal (Met Coal) (per tonne) | | Iron Ore (per tonne) |
Fourth Quarter through October 21, 2022 | | $ | 87.20 | | | $ | 59.78 | | | $ | 279.41 | | | $ | 92.31 | | |
Fourth Quarter through October 23, 2023 | | Fourth Quarter through October 23, 2023 | | $ | 86.25 | | | $ | 64.26 | | | $ | 354.05 | | | $ | 114.79 | |
9/30/2023 | | 9/30/2023 | | 82.50 | | | 66.20 | | | 260.12 | | | 111.04 | |
6/30/2023 | | 6/30/2023 | | 73.54 | | | 60.25 | | | 243.54 | | | 106.98 | |
3/31/2023 | | 3/31/2023 | | 75.96 | | | 56.61 | | | 341.08 | | | 117.08 | |
12/31/2022 | | 12/31/2022 | | 82.82 | | | 54.72 | | | 276.19 | | | 94.93 | |
9/30/2022 | 9/30/2022 | | 91.63 | | | 70.70 | | | 252.63 | | | 99.21 | | 9/30/2022 | | 91.63 | | | 70.70 | | | 252.63 | | | 99.21 | |
6/30/2022 | 6/30/2022 | | 108.77 | | | 92.89 | | | 464.61 | | | 128.80 | | 6/30/2022 | | 108.77 | | | 92.89 | | | 464.61 | | | 128.80 | |
3/31/2022 | 3/31/2022 | | 95.17 | | | 82.04 | | | 474.83 | | | 129.46 | | 3/31/2022 | | 95.17 | | | 82.04 | | | 474.83 | | | 129.46 | |
12/31/2021 | | 77.31 | | | 60.84 | | | 371.95 | | | 104.88 | | |
9/30/2021 | | 70.54 | | | 57.58 | | | 258.41 | | | 164.90 | | |
6/30/2021 | | 66.19 | | | 53.27 | | | 136.44 | | | 195.97 | | |
|
(1)Source: WTI crude prices are from U.S. Energy Information Administration, (EIA), WCS crude prices and iron ore prices are from Bloomberg and hard coking coal prices are from IHS Markit.
Foreign Currency Exchange Rates. Exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar influence our U.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income (loss) in Canada and Australia. These revenues and profits/losses are translated into U.S. dollars for U.S. GAAP financial reporting purposes. The following tables summarize the fluctuations in the exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | Change | | Percentage | | 2022 | | 2021 | | Change | | Percentage | | 2023 | | 2022 | | Change | | Percentage | | 2023 | | 2022 | | Change | | Percentage |
Average Canadian dollar to U.S. dollar | Average Canadian dollar to U.S. dollar | $0.766 | | $0.794 | | ($0.03) | | (3.5)% | | $0.779 | | $0.799 | | ($0.02) | | (2.5)% | Average Canadian dollar to U.S. dollar | $0.746 | | $0.766 | | ($0.02) | | (2.6)% | | $0.743 | | $0.779 | | ($0.04) | | (4.6)% |
Average Australian dollar to U.S. dollar | Average Australian dollar to U.S. dollar | $0.683 | | $0.735 | | ($0.05) | | (7.1)% | | $0.707 | | $0.759 | | ($0.05) | | (6.8)% | Average Australian dollar to U.S. dollar | $0.655 | | $0.683 | | ($0.03) | | (4.1)% | | $0.669 | | $0.707 | | ($0.04) | | (5.4)% |
| | | As of | | As of |
| | September 30, 2022 | | December 31, 2021 | | Change | | Percentage | | September 30, 2023 | | December 31, 2022 | | Change | | Percentage |
Canadian dollar to U.S. dollar | Canadian dollar to U.S. dollar | $0.730 | | $0.789 | | ($0.06) | | (7.5)% | Canadian dollar to U.S. dollar | $0.740 | | $0.738 | | $0.00 | | 0.2% |
Australian dollar to U.S. dollar | Australian dollar to U.S. dollar | $0.648 | | $0.726 | | ($0.08) | | (10.7)% | Australian dollar to U.S. dollar | $0.645 | | $0.679 | | ($0.03) | | (5.0)% |
These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results.
Capital Expenditures. We continue to monitor the global economy, commodity prices, demand for crude oil, met coal, LNG and iron ore, inflation the COVID-19 global pandemic and the responses thereto and the resultant impact on the capital spending plans of our customers in order to plan our business activities. We currently expect that our 20222023 capital expenditures will be in the range of approximately $24$35 million to $29$40 million, compared to 20212022 capital expenditures of $15.6$25.4 million. We previously increased 2022The 2023 capital expenditures estimates primarily asinclude $10 million related to village enhancements in Australia, for which our customer will reimburse us, resulting in a result of recently awarded contracts for our Wapasu Lodgenet negligible cash flow impact in Canada and our Australian integrated services business in Western Australia.2023. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity.
We have agreed to not renew an expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which currently expires in June 2023, to support our customer’s intent to mine the land where the lodge currently resides. We are currently working with the customer to (i) secure an alternative site for the lodge and (ii) obtain a contract to economically justify the cost of moving and reinstalling the lodge assets. However, we can provide no assurances that we will reach an agreement on a satisfactory contract to support the future utilization of the McClelland assets and the resulting impact could negatively affect our results of operations, financial condition and cash flows. We are in preliminary discussions with potential strategic joint venture partners that would participate in both the economics of relocating the lodge and its ongoing ownership. We expect to have further clarity on any potential contract associated with our McClelland Lake Lodge in the first half of 2023.
See “Liquidity and Capital Resources” below for further discussion of our 20222023 capital expenditures.
Results of Operations
Unless otherwise indicated, discussion of results for the three and nine months ended September 30, 2022,2023, is based on a comparison to the corresponding periodsperiod of 2021.2022.
Results of Operations – Three Months Ended September 30, 20222023 Compared to Three Months Ended September 30, 20212022
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
| | | ($ in thousands) | | ($ in thousands) |
Revenues | | | | | | |
Revenues: | | Revenues: | | | | | |
Canada | Canada | $ | 103,009 | | | $ | 84,057 | | | $ | 18,952 | | Canada | $ | 95,144 | | | $ | 103,009 | | | $ | (7,865) | |
Australia | Australia | 73,805 | | | 65,118 | | | 8,687 | | Australia | 87,885 | | | 73,805 | | | 14,080 | |
U.S. and other | 7,413 | | | 5,888 | | | 1,525 | | |
Other | | Other | 543 | | | 7,413 | | | (6,870) | |
Total revenues | Total revenues | 184,227 | | | 155,063 | | | 29,164 | | Total revenues | 183,572 | | | 184,227 | | | (655) | |
Costs and expenses | | | | | | |
Costs and expenses: | | Costs and expenses: | | | | | |
Cost of sales and services | Cost of sales and services | | | | | | Cost of sales and services | | | | | |
Canada | Canada | 72,878 | | | 59,214 | | | 13,664 | | Canada | 65,972 | | | 72,878 | | | (6,906) | |
Australia | Australia | 53,333 | | | 46,374 | | | 6,959 | | Australia | 63,595 | | | 53,333 | | | 10,262 | |
U.S. and other | 7,285 | | | 5,842 | | | 1,443 | | |
Other | | Other | 729 | | | 7,285 | | | (6,556) | |
Total cost of sales and services | Total cost of sales and services | 133,496 | | | 111,430 | | | 22,066 | | Total cost of sales and services | 130,296 | | | 133,496 | | | (3,200) | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 17,677 | | | 17,320 | | | 357 | | Selling, general and administrative expenses | 20,236 | | | 17,677 | | | 2,559 | |
Depreciation and amortization expense | Depreciation and amortization expense | 22,608 | | | 20,282 | | | 2,326 | | Depreciation and amortization expense | 16,914 | | | 22,608 | | | (5,694) | |
| Other operating (income) expense | (339) | | | 21 | | | (360) | | |
Other operating expense (income) | | Other operating expense (income) | 87 | | | (339) | | | 426 | |
Total costs and expenses | Total costs and expenses | 173,442 | | | 149,053 | | | 24,389 | | Total costs and expenses | 167,533 | | | 173,442 | | | (5,909) | |
Operating income | Operating income | 10,785 | | | 6,010 | | | 4,775 | | Operating income | 16,039 | | | 10,785 | | | 5,254 | |
| Interest expense, net | Interest expense, net | (2,988) | | | (3,582) | | | 594 | | Interest expense, net | (3,321) | | | (2,988) | | | (333) | |
Other income | 2,179 | | | 364 | | | 1,815 | | |
Other income (expense) | | Other income (expense) | (4,709) | | | 2,179 | | | (6,888) | |
Income before income taxes | Income before income taxes | 9,976 | | | 2,792 | | | 7,184 | | Income before income taxes | 8,009 | | | 9,976 | | | (1,967) | |
Income tax expense | (3,713) | | | (1,770) | | | (1,943) | | |
Income tax benefit (expense) | | Income tax benefit (expense) | 1,214 | | | (3,713) | | | 4,927 | |
Net income | Net income | 6,263 | | | 1,022 | | | 5,241 | | Net income | 9,223 | | | 6,263 | | | 2,960 | |
Less: Net income attributable to noncontrolling interest | Less: Net income attributable to noncontrolling interest | 546 | | | 478 | | | 68 | | Less: Net income attributable to noncontrolling interest | 201 | | | 546 | | | (345) | |
Net income attributable to Civeo Corporation | Net income attributable to Civeo Corporation | 5,717 | | | 544 | | | 5,173 | | Net income attributable to Civeo Corporation | 9,022 | | | 5,717 | | | 3,305 | |
Less: Dividends attributable to preferred shares | Less: Dividends attributable to preferred shares | 492 | | | 482 | | | 10 | | Less: Dividends attributable to preferred shares | — | | | 492 | | | (492) | |
Net income attributable to Civeo common shareholders | Net income attributable to Civeo common shareholders | $ | 5,225 | | | $ | 62 | | | $ | 5,163 | | Net income attributable to Civeo common shareholders | $ | 9,022 | | | $ | 5,225 | | | $ | 3,797 | |
We reported net income attributable to Civeo for the quarter ended September 30, 2023 of $9.0 million, or $0.61 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2022 of $5.2 million, or $0.32 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2021 of $0.1 million, or $0.00 per diluted share.
Revenues. Consolidated revenues increased $29.2decreased $0.7 million, or 19%0%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. This increasedecrease was primarily due to (i) higher billed rooms at our Canadian lodges related to turnaround activities by a number of customers, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increaseddecreased mobile asset activity from pipeline projects in Canada, (iv) increased(ii) reduced activity at our Civeo owned villages in the Australian BowenU.S. operations due to the sale of our wellsite and Gunnedah Basinsoffshore businesses in the second half of 2022 and (v) increased activity at our Australian integrated services villages in Western Australia. These items were partially offset by(iii) a weaker Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 20222023 compared to the third quarter of 2021.2022. These items were partially offset by (i) increased occupancy at our Civeo owned villages in the Australian Bowen and Gunnedah Basins and (ii) increased activity at our integrated services villages in Western Australia. See the discussion of segment results of operations below for further information.
Cost of Sales and Services. Our consolidated cost of sales and services increased $22.1decreased $3.2 million, or 20%2%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. This increasedecrease was primarily due to (i) higher billed rooms at our Canadian lodges, (ii) increasedlower costs related to reduced mobile asset activity from pipeline projectsin Canada, (ii) lower staff costs at certain lodges in Canada, (iii) increasedreduced activity at our Civeo owned villagessouth lodges in Canada, (iv) reduced activity in the Australian BowenU.S. operations due to the sale of our wellsite and Gunnedah Basinsoffshore businesses in the second half of 2022 and (iv) increased activity at our Australian integrated services villages in Western Australia. These items were partially offset by(v) a weaker Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 2023 compared to the third quarter of 2022. These items were partially offset by (i) increased occupancy at our Civeo owned villages in the Australian
dollarBowen and Gunnedah Basins and (ii) increased activity at our integrated services villages in the third quarter of 2022 compared to the third quarter of 2021.Western Australia. See the discussion of segment results of operations below for further information.
Selling, General and Administrative Expenses. SG&A expense increased $0.4$2.6 million, or 2%14%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. This increase was primarily due to higher information technology expenseincentive compensation costs and travel and entertainment expense. This increase in information technology expense was related to set-up costs incurred in a cloud computing arrangement for our newly implemented human capital management system, which are being amortized through SG&A expense instead of depreciation and amortizationhigher compensation expense. The increase in travelcompensation expense was primarily due to increased staff and entertainment expenses was largely a result of a return to more normalized travel expenses with the lifting of travel restrictions associated with COVID-19.recruitment costs. These items were partially offset by lower incentive compensation costs and a weaker Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 20222023 compared to the third quarter of 2021.2022.
Depreciation and Amortization Expense. Depreciation and amortization expense increased $2.3decreased $5.7 million, or 11%25%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. The increasedecrease was primarily due to shortening(i) the lives onsale of our wellsite and offshore businesses in the U.S. in the second half of 2022, (ii) certain assets in Canada, partially offset by certain assets in Canada becoming fully depreciated during 2021 and the disposal of our West Permian Lodgein Canada in the U.S. during 2021. In addition,second quarter of 2023 and (iii) lower depreciation and amortization expense decreased due to a weaker Australian and Canadian dollar relative to the U.S. dollar in the third quarter of 20222023 compared to the third quarter of 2021.2022.
Operating Income. Consolidated operating income increased $4.8$5.3 million, or 79%49%, in the third quarter of 20222023 compared to the third quarter of 2021,2022, primarily due to higherincreased activity levelsin Australia and lower depreciation and amortization expense. These items were partially offset by reduced mobile asset activity in Canada and Australiaincreased operating costs due to inflationary pressures in the third quarter of 20222023 compared to the third quarter of 2021.2022.
Interest Expense, net. Net interest expense decreasedincreased by $0.6$0.3 million, or 17%11%, in the third quarter of 20222023 compared to the third quarter of 2021,2022, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021, partially offset by higher interest rates on credit facility borrowings.
borrowings during 2023 compared to 2022, partially offset by lower average debt levels.
Other Income. Consolidated other income increased $1.8decreased $6.9 million in the third quarter of 20222023 compared to the third quarter of 20212022, primarily due to higher gainlower net gains on the sale of assets. The third quarter of 2023 included expenses of $4.9 million associated with the demobilization of our McClelland Lake Lodge to prepare the assets for sale. The associated gain related to the sale of the McClelland Lake Lodge assets will be recognized in the fourth quarter of 2023 and first quarter of 2024. The third quarter of 2022 include gains related to the sale of our Kambalda village and an undeveloped land holding in Australia, our wellsite business in the U.S. and various mobile assets and unused corporate office space in Canada in the third quarter of 2022 compared to the third quarter of 2021.Canada.
Income Tax (Expense) Benefit. Our income tax expensebenefit for the three months ended September 30, 20222023 totaled $3.7$1.2 million, or 37.2%(15.2)% of pretax income, compared to an income tax expense of $1.8$3.7 million, or 63.4%37.2% of pretax income, for the three months ended September 30, 2021.2022. Our effective tax rate for the three months ended September 30, 2023 and 2022 was impacted by considering the U.S. a loss jurisdiction that was removed from the annual effective tax rate computation for purposes of computing the interim tax provision. For the three months ended September 30, 2021, our effective tax rate was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Additionally, under Accounting Standards Codification 740-270, “Accounting for Income Taxes,” the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter’s year to date provision.
Other Comprehensive (Loss) Income. Other comprehensive lossincome increased $8.5$14.0 million in the third quarter of 20222023 compared to the third quarter of 2021,2022, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar decreased 6%2% in the third quarter of 20222023 compared to a 3%6% decrease in the third quarter of 2021.2022. The Australian dollar exchange rate compared to the U.S. dollar decreased 6%3% in the third quarter of 20222023 compared to a 4%6% decrease in the third quarter of 2021.2022.
Segment Results of Operations – Canadian Segment
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
Revenues ($ in thousands) | Revenues ($ in thousands) | | | | | | Revenues ($ in thousands) | | | | | |
Accommodation revenue (1) | Accommodation revenue (1) | $ | 72,724 | | | $ | 60,511 | | | $ | 12,213 | | Accommodation revenue (1) | $ | 71,417 | | | $ | 72,724 | | | $ | (1,307) | |
Mobile facility rental revenue (2) | Mobile facility rental revenue (2) | 25,283 | | | 19,075 | | | 6,208 | | Mobile facility rental revenue (2) | 17,314 | | | 25,283 | | | (7,969) | |
Food service and other services revenue (3) | Food service and other services revenue (3) | 5,002 | | | 4,471 | | | 531 | | Food service and other services revenue (3) | 6,413 | | | 5,002 | | | 1,411 | |
| Total revenues | Total revenues | $ | 103,009 | | | $ | 84,057 | | | $ | 18,952 | | Total revenues | $ | 95,144 | | | $ | 103,009 | | | $ | (7,865) | |
| Cost of sales and services ($ in thousands) | Cost of sales and services ($ in thousands) | | | | | | Cost of sales and services ($ in thousands) | | | | | |
Accommodation cost | Accommodation cost | $ | 50,308 | | | $ | 41,470 | | | $ | 8,838 | | Accommodation cost | $ | 46,063 | | | $ | 50,308 | | | $ | (4,245) | |
Mobile facility rental cost | Mobile facility rental cost | 15,597 | | | 11,144 | | | 4,453 | | Mobile facility rental cost | 11,636 | | | 15,597 | | | (3,961) | |
Food service and other services cost | Food service and other services cost | 4,447 | | | 4,007 | | | 440 | | Food service and other services cost | 5,867 | | | 4,447 | | | 1,420 | |
| Indirect other costs | Indirect other costs | 2,526 | | | 2,593 | | | (67) | | Indirect other costs | 2,406 | | | 2,526 | | | (120) | |
Total cost of sales and services | Total cost of sales and services | $ | 72,878 | | | $ | 59,214 | | | $ | 13,664 | | Total cost of sales and services | $ | 65,972 | | | $ | 72,878 | | | $ | (6,906) | |
| Gross margin as a % of revenues | Gross margin as a % of revenues | 29.3 | % | | 29.6 | % | | (0.3) | % | Gross margin as a % of revenues | 30.7 | % | | 29.3 | % | | 1.4 | % |
| Average daily rate for lodges (4) | Average daily rate for lodges (4) | $ | 99 | | | $ | 98 | | | $ | 1 | | Average daily rate for lodges (4) | $ | 98 | | | $ | 99 | | | $ | (1) | |
| Total billed rooms for lodges (5) | Total billed rooms for lodges (5) | 730,708 | | | 613,017 | | | 117,691 | | Total billed rooms for lodges (5) | 726,364 | | | 730,708 | | | (4,344) | |
| Average Canadian dollar to U.S. dollar | Average Canadian dollar to U.S. dollar | $ | 0.766 | | | $ | 0.794 | | | $ | (0.028) | | Average Canadian dollar to U.S. dollar | $ | 0.746 | | | $ | 0.766 | | | $ | (0.020) | |
(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile assets for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
(4)Average daily rate is based on billed rooms and accommodation revenue.
(5)Billed rooms represents total billed days for owned assets for the periods presented.
Our Canadian segment reported revenues in the third quarter of 20222023 that were $19.0$7.9 million, or 23%8%, higherlower than the third quarter of 2021.2022. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3%2.6% in the third quarter of 20222023 compared to the third quarter of 20212022 resulted in a $3.7$2.6 million period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rate, the increaserevenue decrease was driven by (i) higher billed rooms at our lodges related to turnaround activities by a number of customers, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increasedreduced mobile asset activity from pipeline projects.
Our Canadian segment cost of sales and services increased $13.7decreased $6.9 million, or 23%9%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3%2.6% in the third quarter of 20222023 compared to the third quarter of 20212022 resulted in a $2.6$1.8 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Canadian exchange rate, the increasedecrease in cost of sales and services was driven by (i) lower costs related to the reduced mobile asset activity, (ii) lower staff costs at certain lodges and (iii) reduced activity at our south lodges. These decreases were partially offset by increased occupancyoperating costs at our lodges and by increased mobile asset activity from pipeline projects.due to inflationary pressures.
Our Canadian segment gross margin as a percentage of revenues was largely unchanged, decreasingincreased from 29.6% in the third quarter of 2021 to 29.3% in the third quarter of 2022.
2022 to 30.7% in the third quarter of 2023. This was primarily driven by improved margins at our lodges due to improved efficiencies, partially offset by reduced margins at our lodges due to inflationary pressures and reduced margins from our mobile asset activity as certain higher margin components were recognized over the initial contract terms through late 2022, with 2023 representing continuing operations.
Segment Results of Operations – Australian Segment
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
Revenues ($ in thousands) | Revenues ($ in thousands) | | | | | | Revenues ($ in thousands) | | | | | |
Accommodation revenue (1) | Accommodation revenue (1) | $ | 38,316 | | | $ | 38,104 | | | $ | 212 | | Accommodation revenue (1) | $ | 46,012 | | | $ | 38,316 | | | $ | 7,696 | |
Food service and other services revenue (2) | Food service and other services revenue (2) | 35,489 | | | 27,014 | | | 8,475 | | Food service and other services revenue (2) | 41,873 | | | 35,489 | | | 6,384 | |
Total revenues | Total revenues | $ | 73,805 | | | $ | 65,118 | | | $ | 8,687 | | Total revenues | $ | 87,885 | | | $ | 73,805 | | | $ | 14,080 | |
| Cost of sales and services ($ in thousands) | Cost of sales and services ($ in thousands) | | Cost of sales and services ($ in thousands) | |
Accommodation cost | Accommodation cost | $ | 17,818 | | | $ | 18,351 | | | $ | (533) | | Accommodation cost | $ | 22,404 | | | $ | 17,818 | | | $ | 4,586 | |
Food service and other services cost | Food service and other services cost | 33,465 | | | 26,007 | | | 7,458 | | Food service and other services cost | 38,898 | | | 33,465 | | | 5,433 | |
Indirect other cost | Indirect other cost | 2,050 | | | 2,016 | | | 34 | | Indirect other cost | 2,293 | | | 2,050 | | | 243 | |
Total cost of sales and services | Total cost of sales and services | $ | 53,333 | | | $ | 46,374 | | | $ | 6,959 | | Total cost of sales and services | $ | 63,595 | | | $ | 53,333 | | | $ | 10,262 | |
| Gross margin as a % of revenues | Gross margin as a % of revenues | 27.7 | % | | 28.8 | % | | (1.0) | % | Gross margin as a % of revenues | 27.6 | % | | 27.7 | % | | (0.1) | % |
| Average daily rate for villages (3) | Average daily rate for villages (3) | $ | 73 | | | $ | 78 | | | $ | (5) | | Average daily rate for villages (3) | $ | 74 | | | $ | 73 | | | $ | 1 | |
| Total billed rooms for villages (4) | Total billed rooms for villages (4) | 525,359 | | | 491,218 | | | 34,141 | | Total billed rooms for villages (4) | 623,436 | | | 525,359 | | | 98,077 | |
| Australian dollar to U.S. dollar | Australian dollar to U.S. dollar | $ | 0.683 | | | $ | 0.735 | | | $ | (0.052) | | Australian dollar to U.S. dollar | $ | 0.655 | | | $ | 0.683 | | | $ | (0.028) | |
(1)Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to food services and other services, including facilities management for the periods presented.
(3)Average daily rate is based on billed rooms and accommodation revenue.
(4)Billed rooms represent total billed days for owned assets for the periods presented.
Our Australian segment reported revenues in the third quarter of 20222023 that were $8.7$14.1 million, or 13%19%, higher than the third quarter of 2021.2022. The weakening of the average exchange rate for Australian dollars relative to the U.S. dollar by 7%4.1% in the third quarter of 20222023 compared to the third quarter of 20212022 resulted in a $5.5$3.8 million period-over-period decrease in revenues. On a constant currency basis, the Australian segment experienced a 22%24% period-over-period increase in revenues. Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and Gunnedah BasinsBasin and our integrated services sitesvillages in Western Australia.
Our Australian segment cost of sales and services increased $7.0$10.3 million, or 15%19%, in the third quarter of 20222023 compared to the third quarter of 2021.2022. The weakening of the average exchange rate for Australian dollars relative to the U.S. dollar by 7%4.1% in the third quarter of 20222023 compared to the third quarter of 20212022 resulted in a $4.0$2.8 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services was largely driven by increased activityoccupancy at our Civeo owned villages in the Bowen Basin and Gunnedah BasinsBasin and our integrated services sitesvillages in Western Australia.
Our Australian segment gross margin as a percentage of revenues decreased to 27.6% in the third quarter of 2023 from 27.7% in the third quarter of 2022 from 28.8% in the third quarter of 2021.2022. This was primarily driven by a higher proportion ofan increased relative revenue contribution from our integrated services business, which has a service-only business model, and therefore generates lower overall gross margins than our accommodation business.
Segment Results of Operations – U.S. Segment
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 | | Change |
Revenues ($ in thousands) | $ | 7,413 | | | $ | 5,888 | | | $ | 1,525 | |
| | | | | |
Cost of sales and services ($ in thousands) | $ | 7,285 | | | $ | 5,842 | | | $ | 1,443 | |
| | | | | |
Gross margin as a % of revenues | 1.7 | % | | 0.8 | % | | 0.9 | % |
Our U.S. segment reported revenues in the third quarter of 2022 that were $1.5 million, or 26%, higher than the third quarter of 2021. This increase wasbusiness and increased operating costs due to greater U.S. drilling activity positively impacting our wellsite business in July and August,inflationary pressures, partially offset by reduced revenue due to the sale of this business on September 1, 2022. In addition, the offshore business had increased activity from completed projects and unit salesimproved margins at Civeo owned villages in the third quarter of 2022 that did not occur to the same extent in the third quarter of 2021. These increases were partially offset by the reduced revenue from our former West Permian Lodge, which operated in the third quarter of 2021Bowen Basin and was sold in the fourth quarter of 2021.
Our U.S. segment cost of sales and services increased $1.4 million, or 25%, in the third quarter of 2022 compared to the third quarter of 2021. This increase was due to greater U.S. drilling activity impacting our wellsite business in July and August.
Our U.S. segment gross margin as a percentage of revenues increased from 0.8% in the third quarter of 2021 to 1.7% in the third quarter of 2022 primarilyGunnedah Basin due to improved margins in our wellsite business due to operating efficiencies at higher activity levels and increased margins from product sales in our offshore business. These were partially offset by our former West Permian Lodge, which generated a 79% gross margin as a percentageresult of revenues in the third quarter of 2021 and was sold in the fourth quarter of 2021.
increased activity.
Results of Operations – Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change | |
| | | ($ in thousands) | | ($ in thousands) | |
Revenues | | | | | | |
Revenues: | | Revenues: | | | | | | |
Canada | Canada | $ | 307,984 | | | $ | 229,223 | | | $ | 78,761 | | Canada | $ | 280,067 | | | $ | 307,984 | | | $ | (27,917) | | |
Australia | Australia | 205,154 | | | 188,774 | | | 16,380 | | Australia | 247,418 | | | 205,154 | | | 42,264 | | |
U.S. and other | 21,721 | | | 16,672 | | | 5,049 | | |
Other | | Other | 2,521 | | | 21,721 | | | (19,200) | | |
Total revenues | Total revenues | 534,859 | | | 434,669 | | | 100,190 | | Total revenues | 530,006 | | | 534,859 | | | (4,853) | | |
Costs and expenses | | |
Costs and expenses: | | Costs and expenses: | | |
Cost of sales and services | Cost of sales and services | | Cost of sales and services | | |
Canada | Canada | 223,093 | | | 168,441 | | | 54,652 | | Canada | 211,722 | | | 223,093 | | | (11,371) | | |
Australia | Australia | 145,539 | | | 134,172 | | | 11,367 | | Australia | 180,448 | | | 145,539 | | | 34,909 | | |
U.S. and other | 20,760 | | | 16,629 | | | 4,131 | | |
Other | | Other | 3,065 | | | 20,760 | | | (17,695) | | |
Total cost of sales and services | Total cost of sales and services | 389,392 | | | 319,242 | | | 70,150 | | Total cost of sales and services | 395,235 | | | 389,392 | | | 5,843 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 50,572 | | | 46,204 | | | 4,368 | | Selling, general and administrative expenses | 52,885 | | | 50,572 | | | 2,313 | | |
Depreciation and amortization expense | Depreciation and amortization expense | 65,818 | | | 62,928 | | | 2,890 | | Depreciation and amortization expense | 59,277 | | | 65,818 | | | (6,541) | | |
Impairment expense | — | | | 7,935 | | | (7,935) | | |
Other operating (income) expense | (187) | | | 122 | | | (309) | | |
| Other operating expense (income) | | Other operating expense (income) | 302 | | | (187) | | | 489 | | |
Total costs and expenses | Total costs and expenses | 505,595 | | | 436,431 | | | 69,164 | | Total costs and expenses | 507,699 | | | 505,595 | | | 2,104 | | |
Operating income (loss) | 29,264 | | | (1,762) | | | 31,026 | | |
Operating income | | Operating income | 22,307 | | | 29,264 | | | (6,957) | | |
| Interest expense, net | Interest expense, net | (8,062) | | | (10,343) | | | 2,281 | | Interest expense, net | (10,499) | | | (8,062) | | | (2,437) | | |
Other income | 4,290 | | | 6,066 | | | (1,776) | | |
Income (loss) before income taxes | 25,492 | | | (6,039) | | | 31,531 | | |
Other income (expense) | | Other income (expense) | (1,832) | | | 4,290 | | | (6,122) | | |
Income before income taxes | | Income before income taxes | 9,976 | | | 25,492 | | | (15,516) | | |
Income tax expense | Income tax expense | (7,091) | | | (2,354) | | | (4,737) | | Income tax expense | (2,897) | | | (7,091) | | | 4,194 | | |
Net income (loss) | 18,401 | | | (8,393) | | | 26,794 | | |
Less: Net income attributable to noncontrolling interest | 1,706 | | | 534 | | | 1,172 | | |
Net income (loss) attributable to Civeo Corporation | 16,695 | | | (8,927) | | | 25,622 | | |
Net income | | Net income | 7,079 | | | 18,401 | | | (11,322) | | |
Less: Net income (loss) attributable to noncontrolling interest | | Less: Net income (loss) attributable to noncontrolling interest | (53) | | | 1,706 | | | (1,759) | | |
Net income attributable to Civeo Corporation | | Net income attributable to Civeo Corporation | 7,132 | | | 16,695 | | | (9,563) | | |
Less: Dividends attributable to preferred shares | Less: Dividends attributable to preferred shares | 1,469 | | | 1,440 | | | 29 | | Less: Dividends attributable to preferred shares | — | | | 1,469 | | | (1,469) | | |
Net income (loss) attributable to Civeo common shareholders | $ | 15,226 | | | $ | (10,367) | | | $ | 25,593 | | |
Net income attributable to Civeo common shareholders | | Net income attributable to Civeo common shareholders | $ | 7,132 | | | $ | 15,226 | | | $ | (8,094) | | |
We reported net income attributable to Civeo for the nine months ended September 30, 2023 of $7.1 million, or $0.47 per diluted share compared to net income attributable to Civeo for the nine months ended September 30, 2022 of $15.2 million, or $0.91 per diluted share compared to net loss attributable to Civeo for the nine months ended September 30, 2021 of $10.4 million, or $0.73 per diluted share. As further discussed below, net loss for the nine months ended September 30, 2021 included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.
Revenues. Consolidated revenues increased $100.2decreased $4.9 million, or 23%1%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. This increasedecrease was primarily driven by (i) higher billed rooms at our Canadian lodges as occupancy in the first nine months of 2021 was negatively impacted by the COVID-19 pandemic, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increased(i) decreased mobile asset activity from pipeline projects in Canada, (iv) increased activity(ii) lower billed rooms at our Australian Civeo owned villagesCanadian lodges, (iii) reduced activity in the BowenU.S. operations due to the sale of our wellsite and Gunnedah Basinsoffshore businesses in the second half of 2022 and (v) increased activity at our integrated services villages in Western Australia. These items were partially offset by(iv) a weaker Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. These items were partially offset by (i) increased occupancy at our Civeo owned villages in the Australian Bowen and Gunnedah Basins and (ii) increased activity at our integrated services villages in Western Australia. See the discussion of segment results of operations below for further information.
Cost of Sales and Services. Our consolidated cost of sales and services increased $70.2$5.8 million, or 22%2%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. This increase was primarily due to (i) higher billed roomsincreased occupancy at our Canadian lodges, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased activity at our Australian Civeo owned villages in the Australian Bowen and Gunnedah Basins, and (iv)(ii) increased activity at our integrated services villages in Western Australia and (iii) increased operating costs due to inflationary pressures in Australia. These items were partially offset by (i) reduced activity in the U.S. operations due to the sale of our wellsite and offshore businesses in the second half of 2022, (ii) lower costs related to reduced mobile asset activity in Canada and (iii) a weaker Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. See the discussion of segment results of operations below for further information.
Selling, General and Administrative ExpensesExpenses.. SG&A expense increased $4.4$2.3 million, or 9%5%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. This increase was primarily due to higher share-based compensation expense, travel and entertainmenthigher information technology expense and information technology expense.higher incentive compensation costs. The increase in share-based compensation expense was primarily due to a relative increase in our stock price during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.increased staff and recruitment costs. The increase in information technology expense was related to ongoing investment in our newly implemented HCM system and set-up costs incurred in a cloud computing arrangement for our newly implemented human capital managementthe HCM system, which are being amortized through SG&A expense instead of depreciation and amortization expense. These items were partially offset by lower share-based compensation expense and a weaker Australian and Canadian dollar relative to the U.S. dollar in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increasedecrease in travel and entertainment expensesshare-based compensation expense was largelydue to a result of a returnrelative decrease in our stock price during 2023 compared to more normalized travel expenses with the lifting of travel restrictions associated with COVID-19.2022.
Depreciation and Amortization Expense. Depreciation and amortization expense increased $2.9decreased $6.5 million, or 5%10%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. The increasedecrease was primarily due to shortening(i) the lives onsale of our wellsite and offshore businesses in the U.S. in the second half of 2022, (ii) certain assets in Canada, partially offset by assets in Canada becoming fully depreciated during 2021 and the disposal of our West Permian Lodgein Canada in the second quarter of 2023 and (iii) lower depreciation and amortization expense due to a weaker Australian and Canadian dollar relative to the U.S. during 2021.
Impairment Expense. We recorded pre-tax impairment expense of $7.9 milliondollar in the nine months ended September 30, 2021 associated with long-lived2023 compared to the nine months ended September 30, 2022. This was partially offset by the shortening of the useful lives on certain assets in our Australian reporting unit.
See Note 3 - Impairment Charges toCanada, including the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.McClelland Lake Lodge.
Operating Income (Loss).Income. Consolidated operating income increased $31.0decreased $7.0 million, or 1,761%24%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021,2022, primarily due to higherreduced mobile asset activity levels in Canada and Australiaincreased operating costs due to inflationary pressures in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021 and lower impairment expense in Australia in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.2022.
Interest Expense, net. Net interest expense decreasedincreased by $2.3$2.4 million, or 22%30%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021,2022, primarily related to lower average debt levelshigher interest rates on credit facility borrowings during 20222023 compared to 2021.2022, partially offset by lower average debt levels.
Other Income. Consolidated other income decreased $1.8$6.1 million in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022, primarily due to lower gain on the sale of assets. The nine months ended September 30, 2023 included expenses of $4.9 million associated with the demobilization of our McClelland Lake Lodge to prepare the assets for sale, partially offset by gains related to the sale of our Acadian Acres accommodation assets in the U.S. The associated gain related to the sale of the McClelland Lake Lodge assets will be recognized in the fourth quarter of 2023 and first quarter of 2024. The nine months ended September 30, 2022 included gains on the sale of assets primarily related to our Kambalda village and undeveloped land holdings in Australia, our wellsite business in the U.S. and various mobile assets across Canada, Australia and the U.S. The nine months ended September 30, 2021 included $3.5 million related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and a lower gain on the sale of assets primarily related to the sale of a manufacturing facility and mobile assets in Canada.
Income Tax (Expense) Benefit. Our income tax expense for the nine months ended September 30, 20222023 totaled $7.1$2.9 million, or 27.8%29% of pretax income, compared to an income tax expense of $2.4$7.1 million, or (39.0)%28% of pretax loss,income, for the nine months ended September 30, 2021.2022. Our effective tax rate for the nine months ended September 30, 2023 and 2022 was impacted by considering the U.S. a loss jurisdiction that was removed from the annual effective tax rate computation for the purposes of computing the interim tax provision. Our effective tax rate for the nine months ended September 30, 2021 was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for the purposes of computing the interim tax provision.
Other Comprehensive (Loss) Income. Other comprehensive lossincome increased $17.3$25.9 million in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021,2022, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar decreased 8%increased 0.2% in the nine months ended September 30, 2022 and was flat2023 compared to a 8% decrease in the nine months ended September 30, 2021.2022. The Australian dollar exchange rate compared to the U.S. dollar decreased 11%5% in the nine months ended September 30, 20222023 compared to a 7%11% decrease in the nine months ended September 30, 2021.2022.
Segment Results of Operations – Canadian Segment
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change | |
Revenues ($ in thousands) | Revenues ($ in thousands) | | | | | | Revenues ($ in thousands) | | | | | | |
Accommodation revenue (1) | Accommodation revenue (1) | $ | 219,349 | | | $ | 176,800 | | | $ | 42,549 | | Accommodation revenue (1) | $ | 208,000 | | | $ | 219,349 | | | $ | (11,349) | | |
Mobile facility rental revenue (2) | Mobile facility rental revenue (2) | 73,359 | | | 38,240 | | | 35,119 | | Mobile facility rental revenue (2) | 54,752 | | | 73,359 | | | (18,607) | | |
Food service and other services revenue (3) | Food service and other services revenue (3) | 15,276 | | | 14,183 | | | 1,093 | | Food service and other services revenue (3) | 17,315 | | | 15,276 | | | 2,039 | | |
| Total revenues | Total revenues | $ | 307,984 | | | $ | 229,223 | | | $ | 78,761 | | Total revenues | $ | 280,067 | | | $ | 307,984 | | | $ | (27,917) | | |
| Cost of sales and services ($ in thousands) | Cost of sales and services ($ in thousands) | | Cost of sales and services ($ in thousands) | | | | | | |
Accommodation cost | Accommodation cost | $ | 156,543 | | | $ | 124,798 | | | $ | 31,745 | | Accommodation cost | $ | 150,592 | | | $ | 156,543 | | | $ | (5,951) | | |
Mobile facility rental cost | Mobile facility rental cost | 44,939 | | | 23,562 | | | 21,377 | | Mobile facility rental cost | 37,736 | | | 44,939 | | | (7,203) | | |
Food service and other services cost | Food service and other services cost | 13,782 | | | 12,583 | | | 1,199 | | Food service and other services cost | 15,701 | | | 13,782 | | | 1,919 | | |
| Indirect other costs | Indirect other costs | 7,829 | | | 7,498 | | | 331 | | Indirect other costs | 7,693 | | | 7,829 | | | (136) | | |
Total cost of sales and services | Total cost of sales and services | $ | 223,093 | | | $ | 168,441 | | | $ | 54,652 | | Total cost of sales and services | $ | 211,722 | | | $ | 223,093 | | | $ | (11,371) | | |
| Gross margin as a % of revenues | Gross margin as a % of revenues | 27.6 | % | | 26.5 | % | | 1.0 | % | Gross margin as a % of revenues | 24.4 | % | | 27.6 | % | | (3.2) | % | |
| Average daily rate for lodges (4) | Average daily rate for lodges (4) | $ | 102 | | | $ | 97 | | | $ | 5 | | Average daily rate for lodges (4) | $ | 98 | | | $ | 102 | | | $ | (4) | | |
| Total billed rooms for lodges (5) | Total billed rooms for lodges (5) | 2,137,530 | | | 1,816,407 | | | 321,123 | | Total billed rooms for lodges (5) | 2,093,459 | | | 2,137,530 | | | (44,071) | | |
| Average Canadian dollar to U.S. dollar | Average Canadian dollar to U.S. dollar | $ | 0.779 | | | $ | 0.799 | | | $ | (0.020) | | Average Canadian dollar to U.S. dollar | $ | 0.743 | | | $ | 0.779 | | | $ | (0.036) | | |
(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile assets for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
(4)Average daily rate is based on billed rooms and accommodation revenue.
(5)Billed rooms represents total billed days for owned assets for the periods presented.
Our Canadian segment reported revenues in the nine months ended September 30, 20222023 that were $78.8$27.9 million, or 34%9%, higherlower than the nine months ended September 30, 2021.2022. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3%4.6% in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 resulted in a $8.2$13.7 million period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rate, the increaserevenue decrease was driven by (i) higher billed rooms at our lodges as occupancy in the first nine month of 2021 was negatively impacted by the COVID-19 pandemic, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increasedreduced mobile asset activity from pipeline projects.projects and (ii) lower billed rooms at our lodges.
Our Canadian segment cost of sales and services increased $54.7decreased $11.4 million, or 32%5%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3%4.6% in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 resulted in a $5.6$10.6 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Canadian exchange rate, the increasedecrease in cost of sales and services was driven by lower costs related to the reduced mobile asset activity. This decrease was partially offset by increased occupancyoperating costs at our lodges and increased mobile asset activity from pipeline projects.due to inflationary pressures.
Our Canadian segment gross margin as a percentage of revenues increaseddecreased from 26.5% in the nine months ended September 30, 2021 to 27.6% in the nine months ended September 30, 2022.2022 to 24.4% in the nine months ended September 30, 2023. This was primarily driven by an increased relative contributionreduced margins at our lodges due to inflationary pressures and reduced margins from our mobile asset activity which generatesas certain higher gross margin.margin components were recognized over the initial contract terms through late 2022, with 2023 representing continuing operations.
Segment Results of Operations – Australian Segment
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
Revenues ($ in thousands) | Revenues ($ in thousands) | | | | | | Revenues ($ in thousands) | | | | | |
Accommodation revenue (1) | Accommodation revenue (1) | $ | 114,967 | | | $ | 109,559 | | | $ | 5,408 | | Accommodation revenue (1) | $ | 130,953 | | | $ | 114,967 | | | $ | 15,986 | |
Food service and other services revenue (2) | Food service and other services revenue (2) | 90,187 | | | 79,215 | | | 10,972 | | Food service and other services revenue (2) | 116,465 | | | 90,187 | | | 26,278 | |
Total revenues | Total revenues | $ | 205,154 | | | $ | 188,774 | | | $ | 16,380 | | Total revenues | $ | 247,418 | | | $ | 205,154 | | | $ | 42,264 | |
| Cost of sales and services ($ in thousands) | Cost of sales and services ($ in thousands) | | Cost of sales and services ($ in thousands) | |
Accommodation cost | Accommodation cost | $ | 55,065 | | | $ | 53,538 | | | $ | 1,527 | | Accommodation cost | $ | 63,670 | | | $ | 55,065 | | | $ | 8,605 | |
Food service and other services cost | Food service and other services cost | 84,836 | | | 75,458 | | | 9,378 | | Food service and other services cost | 110,132 | | | 84,836 | | | 25,296 | |
Indirect other cost | Indirect other cost | 5,638 | | | 5,176 | | | 462 | | Indirect other cost | 6,646 | | | 5,638 | | | 1,008 | |
Total cost of sales and services | Total cost of sales and services | $ | 145,539 | | | $ | 134,172 | | | $ | 11,367 | | Total cost of sales and services | $ | 180,448 | | | $ | 145,539 | | | $ | 34,909 | |
| Gross margin as a % of revenues | Gross margin as a % of revenues | 29.1 | % | | 28.9 | % | | 0.1 | % | Gross margin as a % of revenues | 27.1 | % | | 29.1 | % | | (2.0) | % |
| Average daily rate for villages (3) | Average daily rate for villages (3) | $ | 76 | | | $ | 79 | | | $ | (3) | | Average daily rate for villages (3) | $ | 76 | | | $ | 76 | | | $ | — | |
| Total billed rooms for villages (4) | Total billed rooms for villages (4) | 1,505,143 | | | 1,382,182 | | | 122,961 | | Total billed rooms for villages (4) | 1,734,004 | | | 1,505,143 | | | 228,861 | |
| Australian dollar to U.S. dollar | Australian dollar to U.S. dollar | $ | 0.707 | | | $ | 0.759 | | | $ | (0.052) | | Australian dollar to U.S. dollar | $ | 0.669 | | | $ | 0.707 | | | $ | (0.038) | |
(1)Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to food services and other services, including facilities management for the periods presented.
(3)Average daily rate is based on billed rooms and accommodation revenue.
(4)Billed rooms represent total billed days for owned assets for the periods presented.
Our Australian segment reported revenues in the nine months ended September 30, 20222023 that were $16.4$42.3 million, or 9%21%, higher than the nine months ended September 30, 2021.2022. The weakening of the average exchange rate for Australian dollars relative to the U.S. dollar by 7%5.4% in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 resulted in a $15.1$14.1 million period-over-period decrease in revenues. On a constant currency basis, the Australian segment experienced a 27% period-over-period increase in revenues. Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and Gunnedah BasinsBasin and our integrated services villages in Western Australia.
Our Australian segment cost of sales and services increased $11.4$34.9 million, or 8%24%, in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022. The weakening of the average exchange rate for Australian dollars relative to the U.S. dollar by 7%5.4% in the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 resulted in a $10.7$10.3 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services was largely driven by increased activityoccupancy at our Civeo owned villages in the Bowen Basin and Gunnedah BasinsBasin and our integrated services villages in Western Australia.Australia and increased operating costs due to inflationary pressures.
Our Australian segment gross margin as a percentage of revenues increaseddecreased to 27.1% in the nine months ended September 30, 2023 from 29.1% in the nine months ended September 30, 2022 from 28.9% in the nine months ended September 30, 2021.2022. This was primarily driven by improved margins at Civeo owned villages in the Bowen and Gunnedah Basins as a result of increased activity, partially offset byan increased relative revenue contribution from our integrated services business, which has a service-only business model, and therefore generates lower overall gross margins than our accommodation business.
business and increased operating costs due to inflationary pressures, partially offset by improved margins at Civeo owned villages in the Bowen Basin and Gunnedah Basin due to improved efficiencies as a result of increased activity.
Segment Results of Operations – U.S. Segment
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 | | Change |
Revenues ($ in thousands) | $ | 21,721 | | | $ | 16,672 | | | $ | 5,049 | |
| | | | | |
Cost of sales and services ($ in thousands) | $ | 20,760 | | | $ | 16,629 | | | $ | 4,131 | |
| | | | | |
Gross margin as a % of revenues | 4.4 | % | | 0.3 | % | | 4.2 | % |
Our U.S. segment reported revenues in the nine months ended September 30, 2022 that were $5.0 million, or 30%, higher than the nine months ended September 30, 2021. This increase was due to greater U.S. drilling activity positively impacting our wellsite business that was sold on September 1, 2022, partially offset by reduced revenue from our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.
Our U.S. segment cost of sales and services increased $4.1 million, or 25%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase was due to greater U.S. drilling activity impacting our wellsite business that was sold on September 1, 2022, partially offset by reduced costs from our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.
Our U.S. segment gross margin as a percentage of revenues increased 4.2% from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily due to improved margins in our wellsite business due to operating efficiencies at higher activity levels, partially offset by our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.
Liquidity and Capital Resources
Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our hospitality services, developing new lodges and villages and purchasing or leasing land, to pay dividends, to repurchase common shares and for general working capital needs. In addition, capital has been used to repay debt repurchase our common shares and fund strategic business acquisitions. In the future, capital may be required to move lodges from one site to another. Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances. In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions or refinance debt or retire preferred shares.debt.
The following table summarizes our consolidated liquidity position as of September 30, 20222023 and December 31, 20212022 (in thousands):
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Lender commitments | Lender commitments | $ | 200,000 | | | $ | 200,000 | | Lender commitments | $ | 200,000 | | | $ | 200,000 | |
| Borrowings against revolving credit capacity | Borrowings against revolving credit capacity | (89,736) | | | (112,026) | | Borrowings against revolving credit capacity | (95,852) | | | (102,505) | |
Outstanding letters of credit | Outstanding letters of credit | (1,352) | | | (1,439) | | Outstanding letters of credit | (1,367) | | | (1,365) | |
Unused availability | Unused availability | 108,912 | | | 86,535 | | Unused availability | 102,781 | | | 96,130 | |
Cash and cash equivalents | Cash and cash equivalents | 8,361 | | | 6,282 | | Cash and cash equivalents | 7,817 | | | 7,954 | |
Total available liquidity | Total available liquidity | $ | 117,273 | | | $ | 92,817 | | Total available liquidity | $ | 110,598 | | | $ | 104,084 | |
Cash totaling $62.4$56.6 million was provided by operations during the nine months ended September 30, 2022,2023, compared to $63.2$62.4 million provided by operations during the nine months ended September 30, 2021.2022. During the nine months ended September 30, 2023 and 2022, and 2021, $29.9$20.0 million and $5.0$29.9 million was used in working capital, respectively. The increaseyear-over-over decrease in cash used in working capital in 20222023 compared to 20212022 is largely due to payments received from a customer for village enhancements in Australia and a payment received from a customer related to an asset transportation contract, partially offset by the timing of customer payments and revenue recognition as it relates to mobile asset activity in Canada during the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021.2022.
Cash was used in investing activities during the nine months ended September 30, 2023 in the amount of $14.1 million, compared to cash used in investing activities during the nine months ended September 30, 2022 in the amount of $5.3 million, compared to cash used in investing activities during the nine months ended September 30, 2021 in the amount of $2.1 million. The increase in cash used in investing activities was primarily due to higher capital expenditures.expenditures and lower proceeds from the sale of property, plant and equipment. Capital expenditures totaled
$17.5 $21.2 million and $9.6$17.5 million during the nine months ended September 30, 20222023 and 2021,2022, respectively. Capital expenditures in both periods were primarily maintenance related. Offsetting these capital expenditures, werelated to maintenance. We received proceeds from the sale of property, plant and equipment of $7.1 million during the nine months ended September 30, 2023 primarily related to the sale of our McClelland Lake Lodge accommodation assets in Canada and Acadian Acres accommodation assets in the U.S., compared to $12.0 million during the nine months ended September 30, 2022 primarily related to the sale of our Kambalda village and undeveloped land holdings in Australia, unused corporate office space and various mobile assets in Canada and our wellsite business in the U.S., compared to $7.5 million during the nine months ended September 30, 2021 primarily related to the sale of our manufacturing facility and mobile assets in Canada.
We expect our capital expenditures for 20222023 to be in the range of $24$35 million to $29$40 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments. Our 2022 capital expenditures estimate includes the capital expenditures associated with our recently announced 12-year contract renewal for our Wapasu Lodge in the Canadian oil sands. Whether planned expenditures will actually be spent in 20222023 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction and return of capital to shareholders. We continue to monitor the global economy, commodity prices, demand for crude oil, met coal, LNG and iron ore, inflation the COVID-19 global pandemic and the responses thereto and the resultant impact on the capital spending plans of our customers in order to plan our business activities, and we may adjust our capital expenditure plans in the future.
Net cash of $42.0 million was used in financing activities during the nine months ended September 30, 2023 primarily due to term loan repayments of $22.3 million, repurchases of our common shares of $9.2 million, net repayments under our revolving credit facilities of $6.7 million and dividend payments of $3.7 million. Net cash of $53.1 million was used in financing activities during the nine months ended September 30, 2022 primarily due to net repayments under our revolving
credit facilities of $14.8 million, term loan repayments of $23.1 million, repurchases of our common shares of $14.2 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.0 million. Net cash of $61.1 million was used in financing activities during the nine months ended September 30, 2021 primarily due to repayments of term loan borrowings of $117.6 million, payments to settle tax obligations on vested shares under our share-based compensation plans of $1.1 million, debt issuance costs of $4.4 million and repurchases of our common shares of $0.4 million, partially offset by net borrowings under our revolving credit facilities of $62.5 million.
The following table summarizes the changes in debt outstanding during the nine months ended September 30, 20222023 (in thousands):
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Balance at December 31, 20212022 | | | | | | | $ | 175,130132,037 | |
Borrowings under revolving credit facilities | | | | | | | 204,951172,867 | |
Repayments of borrowings under revolving credit facilities | | | | | | | (219,775)(179,599) | |
Repayments of term loans | | | | | | | (23,059)(22,338) | |
Translation | | | | | | | (11,031)281 | |
Balance at September 30, 20222023 | | | | | | | $ | 126,216103,248 | |
We believe that cash on hand and cash flow from operations will be sufficient to meet our anticipated liquidity needs for the next 12 months. If our plans or assumptions change, including as a result of the impact of COVID-19changes in our customers' capital spending or changes in the price of and demand for oil,natural resources, or are inaccurate, or if we make acquisitions, we may need to raise additional capital. Acquisitions have been, and our management believes acquisitions will continue to be, an element of our long-term business strategy. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances or may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.
In August 2022,2023, our Board authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 685,614742,134 common shares, over a twelve month period. In addition, on September 5, 2023, our Board declared a quarterly dividend of $0.25 per common share to shareholders of record as of close of business on September 15, 2023. The total cash payment of $3.7 million was paid on September 29, 2023. The dividend is an eligible dividend pursuant to the Income Tax Act (Canada). See Note 1211 – Share RepurchasesRepurchase Programs and Dividends to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Credit Agreement
As of September 30, 2022,2023, our Credit Agreement (as then amended to date, the Credit Agreement) provided for: (i) a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, allocated as follows: (A) a $10.0 million senior secured revolving credit facility in favor of one of our U.S. subsidiaries, as borrower; (B) a $155.0 million senior secured revolving credit facility in favor of Civeo, as borrower; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a C$100.0 million term loan facility scheduled to be fully repaid on December 31, 2023 in favor of Civeo.
As of September 30, 2022,2023, we had outstanding letters of credit of $0.3 million under the U.S. facility, zero under the Australian facility and $1.1 million under the Canadian facility. We also had outstanding bank guarantees of A$0.8 million under the Australian facility.
See Note 87 – Debt to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Dividends
We intend to pay regular quarterly dividends on our common shares, with all future dividend payments subject to quarterly review and approval by our Board. The declaration and amount of all potential future dividends will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the Board deems relevant. In addition, our ability to pay cash dividends on common or preferred shares is limited by covenants in the Credit Agreement. Future agreements may also limit our ability to pay dividends, and we may incur incremental taxes if we are required to repatriate foreign earnings to pay such dividends. If we elect to pay dividends in the future, theThe amount per share of our dividend payments may be changed, or dividends may be suspended, without advance notice. The likelihood that dividends will be reduced or suspended is increased during periods of market weakness. There can be no assurance that we will continue to pay a dividend in the future.
The preferred shares we issued in the Noralta acquisition arewere entitled to receive a 2% annual dividend on the liquidation preference (initially $10,000 per share), paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof. Quarterly dividends were paid in-kind on September 30,Following the repurchase and conversion of our outstanding preferred shares in the fourth quarter of 2022, thereby increasing the liquidation preference to $10,939 per share as of September 30, 2022. We currently expect to payno further dividends on the preferred shares through an increase in liquidation preference rather than cash until they mandatorily convert to Civeo common shares in April 2023.will be paid.
Critical Accounting Policies
For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the audit committee of our Board of Directors.Board. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Our principal market risks are our exposure to changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
We have credit facilities that are subject to the risk of higher interest charges associated with increases in interest rates. As of September 30, 2022,2023, we had $126.2$103.2 million of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates. If floating interest rates increased by 100 basis points, our consolidated interest expense would increase by approximately $1.3$1.0 million annually, based on our floating-rate debt obligations and interest rates in effect as of September 30, 2022.2023.
Foreign Currency Exchange Rate Risk
Our operations are conducted in various countries around the world, and we receive revenue and pay expenses from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than the U.S. dollar, which is our reporting currency, or (ii) the functional currency of our subsidiaries, which is not necessarily the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets total approximately C$232198 million and A$232211 million, respectively, at September 30, 2022.2023. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the United StatesU.S. dollar. A hypothetical 10% adverse change in the value of the Canadian dollar and Australian dollar relative to the U.S. dollar as of September 30, 20222023 would result in translation adjustments of approximately $23$20 million and $23$21 million, respectively, recorded in other comprehensive loss. Although we do not currently have any foreign exchange agreements outstanding, in order to reduce our exposure to fluctuations in currency exchange rates, we may enter into foreign exchange agreements with financial institutions in the future.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022,2023, at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2022,2023, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings
We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including occasional claims by individuals alleging exposure to hazardous materials as a result of our products or operations. Some of these claims relate to matters occurring prior to our acquisition of businesses, and some relate to businesses we have sold. In certain cases, we are entitled to indemnification from the sellers of businesses, and in other cases, we have indemnified the buyers of businesses from us. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by indemnity or insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.
ITEM 1A. Risk Factors
For additional information about our risk factors, you should carefully read the section entitled "Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about purchases of our common shares during the three months ended September 30, 2022.2023.
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| Total Number of Shares Purchased | | Average Price Paid per Share | | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs | |
July 1, 2022 - July 31, 2022 | — | | | — | | | — | | 475,724 | | |
August 1, 2022 - August 31, 2022 | 475,724 | | (1) (3) | $ | 28.72 | | | 100,971 | | 374,753 | | |
September 1, 2022 - September 30, 2022 | — | | | — | | | — | | 685,614 | | (2) |
Total | 475,724 | | | $ | 28.72 | | | 100,971 | | 685,614 | | |
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| Total Number of Shares Purchased | | Average Price Paid per Share | | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may be purchased under the plans or programs | |
July 1, 2023 - July 31, 2023 | 20,500 | | (1) | $ | 19.66 | | | 20,500 | | 284,236 | | |
August 1, 2023 - August 31, 2023 | — | | | $ | — | | | — | | 742,134 | | (2) |
September 1, 2023 - September 30, 2023 | 41,844 | | | $ | 20.24 | | | 41,844 | | 700,290 | | |
Total | 62,344 | | | $ | 20.05 | | | 62,344 | | 700,290 | | |
(1)In August 2021,2022, our Board authorized a common share repurchase program (the 20212022 Share Repurchase Program) to repurchase up to 5.0% of our total common shares, which are issued and outstanding, or 715,814 common shares, over a twelve month period. We repurchased an aggregate of 100,971 of our common shares outstanding for approximately $3.0 million during the three months ended September 30, 2022 under the 2021 Share Repurchase Program.
(2)Inexpired in August 2022, our Board authorized a new common share repurchase program (the 2022 Share Repurchase Program and, together with the 2021 Share Repurchase Program, the "Share Repurchase Programs")2023, to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 685,614 common shares, over a twelve month period. We have not repurchased anyan aggregate of 20,500 of our common shares outstanding for approximately $0.4 million under the 2022 Share Repurchase Program as of September 30, 2022.
(3)In addition to the Share Repurchase Programs, we repurchased 374,753 common shares from a shareholder for approximately $10.7 million during the three months ended September 30, 2022.2023.
(2)In August 2023, our Board authorized a new common share repurchase program, (the 2023 Share Repurchase Program), which expires August 2024, to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 742,134 common shares over a twelve month period. We repurchased an aggregate of 41,844 of our common shares outstanding for approximately $0.8 million under the 2023 Share Repurchase Program during the three months ended September 30, 2023.
ITEM 5.Other Information
None.
ITEM 6. Exhibits
(a)INDEX OF EXHIBITS
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Exhibit No. | | Description | |
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10.1* | | |
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31.1* | — | | |
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31.2* | — | | |
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32.1** | — | | |
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32.2** | — | | |
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101.INS* | — | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
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101.SCH* | — | Inline XBRL Taxonomy Extension Schema Document | |
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101.CAL* | — | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
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101.DEF* | — | Inline Taxonomy Extension Definition Linkbase Document | |
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101.LAB* | — | Inline XBRL Taxonomy Extension Label Linkbase Document | |
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101.PRE* | — | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
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104 | — | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
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* | Filed herewith. | |
** | Furnished herewith. | |
PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Quarterly Report on Form 10-Q. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about Civeo or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in our public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about Civeo or its business or operations on the date hereof.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CIVEO CORPORATION
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Date: October 28, 202227, 2023 | By /s/ Carolyn J. Stone |
| Carolyn J. Stone |
| Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) |
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