What changed in this filing

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Item 1. Financial Statements

2020-07-29 compared with 2020-05-07 · 208 added, 127 removed, 350 unchanged (49% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Service and other $ 110,006 $ 112,719 $ 239,405 $ 212,798

Rental 3,865 7,625 10,044 14,115

Product 831 1,809 4,045 3,790

114,702 122,153 253,494 230,703

Costs and expenses:

Service and other costs 78,860 77,659 174,904 150,303

Rental costs 3,615 6,357 8,428 11,507

Product costs 658 1,224 3,114 3,060

3 unchanged sentences

Other operating expense (income) ( 285 ) ( 103 ) 704 ( 168 )

116,543 134,209 404,404 260,652

Operating loss ( 1,841 ) ( 12,056 ) ( 150,910 ) ( 29,949 )

1 unchanged sentence

Interest income 4 22 20 49

Loss before income taxes

Income tax benefit

Other income 12,642 1,055 12,667 4,033

Income (loss) before income taxes 6,951 ( 17,699 ) ( 147,672 ) ( 39,222 )

Income tax (expense) benefit ( 122 ) 2,850 8,689 7,334

Net income (loss) 6,829 ( 14,849 ) ( 138,983 ) ( 31,888 )

Net income attributable to noncontrolling interest 222 — 480 —

Net loss attributable to Civeo Corporation

Net income (loss) attributable to Civeo Corporation 6,607 ( 14,849 ) ( 139,463 ) ( 31,888 )

Dividends attributable to Class A preferred shares 471 461 939 920

Net loss attributable to Civeo common shareholders

Net income (loss) attributable to Civeo common shareholders $ 6,136 $ ( 15,310 ) $ ( 140,402 ) $ ( 32,808 )

Per Share Data (see Note 8 )

Basic net loss per share attributable to Civeo Corporation common shareholders

Diluted net loss per share attributable to Civeo Corporation common shareholders

Basic net income (loss) per share attributable to Civeo Corporation common shareholders $ 0.03 $ ( 0.09 ) $ ( 0.83 ) $ ( 0.20 )

Diluted net income (loss) per share attributable to Civeo Corporation common shareholders $ 0.03 $ ( 0.09 ) $ ( 0.83 ) $ ( 0.20 )

Weighted average number of common shares outstanding:

Basic 169,812 167,532 169,165 166,437

Diluted 169,990 167,532 169,165 166,437

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Net income (loss) $ 6,829 $ ( 14,849 ) $ ( 138,983 ) $ ( 31,888 )

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustment, net of zero taxes

29,385 1,084 ( 19,156 ) 6,463

Total other comprehensive income (loss), net of taxes 29,385 1,084 ( 19,156 ) 6,463

Comprehensive loss

Comprehensive income (loss) 36,214 ( 13,765 ) ( 158,139 ) ( 25,425 )

Comprehensive income attributable to noncontrolling interest 303 — 466 —

Comprehensive loss attributable to Civeo Corporation

Comprehensive incom e (loss) att ributable to Civeo Corporation

$ 35,911 $ ( 13,765 ) $ ( 158,605 ) $ ( 25,425 )

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(In Thousands, Excluding Share Amounts)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Current assets:

1 unchanged sentence

Accounts receivable, net 85,553 99,493

Inventories 7,683 5,877

Prepaid expenses 7,482 7,247

3 unchanged sentences

Property, plant and equipment, net 486,815 590,309

Goodwill 7,778 110,173

Other intangible assets, net 100,423 111,837

1 unchanged sentence

Other noncurrent assets 563 1,276

Total assets $ 734,583 $ 969,912

LIABILITIES AND SHAREHOLDERS’ EQUITY

2 unchanged sentences

Accrued liabilities 16,910 21,755

Income taxes 571 328

Current portion of long-term debt 33,510 35,080

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50,000,000 shares authorized, 9,042 , shares issued and outstanding, respectively;

aggregate liquidation preference of $94,096 and $93,627 as of March 31, 2020 and December 31, 2019)

aggregate liquidation preference of $ 94,566 and $ 93,627 as of June 30, 2020 and December 31, 2019)

59,068 58,129

Common shares ( no par value;

3 unchanged sentences

Common shares held in treasury at cost, 3,164,511 and 2,099,636 shares, respectively

( 6,930 ) ( 5,472 )

Accumulated other comprehensive loss ( 382,315 ) ( 363,173 )

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Attributable to Civeo

Shares Common

Amount Par Value Additional

Capital Accumulated

Deficit Treasury

Shares Accumulated

Comprehensive

Income (Loss)

Noncontrolling

Income (Loss) Noncontrolling

Interest Total

Shareholders’

Balance, March 31, 2019 $ 56,739 $ — $ 1,564,667 $ ( 728,748 ) $ ( 5,471 ) $ ( 365,870 ) $ — $ 521,317

Net income (loss) — — — ( 14,849 ) — — — ( 14,849 )

Currency translation adjustment — — — — — 1,084 — 1,084

Dividends paid — — — — — — — —

Issuance of shares for acquisitions — — — — — — — —

Dividends attributable to Class A preferred shares 461 — — ( 461 ) — — — —

Share-based compensation — — 2,495 — ( 1 ) — — 2,494

Balance, June 30, 2019 $ 57,200 $ — $ 1,567,162 $ ( 744,058 ) $ ( 5,472 ) $ ( 364,786 ) $ — $ 510,046

Balance, March 31, 2020 $ 58,597 $ — $ 1,574,457 $ ( 918,128 ) $ ( 6,914 ) $ ( 411,619 ) $ 552 $ 296,945

Net income (loss) — — — 6,607 — — 222 6,829

Currency translation adjustment — — — — — 29,304 81 29,385

Dividends paid — — — — — — ( 231 ) ( 231 )

Dividends attributable to Class A preferred shares 471 — — ( 471 ) — — — —

Share-based compensation — — 1,331 — ( 16 ) — — 1,315

Balance, June 30, 2020 $ 59,068 $ — $ 1,575,788 $ ( 911,992 ) $ ( 6,930 ) $ ( 382,315 ) $ 624 $ 334,243

Balance, December 31, 2018 $ 56,280 $ — $ 1,562,133 $ ( 710,551 ) $ ( 1,189 ) $ ( 371,249 ) $ — $ 535,424

3 unchanged sentences

Cumulative effect of implementation of ASU 2014-09

— — — ( 699 ) — — — ( 699 )

Dividends attributable to Class A preferred shares 920 — — ( 920 ) — — — —

Share-based compensation — — 5,029 — ( 4,283 ) — — 746

Balance, March 31, 2019

Balance, June 30, 2019 $ 57,200 $ — $ 1,567,162 $ ( 744,058 ) $ ( 5,472 ) $ ( 364,786 ) $ — $ 510,046

Balance, December 31, 2019 $ 58,129 $ — $ 1,572,249 $ ( 771,590 ) $ ( 5,472 ) $ ( 363,173 ) $ 662 $ 490,805

4 unchanged sentences

Share-based compensation — — 3,539 — ( 1,458 ) — — 2,081

Balance, March 31, 2020

Balance, June 30, 2020 $ 59,068 $ — $ 1,575,788 $ ( 911,992 ) $ ( 6,930 ) $ ( 382,315 ) $ 624 $ 334,243

thousands) Common

Balance, December 31, 2019 9,042 169,556

Stock-based compensation — 1,022

Balance, March 31, 2020

Balance, June 30, 2020 9,042 170,578

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(In Thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net loss $ ( 138,983 ) $ ( 31,888 )

Adjustments to reconcile net loss to net cash provided by operating activities:

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Provision (benefit) for loss on receivables, net of recoveries 25 ( 56 )

Other, net ( 3,240 ) 1,444

Changes in operating assets and liabilities:

Accounts receivable 10,231 ( 18,616 )

Inventories ( 1,895 ) ( 3 )

Accounts payable and accrued liabilities ( 4,583 ) 135

5 unchanged sentences

Proceeds from disposition of property, plant and equipment 1,897 4,448

Net cash flows used in investing activities

Other, net 4,619 1,762

Net cash flows provided by (used in) investing activities 2,669 ( 14,998 )

Cash flows from financing activities:

3 unchanged sentences

Taxes paid on vested shares ( 1,458 ) ( 4,283 )

Net cash flows used in financing activities

Net cash flows provided by (used in) financing activities ( 43,639 ) 6,073

Effect of exchange rate changes on cash ( 368 ) 52

41 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Accommodation revenues $ 40,204 $ 66,183 $ 106,270 $ 123,835

1 unchanged sentence

Food service and other services revenues 6,710 9,086 17,484 17,423

Manufacturing revenues — 1,014 — 1,014

Total Canada revenues 52,986 78,102 132,334 144,872

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Food service and other services revenues 9 47 34 90

revenues 4,645 13,055 14,976 26,414

Total revenues $ 114,702 $ 122,153 $ 253,494 $ 230,703

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We do not have significant financing components or significant payment terms.

As of March 31, 2020 , 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 (in thousands):

As of June 30, 2020, 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 (in thousands):

For the years ending December 31,

Revenue expected to be recognized as of March 31, 2020

2020 2021 2022 Thereafter Total

Revenue expected to be recognized as of June 30, 2020 $ 65,883 $ 60,430 $ 29,470 $ 11,762 $ 167,545

FAIR VALUE MEASUREMENTS

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We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.

As of March 31, 2020 and December 31, 2019 , 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.

As of June 30, 2020 and December 31, 2019, 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.

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We also recorded goodwill impairment charges related to one of our reporting units during the first quarter of 2020 and one of our reporting units during the fourth quarter of 2019.

Our estimates of fair value required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future circumstances that might directly impact each of the relevant asset groups’ operations in the future and are therefore uncertain.

We estimated the fair value when conducting the goodwill impairment and long-lived asset impairment tests primarily using an income approach.

Our estimates of fair value required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future

CIVEO CORPORATION

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FINANCIAL STATEMENTS

circumstances that might directly impact each of the relevant asset groups’ operations in the future and are therefore uncertain.

We estimated the fair value when conducting the goodwill impairment and long-lived asset impairment tests primarily using an income approach.

The discount rates used to value our reporting units for the interim goodwill impairment test, as well as the Canadian and U.S.

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These assumptions with respect to future circumstances included future cash flows, oil, met coal and natural gas prices, anticipated spending by our customers, the cost of capital, and industry and/or local market conditions.

During the fourth quarter of 2019 , our estimate of fair value of corporate office space in Canada was based on an appraisal from a third party.

During the fourth quarter of 2019, our estimate of fair value of corporate office space in Canada and during the second quarter of 2019, our estimate of fair value of land in Australia, were based on appraisals from third parties.

See Note 6 – Impairment Charges for further information.

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DETAILS OF SELECTED BALANCE SHEET ACCOUNTS

Additional information regarding selected balance sheet accounts at March 31, 2020 and December 31, 2019 is presented below (in thousands):

March 31, 2020

December 31, 2019

Additional information regarding selected balance sheet accounts at June 30, 2020 and December 31, 2019 is presented below (in thousands):

June 30, 2020 December 31, 2019

Accounts receivable, net:

Trade $ 62,603 $ 76,370

Unbilled revenue 18,761 23,041

Other (1) 4,432 335

Total accounts receivable 85,796 99,746

Allowance for doubtful accounts

Allowance for credit losses ( 243 ) ( 253 )

Total accounts receivable, net $ 85,553 $ 99,493

March 31, 2020

December 31, 2019

(1) As of June 30, 2020, Other accounts receivable includes a $ 4.4 million receivable related to the Canada Emergency Wage Subsidy (CEWS), a subsidy implemented by the Canadian government in response to the COVID-19 pandemic.

Other income in the second quarter of 2020 includes $ 6.2 million of income related to the CEWS.

June 30, 2020 December 31, 2019

Finished goods and purchased products $ 4,487 $ 3,982

2 unchanged sentences

Total inventories $ 7,683 $ 5,877

March 31, 2020

December 31, 2019

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(in years) June 30, 2020 December 31, 2019

Property, plant and equipment, net:

Land $ 45,816 $ 43,147

Accommodations assets 3 — 15 1,617,979 1,696,425

2 unchanged sentences

Office furniture and equipment 3 — 7 57,489 58,005

Vehicles 3 — 5 14,448 14,604

Construction in progress 4,841 4,286

2 unchanged sentences

Total property, plant and equipment, net $ 486,815 $ 590,309

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2020

December 31, 2019

During the second quarter of 2020 we reclassified $ 6.6 million of assets held for sale back into property, plant and equipment due to no longer meeting the accounting requirements.

June 30, 2020 December 31, 2019

Accrued liabilities:

1 unchanged sentence

Accrued taxes, other than income taxes 2,876 3,152

Other 1,196 1,434

Total accrued liabilities $ 16,910 $ 21,755

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As a result, we experienced a sustained reduction of our share price during the first quarter of 2020.

Our market capitalization implied an enterprise value which is significantly less than the sum of the estimated fair values of our reporting units, and we determined that an indicator of a goodwill impairment was present as of March 31, 2020.

Our market capitalization implied an enterprise value which was significantly less than the sum of the estimated fair values of our reporting units, and we determined that an indicator of a goodwill impairment was present as of March 31, 2020.

Accordingly, we performed an interim goodwill impairment test as of March 31, 2020, and the carrying amount of our Canadian reporting unit exceeded the reporting unit's fair value.

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segment to determine if an indicator of impairment had occurred that would indicate that the carrying values of the asset groups in the segment might not be recoverable.

We determined that certain asset groups within the segment had experienced an indicator of impairment, and thus we assessed the carrying values of our long-lived assets in the U.S.

We determined that certain asset groups within the segment had experienced an indicator of impairment, and thus we assessed the carrying values of our long-lived assets in

to determine if they continued to be recoverable based on estimated future cash flows.

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We recorded impairment expense of $ 12.4 million during the first quarter of 2020 related to our U.S.

Quarter ended June 30, 2019 .

During the second quarter of 2019, we identified indicators that certain long-lived assets in Australia may be impaired due to market developments, including the non-renewal of certain land development approval agreements.

We assessed the carrying values of the related assets to determine if they continued to be recoverable based on estimated future cash flows.

Based on the assessment, the carrying values were determined to not be fully recoverable, and we proceeded to compare the estimated fair value of the assets to their respective carrying values.

Accordingly, the assets were written down to their estimated fair values of $ 0.5 million.

As a result of the analysis described above, we recorded an impairment expense of $ 4.5 million.

Additionally, during the second quarter of 2019, we identified a liability related to an asset retirement obligation (ARO) at one of our villages in Australia that should have been recorded in 2011.

We determined that the error was not material to our previously issued financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, and therefore, corrected the error in the second quarter of 2019.

Specifically, we recorded the following amounts in our second quarter 2019 unaudited consolidated statement of operations related to prior periods:

(1) additional accretion expense related to the ARO of $ 0.9 million, (2) additional depreciation and amortization expense of $ 0.5 million related to amortization of the related asset retirement cost and (3) additional impairment expense related to the impairment of the asset retirement cost of $ 1.0 million offset by recognition of an ARO liability totaling $ 2.3 million as of June 30, 2019.

On July 1, 2019, we acquired Action, a provider of catering and managed services to the mining industry in Western Australia.

We funded the purchase price of $ 16.9 million in cash through a combination of cash on hand and borrowings under our revolving credit facility.

The acquisition expands our business into the growing integrated services opportunities in the Western Australian mining market.

Action's operations are reported as part of our Australia reporting business segment beginning on July 1, 2019, the date of acquisition.

This acquisition was accounted for in accordance with the acquisition method of accounting for business combinations, which required us to record the assets acquired and the liabilities assumed at their fair values at July 1, 2019.

Our estimates of the fair value for such assets and liabilities require significant assumptions and judgment.

Our estimates of the fair value for such assets and liabilities required significant assumptions and judgment.

Based on the final purchase price allocation, intangible assets acquired totaled $ 8.4 million and consisted primarily of customer contracts and a trade name.

In addition, we recognized goodwill of $ 7.9 million.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

ASSETS HELD FOR SALE

During 2017, we made the decision to dispose of our modular construction and manufacturing plant near Edmonton, Alberta, Canada due to changing geographic and market needs.

Accordingly, the facility met the criteria of held for sale.

Its estimated fair value (less costs to sell) of $3.8 million exceeded its carrying value.

Additionally, we discontinued depreciation of the facility.

The facility is part of our Canadian segment.

Certain undeveloped land positions in the British Columbia LNG market in our Canadian segment previously met the criteria of held for sale.

During the first quarter of 2019, we received $4.0 million in proceeds from the sale of four different land positions.

The remaining assets are recorded at the estimated fair value (less costs to sell) of approximately $1.5 million .

In addition, as a result of the acquisition of Noralta Lodge Ltd.

(Noralta), Noralta’s corporate offices located on two adjacent property titles in Nisku, Alberta, Canada were closed.

During the fourth quarter of 2018, we sold one property.

The remaining property is recorded at the estimated fair value (less costs to sell) of approximately $1.0 million .

The following table summarizes the carrying amount as of March 31, 2020 and December 31, 2019 of the assets classified as held for sale (in thousands):

March 31, 2020

December 31, 2019

Assets held for sale:

Property, plant and equipment, net

Total assets held for sale

On April 2, 2018, we acquired Noralta Lodge Ltd.

During the second quarter of 2020, $ 5.0 million in cash was released to us from escrow to cover certain agreed upon indemnification claims.

As a result of this settlement, we recorded $ 4.7 million in Other income in the accompanying unaudited consolidated statements of operations for the three and six months ended June 30, 2020.

CIVEO CORPORATION

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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 March 31,

Net loss attributable to Civeo common shareholders

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net income (loss) attributable to Civeo common shareholders $ 6,136 $ ( 15,310 ) $ ( 140,402 ) $ ( 32,808 )

income allocated to participating securities ( 886 ) — — —

Basic net loss attributable to Civeo Corporation common shareholders

Basic net income (loss) attributable to Civeo Corporation common shareholders $ 5,250 $ ( 15,310 ) $ ( 140,402 ) $ ( 32,808 )

undistributed income attributable to participating securities 886 — — —

undistributed income reallocated to participating securities ( 885 ) — — —

Diluted net loss attributable to Civeo Corporation common shareholders

Diluted net income (loss) attributable to Civeo Corporation common shareholders $ 5,251 $ ( 15,310 ) $ ( 140,402 ) $ ( 32,808 )

Weighted average shares outstanding - basic 169,812 167,532 169,165 166,437

1 unchanged sentence

Weighted average shares outstanding - diluted 169,990 167,532 169,165 166,437

Basic net loss per share attributable to Civeo Corporation common shareholders (1)

Diluted net loss per share attributable to Civeo Corporation common shareholders (1)

Basic net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ 0.03 $ ( 0.09 ) $ ( 0.83 ) $ ( 0.20 )

Diluted net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ 0.03 $ ( 0.09 ) $ ( 0.83 ) $ ( 0.20 )

(1) Computations may reflect rounding adjustments.

For the three months ended June 30, 2020, we excluded 3.7 million share based awards from the computation of diluted earnings per share because their effect was anti-dilutive.

When an entity has a net loss from continuing operations, it is prohibited from including potential common shares in the computation of diluted per share amounts.

For the three months ended March 31, 2020 and 2019 , we excluded from the computation of diluted loss per share 6.3 million and 8.5 million share-based awards, respectively, since the effect would have been anti-dilutive.

Additionally, for the three months ended March 31, 2020 and 2019 , we excluded from the calculation the impact of converting the Preferred Shares into 28.5 million and 28.0 million common shares, since the effect would have been anti-dilutive.

For the three months ended June 30, 2019 and the six months ended June 30, 2020 and 2019, we excluded from the computation of diluted loss per share 6.6 million, 5.0 million and 7.5 million share-based awards, respectively, since the effect would have been anti-dilutive.

Additionally, for the three and six months ended June 30, 2020 and 2019, we excluded from the computation the impact of converting the Preferred Shares into 28.7 million and 28.1 million common shares, since the effect would have been anti-dilutive.

CIVEO CORPORATION

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FINANCIAL STATEMENTS

As of March 31, 2020 and December 31, 2019 , long-term debt consisted of the following (in thousands):

March 31, 2020

December 31, 2019

As of June 30, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):

June 30, 2020 December 31, 2019

Canadian term loan, which matures on November 30, 2021;

3.125 % of aggregate principal repayable per quarter;

weighted average interest rate of 5.2% for the three-month period ended March 31, 2020 (1)

revolving credit facility, which matures on November 30, 2021), weighted average interest rate of 7.2% for the three-month period ended March 31, 2020 (1)

Canadian revolving credit facility, which matures on November 30, 2021, weighted average interest rate of 5.3% for the three-month period ended March 31, 2020 (1)

Australian revolving credit facility, which matures on November 30, 2021, weighted average interest rate of 4.5% for the three-month period ended March 31, 2020 (1)

weighted average interest rate of 4.4 % f or the six-month period ended June 30, 2020 (1)

$ 197,532 $ 224,963

revolving credit facility, which matures on November 30, 2021), weighted average interest rate of 7.0 % for the six-month period ended June 30, 2020 (1)

Canadian revolving credit facility, which matures on November 30, 2021, weighted average interest rate of 4.5 % for the six-month period ended June 30, 2020 (1)

101,998 134,117

Australian revolving credit facility, which matures on November 30, 2021, weighted average interest rate of 4.2 % for the six-month period ended June 30, 2020 (1)

299,530 359,080

Unamortized debt issuance costs 1,498 2,208

Total debt 298,032 356,872

Current portion of long-term debt, including unamortized debt issuance costs, net 33,510 35,080

Long-term debt, less current maturities $ 264,522 $ 321,792

As of March 31, 2020 , one lender had an outstanding Canadian term loan of $6.0 million and an outstanding Canadian revolver loan of $10.0 million that matures on November 30, 2020.

(1) As of June 30, 2020, one lender had an outstanding Canadian term loan of $ 5.9 million and an outstanding Canadian revolver loan of $ 8.7 million that matures on November 30, 2020.

Another lender had an outstanding Canadian revolver loan of $ 12.5 million that matures on November 30, 2020.

Maturities in 2020 are not classified as current as of March 31, 2020 and December 31, 2019, since we are able and have the intent to repay the outstanding 2020 maturities by borrowing amounts equal to such maturities under our existing revolving credit facility, which matures on November 30, 2021.

We did not have any capitalized interest to net against interest expense for the three months ended March 31, 2020 or 2019 .

Maturities in 2020 are not classified as current as of June 30, 2020 and December 31, 2019, since we are able, and have the intent, to repay the outstanding 2020 maturities by borrowing amounts equal to such maturities under our existing revolving credit facility, which matures on November 30, 2021.

We did not have any capitalized interest to net against interest expense for the three and six months ended June 30, 2020 or 2019.

Credit Agreement

As of March 31, 2020 , our Credit Agreement (as then amended to date, the Credit Agreement), provided for:

As of June 30, 2020, our Credit Agreement (as then amended to date, the Credit Agreement), provided for:

(i) a $ 263.5 million revolving credit facility scheduled to mature on November 30, 2021 for certain lenders, allocated as follows:

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We are required to maintain, if a qualified offering of indebtedness with gross proceeds in excess of $ 150 million has been consummated, a maximum leverage ratio of 4.00 to 1.00 and, if such qualified offering has not been consummated, a maximum leverage ratio not to exceed the ratios set forth in the following table:

Maximum Leverage Ratio

March 31, 2020, June 30, 2020 & September 30, 2020

Period Ended Maximum Leverage Ratio

June 30, 2020 & September 30, 2020 3.75 :

December 31, 2020 and thereafter 3.50 :

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) plus a margin of 2.25% to 4.00% , or a base rate plus 1.25% to 3.00% , in each

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) plus a margin of 2.25 % to 4.00 %, or a base rate plus 1.25 % to 3.00 %, in each case based on a ratio of our total debt to consolidated EBITDA (as defined in the Credit Agreement).

Canadian dollar

CIVEO CORPORATION

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FINANCIAL STATEMENTS

case based on a ratio of our total debt to consolidated EBITDA (as defined in the Credit Agreement).

Canadian dollar amounts outstanding bear interest at a variable rate equal to a B/A Discount Rate based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 2.25% to 4.00% , or a Canadian Prime rate plus a margin of 1.25% to 3.00% , in each case based on a ratio of our total debt to consolidated EBITDA.

amounts outstanding bear interest at a variable rate equal to a B/A Discount Rate (as defined in the Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 2.25 % to 4.00 %, or a Canadian Prime rate plus a margin of 1.25 % to 3.00 %, in each case based on a ratio of our total 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 2.25 % to 4.00 %, based on a ratio of our total debt to consolidated EBITDA.

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and (vii) investments and other restricted payments, including dividends and other distributions.

In addition, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0 and our maximum leverage ratio, defined as the ratio of total debt to consolidated EBITDA, of no greater than 3.75 to 1.0 (as of March 31, 2020 ).

As noted above, the permitted maximum leverage ratio changes over time.

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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 March 31, 2020 .

As a result of the spread of COVID-19 and the resulting unprecedented decline in oil demand, coupled with disagreements between Saudi Arabia and Russia about production limits, global oil prices have dropped to historically low levels and oil prices are expected to remain at low levels for the remainder of 2020.

As a result, it is likely that we will not remain in compliance with our leverage ratio, particularly beginning with the period ended December 31, 2020, when our maximum leverage ratio reduces to 3.5 to 1.0.

In order to avoid a default under our Credit Agreement, we must either (i) meet the leverage ratio, (ii) obtain a waiver of compliance for the period or periods in question, (iii) amend our Credit Agreement to allow for a higher leverage ratio or (iv) obtain replacement financing.

A failure by us to avoid a default would eliminate our access to incremental borrowings and give our lenders the right to declare our debt obligations under our Credit Agreement to become immediately due and payable.

If we are unable to cure any such default, or obtain a waiver or a replacement financing, and our lenders accelerate the payment of such indebtedness, we would be unable to repay those amounts, and our lenders under our Credit Agreement would be entitled to foreclose on, and acquire control of substantially all of our assets, which would have a material adverse impact on our financial condition, results of operations and cash flows.

We believe that it is probable that we will be able to obtain an amendment, waiver or replacement financing to our Credit Agreement that will enable us to meet any debt covenants for the twelve-month period following the issuance of our financial statements included in this report;

however, we can give no assurance that we will be able to obtain such amendment, waiver or replacement financing on favorable terms or at all.

We were in compliance with our covenants as of June 30, 2020.

Borrowings under the Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries.

The obligations under the Credit Agreement are guaranteed by our significant subsidiaries.

As of March 31, 2020 , we had ten lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $24.9 million to $85.4 million .

As of March 31, 2020 , we had outstanding letters of credit of $0.3 million under the U.S.

As of June 30, 2020, we had ten lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $ 24.9 million to $ 85.4 million.

As of June 30, 2020, we had outstanding letters of credit of $ 0.3 million under the U.S.

facility, $ 0.5 million under the Australian facility and $ 1.8 million under the Canadian facility.

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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 March 31, 2020 ,

As of June 30, 2020, 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.

As of June 30, 2019, Australia 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 expense for the three months ended June 30, 2020 totaled $ 0.1 million, or 1.8 % of pretax loss, compared to a benefit of $ 2.9 million, or 16.1 % of pretax loss, for the three months ended June 30, 2019.

For the three months ended June 30, 2020, we recorded a tax expense of $ 0.1 million related to foreign withholding taxes.

Under ASC 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 benefit for the six months ended June 30, 2020 totaled $ 8.7 million, or 5.9 % of pretax loss, compared to a benefit of $ 7.3 million, or 18.7 % of pretax loss, for the six months ended June 30, 2019.

For the six months ended June 30, 2020, we recorded a deferred tax benefit of $ 9.6 million offset by a valuation allowance of $ 0.7 million against the Canadian net deferred tax assets.

Our effective tax rate for the six months ended June 30, 2020 was impacted by considering Canada and the U.S.

loss jurisdictions.

Although Australia is not considered a loss jurisdiction for the six months ended June 30, 2020, our effective tax rate is impacted by utilization of deferred tax assets and a release of the corresponding valuation allowance in

CIVEO CORPORATION

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FINANCIAL STATEMENTS

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.

As of March 31, 2019 , Australia 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.

Our income tax benefit for the three months ended March 31, 2020 totaled $8.8 million , or 5.7% of pretax loss, compared to a benefit of $4.5 million , or 20.8% of pretax loss, for the three months ended March 31, 2019 .

For the three months ended March 31, 2020, we recorded a deferred tax benefit of $12.4 million offset by a valuation allowance of $3.4 million against the Canadian net deferred tax assets.

Our effective tax rate for the three months ended March 31, 2020 was impacted by considering Canada and the U.S.

loss jurisdictions.

For the three months ended March 31, 2019, only Australia was considered a loss jurisdiction.

Australia, resulting in no income tax expense for that jurisdiction.

For the six months ended June 30, 2019, Australia and the U.S.

were considered loss jurisdictions.

COMMITMENTS AND CONTINGENCIES

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ACCUMULATED OTHER COMPREHENSIVE LOSS

Our accumulated other comprehensive loss increased $48.4 million from $363.2 million at December 31, 2019 to $411.6 million at March 31, 2020 , as a result of foreign currency exchange rate fluctuations.

Changes in other comprehensive loss during the first three months of 2020 were primarily driven by the Australian dollar and Canadian dollar decreasing in value compared to the U.S.

Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C $0.1 billion and A $0.4 billion , respectively, at March 31, 2020 .

Changes in the carrying amount of goodwill from December 31, 2019 to March 31, 2020 are as follows (in thousands):

Our accumulated other comprehensive loss increased $ 19.1 million from $ 363.2 million at December 31, 2019 to $ 382.3 million at June 30, 2020, as a result of foreign currency exchange rate fluctuations.

Changes in other comprehensive loss during the first six months of 2020 were primarily driven by the Australian dollar and Canadian dollar decreasing in value compared to the U.S.

Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$ 0.1 billion and A$ 0.3 billion, respectively, at June 30, 2020.

Changes in the carrying amount of goodwill from December 31, 2019 to June 30, 2020 are as follows (in thousands):

Canada Australia U.S.

Goodwill, net of $ 19.9 million accumulated impairment loss as of December 31, 2019

$ 102,238 $ 7,935 $ — $ 110,173

Foreign currency translation ( 8,632 ) ( 157 ) — ( 8,789 )

Goodwill impairment (1) ( 93,606 ) — — ( 93,606 )

Goodwill, net of $113.5 million accumulated impairment loss as of March 31, 2020

Goodwill, net of $ 113.5 million accumulated impairment loss as of June 30, 2020

$ — $ 7,778 $ — $ 7,778

(1) See Note 6 – Impairment Charges for further information.

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Restricted Share Awards / Restricted Share Units / Deferred Share Awards.

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended March 31, 2020 and 2019 totaled $1.3 million and $1.4 million , respectively.

The total fair value of restricted share awards, restricted share units

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended June 30, 2020 and 2019 totaled $ 0.8 million and $ 1.4 million, respectively.

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the six months ended June 30, 2020 and 2019 totaled $ 2.0 million and $ 2.8 million, respectively.

The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the three months ended June 30, 2020 and 2019 was $ 0.2 million and $ 0.4 million, respectively.

The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the six months ended June 30, 2020 and 2019 was $ 2.6 million and $ 3.9 million, respectively.

At June 30, 2020, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $ 2.8 million, which is expected to be recognized over a weighted average period of 1.2 years.

CIVEO CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

and deferred share awards that vested during the three months ended March 31, 2020 and 2019 was $2.3 million and $3.5 million , respectively.

At March 31, 2020 , unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $4.0 million , which is expected to be recognized over a weighted average period of 1.4 years .

Phantom Share Awards.

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We also granted 1,221,725 phantom share awards under the Canadian Long-Term Incentive Plan, which vest in three equal annual installments beginning on February 25, 2021.

During the three months ended March 31, 2020 and 2019 , we recognized compensation expense associated with phantom shares totaling $0.3 million and $3.1 million , respectively.

At March 31, 2020 , unrecognized compensation cost related to phantom shares was $2.3 million , as remeasured at March 31, 2020 , which is expected to be recognized over a weighted average period of 2.7 years .

During the three months ended June 30, 2020 and 2019, we recognized compensation expense associated with phantom shares totaling $ 0.4 million and $ 0.3 million, respectively.

During the six months ended June 30, 2020 and 2019, we recognized compensation expense associated with phantom shares totaling $ 0.7 million and $ 3.4 million, respectively.

At June 30, 2020, unrecognized compensation cost related to phantom shares was $ 3.0 million, as remeasured at June 30, 2020, which is expected to be recognized over a weighted average period of 2.5 years.

Performance Awards.

During the three months ended March 31, 2020 and 2019 , we recognized compensation expense associated with performance awards totaling $0.9 million and $1.1 million , respectively.

The total fair value of performance share awards that vested during the three months ended March 31, 2020 and 2019 was $1.9 million and $10.1 million , respectively.

At March 31, 2020 , unrecognized compensation cost related to performance shares was $4.1 million , which is expected to be recognized over a weighted average period of 1.6 years .

During the three months ended June 30, 2020 and 2019, we recognized compensation expense associated with performance awards totaling $ 0.6 million and $ 1.1 million, respectively.

During the six months ended June 30, 2020 and 2019, we recognized compensation expense associated with performance awards totaling $ 1.5 million and $ 2.2 million, respectively.

The total fair value of performance share awards that vested during the three months ended June 30, 2020 and 2019 was zero .

The total fair value of performance share awards that vested during the six months ended June 30, 2020 and 2019 was $ 1.9 million and $ 10.1 million, respectively.

At June 30, 2020, unrecognized compensation cost related to performance shares was $ 2.8 million, which is expected to be recognized over a weighted average period of 1.4 years.

CIVEO CORPORATION

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Canada, Australia and U.S., which represent our strategic focus on hospitality services and workforce accommodations.

Financial information by business segment for each of the three months ended March 31, 2020 and 2019 is summarized in the following table (in thousands):

Three months ended March 31, 2020

Financial information by business segment for each of the three and six months ended June 30, 2020 and 2019 is summarized in the following table (in thousands):

revenues Depreciation

amortization Operating

(loss) Capital

Three months ended June 30, 2020

Canada $ 52,986 $ 12,177 $ ( 6,719 ) $ 231 $ 662,926

Australia 57,071 9,733 8,191 748 261,188

4,645 195 ( 2,623 ) 12 30,503

Corporate and eliminations — 100 ( 690 ) 205 ( 220,034 )

Three months ended March 31, 2019

Total $ 114,702 $ 22,205 $ ( 1,841 ) $ 1,196 $ 734,583

Three months ended June 30, 2019

Canada $ 78,102 $ 16,127 $ ( 5,761 ) $ 9,379 $ 842,551

Australia 30,996 10,068 ( 5,579 ) 898 276,525

13,055 3,036 ( 1,356 ) 774 57,570

Corporate and eliminations — 1,765 640 478 ( 156,241 )

Total $ 122,153 $ 30,996 $ ( 12,056 ) $ 11,529 $ 1,020,405

Six months ended June 30, 2020

Canada $ 132,334 $ 26,546 $ ( 143,350 ) $ 841 $ 662,926

Australia 106,184 19,028 14,355 1,211 261,188

United States 14,976 1,778 ( 16,757 ) 1,384 30,503

Corporate and eliminations — 355 ( 5,158 ) 411 ( 220,034 )

Total $ 253,494 $ 47,707 $ ( 150,910 ) $ 3,847 $ 734,583

Six months ended June 30, 2019

Canada $ 144,872 $ 32,355 $ ( 17,356 ) $ 16,443 $ 842,551

Australia 59,417 19,825 ( 5,964 ) 1,833 276,525

United States 26,414 6,102 ( 2,317 ) 2,294 57,570

Corporate and eliminations — 3,496 ( 4,312 ) 638 ( 156,241 )

Total $ 230,703 $ 61,778 $ ( 29,949 ) $ 21,208 $ 1,020,405

Cautionary Statement Regarding Forward-Looking Statements

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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 decline in the price of and demand for oil, as well as our expectations about capital expenditures in 2020 and beliefs with respect to liquidity needs, including our ability to remain in compliance with our financial covenants or obtain an amendment to or waiver of our Credit Agreement to obtain financial covenant relief.

Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements