What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-29 compared with 2020-05-07 · 351 added, 137 removed, 236 unchanged (67% of the section changed)

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In general, industry operating and maintenance spending programs are based on the outlook for commodity prices, economic growth, global commodity supply/demand dynamics and estimates of resource production.

As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to crude oil, metallurgical (met) coal and iron ore.

As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to crude oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore.

Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in Canada, Australia, the U.S.

and other markets, including governmental measures introduced to help slow the spread or mitigate the impact of COVID-19.

Our business is predominantly located in northern Alberta, Canada, British Columbia, Canada and Queensland, Australia.

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 and met coal resources and, to a lesser extent, other hydrocarbon and mineral resources.

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We typically contract our facilities to our customers on a fee-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 economic disruption caused by the decline in the price of and demand for oil has impacted the activity in the Canadian oil sands, and we have seen a decrease in occupancy by our oil sands customers.

As a result of our geographic concentration in this area, a reduction in the occupancy at our Canadian oil sands lodges for any period of time would materially impact our business.

Generally, our core oil sands and Australian mining customers are making multi-billion dollar investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years.

Consequently, these investments are dependent on those customers’ long-term views of commodity demand and prices.

The spread of COVID-19 and the response thereto during the first quarter 2020 negatively impacted the global economy.

The resulting unprecedented decline in oil demand, coupled with disagreements between Saudi Arabia and Russia about production limits, resulted in a collapse of global oil prices in March 2020.

Global oil prices have dropped to historically low levels due 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.

While in mid-April 2020, OPEC+ (the combination of historical OPEC members and other significant oil producers, such as Russia) announced potential production cuts of up to 10 million barrels per day, these cuts are not expected to be sufficient to avoid a historic oil glut in the second and third quarters of 2020.

The spread of COVID-19 and the response thereto during the first half of 2020 has negatively impacted the global economy.

The actions taken to mitigate the spread of COVID-19 and the risk of infection have altered, and are expected to continue to alter, governmental and private-sector policies and behaviors in ways that have had a significant negative effect on oil consumption, such as government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies.

Additionally, global oil prices dropped to historically low levels in March and April 2020 due 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.

While in mid-April 2020, OPEC+ (the combination of historical OPEC members and other significant oil producers, such as Russia) announced potential production cuts of up to approximately 10 million barrels per day, these cuts are not expected to be sufficient to avoid a historic glut in the second and third quarters of 2020.

As a result, oil prices are expected to remain at low levels for the remainder of 2020.

Due to lower oil prices and the economic disruption caused by COVID-19, we have implemented certain cost containment initiatives, including salary and total compensation reductions of between 10% to 20% for the Board, executive leadership team and other senior management, headcount reduction in North America of 25% in March and April 2020, and cutting expected 2020 capital spending by approximately 25%.

The economic disruption in 2020 caused by the decline in the price of and demand for oil has impacted the activity in the Canadian oil sands and we have seen a decrease in occupancy by our oil sands customers.

A reduction in the occupancy at our Canadian oil sands lodges negatively impacted our business in the quarter ended June 30, 2020 and could continue to negatively impact our business if oil prices remain at the current lower levels.

Due to lower oil prices and the economic disruption caused by COVID-19, we implemented certain cost containment initiatives, including salary and total compensation reductions of between 10% to 20% for the Board, executive leadership team and other senior management, headcount reduction in North America of approximately 25% in March through June 2020, and cutting expected 2020 capital spending by approximately 25%.

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 for individuals that enter our facilities, social distancing practices, enhanced cleaning and deep sanitization, the suspension of nonessential employee travel and work-from-home policies, where applicable.

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The WCS Differential has varied depending on the extent of transportation capacity availability.

Notwithstanding the current low WTI prices, recent regulatory approvals of several major pipeline projects, including Kinder Morgan’s Trans Mountain Pipeline and the Keystone XL Pipeline (KXL), have the potential to both drive incremental demand for mobile accommodations assets and to improve take-away capacity for Canadian oil sands producers over the longer term.

However, these projects have been delayed due to the lack of agreement between the Canadian federal government, which supports the pipeline projects, and the British Columbia provincial government.

Certain expansionary oil pipeline projects have the potential to both drive incremental demand for mobile accommodations assets and to improve take-away capacity for Canadian oil sands producers over the longer term.

While these pipeline projects, including Kinder Morgan’s Trans Mountain Pipeline and the Keystone XL Pipeline (KXL), have recently received incremental regulatory approvals, it is still not certain if any of the proposed pipeline projects will ultimately be constructed.

These projects have been delayed due to the lack of agreement between the Canadian federal government, which supports the pipeline projects, and the British Columbia provincial government.

The Canadian federal government recently acquired Kinder Morgan’s Trans Mountain Pipeline, approved the expansion of the project and is currently working through the construction timeline.

It was recently announced that the Alberta provincial government will financially support the construction of the KXL pipeline and construction of this pipeline expansion could begin later in 2020.

While WCS prices in the first quarter of 2020 averaged $27.92 per barrel, by March 31, 2020 the WCS price had decreased to $5.08 per barrel.

The WCS Differential decreased from $22.49 per barrel at the end of the fourth quarter of 2019 to $15.40 per barrel at the end of the first quarter of 2020.

As of May 1, 2020 , the WTI price was $19.78 and the WCS price was $13.99, resulting in a WCS Differential of $5.79.

Additionally, the U.S.

Supreme Court refused to renew a water permit for the KXL pipeline in July 2020.

Construction of the KXL pipeline in the U.S.

is currently suspended, which may delay connection of the pipeline with Canadian oil sands producers.

While WCS prices in the second quarter of 2020 averaged $19.73 per barrel, by June 30, 2020 the WCS price had increased to $29.14 per barrel.

The WCS Differential decreased from $15.40 per barrel at the end of the first quarter of 2020 to $10.13 per barrel at the end of the second quarter of 2020.

As of July 24, 2020, the WTI price was $41.14 and the WCS price was $31.62, resulting in a WCS Differential of $9.52.

The depressed price levels of both WTI and WCS are expected to materially impact exploration, development, maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services.

For example, on March 23, 2020, the Fort Hills Energy LP project announced a reduction of activity from two trains to one train.

For example, on March 23, 2020, the Fort Hills Energy LP project announced a reduction of activity from two trains to one

Many of the publicly traded oil and gas companies have announced significant reductions in their spending forecasts for 2020, reductions in the range of 30-40%.

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British Columbia, Canada.

Our Sitka Lodge supports the British Columbia liquefied natural gas (LNG) market and related pipeline projects.

Our Sitka Lodge supports the British Columbia LNG market and related pipeline projects.

From a macroeconomic standpoint, global LNG imports continued to significantly increase in 2019, rising by 40 million tonnes and reinforcing the need for the global LNG industry to expand access to natural gas.

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The actual timing of when revenue is realized from the CGL pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, including recent blockades that aim to delay construction.

In late March 2020, LNGC announced that steps being taken to reduce the spread of COVID-19, including reduction of the workforce at the project site to essential personnel only.

This resulted in a reduction in occupancy at our Sitka Lodge, which is expected to continue at least through the end of the second quarter of 2020.

In Australia, approximately 80% of our rooms are located in the Bowen Basin 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 levels of global steel production, which decreased by 1.4% during the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

As of May 1, 2020, met coal spot prices were $110 per metric tonne.

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.

This resulted in a reduction in occupancy at our Sitka Lodge during the second quarter of 2020.

Occupancy at the Sitka Lodge has returned to expected levels during July 2020.

In Australia, 82% of our rooms are located in the Bowen Basin 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 levels of global steel production, which decreased by 6% during the first half of 2020 compared to the first half of 2019.

As of July 24, 2020, met coal spot prices were $112 per metric tonne.

Long-term demand for steel is expected to be driven by increased steel consumption per capita in developing economies, such as China and India, whose current consumption per capita is a fraction of developed countries.

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The impact on the demand for steel with the closure or curtailment of manufacturing in economies affected by COVID-19, which will only return to normal levels of consumption once jurisdictions lift quarantine requirements and manufacturing facilities are reopened, is also uncertain.

There is a high likelihood that many countries will use infrastructure spend as part of their economic recovery plan, which would have a positive impact on the demand for met coal and the spot price.

To date, we have not seen a decline in occupancy at our Australian villages resulting from COVID-19.

Activity in Western Australia is driven primarily by iron ore production, which is a key steel-making ingredient.

As of May 1, 2020 , iron ore spot prices were $82.56 per metric tonne.

As of July 24, 2020, iron ore spot prices were $106.27 per metric tonne.

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

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shale formations in the Permian Basin, the Mid-Continent, the Bakken and the Rockies.

oil rig count and associated completion activity has been negatively impacted in the first quarter of 2020 due to the global oil price decline discussed above.

Currently, only 624 oil rigs were active at the end of the first quarter of 2020.

oil rig count and associated completion activity has been negatively impacted in the first half of 2020 due to the global oil price decline discussed above.

Currently, only 188 oil rigs were active at the end of the second quarter of 2020.

The Permian Basin remains the most active U.S.

unconventional play, representing 70% of the oil rigs in the U.S.

market at the end of the first quarter of 2020.

As of May 1, 2020 , there were 325 active oil rigs in the U.S.

market at the end of the second quarter of 2020.

As of July 24, 2020, there were 181 active oil rigs in the U.S.

(as measured by Bakerhughes.com).

With the recent reduction in oil prices and resulting reduction in spending by exploration and production companies, we will be exiting the Bakken and Rockies markets for our mobile well site units.

With the recent reduction in oil prices and resulting reduction in spending by exploration and production companies, we will be exiting the

Bakken and Rockies markets for our mobile well site units.

Those assets will either be sold or transported to our Texas and Oklahoma district locations.

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Average Price (1)

Second Quarter through 5/1/2020

(per bbl) WCS

(per bbl) Hard

Third Quarter through 7/24/2020 $ 40.74 $ 32.27 $ 114.16

6/30/2020 27.95 19.73 120.27

3/31/2020 45.38 27.92 156.17

12/30/2019 56.85 37.94 141.39

9/30/2019 56.40 43.88 160.25

6/30/2019 59.89 47.39 204.78

3/31/2019 54.87 44.49 203.30

12/31/2018 59.32 25.66 223.02

9/30/2018 69.61 41.58 188.46

6/30/2018 67.97 49.93 189.41

3/31/2018 62.89 37.09 228.82

12/31/2017 55.28 38.65 202.33

9/30/2017 48.16 37.72 187.89

6/30/2017 48.11 38.20 193.27

WTI crude prices are from U.S.

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Three Months Ended

June 30, Six Months Ended

2020 2019 Change Percentage 2020 2019 Change Percentage

Average Canadian dollar to U.S.

dollar $0.72 $0.75 (0.03) (3.5)% $0.73 $0.75 ($0.02) (2.2)%

Average Australian dollar to U.S.

March 31, 2020

December 31, 2019

dollar $0.66 $0.70 (0.04) (6.1)% $0.66 $0.71 ($0.05) (6.8)%

June 30, 2020 December 31, 2019 Change Percentage

Canadian dollar to U.S.

dollar $0.73 $0.77 (0.04) (4.7)%

Australian dollar to U.S.

dollar $0.69 $0.70 (0.01) (1.7)%

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.

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We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the price of and demand for crude oil, met coal and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities.

In April 2020, we revised downward our capital expenditure plans and we currently expect that our 2020 capital expenditures, exclusive of any expansionary spending, will total approximately $15 million , compared to 2019 capital expenditures of $29.8 million.

In April 2020, we revised downward our 2020 capital expenditure plans

and we currently expect that our 2020 capital expenditures, exclusive of any expansionary spending, which is contingent on obtaining customer contracts, will total approximately $15 million, compared to 2019 capital expenditures of $29.8 million.

We may adjust our capital expenditure plans in the future as we continue to monitor the impact of COVID-19.

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Results of Operations

Unless otherwise indicated, discussion of results for the three months ended March 31, 2020 , is based on a comparison to the corresponding period of 2019 .

Results of Operations – Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2020, is based on a comparison to the corresponding period of 2019.

Results of Operations – Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Three Months Ended

2020 2019 Change

($ in thousands)

Canada $ 52,986 $ 78,102 $ (25,116)

Australia 57,071 30,996 26,075

and other 4,645 13,055 (8,410)

Total revenues 114,702 122,153 (7,451)

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Cost of sales and services

Canada 42,465 59,276 (16,811)

Australia 34,913 16,055 18,858

and other 5,755 9,909 (4,154)

Total cost of sales and services 83,133 85,240 (2,107)

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Impairment expense — 5,546 (5,546)

Other operating income (285) (103) (182)

Total costs and expenses 116,543 134,209 (17,666)

Operating loss (1,841) (12,056) 10,215

Interest expense and income, net (3,850) (6,698) 2,848

Other income 12,642 1,055 11,587

Income (loss) before income taxes 6,951 (17,699) 24,650

Income tax (expense) benefit (122) 2,850 (2,972)

Net income (loss) 6,829 (14,849) 21,678

Net income attributable to noncontrolling interest 222 — 222

Net income (loss) attributable to Civeo Corporation 6,607 (14,849) 21,456

Dividends attributable to preferred shares 471 461 10

Net income (loss) attributable to Civeo common shareholders $ 6,136 $ (15,310) $ 21,446

We reported net income attributable to Civeo for the quarter ended June 30, 2020 of $6.1 million, or $0.03 per diluted share.

As further discussed below, net income included $4.7 million ($4.7 million after-tax, or $0.03 per diluted share) of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income.

We reported net loss attributable to Civeo for the quarter ended June 30, 2019 of $15.3 million, or $0.09 per diluted share.

As further discussed below, net loss included a $5.5 million pre-tax loss ($5.5 million after-tax, or $0.03 per diluted share) resulting from the impairment of fixed assets included in Impairment expense.

Consolidated revenues decreased $7.5 million, or 6%, in the second quarter of 2020 compared to the second quarter of 2019.

This decrease was primarily due to lower revenue in Canada resulting from lower occupancy at oil sands lodges and reduced food services activity, both related to the COVID-19 pandemic and lower oil prices.

Additionally, lower

activity levels in certain markets in the U.S.

and weaker Canadian and Australian dollars relative to the U.S.

dollar in the second quarter of 2020 compared to the second quarter of 2019 contributed to decreased revenues.

These items were partially offset by higher revenues in Australia due to the Action acquisition completed on July 1, 2019, increased occupancy at our Bowen Basin villages and increased mobile camp activity from a pipeline project in Canada.

See the discussion of segment results of operations below for further information.

Cost of Sales and Services.

Our consolidated cost of sales and services decreased $2.1 million, or 2%, in the second quarter of 2020 compared to the second quarter of 2019.

This decrease was primarily due to lower cost of sales in Canada resulting from lower occupancy at oil sands lodges and reduced food services activity, both related to the COVID-19 pandemic and lower oil prices.

Additionally, lower activity levels in certain markets in the U.S.

and weaker Canadian and Australian dollars relative to the U.S.

dollar in the second quarter of 2020 compared to the second quarter of 2019 contributed to decreased cost of sales and services.

This was partially offset by the Action acquisition, increased occupancy at our Bowen Basin villages in Australia and higher cost of sales and services due to increased mobile camp activity from a pipeline project in Canada.

See the discussion of segment results of operations below for further information.

Selling, General and Administrative Expenses.

SG&A expense decreased $1.0 million, or 8%, in the second quarter of 2020 compared to the second quarter of 2019.

This decrease was primarily due to lower share-based compensation expense, lower professional fees and lower travel and entertainment expenses, partially offset by higher incentive compensation costs.

The decrease in share-based compensation was due to a reduction in the amount of restricted share and performance share awards outstanding and the reduction in our stock price associated with phantom share awards during the second quarter of 2020 compared to the second quarter of 2019.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $8.8 million, or 28%, in the second quarter of 2020 compared to the second quarter of 2019.

The decrease was primarily due to (1) certain assets and intangibles becoming fully depreciated during 2019, (2) the extension of the remaining life of certain long-lived accommodation assets in Canada during the fourth quarter of 2019, (3) the impairment of certain long-lived assets in Canada and the U.S.

during the first quarter of 2020 and (4) weaker Canadian and Australian dollars relative to the U.S.

dollar in the second quarter of 2020 compared to the second quarter of 2019.

These items were partially offset by additional depreciation and intangible amortization expense related to our Action acquisition in 2019.

Impairment Expense.

We recorded pre-tax impairment expense of $5.5 million in second quarter of 2019 associated with long-lived assets in our Australian reporting unit.

Please see Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Operating Income (Loss).

Consolidated operating loss decreased $10.2 million, or 85%, in the second quarter of 2020 compared to the second quarter of 2019, primarily due to lower depreciation and amortization expense, lower impairment expense and increased activity levels in Australia, partially offset by decreased activity levels in Canada and U.S.

Interest Expense and Income, net.

Net interest expense decreased by $2.8 million, or 43%, in the second quarter of 2020 compared to the second quarter of 2019, primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2020 compared to 2019.

Other Income.

Consolidated other income increased $11.6 million, or 1098%, in the second quarter of 2020 compared to the second quarter of 2019, primarily due to $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition, $6.2 million of other income related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and a higher gain on sale of assets compared to the second quarter of 2019.

The second quarter of 2019 included $1.1 million of other income related to proceeds from an insurance claim associated with the closure of a lodge in 2018 for maintenance-related operational issues.

Income Tax Benefit.

Our income tax benefit 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.

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.

Other Comprehensive Income (Loss).

Other comprehensive income increased $28.3 million in the second quarter of 2020 compared to the second quarter of 2019, 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.

The Canadian dollar exchange rate compared to the U.S.

dollar decreased 4% in the second quarter of 2020 compared to a 2% increase in the second quarter of 2019.

Australian dollar exchange rate compared to the U.S.

dollar decreased 2% in the second quarter of 2020 compared to a 1% decrease in the second quarter of 2019.

Segment Results of Operations – Canadian Segment

Three Months Ended

2020 2019 Change

Revenues ($ in thousands)

Accommodation revenue (1) $ 40,204 $ 66,183 $ (25,979)

Mobile facility rental revenue (2) 6,072 1,819 4,253

Food service and other services revenue (3) 6,710 9,086 (2,376)

Manufacturing revenue (4) — 1,014 (1,014)

Total revenues $ 52,986 $ 78,102 $ (25,116)

Cost of sales and services ($ in thousands)

Accommodation cost $ 28,598 $ 45,145 $ (16,547)

Mobile facility rental cost 5,285 2,027 3,258

Food service and other services cost 6,163 8,466 (2,303)

Manufacturing cost 141 668 (527)

Indirect other costs 2,278 2,970 (692)

Total cost of sales and services $ 42,465 $ 59,276 $ (16,811)

Gross margin as a % of revenues 19.9 % 24.1 % (4.2) %

Average daily rate for lodges (5) $ 96 $ 89 $ 7

Total billed rooms for lodges (6) 409,897 739,627 (329,730)

Average Canadian dollar to U.S.

dollar $ 0.72 $ 0.75 $ (0.03)

(1) Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.

(2) Includes revenues related to mobile camps for the periods presented.

(3) Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.

(4) Includes revenues related to modular construction and manufacturing services for the periods presented.

(5) Average daily rate is based on billed rooms and accommodation revenue.

(6) Billed rooms represent total billed days for the periods presented.

Our Canadian segment reported revenues in the second quarter of 2020 that were $25.1 million, or 32%, lower than the second quarter of 2019.

The weakening of the average exchange rates for the Canadian dollar relative to the U.S.

dollar by 4% in the second quarter of 2020 compared to the second quarter of 2019 resulted in a $1.9 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rates, the segment experienced a 30% decrease in revenues.

This decrease was driven by lower occupancy at oil sands lodges, where billed rooms were down 45% year-over-year, and reduced food services activity.

These decreases were both related to the COVID-19 pandemic and lower oil prices.

Additionally, revenue was negatively impacted by reduced manufacturing activity as 2019 included two projects that did not recur in 2020.

Partially offsetting these items was increased mobile camp activity from a pipeline project.

Our Canadian segment cost of sales and services decreased $16.8 million, or 28%, in the second quarter of 2020 compared to the second quarter of 2019.

The weakening of the average exchange rates for the Canadian dollar relative to the U.S.

dollar by 4% in the second quarter of 2020 compared to the second quarter of 2019 resulted in a $1.5 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rates, the decreased cost of sales and services was driven by lower occupancy at our oil sands lodges and reduced food services activity.

These decreases were both related to the COVID-19 pandemic and lower oil prices.

Additionally, lower costs resulted from reduced indirect other costs due to a continued focus on cost containment and operational efficiencies, partially offset by increased costs related to enhanced measures during the COVID-19 pandemic and increased mobile camp activity.

Our Canadian segment gross margin as a percentage of revenues decreased from 24.1% in the second quarter of 2019 to 19.9% in the second quarter of 2020.

This was primarily driven by increased costs related to enhanced measures during the COVID-19 pandemic, as well as reduced operating efficiencies due to lower occupancy.

Segment Results of Operations – Australian Segment

Three Months Ended

2020 2019 Change

Revenues ($ in thousands)

Accommodation revenue (1) $ 34,933 $ 30,996 $ 3,937

Food service and other services revenue (2) 22,138 $ — $ 22,138

Total revenues $ 57,071 $ 30,996 $ 26,075

Cost of sales ($ in thousands)

Accommodation cost $ 15,269 $ 15,465 $ (196)

Food service and other services cost 18,759 — 18,759

Indirect other cost 885 590 295

Total cost of sales and services $ 34,913 $ 16,055 $ 18,858

Gross margin as a % of revenues 38.8 % 48.2 % (9.4) %

Average daily rate for villages (3) $ 70 $ 74 $ (4)

Total billed rooms for villages (4) 502,392 416,416 85,976

Australian dollar to U.S.

dollar $ 0.66 $ 0.70 $ (0.04)

(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 the periods presented.

Our Australian segment reported revenues in the second quarter of 2020 that were $26.1 million, or 84%, higher than the second quarter of 2019.

Action contributed $22.1 million in revenues in the second quarter of 2020.

The weakening of the average exchange rates for Australian dollars relative to the U.S.

dollar by 6% in the second quarter of 2020 compared to the second quarter of 2019 resulted in a $2.2 million period-over-period decrease in revenues and a $5 reduction in the average daily rate.

Excluding the impact of the weaker Australian exchange rates, the Australian segment experienced an 96% increase in revenues largely due to the Action acquisition and increased occupancy of our Bowen Basin villages, partially offset by decreased activity at our Western Australia villages.

Our Australian segment cost of sales increased $18.9 million, or 117%, in the second quarter of 2020 compared to the second quarter of 2019.

The increase was largely driven by the Action acquisition.

Increases also related to increased occupancy at our Bowen Basin villages which were entirely offset by decreased activity at our Western Australia villages, additional accretion expense in 2019 related to an asset retirement obligation at one of our Australia villages and the weakening of the Australian dollar.

Our Australian segment gross margin as a percentage of revenues decreased to 38.8% in the second quarter of 2020 from 48.2% in the second quarter of 2019.

This was primarily driven by Action, which has a service-only business model and therefore results in lower overall gross margins than the accommodation business, partially offset by improved margins at our Bowen Basin villages as a result of increased occupancy.

Segment Results of Operations – U.S.

Three Months Ended

2020 2019 Change

Revenues ($ in thousands) $ 4,645 $ 13,055 $ (8,410)

Cost of sales ($ in thousands) $ 5,755 $ 9,909 $ (4,154)

Gross margin as a % of revenues (23.9) % 24.1 % (48.0) %

segment reported revenues in the second quarter of 2020 that were $8.4 million, or 64%, lower than the second quarter of 2019.

This was primarily due to reduced occupancy at our West Permian, Killdeer and Acadian Acres lodges, reduced U.S.

drilling activity affecting our wellsite business and reduced activity in our offshore rental business, all resulting from the COVID-19 pandemic and lower oil prices.

segment cost of sales decreased $4.2 million, or 42%, in the second quarter of 2020 compared to the second quarter of 2019.

The decrease was driven by reduced occupancy at our West Permian and Killdeer lodges, reduced U.S.

drilling activity affecting our wellsite business and reduced activity in our offshore rental business.

segment gross margin as a percentage of revenues decreased from 24.1% in the second quarter of 2019 to (23.9)% in the second quarter of 2020 primarily due to reduced activity in all areas of the business and reduced operating efficiencies at lower activity levels.

Results of Operations – Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Six Months Ended

2020 2019 Change

($ in thousands)

Canada $ 132,334 $ 144,872 $ (12,538)

Australia 106,184 59,417 46,767

and other 14,976 26,414 (11,438)

Total revenues 253,494 230,703 22,791

Costs and expenses

Cost of sales and services

Canada 106,737 113,923 (7,186)

Australia 64,466 31,054 33,412

and other 15,243 19,893 (4,650)

Total cost of sales and services 186,446 164,870 21,576

Selling, general and administrative expenses 25,427 28,626 (3,199)

Depreciation and amortization expense 47,707 61,778 (14,071)

Impairment expense 144,120 5,546 138,574

Other operating expense (income) 704 (168) 872

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Interest expense and income, net (9,429) (13,306) 3,877

Other income 12,667 4,033 8,634

Loss before income taxes (147,672) (39,222) (108,450)

Income tax benefit 8,689 7,334 1,355

Net loss (138,983) (31,888) (107,095)

Net income attributable to noncontrolling interest 480 — 480

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Net loss attributable to Civeo common shareholders $ (140,402) $ (32,808) $ (107,594)

We reported net loss attributable to Civeo for the quarter ended March 31, 2020 of $146.5 million, or $0.87 per diluted share.

We reported net loss attributable to Civeo for the six months ended June 30, 2020 of $140.4 million, or $0.83 per diluted share.

As further discussed below, net loss included (i) a $93.6 million pre-tax loss ($93.6 million after-tax, or $0.55 per diluted share) resulting from the impairment of goodwill in our Canadian reporting unit included in Impairment expense, (ii) a $38.1 million pre-tax loss ($38.1 million after-tax, or $0.23 per diluted share) resulting from the impairment of long-lived assets in our Canadian reporting unit included in Impairment expense and (iii) a $12.4 million pre-tax loss ($12.4 million after-tax, or $0.07 per diluted share) resulting from the impairment of long-lived assets in our U.S.

reporting unit included in Impairment expense.

We reported net loss attributable to Civeo for the quarter ended March 31, 2019 of $17.5 million, or $0.11 per diluted share.

Consolidated revenues increased $30.2 million, or 28% , in the first quarter of 2020 compared to the first quarter of 2019 .

This increase was primarily due to higher revenues in Australia due to the Action acquisition completed on July 1, 2019 and higher activity levels at our Bowen Basin villages.

Increased revenues in Canada were due to higher room demand at both our Sitka Lodge related to an LNG project and at our core oil sands lodges.

In addition, revenue in Canada was favorable impacted by increased food services and other services revenue and increased mobile facility activity.

These items were partially offset by lower activity levels in certain markets in the U.S.

Additionally, weaker Canadian and Australian dollars relative to the U.S.

in the first quarter of 2020 compared to the first quarter of 2019 contributed to decreased revenues.

Please see the discussion of segment results of operations below for further information.

Net loss was partially offset by $4.7 million ($4.7 million after-tax, or $0.03 per diluted share) of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income.

We reported net loss attributable to Civeo for the six months ended June 30, 2019 of $32.8 million, or $(0.20) per diluted share.

Consolidated revenues increased $22.8 million, or 10%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

This increase was primarily due to higher revenues in Australia due to the Action acquisition completed on July 1, 2019, increased occupancy at our Bowen Basin villages and at our Sitka Lodge, as well as higher mobile camp revenues in Canada related to a pipeline project.

These items were partially offset by lower revenue from reduced occupancy at our north oil sands lodges in Canada resulting from the COVID-19 pandemic and lower oil prices.

Additionally, lower activity levels in certain markets in the U.S.

and weaker Canadian and Australian dollars relative to the U.S.

dollar in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 also offset the increased revenues.

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 $23.7 million, or 30% , in the first quarter of 2020 compared to the first quarter of 2019 , primarily due to the Action acquisition and higher activity levels at our Bowen Basin villages in Australia.

In addition, increased cost of sales and services in Canada was driven by greater activity at both our Sitka Lodge and our core oil sands lodges, increased food services activity and increased mobile facility activity.

This was partially offset by lower activity levels in certain U.S.

Additionally, weaker Canadian and Australian dollars relative to the U.S.

dollar in the first quarter of 2020 compared to the first quarter of 2019 contributed to decreased cost of sales and services.

Our consolidated cost of sales and services increased $21.6 million, or 13%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to the Action acquisition and increased occupancy at our Bowen Basin villages in Australia and at our Sitka Lodge as well as higher cost of sales and services in Canada due to increased mobile camp activity from a pipeline project.

These items were partially offset by decreased cost of sales and services due to reduced occupancy at our north oil sands lodges in Canada resulting from the COVID-19 pandemic and lower oil prices.

Additionally, lower activity levels in certain markets in the U.S.

and weaker Canadian and Australian dollars relative to the U.S.

dollar in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 offset the increased cost of sales and services.

See the discussion of segment results of operations below for further information.

Selling, General and Administrative Expenses.

SG&A expense decreased $2.2 million, or 13% , in the first quarter of 2020 compared to the first quarter of 2019 .

This decrease was primarily due to lower share-based compensation expense, partially offset by higher professional fees.

The decrease in share-based compensation was due to a reduction in the amount of phantom share awards outstanding and the reduction in our stock price during the first quarter of 2020 compared to the first quarter of 2019.

SG&A expense decreased $3.2 million, or 11%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

This decrease was primarily due to lower share-based compensation expense, partially offset by higher incentive compensation costs and professional fees.

The decrease in share-based compensation was due to a reduction in the amount of phantom share awards outstanding and the reduction in our stock price during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $5.3 million, or 17% , in the first quarter of 2020 compared to the first quarter of 2019 .

The decrease was primarily due to (1) certain assets and intangibles becoming fully depreciated during 2019, (2) the extension of the remaining life of certain long-lived accommodation assets in Canada during the fourth quarter of 2019 and (3) weaker Canadian and Australian dollars relative to the U.S.

dollar in the first quarter of 2020 compared to the first quarter of 2019.

Depreciation and amortization expense decreased $14.1 million, or 23%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

during the first quarter of 2020 and (4) weaker Canadian and Australian dollars relative to the U.S.

dollar in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

These items were partially offset by additional depreciation and intangible amortization expense related to our acquisition in 2019.

Impairment Expense.

Impairment expense of $144.1 million in the first quarter of 2020 included the following items:

Impairment expense of $144.1 million in the six months ended June 30, 2020 included the following items:

• Pre-tax impairment expense of $93.6 million related to the impairment of goodwill in our Canadian reporting unit.

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reporting unit.

Please see Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Impairment expense of $5.5 million in the six months ended June 30, 2019 was associated with long-lived assets in our Australian segment.

See Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Operating Income (Loss).

Consolidated operating loss increased $131.2 million, or 733% , in the first quarter of 2020 compared to the first quarter of 2019 , primarily due to impairments of goodwill and long-lived assets, partially offset by increased activity levels in Canada and Australia as well as lower SG&A and depreciation and amortization expense.

Consolidated operating loss increased $121.0 million, or 404%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to impairments of goodwill and long-lived assets, partially offset by increased activity levels in Australia, as well as lower depreciation and amortization expense.

Interest Expense and Income, net.

Net interest expense decreased by $1.0 million, or 16% , in the first quarter of 2020 compared to the first quarter of 2019 , primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2020 compared to 2019.

Net interest expense decreased by $3.9 million, or 29%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2020 compared to 2019.

Other Income.

Consolidated other income decreased $3.0 million, or 99% , in the first quarter of 2020 compared to the first quarter of 2019 , primarily due to $1.5 million of other income related to proceeds received in the first quarter of 2019 from an insurance claim associated with to the closure of a lodge in 2018 for maintenance-related operational issues and a higher gain on sale of assets in the first quarter of 2019 compared to the first quarter of 2020.

Consolidated other income increased $8.6 million, or 214%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition, $6.2 million of other income related to proceeds from the CEWS and a higher gain on sale of assets compared to the first half of 2019.

The first half of 2019 included $2.6 million of other income related to proceeds from an insurance claim associated with the closure of a lodge in 2018 for maintenance-related operational issues.

Income Tax Benefit.

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 .

Our effective tax rate for the three months ended March 31, 2020 was impacted by a deferred tax benefit of $12.4 million offset by an increase of $3.4 million in the valuation allowance in Canada.

For the three months ended March 31, 2020 , Canada and the U.S.

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.

Our effective tax rate for the six months ended June 30, 2020 was impacted by a deferred tax benefit of $9.6 million offset by an increase of $0.7 million in the valuation allowance in Canada.

For the six months ended 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.

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 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 for tax accounting purposes and were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

For the three months ended 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.

Other Comprehensive Income (Loss).

Other comprehensive income decreased $53.9 million in the first quarter of 2020 compared to the first quarter of 2019 , 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.

Other comprehensive income decreased $25.6 million in the six months ended June 30, 2020 compared to the six months ended June 30, 2019, 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.

The Canadian dollar exchange rate compared to the U.S.

dollar decreased 9% in the first quarter of 2020 compared to a 2% increase in the first quarter of 2019 .

dollar decreased 5% in the six months ended June 30, 2020 compared to a 4% increase in the six months ended June 30, 2019.

The Australian dollar exchange rate compared to the U.S.

dollar decreased 13% in the first quarter of 2020 compared to a 1% increase in the first quarter of 2019 .

dollar decreased 2% in the six months ended June 30, 2020 compared to a 1% decrease in the six months ended June 30, 2019.

Segment Results of Operations – Canadian Segment

Three Months Ended

Six Months Ended

2020 2019 Change

Revenues ($ in thousands)

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Food service and other services revenue (3) 17,484 17,423 61

Manufacturing revenue (4) — 1,014 (1,014)

Total revenues $ 132,334 $ 144,872 $ (12,538)

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Food service and other services cost 16,178 16,301 (123)

Indirect other costs

Manufacturing cost 297 857 (560)

Indirect other cost 5,067 6,326 (1,259)

Total cost of sales and services $ 106,737 $ 113,923 $ (7,186)

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Average Canadian dollar to U.S.

dollar $ 0.73 $ 0.75 $ (0.02)

(1) Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.

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(3) Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.

(4) Includes revenues related to modular construction and manufacturing services for the periods presented.

(5) Average daily rate is based on billed rooms and accommodation revenue.

(6) Billed rooms represent total billed days for the periods presented.

Our Canadian segment reported revenues in the first quarter of 2020 that were $12.6 million, or 19% , higher than the first quarter of 2019 .

Our Canadian segment reported revenues in the six months ended June 30, 2020 that were $12.5 million, or 9%, lower than the six months ended June 30, 2019.

The weakening of the average exchange rates for the Canadian dollar relative to the U.S.

dollar by 1% in the first quarter of 2020 compared to the first quarter of 2019 resulted in a $0.8 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rates, the segment experienced a 20% increase in revenues.

This increase was driven by higher demand at both our Sitka Lodge related to an LNG project and at our core oil sands lodges related to large client projects.

Additionally, revenue was favorably impacted by increased food services activity related to an LNG project and increased mobile facility activity from a pipeline project.

Our Canadian segment cost of sales and services increased $9.6 million, or 18% , in the first quarter of 2020 compared to the first quarter of 2019 .

dollar by 2% in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 resulted in a $2.6 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rates, the segment experienced a 7% decrease in revenues.

This decrease was driven by reduced occupancy at our lodges in the north oil sands region related to lower oil prices and the COVID-19 pandemic.

Additionally, revenue was negatively impacted by reduced manufacturing revenue as 2019 included two projects that did not recur in 2020.

Partially offsetting these items, revenue was favorably impacted by higher occupancy at our Sitka Lodge related to an LNG project and increased mobile camp activity from a pipeline project.

Our Canadian segment cost of sales and services decreased $7.2 million, or 6%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The weakening of the average exchange rates for the Canadian dollar relative to the U.S.

dollar by 1% in the first quarter of 2020 compared to the first quarter of 2019 resulted in a $0.7 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rates, the increased cost of sales and services was driven by greater activity at our Sitka Lodge and our core oil sands lodges, increased food services activity and increased mobile facility activity, partially offset by reduced indirect other costs from a continued focus on cost containment and operational efficiencies.

Our Canadian segment gross margin as a percentage of revenues increased from 18% in the first quarter of 2019 to 19% in the first quarter of 2020 .

This was primarily driven by increased operating efficiencies due to higher occupancy percentages.

dollar by 2% in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 resulted in a $2.2 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rates, the decreased cost of sales and services was driven by reduced occupancy at our lodges in the north oil sands region and reduced indirect other costs from a continued focus on cost containment and operational efficiencies.

These decreases were partially offset by higher occupancy at our Sitka Lodge, as well as increased mobile camp activity from a pipeline project and increased costs related to enhanced measures during the COVID-19 pandemic.

Our Canadian segment gross margin as a percentage of revenues decreased from 21.4% in the six months ended June 30, 2019 to 19.3% in the six months ended June 30, 2020.

This was primarily driven by increased costs related to enhanced measures during the COVID-19 pandemic, as well as reduced operating efficiencies due to lower occupancy.

Segment Results of Operations – Australian Segment

Three Months Ended

Six Months Ended

2020 2019 Change

Revenues ($ in thousands)

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Australian dollar to U.S.

dollar $ 0.66 $ 0.71 $ (0.05)

(1) Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented.

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(4) Billed rooms represent total billed days for the periods presented.

Our Australian segment reported revenues in the first quarter of 2020 that were $20.7 million, or 73% , higher than the first quarter of 2019 .

Action contributed $16.5 million in revenues in the first quarter of 2020 .

Our Australian segment reported revenues in the six months ended June 30, 2020 that were $46.8 million, or 79%, higher than the six months ended June 30, 2019.

Action contributed $38.7 million in revenues in the six months ended June 30, 2020.

The weakening of the average exchange rates for Australian dollars relative to the U.S.

dollar by 8% in the first quarter of 2020 compared to the first quarter of 2019 resulted in a $2.7 million period-over-period decrease in revenues and a $6 reduction in the average daily rate.

Excluding the impact of the weaker Australian exchange rates, the Australian segment experienced an 87% increase in revenues due to the Action acquisition and increased activity of our Bowen Basin villages, partially offset by decreased activity at our Western Australia villages.

Our Australian segment cost of sales increased $14.6 million, or 97% , in the first quarter of 2020 compared to the first quarter of 2019 .

The increase was primarily driven by the Action acquisition and increased activity at our Bowen Basin villages, partially offset by the weakening of the Australian dollar.

Our Australian segment gross margin as a percentage of revenues decreased to 40% in the first quarter of 2020 from 47% in the first quarter of 2019 .

dollar by 7% in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 resulted in a $5.0 million period-over-period decrease in revenues and a $5 reduction in the average daily rate.

Excluding the impact of the weaker Australian exchange rates, the Australian segment experienced an 92% increase in revenues primarily due to the Action acquisition.

In addition, increased activity at our Bowen Basin villages was partially offset by decreased activity at our Western Australia villages.

Our Australian segment cost of sales increased $33.4 million, or 108%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The increase was primarily driven by the Action acquisition.

Increases related to increased activity at our Bowen Basin villages were almost entirely offset by decreased activity at our Western Australia villages and the weakening of the Australian dollar.

Our Australian segment gross margin as a percentage of revenues decreased to 39.3% in the six months ended June 30, 2020 from 47.7% in the six months ended June 30, 2019.

Segment Results of Operations – U.S.

Three Months Ended

Six Months Ended

2020 2019 Change

Revenues ($ in thousands) $ 14,976 $ 26,414 $ (11,438)

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Gross margin as a % of revenues (1.8) % 24.7 % (26.5) %

segment reported revenues in the first quarter of 2020 that were $3.0 million, or 23% , lower than the first quarter of 2019 .

This was primarily due to reduced activity at our West Permian, Killdeer and Acadian Acres lodges, partially offset by increased activity in our offshore fabrication business as a project was completed in the first quarter 2020.

segment cost of sales decreased $0.5 million, or 5% , in the first quarter of 2020 compared to the first quarter of 2019 .

The decrease was driven by reduced activity at our West Permian and Killdeer lodges, reduced U.S.

drilling and completion activity in the Bakken, Rockies and the Mid-Continent markets affecting our wellsite business, partially offset by increased activity in our offshore fabrication business.

segment gross margin as a percentage of revenues decreased from 25% in the first quarter of 2019 to 8% in the first quarter of 2020 primarily due to reduced activity at our lodges, partially offset by increased activity in our offshore fabrication business.

segment reported revenues in the six months ended June 30, 2020 that were $11.4 million, or 43%, lower than the six months ended June 30, 2019.

This was primarily due to reduced occupancy at our West Permian, Killdeer and Acadian Acres lodges, reduced U.S.

drilling activity in the Bakken, Rockies and the Mid-Continent market affecting our wellsite business, partially offset by increased activity in the West Permian market positively affecting our wellsite business.

segment cost of sales decreased $4.7 million, or 23%, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The decrease was driven by reduced occupancy at our West Permian and Killdeer lodges, reduced U.S.

drilling activity in the Bakken, Rockies and the Mid-Continent markets affecting our wellsite business, partially offset by increased activity in West Permian market positively affecting our wellsite business.

segment gross margin as a percentage of revenues decreased from 24.7% in the six months ended June 30, 2019 to (1.8)% in the six months ended June 30, 2020 primarily due to reduced activity at our lodges and certain wellsite markets and reduced operating efficiencies at lower activity levels.

Liquidity and Capital Resources

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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, refinance debt or retire preferred shares.

The following table summarizes our consolidated liquidity position as of March 31, 2020 and December 31, 2019 (in thousands):

March 31, 2020

December 31, 2019

The following table summarizes our consolidated liquidity position as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019

Lender commitments (1) $ 263,500 $ 263,500

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(1) We also have a A$2.0 million bank guarantee facility.

We had bank guarantees of A$0.7 million under this facility outstanding as of both March 31, 2020 and December 31, 2019 , respectively.

As of March 31, 2020 , there were no reductions in our availability under the Credit Agreement.

We had bank guarantees of A$0.7 million under this facility outstanding as of both June 30, 2020 and December 31, 2019, respectively.

(2) As of June 30, 2020, there were no reductions in our availability under the Credit Agreement.

As of December 31, 2019, $6.6 million of our borrowing capacity under the Credit Agreement could not be utilized in order to maintain compliance with the maximum leverage ratio financial covenant in the Credit Agreement.

Cash totaling $20.8 million was provided by operations during the three months ended March 31, 2020 , compared to $6.3 million provided by operations during the three months ended March 31, 2019 .

During the three months ended March 31, 2020 and 2019 , $3.0 million was provided by working capital and $3.3 million was used in working capital, respectively.

The increase in cash provided by working capital in 2020 compared to 2019 is largely due to increased accounts payable balances in Canada.

Cash was used in investing activities during the three months ended March 31, 2020 in the amount of $2.6 million, compared to cash used in investing activities during the three months ended March 31, 2019 in the amount of $3.7 million.

The decrease in cash used in investing activities was primarily due to lower capital expenditures in the first three months of 2020, partially offset by higher proceeds from the disposition of property, plant and equipment in the first three months of 2019.

Capital expenditures totaled $2.7 million and $9.7 million during the three months ended March 31, 2020 and 2019 , respectively.

The decrease in capital expenditures from 2019 to 2020 was related primarily to the expansion of the Sitka Lodge, which occurred during 2019.

We expect our capital expenditures for 2020, exclusive of any expansionary spending, to be approximately $15 million , which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts.

Cash totaling $45.3 million was provided by operations during the six months ended June 30, 2020, compared to $10.0 million provided by operations during the six months ended June 30, 2019.

During the six months ended June 30, 2020 and 2019, $2.9 million was provided by working capital and $22.7 million was used in working capital, respectively.

The increase in cash provided by working capital in 2020 compared to 2019 is largely due to decreased accounts receivable balances in Canada.

Cash was provided by investing activities during the six months ended June 30, 2020 in the amount of $2.7 million, compared to cash used in investing activities during the six months ended June 30, 2019 in the amount of $15.0 million.

The decrease in cash used in investing activities was primarily due to lower capital expenditures and $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition in the six months ended June 30, 2020, partially offset by higher proceeds from the disposition of property, plant and equipment in the six months ended June 30, 2019.

Capital expenditures totaled $3.8 million and $21.2 million during the six months ended June 30, 2020 and 2019, respectively.

The decrease in capital expenditures from 2019 to 2020 was related primarily to the completion of the Sitka Lodge expansion, which occurred during 2019.

We expect our capital expenditures for 2020, exclusive of any expansionary spending, to be approximately $15 million, which excludes any expansionary projects, the spending for which is contingent on obtaining customer contracts.

Whether planned expenditures will actually be spent in 2020 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 depending on the economic environment in our industry and the availability of transactions at prices deemed to be attractive to us.

The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the economic environment in our industry improve and the transaction economics are deemed to be attractive to us.

We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the prices of and demand for crude oil, met coal and iron ore 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 as we continue to monitor the impact of COVID-19.

Net cash of $15.6 million was used in financing activities during the three months ended March 31, 2020 primarily due to net repayments under our revolving credit facilities of $6.1 million, repayments of term loan borrowings of $8.1 million and $1.4 million used to settle tax obligations on vested shares under our share based compensation plans.

Net cash of $7.5 million was used in financing activities during the three months ended March 31, 2019 primarily due to repayments of term loan borrowings of $8.6 million and $4.3 million used to settle tax obligations on vested shares under our share-based compensation plans, partially offset by net borrowings under our revolving credit facilities of $5.4 million.

The following table summarizes the changes in debt outstanding during the three months ended March 31, 2020 (in thousands):

Net cash of $43.6 million was used in financing activities during the six months ended June 30, 2020 primarily due to net repayments under our revolving credit facilities of $25.6 million, repayments of term loan borrowings of $16.5 million and $1.5 million used to settle tax obligations on vested shares under our share-based compensation plans.

Net cash of $6.1 million was provided by financing activities during the six months ended June 30, 2019 primarily due to net borrowings under our revolving credit facilities of $27.8 million, partially offset by repayments of term loan borrowings of $17.4 million and $4.3 million used to settle tax obligations on vested shares under our share-based compensation plans.

The following table summarizes the changes in debt outstanding during the six months ended June 30, 2020 (in thousands):

Balance at December 31, 2019 $ 359,080

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Repayments of term loans (16,551)

Balance at March 31, 2020

Translation (17,369)

Balance at June 30, 2020 $ 299,530

We believe that cash on hand and cash flow from operations will be sufficient to meet our anticipated liquidity needs in the coming 12 months.

However, it is likely that we will not remain in compliance with our leverage ratio, particularly beginning with the period ending December 31, 2020.

See "Credit Agreement" below for further discussion.

If our plans or assumptions change, including as a result of the impact of COVID-19 or the historic decline in the price of and demand for oil, 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 business strategy.

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.

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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 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.

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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and (ii) a $285.4 million term loan facility scheduled to mature on November 30, 2021 for certain lenders in favor of Civeo.

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.

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.

One other 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.

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 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 & 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 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.

Canadian dollar 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 ending 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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The preferred shares we issued in the Noralta acquisition are 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 March 31, 2020 , thereby increasing the liquidation preference to $10,407 per share as of March 31, 2020 .

Quarterly dividends were paid in-kind on June 30, 2020, thereby increasing the liquidation preference to $10,459 per share as of June 30, 2020.

We currently expect to pay dividends on the preferred shares for the foreseeable future through an increase in liquidation preference rather than cash.

Off-Balance Sheet Arrangements

As of March 31, 2020 , we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of June 30, 2020, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

For additional information about our contractual obligations, refer to “Liquidity and Capital Resources—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

As of March 31, 2020 , except for net repayments under our revolving credit facilities, there were no material changes to the disclosure regarding our contractual obligations made in our Annual Report on Form 10-K for the year ended December 31, 2019 .

As of June 30, 2020, except for net repayments under our revolving credit facilities, there were no material changes to the disclosure regarding our contractual obligations made in our Annual Report on Form 10-K for the year ended December 31, 2019.

Critical Accounting Policies

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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 2. Management’s Discussion and Analysis