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Item 1A. Risk Factors

2021-02-26 compared with 2020-02-27 · 319 added, 421 removed, 138 unchanged (84% of the section changed)

We are subject to various risks and hazards due to the nature of the business activities we conduct.

The risks discussed below, any of which could materially and adversely affect our business, financial condition, cash flows and results of operations and the price of our shares, are not the only risks we face.

The risks summarized and discussed below, any of which could materially and adversely affect our business, financial condition, cash flows and results of operations and the price of our shares, are not the only risks we face.

We may experience additional risks and uncertainties not currently known to us or, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations.

Risks Related to Our Business

Due to the cyclical nature of the natural resources industry, certain of our customers’ spending may be directly, and our business may be indirectly, affected by volatile or low oil, coal or natural gas prices or unsuccessful exploration results.

Summary of Risk Factors:

Set forth below is a summary of the risks more fully described in this Part I, Item 1A.

“Risk Factors” of this Annual Report on Form 10-K.

This summary should be read in connection with the Risk Factors more fully described below and should not be relied upon as an exhaustive summary of the material risks facing our business.

• Risks Related to Our Macroeconomic-Business Environment

◦ Certain of our customers’ spending may be directly, and our business may be indirectly, affected by volatile or low oil, coal or natural gas prices or unsuccessful exploration results.

◦ We have been adversely affected by the coronavirus pandemic.

• Risks Related to Our Customers

◦ Our customers and their operations are exposed to a number of unique operating risks and challenges.

◦ We depend on several significant customers.

◦ Our failure to retain our current customers, renew our existing customer contracts and obtain new customer contracts, or the termination of existing contracts, could adversely affect our business.

◦ Adverse events in areas where we operate could negatively impact our business, and our geographic concentration could limit the number of customers seeking our services.

◦ We may be adversely affected if customers reduce their accommodations outsourcing.

• Risks Related to Our Operations

◦ We operate in a highly competitive industry, and if we fail to compete effectively, our business will suffer.

◦ Our operations may suffer due to over-capacity of certain types of accommodations assets.

◦ Increased operating costs and limited cost recovery through pricing or contract terms may constrain our ability to make a profit.

◦ Employee and customer labor problems could adversely affect us.

◦ A failure to maintain food safety or comply with government regulations related to food and beverages or serving alcoholic beverages may subject us to liability.

◦ The majority of our major Canadian lodges are located on land subject to leases.

◦ We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations.

◦ Failure to maintain positive relationships with the indigenous people in the areas where we operate could adversely affect our business.

◦ Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business.

◦ We may be subject to risks associated with the transportation and installation of mobile accommodations.

◦ Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions.

◦ Loss of key members of our management could adversely affect our business.

• Financial/Accounting Risks

◦ Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

◦ Currency exchange rate fluctuations could adversely affect our U.S.

dollar reported results of operations and financial position.

◦ The cyclical nature of our business and a severe prolonged downturn has and could in the future negatively affect the value of our long-lived assets and our goodwill.

◦ Our inability to control the inherent risks of identifying, acquiring and integrating businesses that we may acquire could adversely affect our operations.

◦ We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities.

• Legal and Regulatory Risks

◦ We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the United States.

◦ We are subject to extensive and costly environmental laws and regulations.

◦ We may be exposed to certain regulatory and financial risks related to climate change.

◦ An accidental release of pollutants into the environment may cause us to incur significant costs and liabilities.

• Risks Related to Our Common Shares

◦ The market price and trading volume of our common shares may be volatile.

◦ The rights of holders of our common shares are subordinate to the rights of the holders of our preferred shares.

◦ We are governed by the corporate laws in British Columbia, Canada.

◦ Provisions contained in our articles and applicable Canadian and British Columbia laws could discourage a take-over attempt.

◦ The enforcement of civil liabilities against Civeo may be more difficult.

• Risks Related to Our Structure

◦ We are subject to various Canadian and other taxes.

◦ We remain subject to changes in tax law (in various jurisdictions) and other factors that could impact our effective tax rate.

◦ The Canada Revenue Agency (CRA) may disagree with our conclusions on tax treatment.

◦ Future potential changes to U.S.

tax laws could result in Civeo being treated as a U.S.

corporation for U.S.

federal income tax purposes.

Risk Factors:

Risks Related to Our Macroeconomic-Business Environment

Certain of our customers’ spending may be directly, and our business may be indirectly, affected by volatile or low oil, coal or natural gas prices or unsuccessful exploration results.

Demand for our services is sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and gas and mining companies.

Our business typically supports projects that are capital intensive and require several years to generate first production.

The economic analyses conducted by our customers in oil sands, Australian mining and LNG investment areas have historically assumed a relatively conservative longer-term price outlook for production from such projects to determine economic viability.

The oil and gas and mining industries’ willingness to explore, develop and produce depends largely upon the availability of attractive resource prospects and the prevailing view of future commodity prices, and expenditures by our oil and gas and mining customers generally lag changes in commodity prices by nine to 12 months.

For the past several years, commodity prices have remained relatively low since their high in 2014, and continue to be volatile.

Prices for oil, metallurgical (met) coal, natural gas and other natural resources are subject to large fluctuations in response to changes in supply of and demand for these commodities and many other factors beyond our control, including:

the level of activity and developments in the Canadian oil sands;

the global level of demand, particularly from China, for coal and other natural resources produced in Australia;

the availability of economically attractive oil and natural gas field prospects, which may be affected by governmental actions or environmental activists which may restrict development;

the availability of transportation infrastructure for oil, natural gas, LNG and coal, refining capacity and shifts in end customer preferences toward fuel efficiency and the use of natural gas;

global weather conditions, natural disasters and global health concerns;

worldwide economic activity including growth in developing countries, such as China and India;

national government political requirements, including the ability of the Organization of Petroleum Exporting Companies (OPEC) to set and maintain production levels and prices for oil and government policies which could nationalize or expropriate oil and natural gas exploration, production, refining or transportation assets;

the level of oil and gas production by non-OPEC countries, particularly the U.S.

Our business typically supports customer projects that are capital intensive and require several years to generate first production with production lasting for decades.

The economic analyses conducted by our customers in oil sands, Australian mining and liquefied natural gas (LNG) investment areas have historically assumed a relatively conservative longer-term price outlook for production from such projects to determine economic viability.

However, with the extreme global oil demand destruction in 2020 due to the COVID-19 coronavirus (COVID-19) pandemic, our oil and gas customers in North America have changed their spending and production plans and have reduced or deferred, and may continue to reduce or defer, major expenditures.

Prices for oil, metallurgical (met) coal, LNG, natural gas and other natural resources are subject to large fluctuations in response to changes in supply of and demand for these commodities.

For the past several years, commodity prices have remained relatively low, and continue to be volatile.

Global oil prices dropped to historically low levels in April 2020 due to severely reduced global oil demand, the resulting 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.

Other factors beyond our control that affect commodity prices include:

• worldwide economic activity including growth in, and demand for oil, coal and other natural resources, particularly from developing countries, such as China and India;

• the level of activity and natural resource developments in Australia and the Canadian oil sands;

• the level of global oil and gas exploration and production and the impact of government regulation or Organization of Petroleum Exporting Companies (OPEC) policies that impact production levels and oil prices;

• the availability of transportation infrastructure and refining capacity for oil, natural gas, LNG and coal;

• global weather conditions, natural disasters and global health concerns such as the COVID-19 pandemic or any future disaster or pandemic;

• rapid technological change and the timing and extent of energy resource development, including hydraulic fracturing of horizontally drilled wells in shale discoveries and LNG;

the price and availability of alternative fuels;

government and environmental regulation, including climate change legislation;

and foreign tax policies.

Because of the recent volatile commodity price environment, our customers have reduced or deferred, and may continue to reduce or defer, major expenditures, particularly in Canada and Australia, given the long-term nature of many large scale development projects, adversely affecting our revenues and profitability.

On December 2, 2018, the Government of Alberta announced it would mandate temporary curtailments of the province’s oil production and has extended the curtailment through 2020.

This curtailment resulted in a narrowing of the discount (WCS Differential) at which Western Canadian Select (WCS) trades relative to West Texas Intermediate (WTI) in December 2018, which ended the year at $15.75 per barrel, that continued throughout 2019.

• development, commercialization and availability of alternative fuels;

• government, tax and environmental regulation, including climate change legislation and clean energy policies.

In 2018, the Government of Alberta announced it would mandate temporary curtailments of the province’s oil production.

However, monthly production limits were put on hold in December 2020 until further notice, allowing operators to produce freely at their discretion while the government monitors production.

Should forecasts show storage inventories approaching maximum capacity, the government may reintroduce production limits.

The curtailment initially resulted in a narrowing of the discount (WCS Differential) at which Western Canadian Select (WCS) trades relative to West Texas Intermediate (WTI) in December 2018, which increased in 2019 before narrowing again in the first quarter of 2020.

As of February 22, 2021, the WTI price was $61.49 and the WCS price was $49.95, resulting in a WCS Differential of $11.54.

Should the price of WTI decline or the WCS discount to WTI widen further, our oil sands customers may delay or eliminate additional investments, further reduce their spending in the oil sands region or curtail or shut-down additional existing operations.

We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the United States.

A significant portion of our revenue is attributable to operations in Canada and Australia.

These activities accounted for 90% of our consolidated revenue in the year ended December 31, 2019 .

Risks associated with our operations in Canada and Australia include, but are not limited to:

international currency fluctuations;

different taxing regimes;

changing political conditions at the federal, provincial or state level;

changing international and U.S.

monetary policies;

regional economic downturns;

expropriation, confiscation or nationalization of assets;

foreign exchange limitations.

The regulatory regimes in these countries are substantially different than those in the United States, and may be unfamiliar to U.S.

Violations of non-U.S.

laws could result in monetary and criminal penalties against us or our subsidiaries and could damage our reputation and, therefore, our ability to do business.

Due to the significant concentration of our business in the oil sands region of Alberta, Canada and in the Bowen Basin coal region of Queensland, Australia, adverse events in these areas could negatively impact our business, and our geographic concentration could limit the number of customers seeking our services.

Because of the concentration of our business in the oil sands region of Alberta, Canada and in the coal producing region of Queensland, Australia, two relatively small geographic areas, we have increased exposure to political, regulatory, environmental, labor, climate or natural disasters such as forest fires, events or developments that could disproportionately impact our operations and financial results.

For example, in 2017, a cyclone threatened areas near our villages in Australia.

Also in 2011 and 2016, forest fires in northern Alberta impacted areas near our Canadian oil sands lodges.

Due to our geographic concentration, any adverse events or developments in our operating areas may disproportionately affect our financial results.

In addition, a limited number of companies operate in the areas in which our business is concentrated, and occupancy at each of our lodges may be constrained by the radius which potential customers are willing to transport their workers.

Our geographic concentration could limit the number of customers seeking our services, and as to any single lodge or village, we may have few potential customers.

Therefore, we are subject to volatility in occupancy in any location based on the capital spending plans of a limited number of customers, based on their changing decisions as to whether to outsource or use their own company-owned accommodations and whether other potential customers move into that lodge’s radius.

Currency exchange rate fluctuations could adversely affect our U.S.

dollar reported results of operations and financial position.

Currency exchange rate fluctuations can create volatility in our consolidated financial position, results of operations and/or cash flows.

Because our consolidated financial results are reported in U.S.

dollars, if we generate net revenues or earnings in countries whose currency is not the U.S.

dollar, the translation of such amounts into U.S.

dollars can result in an increase or decrease in our reported revenues, net income, financial condition and cash flows depending upon exchange rate movements.

For the year ended December 31, 2019 , 90% of our revenues originated from subsidiaries outside of the U.S.

and were denominated in either the Canadian dollar or the Australian dollar.

As a result, a material decrease in the value of these currencies relative to the U.S.

dollar has had, and may have in the future, a negative impact on our reported revenues, net income, financial condition and cash flows.

Any currency controls implemented by local monetary authorities in countries where we currently operate could also adversely affect our business, financial condition and results of operations.

Our reporting currency is the U.S.

dollar, and we are exposed to currency exchange risk primarily between the U.S.

dollar and the Canadian and Australian dollars.

We may attempt to limit the risks of currency fluctuation where possible by entering into financial instruments to protect against foreign currency exposure.

Our efforts to limit exchange risks may be unsuccessful, thereby exposing us to foreign currency fluctuations that could cause our results of operations, financial condition and cash flows to deteriorate.

All but three of our major Canadian lodges are located on land subject to leases.

If we are unable to renew a lease or obtain permits necessary to operate on such leased land, we could be materially and adversely affected.

All but three of our major Canadian lodges are located on land subject to leases.

Accordingly, while we own the accommodations assets, we only own a leasehold in those properties.

If we are found to be in breach of a lease, we could lose the right to use the property.

In addition, our leases generally have an initial term of ten years and will expire between 2020 and 2028 unless extended.

Unless we can extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to operate our facilities located on these properties upon expiration of the leases.

In that event, we would be required to remove our accommodations assets and remediate the site.

Also, in certain areas in which we operate, we are required to seek permits from local government agencies in order to build a new lodge or operate an existing lodge on leased land.

A proposed regulation in a regional municipality of Alberta would require us to seek renewal of such permits every four years;

however, this proposal was deferred in late 2019 and no update has been provided.

We depend on several significant customers.

The loss of one or more such customers or the inability of one or more such customers to meet their obligations to us could adversely affect our results of operations.

We have been adversely affected by the coronavirus pandemic.

The outbreak of COVID-19 has adversely impacted and continues to impact worldwide economic activity, including the natural resources industry in Canada, Australia and the U.S.

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, stay-at-home orders, health and safety considerations, reduced travel and remote work policies.

We have experienced, and expect to continue to experience, some resulting disruptions and increased costs to our business as a result of the measures we have set in place to comply with governmental regulations and customer policies related to COVID-19.

In addition, with lower and volatile oil prices due to reduced global oil demand and uncertainty around the continued economic impact of COVID-19, capital spending by oil and gas companies and customer demand for our services has been adversely affected.

The ultimate extent of the impact of COVID-19 on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of the outbreak in the countries in which we operate and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread of COVID-19 and the development and availability of effective treatments and vaccines, all of which are highly uncertain and cannot be predicted with certainty at this time.

Risks Related to Our Customers

Our customers and their operations are exposed to a number of unique operating risks and challenges which could also adversely affect us.

We could be materially adversely affected by disruptions to our customers’ operations.

The price of and demand for natural resources produced by our customers may impact their desire and/or ability to continue existing projects or start new projects.

Customers may also experience unexpected problems, higher costs or delays in commencing or developing a project.

Operating risks and challenges our customers face, which may ultimately affect their need for the accommodations and services we provide, include:

• commodity price volatility;

• unforeseen and adverse geological, geotechnical, seismic and mining conditions;

• lack of availability or failure of the required infrastructure, including sourcing sufficient water or power, necessary to maintain or to expand their operations;

• the breakdown or shortage of equipment and labor necessary to maintain their operations;

• risks associated with the natural resources industry being subject to various regulatory approvals, including a government agency failing to grant an approval or failing to renew an existing approval, or the approval or renewal not being provided by the government agency in a timely manner or the government agency granting or renewing an approval subject to materially onerous conditions;

• risks to land titles, mining titles and use thereof as a result of native title claims;

• claims by persons living in close proximity to mining projects, which may have an impact on the consents granted;

• interruptions to the operations of our customers caused by governmental action, industrial accidents, disputes or public health emergencies.

We depend on several significant customers.

The majority of our customers operate in the energy or mining industries.

For a more detailed explanation of our customers, see “Business” in Item 1 of this annual report.

We depend on several significant customers, including customers that operate in the oil and gas and mining industries, which has been adversely impacted by the effects of the COVID-19 pandemic.

The loss of any one of our largest customers in any of our business segments or a sustained decrease in demand by any of such customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations.

In addition, the concentration of customers in two industries may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions.

As a result of our customer concentration, risks of nonpayment and nonperformance by our counterparties are a concern in our business.

We are subject to risks of loss resulting from nonpayment or nonperformance by our customers.

While we perform ongoing credit evaluations of our customers, we do not require collateral in support of our trade receivables consistent with industry practice.

Many of our customers finance their activities through cash flow from operations, the incurrence of debt or the issuance of equity.

Oil prices have remained relatively low since their high in 2014 and continue to be volatile, commodity prices generally have remained depressed since 2015, and the capital markets and availability of credit have been constrained relative to historical levels.

Additionally, many of our customers’ equity values have declined and could decline further.

The combination of lower cash flow due to commodity prices, a reduction in borrowing bases under reserve-based credit facilities and the lack of available debt or equity financing may continue to result in a significant reduction in our customers’ liquidity and could impair their ability to pay or otherwise perform on their obligations to us.

In addition, the concentration of customers in the mining and oil and gas industries may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions.

With the current low and volatile oil and gas prices, some of our customers may face liquidity issues, which could impair their ability to pay or otherwise perform on their obligations.

Furthermore, some of our customers may be highly leveraged and subject to their own operating and regulatory risks, which increases the risk that they may default on their obligations to us.

The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results.

For a more detailed explanation of our customers, see “Business” in Item 1 of this annual report.

Our failure to retain our current customers, renew our existing customer contracts and obtain new customer contracts, or the termination of existing contracts, could adversely affect our business.

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Our ability to do so generally depends on a variety of factors, including overall customer expenditure levels and the quality, price and responsiveness of our services, as well as our ability to market these services effectively and differentiate ourselves from our competitors.

We cannot assure you that we will be able to obtain new business, renew existing customer contracts at the same or higher levels of pricing, or at all, or that our current customers will not turn to competitors,

cease operations, elect to self-operate or terminate contracts with us.

Because of the current volatile commodity price environment, our customers may not renew contracts on terms favorable to us or, in some cases, at all, and we may have difficulty obtaining new business.

Additionally, several contracts have clauses that allow termination upon the payment of a termination fee.

Our business is contract intensive and we are party to many contracts with customers.

Due to the current volatile commodity price environment, our customers may not renew contracts on terms favorable to us or, in some cases, at all, and we may have difficulty obtaining new business.

Several contracts have clauses that allow termination upon the payment of a termination fee.

As a result, our customers may choose to terminate their contracts.

The likelihood that a customer may seek to terminate a contract is increased during periods of market volatility like those we are currently experiencing.

Further, certain of our customers may not reach positive final investment decisions on projects with respect to which we have been awarded contracts to provide related accommodation, which may cause those customers to terminate the contracts.

Finally, while we periodically review our compliance with contract terms and provisions, if customers were to dispute our contract determinations, the resolution of such disputes in a manner adverse to our interests, including customers withholding payments or modification of payment terms, could negatively affect sales and operating results.

Customer contract cancellations, the failure to renew a significant number of our existing contracts or the failure to obtain new business would have a material adverse effect on our business and results of operations.

We can provide no assurances that we will be able to renew our leases or permits upon expiration on similar terms, or at all.

If we are unable to renew our leases or permits on similar terms, it may have an adverse effect on our business and results of operations.

Our customers are exposed to a number of unique operating risks and challenges which could also adversely affect us.

We could be materially adversely affected by disruptions to our customers’ operations caused by any one of or all of the following singularly or in combination:

and international pricing and demand for the natural resource being produced at a given project (or proposed project);

unexpected problems, higher costs and delays during the development, construction and project start-up which may delay the commencement of production;

unforeseen and adverse geological, geotechnical, seismic and mining conditions;

lack of availability of sufficient water or power to maintain their operations;

lack of availability or failure of the required infrastructure necessary to maintain or to expand their operations;

the breakdown or shortage of equipment and labor necessary to maintain their operations;

risks associated with the natural resources industry being subject to various regulatory approvals.

Such risks may include a government agency failing to grant an approval or failing to renew an existing approval, or the approval or renewal not being provided by the government agency in a timely manner or the government agency granting or renewing an approval subject to materially onerous conditions;

risks to land titles, mining titles and use thereof as a result of native title claims;

claims by persons living in close proximity to mining projects, which may have an impact on the consents granted;

interruptions to the operations of our customers caused by industrial accidents or disputes;

delays in or failure to commission new infrastructure in timeframes so as not to disrupt customer operations.

Due to the significant geographic concentration of our business, adverse events in areas where we operate could negatively impact our business, and our geographic concentration could limit the number of customers seeking our services.

Because of the concentration of our business in the oil sands region of Alberta, Canada and in the coal producing, Bowen Basin region of Queensland, Australia, two relatively small geographic areas, we have increased exposure to political, regulatory, environmental, labor, climate or natural disasters such as forest fires or flooding, events or developments that could disproportionately impact our operations and financial results.

For example, in 2011 and 2017, cyclones and resulting flooding threatened our villages in Australia.

Also in 2011 and 2016, forest fires in northern Alberta impacted areas near our Canadian oil sands lodges.

Due to our geographic concentration, any adverse events or developments in our operating areas may disproportionately affect our financial results.

In addition, a limited number of potential customers operate in the areas in which our business is concentrated, and occupancy at each of our lodges may be constrained by the radius which potential customers are willing to transport their workers.

Our geographic concentration could limit the number of customers seeking our services, and as to any single lodge or village, we may have few potential customers.

We may be adversely affected if customers reduce their accommodations outsourcing.

Our business and growth strategies depend in large part on customers outsourcing some or all of the services that we provide.

Many oil and gas and mining companies in our core markets own their own accommodations facilities, while others outsource all or part of their accommodations requirements.

Customers have largely built their own accommodations in the past but will outsource if they perceive that outsourcing may provide quality services at a lower overall cost or allow them to

accelerate the timing of their projects.

We cannot be certain that these customer preferences will continue or that customers that have previously outsourced accommodations will not decide to perform these functions themselves or only outsource accommodations during the development or construction phases of their projects.

In addition, labor unions representing customer employees and contractors have, in the past, opposed outsourcing accommodations to the extent that the unions believe that third-party accommodations negatively impact union membership and recruiting.

The reversal or reduction in customer outsourcing of accommodations could negatively impact our financial results and growth prospects.

Risks Related to Our Operations

We operate in a highly competitive industry, and if we fail to compete effectively, our business will suffer.

The workforce accommodations and hospitality industry in which we operate is highly competitive.

To be successful, we must provide hospitality services that meet the specific needs of our customers at competitive prices.

The principal competitive factors in the markets in which we operate are service quality and availability, price, technical knowledge and experience and safety performance.

We compete with international and regional competitors, several of which are significantly larger than we.

These competitors offer similar services in the geographic regions in which we operate.

Many oil and gas and mining companies in our core markets own their own accommodations facilities and outsource their service requirements, while others outsource all or part of their accommodations requirements.

As a result of competition, we may be unable to continue to provide our present services, to provide such services at historical operating margins or to acquire additional business opportunities, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Reduced levels of activity in the workforce accommodation industry can intensify competition and result in lower revenue to us.

Our operations may suffer due to over-capacity of certain types of accommodations assets.

The demand for and/or pricing of rooms and accommodation services is subject to the overall availability of rooms in the marketplace.

If demand for our assets were to decrease, or to the extent that we and our competitors increase our capacity in excess of current demand, we may encounter decreased pricing for, or utilization of, our assets and services, which could adversely impact our operations and profits.

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 our U.S.

business, and we have seen decreased customer demand for accommodations in those areas, and we have experienced a corresponding significant decrease in our occupancy and profitability.

Increased operating costs and limited cost recovery through pricing or contract terms may constrain our ability to make a profit.

Our profitability can be adversely affected to the extent we are faced with cost increases for food, wages and other labor related expenses, insurance, fuel and utilities, especially to the extent we are unable to recover such increased costs through increases in the prices for our services, due to one or more of general economic conditions, competitive conditions or contractual provisions in our customer contracts.

Substantial increases in the cost of fuel and utilities have historically resulted in cost increases in our lodges and villages.

From time to time we have experienced increases in our food costs.

While we believe a portion of these increases were attributable to fuel prices, we believe the increases also resulted from rising global food demand.

In addition, food prices can fluctuate as a result of foreign exchange rates and temporary changes in supply, including as a result of incidences of wildfires or severe weather such as droughts, heavy rains and late freezes, or other climate effects.

While our multi-year contracts often provide for annual escalation in our room rates for food, labor and utility inflation, we may be unable to fully recover costs and such increases would negatively impact our profitability on contracts that do not contain such inflation protections.

Employee and customer labor problems could adversely affect us.

Our business is labor intensive requiring a significant number of employees to perform housekeeping, janitorial and food services at our locations or locations that we manage.

As our operations grow or our occupancy increases, we require additional staff to take care of our guests at a standard we deem appropriate and to operate safely.

If we are unable to hire a sufficient labor force, we may be required to increase wages or use temporary labor at a higher cost and reduced efficiency.

Inefficient operations or higher labor costs would negatively impact our profitability and could damage our reputation with our customers.

Additionally, as of December 31, 2020, we were party to collective bargaining agreements covering 885 employees in Canada and 588 employees in Australia.

Efforts have been made from time to time to unionize other portions of our workforce.

In addition, our facilities serving oil sands development work in Northern Alberta, Canada and mining operations in Australia

house both union and non-union customer employees.

We have not experienced strikes, work stoppages or other slowdowns in the past, but we cannot guarantee that we will not experience such events in the future.

A prolonged strike, work stoppage or other slowdown by our employees or by the employees of our customers could cause us to experience a disruption of our operations, which could adversely affect our business and results of operations.

Additional unionization efforts and new collective bargaining agreements also could materially increase our costs or limit our flexibility.

Collective bargaining agreements in our Canadian operations have individual expiration dates, but in no case extend beyond 2023.

Enterprise bargaining agreements in our Australian operations cover certain employees working at our villages in Queensland, New South Wales and Western Australia, as well as certain employees working at our integrated services customer owned sites in Western Australia.

These agreements have individual expiration dates, but in no case extend beyond 2022.

A failure to maintain food safety or comply with government regulations related to food and beverages or serving alcoholic beverages may subject us to liability.

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A variety of regulations at various governmental levels relating to the handling, preparation and serving of food (including, in some cases, requirements relating to the temperature of food), cleanliness of food production facilities and hygiene of food-handling personnel are enforced primarily at the local public health department level.

We can give no

assurances that we are in full compliance with all applicable laws and regulations at all times or that we will be able to comply with any future laws and regulations.

We can give no assurances that we are in full compliance with all applicable laws and regulations at all times or that we will be able to comply with any future laws and regulations.

Furthermore, legislation and regulatory attention to food safety is very high.

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If we violate these laws, we may be liable to the patron and/or third parties for the acts of the patron.

We cannot guarantee that intoxicated or minor patrons will not be served or that liability for their acts will not be imposed on us.

We cannot guarantee that certain patrons will not be served or that liability for their acts will not be imposed on us.

There can be no assurance that additional regulation in this area would not limit our activities in the future or significantly increase the cost of regulatory compliance.

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If we are unable to maintain food safety or comply with government regulations related to food, beverages or alcoholic beverages, the effect could be materially adverse to our business and results of operations.

The majority of our major Canadian lodges are located on land subject to leases.

If we are unable to renew a lease or obtain permits necessary to operate on such leased land, we could be materially and adversely affected.

The majority of our major Canadian lodges are located on land subject to provincial leases.

Accordingly, while we own the accommodations assets, we only own a leasehold in those properties.

If we are found to be in breach of a lease, we could lose the right to use the property.

In addition, our leases generally have an initial term of ten years and will expire between 2022 and 2028 unless extended.

In that event, we would be required to remove our accommodations assets and remediate the site.

As of December 31, 2020, we had an asset retirement obligation (ARO) liability on our balance sheet of $15.0 million.

Consistent with US GAAP, this liability is the estimated present value of the amount of required asset removal and site remediation costs related to the retirement of assets at these locations.

Should the remediation requirement be accelerated, our near term cash obligation could be significantly larger than the liability currently on our balance sheet and could negatively impact our cash flows and liquidity.

Also, in certain areas in which we operate, we are required to seek permits from local government agencies in order to build a new lodge or operate an existing lodge on leased land.

A proposed regulation in a Regional Municipality of Wood Buffalo, Alberta, where we have eight facilities, would require us to seek renewal of such permits every four years;

however, this proposal was abandoned in late 2019, and no update has been provided.

We can provide no assurances that we will be able to renew our leases or permits upon expiration on similar terms, or at all.

If we are unable to renew our leases or permits on similar terms, it may have an adverse effect on our business and results of operations.

We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations.

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Severe winter weather conditions in the Permian Basin of the United States can restrict access to work areas for our customers.

Furthermore, the areas in which we operate are susceptible to forest fires, which could interrupt our operations and adversely impact our earnings.

We may be adversely affected if customers reduce their accommodations outsourcing.

Our business and growth strategies depend in large part on customers outsourcing some or all of the services that we provide.

Many oil and gas and mining companies in our core markets own their own accommodations facilities, while others outsource all or part of their accommodations requirements.

Customers have largely built their own accommodations in the past but will outsource if they perceive that outsourcing may provide quality services at a lower overall cost or allow them to accelerate the timing of their projects.

The reversal or reduction in customer outsourcing of accommodations could negatively impact our financial results and growth prospects.

Development of permanent infrastructure in the Canadian oil sands region, the west coast of British Columbia, regions of Australia or various U.S.

locations where we locate our assets could negatively impact our business.

We specialize in providing hospitality services for work forces in remote areas which often lack the infrastructure typically available in nearby towns and cities.

Furthermore, the areas in which we operate are susceptible to wildfires, which could interrupt our operations and adversely impact our earnings.

Failure to maintain positive relationships with the indigenous people in the areas where we operate could adversely affect our business.

A component of our business strategy is based on developing and maintaining positive relationships with the indigenous people and communities in the areas where we operate.

These relationships are important to our operations and customers who desire to work on traditional indigenous lands.

The inability to develop and maintain relationships and to be in compliance with local requirements could have an adverse effect on our business and results of operations.

Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business.

We specialize in providing hospitality services for workforces in remote areas which often lack the infrastructure typically available in nearby towns and cities.

If permanent towns, cities and municipal infrastructure develop, grow or otherwise become available in the oil sands region of northern Alberta, Canada, the west coast of British Columbia or regions of Australia where we locate villages, then demand for our hospitality services could decrease as customer employees move to the region and choose to utilize permanent housing and food services.

Increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our accommodation services contracts may constrain our ability to make a profit.

Substantial increases in the cost of fuel and utilities have historically resulted in cost increases in our lodges and villages.

From time to time we have experienced increases in our food costs.

While we believe a portion of these increases were attributable to fuel prices, we believe the increases also resulted from rising global food demand.

In addition, food prices can fluctuate as a result of foreign exchange rates and temporary changes in supply, including as a result of incidences of forest fires or severe weather such as droughts, heavy rains and late freezes.

multi-year contracts often provide for annual escalation in our room rates for food, labor and utility inflation, we may be unable to fully recover costs and such increases would negatively impact our profitability on contracts that do not contain such inflation protections.

Our business is contract intensive and may lead to customer disputes or delays in receipt of payments.

Our business is contract intensive and we are party to many contracts with customers.

We periodically review our compliance with contract terms and provisions.

If customers were to dispute our contract determinations, the resolution of such disputes in a manner adverse to our interests could negatively affect sales and operating results.

In the past, our customers have withheld payment due to contract or other disputes, which has delayed our receipt of payments.

While we do not believe any reviews, audits, delayed payments or other such matters should result in material adjustments, if a large number of our customer arrangements were modified or payments withheld in response to any such matter, the effect could be materially adverse to our business and results of operations.

We are subject to extensive and costly environmental laws and regulations that may require us to take actions that will adversely affect our results of operations.

All of our operations are significantly affected by stringent and complex foreign, federal, provincial, state and local laws and regulations governing the discharge of substances into the environment or otherwise relating to environmental protection.

We could be exposed to liabilities for cleanup costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third-parties.

Environmental laws and regulations are subject to change in the future, possibly resulting in more stringent requirements.

The implementation of new laws and regulations could result in materially increased costs, stricter standards and enforcement, larger fines and liability and increased capital expenditures and operating costs, particularly for our customers, and could have an adverse effect on our business or demand for our services.

“Business - Government Regulation” of this annual report for a more detailed description of our risks associated with environmental laws and regulations.

It should also be noted that some scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.

Any failure by us to comply with applicable environmental laws and regulations may result in governmental authorities taking actions against our business that could adversely impact our business and results of operations, including the:

issuance of administrative, civil and criminal penalties;

denial or revocation of permits or other authorizations;

reduction or cessation of operations;

performance of site investigatory, remedial or other corrective actions.

We may be exposed to certain regulatory and financial risks related to climate change.

Climate change is receiving increasing attention from the media, scientists and legislators alike.

The debate is ongoing as to the extent to which our climate is changing, the potential causes of any change and its potential impacts.

Some attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions.

Significant focus is being made on companies that are active producers of fossil fuels.

Efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues and impose reductions of hydrocarbon-based fuels, including plans developed in connection with the Paris climate conference in December 2015 and the Katowice climate conference in December 2018.

There are a number of legislative and regulatory proposals to address greenhouse gas emissions, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy, which are in various phases of discussion or implementation.

The outcome of Canadian, Australian and U.S.

federal, regional, provincial and state actions to address global climate change could result in a variety of regulatory programs including potential new regulations, additional charges to fund energy efficiency activities, or other regulatory actions.

These actions could:

result in the cessation of our customers operations and therefore the demand for services;

result in increased costs associated with our operations and our customers’ operations;

increase other costs to our business;

reduce the demand for carbon-based fuels;

reduce the demand for our services.

Any adoption of these or similar proposals by Canadian, Australian, U.S.

federal, regional, provincial or state governments mandating a substantial reduction in greenhouse gas emissions could have far-reaching and significant impacts on the energy industry, including negatively impacting the price of oil relative to other energy sources, reducing demand for hydrocarbons and other minerals or limiting drilling or mining in the areas in which we operate.

Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business or demand for our services.

In addition, there have also been efforts in recent years to influence the investment community, including investment advisors and certain sovereign wealth, pension and endowment funds promoting divestment of fossil fuel equities and pressuring lenders to limit funding to companies engaged in the extraction of fossil fuel reserves.

Such environmental activism and initiatives aimed at limiting climate change and reducing air pollution could interfere with our business activities, operations and ability to access capital.

“Business-Government Regulation” of this annual report for a more detailed description of our climate-change related risks.

The cyclical nature of our business and a severe prolonged downturn has and could in the future negatively affect the value of our goodwill and long-lived assets.

As of December 31, 2019 , goodwill at our Canadian reporting unit represented 11% of total assets, or $102.2 million , and goodwill at our Australian reporting unit represented 1% of total assets, or $7.9 million .

We have recorded goodwill because we paid more for two of our businesses that we acquired than the fair market value of the tangible and separately measurable intangible net assets of those businesses.

We evaluate goodwill for impairment annually and when an event occurs or circumstances change to suggest that the carrying amount may not be recoverable.

With the extended period and depth of the current downturn, we have impaired our goodwill and long-term assets in the past.

We may recognize impairment losses on our current goodwill value in the future if, among other factors:

global economic conditions remain depressed or further deteriorate, including a further decrease in the price of or demand for oil, coal, natural gas, iron ore and other minerals;

the outlook for future profits and cash flow for our Canadian and Australian reporting units deteriorates as the result of many possible factors, including, but not limited to, increased or unanticipated competition, technology becoming obsolete, need to satisfy changes in customers’ accommodations requirements, further reductions in customer capital spending plans, loss of key personnel, adverse legal or regulatory judgment(s), future operating losses at a reporting unit, downward forecast revisions or restructuring plans or if certain of our customers do not reach positive final investment decisions on projects with respect to which we have been awarded contracts to provide related accommodation, which may cause those customers to terminate the contracts;

costs of equity or debt capital increase;

valuations for comparable public companies or comparable acquisition valuations deteriorate.

In addition, we recorded impairments of our long-lived assets of $6.2 million , $28.7 million and $31.6 million in 2019 , 2018 and 2017 , respectively.

We also recorded goodwill impairments of $19.9 million in 2019 .

Extended periods of limited or no activity by our customers at our lodges or villages could require us to record further impairment charges equal to the excess of the carrying value of the lodges or villages over fair value or could result in an impairment to our goodwill balance.

We may be subject to risks associated with the transportation and installation of mobile accommodations.

In connection with our Canadian and U.S.

businesses, we currently have several contracts to transport and install modular, skid-mounted accommodations and central facilities that can be quickly configured to serve a multitude of short to medium-term accommodation needs.

In connection with the transportation and installation of these facilities, we may be exposed to various risks, including

• delays in necessary approvals to install the facilities or objections to our activities or those of our customers aired by aboriginal or community interests, environment and/or neighborhood groups which may cause delays in the granting of such approvals and/or the overall progress of a project;

• challenges during installation, including problems, defects, inclement weather conditions, land contamination, cultural heritage claims, difficult site access or industrial relations issues;

• risks related to the quality of our materials and workmanship, including warranties and defect liability obligations.

Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions.

We face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable or hold them for ransom;

threats to the safety of our employees;

threats to the security of our facilities and infrastructure or third-party facilities and infrastructure;

and threats from terrorist acts.

Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing.

If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations or cash flows.

Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, ransomware attacks and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of or denial of access to confidential or otherwise protected information and corruption of data.

In 2018, we experienced a minor data security breach resulting from unauthorized access to our systems, which had no material impact on our operations;

however, there is no assurance that such impacts will not be material in the future.

Loss of key members of our management could adversely affect our business.

We depend on the continued employment and performance of key members of our management.

If any of our key managers resign or become unable to continue in their present roles and are not adequately replaced, our business operations could be materially adversely affected.

We do not maintain “key man” life insurance for any of our officers.

Financial/Accounting Risks

Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

We currently have a substantial amount of indebtedness.

As of December 31, 2020, we had approximately $187.5 million outstanding under the term loan portion of our credit agreement (as amended from time to time, the Amended Credit Agreement), $63.6 million outstanding under the revolving portion of the Amended Credit Agreement, $4.5 million of outstanding letters of credit and capacity to borrow an additional $99.3 million under the revolving portion of the Amended Credit Agreement.

If market or other economic conditions remain depressed or further deteriorate, our borrowing capacity may be further reduced.

Our Amended Credit Agreement contains, and any future indebtedness we incur may contain, a number of restrictive covenants that will impose significant operating and financial restrictions on us and may limit our ability to, among other things, borrow funds, dispose of assets, pay dividends and make certain investments.

In addition, these covenants also may limit our ability to obtain future financings, make needed capital expenditures, withstand a continued downturn in our business or a downturn in the economy in general or otherwise conduct necessary corporate activities.

Our ability to comply with these covenants may be affected by events beyond our control.

Declines in commodity prices, or a prolonged period of commodity prices at depressed levels, could eventually result in our failing to meet one or more of the financial covenants under the Amended Credit Agreement, which could require us to refinance or amend such obligations resulting in the payment of consent fees or higher interest rates, or require us to raise additional capital at an inopportune time or on terms not favorable to us.

A failure to comply with these covenants, ratios or tests could also result in an event of default.

A default under the Amended Credit Agreement, if not cured or waived, could result in acceleration of all indebtedness outstanding thereunder.

The accelerated debt would become immediately due and payable.

If that should occur, we may be unable to pay all such debt or to borrow sufficient funds to refinance it.

Even if new financing were then available, it may not be on terms that are acceptable to us.

In addition, in the event of an event of default under the Amended Credit Agreement, the lenders could foreclose on the collateral securing the credit facility and require repayment of all borrowings outstanding.

If the amounts outstanding under the credit facility or any of our other indebtedness were to be accelerated, our assets may not be sufficient to repay in full the money owed to the lenders or to our other debt holders.

Moreover, any new indebtedness we incur may impose financial restrictions and other covenants on us that may be more restrictive than our existing debt agreements.

Our ability to service our debt, including repaying outstanding borrowings under our Amended Credit Agreement at maturity, will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control.

If our business does not generate sufficient cash flows from operations to enable us to meet our obligations under our indebtedness, we will be forced to take actions such as reducing or delaying business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital.

We may not be able to effect any of these remedies on satisfactory terms or at all, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Currency exchange rate fluctuations could adversely affect our U.S.

dollar reported results of operations and financial position.

Our reporting currency is the U.S.

dollar, and we are exposed to currency exchange risk primarily between the U.S.

dollar and the Canadian and Australian dollars.

For the year ended December 31, 2020, 95% of our revenues originated from subsidiaries outside of the U.S.

and were denominated in either the Canadian dollar or the Australian dollar.

As a result, a material decrease in the value of these currencies relative to the U.S.

dollar has had, and may have in the future, a negative impact on our reported revenues, net income, financial condition and cash flows.

Any currency controls implemented by local monetary authorities in countries where we currently operate could also adversely affect our business, financial condition and results of operations.

We may attempt to limit the risks of currency fluctuation where possible by entering into financial instruments to protect against foreign currency exposure, but, to date, we have not entered into any foreign currency financial

The cyclical nature of our business and a severe prolonged downturn has, and could in the future, negatively affect the value of our long-lived assets and our goodwill.

We recorded impairments of our long-lived assets of $50.5 million, $6.2 million and $28.7 million in 2020, 2019 and 2018, respectively.

We also recorded goodwill impairments of $93.6 million and $19.9 million in 2020 and 2019, respectively.

As of December 31, 2020, goodwill at our Australian reporting unit represented 1% of total assets, or $8.7 million.

Factors that may cause us to recognize further impairment losses on our long-lived assets or on the goodwill at our Australian reporting unit include, among other things, extended periods of limited or no activity by our customers at our lodges or villages, increased or unanticipated competition, and downward forecast revisions or restructuring plans or if certain of our customers do not reach positive final investment decisions on projects with respect to which we have been awarded contracts to provide related accommodation, which may cause those customers to terminate the contracts.

Our inability to control the inherent risks of identifying, acquiring and integrating businesses that we may acquire, including any related increases in debt or issuances of equity securities, could adversely affect our operations.

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Our capitalization and results of operations may change significantly following an acquisition, and our shareholders may not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in evaluating future acquisitions.

Failure to maintain positive relationships with the indigenous people in the areas where we operate could adversely affect our business.

A component of our business strategy is based on developing and maintaining positive relationships with the indigenous people and communities in the areas where we operate.

These relationships are important to our operations and customers who desire to work on traditional aboriginal lands.

The inability to develop and maintain relationships and to be in compliance with local requirements could have an adverse effect on our business and results of operations.

We operate in a highly competitive industry, and if we fail to compete effectively, our business will suffer.

The workforce accommodation and hospitality industry in which we operate is highly competitive.

To be successful, we must provide hospitality services that meet the specific needs of our customers at competitive prices.

The principal competitive factors in the markets in which we operate are service quality and availability, price, technical knowledge and experience and reputation for safety.

We compete with international and regional competitors, several of which are significantly larger than us.

These competitors offer similar services in the geographic regions in which we operate.

Many oil and gas and mining companies in our core markets own their own accommodations facilities, while others outsource all or part of their accommodations requirements.

Reduced levels of activity in the workforce accommodation industry can intensify competition and result in lower revenue to us.

Construction risks exist which may adversely affect our results of operations.

There are a number of general risks that might impinge on companies involved in the development, construction and installation of facilities as a prerequisite to the management of those assets in an operational sense.

We might be exposed to these risks from time to time by relying on these corporations and/or other third parties which could include any and/or all of the following:

the construction activities of our accommodations are partially dependent on the supply of appropriate construction and development opportunities;

development approvals, slow decision making by counterparties, complex construction specifications, changes to design briefs, legal issues and other documentation changes may give rise to delays in completion, loss of revenue and cost over-runs which may, in turn, result in termination of accommodation supply contracts;

other time delays that may arise in relation to construction and development include supply of labor, scarcity of construction materials, lower than expected productivity levels, inclement weather conditions, land contamination, cultural heritage claims, difficult site access or industrial relations issues;

objections to our activities or those of our customers aired by aboriginal or community interests, environment and/or neighborhood groups which may cause delays in the granting or approvals and/or the overall progress of a project;

where we assume design responsibility, there is a risk that design problems or defects may result in rectification and/or costs or liabilities which we cannot readily recover;

there is a risk that we may fail to fulfill our statutory and contractual obligations in relation to the quality of our materials and workmanship, including warranties and defect liability obligations.

An accidental release of pollutants into the environment may cause us to incur significant costs and liabilities.

There is inherent risk of environmental costs and liabilities in our business as a result of (1) our handling of petroleum hydrocarbons, (2) air emissions and waste water discharges related to our operations, and (3) historical industry operations and waste disposal practices.

Certain environmental statutes impose joint and several strict liability for these costs.

For example, an accidental release by us in the performance of services at one of our or our customers’ sites could subject us to substantial liabilities arising from environmental cleanup, restoration costs and natural resource damages, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations.

We may not be able to recover some or any of these costs from insurance.

Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

We currently have a substantial amount of indebtedness.

As of December 31, 2019 , we had approximately $225.0 million outstanding under the term loan portion of our credit agreement (as amended from time to time, the Credit Agreement), $134.1 million outstanding under the revolving portion of the Credit Agreement, $2.0 million of outstanding letters of credit and capacity to borrow an additional $120.8 million under the revolving portion of 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.

Our Credit Agreement contains, and any future indebtedness we incur may contain, a number of restrictive covenants that will impose significant operating and financial restrictions on us.

Specifically, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA (as defined in the Credit Agreement) 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 4.00 to 1.0 (as of December 31, 2019).

Each of the factors considered in the calculations of these ratios are defined in the Credit Agreement.

EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt discount amortization and other non-cash charges.

Borrowings outstanding under the Credit Agreement mature in November 2021, except for two non-extending lenders whose borrowings outstanding mature in November 2020.

If market or other economic conditions remain depressed or further deteriorate, our borrowing capacity may be further reduced.

The permitted level of the maximum leverage ratio changes over time, as illustrated in the table below.

Maximum Leverage Ratio

December 31, 2019

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

December 31, 2020 & thereafter

Our level of indebtedness may adversely affect our operations and limit our growth, and we may have difficulty making debt service payments on our indebtedness as such payments become due.

Our level of indebtedness may affect our operations in several ways, including the following:

our indebtedness may increase our vulnerability to general adverse economic and industry conditions;

the covenants contained in the Credit Agreement limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments;

our debt covenants also affect our flexibility in planning for, and reacting to, changes in the economy and in its industry;

our indebtedness could impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes.

Our ability to service our debt, including repaying outstanding borrowings under our Credit Agreement at maturity, will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control.

Additionally, our ability to comply with some of the covenants, ratios or tests contained in the Credit Agreement may be affected by events beyond our control and, as a result, we may be unable to meet these ratios and financial condition tests.

These financial ratio restrictions and financial condition tests could limit our ability to obtain future financings, make needed capital expenditures, withstand a continued downturn in our business or a downturn in the economy in general or otherwise conduct necessary corporate activities.

Declines in commodity prices, or a prolonged period of commodity prices at depressed levels, could eventually result in our failing to meet one or more of the financial covenants under the Credit Agreement, which could require us to refinance or amend such obligations resulting in the payment of consent fees or higher interest rates, or require us to raise additional capital at an inopportune time or on terms not favorable to us.

We may not be able to reduce our indebtedness to comply with these covenants.

A failure to comply with these covenants, ratios or tests could result in an event of default.

A default under the Credit Agreement, if not cured or waived, could result in acceleration of all indebtedness outstanding thereunder.

The accelerated debt would become immediately due and payable.

If that should occur, we may be unable to pay all such debt or to borrow sufficient funds to refinance it.

Even if new financing were then available, it may not be on terms that are acceptable to us.

In addition, in the event of an event of default under the Credit Agreement, the lenders could foreclose on the collateral securing the credit facility and require repayment of all borrowings outstanding.

Moreover, any new indebtedness we incur may impose financial restrictions and other covenants on us that may be more restrictive than our existing debt agreements.

We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities, including litigation.

We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities.

Our operations are subject to many hazards.

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Some of these claims relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to our acquisition of such businesses.

We maintain insurance to cover many of our potential losses, and we are subject to various self-retentions and deductibles under our insurance policies.

We maintain insurance to cover many of our potential losses, including cyber risk insurance, and we are subject to various self-retentions and deductibles under our insurance policies.

It is possible, however, that a judgment could be rendered against us in cases in which we could be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for such matters.

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The specifications and insured limits under those policies, however, may be insufficient for such claims.

We also face the following other risks related to our insurance coverage:

we may not be able to continue to obtain insurance on commercially reasonable terms;

We also face other risks related to our insurance coverage, including (1) we may not be able to continue to obtain insurance on commercially reasonable terms;

(2) the counterparties to our insurance contracts may pose credit risks;

we may incur losses from interruption of our business that exceed our insurance coverage.

Employee and customer labor problems could adversely affect us.

As of December 31, 2019 , we were party to collective bargaining agreements covering approximately 1,200 employees in Canada and 550 employees in Australia.

Efforts have been made from time to time to unionize other portions of our workforce.

In addition, our facilities serving oil sands development work in Northern Alberta, Canada and mining operations in Australia house both union and non-union customer employees.

We have not experienced strikes, work stoppages or other slowdowns in the past, but we cannot guarantee that we will not experience such events in the future.

Additional unionization efforts and new collective bargaining agreements also could materially increase our costs, reduce our revenues or limit our flexibility.

Collective bargaining agreements in our Canadian operations have individual expiration dates, extending in some cases to 2023.

These agreements have individual expiration dates, extending in some cases to 2022.

Our operations may suffer due to increased industry-wide capacity of certain types of assets.

The demand for and/or pricing of rooms and accommodation services is subject to the overall availability of rooms in the marketplace.

If demand for our assets were to decrease, or to the extent that we and our competitors increase our capacity in excess of current demand, we may encounter decreased pricing for or utilization of our assets and services, which could adversely impact our operations and profits.

Due to the sustained low commodity prices throughout 2016 and 2017 and into 2018, customer demand for accommodations in those areas has decreased significantly, and we have experienced a corresponding significant decrease in our occupancy and profitability.

Our land banking activities may not be successful.

Our land banking activities are focused on investing early in land in order to gain a strategic, early mover advantage in an emerging region or resource play.

However, we cannot assure you that all land that we purchase or lease will be in a region in which our customers require our services in the future.

We also cannot assure you that the property acquired by us will be profitably developed.

Our land banking activities involve significant risks that could adversely affect our financial condition, results of operations, cash flow and the market price of our securities, which include the following risks:

we may incur costs to acquire land and/or construct assets without securing a customer contract or prior to finalization of an accommodations contract with a customer and, if the contract is not obtained or delayed, the resulting impact could result in an impairment of the related investment;

during the time between acquisition and use, and depending on adjacent uses of the land, the property may become unusable or require costly remediation efforts due to environmental damage;

we may not be able to obtain financing for development projects on favorable terms or at all;

we may not be able to obtain, or may experience delays in obtaining governmental permits and authorizations;

development opportunities that we explore may be abandoned and the related investment impaired;

we may experience delays (temporary or permanent) if there is public, government or aboriginal opposition to our activities.

Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions.

We face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable or hold them for ransom;

threats to the safety of our employees;

threats to the security of our

facilities and infrastructure or third-party facilities and infrastructure;

and threats from terrorist acts.

In the past, we experienced a data security breach resulting from unauthorized access to our systems, which to date has not had a material impact on our operations;

however, there is no assurance that such impacts will not be material in the future.

Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.

Loss of key members of our management could adversely affect our business.

We depend on the continued employment and performance of key members of our management.

If any of our key managers resign or become unable to continue in their present roles and are not adequately replaced, our business operations could be materially adversely affected.

We do not maintain “key man” life insurance for any of our officers.

The enforcement of civil liabilities against Civeo may be more difficult.

Civeo is a British Columbia company and a substantial portion of our assets are located outside the U.S.

As a result, investors could experience more difficulty enforcing judgments obtained against us in U.S.

courts than would be the case for U.S.

judgments obtained against a U.S.

In addition, some claims may be more difficult to bring against Civeo in Canadian courts than it would be to bring similar claims against a U.S.

company in a U.S.

We may increase our debt or issue equity in the future, which could affect our financial condition, may decrease our profitability or could dilute our shareholders.

We may increase our debt or issue equity in the future, subject to restrictions in our debt agreements and our ability to access the capital markets.

If our cash flow from operations is less than we anticipate, or if our cash requirements are more than we expect, we may require more financing.

However, debt or equity financing may not be available to us on terms acceptable to us, if at all.

If we incur additional debt or raise equity through the issuance of our preferred shares, the terms of the debt or our preferred shares issued may give the holders rights, preferences and privileges senior to those of holders of our common shares, particularly in the event of liquidation.

The terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have.

If we raise funds through the issuance of additional equity, holders of our common shares would be diluted.

If we are unable to raise additional capital when needed, it could affect our financial health.

and (3) we may incur losses from interruption of our business that exceed our insurance coverage

Legal and Regulatory Risks

We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the United States.

A significant portion of our revenue is attributable to operations in Canada and Australia.

These activities accounted for 95% of our consolidated revenue in the year ended December 31, 2020.

Risks associated with our operations in Canada and Australia include, but are not limited to, (1) different taxing regimes;

(2) changing political conditions at the federal, provincial or state level;

(3) changing international and U.S.

monetary policies;

and (4) regional economic downturns.

The regulatory regimes in these countries are substantially different than those in the United States, and may be unfamiliar to U.S.

Violations of non-U.S.

laws could result in monetary and criminal penalties against us or our subsidiaries and could damage our reputation and, therefore, our ability to do business.

We are subject to extensive and costly environmental laws and regulations that may require us to take actions that will adversely affect our results of operations.

Environmental laws and regulations are subject to change in the future, possibly resulting in more stringent requirements.

“Business - Government Regulation” of this annual report for a more detailed description of our risks associated with environmental laws and regulations.

It should also be noted that scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.

denial or revocation of permits or other authorizations;

reduction or cessation of operations;

and performance of site investigatory, remedial or other corrective actions.

We may be exposed to certain regulatory and financial risks related to climate change.

Climate change is receiving increasing attention from the media, scientists and legislators alike which has resulted in legislative, regulatory and other initiatives, including international agreements, to reduce greenhouse gas emissions, such as carbon dioxide and methane.

Significant focus is being made on companies that are active producers of fossil fuels, or companies which serve such producers.

Moreover, such legislation, regulations and proposals are subject to frequent change by regulatory authorities, including in connection with the change in the U.S.

federal administration in January 2021.

The outcome of Canadian, Australian and U.S.

These actions could both (1) directly impact us due to increased costs associated with our operations, and (2) indirectly impact us due to increased costs of and/or reduced demand for our customers' operations, and resulting reduced demand for our services.

Any adoption of these or similar proposals by Canadian, Australian, U.S.

Although it is not possible at

this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business or demand for our services.

Such environmental activism and initiatives aimed at limiting climate change and reducing air pollution could interfere with our business activities, operations and ability to access capital.

“Business - Government Regulation” of this annual report for a more detailed description of our climate-change related risks.

An accidental release of pollutants into the environment may cause us to incur significant costs and liabilities.

Certain environmental statutes impose joint and several strict liability for these costs.

We may not be able to recover some or any of these costs from insurance.

Risks Related to Our Common Shares

The market price and trading volume of our common shares may be volatile.

On November 19, 2020, we effected the Reverse Share Split, where each twelve issued and outstanding common shares were converted into one common share.

Our common shares began trading on a reverse share split-adjusted basis on November 19, 2020.

All common share and per common share data included in this annual report have been retroactively adjusted to reflect the Reverse Share Split.

The market price of our common shares has historically experienced and may continue to experience volatility.

For example, during 2018, the market price of our common shares ranged from a low of $1.12 per share to a high of $4.64 per share, and during 2019, the market price of our common shares ranged from a low of $0.75 per share to a high of $2.85 per share.

From January 1, 2020 to February 21, 2020 , the market price of our common shares has ranged between a low of $1.15 per share to a high of $1.54 per share.

For example, during 2019, the market price of our common shares, adjusted to reflect the Reverse Share Split, ranged from a low of $9.01 per share to a high of $34.20 per share.

During 2020, the market price of our common shares, adjusted to reflect the Reverse Share Split, ranged from a low of $4.08 per share to a high of $18.48 per share.

The market price of our common shares may be influenced by many factors, some of which are beyond our control, including those described above and the following:

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• future sales of our common shares or other securities by us, members of our management team or our existing shareholders;

investor perceptions of the investment opportunity associated with our common shares relative to other investment alternatives.

• investor perceptions of the investment opportunity associated with our industry or common shares relative to other investment alternatives.

These broad market and industry factors may materially reduce the market price of our common shares, regardless of our operating performance.

In addition, price volatility may be greater if the public float and trading volume of our common shares is low.

Our financial position, cash flows, results of operations and share price could be materially adversely affected if commodity prices do not improve or decline further.

In addition, in recent years the stock market has experienced substantial price and volume fluctuations.

This volatility has had a significant effect on the market prices of securities issued by many companies for reasons potentially unrelated to their operating performance.

Our share price may experience substantial volatility due to uncertainty regarding commodity prices.

For example, our share price may experience substantial volatility due to uncertainty regarding commodity prices.

These market fluctuations, regardless of the cause, may materially and adversely affect our share price, regardless of our operating results.

If we cannot meet the NYSE continued listing requirements, the NYSE may delist our common shares.

Our common shares are currently listed on the NYSE, and the continued listing of our common shares is subject to our compliance with a number of listing standards.

To maintain compliance with these continued listing standards, we are required to maintain an average closing price of $1.00 or more over a consecutive 30 trading-day period.

On November 27, 2019, we received a notice from the NYSE that the average closing price of our common shares over a 30 consecutive trading day period was below $1.00 per share, and, as a result, the price per share of the common shares was below the minimum average closing price required to maintain listing on the NYSE.

On January 6, 2020, we were notified by the NYSE that we regained compliance with the NYSE continued listing standards after our average closing price for the 30 trading days ended December 31, 2019 and our closing price on December 31, 2019 both exceeded $1.00 per share.

If we receive further notices from the NYSE that we have failed to maintain compliance of an NYSE continued listing standard, and fail to regain compliance of such standard during the applicable cure period, the NYSE may initiate procedures to suspend and delist our common shares.

A delisting of our common shares could negatively impact us by, among other things:

reducing the liquidity and market price of our common shares;

reducing the number of investors, including institutional investors, willing to hold or acquire our common shares, which could negatively impact our ability to raise equity;

decreasing the amount of news and analyst coverage of us;

limiting our ability to issue additional securities, obtain additional financing or pursue strategic restructuring, refinancing or other transactions;

impacting our reputation and, as a consequence, our ability to attract new business.

Furthermore, the trading market for our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease coverage of

our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

The rights of holders of our common shares are subordinate to the rights of the holders of our preferred shares.

The holders of the preferred shares issued in the Noralta Acquisition have rights and preferences superior to those of the holders of our common shares.

These rights include, among others:

the right to receive a liquidation preference prior to any distribution of our assets to the holders of our common shares;

the right to receive a 2% annual dividend, paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof;

the right to convert the preferred shares into common shares after two years from the closing of the Noralta Acquisition at an initial conversion price of $3.30 per common share, which may not be the fair market value of such shares at the time of conversion.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, our share price could decline.

The trading market for our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

The holders of the preferred shares issued in the Noralta Acquisition have rights and preferences superior to those of the holders of our common shares, including the right to receive a 2% annual dividend, paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof and the right to receive a liquidation preference prior to any distribution of our assets to the holders of our common shares.

In addition, holders of the preferred shares may convert their shares into common shares at an initial conversion price of $39.60 per common share, which may not be the fair market value of such shares at the time of conversion.

We are governed by the corporate laws in British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, United States.

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If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

We cannot assure you that we will pay dividends in the future, and our indebtedness could limit our ability to pay dividends on our common shares.

We currently do not pay dividends.

The declaration and amount of all dividends will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the board of directors deems relevant.

In addition, our ability to pay dividends on our common shares is limited by covenants in the Credit Agreement.

Future agreements may also limit our ability to pay dividends.

If we elect to pay dividends in the future, the amount per share of our dividend payments may be changed, or dividends may again be suspended, without advance notice.

The likelihood that dividends will be reduced or suspended is increased during periods of market weakness.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this annual report.

There can be no assurance that we will pay a dividend in the future.

Provisions contained in our articles and applicable Canadian and British Columbia laws could discourage a take-over attempt, which may reduce or eliminate the likelihood of a change of control transaction and, therefore, the ability of our shareholders to sell their shares for a premium.

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Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their common shares and/or affect the market price of our common shares.

Our business could be negatively affected as a result of the actions of activist shareholders.

Publicly traded companies have increasingly become subject to campaigns by investors seeking to increase shareholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, share repurchases or even sales of assets or the entire company.

It is possible activist shareholders may attempt to effect such changes or acquire control over us.

Responding to proxy contests and other actions by such activist shareholders or others in the future would be costly and time-consuming, disrupt our operations and divert the attention of our board of directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition.

Additionally, perceived uncertainties as to our future direction as a result of shareholder activism or changes to the composition of the board of directors may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel.

If customers choose to delay, defer or reduce transactions with us or transact with our competitors instead of us because of any such issues, then our revenue, earnings and operating cash flows could be adversely affected.

The enforcement of civil liabilities against Civeo may be more difficult.

Civeo is a British Columbia company and a substantial portion of our assets are located outside the U.S.

As a result, investors could experience more difficulty enforcing judgments obtained against us in U.S.

courts than would be the case for U.S.

judgments obtained against a U.S.

In addition, some claims may be more difficult to bring against Civeo in Canadian courts than it would be to bring similar claims against a U.S.

company in a U.S.

Risks Related to Our Structure

We are subject to various Canadian and other taxes.

Our effective tax rates (including our Canadian tax rate) are dependent on a variety of factors, many of which are beyond our ability to control, such as changes in the rate of economic growth in Canada, the financial performance of our business in various jurisdictions, currency exchange rate fluctuations (especially between Canadian and U.S.

Our effective tax rates (including our Canadian tax rate) are dependent on a variety of factors, many of which are beyond our ability to control, such as changes in the rate of economic growth in Canada, currency exchange rate fluctuations (especially between Canadian and U.S.

dollars), and significant changes in trade, monetary or fiscal policies of Canada, including changes in interest rates, withholding taxes, tax treaties and federal and provincial tax rates generally.

The impact of these factors, individually and in the aggregate, is difficult to predict, in part because the occurrence of the events or circumstances described in such factors may be (and, in fact, often seem to be) interrelated, and the impact to us of the occurrence of any one of these events or circumstances could be compounded or, alternatively, reduced, offset, or more than offset, by the occurrence of one or more of the other events or circumstances described in such factors.

The impact of these factors, individually and in the aggregate, is difficult to predict, in part because the occurrence of any number of the events or circumstances described in such factors may be (and, in fact, often seem to be) interrelated, and the impact to us of the occurrence of any one of these events or circumstances could be compounded or, alternatively, reduced, offset, or more than offset, by the occurrence of one or more of the other events or circumstances described in such factors.

Canada’s tax rules under the Income Tax Act (Canada) (the Canadian Tax Act) allow for favorable tax treatment insofar as the repatriation of certain dividends from foreign affiliates.

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Any such changes could have a material impact on our overall tax rate.

Canada has also introduced tax rules governing “foreign affiliate dumping” in the Canadian Tax Act that can have adverse tax consequences for Canadian corporations that are controlled by non-Canadian corporations in respect of non-Canadian business activities and investments.

Canada has also introduced tax rules governing “foreign affiliate dumping” in the Canadian Tax Act that can have adverse tax consequences in respect of non-Canadian business activities and investments for Canadian corporations that are controlled by non-Canadian corporations.

These rules would have a negative impact on us to the extent that we became controlled by a non-Canadian resident corporation.

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could change in the future, and such changes could cause a material change in our effective corporate tax rate.

As a result, our actual effective tax rate may be materially different from our expectation.

As a result, our realized effective tax rate may be materially different from our current expectation.

Our provision for income taxes will be based on certain estimates and assumptions made by management in consultation with our tax and other advisors.

Our consolidated income tax rate will be affected by the amount of net income earned in Canada and our other operating jurisdictions, the availability of future taxable income, the availability of benefits under tax treaties, and the rates of taxes payable in respect of that income.

Our consolidated income tax rate will be affected by the amount of net income earned in Canada and our other operating jurisdictions, the availability of benefits under tax treaties, and the rates of taxes payable in respect of that income.

We will enter into many transactions and arrangements in the ordinary course of business in respect of which the tax treatment is not entirely certain.

We will therefore make estimates and judgments based on our knowledge and understanding of applicable tax laws and tax treaties, and the application of those tax laws and tax treaties to our business, in determining our consolidated tax provision.

The final outcome of any audits by taxation authorities may differ from the estimates and assumptions we may use in determining our

consolidated tax provisions and accruals.

The final outcome of any audits by taxation authorities may differ from the estimates and assumptions we may use in determining our consolidated tax provisions and accruals.

This could result in a material adverse effect on our consolidated income tax provision, financial condition and the net income for the period in which such determinations are made.

Congress, government agencies in non-U.S.

jurisdictions where we and our affiliates do business, and the Organization for Economic Co-operation and Development have recently focused on issues related to the taxation of multinational corporations.

One example is found in the area of “base erosion and profit shifting”, where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates.

As a result, the tax laws in the U.S.

and other countries in which we and our affiliates do business could change on a prospective or retroactive basis (or both), and any such changes could materially adversely affect us.

The Canada Revenue Agency (CRA) may disagree with our conclusions on tax treatment, and the CRA has not provided (and we have not requested), a ruling on the Canadian tax aspects of our redomestication.

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There can be no assurance that the CRA will agree with our interpretation of the tax aspects of the Redomicile Transaction or any related matters associated therewith.

The Internal Revenue Service (IRS) may not agree with the conclusion that we should be treated as a foreign corporation for U.S.

federal tax purposes, and no ruling has been sought from the IRS.

federal income tax purposes, a corporation generally is considered a tax resident in the jurisdiction of its organization or incorporation.

Because we are a British Columbia incorporated entity following the Redomicile Transaction, we generally will be classified as a foreign corporation (and, therefore, a non-U.S.

tax resident) under U.S.

federal income tax law, and we believe that we are properly classified as a foreign corporation (that is a non-U.S.

tax resident) for purposes of U.S.

federal income tax law.

Even so, the IRS may assert that we should be treated as a U.S.

corporation (and, therefore, a U.S.

tax resident) for U.S.

federal income tax purposes pursuant to Section 7874 of the Internal Revenue Code.

If it were determined that we should be taxed as a U.S.

corporation for U.S.

federal income tax purposes, we could be liable for substantial additional U.S.

federal income taxes.

Future potential changes to U.S.

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federal income tax liability.

Our tax position may be adversely affected by changes in tax law relating to multinational corporations, or increased scrutiny by tax authorities.

Congress, government agencies in non-U.S.

As a result, the tax laws in the U.S.

and other countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could materially adversely affect us.

Moreover, U.S.

and international tax authorities may carefully scrutinize companies that have redomiciled, such as our company, which may lead such authorities to assert that we owe additional taxes.

Risks Related to our Spin-Off from Oil States

Our tax sharing agreement with Oil States may require us to indemnify Oil States for significant tax liabilities.

In connection with the Spin-Off, we entered into a tax sharing agreement.

Under the tax sharing agreement, we are required to indemnify Oil States against certain tax-related liabilities incurred by Oil States (including any of its subsidiaries) relating to the Spin-Off, to the extent caused by our breach of any representations or covenants made in the tax sharing agreement or the separation and distribution agreement, or made in connection with the private letter ruling or the tax opinion obtained with respect to the Spin-Off.

These liabilities include the substantial tax-related liability (calculated without regard to any net operating loss or other tax attribute of Oil States) that would result if the Spin-Off of our stock to Oil States stockholders failed to qualify as a tax-free transaction.

In addition, we have agreed to pay 50% of any taxes arising from the Spin-Off to the extent that the tax is not attributable to the fault of either party.

We could have significant tax liabilities for periods during which our subsidiaries and operations were those of Oil States.

For any tax periods (or portion thereof) in which Oil States owned at least 80% of the total voting power and value of Civeo U.S.’s common stock, our U.S.

subsidiaries will be included in Oil States’ consolidated group for U.S.

federal income tax purposes.

In addition, one or more of our U.S.

subsidiaries may be included in the combined, consolidated or unitary tax returns of Oil States or one or more of its subsidiaries for U.S.

state or local income tax purposes.

In addition, by virtue of Oil States’ controlling ownership and the tax sharing agreement, Oil States will effectively control all of our U.S.

tax decisions in connection with any consolidated, combined or unitary income tax returns in which any of our subsidiaries are included.

The tax sharing agreement provides that Oil States will have sole authority to respond to and conduct all tax proceedings (including tax audits) relating to us, to prepare and file all consolidated, combined or unitary income tax returns in which we are included on our behalf (including the making of any tax elections), and to determine the reimbursement amounts in connection with any pro forma tax returns.

This arrangement may result in conflicts of interest between Oil States and us.

For example, under the tax sharing agreement, Oil States will be able to choose to contest, compromise or settle any adjustment or deficiency proposed by the relevant taxing authority in a manner that may be beneficial to Oil States and detrimental to us;

provided, however, that Oil States may not make any settlement that would materially increase our tax liability without our consent.

Moreover, notwithstanding the tax sharing agreement, U.S.

federal law provides that each member of a consolidated group is liable for the group’s entire tax obligation.

Thus, to the extent Oil States or other members of Oil States’ consolidated group fail to make any U.S.

federal income tax payments required by law, one or more of our U.S.

subsidiaries could be liable for the shortfall with respect to periods in which such subsidiary was a member of Oil States’ consolidated group.

Similar principles may apply for foreign, state or local income tax purposes where we file combined, consolidated or unitary returns with Oil States or its subsidiaries for federal, foreign, state or local income tax purposes.

If there is a determination that the Spin-Off is taxable for U.S.

federal income tax purposes because the facts, assumptions, representations, or undertakings underlying the tax opinion are incorrect or for any other reason, then Oil States and its stockholders could incur significant income tax liabilities, and we could incur significant liabilities.

Oil States received a private letter ruling from the IRS and an opinion of its outside counsel regarding certain aspects of the Spin-Off transaction.

The private letter ruling and the opinion rely on certain facts, assumptions, representations and undertakings from Oil States and us regarding the past and future conduct of the companies’ respective businesses and other matters.

If any of these facts, assumptions, representations, or undertakings are, or become, incorrect or not otherwise satisfied, Oil States and its stockholders may not be able to rely on the private letter ruling or the opinion of its tax advisor and could be subject to significant tax liabilities.

In addition, an opinion of counsel is not binding upon the IRS, so, notwithstanding the opinion of Oil States’ tax advisor, the IRS could conclude upon audit that the Spin-Off is taxable in full or in part if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the stock ownership of Oil States or us.

If the Spin-Off is determined to be taxable for U.S.

federal income tax purposes for any reason, Oil States and/or its stockholders could incur significant income tax liabilities, and we could incur significant liabilities.

Third parties may seek to hold us responsible for liabilities of Oil States that we did not assume in our agreements.

Third parties may seek to hold us responsible for retained liabilities of Oil States.

Under our agreements with Oil States, Oil States agreed to indemnify us for claims and losses relating to these retained liabilities.

However, if those liabilities are

significant and we are ultimately held liable for them, we cannot assure you that we will be able to recover the full amount of our losses from Oil States.

The Spin-Off may have exposed us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

The Spin-Off is subject to review under various state and federal fraudulent conveyance laws.

Under these laws, if a court in a lawsuit by an unpaid creditor or an entity vested with the power of such creditor (including without limitation a trustee or debtor-in-possession in a bankruptcy by us or Oil States or any of our respective subsidiaries) were to determine that Oil States or any of its subsidiaries did not receive fair consideration or reasonably equivalent value for distributing shares of our common stock or taking other action as part of the Spin-Off, or that we or any of our subsidiaries did not receive fair consideration or reasonably equivalent value for incurring indebtedness, including the debt incurred by us in connection with the Spin-Off, transferring assets or taking other action as part of the Spin-Off and, at the time of such action, we, Oil States or any of our respective subsidiaries (i) was insolvent or would be rendered insolvent, (ii) had reasonably small capital with which to carry on its business and all business in which it intended to engage or (iii) intended to incur, or believed it would incur, debts beyond its ability to repay such debts as they would mature, then such court could void the Spin-Off as a constructive fraudulent transfer.

If such court made this determination, the court could impose a number of different remedies, including without limitation, voiding our liens and claims against Oil States, or providing Oil States with a claim for money damages against us in an amount equal to the difference between the consideration received by Oil States and the fair market value of our company at the time of the Spin-Off.

The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction’s law is applied.

Generally, however, an entity would be considered insolvent if the present fair saleable value of its assets is less than (i) the amount of its liabilities (including contingent liabilities) or (ii) the amount that will be required to pay its probable liabilities on its existing debts as they become absolute and mature.

No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that we, Oil States or any of our respective subsidiaries were solvent at the time of or after giving effect to the Spin-Off, including the distribution of shares of our common stock.

Under the separation and distribution agreement, Oil States is and we are responsible for the debts, liabilities and other obligations related to the business or businesses which Oil States and we, respectively, own and operate following the Spin-Off.

Although we do not expect to be liable for any such obligations not expressly assumed by us pursuant to the separation and distribution agreement, it is possible that a court would disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to Oil States, particularly if Oil States were to refuse or were unable to pay or perform the subject allocated obligations.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors