What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2021-10-28 · 144 added, 388 removed, 225 unchanged (70% of the section changed)

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You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q.

Reverse Share Split

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

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 quarterly report have been retroactively adjusted to reflect the Reverse Share Split.

See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Overview and Macroeconomic Environment

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Long-term demand for our services has been driven by natural resource production, maintenance and operation of those facilities as well as expansion of those sites.

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

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

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

Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in

Canada, Australia, the U.S.

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

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

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We derive most of our business from natural resource companies who are developing and producing oil sands, met coal, LNG and iron ore resources and, to a lesser extent, other hydrocarbon and mineral resources.

Approximately 66% of our revenue is generated by our lodges in Canada and our villages in Australia.

In the first quarter of 2022, approximately 63% of our revenue is generated by our lodges in Canada and our villages in Australia.

Where traditional accommodations and infrastructure are insufficient, inaccessible or cost ineffective, our lodge and village facilities provide comprehensive hospitality services similar to those found in an urban hotel.

We typically contract our facilities to our customers on a fee-per-person-per- day basis that covers lodging and meals and is based on the duration of customer needs, which can range from several weeks to several years.

We typically contract our facilities to our customers on a fee-per-person-per- day basis that covers lodging and meals and is based on the duration of customer needs,

which can range from several weeks to several years.

The remainder of our revenue is generated by our hospitality services at customer-owned locations in Canada and Australia, mobile assets in Canada and the U.S and our lodges in the U.S.

Generally, our core Canadian oil sands and Australian mining customers make significant capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years.

Generally, our core Canadian oil sands and Australian mining customers make significant, upfront capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years.

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

The spread of COVID-19 and the response thereto have negatively impacted the global economy.

The actions taken by governments and the private-sector to mitigate the spread of COVID-19 and the risk of infection, including government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies, have evolved with the introduction of vaccination efforts, and may continue to evolve as the surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19.

Additionally, global oil prices dropped to historically low levels in March and April 2020 due to severely reduced global oil demand, high global crude inventory levels, uncertainty around timing and slope of worldwide economic recovery after COVID-19 related economic shut-downs and effectiveness of production cuts by major oil producing countries, such as Saudi Arabia, Russia and the U.S.

In mid-April 2020, OPEC+ (the combination of historical OPEC members and other significant oil producers, such as Russia) announced production cuts of up to approximately 10 million barrels per day.

However, oil prices remained at depressed levels throughout most of 2020, before modest improvement late in the year and into early 2021.

Global oil demand has continued to recover throughout 2021 as COVID-19 lockdowns have begun to be lifted and other fossil fuels are experiencing supply shortages.

Oil supply has not kept up with the increase in demand in 2021, exacerbated by the impacts of Hurricane Ida in the Gulf of Mexico earlier this year, resulting in falling inventories and a significant increase in oil prices continuing into October 2021.

In July 2021, OPEC+ agreed to phase out 5.8 million barrels per day of oil production cuts by September 2022.

In October 2021, OPEC+ declined requests from the Biden administration to accelerate production to help mitigate the growing deficit between oil supply and demand and address short-term fluctuations in the market.

The actions taken by governments and the private-sector to mitigate the spread of COVID-19 and the risk of infection, including government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies, evolved with the introduction of vaccination efforts in 2021, and may continue to evolve as the surfacing of virus variants has added a degree of uncertainty to the continuing global impact.

Since the COVID-19 pandemic began, we have been impacted by increased staff costs as a result of hospitality labor shortages in Australia.

This labor shortage has been exacerbated by significantly reduced migration in and around Australia affecting labor availability, which has subsequently led to an increased reliance on more expensive temporary labor resources.

We continue to closely monitor the COVID-19 situation and have taken measures to help ensure the health and well-being of our employees, guests and contractors, including screening of individuals that enter our facilities, social distancing practices, enhanced cleaning and deep sanitization, the suspension of nonessential employee travel and implementation of work-from-home policies, where applicable.

In part due to the impact of COVID-19 on the global economy, increasing inflationary pressures are being experienced worldwide.

These price increases could negatively impact our labor and food costs, as well as consumable costs such as fuel.

The Company is managing inflation risk with service scope changes and contractual protections.

Global oil prices dropped to historically low levels in March and April 2020 due to severely reduced global oil demand, high global crude inventory levels, uncertainty around timing and slope of worldwide economic recovery after COVID-19 related economic shut-downs and effectiveness of production cuts by major oil producing countries, such as Saudi Arabia, Russia and the U.S.

Since this trough in early 2020, global oil prices increased later in 2020 and throughout 2021 primarily due to improved global oil demand and lagging global oil supply due to oil production discipline from publicly traded oil producers and OPEC+ countries.

These supply/demand dynamics have continued into early 2022 and have been exacerbated by the recent conflict between Russia and Ukraine and related sanctions on Russia, which decreased global fossil fuel supply even further.

This has led to a significant increase in global oil prices to above $100 per barrel.

Several governments, including the U.S.

government under the Biden administration, have begun to release oil from the government controlled strategic reserves in the hopes of stemming high oil prices and the related impacts on higher heating fuels and gasoline.

Alberta, Canada.

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

While these pipeline projects, including the Trans Mountain Pipeline (TMX), have recently received incremental regulatory approvals, it is still not certain if any of the proposed pipeline projects will ultimately be completed.

Certain segments of the TMX pipeline have resumed construction without conflict at the present time.

Recent legal issues with the Canadian government and First Nation groups have been resolved for the time being.

The Canadian federal government acquired the TMX pipeline in 2018, approved the expansion of the project and is currently working through a revised construction timeline to adjust for recent delays related to legal hurdles, the COVID-19 pandemic and seasonal wildfires.

WCS prices in the third quarter of 2021 averaged $57.58 per barrel compared to an average of $31.15 in the third quarter of 2020.

The WCS Differential decreased from $15.35 per barrel at the end of the fourth quarter of 2020 to $11.62 at the end of

the third quarter of 2021.

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 and inventory levels.

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

As of October 25, 2021, the WTI price was $84.26 and the WCS price was $67.80, resulting in a WCS Differential of $16.46.

Together with the initial spread of COVID-19, the depressed price levels of both WTI and WCS materially impacted 2020 maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services.

Customers began increasing production activity in the fourth quarter of 2020 and into the first nine months of 2021.

Continued uncertainty, including about the impact of COVID-19, and commodity price volatility and regulatory complications could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.

Additionally, if oil prices do not stabilize, the resulting impact could continue to negatively affect the value of our long-lived assets.

The Enbridge Line 3 replacement project was completed at the end of 2021 and the Trans Mountain Pipeline (TMX) is currently under construction and approximately 50% complete.

The Canadian federal government acquired the TMX pipeline in 2018, approved the expansion of the project and is currently working through a revised construction timeline to adjust for recent delays related to legal challenges, the COVID-19 pandemic, flooding along certain sections of the pipeline corridor and seasonal wildfires.

As a result, the TMX pipeline construction has been delayed, and there is a risk that there are more delays to come.

Recent legal issues between the Canadian government and First Nation groups have been resolved for the time being and construction has resumed.

WCS prices in the first quarter of 2022 averaged $82.04 per barrel compared to an average of $46.28 in the first quarter of 2021.

The WCS Differential decreased from $14.12 per barrel at the end of the fourth quarter of 2021 to $10.78 at the end of the first quarter of 2022.

As of April 25, 2022, the WTI price was $99.54 and the WCS price was $86.62, resulting in a WCS Differential of $12.92.

Together with the initial spread of COVID-19, depressed price levels of both WTI and WCS materially impacted 2020 maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services.

Customers began increasing production activity in the fourth quarter of 2020, throughout 2021 and into the first three months of 2022.

While oil prices have recently increased to multi-year highs, there is continued uncertainty around commodity price

levels, including the impact of COVID-19 and regulatory complications on such prices, which could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.

British Columbia, Canada.

Our Sitka Lodge supports the LNG Canada project and related pipeline projects (see discussion below).

From a macroeconomic standpoint, LNG demand continued to grow despite the COVID-19 pandemic, reinforcing the need for the global LNG industry to expand access to natural gas.

From a macroeconomic standpoint, LNG demand continued to grow despite the spread of COVID-19, reinforcing the need for the global LNG industry to expand access to natural gas.

Evolving government energy policies around the world have amplified support for cleaner energy supply, creating more opportunities for natural gas and LNG.

Accordingly, the current view is additional investment in LNG supply will be needed to meet the expected long-term LNG demand growth.

The conflict between Russia and Ukraine has further highlighted the need for secure natural gas supply globally, particularly in Europe.

Accordingly, additional investment in LNG supply will be needed to meet the resulting expected long-term LNG demand growth.

Currently, Western Canada does not have any operational LNG export facilities.

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British Columbia LNG activity and related pipeline projects are a material driver of activity for our Sitka Lodge, as well as for our mobile assets, which are contracted to serve several portions of the related pipeline construction activity.

The actual timing of when revenue is realized from the Coastal Gas Link pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, such as protest blockades and the COVID-19 pandemic.

The actual timing of when revenue is realized from the Coastal GasLink (CGL) pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, such as protest blockades or COVID-19.

Our current expectation is that our contracted commitments associated with the CGL pipeline project will be completed in the second half of 2022 or early 2023.

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

This resulted in a reduction in occupancy at our Sitka Lodge during the second quarter of 2020, before returning to expected levels in the second half of 2020.

In late December 2020, British Columbia’s public health officer issued a health order limiting workforce size at all large industrial projects across the province, including LNGC.

This order once again reduced occupancy at our Sitka Lodge in the first quarter of 2021.

In the second quarter of 2021, this order was repealed.

It was replaced with less restrictive requirements focused on monitoring, allowing workforces to return to their optimal sizes.

These actions resulted in reduced occupancy at our Sitka Lodge beginning in the second quarter of 2020.

British Columbia's public health order was phased out in the second quarter of 2021.

It was replaced with less restrictive requirements focused on monitoring, allowing workforces to return to their optimal sizes, which increased occupancy at our Sitka Lodge in the second half of 2021 and into 2022.

In Australia, 82% of our rooms are located in the Bowen Basin of Queensland, Australia and primarily serve met coal mines in that region.

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the levels of global steel production, which increased by 7.8% during the first nine months of 2021 compared to the same period of 2020.

As of October 25, 2021, met coal spot prices were $398 per metric tonne.

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the levels of global steel production, which decreased by 6.8% during the first three months of 2022 compared to the same period of 2021 but remained at high levels.

As of April 25, 2022, met coal spot prices were $480 per metric tonne.

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

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However, Australian met coal producers have found new markets, including India and Europe, for their premium product.

This has led to a rebalancing of the market globally, with China relying on domestic production along with much higher imports of U.S.

and Canadian coal in 2021.

With the backdrop of continuing strong steel demand and met coal supply constraints, the spot price for met coal has surged to record highs in October 2021.

Analysts expect elevated met coal prices to persist in the short-term, while steel demand and prices remain strong and until met coal supply issues are resolved.

Additionally, if the trade impasse with China remains unresolved, there remains a possibility of further volatility in the short-medium term.

This led to a rebalancing of the market globally in 2021, with China relying on domestic production along with increased met coal imports from the U.S., Canada and Mongolia.

With the backdrop of continuing strong steel demand and met coal supply constraints, the spot price for met coal surged to record highs through the second half of 2021 into early 2022.

While met coal prices have receded from their all-time highs, they still remain over $400 per tonne.

Analysts expect elevated met coal prices to persist in the short-term but to moderate and decline further over the medium term if supply and demand issues are resolved.

If the trade impasse with China remains unresolved and the Ukraine conflict continues, there remains a possibility of further volatility in the short to medium term.

Civeo's activity in Western Australia is driven primarily by iron ore production, which is a key steel-making ingredient.

As of October 22, 2021, iron ore spot prices were $119.70 per metric tonne.

Our integrated services business provides catering and managed services to the mining industry in Western Australia.

We have contracts to manage customer-owned villages in Western Australia which primarily support iron ore mines in addition to

gold, lithium and nickel mines.

We believe iron ore prices are currently at a level that may contribute to increased activity over the long term if our customers view these price levels as sustainable.

Iron ore prices experienced strong support through the first half of 2021, with prices reaching in excess of $200 US per metric tonne by mid year due to high demand for steel used for infrastructure and increased manufacturing activity in China.

Through the second half of 2021, with forced cuts in Chinese steel production along with weaker demand, prices retreated.

As of April 25, 2022, iron ore spot prices were $126.38 per metric tonne, which reflects a sustained improvement in prices early in 2022 with tighter supply and strong demand.

Higher iron production is expected to continue through 2022 and along with constrained supply, analysts are forecasting an average iron ore price of $135-$150 per metric tonne for 2022.

Despite some constraint in supply, Australian iron ore exports in 2022 are forecast to exceed both 2020 and 2021 volumes.

business supports oil shale drilling and completion activity and is primarily tied to WTI oil prices in the U.S.

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

During 2019, the U.S.

oil rig count and associated completion activity decreased due to the oil price decline in late 2018 and early 2019 coupled with other market dynamics negatively impacting exploration and production (E&P) spending, finishing the year at 677 rigs.

In 2020, the U.S.

oil rig count and associated completion activity further decreased due to the global oil price decline discussed above.

oil rig count and associated completion activity decreased due to COVID-19 and the global oil price decline discussed above.

Only 267 oil rigs were active at the end of 2020.

As oil prices began to recover in 2021, oil rig count and drilling activity recovered somewhat, with 421 oil rigs active at the end of the third quarter 2021.

With the recovery of oil prices, oil rig count and drilling activity have recovered substantially, with 531 oil rigs active at the end of the first quarter 2022.

The Permian Basin remains the most active U.S.

unconventional play, representing 60% of the oil rigs active in the U.S.

at the end of the third quarter of 2021.

The lower U.S.

rig count and decline in oil prices resulted in decreased U.S.

oil production from an average of 12.2 million barrels per day in 2019 to an average of 11.3 million barrels per day in 2020.

For the first seven months of 2021, the average barrels per day stayed constant at 11.3 million.

As of October 25, 2021, there were 443 active oil rigs in the U.S.

at the end of the first quarter of 2022.

The increase in the U.S.

rig count and oil prices has only resulted in slight increases to U.S.

oil production from an average of 11.3 million barrels per day in 2021 to an average of 11.4 million barrels per day at the end of January 2022.

As of April 22, 2022, there were 549 active oil rigs in the U.S.

(as measured by Bakerhughes.com).

With the recent volatility in oil prices and a resulting reduction in spending by E&P companies, we exited the Bakken and reduced our presence in the Rockies regions for our U.S.

mobile assets.

Those assets were either sold or transported to our Permian Basin and Mid-Continent district locations.

oil shale drilling and completion activity will continue to be dependent on sustained higher WTI oil prices, pipeline capacity and sufficient capital to support E&P drilling and completion plans.

oil shale drilling and completion activity will continue to be impacted by higher WTI oil prices, pipeline capacity, federal energy policies and availability of capital to support exploration and production (E&P) drilling and completion plans.

In addition, consolidation among our E&P customer base in the U.S.

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(per tonne) Iron

Fourth Quarter through October 25, 2021

$ 80.83 $ 66.82 $ 392.80 $ 124.27

9/30/2021 70.54 57.58 258.41 164.90

6/30/2021 66.19 53.27 136.44 195.97

3/31/2021 58.13 46.28 127.95 159.83

12/31/2020 42.63 31.34 109.37 128.24

9/30/2020 40.90 31.15 113.30 116.10

6/30/2020 27.95 19.73 120.27 89.53

3/31/2020 45.38 27.92 156.17 83.57

12/30/2019 56.85 37.94 141.39 85.13

Second Quarter through April 25, 2022

$ 101.36 $ 88.55 $ 475.20 $ 140.72

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 Change Percentage 2021 2020 Change Percentage

2022 2021 Change Percentage

Average Canadian dollar to U.S.

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dollar $0.724 $0.773 ($0.05) (6.3)%

September 30, 2021 December 31, 2020 Change Percentage

March 31, 2022 December 31, 2021 Change Percentage

Canadian dollar to U.S.

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Capital Expenditures.

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

We currently expect that our 2021 capital expenditures, exclusive of any business acquisitions, will total approximately $20 million, compared to 2020 capital expenditures of $10.1 million.

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

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

We currently expect that our 2022 capital expenditures will be in the range of approximately $20 million to $25 million, compared to 2021 capital expenditures of $15.6 million.

We may adjust our capital expenditure plans in the future as we continue to monitor customer activity.

See “Liquidity and Capital Resources ” below for further discussion of 2022 capital expenditures.

Results of Operations

Unless otherwise indicated, discussion of results for the three months ended September 30, 2021, is based on a comparison to the corresponding period of 2020.

Results of Operations – Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Unless otherwise indicated, discussion of results for the three months ended March 31, 2022, is based on a comparison to the corresponding period of 2021.

Results of Operations – Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Three Months Ended

September 30,

2022 2021 Change

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Depreciation and amortization expense 20,127 21,269 (1,142)

Impairment expense — — —

Other operating expense 258 71 187

Total costs and expenses 161,441 135,331 26,110

Operating income 6,010 7,090 (1,080)

Operating income (loss) 4,237 (9,901) 14,138

Interest expense, net (2,468) (3,362) 894

Other (expense) income 364 4,542 (4,178)

Income before income taxes 2,792 7,603 (4,811)

Other income 1,696 4,914 (3,218)

Income (loss) before income taxes 3,465 (8,349) 11,814

Income tax (expense) (1,557) (1,076) (481)

Net income 1,022 7,423 (6,401)

Net income (loss) 1,908 (9,425) 11,333

Net income attributable to noncontrolling interest 498 59 439

Net income attributable to Civeo Corporation 544 6,989 (6,445)

Net income (loss) attributable to Civeo Corporation 1,410 (9,484) 10,894

Dividends attributable to preferred shares 487 478 9

Net income attributable to Civeo common shareholders $ 62 $ 6,517 $ (6,455)

We reported net income attributable to Civeo for the quarter ended September 30, 2021 of $0.1 million, or $0.00 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2020 of $6.5 million, or $0.39 per diluted share.

Consolidated revenues increased $12.2 million, or 9%, in the third quarter of 2021 compared to the third quarter of 2020.

This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages, (iv) increased activity levels in certain U.S.

markets and (v) a stronger Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2021 compared to the third quarter of 2020.

These items were partially offset by (i) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (ii) decreased activity at our Bowen Basin villages and Gunnedah Basin villages in Australia and (iii) decreased activity at our U.S.

offshore fabrication business.

Net income (loss) attributable to Civeo common shareholders $ 923 $ (9,962) $ 10,885

We reported net income attributable to Civeo for the quarter ended March 31, 2022 of $0.9 million, or $0.06 per diluted share compared to net loss attributable to Civeo for the quarter ended March 31, 2021 of $10.0 million, or $0.70 per diluted share.

Consolidated revenues increased $40.2 million, or 32%, in the first quarter of 2022 compared to the first quarter of 2021.

This increase was primarily due to (i) higher billed rooms at our Canadian lodges as occupancy in the first quarter of 2021 was negatively impacted by the COVID-19 pandemic, particularly at our Sitka Lodge, (ii) higher average daily rate at our Canadian lodges due to mix, (iii) increased mobile asset activity from pipeline projects in Canada, (iv) increased occupancy at our Australian Civeo owned villages and (v) increased activity in our U.S.

offshore and wellsite business.

These items were partially offset by a weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2022 compared to the first quarter of 2021.

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

Cost of Sales and Services.

Our consolidated cost of sales and services increased $14.0 million, or 14%, in the third quarter of 2021 compared to the third quarter of 2020.

This increase was primarily due to (i) increased occupancy at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages and the increased cost of

temporary labor due to ongoing labor shortages in Australia, (iv) increased activity levels in certain U.S.

markets and (v) a stronger Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2021 compared to the third quarter of 2020.

These items were partially offset by (i) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required and (ii) decreased activity at our U.S.

offshore fabrication business.

Our consolidated cost of sales and services increased $26.0 million, or 26%, in the first quarter of 2022 compared to the first quarter of 2021.

This increase was primarily due to (i) higher billed rooms at our Canadian lodges, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian Civeo owned villages and the increased cost of temporary labor due to ongoing labor shortages in Australia and (vi) increased activity in our U.S.

offshore business and wellsite business.

These items were partially offset by a weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2022 compared to the first quarter of 2021.

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

Selling, General and Administrative Expenses.

SG&A expense increased $3.9 million, or 29%, in the third quarter of 2021 compared to the third quarter of 2020.

This increase was primarily due to higher share-based compensation expense, compensation expense and professional fees related to the Company's recent debt offering efforts.

The increase in share-based compensation expense was due to an increase in our stock price during the third quarter of 2021 compared to the third quarter of 2020.

SG&A expense increased $1.0 million, or 7%, in the first quarter of 2022 compared to the first quarter of 2021.

This increase was primarily due to higher share-based compensation expense and information technology expense related to our newly implemented human capital management system.

The increase in share-based compensation expense was due to an increase in our stock price during the first quarter of 2022 compared to the first quarter of 2021.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $4.5 million, or 18%, in the third quarter of 2021 compared to the third quarter of 2020.

The decrease was primarily due to certain assets and intangibles becoming fully depreciated during 2020, partially offset by a stronger Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2021 compared to the third quarter of 2020.

Depreciation and amortization expense decreased $1.1 million, or 5%, in the first quarter of 2022 compared to the first quarter of 2021.

The decrease was primarily due to certain assets in Canada becoming fully depreciated during 2021 and the disposal of our West Permian Lodge during 2021 in the U.S.

Operating Income (Loss).

Consolidated operating income decreased $1.1 million, or 15%, in the third quarter of 2021 compared to the third quarter of 2020, primarily due to lower occupancy levels in Australia and higher SG&A expenses, partially offset by increased activity levels in Canada and lower depreciation and amortization expense in the third quarter of 2021 compared to the third quarter of 2020.

Consolidated operating income increased $14.1 million, or 143%, in the first quarter of 2022 compared to the first quarter of 2021, primarily due to higher activity levels in Canada and Australia in the first quarter of 2022 compared to the first quarter of 2021.

Interest Expense, net.

Net interest expense decreased by $0.4 million, or 11%, in the third quarter of 2021 compared to the third quarter of 2020, primarily related to lower average debt levels on credit facility borrowings during 2021 compared to 2020, partially offset by higher interest rates on credit facility borrowings.

Net interest expense decreased by $0.9 million, or 27%, in the first quarter of 2022 compared to the first quarter of 2021, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021 and lower interest rates on credit facility borrowings.

Other Income.

Consolidated other income decreased $4.2 million in the third quarter of 2021 compared to the third quarter of 2020, primarily due to $3.6 million of other income related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and higher gains on sale of assets in 2020 compared to 2021.

Consolidated other income decreased $3.2 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to $2.8 million of other income in 2021 related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and higher gains on sale of assets in 2021 compared to 2022.

Income Tax (Expense) Benefit.

Our income tax expense for the three months ended September 30, 2021 totaled $1.8 million, or 63.4% of pretax income, compared to an income tax expense of $0.2 million, or 2.4% of pretax income, for the three months ended September 30, 2020.

Our effective tax rate for both the three months ended September 30, 2021 and 2020 was impacted by considering Canada and the U.S.

Our income tax expense for the three months ended March 31, 2022 totaled $1.6 million, or 44.9% of pretax income, compared to an income tax expense of $1.1 million, or (12.9)% of pretax loss, for the three months ended March 31, 2021.

Our effective tax rate for both the three months ended March 31, 2022 and 2021 was impacted by considering Canada and the U.S.

loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Under ASC 740-270, "Accounting for Income Taxes," the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter's year-to-date provision.

Other Comprehensive (Loss) Income.

Other comprehensive income decreased $23.3 million in the third quarter of 2021 compared to the third quarter of 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

Other comprehensive income increased $9.6 million in the first quarter of 2022 compared to the first quarter of 2021, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

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

dollar decreased 3% in the third quarter of 2021 compared to a 2% increase in the third quarter of 2020.

dollar increased 1% in the first quarter of 2022 compared to a 1% increase in the first quarter of 2021.

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

dollar decreased 4% in the third quarter of 2021 compared to a 4% increase in the third quarter of 2020.

dollar increased 3% in the first quarter of 2022 compared to a 2% decrease in the first quarter of 2021.

Segment Results of Operations – Canadian Segment

Three Months Ended

September 30,

2022 2021 Change

25 unchanged sentences

(5) Billed rooms represents total billed days for owned assets for the periods presented.

Our Canadian segment reported revenues in the third quarter of 2021 that were $12.3 million, or 17%, higher than the third quarter of 2020.

The strengthening of the average exchange rate for the Canadian dollar relative to the U.S.

dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $4.4 million period-over-period increase in revenues.

Excluding the impact of the stronger Canadian exchange rate, the segment experienced an 11% increase in revenues.

This increase was driven by higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects.

Partially offsetting these items, revenue was lower from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.

Our Canadian segment cost of sales and services increased $7.8 million, or 15%, in the third quarter of 2021 compared to the third quarter of 2020.

The strengthening of the average exchange rate for the Canadian dollar relative to the U.S.

dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $3.2 million period-over-period increase in cost of sales and services.

Excluding the impact of the stronger Canadian exchange rate, the increased cost of sales and services was driven by increased occupancy at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects.

Partially offsetting these items, cost of sales and services decreased from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.

Our Canadian segment gross margin as a percentage of revenues increased from 28.4% in the third quarter of 2020 to 29.6% in the third quarter of 2021.

This was primarily driven by increased mobile asset activity and related operating efficiencies.

Our Canadian segment reported revenues in the first quarter of 2022 that were $34.1 million, or 55%, higher than the first quarter of 2021.

This increase was driven by higher billed rooms at our lodges as occupancy in the first quarter of 2021 was negatively impacted by the COVID-19 pandemic, particularly at our Sitka Lodge, higher average daily rate at our lodges largely due to mix and by increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $23.3 million, or 45%, in the first quarter of 2022 compared to the first quarter of 2021.

The increased cost of sales and services was driven by increased occupancy at our lodges and by increased mobile asset activity from pipeline projects.

Our Canadian segment gross margin as a percentage of revenues increased from 16.2% in the first quarter of 2021 to 21.6% in the first quarter of 2022.

This was primarily driven by increased lodge and mobile asset activity and related operating efficiencies.

Segment Results of Operations – Australian Segment

Three Months Ended

September 30,

2022 2021 Change

21 unchanged sentences

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

Our Australian segment reported revenues in the third quarter of 2021 that were $0.4 million, or 1%, higher than the third quarter of 2020.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $1.6 million period-over-period increase in revenues.

Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced decreased activity at our Bowen Basin villages and Gunnedah Basin villages, partially offset by increased occupancy at our integrated services villages.

Our Australian segment cost of sales and services increased $7.8 million, or 20%, in the third quarter of 2021 compared to the third quarter of 2020.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a $1.2 million period-over-period increase in cost of sales and services.

Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages.

Our Australian segment gross margin as a percentage of revenues decreased to 28.8% in the third quarter of 2021 from 40.4% in the third quarter of 2020.

This was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than the accommodation business.

The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins.

Reduced occupancy at the Bowen Basin villages and Western Australia villages further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels.

Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage in Australia which has been exacerbated by state and international border closures due to COVID-19.

State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor.

Our Australian segment reported revenues in the first quarter of 2022 that were $3.9 million, or 7%, higher than the first quarter of 2021.

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

dollar by 6% in the first quarter of 2022 compared to the first quarter of 2021 resulted in a $4.2 million period-over-period decrease in revenues.

Excluding the impact of the weaker Australian exchange rate, the Australian segment experienced increased activity at Civeo owned villages in the Bowen Basin.

Our Australian segment cost of sales and services increased $1.6 million, or 4%, in the first quarter of 2022 compared to the first quarter of 2021.

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

dollar by 6% in the first quarter of 2022 compared to the first quarter of 2021 resulted in a $3.0 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our Bowen Basin villages and increased costs of temporary labor due to ongoing labor shortages.

Our Australian segment gross margin as a percentage of revenues increased to 29.9% in the first quarter of 2022 from 28.1% in the first quarter of 2021.

This was primarily driven by improved margins at Civeo owned villages in the Bowen Basin as a result of increased occupancy.

Segment Results of Operations – U.S.

Three Months Ended

September 30,

2022 2021 Change

2 unchanged sentences

Gross margin as a % of revenues 1.2 % (28.5) % 29.7 %

segment reported revenues in the third quarter of 2021 that were $0.5 million, or 8%, lower than the third quarter of 2020.

This decrease was due to reduced activity in our offshore fabrication business, as two fabrication projects were completed in the third quarter of 2020, that did not recur to the same extent in 2021.

This decrease was partially offset by increased occupancy at our West Permian, Killdeer and Acadian Acres lodges.

segment cost of sales and services decreased in the third quarter of 2021 compared to the third quarter of 2020.

This decrease was due to reduced activity in our offshore fabrication business, as two fabrication projects were completed in the third quarter of 2020, that did not recur to the same extent in 2021.

segment gross margin as a percentage of revenues increased from (17.6)% in the third quarter of 2020 to 0.8% in the third quarter of 2021 primarily due to increased occupancy at our West Permian, Killdeer and Acadian Acres lodges and related operating efficiencies.

Results of Operations – Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Nine Months Ended

September 30,

2021 2020 Change

($ in thousands)

Canada $ 229,223 $ 204,119 $ 25,104

Australia 188,774 170,869 17,905

and other 16,672 21,363 (4,691)

Total revenues 434,669 396,351 38,318

Costs and expenses

Cost of sales and services

Canada 168,441 158,130 10,311

Australia 134,172 102,995 31,177

and other 16,629 22,755 (6,126)

Total cost of sales and services 319,242 283,880 35,362

Selling, general and administrative expenses 46,204 38,889 7,315

Depreciation and amortization expense 62,928 72,527 (9,599)

Impairment expense 7,935 144,120 (136,185)

Other operating expense 122 755 (633)

Total costs and expenses 436,431 540,171 (103,740)

Operating loss (1,762) (143,820) 142,058

Interest expense, net (10,343) (13,458) 3,115

Other income 6,066 17,209 (11,143)

Loss before income taxes (6,039) (140,069) 134,030

Income tax (expense) benefit (2,354) 8,509 (10,863)

Net loss (8,393) (131,560) 123,167

Net income attributable to noncontrolling interest 534 914 (380)

Net loss attributable to Civeo Corporation (8,927) (132,474) 123,547

Dividends attributable to preferred shares 1,440 1,411 29

Net loss attributable to Civeo common shareholders $ (10,367) $ (133,885) $ 123,518

We reported net loss attributable to Civeo for the nine months ended September 30, 2021 of $10.4 million, or $0.73 per diluted share.

As further discussed below, net loss included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

We reported net loss attributable to Civeo for the nine months ended September 30, 2020 of $133.9 million, or $9.48 per diluted share.

As further discussed below, net loss included (i) a $93.6 million pre-tax loss resulting from the impairment of goodwill in our Canada segment included in Impairment expense, (ii) a $38.1 million pre-tax loss resulting from the impairment of long-lived assets in our Canada segment included in Impairment expense and (iii) a $12.4 million pre-tax loss resulting from the impairment of long-lived assets in our U.S.

segment included in Impairment expense.

Net loss was partially offset by $4.7 million of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income.

Consolidated revenues increased $38.3 million, or 10%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

These items were partially offset by (i) lower revenue at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) decreased activity at our U.S.

wellsite and offshore businesses.

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

Cost of Sales and Services.

Our consolidated cost of sales and services increased $35.4 million, or 12%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This increase was primarily due to (i) greater activity at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects in Canada, (iii) increased occupancy at our Australian integrated services villages and increased cost of temporary labor due to ongoing labor shortages in Australia and (iv) a stronger Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

These items were partially offset by (i) reduced activity at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity in Canada, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) lower activity at our U.S.

wellsite and offshore businesses.

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

Selling, General and Administrative Expenses.

SG&A expense increased $7.3 million, or 19%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

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

In addition, SG&A expense increased approximately $2.2 million due to a stronger Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase in share-based compensation was due to an increase in our stock price during 2021 compared to 2020.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $9.6 million, or 13%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was primarily due to (i) certain assets and intangibles becoming fully depreciated during 2020, (ii) the impairment of certain long-lived assets in Canada and the U.S.

during the first quarter of 2020 and (iii) the extension of the remaining life of certain long-lived assets in the U.S.

during the third quarter of 2020.

These items were partially offset by a stronger Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Impairment Expense.

We recorded pre-tax impairment expense of $7.9 million in the nine months ended September 30, 2021 associated with long-lived assets in our Australian reporting unit.

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

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

• Pre-tax impairment expense of $38.1 million associated with long-lived assets in our Canadian reporting unit.

• Pre-tax impairment expense of $12.4 million associated with long-lived assets in our U.S.

reporting unit.

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

Operating Loss.

Consolidated operating loss decreased $142.1 million, or 99%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to impairment expense of goodwill and long-lived assets in 2020.

Interest Expense, net.

Net interest expense decreased by $3.1 million, or 23%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily related to lower average debt levels on term loan and revolving credit facility borrowings during 2021 compared to 2020.

Other Income.

Consolidated other income decreased $11.1 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The nine months ended September 30, 2021 included $3.5 million of other income related to proceeds from the CEWS.

The nine months ended September 30, 2020 included $9.7 million of other income related to proceeds from the CEWS and $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition.

In addition, 2020 included a higher gain on sale of assets compared to 2021.

Income Tax (Expense) Benefit.

Our income tax expense for the nine months ended September 30, 2021 totaled $2.4 million, or (39.0)% of pretax loss, compared to an income tax benefit of $8.5 million, or 6.1% of pretax loss, for the nine months ended September 30, 2020.

Our effective tax rate for both the nine months ended September 30, 2021 and 2020 was

impacted by considering Canada and the U.S.

loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

Our effective tax rate for the nine months ended September 30, 2021 was impacted by an increase in the valuation allowance related to the impairment of land in Australia.

Our effective tax rate for the nine months ended September 30, 2020 was impacted by a deferred tax benefit of $9.0 million, offset by a valuation allowance of $0.1 million, against the Canadian net deferred tax assets.

Other Comprehensive Loss.

Other comprehensive loss increased $7.4 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

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

dollar was flat in the nine months ended September 30, 2021 compared to a 3% decrease in the nine months ended September 30, 2020.

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

dollar decreased 7% in the nine months ended September 30, 2021 compared to a 2% increase in the nine months ended September 30, 2020.

Segment Results of Operations – Canadian Segment

Nine Months Ended

September 30,

2021 2020 Change

Revenues ($ in thousands)

Accommodation revenue (1)

$ 176,800 $ 156,068 $ 20,732

Mobile facility rental revenue (2)

38,240 21,715 16,525

Food service and other services revenue (3)

14,183 26,336 (12,153)

Total revenues $ 229,223 $ 204,119 $ 25,104

Cost of sales and services ($ in thousands)

Accommodation cost $ 124,798 $ 109,143 $ 15,655

Mobile facility rental cost 23,562 17,099 6,463

Food service and other services cost 12,583 23,773 (11,190)

Indirect other costs 7,498 8,115 (617)

Total cost of sales and services $ 168,441 $ 158,130 $ 10,311

Gross margin as a % of revenues 26.5 % 22.5 % 4.0 %

Average daily rate for lodges (4)

$ 97 $ 95 $ 2

Total billed rooms for lodges (5)

1,816,407 1,626,668 189,739

Average Canadian dollar to U.S.

dollar $ 0.799 $ 0.739 $ 0.060

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

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

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

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

(5) Billed rooms represents total billed days for owned assets for the periods presented.

Our Canadian segment reported revenues in the nine months ended September 30, 2021 that were $25.1 million, or 12%, higher than the nine months ended September 30, 2020.

The strengthening of the average exchange rate for the Canadian dollar relative to the U.S.

dollar by 8% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $17.7 million period-over-period increase in revenues.

Excluding the impact of the stronger Canadian exchange rate, the revenue increase was due to higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects.

Partially offsetting these items, revenue was lower at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order affecting activity in the first half of the year and from reduced food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required.

Our Canadian segment cost of sales and services increased $10.3 million, or 7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The strengthening of the average exchange rate for the Canadian dollar relative to the U.S.

dollar by 8% in the nine months ended September 30, 2021 compared to the nine months ended

September 30, 2020 resulted in a $12.7 million period-over-period increase in cost of sales and services.

Excluding the impact of the stronger Canadian exchange rate, the decreased cost of sales and services was driven by reduced activity at our Sitka Lodge related to the COVID-19 pandemic and reduced food services activity, as an overflow site supporting a LNG related project in 2020 is no longer required.

Partially offsetting these items, cost of sales and services increased due to greater activity at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects.

Our Canadian segment gross margin as a percentage of revenues increased from 22.5% in the nine months ended September 30, 2020 to 26.5% in the nine months ended September 30, 2021.

This was primarily driven by increased mobile asset activity and related operating efficiencies.

Segment Results of Operations – Australian Segment

Nine Months Ended

September 30,

2021 2020 Change

Revenues ($ in thousands)

Accommodation revenue (1)

$ 109,559 $ 106,988 $ 2,571

Food service and other services revenue (2)

79,215 $ 63,881 $ 15,334

Total revenues $ 188,774 $ 170,869 $ 17,905

Cost of sales and services ($ in thousands)

Accommodation cost $ 53,538 $ 46,665 $ 6,873

Food service and other services cost 75,458 53,627 21,831

Indirect other cost 5,176 2,703 2,473

Total cost of sales and services $ 134,172 $ 102,995 $ 31,177

Gross margin as a % of revenues 28.9 % 39.7 % (10.8) %

Average daily rate for villages (3)

$ 79 $ 72 $ 7

Total billed rooms for villages (4)

1,382,182 1,487,819 (105,637)

Australian dollar to U.S.

dollar $ 0.759 $ 0.677 $ 0.082

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

(2) Includes revenues related to food services and other services, including facilities management for the periods presented.

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

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

Our Australian segment reported revenues in the nine months ended September 30, 2021 that were $17.9 million, or 10%, higher than the nine months ended September 30, 2020.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 12% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $20.0 million period-over-period increase in revenues.

Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced reduced revenue due to decreased activity at our Bowen Basin villages and Western Australia villages, partially offset by increased occupancy at our integrated services villages.

Our Australian segment cost of sales and services increased $31.2 million, or 30%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The strengthening of the average exchange rate for Australian dollars relative to the U.S.

dollar by 12% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 resulted in a $14.2 million period-over-period increase in cost of sales and services.

Our Australian segment gross margin as a percentage of revenues decreased to 28.9% in the nine months ended September 30, 2021 from 39.7% in the nine months ended September 30, 2020.

This decrease was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than

the accommodation business.

The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins.

Reduced occupancy at the Bowen Basin villages and Western Australia villages, further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels.

Segment Results of Operations – U.S.

Nine Months Ended

September 30,

2021 2020 Change

Revenues ($ in thousands) $ 16,672 $ 21,363 $ (4,691)

Cost of sales and services ($ in thousands) $ 16,629 $ 22,755 $ (6,126)

Gross margin as a % of revenues 0.3 % (6.5) % 6.8 %

segment reported revenues in the nine months ended September 30, 2021 that were $4.7 million, or 22%, lower than the nine months ended September 30, 2020.

This decrease was due to reduced U.S.

drilling activity affecting our wellsite business and reduced activity in our offshore fabrication business as a number of projects were completed in 2020 that did not recur to the same extent in 2021.

These decreases were partially offset by increased activity at our West Permian, Killdeer and Acadian Acres lodges.

segment cost of sales and services decreased $6.1 million, or 27%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This decrease was due to reduced U.S.

drilling activity affecting our wellsite business, reduced activity in our offshore fabrication business as a number of projects were completed in 2020 that did not recur to the same extent in 2021 and reduced costs at our West Permian lodge under a new customer contract.

segment gross margin as a percentage of revenues increased 6.8% from the nine months ended September 30, 2020 to the nine months ended September 30, 2021, primarily due to improved margins at our West Permian lodge under a new customer contract and in our offshore business from product sales, partially offset by reduced operating efficiencies at lower activity levels in our wellsite business.

segment reported revenues in the first quarter of 2022 that were $2.3 million, or 59%, higher than the first quarter of 2021.

This increase was due to increased activity in our offshore rental and fabrication businesses and increased U.S.

drilling activity positively impacting our wellsite business.

segment cost of sales and services increased in the first quarter of 2022 compared to the first quarter of 2021.

This increase was due to increased activity in our offshore rental and fabrication businesses and increased U.S.

drilling activity positively impacting our wellsite business.

These increases were partially offset by reduced costs from our former West Permian lodge, which operated in the first quarter of 2021 and was sold in the fourth quarter of 2021.

segment gross margin as a percentage of revenues increased from (28.5)% in the first quarter of 2021 to 1.2% in the first quarter of 2022 primarily due to improved operating efficiencies in our offshore and wellsite businesses at higher activity levels.

Liquidity and Capital Resources

Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our hospitality services, developing new lodges and villages, purchasing or leasing land, and for general working capital needs.

In addition, capital has been used to repay debt and fund strategic business acquisitions.

In addition, capital has been used to repay debt, repurchase our common shares and fund strategic business acquisitions.

Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances.

In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions, refinance debt or retire preferred shares.

The following table summarizes our consolidated liquidity position as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

The following table summarizes our consolidated liquidity position as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Lender commitments $ 200,000 $ 200,000

4 unchanged sentences

Total available liquidity $ 83,081 $ 92,817

Cash totaling $63.2 million was provided by operations during the nine months ended September 30, 2021, compared to $80.7 million provided by operations during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021 and 2020, $5.0 million was used in working capital and $4.6 million was provided by working capital, respectively.

The decrease in cash provided by working capital in 2021 compared to 2020 is largely due to increased accounts receivable balances, partially offset by increased accounts payable and accrual balances.

Cash was used in investing activities during the nine months ended September 30, 2021 in the amount of $2.1 million, compared to cash provided by investing activities during the nine months ended September 30, 2020 in the amount of $1.7 million.

The decrease in cash provided by investing activities was primarily due to $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition and lower capital expenditures during the nine months ended September 30, 2020, partially offset by higher proceeds from the sale of our manufacturing facility and mobile assets in Canada during the nine months ended September 30, 2021.

Capital expenditures totaled $9.6 million and $6.2 million during the nine months ended September 30, 2021 and 2020, respectively.

We expect our capital expenditures for 2021, exclusive of any business acquisitions or any growth capital expenditures, to be approximately $20 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts.

Cash totaling $2.0 million was provided by operations during the three months ended March 31, 2022, compared to $12.8 million provided by operations during the three months ended March 31, 2021.

During the three months ended March 31, 2022 and 2021, $21.8 million and $0.1 million was used in working capital, respectively.

The increase in cash used in working capital in 2022 compared to 2021 is largely due to increased accounts receivable balances resulting from increased activity in our Canadian and Australian businesses during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 and decreased accounts payable and accrual balances largely due to timing of payments.

Cash was used in investing activities during the three months ended March 31, 2022 in the amount of $1.0 million, compared to cash provided by investing activities during the three months ended March 31, 2021 in the amount of $3.3 million.

The decrease in cash provided by investing activities was primarily due to proceeds from the sale of our manufacturing facility and mobile assets in Canada during the three months ended March 31, 2021.

Capital expenditures totaled $3.6 million and $3.4 million during the three months ended March 31, 2022 and 2021, respectively.

We expect our capital expenditures for 2022 to be in the range of $20 million to $25 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments.

Whether planned expenditures will actually be spent in 2022 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing.

1 unchanged sentence

The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction.

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

Net cash of $61.1 million was used in financing activities during the nine months ended September 30, 2021 primarily due to repayments of term loan borrowings of $117.6 million, $1.1 million used to settle tax obligations on vested shares under our share-based compensation plans, debt issuance costs of $4.4 million and $0.4 million used to repurchase our common shares, partially offset by net borrowings under our revolving credit facilities of $62.5 million.

Net cash of $79.6 million was used in financing activities during the nine months ended September 30, 2020 primarily due to net repayments under our revolving credit facilities of $44.5 million, repayments of term loan borrowings of $31.1 million, $1.5 million used to settle tax obligations on vested shares under our share-based compensation plans and debt issuance costs of $2.6 million.

The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2021 (in thousands):

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

Net cash of $1.3 million was used in financing activities during the three months ended March 31, 2022 primarily due to term loan repayments of $8.0 million and $1.0 million used to settle tax obligations on vested shares under our share-based compensation plans, partially offset by net borrowings under our revolving credit facilities of $7.7 million.

Net cash of $16.7 million was used in financing activities during the three months ended March 31, 2021 primarily due to net repayments under our revolving credit facilities of $6.7 million, repayments of term loan borrowings of $8.9 million and $1.1 million used to settle tax obligations on vested shares under our share-based compensation plans.

The following table summarizes the changes in debt outstanding during the three months ended March 31, 2022 (in thousands):

Balance at December 31, 2021 $ 175,130

3 unchanged sentences

Translation 3,100

Balance at September 30, 2021 $ 195,237

Balance at March 31, 2022 $ 177,907

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

If our plans or assumptions change, including as a result of the impact of COVID-19 or the decline in the price of and demand for oil, or are inaccurate, or if we make acquisitions, we may need to raise additional capital.

If our plans or assumptions change, including as a result of the impact of COVID-19 or changes in price of and demand for oil, or are inaccurate, or if we make acquisitions, we may need to raise additional capital.

Acquisitions have been, and our management believes acquisitions will continue to be, an element of our long-term business strategy.

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Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control.

In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant

burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

Amended and Restated Credit Agreement

As of December 31, 2020, our Amended and Restated Credit Agreement provided for:

(i) a $167.3 million revolving credit facility scheduled to mature on May 30, 2023, allocated as follows:

(A) a $10.0 million senior secured revolving credit facility in favor of certain of our U.S.

subsidiaries, as borrowers;

(B) a $122.3 million senior secured revolving credit facility in favor of Civeo and certain of our Canadian subsidiaries, as borrowers;

(C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower;

and (D) a $194.8 million term loan facility scheduled to mature on May 30, 2023 for certain lenders in favor of Civeo.

New Syndicated Facility Agreement

On September 8, 2021, we entered into a new Syndicated Facility Agreement (Credit Agreement), which, among other things, as compared to the Amended and Restated Credit Agreement outstanding prior to the effectiveness of the Credit Agreement provided for:

In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

In August 2021, our Board authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 715,814 common shares, over a twelve month period.

See Note 11 – Share Repurchase Program to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Credit Agreement

As of March 31, 2022, our Credit Agreement (as then amended to date, the Credit Agreement) provided for:

(i) a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, allocated as follows:

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and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower;

In addition, it provided for a C$100.0 million term loan facility scheduled to be fully repaid on December 31, 2023 for certain lenders in favor of Civeo.

As of September 30, 2021, we had outstanding letters of credit of $0.9 million under the U.S.

and (ii) a C$100.0 million term loan facility scheduled to be fully repaid on December 31, 2023 in favor of Civeo.

As of March 31, 2022, we had outstanding letters of credit of $0.3 million under the U.S.

facility, zero under the Australian facility and $1.2 million under the Canadian facility.

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The preferred shares we issued in the Noralta acquisition are entitled to receive a 2% annual dividend on the liquidation preference (initially $10,000 per share), paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof.

Quarterly dividends were paid in-kind on September 30, 2021, thereby increasing the liquidation preference to $10,723 per share as of September 30, 2021.

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

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

For additional information about our contractual obligations, refer to “Liquidity and Capital Resources—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020.

As of September 30, 2021, except for

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

Quarterly dividends were paid in-kind on March 31, 2022, thereby increasing the liquidation preference to $10,830 per share as of March 31, 2022.

We currently expect to pay dividends on the preferred shares through an increase in liquidation preference rather than cash until they mandatorily convert to Civeo common shares in April 2023.

Critical Accounting Policies

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis