What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-08-04 · 182 added, 165 removed, 384 unchanged (47% of the section changed)

17 unchanged sentences

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

In the second quarter of 2022, approximately 64% of our revenue was generated by our lodges in Canada and our villages in Australia.

In the third quarter of 2022, approximately 60% of our revenue was 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.

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

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

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

These price increases have, and are expected to continue to have, a negative impact on our labor and food costs, as well as consumable costs such as fuel.

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

We are managing inflation risk with negotiated 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 in 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.

These supply/demand dynamics have continued in 2022 and have been exacerbated by the recent conflict between Russia and Ukraine and related sanctions on Russia as well as actions taken by OPEC+ to adjust production levels, which are decreasing global fossil fuel supply even further.

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

In response, several governments, including the U.S.

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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 second quarter of 2022 averaged $92.89 per barrel compared to an average of $53.27 in the second quarter of 2021.

The WCS Differential increased from $14.12 per barrel at the end of the fourth quarter of 2021 to $18.16 at the end of the second quarter of 2022.

As of July 25, 2022, the WTI price was $99.60 and the WCS price was $76.26, resulting in a WCS Differential of $23.34.

WCS prices in the third quarter of 2022 averaged $70.70 per barrel compared to an average of $57.58 in the third quarter of 2021.

The WCS Differential increased from $14.12 per barrel at the end of the fourth quarter of 2021 to $21.72 at the end of the third quarter of 2022.

As of October 21, 2022, the WTI price was $86.65 and the WCS price was $58.72, resulting in a WCS Differential of $27.93.

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 half 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, inflationary pressures and regulatory implications on such prices, which could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.

Customers began increasing production activity in the fourth quarter of 2020 and production capacity has approached pre-

pandemic levels in 2022.

Although oil prices reached multi-year highs in the first half of 2022, there is continued uncertainty around commodity price levels, including the impact of COVID-19, inflationary pressures, actions taken by OPEC+ to adjust production levels and regulatory implications on such prices, which could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets.

British Columbia, Canada.

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

LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of Royal Dutch Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility).

LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility).

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

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

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

Our current expectation is that our contracted commitments associated with the CGL pipeline project will be completed in 2023.

Any new delays in facility or pipeline construction may result in extensions to these dates.

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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 decreased by 5.5% through June 2022 compared to the same period of 2021.

Analysts forecast steel production for 2022 to be subdued for the full year 2022 compared to 2021 with reduced residential construction activity offsetting stronger global infrastructure activity.

As of July 25, 2022, met coal spot prices were $230 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.

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the level of global steel production, which decreased by 5.1% through August 2022 compared to the same period of 2021.

Analysts forecast steel production for 2022 to remain subdued for the full year when compared to 2021, as a result of weakness in the Chinese residential sector and slowing global growth due to inflationary pressures.

As of October 21, 2022, met coal spot prices were $285 per metric tonne.

Steel output is forecast to improve marginally through 2024, with large infrastructure rollouts in a number of major economies including the U.S.

The Chinese embargo on Australian coal continues.

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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.

Since the historic highs in early 2022, prices have retreated to approximately $230 per tonne with a weakening in steel demand coupled with Chinese lockdowns and concerns about a global economic slowdown.

Analysts expect prices to remain stagnant, with some volatility in prices in the near term, recovering to near $300 per tonne in the second half of 2022.

As the trade impasse with China remains unresolved and as the Ukraine conflict continues, there remains volatility in both the short and medium term.

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

Since the historic highs in early 2022, prices have stabilized with weather-related supply interruptions in Australia offset by weakening steel demand.

Analysts forecast the current stable prices to rise in the fourth quarter 2022 due to higher demand in India and supply pressure related La Niña impacts in Australia’s production.

Analysts are forecasting prices to remain close to $250 into 2023, though volatility with both supply and demand drivers could impact prices and drive them higher or lower.

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

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

Iron ore prices have remained relatively stable in the first half of 2022, albeit with a decrease in early July.

As of July 22, 2022, iron ore spot prices were $92.51 per metric tonne, which reflects a softening in prices since early 2022 as new COVID restrictions in China and weaker steel production impact demand.

While there is anticipation of infrastructure-related construction activity improving in China, this factor will be tempered with a slowdown in

residential activity and COVID-19 impacts.

Accordingly, iron ore prices are expected to moderate above current levels during the second half of 2022.

Australian iron ore exports in 2022 are forecast to exceed both 2020 and 2021 volumes and continue to grow over the medium term through to 2024.

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.

Through the second half of 2021, with forced cuts in Chinese steel production, prices retreated from the peaks experienced in mid-2021.

Iron ore prices remained stable through early 2022 and fell to just below $100 during the third quarter of 2022 with a slowdown in steel production.

As of October 20, 2022, iron ore spot prices were $87.84 per metric tonne.

Analysts anticipate that infrastructure-led construction activity in China and other large world economies will continue to stabilize prices at current levels, though residential activity in China remains subdued.

Analysts forecast pricing through 2023 to remain between $90 and $110.

In September, we sold our wellsite services business.

Our remaining U.S.

business supports offshore oil and gas activities in the Gulf of Mexico, completion activity in the Bakken and construction and turnaround work in the Louisiana industrial area.

All these activities are primarily tied to WTI oil prices in the U.S.

In 2020, the U.S.

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

With the recovery of oil prices, oil rig count and drilling activity have recovered substantially, with 594 oil rigs active at the end of the second quarter 2022.

The Permian Basin remains the most active U.S.

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

at the end of the second quarter of 2022.

With the recovery of oil prices, oil rig count and drilling activity have recovered substantially, with 604 oil rigs active at the end of the third quarter 2022.

The increase in the U.S.

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

oil production from an average of 11.3 million barrels per day in 2021 to an average of 11.6 million barrels per day at the end of April 2022.

As of July 22, 2022, there were 599 active oil rigs in the U.S.

oil production from an average of 11.3 million barrels per day in 2021 to an average of 11.8 million barrels per day at the end of July 2022.

As of October 21, 2022, there were 612 active oil rigs in the U.S.

(as measured by Bakerhughes.com).

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.

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

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

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(per tonne) Iron

Third Quarter through July 25, 2022

Fourth Quarter through October 21, 2022

$ 87.20 $ 59.78 $ 279.41 $ 92.31

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 Change Percentage 2022 2021 Change Percentage

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dollar $0.683 $0.735 ($0.05) (7.1)% $0.707 $0.759 ($0.05) (6.8)%

June 30, 2022 December 31, 2021 Change Percentage

September 30, 2022 December 31, 2021 Change Percentage

Canadian dollar to U.S.

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Capital Expenditures.

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, inflation, the COVID-19 global pandemic and the responses thereto in order to plan our business activities.

We currently expect that our 2022 capital expenditures, including the capital expenditures associated with our recently announced 12-year contract renewal for our Wapasu Lodge in the Canadian oil sands, will be in the range of approximately $24 million to $29 million, compared to 2021 capital expenditures of $15.6 million.

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

We currently expect that our 2022 capital expenditures will be in the range of approximately $24 million to $29 million, compared to 2021 capital expenditures of $15.6 million.

We previously increased 2022 capital expenditures estimates primarily as a result of recently awarded contracts for our Wapasu Lodge in Canada and our Australian integrated services business in Western Australia.

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.

We have agreed to not renew an expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which currently expires in June 2023, to support our customer’s intent to mine the land where the lodge currently resides.

We are currently working with the customer to (i) secure an alternative site for the lodge and (ii) obtain a contract to economically justify the cost of moving and reinstalling the lodge assets.

However, we can provide no assurances that we will reach an agreement on a satisfactory contract to support the future utilization of the McClelland assets and the resulting impact could negatively affect our results of operations, financial condition and cash flows.

We are in preliminary discussions with potential strategic joint venture partners that would participate in both the economics of relocating the lodge and its ongoing ownership.

We expect to have further clarity on any potential contract associated with our McClelland Lake Lodge in the first half of 2023.

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

Results of Operations

Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2022, is based on a comparison to the corresponding periods of 2021.

Results of Operations – Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Unless otherwise indicated, discussion of results for the three and nine months ended September 30, 2022, is based on a comparison to the corresponding periods of 2021.

Results of Operations – Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Three Months Ended

September 30,

2022 2021 Change

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Depreciation and amortization expense 22,608 20,282 2,326

Impairment expense — 7,935 (7,935)

Other operating (income) expense (339) 21 (360)

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Other income 2,179 364 1,815

Income (loss) before income taxes 12,051 (482) 12,533

Income tax (expense) benefit (1,821) 492 (2,313)

Income before income taxes 9,976 2,792 7,184

Income tax expense (3,713) (1,770) (1,943)

Net income 6,263 1,022 5,241

Net income (loss) attributable to noncontrolling interest 662 (3) 665

Net income attributable to noncontrolling interest 546 478 68

Net income attributable to Civeo Corporation 5,717 544 5,173

Dividends attributable to preferred shares 492 482 10

Net income (loss) attributable to Civeo common shareholders $ 9,078 $ (467) $ 9,545

We reported net income attributable to Civeo for the quarter ended June 30, 2022 of $9.1 million, or $0.54 per diluted share compared to net loss attributable to Civeo for the quarter ended June 30, 2021 of $0.5 million, or $0.03 per diluted share.

As further discussed below, net loss for the quarter ended June 30, 2021 included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

Consolidated revenues increased $30.8 million, or 20%, in the second quarter of 2022 compared to the second quarter of 2021.

This increase was primarily due to (i) higher billed rooms at our Canadian lodges as occupancy in the second quarter of 2021 was negatively impacted by the COVID-19 pandemic, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increased mobile asset activity from pipeline projects in Canada, (iv) increased activity at our Australian integrated services villages in Western Australia and (v) increased activity at our Australian Bowen Basin owned villages.

Net income attributable to Civeo common shareholders $ 5,225 $ 62 $ 5,163

We reported net income attributable to Civeo for the quarter ended September 30, 2022 of $5.2 million, or $0.32 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2021 of $0.1 million, or $0.00 per diluted share.

Consolidated revenues increased $29.2 million, or 19%, in the third quarter of 2022 compared to the third quarter of 2021.

This increase was primarily due to (i) higher billed rooms at our Canadian lodges related to turnaround activities by a number of customers, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increased mobile asset activity from pipeline projects in Canada, (iv) increased activity at our Civeo owned villages in the Australian Bowen and Gunnedah Basins and (v) increased activity at our Australian integrated services villages in Western Australia.

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

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

dollar in the third quarter of 2022 compared to the third 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 $22.1 million, or 20%, in the second quarter of 2022 compared to the second 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 activity at our Australian integrated services villages, (iv) increased activity at our Australian Bowen Basin owned villages and (v) increased cost of

temporary labor due to ongoing labor shortages in Australia.

Our consolidated cost of sales and services increased $22.1 million, or 20%, in the third quarter of 2022 compared to the third 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 activity at our Civeo owned villages in the Australian Bowen and Gunnedah Basins and (iv) increased activity at our Australian integrated services villages in Western Australia.

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

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

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

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

Selling, General and Administrative Expenses.

SG&A expense increased $3.0 million, or 20%, in the second quarter of 2022 compared to the second quarter of 2021.

This increase was primarily due to higher share-based compensation expense, travel and entertainment expense and information technology expense.

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

SG&A expense increased $0.4 million, or 2%, in the third quarter of 2022 compared to the third quarter of 2021.

This increase was primarily due to higher information technology expense and travel and entertainment expense.

This increase in information technology expense was related to set-up costs incurred in a cloud computing arrangement for our newly implemented human capital management system, which are being amortized through SG&A expense instead of depreciation and amortization expense.

The increase in travel and entertainment expenses was largely a result of a return to more normalized travel expenses with the lifting of travel restrictions associated with COVID-19.

This increase in information technology expense was related to implementation costs incurred in a cloud computing arrangement for our newly implemented human capital management system, which are being amortized through SG&A expense instead of depreciation and amortization expense.

These items were partially offset by lower incentive compensation costs and a weaker Australian and Canadian dollar relative to the U.S.

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

Depreciation and Amortization Expense.

Depreciation and amortization expense increased $1.7 million, or 8%, in the second quarter of 2022 compared to the second quarter of 2021.

Depreciation and amortization expense increased $2.3 million, or 11%, in the third quarter of 2022 compared to the third quarter of 2021.

The increase was primarily due to shortening the lives on certain assets in Canada, partially offset by certain assets in Canada becoming fully depreciated during 2021 and the disposal of our West Permian Lodge in the U.S.

Impairment Expense.

We recorded pre-tax impairment expense of $7.9 million in the second quarter of 2021 associated with long-lived assets in our Australian reporting unit.

See Note 3 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

In addition, depreciation and amortization expense decreased due to a weaker Australian and Canadian dollar relative to the U.S.

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

Operating Income.

Consolidated operating income increased $12.1 million, or 569%, in the second quarter of 2022 compared to the second quarter of 2021, primarily due to higher activity levels in Canada in the second quarter of 2022 compared to the second quarter of 2021 and lower impairment expense in Australia in the second quarter of 2022 compared to the second quarter of 2021.

Consolidated operating income increased $4.8 million, or 79%, in the third quarter of 2022 compared to the third quarter of 2021, primarily due to higher activity levels in Canada and Australia in the third quarter of 2022 compared to the third quarter of 2021.

Interest Expense, net.

Net interest expense decreased by $0.8 million, or 23%, in the second quarter of 2022 compared to the second quarter of 2021, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021, partially offset by higher interest rates on credit facility borrowings.

Net interest expense decreased by $0.6 million, or 17%, in the third quarter of 2022 compared to the third quarter of 2021, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021, partially offset by higher interest rates on credit facility borrowings.

Other Income.

Consolidated other income increased $1.8 million in the third quarter of 2022 compared to the third quarter of 2021 primarily due to higher gain on the sale of assets related to the sale of our Kambalda village and an undeveloped land holding in Australia, our wellsite business in the U.S.

and various mobile assets and unused corporate office space in Canada in the third quarter of 2022 compared to the third quarter of 2021.

Income Tax (Expense) Benefit.

Our income tax expense for the three months ended June 30, 2022 totaled $1.8 million, or 15.1% of pretax income, compared to an income tax benefit of $0.5 million, or 102.1% of pretax loss, for the three months ended June 30, 2021.

Our effective tax rate for both the three months ended June 30, 2022 and 2021 was impacted by considering Canada and the U.S.

Our income tax expense for the three months ended September 30, 2022 totaled $3.7 million, or 37.2% of pretax income, compared to an income tax expense of $1.8 million, or 63.4% of pretax income, for the three months ended September 30, 2021.

Our effective tax rate for the three months ended September 30, 2022 was impacted by considering the U.S.

a loss jurisdiction that was removed from the annual effective tax rate computation for purposes of computing the interim tax provision.

For the three months ended September 30, 2021, our effective tax rate was impacted by considering Canada and the U.S.

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

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Other Comprehensive (Loss) Income.

Other comprehensive loss increased $18.5 million in the second quarter of 2022 compared to the second 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.

Other comprehensive loss increased $8.5 million in the third quarter of 2022 compared to the third 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 second quarter of 2022 compared to a 1% increase in the second quarter of 2021.

dollar decreased 6% in the third quarter of 2022 compared to a 3% decrease in the third quarter of 2021.

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

dollar decreased 8% in the second quarter of 2022 compared to a 2% decrease in the second quarter of 2021.

dollar decreased 6% in the third quarter of 2022 compared to a 4% decrease in the third quarter of 2021.

Segment Results of Operations – Canadian Segment

Three Months Ended

September 30,

2022 2021 Change

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

Our Canadian segment reported revenues in the second quarter of 2022 that were $25.7 million, or 31%, higher than the second quarter of 2021.

Our Canadian segment reported revenues in the third quarter of 2022 that were $19.0 million, or 23%, higher than the third quarter of 2021.

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

dollar by 4% in the second quarter of 2022 compared to the second quarter of 2021 resulted in a $4.4 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the increase was driven by (i) higher billed rooms at our lodges as occupancy in the second quarter of 2021 was negatively impacted by the COVID-19 pandemic, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $17.7 million, or 31%, in the second quarter of 2022 compared to the second quarter of 2021.

dollar by 3% in the third quarter of 2022 compared to the third quarter of 2021 resulted in a $3.7 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the increase was driven by (i) higher billed rooms at our lodges related to turnaround activities by a number of customers, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $13.7 million, or 23%, in the third quarter of 2022 compared to the third quarter of 2021.

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

dollar by 4% in the second quarter of 2022 compared to the second quarter of 2021 resulted in a $3.0 million period-over-period decrease in cost of sales and services.

dollar by 3% in the third quarter of 2022 compared to the third quarter of 2021 resulted in a $2.6 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rate, the increase in 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 was largely unchanged, increasing from 31.1% in the second quarter of 2021 to 31.2% in the second quarter of 2022.

Accommodation gross margin as a percentage of revenues decreased from 35.5% in the second quarter of 2021 to 33.1% in the second quarter of 2022, as 2021 benefited more significantly from billed rooms that were unused by clients under take-or-pay arrangements.

Mobile facility gross margin as a percentage of revenues increased from 34.9% in the second quarter of 2021 to 39.9% in the second quarter of 2022, due to increased mobile asset activity and related operating efficiencies.

Our Canadian segment gross margin as a percentage of revenues was largely unchanged, decreasing from 29.6% in the third quarter of 2021 to 29.3% in the third quarter of 2022.

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 second quarter of 2022 that were $3.8 million, or 6%, higher than the second quarter of 2021.

Our Australian segment reported revenues in the third quarter of 2022 that were $8.7 million, or 13%, higher than the third quarter of 2021.

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

dollar by 7% in the second quarter of 2022 compared to the second quarter of 2021 resulted in a $5.3 million period-over-period decrease in revenues.

dollar by 7% in the third quarter of 2022 compared to the third quarter of 2021 resulted in a $5.5 million period-over-period decrease in revenues.

On a constant currency basis, the Australian segment experienced a 22% period-over-period increase in revenues.

Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our integrated services villages in Western Australia and Civeo owned villages in the Bowen Basin.

Our Australian segment cost of sales and services increased $2.8 million, or 6%, in the second quarter of 2022 compared to the second quarter of 2021.

Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen and Gunnedah Basins and our integrated services sites in Western Australia.

Our Australian segment cost of sales and services increased $7.0 million, or 15%, in the third quarter of 2022 compared to the third quarter of 2021.

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

dollar by 7% in the second quarter of 2022 compared to the second quarter of 2021 resulted in a $3.7 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 (i) increased activity at our integrated services villages in Western Australia, (ii) increased activity our Civeo owned villages in the Bowen Basin and, to a lesser extent, (iii) increased costs of temporary labor due to ongoing labor shortages.

Our Australian segment gross margin as a percentage of revenues decreased to 29.7% in the second quarter of 2022 from 29.9% in the second quarter of 2021.

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

dollar by 7% in the third quarter of 2022 compared to the third quarter of 2021 resulted in a $4.0 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 activity at our Civeo owned villages in the Bowen and Gunnedah Basins and our integrated services sites in Western Australia.

Our Australian segment gross margin as a percentage of revenues decreased to 27.7% in the third quarter of 2022 from 28.8% in the third quarter of 2021.

This was primarily driven by a higher proportion of revenue from our integrated services business, which has a service-only business model and therefore generates lower overall gross margins than our accommodation business.

Segment Results of Operations – U.S.

Three Months Ended

September 30,

2022 2021 Change

2 unchanged sentences

Gross margin as a % of revenues 1.7 % 0.8 % 0.9 %

segment reported revenues in the second quarter of 2022 that were $1.2 million, or 18%, higher than the second quarter of 2021.

segment reported revenues in the third quarter of 2022 that were $1.5 million, or 26%, higher than the third quarter of 2021.

This increase was due to greater U.S.

drilling activity positively impacting our wellsite business.

This increase was partially offset by reduced revenue from our former West Permian Lodge, which operated in the second quarter of 2021 and was sold in the fourth quarter of 2021, and reduced activity in our offshore business as certain projects were completed in the second quarter of 2021 that did not recur to the same extent in 2022.

segment cost of sales and services increased $1.6 million, or 28%, in the second quarter of 2022 compared to the second quarter of 2021.

drilling activity positively impacting our wellsite business in July and August, partially offset by reduced revenue due to the sale of this business on September 1, 2022.

In addition, the offshore business had increased activity from completed projects and unit sales in the third quarter of 2022 that did not occur to the same extent in the third quarter of 2021.

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

segment cost of sales and services increased $1.4 million, or 25%, in the third quarter of 2022 compared to the third quarter of 2021.

This increase was due to greater U.S.

drilling activity positively impacting our wellsite business, partially offset by lower costs in our offshore business as certain projects were completed in the second quarter of 2021 that did not recur to the same extent in 2022.

segment gross margin as a percentage of revenues decreased from 16.2% in the second quarter of 2021 to 9.4% in the second quarter of 2022 primarily due to our former West Permian Lodge, which operated in the second quarter of 2021 and was sold in the fourth quarter of 2021, and reduced margins from our offshore business as the second quarter of 2021 was positively impacted by higher margins from product sales.

These were partially offset by improved margins in our wellsite business due to operating efficiencies at higher activity levels.

Results of Operations – Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Six Months Ended

drilling activity impacting our wellsite business in July and August.

segment gross margin as a percentage of revenues increased from 0.8% in the third quarter of 2021 to 1.7% in the third quarter of 2022 primarily due to improved margins in our wellsite business due to operating efficiencies at higher activity levels and increased margins from product sales in our offshore business.

These were partially offset by our former West Permian Lodge, which generated a 79% gross margin as a percentage of revenues in the third quarter of 2021 and was sold in the fourth quarter of 2021.

Results of Operations – Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Nine Months Ended

September 30,

2022 2021 Change

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Impairment expense — 7,935 (7,935)

Other operating expense 152 101 51

Other operating (income) expense (187) 122 (309)

Total costs and expenses 505,595 436,431 69,164

9 unchanged sentences

Net income (loss) attributable to Civeo common shareholders $ 15,226 $ (10,367) $ 25,593

We reported net income attributable to Civeo for the six months ended June 30, 2022 of $10.0 million, or $0.60 per diluted share compared to net loss attributable to Civeo for the six months ended June 30, 2021 of $10.4 million, or $0.73 per diluted share.

As further discussed below, net loss for the six months ended June 30, 2021 included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

Consolidated revenues increased $71.0 million, or 25%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

This increase was primarily driven by (i) higher billed rooms at our Canadian lodges as occupancy in the first half of 2021 was negatively impacted by the COVID-19 pandemic, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increased mobile asset activity from pipeline projects in Canada, (iv) increased activity at our Australian Civeo owned villages in the Bowen Basin and (v) increased activity at our integrated services villages in Western Australia.

We reported net income attributable to Civeo for the nine months ended September 30, 2022 of $15.2 million, or $0.91 per diluted share compared to net loss attributable to Civeo for the nine months ended September 30, 2021 of $10.4 million, or $0.73 per diluted share.

As further discussed below, net loss for the nine months ended September 30, 2021 included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

Consolidated revenues increased $100.2 million, or 23%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

This increase was primarily driven by (i) higher billed rooms at our Canadian lodges as occupancy in the first nine months of 2021 was negatively impacted by the COVID-19 pandemic, (ii) higher average daily rate at our Canadian lodges largely due to occupancy mix, (iii) increased mobile asset activity from pipeline projects in Canada, (iv) increased activity at our Australian Civeo owned villages in the Bowen and Gunnedah Basins and (v) increased activity at our integrated services villages in Western Australia.

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

dollar in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

dollar in the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 $48.1 million, or 23%, in the six months ended June 30, 2022 compared to the six months ended June 30, 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 activity at our Australian Civeo owned villages in the Bowen Basin, (iv) increased activity at our integrated services villages in Western Australia and (v) increased cost of temporary labor due to ongoing labor shortages in Australia.

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

dollar in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Our consolidated cost of sales and services increased $70.2 million, or 22%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 activity at our Australian Civeo owned villages in the Bowen and Gunnedah Basins and (iv) increased activity at our integrated services villages in Western Australia These items were partially offset by a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

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

Selling, General and Administrative Expenses .

SG&A expense increased $4.0 million, or 14%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

SG&A expense increased $4.4 million, or 9%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

This increase was primarily due to higher share-based compensation expense, travel and entertainment expense and information technology expense.

The increase in share-based compensation expense was due to a relative increase in our stock price during the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The increase in share-based compensation expense was due to a relative increase in our stock price during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The increase in information technology expense was related to set-up costs incurred in a cloud computing arrangement for our newly implemented human capital management system, which are being amortized through SG&A expense instead of depreciation and amortization expense.

The increase in travel and entertainment expenses was largely a result of a return to more normalized travel expenses with the lifting of travel restrictions associated with COVID-19.

The increase in information technology expense was related to implementation costs incurred in a cloud computing arrangement for our newly implemented human capital management system, which are being amortized through SG&A expense instead of depreciation and amortization expense.

Depreciation and Amortization Expense.

Depreciation and amortization expense increased $0.6 million, or 1%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Depreciation and amortization expense increased $2.9 million, or 5%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The increase was primarily due to shortening the lives on certain assets in Canada, partially offset by assets in Canada becoming fully depreciated during 2021 and the disposal of our West Permian Lodge in the U.S.

Impairment Expense.

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

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.

See Note 3 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Operating Income (Loss).

Consolidated operating income increased $26.3 million, or 338%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to higher activity levels in Canada and Australia in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 and lower impairment expense in Australia in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Consolidated operating income increased $31.0 million, or 1,761%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to higher activity levels in Canada and Australia in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 and lower impairment expense in Australia in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Interest Expense, net.

Net interest expense decreased by $1.7 million, or 25%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021.

Net interest expense decreased by $2.3 million, or 22%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily related to lower average debt levels on credit facility borrowings during 2022 compared to 2021.

Other Income.

Consolidated other income decreased $3.6 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The six months ended June 30, 2022 included lower gain on the sale of assets primarily related to various mobile assets across Canada, Australia and the U.S.

The six months ended June 30, 2021 included $3.5 million related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and a higher gain on the sale of assets primarily related to the sale of a manufacturing facility and mobile assets in Canada.

Consolidated other income decreased $1.8 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The nine months ended September 30, 2022 included gains on the sale of assets primarily related to our Kambalda village and undeveloped land holdings in Australia, our wellsite business in the U.S.

and various mobile assets across Canada, Australia and the U.S.

The nine months ended September 30, 2021 included $3.5 million related to proceeds from the Canada Emergency Wage Subsidy (CEWS) and a lower gain on the sale of assets primarily related to the sale of a manufacturing facility and mobile assets in Canada.

Income Tax (Expense) Benefit.

Our income tax expense for the six months ended June 30, 2022 totaled $3.4 million, or 21.8% of pretax income, compared to an income tax expense of $0.6 million, or (6.6)% of pretax loss, for the six months ended June 30, 2021.

Our effective tax rate for both the six months ended June 30, 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.

Our income tax expense for the nine months ended September 30, 2022 totaled $7.1 million, or 27.8% of pretax income, compared to an income tax expense of $2.4 million, or (39.0)% of pretax loss, for the nine months ended September 30, 2021.

Our effective tax rate for the nine months ended September 30, 2022 was impacted by considering the U.S.

a loss jurisdiction that was removed from the annual effective tax rate computation for the purposes of computing the interim tax provision.

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

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

Other Comprehensive (Loss) Income.

Other comprehensive loss increased $8.8 million in the six months ended June 30, 2022 compared to the six months ended June 30, 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.

Other comprehensive loss increased $17.3 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 2% in the six months ended June 30, 2022 compared to a 3% increase in the six months ended June 30, 2021.

dollar decreased 8% in the nine months ended September 30, 2022 and was flat in the nine months ended September 30, 2021.

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

dollar decreased 5% in the six months ended June 30, 2022 compared to a 3% decrease in the six months ended June 30, 2021.

dollar decreased 11% in the nine months ended September 30, 2022 compared to a 7% decrease in the nine months ended September 30, 2021.

Segment Results of Operations – Canadian Segment

Six Months Ended

Nine Months Ended

September 30,

2022 2021 Change

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

Our Canadian segment reported revenues in the six months ended June 30, 2022 that were $59.8 million, or 41%, higher than the six months ended June 30, 2021.

Our Canadian segment reported revenues in the nine months ended September 30, 2022 that were $78.8 million, or 34%, higher than the nine months ended September 30, 2021.

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

dollar by 2% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 resulted in a $4.5 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the increase was driven by (i) higher billed rooms at our lodges as occupancy in the first half of 2021 was negatively impacted by the COVID-19 pandemic, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $41.0 million, or 38%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

dollar by 3% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted in a $8.2 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the increase was driven by (i) higher billed rooms at our lodges as occupancy in the first nine month of 2021 was negatively impacted by the COVID-19 pandemic, (ii) a higher average daily rate at our lodges largely due to occupancy mix and (iii) increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $54.7 million, or 32%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

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

dollar by 2% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 resulted in a $3.0 million period-over-period decrease in cost of sales and services.

dollar by 3% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted in a $5.6 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rate, the increase in cost of sales and services was driven by increased occupancy at our lodges and increased mobile asset activity from pipeline projects.

Our Canadian segment gross margin as a percentage of revenues increased from 24.8% in the six months ended June 30, 2021 to 26.7% in the six months ended June 30, 2022.

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

Our Canadian segment gross margin as a percentage of revenues increased from 26.5% in the nine months ended September 30, 2021 to 27.6% in the nine months ended September 30, 2022.

This was primarily driven by an increased relative contribution from mobile asset activity which generates higher gross margin.

Segment Results of Operations – Australian Segment

Six Months Ended

Nine 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 six months ended June 30, 2022 that were $7.7 million, or 6%, higher than the six months ended June 30, 2021.

Our Australian segment reported revenues in the nine months ended September 30, 2022 that were $16.4 million, or 9%, higher than the nine months ended September 30, 2021.

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

dollar by 7% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 resulted in a $9.5 million period-over-period decrease in revenues.

Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by increased activity at our Civeo owned villages in the Bowen Basin and our integrated services villages in Western Australia.

Our Australian segment cost of sales and services increased $4.4 million, or 5%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

dollar by 7% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted in a $15.1 million period-over-period decrease in revenues.

Our Australian segment cost of sales and services increased $11.4 million, or 8%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

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

dollar by 7% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 resulted in a $6.7 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 (i) increased activity at our Bowen Basin villages, (ii) increased activity at our integrated services villages in Western Australia and (iii) increased costs of temporary labor due to ongoing labor shortages.

Our Australian segment gross margin as a percentage of revenues increased to 29.8% in the six months ended June 30, 2022 from 29.0% in the six months ended June 30, 2021.

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

dollar by 7% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted in a $10.7 million period-over-period decrease in cost of sales and services.

Our Australian segment gross margin as a percentage of revenues increased to 29.1% in the nine months ended September 30, 2022 from 28.9% in the nine months ended September 30, 2021.

This was primarily driven by improved margins at Civeo owned villages in the Bowen and Gunnedah Basins as a result of increased activity, partially offset by increased relative revenue contribution from our integrated services business, which has a service-only business model, and therefore generates lower overall gross margins than our accommodation business.

Segment Results of Operations – U.S.

Six Months Ended

Nine Months Ended

September 30,

2022 2021 Change

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Gross margin as a % of revenues 4.4 % 0.3 % 4.2 %

segment reported revenues in the six months ended June 30, 2022 that were $3.5 million, or 33%, higher than the six months ended June 30, 2021.

segment reported revenues in the nine months ended September 30, 2022 that were $5.0 million, or 30%, higher than the nine months ended September 30, 2021.

This increase was due to greater U.S.

drilling activity positively impacting our wellsite business, partially offset by reduced revenue from our former West Permian Lodge, which operated in the second quarter of 2021 and was sold in the fourth quarter of 2021.

segment cost of sales and services increased $2.7 million, or 25%, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

drilling activity positively impacting our wellsite business that was sold on September 1, 2022, partially offset by reduced revenue from our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.

segment cost of sales and services increased $4.1 million, or 25%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

This increase was due to greater U.S.

drilling activity positively impacting our wellsite business, partially offset by reduced costs from our former West Permian Lodge, which operated in the second quarter of 2021 and was sold in the fourth quarter of 2021.

segment gross margin as a percentage of revenues increased 5.8% from the six months ended June 30, 2021 to the six months ended June 30, 2022 primarily due to improved margins in our wellsite business due to operating efficiencies at higher activity levels, partially offset by our former West Permian Lodge, which operated in the second quarter of 2021 and was sold in the fourth quarter of 2021.

drilling activity impacting our wellsite business that was sold on September 1, 2022, partially offset by reduced costs from our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.

segment gross margin as a percentage of revenues increased 4.2% from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 primarily due to improved margins in our wellsite business due to operating efficiencies at higher activity levels, partially offset by our former West Permian Lodge, which operated in the first nine months of 2021 and was sold in the fourth quarter of 2021.

Liquidity and Capital Resources

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

The following table summarizes our consolidated liquidity position as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

The following table summarizes our consolidated liquidity position as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Lender commitments $ 200,000 $ 200,000

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Total available liquidity $ 117,273 $ 92,817

Cash totaling $23.6 million was provided by operations during the six months ended June 30, 2022, compared to $29.4 million provided by operations during the six months ended June 30, 2021.

During the six months ended June 30, 2022 and 2021, $36.6 million and $13.8 million was used in working capital, respectively.

The increase in cash used in working capital in 2022 compared to 2021 is largely due to the timing of customer payments and revenue recognition as it relates to mobile asset activity in Canada and decreased accounts payable and accrual balances, substantially due to timing of payments during the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Cash was used in investing activities during the six months ended June 30, 2022 in the amount of $5.2 million, compared to cash provided by investing activities during the six months ended June 30, 2021 in the amount of $0.5 million.

The decrease in cash provided by investing activities was primarily due to the receipt of proceeds from the sale of our manufacturing facility

and mobile assets in Canada during the six months ended June 30, 2021.

Capital expenditures totaled $8.6 million and $6.5 million during the six months ended June 30, 2022 and 2021, respectively.

Cash totaling $62.4 million was provided by operations during the nine months ended September 30, 2022, compared to $63.2 million provided by operations during the nine months ended September 30, 2021.

During the nine months ended September 30, 2022 and 2021, $29.9 million and $5.0 million was used in working capital, respectively.

The increase in cash used in working capital in 2022 compared to 2021 is largely due to the timing of customer payments and revenue recognition as it relates to mobile asset activity in Canada during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Cash was used in investing activities during the nine months ended September 30, 2022 in the amount of $5.3 million, compared to cash used in investing activities during the nine months ended September 30, 2021 in the amount of $2.1 million.

The increase in cash used in investing activities was primarily due to higher capital expenditures.

Capital expenditures totaled

$17.5 million and $9.6 million during the nine months ended September 30, 2022 and 2021, respectively.

Capital expenditures in both periods were primarily maintenance related.

Offsetting these capital expenditures, we received proceeds from the sale of property, plant and equipment of $12.0 million during the nine months ended September 30, 2022 primarily related to the sale of our Kambalda village and undeveloped land holdings in Australia, unused corporate office space and various mobile assets in Canada and our wellsite business in the U.S., compared to $7.5 million during the nine months ended September 30, 2021 primarily related to the sale of our manufacturing facility and mobile assets in Canada.

We expect our capital expenditures for 2022 to be in the range of $24 million to $29 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments.

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

Net cash of $19.9 million was used in financing activities during the six months ended June 30, 2022 primarily due to net repayments under our revolving credit facilities of $2.6 million, term loan repayments of $15.8 million, $0.5 million used to repurchase our common shares and $1.0 million used to settle tax obligations on vested shares under our share-based compensation plans.

Net cash of $31.1 million was used in financing activities during the six months ended June 30, 2021 primarily due to net repayments under our revolving credit facilities of $12.1 million, repayments of term loan borrowings of $17.9 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 six months ended June 30, 2022 (in thousands):

Net cash of $53.1 million was used in financing activities during the nine months ended September 30, 2022 primarily due to net repayments under our revolving credit facilities of $14.8 million, term loan repayments of $23.1 million, repurchases of our common shares of $14.2 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.0 million.

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

The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2022 (in thousands):

Balance at December 31, 2021 $ 175,130

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Translation (11,031)

Balance at June 30, 2022 $ 154,638

Balance at September 30, 2022 $ 126,216

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

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In August 2022, our Board authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 685,614 common shares, over a twelve month period.

See Note 12 – Share Repurchase Program to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

See Note 12 – Share Repurchases to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.

Credit Agreement

As of June 30, 2022, our Credit Agreement (as then amended to date, the Credit Agreement) provided for:

As of September 30, 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:

4 unchanged sentences

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 June 30, 2022, we had outstanding letters of credit of $0.3 million under the U.S.

As of September 30, 2022, we had outstanding letters of credit of $0.3 million under the U.S.

facility, zero under the Australian facility and $1.1 million under the Canadian facility.

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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 June 30, 2022, thereby increasing the liquidation preference to $10,884 per share as of June 30, 2022.

Quarterly dividends were paid in-kind on September 30, 2022, thereby increasing the liquidation preference to $10,939 per share as of September 30, 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.

5 unchanged sentences

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