What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-28 · 189 added, 215 removed, 462 unchanged (47% of the section changed)

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Description of the Business

We provide hospitality services to the natural resources industry in Canada, Australia and the U.S.

We provide a full suite of hospitality services for our guests, including lodging, catering and food service, housekeeping and maintenance at accommodation facilities that we or our customers own.

In many cases, we provide services that support the day-to-day operations of accommodation facilities, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics.

We provide hospitality services to the natural resources industry in Canada, Australia and the United States (U.S.) We provide a full suite of services for our guests, including lodging, catering and food service, housekeeping and maintenance at accommodation facilities that we or our customers own.

In many cases, we provide services that support our day-to-day operations of these facilities, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics.

We also offer development activities for workforce accommodation facilities, including site selection, permitting, engineering and design, manufacturing management and site construction, along with providing hospitality services once the facility is constructed.

We primarily operate in some of the world’s most active oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore producing regions, and our customers include major and independent oil companies, mining companies, engineering companies and oilfield and mining service companies.

We operate in three principal reporting business segments – Canada, Australia and the U.S.

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 annual 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 consolidated financial statements in Item 8 of this annual report for further discussion regarding the Reverse Share Split.

We operate in three principal reportable business segments – Canada, Australia and the U.S.

Basis of Presentation

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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.

As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, met coal, 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.

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 the expectations of our customers' shareholders.

As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, met coal, LNG and iron ore, and the resultant impact of these commodity price expectations on customers’ spending.

Other factors that can affect our business and financial results include the general global economic environment, including inflationary pressures, supply chain disruptions and labor shortages, 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 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 largely 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.

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

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.

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

This has been exacerbated by state and international border closures due to COVID-19.

Border closures have affected the number of staff available, which has subsequently led to an increased reliance on more expensive temporary labor hire resources.

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.

Global oil demand has recovered throughout 2021 and into 2022 as COVID-19 lockdowns have begun to be lifted and other fossil fuels are experiencing supply shortages.

Oil supply did not keep up with the increase in demand in 2021, which was exacerbated by the impacts of Hurricane Ida in the Gulf of Mexico in the summer of 2021 and publicly-traded oil producers prioritizing returns of capital to shareholders over deploying capital to expand production capacity, resulting in falling inventories and a significant increase in oil prices.

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.

Despite the continued increase in oil prices in early 2022 and pressure from consuming countries, OPEC+ announced in early February that they will maintain their current production increase targets.

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.

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 monitor the COVID-19 pandemic to help ensure the health and well-being of our employees, guests and contractors.

Most of our previously implemented measures have been revised to reflect improved conditions, and are currently being integrated into a more comprehensive communicable illness plan.

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

Price increases resulting from inflation and supply chain concerns 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.

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

This 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 released oil from the government controlled strategic reserves in an effort to stem high oil prices and the related impacts on higher heating fuels and gasoline.

Alberta, Canada.

In Canada, Western Canadian Select (WCS) crude is the benchmark price for our oil sands customers.

Pricing for WCS is driven by several factors, including the underlying price for West Texas Intermediate (WTI) crude, the availability of transportation infrastructure (consisting of pipelines and crude by railcar) and governmental regulation.

Historically, WCS has traded at a discount to WTI, creating a “WCS Differential,” due to transportation costs and capacity restrictions to move Canadian heavy oil production to refineries, primarily along the U.S.

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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.

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 45% 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.

TMX construction has been delayed multiple times recently, and there is a risk that there are more delays to come.

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

The Enbridge Line 3 replacement project was completed at the end of 2021 and the Trans Mountain Pipeline (TMX) is currently under construction and continues to progress towards completion.

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, COVID-19, 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 could be future delays.

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 fourth quarter of 2022 averaged $54.72 per barrel compared to an average of $60.84 in the fourth quarter of 2021.

The WCS Differential decreased from $15.35 per barrel at the end of the fourth quarter of 2020 to $14.12 at the end of the fourth quarter 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.

The WCS Differential increased from $14.12 per barrel at the end of the fourth quarter of 2021 to $27.62 at the end of the fourth quarter of 2022.

As of February 24, 2023, the WTI price was $76.32 and the WCS price was $60.10, resulting in a WCS Differential of $16.22.

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 throughout 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.

Together with the initial spread of COVID-19, depressed oil 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 restoring production in the fourth quarter of 2020, reaching pre-pandemic levels in 2022.

Although oil prices reached multi-year highs in the first half of 2022 and fluctuated in the second 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, geopolitical events such as the ongoing Russia/Ukraine conflict, 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.

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 is currently located, ten years earlier than originally expected.

In addition, our hospitality services contract at McClelland Lake Lodge expires in June 2023.

Based on ongoing discussion with customers in the region, our current assessment is there are no commercially viable opportunities that support the reinstalling of these assets in a different location within the Regional Municipality of Wood Buffalo.

Accordingly, we intend to market these assets for new opportunities within Canada and the U.S.

During such time, these assets will be stored in part or in whole at a nearby location.

Based on our knowledge and understanding of the marketplace, we believe there is demand for these assets for sale or redeployment.

However, should our marketing efforts fail to identify an economic alternative, other options will be considered.

Revenues associated with the 2022 room commitments at our McClelland Lake Lodge were approximately C$60 million.

We expect to have further clarity on potential sales or redeployment opportunities of these assets as we move through 2023.

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 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/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.

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).

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 GasLink pipeline (CGL) 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.

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

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 several designated portions of the related pipeline construction activity.

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.

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.

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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 in the second half of 2021 at our Sitka lodge.

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, 84% 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 3.6% during 2021 compared to 2020.

As of February 22, 2022, met coal spot prices were $441.65 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.

The Chinese embargo on Australian coal continues, without any resolution foreseeable in the near term.

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 volumes of imports of U.S., Canadian and Mongolian met coal in 2021.

With the backdrop of continuing strong steel demand and met coal supply constraints, the spot price for met coal surged to record highs of over $400 in October 2021 and remains at this level.

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.

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

Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the level of global steel production, which decreased by 4.3% during 2022 compared to 2021.

The decrease was the result of weakness in the Chinese residential sector and slowing global growth due to inflationary pressures.

As of February 24, 2023, met coal spot prices were $360 per 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 placed an embargo on several Australian products, including coal, in the fall of 2020.

During the embargo, Australian met coal producers found new markets, including India and Europe, for their premium product.

This led to a rebalancing of the market globally, 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.

The embargo was recently lifted during the first quarter of 2023.

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

Analysts forecast met coal prices to face downward pressure in early 2023 but to moderate during the year with supply improvement and weaker demand impacting prices.

Downward pressure on prices could accelerate in the short term if demand in China worsens.

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

As of February 22, 2022, iron ore spot prices were $122.23 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.

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.

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 480 oil rigs active at the end of 2021.

The Permian Basin remains the most active U.S.

unconventional play, representing 61% of the oil rigs active in the U.S.

at the end of 2021.

The lower U.S.

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

oil production from an average of 11.3 million barrels per day in 2020 to an average of 11.1 million barrels per day in 2021.

As of February 25, 2022, there were 522 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 have 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.

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

has historically created short-term spending and activity dislocations.

Should the current trend of industry consolidation continue, we may see activity, utilization and occupancy declines in the near term.

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 fluctuated in the second half of 2022, with prices recovering from a low of $78 per tonne to over $100 per tonne with renewed support in the Chinese property sector.

With stronger supply and a slow recovery in Chinese construction, downside pressure on current prices remains.

As of February 24, 2023, iron ore

spot prices were $119.17 per 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 the last half of 2022, we sold both our wellsite services and our offshore businesses.

Our remaining U.S.

business supports completion activity in the Bakken and construction and turnaround work in the Louisiana industrial area.

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

Recent Commodity Prices.

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dollars for U.S.

generally accepted accounting principles (U.S.

GAAP) financial reporting purposes.

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

We currently expect that our 2023 capital expenditures will be in the range of approximately $25 million to $30 million, compared to 2022 capital expenditures of $25.4 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 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 2023 and 2022 capital expenditures.

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Total costs and expenses 680,034 588,411 91,623

Operating income (loss) 6,052 (147,188) 153,240

Interest (expense) and income, net (13,378) (17,050) 3,672

Operating income 17,018 6,052 10,966

Interest expense, net (11,435) (13,378) 1,943

Other income 5,149 13,199 (8,050)

Income (loss) before income taxes 5,873 (143,415) 149,288

Income tax (expense) benefit (3,376) 10,635 (14,011)

Net income (loss) 2,497 (132,780) 135,277

Income before income taxes 10,732 5,873 4,859

Income tax expense (4,402) (3,376) (1,026)

Net income 6,330 2,497 3,833

Net income attributable to noncontrolling interest 2,333 1,147 1,186

Net income (loss) attributable to Civeo Corporation 1,350 (134,250) 135,600

Net income attributable to Civeo Corporation 3,997 1,350 2,647

Dividends attributable to Class A preferred shares 1,771 1,925 (154)

Net loss attributable to Civeo common shareholders $ (575) $ (136,137) $ 135,562

Net income (loss) attributable to Civeo common shareholders $ 2,226 $ (575) $ 2,801

We reported net income attributable to Civeo for 2022 of $2.2 million, or $0.21 loss per diluted share.

As further discussed below, net income included a $5.7 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

We reported net loss attributable to Civeo for 2021 of $0.6 million, or $0.04 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 2020 of $136.1 million, or $9.64 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 pre-tax income

associated with the settlement of a representations and warranties claim related to the Noralta Acquisition included in our Canada segment in Other income.

Consolidated revenues increased $102.6 million, or 17%, in 2022 compared to 2021.

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

This increase was primarily driven by (i) higher billed rooms at our Canadian lodges as occupancy in 2021 was negatively impacted by COVID-19, (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 2022 compared to 2021.

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, (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.

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Our consolidated cost of sales and services increased $80.6 million, or 18%, in 2022 compared to 2021.

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.

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 (iv) increased activity at our integrated services villages in Western Australia and (v) increased costs due to inflationary pressures in both Canada and Australia.

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

dollar in 2022 compared to 2021.

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.

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SG&A expense increased $9.4 million, or 15%, in 2022 compared to 2021.

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

In addition, SG&A expense increased approximately $2.3 million due to a stronger Australian and Canadian dollar relative to the U.S.

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

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

The increase in information technology expense was related to ongoing investment in our human capital management (HCM) system and set-up costs incurred in a cloud computing arrangement for our newly implemented HCM 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 compensation expense was primarily due to increased staff and recruitment costs.

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

dollar in 2022 compared to 2021.

The higher compensation expense year-over-year in 2021 was partially due to the cost containment efforts put in place during 2020 for our North American operations during the initial phase of the COVID-19.

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 $13.4 million, or 14%, in 2021 compared to 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.

Depreciation and amortization expense increased $4.1 million, or 5%, in 2022 compared to 2021.

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

Depreciation and amortization expense was also lower due to a weaker Australian and Canadian dollar relative to the U.S.

dollar in 2022 compared to 2021.

Impairment Expense.

We reported pre-tax impairment expense of $5.7 million in 2022 associated with long-lived assets in our U.S.

and Australian reporting units.

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

Impairment expense of $144.1 million in 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 segment.

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

See Note 4 - Impairment Charges to the notes to the consolidated financial statements included in Item 8 of this annual report for further discussion.

Operating Income (Loss).

Operating income increased $153.2 million, or 104%, in 2021 compared to 2020 primarily due to $144.1 million of impairment expense of goodwill and long-lived assets recorded in 2020.

Operating Income.

Operating income increased $11.0 million, or 181%, in 2022 compared to 2021 primarily due to higher activity levels in Canada and Australia in 2022 compared to 2021, partially offset by higher SG&A expense in 2022 compared to 2021.

Interest (Expense) and Income, net.

Net interest expense decreased $3.7 million, or 22%, in 2021 compared to 2020 primarily related to lower average debt levels on term loan and revolving credit facility borrowings during 2021 compared to 2020.

Net interest expense decreased $1.9 million, or 15%, in 2022 compared to 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.

Other income decreased $8.1 million, or 61%, in 2022 compared to 2021.

Other income in 2021 included $3.5 million of other income related to proceeds from the Canada Emergency Wage Subsidy (CEWS), $2.7 million of other income related to the settlement of a contract dispute with a customer and a $6.2 million gain on sale of assets primarily related

to the sale of our West Permian Lodge in the U.S.

Other income in 2022 included $4.7 million in gains on the sale of assets primarily related to our Kambalda village and undeveloped land holdings in Australia, our wellsite and offshore businesses in the U.S.

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

and the sale of a manufacturing facility and mobile assets in Canada.

Other income in 2020 included $13.0 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 $2.9 million gain on sale of assets primarily related to the sale of unutilized lodge assets in Canada.

Income Tax (Expense) Benefit.

Our income tax expense for 2021 totaled $3.4 million, or 57.5% of pretax income, compared to a benefit of $10.6 million, or 7.4% of pretax loss for 2020.

Our effective tax rate for 2021 was higher than the Canadian federal statutory rate of 15%, primarily due to the higher Australian income tax rate of 30% and an increase in the valuation allowance related to a non-deductible Australian impairment charge of $5.1 million related to various undeveloped land positions in Australia.

Additionally, due to full valuation allowances maintained in both Canada and the U.S., no tax expense or benefit was recorded related to pre-tax income in Canada and pre-tax losses in the U.S.

Our income tax expense for 2022 totaled $4.4 million, or 41.0% of pretax income, compared to an expense of $3.4 million, or 57.5% of pretax loss for 2021.

Our effective tax rate for 2022 was higher than the Canadian federal statutory rate of 15%, primarily due to pre-tax income in Australia being taxed at the higher Australian income tax rate of 30%.

Additionally, due to the full valuation allowances maintained in both Canada and the U.S., no tax expense or benefit was recorded related to pre-tax income in Canada and pre-tax losses in the U.S.

Tax expense in Canada was offset by a valuation allowance release of $0.6 million and the tax benefit in the U.S.

was offset by the establishment of a valuation allowance of $0.8 million.

Our effective tax rate for 2020 was lower than the Canadian federal statutory rate of 15%, primarily due to a non-deductible Canadian goodwill impairment charge of $95.3 million, as well as the release of a valuation allowance of $9.1 million against the net deferred tax assets in Australia.

Due to maintaining full valuation allowances in Canada and the U.S., no tax expense or benefit was recorded.

The tax benefit related to pre-tax losses in Canada and the U.S.

was offset by the establishment of a valuation allowance of $6.4 million against net deferred tax assets in Canada and the U.S.

was offset by an increase to the valuation allowance of $1.0 million.

Our effective tax rate for 2021 was higher than the Canadian federal statutory rate of 15%, primarily due to pre-tax income in Australia being taxed at the higher Australian income tax rate of 30% and an increase in the valuation allowance related to a non-deductible Australian impairment charge of $5.1 million related to various undeveloped land positions in

Additionally, due to the full valuation allowances maintained in both Canada and the U.S., no tax expense or benefit was recorded related to pre-tax income in Canada and pre-tax losses in the U.S.

Tax expense in Canada was offset by a valuation allowance release of $1.3 million and the tax benefit in the U.S.

was offset by an increase to the valuation allowance of $0.8 million.

Other Comprehensive Income (Loss).

Other comprehensive income decreased $27.2 million in 2021 compared to 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 loss increased $10.6 million in 2022 compared to 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 remained relatively consistent in 2021 compared to a 2% increase in 2020.

dollar decreased 6.4% in 2022 compared to remaining relative consistent in 2021.

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

dollar decreased 6.1% in 2021 compared to a 10.4% increase in 2020.

dollar decreased 6.5% in 2022 compared to a 6.1% decrease in 2021.

Segment Results of Operations – Canadian Segment

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Our Canadian segment reported revenues in 2022 that were $74.6 million, or 23%, higher than 2021.

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

dollar by 7% in 2021 compared to 2020 resulted in a $20.8 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.

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

dollar by 4% in 2022 compared to 2021 resulted in a $15.1 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the revenue increase was driven by (i) higher billed rooms at our lodges as occupancy in 2021 was negatively impacted by COVID-19 and (ii) increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $58.2 million, or 25%, in 2022 compared to 2021.

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

dollar by 7% in 2021 compared to 2020 resulted in a $14.9 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 reduced food services activity and from reduced activity at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order resulting in reduced activity in the first half of the year.

Our Canadian segment gross margin as a percentage of revenues increased from 22% in 2020 to 27% in 2021.

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

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

dollar by 4% in 2022 compared to 2021 resulted in a $11.1 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, increased operating costs due to inflationary pressures and increased mobile asset activity from pipeline projects.

Our Canadian segment gross margin as a percentage of revenues decreased from 27% in 2021 to 26% in 2022.

This was primarily driven by a reduced margin at our lodges as cost increases due to inflationary pressures more than offset the higher average daily rate.

Segment Results of Operations – Australian Segment

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Our Australian segment reported revenues in 2022 that were $27.2 million, or 11%, higher than 2021.

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

dollar by 9% in the 2021 compared to 2020 resulted in a $19.8 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 increased $34.4 million, or 24%, in 2021 compared to 2020.

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

dollar by 9% in 2021 compared to 2020 resulted in a $14.1 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.

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

dollar by 8% in the 2022 compared to 2021 resulted in a $23.1 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 and Gunnedah Basins and our integrated services villages in Western Australia.

Our Australian segment cost of sales and services increased $21.8 million, or 12%, in 2022 compared to 2021.

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

dollar by 8% in 2022 compared to 2021 resulted in a $16.8 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 villages in Western Australia and increased operating costs due to inflationary pressures.

Our Australian segment gross margin as a percentage of revenues decreased to 28% in 2022 from 29% in 2021.

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 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.

This was primarily driven 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, partially offset by improved margins at Civeo owned villages in the Bowen and Gunnedah Basins as a result of increased activity.

Segment Results of Operations – U.S.

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Gross margin as a % of revenues 1.1 % 0.5 % 0.6 %

segment reported revenues in 2021 that were $3.5 million, or 14%, lower than 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 $6.2 million, or 22%, in 2021 compared to 2020.

The 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 through September 30, 2021.

segment gross margin as a percentage of revenues increased from (10)% in 2020 to 0.5% in 2021, primarily due to improved margins at our West Permian lodge under a new customer contract through September 30, 2021.

Margins at our Killdeer and Acadian Acres lodges also increased due to increased activity.

These increases were partially offset by reduced operating efficiencies due to lower activity levels in our wellsite business.

segment reported revenues in 2022 that were $0.8 million, or 4%, higher than 2021.

This increase was due to (i) greater U.S.

drilling activity positively impacting our wellsite business that was sold on September 1, 2022 and (ii) increased activity from our Killdeer Lodge.

These items were partially offset by (i) reduced revenue from our former offshore fabrication business that was sold on November 1, 2022, (ii) reduced revenue from our Acadian Acres Lodge and (iii) 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 $0.6 million, or 3%, in 2022 compared to 2021.

This increase in cost of sales and services was due to (i) greater U.S.

drilling activity impacting our wellsite business that was sold on September 1, 2022 and (ii) increased activity from our Killdeer Lodge.

These items were partially offset by (i) reduced costs from our former offshore fabrication business that was sold on November 1, 2022, (ii) reduced costs from our Acadian Acres Lodge and (iii) reduced costs from our 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 from 0.5% in 2021 to 1.1% in 2022, primarily due to improved margins in our wellsite business due to operating efficiencies at higher activity levels in the first eight months of 2022, 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

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 and preferred shares and fund strategic business acquisitions.

In the future, capital may be required to move lodges from one site to another.

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

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(1) Interest payments due under the Credit Agreement, which matures on September 8, 2025;

based on a interest rate of 3.7% for Canadian term loan, 3.7% for Canadian revolver borrowings and 3.3% for Australian revolver borrowings for the twelve month period ended December 31, 2021.

based on an interest rate of 7.8% for Canadian term loan borrowings, 7.8% for Canadian revolver borrowings and 6.1% for Australian revolver borrowings.

Our debt obligations at December 31, 2022 are reflected in our consolidated balance sheet, which is a part of our consolidated financial statements in Item 8 of this annual report.

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Cash totaling $91.8 million was provided by operations during 2022 compared to $88.5 million provided by operations during 2021.

The decrease in operating cash flow in 2021 compared to 2020 was primarily due to lower cash provided by working capital.

Net cash used by working capital was $8.8 million during 2021 compared to net cash provided by working capital of $19.9 million during 2020.

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.

During 2022 and 2021, net cash used by working capital was $13.9 million and $8.8 million, 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 2022 compared to 2021.

Cash was used in investing activities during 2022 of $8.9 million compared to cash used in investing activities of $0.7 million during 2021.

The decrease in cash used in investing activities in 2021 compared to 2020 was primarily due to higher proceeds from the sale of our West Permian Lodge in the U.S.

and the sale of our manufacturing facility and mobile assets in Canada during 2021, partially offset by $4.7 million of other income associated with the settlement of a representations and warranties claim in 2020 related to the Noralta Acquisition and lower capital expenditures during 2020.

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

Capital expenditures totaled $25.4 million and $15.6 million during 2022 and 2021, respectively.

The increase in capital expenditures in 2021 was related primarily to deferred 2020 routine maintenance capital expenditures as well as increased Canadian pipeline-related capital expenditures during 2021.

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 $16.3 million during 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 and offshore businesses in the U.S., compared to $14.3 million during 2021 primarily related to the sale of our West Permian Lodge in the U.S.

and the sale of our manufacturing facility and mobile assets in Canada.

We expect our capital expenditures for 2023 to be in the range of $25 million to $30 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments.

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We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement.

The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue 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.

The table below delineates historical capital expenditures split between expansionary and maintenance spending on our lodges and villages, mobile asset spending and other capital expenditures.

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Expansion lodge and village spending in 2021 was primarily related to infrastructure improvements at an Australian village.

Expansion lodge and village spending in 2020 was primarily associated with the purchase of previously rented rooms for a lodge in the U.S segment.

Maintenance lodge and village spending in 2022 and 2021 was primarily associated with routine maintenance projects at our major properties.

Mobile asset spending in 2021 and 2020 was primarily associated with Canadian pipeline-related capital expenditures.

Other maintenance and expansion spending in 2021 and 2020 was primarily associated with purchases of miscellaneous equipment and supplies to support the day-to-day operations at our accommodation facilities and information technology infrastructure to support our business.

Net cash of $86.5 million was used in financing activities during 2021 primarily due to repayments of term loan borrowings of $125.5 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 related to our Credit Agreement and $4.6 million used to repurchase our common shares, partially offset by net borrowings under our revolving credit facilities of $49.2 million.

Net cash of $114.2 million was used in financing activities during 2020 primarily due to net repayments under our revolving credit facilities of $70.3 million, repayments of term loan borrowings of $39.9 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 related to our Credit Agreement.

Mobile asset spending in 2022 was primary related to routine maintenance of our mobile assets in the U.S.

and Canadian markets.

Mobile asset spending in 2021 was primarily associated with Canadian pipeline-related capital expenditures.

Other maintenance and expansion spending in 2022 was primarily related to mobilization of new sites at our integrated services business in Western Australia, purchases of miscellaneous equipment and supplies to support the day-to-day operations at our accommodation facilities and information technology infrastructure to support our business.

Other maintenance and expansion spending in 2021 was primarily associated with purchases of miscellaneous equipment and supplies to support the day-to-day operations at our accommodation facilities and information technology infrastructure to support our business.

Net cash of $79.7 million was used in financing activities during 2022 primarily due to (i) repayments of term loan borrowings of $30.4 million, (ii) repurchases of our preferred shares and our common shares of $30.6 million and $14.2 million, respectively, (iii) net repayments under our revolving credit facilities of $3.4 million, (iv) settlement of tax obligations on vested shares under our share-based compensation plans of $1.0 million and (v) a cash dividend paid on our preferred shares in connection with the repurchase of $0.1 million.

Net cash of $86.5 million was used in financing activities during 2021 primarily due to repayments of term loan borrowings of $125.5 million, settlement of tax obligations on vested shares under our share-based compensation plans of $1.1 million, debt issuance costs of $4.4 million related to our Credit Agreement and repurchases of our common shares of $4.6 million, partially offset by net borrowings under our revolving credit facilities of $49.2 million.

The following table summarizes the changes in debt outstanding during 2022 (in thousands):

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Balance at December 31, 2022 $ 130,679 $ 1,358 $ — $ 132,037

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.

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.

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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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 credit agreement provided for 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 prior credit agreement provided for a $200.0 million revolving credit facility scheduled to mature on September 8, 2025, allocated as follows:

In August 2022, our Board of Directors 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 17 – Common 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 December 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:

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

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(B) a $155.0 million senior secured revolving credit facility in favor of Civeo, as borrower;

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 December 31, 2021, 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.

and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower, 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 December 31, 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.

We also had outstanding bank guarantees of A$0.8 million under the Australian facility.

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

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 have been paid in-kind for each quarterly period beginning June 30, 2018 through December 31, 2021, thereby increasing the liquidation preference to $10,776 per share as of December 31, 2021.

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.

The preferred shares we issued in the Noralta Acquisition were 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 beginning June 30, 2018 through December 12, 2022, thereby increasing the liquidation preference to $10,982 per share as of December 12, 2022.

We repurchased 40% of the outstanding preferred shares on October 30, 2022, which included accrued cash dividends for the month of October 2022 of under $0.1 million.

On December 13, 2022, the holders of the preferred shares converted all outstanding preferred shares into approximately 1.5 million common shares.

Following such conversion, no further dividends are required to be paid.

For further information, see Note 16 - Preferred Shares to the notes to the consolidated financial statements included in Item 8 of this annual report for further information.

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Upon the ultimate resolution of these uncertainties, our future reported financial results will be impacted by the difference between our estimates and the actual amounts paid to settle a liability.

Examples of areas where we have made important estimates of future liabilities include taxes, interest, insurance claims, litigation, warranty claims, contract claims and obligations.

Examples of areas where we have made important estimates of future liabilities include insurance claims, litigation, warranty claims, contract claims and obligations.

Impairment of Tangible and Intangible Assets, including Goodwill

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

A reporting unit is the operating segment, or a business one level below that operating segment (the “component” level) if discrete financial information is prepared and regularly reviewed by management at the component level.

A reporting unit is the operating segment, or a business one level below that operating segment (the “component” level) if discrete

financial information is prepared and regularly reviewed by management at the component level.

Each segment of our business represents a separate reporting unit, and all three of our reporting units have or previously had goodwill.

In connection with the preparation of our financial statements for the three months ended March 31, 2020, we performed a quantitative goodwill impairment test as of March 31, 2020, and we reduced the value of our goodwill in our Canadian reporting unit to zero.

See Note 4 – Impairment Charges to the notes to consolidated financial statements in Item 8 of this annual report for further discussion of goodwill impairments recorded in the years ended December 31, 2020 and 2019.

See Note 4 – Impairment Charges to the notes to consolidated financial statements in Item 8 of this annual report for further discussion of goodwill impairment recorded in the year ended December 31, 2020.

We conduct our annual impairment test as of November 30 of each year.

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After assessing these events and circumstances, we determined that it was more likely than not that the fair value of the Australia reporting unit was greater than its carrying value.

Based on the interim quantitative testing performed as of March 31, 2020, the fair value of the Australia reporting unit exceeded its carrying value by 127%.

Based on the interim quantitative testing performed as of March 31, 2020, the fair value of the Australia reporting unit exceeded its carrying value by more than 125%.

In performing the quantitative goodwill impairment test, we compare each reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit.

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We believe these valuation approaches are proven valuation techniques and methodologies for our industry and widely accepted by investors.

The fair value of each reporting unit would change if our assumptions under these valuation approaches, or relative weighting of the valuation approaches, were materially modified.

value of each reporting unit would change if our assumptions under these valuation approaches, or relative weighting of the valuation approaches, were materially modified.

The following assumptions are significant to our evaluation process:

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In general, the lodges are operated on a lodge by lodge basis.

However, for one set of lodges (the Core Region, including Beaver River, Athabasca, Hudson and Borealis Lodges and Fort McMurray Village), there are no identifiable cash flows largely independent of the cash flows of other assets and liabilities for such lodges, and therefore, such lodges are combined into a single asset group.

Factors such as proximity to each other, commonality of customers, common monitoring by management

and operating decisions being made to optimize these lodges as a group result in these lodges being treated as a single asset group for the purposes of our impairment assessments.

Our Australia segment consists of nine villages in several regions within the country, as well as our integrated services assets and land banked assets.

single asset group.

Factors such as proximity to each other, commonality of customers, common monitoring by management and operating decisions being made to optimize these lodges as a group result in these lodges being treated as a single asset group for the purposes of our impairment assessments.

Our Australia segment consists of eight villages in several regions within the country, as well as our integrated services assets and land banked assets.

These properties are grouped in the following asset groups:

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• Integrated services – Assets held on client owned sites in Western Australia

• Kambalda – Kambalda, Western Australia

• Gunnedah Basin

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Integrated services assets provide catering and managed services to the mining industry in Western Australia.

segment consists of lodges in two geographical areas, mobile assets in various geographical areas, and a wastewater treatment plant (WWTP).

segment consists of lodges in two geographical areas and a wastewater treatment plant (WWTP).

These properties are grouped in the following asset groups:

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• Acadian Acres Lodge – Louisiana

• Offshore – this asset group includes mobile assets which are utilized in the Gulf of Mexico

• Wellsites – this asset group includes mobile assets, primarily in the Permian Basin region, the Mid-Continent and the Rocky mountain corridor

• Killdeer WWTP – this asset group represents a WWTP in Killdeer, North Dakota, which was constructed in early 2014

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Our estimate of the fair value requires us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future circumstances, such as industry and/or local market conditions that might directly impact each of the asset groups’ operations in the future, and are therefore uncertain.

In some cases our estimate of fair value is based on appraisals from third parties.

Our industry is cyclical and our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows and our determination of whether a decline in value of our investment has occurred, can have a significant impact on the carrying value of these assets and, in periods of prolonged down cycles, may result in impairment losses.

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We also grant performance share awards under the Plan.

Awards granted in 2021 are earned in amounts between 0% and 200% of the participant’s target performance share award, based on (1) the payout percentage associated with Civeo’s relative total shareholder return (TSR) rank among a peer group of other companies and (2) the payout percentage associated with Civeo's cumulative free cash flow over the performance period relative to a preset target.

Performance share awards granted prior to 2021 are earned in amounts between 0% and 200% of the participant’s target performance share award, based on the payout percentage associated with Civeo’s relative TSR rank among a peer group of other companies.

Awards granted in 2022 are earned in amounts between 0% and 200% of the participant’s target performance share award, based on (1) the payout percentage associated with Civeo’s relative TSR rank among a peer group that includes 17 other companies and (2) the payout percentage associated with Civeo's cumulative operating cash flow over the performance period relative to a preset target.

The fair value of the TSR portion of each award was estimated using a Monte Carlo simulation pricing model.

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Utilizing the Monte Carlo simulation pricing model required us to estimate the risk-free interest rate and the expected market price volatility of our common shares as well as the peer group of companies over a time period equal to the expected term of the award.

The fair value of the free cash flow portion of each award was based on the closing market price of our common shares on the date of grant.

The fair value of the operating cash flow portion of each award was based on the closing market price of our common shares on the date of grant.

We evaluate the probability of achieving the performance criteria throughout the performance period and make adjustments based on the number of shares expected to vest based on our estimate of the most probable performance outcome.

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When our earnings from foreign subsidiaries are considered to be indefinitely reinvested, no provision for Canadian income taxes is made for these earnings.

If any of the subsidiaries have a distribution of earnings in the form of dividends or otherwise, we would be subject to both Canadian income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

If any of the subsidiaries have a distribution of earnings in the form of dividends or otherwise, we could be subject to both Canadian income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

We record a valuation allowance in each reporting period when our management believes that it is more likely than not that any recorded deferred tax asset will not be realized.

Our management will continue to evaluate the appropriateness of the valuation allowance in the future, based upon our current and historical operating results and other potential sources of future taxable income.

Our management will continue to evaluate the appropriateness of the

valuation allowance in the future, based upon our current and historical operating results and other potential sources of future taxable income.

See Note 14 – Income Taxes to the notes to consolidated financial statements in Item 8 of this annual report for further discussion.

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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-K

Item 7. Management’s Discussion and Analysis