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Item 1. Financial Statements

2023-04-28 compared with 2022-10-28 · 124 added, 211 removed, 344 unchanged (49% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Service and other $ 167,377 $ 159,570

8 unchanged sentences

Depreciation and amortization expense 21,662 20,127

Impairment expense — — — 7,935

Other operating (income) expense ( 339 ) 21 ( 187 ) 122

Other operating expense 129 258

171,495 161,441

1 unchanged sentence

Interest expense ( 3,656 ) ( 2,468 )

Loss on extinguishment of debt — ( 416 ) — ( 416 )

Interest income 32 —

18 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income (loss) $ ( 6,311 ) $ 1,908

Other comprehensive loss, net of taxes:

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustment, net of zero taxes

( 2,176 ) 8,012

Total other comprehensive loss, net of taxes ( 20,745 ) ( 12,217 ) ( 32,757 ) ( 15,417 )

Comprehensive loss ( 14,482 ) ( 11,195 ) ( 14,356 ) ( 23,810 )

Total other comprehensive income (loss), net of taxes ( 2,176 ) 8,012

Comprehensive income (loss) ( 8,487 ) 9,920

Comprehensive income attributable to noncontrolling interest 40 538

Comprehensive loss attributable to Civeo Corporation $ ( 14,850 ) $ ( 11,645 ) $ ( 15,830 ) $ ( 24,298 )

Comprehensive income (loss) attributable to Civeo Corporation $ ( 8,527 ) $ 9,382

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(In Thousands, Excluding Share Amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

26 unchanged sentences

Total liabilities 258,986 262,483

Commitments and contingencies (Note 10)

Shareholders’ Equity:

Preferred shares (Class A Series 1) no par value;

50,000,000 shares authorized, 9,042 shares issued and outstanding, aggregate liquidation preference of $ 98,907,587 and $ 97,438,687 as of September 30, 2022 and December 31, 2021, respectively)

63,410 61,941

50,000,000 shares authorized

Common shares ( no par value;

24 unchanged sentences

Shareholders’

Balance, June 30, 2021 $ 60,974 $ — $ 1,580,213 $ ( 918,156 ) $ ( 8,050 ) $ ( 352,171 ) $ 595 $ 363,405

Net income — — — 544 — — 478 1,022

Currency translation adjustment — — — — — ( 12,189 ) ( 28 ) ( 12,217 )

Dividends paid — — — — — — ( 15 ) ( 15 )

Dividends attributable to Class A preferred shares 482 — — ( 482 ) — — — —

Common shares repurchased — — — ( 445 ) — — — ( 445 )

Share-based compensation — — 1,035 — — — — 1,035

Balance, September 30, 2021 $ 61,456 $ — $ 1,581,248 $ ( 918,539 ) $ ( 8,050 ) $ ( 364,360 ) $ 1,030 $ 352,785

Balance, June 30, 2022 $ 62,918 $ — $ 1,584,416 $ ( 903,492 ) $ ( 9,063 ) $ ( 373,841 ) $ 2,582 $ 363,520

Balance, December 31, 2021 $ 61,941 $ — $ 1,582,442 $ ( 912,951 ) $ ( 8,050 ) $ ( 361,883 ) $ 1,612 $ 363,111

Net income — — — 1,410 — — 498 1,908

4 unchanged sentences

Share-based compensation — — 1,032 — ( 1,013 ) — 19

Balance, September 30, 2022 $ 63,410 $ — $ 1,585,303 $ ( 911,934 ) $ ( 9,063 ) $ ( 394,408 ) $ 2,889 $ 336,197

Balance, March 31, 2022 $ 62,428 $ — $ 1,583,474 $ ( 912,037 ) $ ( 9,063 ) $ ( 353,911 ) $ 2,080 $ 372,971

Balance, December 31, 2022 $ — $ — $ 1,624,512 $ ( 930,123 ) $ ( 9,063 ) $ ( 385,187 ) $ 3,562 $ 303,701

2 unchanged sentences

Dividends paid — — — — — — ( 133 ) ( 133 )

Dividends attributable to Class A preferred shares 1,440 — — ( 1,440 ) — — — —

Common shares repurchased — — — ( 3,771 ) — — — ( 3,771 )

Share-based compensation — — 867 — — — — 867

Balance, September 30, 2021 $ 61,456 $ — $ 1,581,248 $ ( 918,539 ) $ ( 8,050 ) $ ( 364,360 ) $ 1,030 $ 352,785

Balance, December 31, 2021 $ 61,941 $ — $ 1,582,442 $ ( 912,951 ) $ ( 8,050 ) $ ( 361,883 ) $ 1,612 $ 363,111

Net income — — — 16,695 — — 1,706 18,401

Currency translation adjustment — — — — — ( 32,525 ) ( 232 ) ( 32,757 )

Dividends paid — — — — — — ( 197 ) ( 197 )

Dividends attributable to Class A preferred shares 1,469 — — ( 1,469 ) — — — —

Common shares repurchased — — — ( 14,209 ) — — — ( 14,209 )

Share-based compensation — — 2,861 — ( 1,013 ) — — 1,848

Balance, September 30, 2022 $ 63,410 $ — $ 1,585,303 $ ( 911,934 ) $ ( 9,063 ) $ ( 394,408 ) $ 2,889 $ 336,197

Balance, March 31, 2023 $ — $ — $ 1,625,379 $ ( 940,247 ) $ ( 9,063 ) $ ( 387,361 ) $ 3,469 $ 292,177

Shares Common

2 unchanged sentences

Common shares repurchased — ( 169 )

Balance, September 30, 2022 9,042 13,713

Balance, March 31, 2023 — 15,049

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(In Thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 21,662 20,127

Impairment charges — 7,935

Loss on extinguishment of debt — 416

Deferred income tax expense 1,189 1,491

1 unchanged sentence

Gains on disposals of assets ( 2,018 ) ( 1,489 )

Provision (benefit) for credit losses, net of recoveries ( 23 ) 155

Provision for credit losses, net of recoveries ( 68 ) ( 20 )

Other, net 589 686

15 unchanged sentences

Term loan repayments ( 7,389 ) ( 8,003 )

Debt issuance costs — ( 4,407 )

Repurchases of common shares ( 3,771 ) ( 9 )

Taxes paid on vested shares — ( 1,013 )

Net cash flows used in financing activities ( 53,105 ) ( 61,093 )

Net cash flows provided by (used in) financing activities 6,570 ( 1,345 )

Effect of exchange rate changes on cash ( 9 ) 571

11 unchanged sentences

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

Our full suite of hospitality services for our guests includes 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, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics.

We provide a 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 the 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 reportable business segments – Canada, Australia and the U.S.

We operate in two principal reportable business segments – Canada and Australia.

Basis of Presentation

4 unchanged sentences

Certain information in footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) has been condensed or omitted pursuant to those rules and regulations.

The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet.

The unaudited consolidated financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet.

Results for the interim periods are not necessarily indicative of results for the full year.

Certain reclassifications have been made to the 2022 financial information to conform to current year presentation.

The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements.

The financial statements included in this report should be read in conjunction with our audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

The unaudited consolidated financial statements included in this report should be read in conjunction with our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

CIVEO CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

The following table disaggregates our revenue by our three reportable segments:

Canada, Australia and the U.S., and major categories for the periods indicated (in thousands):

The following table disaggregates our revenue by our two reportable segments:

Canada and Australia and major categories for the periods indicated (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Accommodation revenues $ 64,228 $ 67,194

5 unchanged sentences

Total Australia revenues 76,989 63,529

Accommodation revenues $ 990 $ 1,812 $ 2,244 $ 4,189

Mobile facility rental revenues 5,811 3,941 18,128 10,769

Manufacturing revenues 587 124 1,286 1,686

Food service and other services revenues 25 11 63 28

revenues 7,413 5,888 21,721 16,672

Other revenues $ 1,149 $ 6,197

Total Other revenues 1,149 6,197

Total revenues $ 167,591 $ 165,678

3 unchanged sentences

We do not have significant financing components or significant payment terms.

As of September 30, 2022, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue.

As of March 31, 2023, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue.

The table only includes revenue expected to be recognized from contracts where the quantity of service is certain (in thousands):

1 unchanged sentence

2023 2024 2025 Thereafter Total

Revenue expected to be recognized as of September 30, 2022 $ 41,135 $ 86,433 $ 47,742 $ 297,488 $ 472,798

Revenue expected to be recognized as of March 31, 2023 $ 130,325 $ 131,509 $ 101,967 $ 357,336 $ 721,137

We applied the practical expedient and do not disclose consideration for remaining performance obligations with an original expected duration of one year or less.

1 unchanged sentence

The table above represents only a portion of our expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues.

IMPAIRMENT CHARGES

Quarter ended June 30, 2021 .

During the second quarter of 2021, we recorded impairment expense of $ 7.9 million related to various undeveloped land positions and related permitting costs in Australia.

At June 30, 2021, we identified an impairment trigger related to certain of these properties due to the cancellation of a significant thermal coal project in Australia and our negative expectations related to other possible Australian thermal coal projects becoming viable in the near term.

Accordingly, the assets were written down to their estimated fair value of $ 2.4 million.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

FAIR VALUE MEASUREMENTS

1 unchanged sentence

We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.

As of September 30, 2022 and December 31, 2021, we believe the carrying value of our floating-rate debt outstanding under our term loans and revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment.

We estimated the fair value of our floating-rate term loan and revolving credit facilities using significant other observable inputs, representative of a Level 2 fair value measurement, including terms and credit spreads for these loans.

As of March 31, 2023 and December 31, 2022, we believe the carrying value of our floating-rate debt outstanding under our term loans and revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment.

In addition, the estimated fair value of our assets held for sale is based upon Level 2 fair value measurements, which include appraisals and previous negotiations with third parties.

During the second quarter of 2021, we wrote down certain long-lived assets to fair value.

Our estimate of the fair value of undeveloped land positions in Australia that were impaired was based on appraisals from third parties.

See Note 3 – Impairment Charges for further information.

DETAILS OF SELECTED BALANCE SHEET ACCOUNTS

Additional information regarding selected balance sheet accounts at September 30, 2022 and December 31, 2021 is presented below (in thousands):

September 30, 2022 December 31, 2021

Additional information regarding selected balance sheet accounts at March 31, 2023 and December 31, 2022 is presented below (in thousands):

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2023 December 31, 2022

Accounts receivable, net:

5 unchanged sentences

Total accounts receivable, net $ 122,962 $ 119,755

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Finished goods and purchased products $ 5,994 $ 5,538

2 unchanged sentences

Total inventories $ 7,379 $ 6,907

(in years) September 30, 2022 December 31, 2021

(in years) March 31, 2023 December 31, 2022

Property, plant and equipment, net:

9 unchanged sentences

Total property, plant and equipment, net $ 284,371 $ 301,890

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Accrued liabilities:

3 unchanged sentences

Total accrued liabilities $ 21,309 $ 39,211

September 30, 2022 December 31, 2021

Deferred revenue:

Contract liabilities $ 2,092 $ 18,479

Deferred revenue consists of contract liabilities resulting from upfront payments related to the mobilization of mobile assets to service pipeline projects in our Canadian business segment.

The decrease in deferred revenue from December 31, 2021 to September 30, 2022 was primarily due to the recognition of deferred revenue over the contracted terms of these pipeline projects in Canada.

ASSETS AND LIABILITIES HELD FOR SALE

As of September 30, 2022, assets and liabilities held for sale included certain assets and liabilities in our U.S.

business segment.

As of December 31, 2021, assets and liabilities held for sale included certain assets in our U.S.

business segment and undeveloped land holdings in our Australia business segment.

These assets and liabilities were recorded at the estimated fair value less costs to sell, which exceeded their carry values.

The following table summarizes the carrying amount as of September 30, 2022 and December 31, 2021 of the assets and liabilities classified as held for sale (in thousands):

September 30, 2022 December 31, 2021

Assets held for sale:

Accounts receivable, net $ 1,247 $ —

Inventories 321 —

Property, plant and equipment, net 12,010 11,762

Other noncurrent assets 181 —

Total assets held for sale $ 13,759 $ 11,762

Liabilities held for sale:

Accounts payable $ 375 $ —

Accrued liabilities 470 —

Deferred revenue 122 —

Other current liabilities 44 —

Other noncurrent liabilities 114 —

Total liabilities held for sale (1)

March 31, 2023 December 31, 2022

Contract liabilities (Deferred revenue):

Current contract liabilities (1)

$ 3,993 $ 991

Noncurrent contract liabilities (1)

Total contract liabilities (Deferred revenue) $ 6,965 $ 991

(1) Current contract liabilities and Noncurrent contract liabilities are included in "Deferred revenue" and "Other noncurrent liabilities," respectively, in our unaudited consolidated balance sheets.

CIVEO CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

(1) Liabilities held for sale are classified as a current liability on the unaudited consolidated balance sheets, under the caption "Other current liabilities."

Deferred revenue typically consists of upfront payments received before we satisfy the associated performance obligation.

The increase in deferred revenue from December 31, 2022 to March 31, 2023 was primarily due to a payment received from a customer for village enhancements in Australia, which we have the right to control and will recognize over the contracted terms.

ASSETS HELD FOR SALE

As of March 31, 2023 and December 31, 2022, assets held for sale included certain assets in our Canadian business segment and the U.S.

These assets were recorded at the estimated fair value less costs to sell, which exceeded or equaled their carry values.

During the first quarter of 2023, we sold the accommodation assets at our Louisiana location.

The land at this location remains in assets held for sale as of March 31, 2023.

The following table summarizes the carrying amount as of March 31, 2023 and December 31, 2022 of the assets classified as held for sale (in thousands):

March 31, 2023 December 31, 2022

Assets held for sale:

Property, plant and equipment, net $ 8,184 $ 8,653

Total assets held for sale $ 8,184 $ 8,653

EARNINGS PER SHARE

We use the two-class method to calculate basic and diluted earnings per share because we have participating securities in the form of Class A preferred shares.

For the three months ended March 31, 2023, we calculated our basic earnings per share by dividing net income (loss) attributable to common shareholders, before allocation of earnings to participating earnings by the weighted average number of common shares outstanding.

For diluted earnings per share, the basic shares outstanding are adjusted by adding all potentially dilutive securities.

For the three months ended March 31, 2022, a period during which we had participating securities in the form of Class A preferred shares, we used the two-class method to calculate basic and diluted earnings per share.

The two-class method requires a proportional share of net income to be allocated between common shares and participating securities.

The proportional share to be allocated to participating securities is determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities.

Basic earnings per share is computed under the two-class method by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Net income attributable to common shareholders represents our net income reduced by an allocation of current period earnings to participating securities as described above.

Basic earnings per share is computed under the two-class method by dividing the net income (loss) attributable to common shareholders, after allocation of earnings to participating earnings by the weighted average number of common shares outstanding during the period.

Net income attributable to common shareholders, after allocation of earnings to participating earnings represents our net income reduced by an allocation of current period earnings to participating securities as described above.

No such adjustment is made during periods with a net loss, as the adjustment would be anti-dilutive.

Diluted earnings per share is computed under the two-class method by dividing diluted net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of share-based awards.

Diluted earnings per share is computed under the two-class method by dividing diluted net income (loss) attributable to common shareholders, after reallocation adjustment for participating securities by the weighted average number of common shares outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of share-based awards.

In addition, we calculate the potential dilutive effect of any outstanding dilutive security under both the two-class method and the “if-converted” method, and we report the more dilutive of the methods as our diluted earnings per share.

We also apply the treasury stock method with respect to certain share-based awards in the calculation of diluted earnings per share, if dilutive.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

The calculation of earnings per share attributable to Civeo common shareholders is presented below for the periods indicated (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net income (loss) attributable to Civeo common shareholders $ 5,225 $ 62 $ 15,226 $ ( 10,367 )

Three Months Ended March 31,

Net income (loss) attributable to Civeo common shareholders, before allocation of earnings to participating securities $ ( 6,353 ) $ 923

income allocated to participating securities — ( 138 )

Basic net income (loss) attributable to Civeo Corporation common shareholders $ 4,431 $ 53 $ 12,929 $ ( 10,367 )

Net income (loss) attributable to Civeo Corporation common shareholders, after allocation of earnings to participating securities $ ( 6,353 ) $ 785

undistributed income attributable to participating securities — 138

undistributed income reallocated to participating securities — ( 137 )

Diluted net income (loss) attributable to Civeo Corporation common shareholders $ 4,437 $ 53 $ 12,951 $ ( 10,367 )

Diluted net income (loss) attributable to Civeo Corporation common shareholders, after reallocation adjustment for participating securities $ ( 6,353 ) $ 786

Weighted average shares outstanding - basic 15,158 14,096

7 unchanged sentences

The following common share equivalents have been excluded from the calculation of weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented (in millions of shares):

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Share-based awards 0.1 0.1

Preferred shares — 2.5

(1) Share-based awards for the three and nine months ended September 30, 2022 totaled less than 0.1 million shares.

CIVEO CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

As of September 30, 2022 and December 31, 2021, long-term debt consisted of the following (in thousands):

September 30, 2022 December 31, 2021

As of March 31, 2023 and December 31, 2022, long-term debt consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Canadian term loan;

weighted average interest rate of 4.7 % for the nine month period ended September 30, 2022

weighted average interest rate of 7.9 % for the three month period ended March 31, 2023

$ 22,167 $ 29,532

revolving credit facility;

weighted average interest rate of 6.3 % for the nine month period ended September 30, 2022

weighted average interest rate of 9.7 % for the three month period ended March 31, 2023

Canadian revolving credit facility;

weighted average interest rate of 5.0 % for the nine month period ended September 30, 2022

weighted average interest rate of 7.9 % for the three month period ended March 31, 2023

120,441 101,147

Australian revolving credit facility;

weighted average interest rate of 3.8 % for the nine month period ended September 30, 2022

weighted average interest rate of 6.2 % for the three month period ended March 31, 2023

142,608 132,037

4 unchanged sentences

Credit Agreement

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

As of March 31, 2023, 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.

dollar amounts outstanding under the facilities provided by the Credit Agreement bear interest at a variable rate equal to the London Inter-Bank Offered Rate (LIBOR) plus a margin of 3.00 % to 4.00 %, or a base rate plus 2.00 % to 3.00 %, in each case based on a ratio of our total net debt to Consolidated EBITDA (as defined in the Credit Agreement).

Canadian dollar amounts outstanding bear interest at a variable rate equal to a Bankers’ Acceptance Discount Rate (as defined in the Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 3.00 % to 4.00 %, or a Canadian Prime rate plus a margin of 2.00 % to 3.00 %, in each case based on a ratio of our total debt to Consolidated EBITDA.

The Credit Agreement was amended effective March 31, 2023 to, among other things, change the benchmark interest rate for certain U.S.

dollar-denominated loans in each of the Australian Revolving Facility, Canadian Revolving Facility, and U.S.

Revolving Facility from London Inter-Bank Offered Rate to Term Secured Overnight Financing Rate (SOFR).

dollar amounts outstanding under the facilities provided by the Credit Agreement bear interest at a variable rate equal to the Term SOFR plus a margin of 3.00 % to 4.00 %, or a base rate plus 2.00 % to 3.00 %, in each case based on a ratio of our total net debt to Consolidated EBITDA (as defined in the Credit Agreement).

Australian dollar amounts outstanding under the Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 3.00 % to 4.00 %, based on a ratio of our total net debt to Consolidated EBITDA.

The future transitions from LIBOR and CDOR as interest rate benchmarks are addressed in the Credit Agreement and at such time the transition from (i) LIBOR takes place, an alternate benchmark will be established based on the first alternative of the following, plus a benchmark replacement adjustment, Term Secured Overnight Financing Rate (SOFR), Daily Simple SOFR and an alternative benchmark selected by the administrative agent and the applicable borrowers giving due consideration to any selection or recommendation by a government body or any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for U.S.

dollar-denominated syndicated credit facilities at such time or (ii) CDOR takes place, we will endeavor with the administrative agent to establish an alternate rate of interest to CDOR that gives due consideration to any evolving or then existing convention for similar Canadian Dollar denominated syndicated credit facilities for the replacement of CDOR.

The future transition from CDOR as an interest rate benchmark is addressed in the Credit Agreement and at such time the transition from CDOR takes place, an alternate benchmark will be established based on the first alternative of the following, plus a benchmark replacement adjustment, Term Canadian Overnight Repo Rate Average (CORRA) and Compound CORRA.

The Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict:

1 unchanged sentence

(ii) asset sales;

(iii) acquisitions of margin stock;

(iv) specified acquisitions;

(v) certain restrictive agreements;

(vi) transactions with affiliates;

and (vii) investments and other restricted payments, including dividends and other distributions.

In addition, we must maintain a minimum interest coverage ratio, defined as the ratio of Consolidated EBITDA to consolidated interest expense, of at least 3.00 to 1.00 and our maximum net leverage ratio, defined as

(iii) specified acquisitions;

(iv) certain restrictive agreements;

(v) transactions with affiliates;

and (vi) investments and other restricted payments, including dividends and other distributions.

In addition, we must maintain a minimum interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.00 to 1.00 and our maximum net leverage ratio, defined as the ratio of total net debt to Consolidated EBITDA, of no greater than 3.00 to 1.00.

Following a qualified offering of indebtedness, we will be required to maintain a maximum leverage ratio of no greater than 3.50 to 1.00 and a maximum senior secured ratio less than 2.00 to 1.00.

CIVEO CORPORATION

1 unchanged sentence

FINANCIAL STATEMENTS

the ratio of total net debt to Consolidated EBITDA, of no greater than 3.00 to 1.00.

Following a qualified offering of indebtedness, we will be required to maintain a maximum leverage ratio of no greater than 3.50 to 1.00 and a maximum senior secured ratio less than 2.00 to 1.00.

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

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

We were in compliance with our covenants as of September 30, 2022.

We were in compliance with our covenants as of March 31, 2023.

Borrowings under the Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries subject to customary exceptions.

The obligations under the Credit Agreement are guaranteed by our significant subsidiaries.

As of September 30, 2022, we had seven lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $ 22.5 million to $ 52.0 million.

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

As of March 31, 2023, we had seven lenders that were parties to the Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $ 22.5 million to $ 52.0 million.

As of March 31, 2023, 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.

6 unchanged sentences

Income taxes for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs.

As of September 30, 2022, the U.S.

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

As of September 30, 2021, Canada and the U.S.

As of March 31, 2023 and 2022, Canada and the U.S.

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

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

Our income tax expense for the three months ended March 31, 2023 totaled $ 1.2 million, or ( 24.3 )% of pretax income, compared to income tax expense of $ 1.6 million, or 44.9 % of pretax income, for the three months ended March 31, 2022.

Our effective tax rate for each of the three months ended March 31, 2023 and 2022 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.

Additionally, under Accounting Standards Codification 740-270, “Accounting for Income Taxes,” the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter’s year to date provision.

Our income tax expense for nine months ended September 30, 2022 totaled $ 7.1 million, or 27.8 % of pretax income, compared to 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 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.

COMMITMENTS AND CONTINGENCIES

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Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

ACCUMULATED OTHER COMPREHENSIVE LOSS

Our accumulated other comprehensive loss increased $ 2.2 million from $ 385.2 million at December 31, 2022 to $ 387.4 million at March 31, 2023, as a result of foreign currency exchange rate fluctuations.

Changes in other comprehensive loss during the first three months of 2022 were primarily driven by the Australian dollar decreasing in value compared to the U.S.

Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$ 174 million and A$ 223 million, respectively, at March 31, 2023.

SHARE REPURCHASE PROGRAMS

In August 2022 and August 2021, our Board of Directors (Board) authorized common share repurchase programs to repurchase up to 5.0 % of our total common shares which were issued and outstanding, or approximately 685,000 common shares and 715,000 common shares, respectively, over a twelve month period.

CIVEO CORPORATION

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FINANCIAL STATEMENTS

ACCUMULATED OTHER COMPREHENSIVE LOSS

Our accumulated other comprehensive loss increased $ 32.5 million from $ 361.9 million at December 31, 2021 to $ 394.4 million at September 30, 2022, as a result of foreign currency exchange rate fluctuations.

Changes in other comprehensive loss during the first nine months of 2022 were primarily driven by the Australian dollar and Canadian dollar decreasing in value compared to the U.S.

Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$ 232 million and A$ 232 million, respectively, at September 30, 2022.

SHARE REPURCHASES

In August 2021, our Board of Directors (Board) authorized a common share repurchase program (the 2021 Share Repurchase Program) to repurchase up to 5.0 % of our total common shares which are issued and outstanding, or approximately 715,000 common shares, over a twelve month period.

In August 2022, our Board authorized a new common share repurchase program (the 2022 Share Repurchase Program) to repurchase up to 5.0 % of our total common shares which are issued and outstanding, or approximately 685,000 common shares, over a twelve month period.

The 2022 Share Repurchase Program and the 2021 Share Repurchase Program are collectively referred to as the "Share Repurchase Programs."

The repurchase authorization allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.

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The common shares repurchased under the share repurchase programs are cancelled in the periods they are acquired and the payment is accounted for as an increase to accumulated deficit in our Unaudited Consolidated Statements of Changes in Shareholders’ Equity in the period the payment is made.

Pursuant to our 2021 Share Repurchase Program, during the nine months ended September 30, 2022, we repurchased an aggregate of 123,882 of our common shares outstanding at a weighted average price of $ 28.54 per share, for a total of approximately $ 3.5 million.

We repurchased an aggregate of 341,061 of our common shares outstanding at a weighted average price of $ 23.98 per share for a total cost of $ 8.2 million during the twelve month period comprising the 2021 Share Repurchase Program.

We have not repurchased any shares under the 2022 Share Repurchase Program as of September 30, 2022.

In addition to the Share Repurchase Programs, we repurchased 374,753 common shares from a shareholder for approximately $ 10.7 million during the three months ended September 30, 2022.

The following table summarizes our common share repurchases pursuant to our share repurchase programs (in thousands, except per share data).

Three Months Ended

Dollar-value of shares repurchased $ 3,771 $ 9

Shares repurchased 168.7 0.5

Average price paid per share $ 22.33 $ 18.47

SHARE-BASED COMPENSATION

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Restricted Share Awards / Restricted Share Units / Deferred Share Awards.

On May 18, 2022, we granted 39,032 restricted share awards to our non-employee directors, which vest in their entirety on May 17, 2023.

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended September 30, 2022 and 2021 totaled $ 0.3 million and $ 0.4 million, respectively.

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the nine months ended September 30, 2022 and 2021 totaled $ 0.9 million and $ 1.2 million, respectively.

The total fair value of restricted share awards, restricted share units and deferred share awards that vested during both the three months ended September 30, 2022 and 2021 was less than $ 0.1 million.

The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the nine months ended September 30, 2022 and 2021 was $ 2.1 million and $ 1.5 million, respectively.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

At September 30, 2022, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $ 0.6 million, which is expected to be recognized over a weighted average period of 0.6 years.

Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended March 31, 2023 and 2022 totaled $ 0.3 million and $ 0.4 million, respectively.

The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the three months ended March 31, 2023 and 2022 was less than $ 0.1 million and $ 0.6 million, respectively.

At March 31, 2023, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $ 0.1 million, which is expected to be recognized over a weighted average period of 0.1 years.

Phantom Share Awards.

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Phantom share awards are settled in cash upon vesting.

During the three months ended September 30, 2022 and 2021, we recognized compensation expense associated with phantom shares totaling $ 2.3 million and $ 2.1 million, respectively.

During the nine months ended September 30, 2022 and 2021, we recognized compensation expense associated with phantom shares totaling $ 7.2 million and $ 5.0 million, respectively.

At September 30, 2022, unrecognized compensation cost related to phantom shares was $ 11.7 million, as remeasured at September 30, 2022, which is expected to be recognized over a weighted average period of 1.9 years.

During the three months ended March 31, 2023 and 2022, we recognized compensation expense associated with phantom shares totaling $ 1.8 million and $ 2.4 million, respectively.

At March 31, 2023, unrecognized compensation cost related to phantom shares was $ 10.5 million, as remeasured at March 31, 2023, which is expected to be recognized over a weighted average period of 2.1 years.

Performance Awards.

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The portion of the performance awards tied to cumulative operating cash flow includes a performance-based vesting requirement.

The fair value of these awards is 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 will adjust share-based compensation expense based on the number of shares expected to vest based on our estimate of the most probable performance outcome.

During the three months ended September 30, 2022 and 2021, we recognized compensation expense associated with performance awards totaling $ 0.6 million and $ 0.6 million, respectively.

During the nine months ended September 30, 2022 and 2021, we recognized compensation expense associated with performance awards totaling $ 1.9 million and $ 1.7 million, respectively.

No performance share awards vested during the three months ended September 30, 2022 and 2021.

The total fair value of performance share awards that vested during the nine months ended September 30, 2022 and 2021 was $ 2.4 million and $ 1.9 million, respectively.

At September 30, 2022, unrecognized compensation cost related to performance shares was $ 4.6 million, which is expected to be recognized over a weighted average period of 2.0 years.

CIVEO CORPORATION

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FINANCIAL STATEMENTS

During the three months ended March 31, 2023 and 2022, we recognized compensation expense associated with performance share awards totaling $ 0.6 million and $ 0.6 million, respectively.

The total fair value of performance share awards that vested during the three months ended March 31, 2023 and 2022 was zero and $ 2.4 million, respectively.

At March 31, 2023, unrecognized compensation cost related to performance share awards was $ 6.4 million, which is expected to be recognized over a weighted average period of 2.2 years.

SEGMENT AND RELATED INFORMATION

In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, we have identified the following reportable segments:

Canada, Australia and the U.S., which represent our strategic focus on hospitality services and workforce accommodations.

Financial information by business segment for each of the three and nine months ended September 30, 2022 and 2021 is summarized in the following table (in thousands):

Canada and Australia, which represent our strategic focus on hospitality services and workforce accommodations.

Prior to the first quarter of 2023, we presented the U.S.

operating segment as a separate reportable segment.

Our operating segment in the U.S.

no longer meets the reportable segment quantitative thresholds required by GAAP and is included below within the Corporate, other and eliminations category.

Prior periods have been updated to be consistent with the presentation for the three months ended March 31, 2023.

Financial information by business segment for each of the three months ended March 31, 2023 and 2022 is summarized in the following table (in thousands):

revenues Depreciation

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(loss) Capital

Three months ended September 30, 2022

Canada $ 103,009 $ 14,749 $ 7,846 $ 3,580 $ 718,981

Australia 73,805 7,599 5,859 4,921 191,557

7,413 312 ( 1,690 ) 286 20,159

Corporate and eliminations — ( 52 ) ( 1,230 ) 32 ( 347,368 )

Total $ 184,227 $ 22,608 $ 10,785 $ 8,819 $ 583,329

Three months ended September 30, 2021

Canada $ 84,057 $ 11,511 $ 6,131 $ 1,344 $ 754,223

Australia 65,118 8,033 4,422 1,647 231,427

5,888 567 ( 2,124 ) 336 26,699

Corporate and eliminations — 171 ( 2,419 ) 62 ( 328,307 )

Total $ 155,063 $ 20,282 $ 6,010 $ 3,389 $ 684,042

Nine months ended September 30, 2022

Three months ended March 31, 2023

Canada $ 89,453 $ 14,139 $ ( 4,502 ) $ 1,461 $ 710,884

Australia 76,989 7,547 4,897 3,025 192,432

21,721 1,089 ( 4,594 ) 1,010 20,159

Corporate and eliminations — 101 ( 6,669 ) 54 ( 347,368 )

Corporate, other and eliminations 1,149 ( 24 ) ( 4,299 ) 286 ( 352,153 )

Total $ 167,591 $ 21,662 $ ( 3,904 ) $ 4,772 $ 551,163

Nine months ended September 30, 2021

Three months ended March 31, 2022

Canada $ 95,952 $ 11,597 $ 4,038 $ 2,006 $ 773,257

Australia 63,529 7,957 6,135 1,216 226,680

16,672 1,675 ( 5,831 ) 1,187 26,699

Corporate and eliminations — 499 ( 6,928 ) 443 ( 328,307 )

Corporate, other and eliminations 6,197 573 ( 5,936 ) 370 ( 326,843 )

Total $ 165,678 $ 20,127 $ 4,237 $ 3,592 $ 673,094

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Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except to the extent required by applicable law.

In addition, in certain places in this quarterly report, we refer to reports published by third parties that purport to describe trends or developments in the energy industry.

In addition, in certain places in this quarterly report, we may refer to reports published by third parties that purport to describe trends or developments in the energy industry.

We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate.

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

What changed 10-Q

Item 1. Financial Statements