What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 154 added, 344 removed, 178 unchanged (74% of the section changed)

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Overview and Macroeconomic Environment

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

Demand for our services can be attributed to two phases of our customers’ projects:

(1) the development or construction phase;

and (2) the operations or production phase.

Historically, initial demand for our hospitality services has been driven by our customers’ capital spending programs related to the construction and development of natural resource projects and associated infrastructure, as well as the exploration for oil and natural gas.

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, estimates of resource production and the expectations of our customers' shareholders.

In general, industry capital spending programs are based on the outlook for commodity prices, production costs, economic growth, global commodity supply/demand, reserve replacement, 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, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore, and the resultant impact of these commodity price expectations on our 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, volatility affecting the banking system and financial markets, availability of capital to the natural resource industry and regulatory changes in Canada, Australia, the U.S.

and other markets, including governmental measures introduced to fight climate change.

Our business is predominantly located in northern Alberta, Canada;

British Columbia, Canada;

Queensland, Australia;

and Western Australia.

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

Approximately 64% of our revenue is generated by our lodges in Canada and our villages in Australia.

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

We typically contract our facilities to our customers on a fee-per-person-per-

day basis that covers lodging and meals and is based on the duration of customer needs, which can range from several weeks to several years.

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

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.

During 2022 and through the first nine months of 2023, inflationary pressures and supply chain disruptions have been, and 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.

In addition to the macro inflationary impacts on labor costs noted above, during the COVID-19 pandemic, we were, and continue to be, impacted by increased staff costs as a result of hospitality labor shortages in Australia as government-imposed and voluntary social distancing and quarantining impacted travel.

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.

Since historic lows in early 2020 during the start of the COVID-19 pandemic, global oil prices increased in late 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 were 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 in the second quarter of 2022.

Severe inflation and rising interest rates in the second half of 2022 led to concerns of an economic recession and lower oil demand which resulted in decreased oil prices through the remainder of 2022 and the first six months of 2023.

In an effort to support the price of oil amidst demand concerns, OPEC+ announced additional oil production cuts in April 2023.

Further, Saudi Arabia announced voluntary oil production cuts in June 2023, which have been extended through the end of 2023.

These production cuts, coupled with the rising geopolitical risks in the Middle East, resulted in increased oil prices in the third quarter and early fourth quarter of 2023.

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), refinery blending requirements 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.

The WCS Differential has varied depending on the extent of transportation capacity availability.

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.

TMX recently announced that the project is approximately 90% complete, with mechanical completion expected to occur at the end of 2023, and the pipeline is expected to be in-service in the first quarter of 2024.

WCS prices in the third quarter of 2023 averaged $66.20 per barrel compared to an average of $70.70 in the third quarter of 2022.

The WCS Differential decreased from $27.62 per barrel at the end of the fourth quarter of 2022 to $18.30 at the end of the third quarter of 2023.

As of October 23, 2023, the WTI price was $61.42 and the WCS price was $86.39, resulting in a WCS Differential of $24.97

Although oil prices reached multi-year highs in the first half of 2022, they fluctuated through the second half of 2022 and throughout 2023.

There is continued uncertainty around commodity price levels, including the impact of inflationary pressures, actions taken by OPEC+ to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine conflict and rising geopolitical risks in the Middle East, 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 did not renew our expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which expired in June 2023, ten years earlier than originally expected, in order to support our customer’s intent to mine the land where the lodge was located.

In addition, the accompanying hospitality services contract at McClelland Lake Lodge expired in July 2023;

however, we will continue to provide hospitality services to the customer at our other owned lodges through January 31, 2024 under a short-term take-or-pay commitment.

Our assets are being demobilized and expected to be completely removed from the existing site by February 1, 2024.

During the third quarter of 2023, we entered into a definitive agreement to sell our McClelland Lake Lodge assets to a U.S.-based mining project for approximately C$49 million, or US$36 million.

We expect to complete the transaction before January 31, 2024, subject to the satisfaction of customary closing conditions.

During the third quarter of 2023, we recognized $4.9 million in demobilization costs and received $9.1 million in cash proceeds associated with the sale.

We expect to recognize the remaining demobilization costs and the proceeds of the sale in the fourth quarter of 2023 and first quarter of 2024.

British Columbia, Canada.

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

From a macroeconomic standpoint, LNG demand has continued to grow, 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.

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

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

While our current expectation is that the majority of our contracted commitments associated with the CGL pipeline project will be completed in the fourth quarter of 2023, any new delays in facility or pipeline construction may result in extensions to these dates.

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 level of global steel production, which increased by 0.2% for the first eight months of 2023 compared to the same period of 2022.

The marginal increase year-over-year was the result of stronger production from both China and India in July and August.

As of October 23, 2023, met coal spot prices were $342.00 per tonne.

Following historic highs in early 2022, met coal prices have since stabilized and were further supported in the first half of 2023 with seasonal weather-related supply interruptions in Australia.

In September 2023, met coal prices increased to over $300 per tonne, as truck and port disruptions resulted in extremely tight supply from Australia.

Analysts forecast met coal prices to remain near $300 per tonne during the fourth quarter of 2023 due to supply limitations in Australia.

Downward pressure on prices is still possible 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.

Iron ore prices have stabilized in 2023 after fluctuating in the second half of 2022.

As of October 23, 2023, iron ore spot prices were $112.04 per tonne.

Analysts forecast Chinese steel production in 2023 to be at similar levels to 2022 and expect forecast iron ore pricing in 2023 to remain between $100 and $115.

In the first quarter of 2023, we sold our U.S.

Acadian Acres lodge assets.

In addition, in the second half of 2022, we sold both our U.S.

wellsite services and offshore businesses.

Our remaining U.S.

business supports completion activity in the Bakken.

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.

Commodity Prices

There is continued uncertainty around commodity price levels, including the impact of inflationary pressures, actions taken by Organization of the Petroleum Exporting Countries Plus (OPEC+) to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine and Middle East conflicts and rising geopolitical risks in the Middle East, United States (U.S.) oil production levels and regulatory implications on such prices.

In particular, these items 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.

Recent Commodity Prices.

Recent WTI crude, WCS crude, met coal and iron ore pricing trends are as follows:

Recent West Texas Intermediate (WTI) crude, Western Canadian Select (WCS) crude, met coal and iron ore pricing trends are as follows:

Average Price (1)

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(per tonne) Iron

Fourth Quarter through October 23, 2023

Second Quarter through April 22, 2024

$ 84.91 $ 70.89 $ 234.56 $ 104.55

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9/30/2022 91.63 70.70 252.63 99.21

6/30/2022 108.77 92.89 464.61 128.80

3/31/2022 95.17 82.04 474.83 129.46

WTI crude prices are from U.S.

Energy Information Administration, WCS crude prices and iron ore prices are from Bloomberg and hard coking coal prices are from IHS Markit.

After reaching historic lows in early 2020 during the start of the COVID-19 pandemic, global oil prices increased to above $100 per barrel in the second quarter 2022.

In the second half of 2022 and throughout 2023, oil prices declined due to (i) rising fears of a recession resulting from severe inflation and rising interest rates, (ii) resulting lower demand growth for oil and (iii) increasing U.S.

oil production.

In an effort to support the price of oil amidst demand concerns, OPEC+ countries have extended their 2023 oil production cuts through the first half of 2024.

These production cuts, coupled with the rising geopolitical risks in the Middle East, resulted in rising oil prices during the first quarter of 2024 following a decline in prices in the latter part of the fourth quarter of 2023.

In Canada, WCS crude is the benchmark price for our oil sands customers.

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

The WCS Differential has varied depending on the extent of transportation capacity availability.

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, most notably the Trans Mountain Pipeline expansion, which is expected to commence commercial operation by May 1, 2024.

WCS prices in the first quarter of 2024 averaged $59.48 per barrel compared to an average of $56.61 in the first quarter of 2023.

The WCS Differential decreased from $19.35 per barrel at the end of the fourth quarter of 2023 to $13.29 at the end of the first quarter of 2024.

As of April 22, 2024, the WTI price was $82.85 and the WCS price was $68.88, resulting in a WCS Differential of $13.97.

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 level of global steel production, which decreased by 0.1% in the first quarter of 2024 compared to the first quarter of 2023.

Production stability was the result of strong production from key producers in China and India particularly in the month of February 2024, which offset weaker production in the U.S., Russia and Europe.

As of April 22, 2024, met coal spot prices were $250.20 per tonne.

Steel demand is expected to increase by 1.2% in 2024 compared to 2023, with continued improvements in demand from India.

Met coal prices remained over $300 per tonne into early March 2024 before weakening in the second half of March 2024 as a result of a recovery in met coal supply when compared to 2023.

Prices for 2024 have remained over $200 per tonne and continue to support existing production.

With supply side pressures easing and China's gross domestic product target of +5%

year-on-year, analysts anticipate met coal prices will increase to over $230 per tonne in the second quarter of 2024, with a 2024 average of $245 per tonne.

Iron ore prices remained consistently over $100 per tonne despite recent weakness in prices during March 2024 through April 2024 and have averaged $118.54 per tonne in the first quarter of 2024.

Analysts are expecting iron ore prices to remain over $100 per tonne during 2024 as supply stabilizes.

Inflationary Pressures.

During 2023 and through the first quarter of 2024, inflationary pressures and supply chain disruptions have been, and 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.

Labor Shortages.

In addition to the macro inflationary impacts on labor costs noted above, we continue to be impacted by increased staff costs as a result of hospitality labor shortages in Australia due to lingering government-imposed and voluntary social distancing and quarantining during the COVID-19 pandemic.

Our Sitka Lodge supports the LNG Canada project and related pipeline projects.

From a macroeconomic standpoint, LNG demand has continued to grow, 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.

The conflicts between Russia/Ukraine and in the Middle East have 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.

The Kitimat LNG Facility is nearing completion and expected to be operational in 2024.

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 were contracted to serve designated portions of the related pipeline construction activity.

The majority of our contracted commitments associated with the Coastal GasLink Pipeline, the pipeline constructed to transport natural gas feedstock to LNGC, were completed in the fourth quarter of 2023.

McClelland Lake Lodge.

We did not renew our expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which expired in June 2023, in order to support our customer’s intent to mine the land where the lodge was located.

In addition, the accompanying hospitality services contract at McClelland Lake Lodge expired in July 2023;

however, we continued to provide hospitality services to the customer at our other owned lodges through January 31, 2024 under a short-term take-or-pay commitment.

Subsequent to this date, we have continued to provide such services at our other lodges;

however, not pursuant to a take-or-pay commitment.

During the third quarter of 2023, we entered into a definitive agreement to sell our McClelland Lake Lodge assets to a U.S.-based mining project for approximately C$49 million, or US$36 million.

Our McClelland Lake Lodge assets were dismantled and completely removed from the existing site in January 2024.

During the third and fourth quarters of 2023, we recognized $14.2 million in dismantle costs and received $28.2 million in cash proceeds associated with the sale.

During the first quarter of 2024, the transaction was completed, and we recognized the remaining $1.0 million in dismantle costs and received the remaining $7.8 million in cash proceeds.

In the first quarter of 2023, we sold our accommodation assets in Louisiana.

business supports completion activity in the Bakken.

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.

Foreign Currency Exchange Rates.

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These revenues and profits/losses are translated into U.S.

dollars for U.S.

GAAP financial reporting purposes.

dollars for financial reporting purposes under U.S.

Generally Accepted Accounting Principles.

The following tables summarize the fluctuations in the exchange rates between the U.S.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 Change Percentage 2023 2022 Change Percentage

2024 2023 Change Percentage

Average Canadian dollar to U.S.

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dollar $0.657 $0.684 ($0.027) (3.9)%

September 30, 2023 December 31, 2022 Change Percentage

March 31, 2024 December 31, 2023 Change Percentage

Canadian dollar to U.S.

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We currently expect that our 2024 capital expenditures will be in the range of approximately $30 million to $35 million, compared to 2023 capital expenditures of $31.6 million.

The 2023 capital expenditures include $10 million related to village enhancements in Australia, for which our customer will reimburse us, resulting in a net negligible cash flow impact in 2023.

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

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Results of Operations

Unless otherwise indicated, discussion of results for the three and nine months ended September 30, 2023, is based on a comparison to the corresponding period of 2022.

Results of Operations – Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Unless otherwise indicated, discussion of results for the three months ended March 31, 2024, is based on a comparison to the corresponding period of 2023.

Results of Operations – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Three Months Ended

September 30,

2024 2023 Change

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Depreciation and amortization expense 16,770 21,662 (4,892)

Other operating expense (income) 87 (339) 426

Impairment expense 7,823 — 7,823

Gain on sale of McClelland Lake Lodge assets, net (6,075) — (6,075)

Other operating expense 298 129 169

Total costs and expenses 167,901 171,495 (3,594)

Operating income 16,039 10,785 5,254

Interest expense, net (3,321) (2,988) (333)

Other income (expense) (4,709) 2,179 (6,888)

Income before income taxes 8,009 9,976 (1,967)

Income tax benefit (expense) 1,214 (3,713) 4,927

Net income 9,223 6,263 2,960

Net income attributable to noncontrolling interest 201 546 (345)

Net income attributable to Civeo Corporation 9,022 5,717 3,305

Dividends attributable to preferred shares — 492 (492)

Net income attributable to Civeo common shareholders $ 9,022 $ 5,225 $ 3,797

We reported net income attributable to Civeo for the quarter ended September 30, 2023 of $9.0 million, or $0.61 per diluted share compared to net income attributable to Civeo for the quarter ended September 30, 2022 of $5.2 million, or $0.32 per diluted share.

Consolidated revenues decreased $0.7 million, or 0%, in the third quarter of 2023 compared to the third quarter of 2022.

This decrease was primarily due to (i) decreased mobile asset activity from pipeline projects in Canada, (ii) reduced activity in the U.S.

operations due to the sale of our wellsite and offshore businesses in the second half of 2022 and (iii) a weaker Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2023 compared to the third quarter of 2022.

These items were partially offset by (i) increased occupancy at our Civeo owned villages in the Australian Bowen and Gunnedah Basins and (ii) increased activity at our integrated services villages in Western Australia.

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

Cost of Sales and Services.

Our consolidated cost of sales and services decreased $3.2 million, or 2%, in the third quarter of 2023 compared to the third quarter of 2022.

This decrease was primarily due to (i) lower costs related to reduced mobile asset activity in Canada, (ii) lower staff costs at certain lodges in Canada, (iii) reduced activity at our south lodges in Canada, (iv) reduced activity in the U.S.

operations due to the sale of our wellsite and offshore businesses in the second half of 2022 and (v) a weaker Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2023 compared to the third quarter of 2022.

These items were partially offset by (i) increased occupancy at our Civeo owned villages in the Australian

Bowen and Gunnedah Basins and (ii) increased activity at our integrated services villages in Western Australia.

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

Selling, General and Administrative Expenses.

SG&A expense increased $2.6 million, or 14%, in the third quarter of 2023 compared to the third quarter of 2022.

This increase was primarily due to higher incentive compensation costs and higher compensation expense.

The increase in compensation expense was primarily due to increased staff and associated recruitment costs.

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

dollar in the third quarter of 2023 compared to the third quarter of 2022.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $5.7 million, or 25%, in the third quarter of 2023 compared to the third quarter of 2022.

The decrease was primarily due to (i) the sale of our wellsite and offshore businesses in the U.S.

in the second half of 2022, (ii) certain assets becoming fully depreciated in Canada in the second quarter of 2023 and (iii) lower depreciation and amortization expense due to a weaker Australian and Canadian dollar relative to the U.S.

dollar in the third quarter of 2023 compared to the third quarter of 2022.

Operating Income.

Consolidated operating income increased $5.3 million, or 49%, in the third quarter of 2023 compared to the third quarter of 2022, primarily due to increased activity in Australia and lower depreciation and amortization expense.

These items were partially offset by reduced mobile asset activity in Canada and increased operating costs due to inflationary pressures in the third quarter of 2023 compared to the third quarter of 2022.

Operating loss (1,781) (3,904) 2,123

Interest expense, net (2,317) (3,624) 1,307

Net interest expense increased by $0.3 million, or 11%, in the third quarter of 2023 compared to the third quarter of 2022, primarily related to higher interest rates on credit facility borrowings during 2023 compared to 2022, partially offset by lower average debt levels.

Other income 453 2,450 (1,997)

Consolidated other income decreased $6.9 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to lower net gains on the sale of assets.

The third quarter of 2023 included expenses of $4.9 million associated with the demobilization of our McClelland Lake Lodge to prepare the assets for sale.

The associated gain related to the sale of the McClelland Lake Lodge assets will be recognized in the fourth quarter of 2023 and first quarter of 2024.

The third quarter of 2022 include gains related to the sale of our Kambalda village and an undeveloped land holding in Australia, our wellsite business in the U.S.

and various mobile assets and unused corporate office space in Canada.

Income Tax (Expense) Benefit.

Our income tax benefit for the three months ended September 30, 2023 totaled $1.2 million, or (15.2)% of pretax income, compared to an income tax expense of $3.7 million, or 37.2% of pretax income, for the three months ended September 30, 2022.

Our effective tax rate for the three months ended September 30, 2023 and 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.

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.

Other Comprehensive (Loss) Income.

Other comprehensive income increased $14.0 million in the third quarter of 2023 compared to the third quarter of 2022, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

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

dollar decreased 2% in the third quarter of 2023 compared to a 6% decrease in the third quarter of 2022.

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

dollar decreased 3% in the third quarter of 2023 compared to a 6% decrease in the third quarter of 2022.

Segment Results of Operations – Canadian Segment

Three Months Ended

September 30,

2023 2022 Change

Revenues ($ in thousands)

Accommodation revenue (1)

$ 71,417 $ 72,724 $ (1,307)

Mobile facility rental revenue (2)

17,314 25,283 (7,969)

Food service and other services revenue (3)

6,413 5,002 1,411

Total revenues $ 95,144 $ 103,009 $ (7,865)

Cost of sales and services ($ in thousands)

Accommodation cost $ 46,063 $ 50,308 $ (4,245)

Mobile facility rental cost 11,636 15,597 (3,961)

Food service and other services cost 5,867 4,447 1,420

Indirect other costs 2,406 2,526 (120)

Total cost of sales and services $ 65,972 $ 72,878 $ (6,906)

Gross margin as a % of revenues 30.7 % 29.3 % 1.4 %

Average daily rate for lodges (4)

$ 98 $ 99 $ (1)

Total billed rooms for lodges (5)

726,364 730,708 (4,344)

Average Canadian dollar to U.S.

dollar $ 0.746 $ 0.766 $ (0.020)

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

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

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

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

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

Our Canadian segment reported revenues in the third quarter of 2023 that were $7.9 million, or 8%, lower than the third quarter of 2022.

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

dollar by 2.6% in the third quarter of 2023 compared to the third quarter of 2022 resulted in a $2.6 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the revenue decrease was driven by reduced mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services decreased $6.9 million, or 9%, in the third quarter of 2023 compared to the third quarter of 2022.

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

dollar by 2.6% in the third quarter of 2023 compared to the third quarter of 2022 resulted in a $1.8 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rate, the decrease in cost of sales and services was driven by (i) lower costs related to the reduced mobile asset activity, (ii) lower staff costs at certain lodges and (iii) reduced activity at our south lodges.

These decreases were partially offset by increased operating costs at our lodges due to inflationary pressures.

Our Canadian segment gross margin as a percentage of revenues increased from 29.3% in the third quarter of 2022 to 30.7% in the third quarter of 2023.

This was primarily driven by improved margins at our lodges due to improved efficiencies, partially offset by reduced margins at our lodges due to inflationary pressures and reduced margins from our mobile asset activity as certain higher margin components were recognized over the initial contract terms through late 2022, with 2023 representing continuing operations.

Segment Results of Operations – Australian Segment

Three Months Ended

September 30,

2023 2022 Change

Revenues ($ in thousands)

Accommodation revenue (1)

$ 46,012 $ 38,316 $ 7,696

Food service and other services revenue (2)

41,873 35,489 6,384

Total revenues $ 87,885 $ 73,805 $ 14,080

Cost of sales and services ($ in thousands)

Accommodation cost $ 22,404 $ 17,818 $ 4,586

Food service and other services cost 38,898 33,465 5,433

Indirect other cost 2,293 2,050 243

Total cost of sales and services $ 63,595 $ 53,333 $ 10,262

Gross margin as a % of revenues 27.6 % 27.7 % (0.1) %

Average daily rate for villages (3)

$ 74 $ 73 $ 1

Total billed rooms for villages (4)

623,436 525,359 98,077

Australian dollar to U.S.

dollar $ 0.655 $ 0.683 $ (0.028)

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

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

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

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

Our Australian segment reported revenues in the third quarter of 2023 that were $14.1 million, or 19%, higher than the third quarter of 2022.

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

dollar by 4.1% in the third quarter of 2023 compared to the third quarter of 2022 resulted in a $3.8 million period-over-period decrease in revenues.

On a constant currency basis, the Australian segment experienced a 24% period-over-period increase in revenues.

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

Our Australian segment cost of sales and services increased $10.3 million, or 19%, in the third quarter of 2023 compared to the third quarter of 2022.

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

dollar by 4.1% in the third quarter of 2023 compared to the third quarter of 2022 resulted in a $2.8 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 occupancy at our Civeo owned villages in the Bowen Basin and Gunnedah Basin and our integrated services villages in Western Australia.

Our Australian segment gross margin as a percentage of revenues decreased to 27.6% in the third quarter of 2023 from 27.7% in the third quarter of 2022.

This was primarily driven by an 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 and increased operating costs due to inflationary pressures, partially offset by improved margins at Civeo owned villages in the Bowen Basin and Gunnedah Basin due to improved efficiencies as a result of increased activity.

Results of Operations – Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Nine Months Ended

September 30,

2023 2022 Change

($ in thousands)

Canada $ 280,067 $ 307,984 $ (27,917)

Australia 247,418 205,154 42,264

Other 2,521 21,721 (19,200)

Total revenues 530,006 534,859 (4,853)

Costs and expenses:

Cost of sales and services

Canada 211,722 223,093 (11,371)

Australia 180,448 145,539 34,909

Other 3,065 20,760 (17,695)

Total cost of sales and services 395,235 389,392 5,843

Selling, general and administrative expenses 52,885 50,572 2,313

Depreciation and amortization expense 59,277 65,818 (6,541)

Other operating expense (income) 302 (187) 489

Total costs and expenses 507,699 505,595 2,104

Operating income 22,307 29,264 (6,957)

Interest expense, net (10,499) (8,062) (2,437)

Other income (expense) (1,832) 4,290 (6,122)

Income before income taxes 9,976 25,492 (15,516)

Loss before income taxes (3,645) (5,078) 1,433

Income tax expense (1,551) (1,233) (318)

Net income 7,079 18,401 (11,322)

Net loss attributable to noncontrolling interest (5,196) (6,311) 1,115

Net income (loss) attributable to noncontrolling interest (63) 42 (105)

Net income attributable to Civeo Corporation 7,132 16,695 (9,563)

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

Net income attributable to Civeo common shareholders $ 7,132 $ 15,226 $ (8,094)

We reported net income attributable to Civeo for the nine months ended September 30, 2023 of $7.1 million, or $0.47 per diluted share compared to net income attributable to Civeo for the nine months ended September 30, 2022 of $15.2 million, or $0.91 per diluted share.

Consolidated revenues decreased $4.9 million, or 1%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This decrease was primarily due to (i) decreased mobile asset activity from pipeline projects in Canada, (ii) lower billed rooms at our Canadian lodges, (iii) reduced activity in the U.S.

operations due to the sale of our wellsite and offshore businesses in the second half of 2022 and (iv) a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Net loss attributable to Civeo Corporation $ (5,133) $ (6,353) $ 1,220

We reported net loss attributable to Civeo for the quarter ended March 31, 2024 of $5.1 million, or $0.35 per diluted share.

As further discussed below, net loss included (i) $6.1 million of net gains associated with the sale of the McClelland Lake Lodge in Canada and (ii) a $7.8 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense.

We reported net loss attributable to Civeo for the quarter ended March 31, 2023 of $6.4 million, or $0.42 per diluted share.

Consolidated revenues decreased $1.5 million, or 1%, in the first quarter of 2024 compared to the first quarter of 2023.

This decrease was primarily due to (i) decreased mobile asset activity from pipeline projects in Canada which were largely completed in 2023, (ii) lower billed rooms at our lodges in Canada and (iii) a weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2024 compared to the first quarter of 2023.

These items were partially offset by (i) increased activity at our Civeo owned villages in the Australian Bowen Basin, (ii) increased activity at our integrated services villages in Western Australia and (iii) higher other revenue related to the transportation contract for the McClelland Lake Lodge assets.

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

Cost of Sales and Services.

Our consolidated cost of sales and services increased $5.8 million, or 2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This increase was primarily due to (i) increased occupancy at our Civeo owned villages in the Australian Bowen and Gunnedah Basins, (ii) increased activity at our integrated services villages in Western Australia and (iii) increased operating costs due to inflationary pressures in Australia.

These items were partially offset by (i) reduced activity in the U.S.

operations due to the sale of our wellsite and offshore businesses in the second half of 2022, (ii) lower costs related to reduced mobile asset activity in Canada and (iii) a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Our consolidated cost of sales and services decreased $3.1 million, or 2%, in the first quarter of 2024 compared to the first quarter of 2023.

This decrease was primarily due to (i) reduced mobile asset activity from pipeline projects in Canada which were largely completed in 2023, (ii) reduced activity at certain lodges in Canada and (iii) a

weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2024 compared to the first quarter of 2023.

These items were partially offset by the increase in cost of sales and services largely driven by (i) increased occupancy at our Bowen Basin Civeo owned villages in Australia, (ii) increased activity at our integrated services villages in Western Australia and (iii) higher other costs related to the transportation contract for the McClelland Lake Lodge assets.

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

Selling, General and Administrative Expenses.

SG&A expense increased $2.3 million, or 5%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This increase was primarily due to higher compensation expense, higher information technology expense and higher incentive compensation costs.

The increase in compensation expense was primarily due to increased staff and recruitment costs.

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

These items were partially offset by lower share-based compensation expense and a weaker Australian and Canadian dollar relative to the U.S.

dollar in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease in share-based compensation expense was due to a relative decrease in our stock price during 2023 compared to 2022.

SG&A expenses increased $2.5 million, or 15%, in the first quarter of 2024 compared to the first quarter of 2023.

This increase was primarily due to higher compensation expense of $1.7 million, higher incentive compensation costs of $0.6 million and higher professional fees of $0.6 million.

The increase in compensation expense was primarily due to $1.1 million in severance costs related to the departure of our former Chief Financial Officer (CFO) and increased staff and associated recruitment costs.

These items were partially offset by lower share-based compensation expense of $0.9 million and a weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2024 compared to the first quarter of 2023.

The decrease in share-based compensation expense was due to the changes in our share price during 2024 compared to 2023 and forfeitures related to the departure of our former CFO.

Depreciation and Amortization Expense.

Depreciation and amortization expense decreased $6.5 million, or 10%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease was primarily due to (i) the sale of our wellsite and offshore businesses in the U.S.

dollar in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This was partially offset by the shortening of the useful lives on certain assets in Canada, including the McClelland Lake Lodge.

Operating Income.

Consolidated operating income decreased $7.0 million, or 24%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to reduced mobile asset activity in Canada and increased operating costs due to inflationary pressures in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Depreciation and amortization expense decreased $4.9 million, or 23%, in the first quarter of 2024 compared to the first quarter of 2023.

The decrease was primarily due to certain assets becoming fully depreciated in Canada, including the McClelland Lake Lodge, in the second quarter of 2023 and lower depreciation and amortization expense due to a weaker Australian dollar relative to the U.S.

dollar in the first quarter of 2024 compared to the first quarter of 2023.

Impairment Expense.

We recorded pre-tax impairment expense of $7.8 million in 2024 associated with long-lived assets in Australia and the U.S.

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

Gain on Sale of McClelland Lake Lodge Assets, net.

We recorded $6.1 million in the first quarter of 2024 related to net gains associated with the sale of the McClelland Lake Lodge.

Operating Loss.

Consolidated operating loss decreased $2.1 million, or 54%, in the first quarter of 2024 compared to the first quarter of 2023, primarily due to a net gain on sale of McClelland Lake Lodge assets, higher activity levels in Australia and lower depreciation and amortization expense in the first quarter of 2024 compared to the first quarter of 2023.

These items were partially offset by reduced mobile asset activity in Canada and impairment expenses in the first quarter of 2024 compared to the first quarter of 2023.

Interest Expense, net.

Net interest expense increased by $2.4 million, or 30%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily related to higher interest rates on credit facility borrowings during 2023 compared to 2022, partially offset by lower average debt levels.

Net interest expense decreased by $1.3 million, or 36%, in the first quarter of 2024 compared to the first quarter of 2023, primarily related to lower average debt levels during 2024 compared to 2023, partially offset by higher interest rates on credit facility borrowings.

Other Income.

Consolidated other income decreased $6.1 million in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to lower gain on the sale of assets.

The nine months ended September 30, 2023 included expenses of $4.9 million associated with the demobilization of our McClelland Lake Lodge to prepare the assets for sale, partially offset by gains related to the sale of our Acadian Acres accommodation assets in the U.S.

The associated gain related to the sale of the McClelland Lake Lodge assets will be recognized in the fourth quarter of 2023 and first quarter of 2024.

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

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

Income Tax (Expense) Benefit.

Our income tax expense for the nine months ended September 30, 2023 totaled $2.9 million, or 29% of pretax income, compared to an income tax expense of $7.1 million, or 28% of pretax income, for the nine months ended September 30, 2022.

Our effective tax rate for the nine months ended September 30, 2023 and 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.

Consolidated other income decreased $2.0 million in the first quarter of 2024 compared to the first quarter of 2023, primarily due to higher gain on the sale of assets related to the sale of our Acadian Acres accommodation assets in the U.S.

in the first quarter of 2023 compared to the first quarter of 2024.

Income Tax Expense.

Our income tax expense for the three months ended March 31, 2024 totaled $1.6 million, or (42.6)% of pretax loss, compared to an income tax expense of $1.2 million, or (24.3)% of pretax loss, for the three months ended March 31, 2023.

Our effective tax rate for each of the three months ended March 31, 2024 and 2023 was impacted by Canada and the U.S.

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

Other Comprehensive (Loss) Income.

Other comprehensive income increased $25.9 million in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S.

Other comprehensive loss increased $8.1 million in the first quarter of 2024 compared to the first quarter of 2023, 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 increased 0.2% in the nine months ended September 30, 2023 compared to a 8% decrease in the nine months ended September 30, 2022.

dollar decreased 2% in the first quarter of 2024 and remained constant in the first quarter of 2023.

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

dollar decreased 5% in the nine months ended September 30, 2023 compared to a 11% decrease in the nine months ended September 30, 2022.

dollar decreased 4% in the first quarter of 2024 compared to a 1% decrease in the first quarter of 2023.

Segment Results of Operations – Canadian Segment

Nine Months Ended

September 30,

Three Months Ended

2024 2023 Change

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

Our Canadian segment reported revenues in the nine months ended September 30, 2023 that were $27.9 million, or 9%, lower than the nine months ended September 30, 2022.

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

dollar by 4.6% in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted in a $13.7 million period-over-period decrease in revenues.

Excluding the impact of the weaker Canadian exchange rate, the revenue decrease was driven by (i) reduced mobile asset activity from pipeline projects and (ii) lower billed rooms at our lodges.

Our Canadian segment cost of sales and services decreased $11.4 million, or 5%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

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

dollar by 4.6% in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted in a $10.6 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Canadian exchange rate, the decrease in cost of sales and services was driven by lower costs related to the reduced mobile asset activity.

This decrease was partially offset by increased operating costs at our lodges due to inflationary pressures.

Our Canadian segment gross margin as a percentage of revenues decreased from 27.6% in the nine months ended September 30, 2022 to 24.4% in the nine months ended September 30, 2023.

This was primarily driven by reduced margins at our lodges due to inflationary pressures and reduced margins from our mobile asset activity as certain higher margin components were recognized over the initial contract terms through late 2022, with 2023 representing continuing operations.

Our Canadian segment reported revenues in the first quarter of 2024 that were $22.3 million, or 25%, lower than the first quarter of 2023.

The revenue decrease was driven by reduced mobile asset activity from pipeline projects which were largely completed in 2023 and lower billed rooms at our lodges.

Our Canadian segment cost of sales and services decreased $16.6 million, or 23%, in the first quarter of 2024 compared to the first quarter of 2023.

The decrease in cost of sales and services was driven by lower costs related to reduced mobile asset activity from pipeline projects which were largely completed in 2023 and reduced activity at certain lodges.

Our Canadian segment gross margin as a percentage of revenues decreased from 17.4% in the first quarter of 2023 to 14.7% in the first quarter of 2024.

This was primarily driven by reduced mobile asset activity from pipeline projects which were largely completed in 2023 and mobile camp demobilization costs of approximately $1.8 million which were incurred in the first quarter of 2024, partially offset by improved margins at our lodges due to improved efficiencies.

Segment Results of Operations – Australian Segment

Nine Months Ended

September 30,

Three Months Ended

2024 2023 Change

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613,936 522,713 91,223

Australian dollar to U.S.

Average Australian dollar to U.S.

dollar $ 0.657 $ 0.684 $ (0.027)

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

Our Australian segment reported revenues in the nine months ended September 30, 2023 that were $42.3 million, or 21%, higher than the nine months ended September 30, 2022.

Our Australian segment reported revenues in the first quarter of 2024 that were $14.7 million, or 19%, higher than the first quarter of 2023.

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

dollar by 5.4% in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted in a $14.1 million period-over-period decrease in revenues.

dollar by 3.9% in the first quarter of 2024 compared to the first quarter of 2023 resulted in a $3.7 million period-over-period decrease in revenues.

On a constant currency basis, the Australian segment experienced a 24% period-over-period increase in revenues.

Our Australian segment cost of sales and services increased $34.9 million, or 24%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

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

Our Australian segment cost of sales and services increased $7.8 million, or 13%, in the first quarter of 2024 compared to the first quarter of 2023.

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

dollar by 5.4% in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted in a $10.3 million period-over-period decrease in cost of sales and services.

Our Australian segment gross margin as a percentage of revenues decreased to 27.1% in the nine months ended September 30, 2023 from 29.1% in the nine months ended September 30, 2022.

dollar by 3.9% in the first quarter of 2024 compared to the first quarter of 2023 resulted in a $2.6 million period-over-period decrease in cost of sales and services.

Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our Bowen Basin owned villages and integrated services villages in Western Australia.

Our Australian segment gross margin as a percentage of revenues increased to 27.9% in the first quarter of 2024 from 24.3% in the first quarter of 2023.

This was primarily driven by an increased relative gross margin contribution from our Bowen Basin accommodation business which generates higher overall gross margins than our integrated services business, which has a service-only business model.

Liquidity and Capital Resources

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In addition, capital has been used to repay debt 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.

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

The following table summarizes our consolidated liquidity position as of September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022

In the future, capital may be required to move lodges from one site to another, and we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions or refinance debt.

The following table summarizes our consolidated liquidity position as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

Lender commitments $ 200,000 $ 200,000

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Total available liquidity $ 136,827 $ 136,416

Cash totaling $56.6 million was provided by operations during the nine months ended September 30, 2023, compared to $62.4 million provided by operations during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023 and 2022, $20.0 million and $29.9 million was used in working capital, respectively.

The year-over-over decrease in cash used in working capital in 2023 compared to 2022 is largely due to payments received from a customer for village enhancements in Australia and a payment received from a customer related to an asset transportation contract, partially offset by the timing of payments during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Cash was used in investing activities during the nine months ended September 30, 2023 in the amount of $14.1 million, compared to cash used in investing activities during the nine months ended September 30, 2022 in the amount of $5.3 million.

The increase in cash used in investing activities was primarily due to higher capital expenditures and lower proceeds from the sale of property, plant and equipment.

Capital expenditures totaled $21.2 million and $17.5 million during the nine months ended September 30, 2023 and 2022, respectively.

Cash totaling $6.0 million was provided by operations during the three months ended March 31, 2024, compared to $0.4 million provided by operations during the three months ended March 31, 2023.

During the three months ended March 31, 2024 and 2023, $6.4 million and $15.6 million was used in working capital, respectively.

The year-over-year decrease in cash used in working capital in 2024 compared to 2023 is largely due to the timing of collections of accounts receivable and the timing of payments and accrued liabilities during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Cash was provided by investing activities during the three months ended March 31, 2024 in the amount of $1.2 million, compared to cash used in investing activities during the three months ended March 31, 2023 in the amount of $2.5 million.

The increase in cash provided by investing activities was primarily due to higher proceeds from the sale of property, plant and equipment.

We received net proceeds from the sale of property, plant and equipment of $6.8 million during the three months ended March 31, 2024 related to the sale of our McClelland Lake Lodge accommodation assets in Canada, compared to $2.3 million during the three months ended March 31, 2023 primarily related to the sale of our Acadian Acres accommodation assets in the U.S.

Capital expenditures totaled $5.6 million and $4.8 million during the three months ended March 31, 2024 and 2023, respectively.

Capital expenditures in both periods were primarily related to maintenance.

We received proceeds from the sale of property, plant and equipment of $7.1 million during the nine months ended September 30, 2023 primarily related to the sale of our McClelland Lake Lodge accommodation assets in Canada and Acadian Acres accommodation assets in the U.S., compared to $12.0 million during the nine months ended September 30, 2022 primarily related to the sale of our Kambalda village and undeveloped land holdings in Australia, unused corporate office space and various mobile assets in Canada and our wellsite business in the U.S.

In addition, our 2024 capital expenditures included approximately $2.4 million related to customer-funded infrastructure upgrades in Australia.

We expect our capital expenditures for 2024 to be in the range of $30 million to $35 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 continue to monitor the global economy, commodity prices, demand for crude oil, met coal, LNG and iron ore, inflation and the resultant impact on the capital spending plans of our customers in order to plan our business activities, and we may adjust our capital expenditure plans in the future.

Net cash of $42.0 million was used in financing activities during the nine months ended September 30, 2023 primarily due to term loan repayments of $22.3 million, repurchases of our common shares of $9.2 million, net repayments under our revolving credit facilities of $6.7 million and dividend payments of $3.7 million.

Net cash of $53.1 million was used in financing activities during the nine months ended September 30, 2022 primarily due to net repayments under our revolving

credit facilities of $14.8 million, term loan repayments of $23.1 million, repurchases of our common shares of $14.2 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.0 million.

The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2023 (in thousands):

Net cash of $6.6 million was provided by financing activities during the three months ended March 31, 2024 primarily due to net borrowings under our revolving credit facilities of $14.6 million, partially offset by dividend payments of $3.7 million, repurchases of our common shares of $3.2 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.1 million.

Net cash of $6.6 million was provided by financing activities during the three months ended March 31, 2023 primarily due to net borrowings under our revolving credit facilities of $17.7 million, partially offset by term loan repayments of $7.4 million and repurchases of our common shares of $3.8 million.

The following table summarizes the changes in debt outstanding during the three months ended March 31, 2024 (in thousands):

Balance at December 31, 2023 $ 65,554

1 unchanged sentence

Repayments of borrowings under revolving credit facilities (66,477)

Repayments of term loans (22,338)

Translation (1,553)

Balance at September 30, 2023 $ 103,248

Balance at March 31, 2024 $ 78,597

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

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

In August 2023, our Board authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 742,134 common shares, over a twelve month period.

In addition, on September 5, 2023, our Board declared a quarterly dividend of $0.25 per common share to shareholders of record as of close of business on September 15, 2023.

The total cash payment of $3.7 million was paid on September 29, 2023.

In August 2023, our Board of Directors (Board) authorized a common share repurchase program to repurchase up to 5.0% of our total common shares which are issued and outstanding, or 742,134 common shares, over a twelve month period.

In addition, our Board declared a quarterly dividend on February 2, 2024 of $0.25 per common share to shareholders of record as of close of business on February 26, 2024.

The total cash payment of $3.7 million was paid on March 18, 2024.

The dividend is an eligible dividend pursuant to the Income Tax Act (Canada).

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Credit Agreement

As of September 30, 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:

As of March 31, 2024, our Credit Agreement (as then amended to date, the Credit Agreement) provided for 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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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 September 30, 2023, we had outstanding letters of credit of $0.3 million under the U.S.

A C$100.0 million term loan facility provided under the Credit Agreement was fully repaid on December 31, 2023.

As of March 31, 2024, we had outstanding letters of credit of $0.3 million under the U.S.

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

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We intend to pay regular quarterly dividends on our common shares, with all future dividend payments subject to quarterly review and approval by our Board.

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

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

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

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

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.

Following the repurchase and conversion of our outstanding preferred shares in the fourth quarter of 2022, no further dividends on the preferred shares will be paid.

Critical Accounting Policies

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis