Civeo Corp 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q. Overview and Macroeconomic Environment 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, 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 and other markets, including governmental measures introduced to fight climate change. 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. 18 Recent Commodity Prices. Recent West Texas Intermediate (WTI) crude, Western Canadian Select (WCS) crude, met coal and iron ore pricing trends are as follows: Average Price (1) Quarter ended WTI Crude (per bbl) WCS Crude (per bbl) Hard Coking Coal (Met Coal) (per tonne) Iron Ore (per tonne) Second Quarter through April 22, 2024 $ 84.91 $ 70.89 $ 234.56 $ 104.55 3/31/2024 77.01 59.48 307.68 118.54 12/31/2023 78.60 55.31 332.24 122.24 9/30/2023 82.50 66.20 260.12 111.04 6/30/2023 73.54 60.25 243.54 106.98 3/31/2023 75.96 56.61 341.08 117.08 12/31/2022 82.82 54.72 276.19 94.93 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 (1) Source: 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. WTI Crude. 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. WCS Crude. 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. 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. Gulf Coast. 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. Met Coal. 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% 19 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. 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. Other 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. 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. LNG. 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. 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). 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. U.S. Business. In the first quarter of 2023, we sold our accommodation assets in Louisiana. Our U.S. business supports completion activity in the Bakken. U.S. 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. Exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar influence our U.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income (loss) in Canada and Australia. These revenues and profits/losses are translated into U.S. 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. dollar and each of the Canadian dollar and the Australian dollar: 20 Three Months Ended March 31, 2024 2023 Change Percentage Average Canadian dollar to U.S. dollar $0.741 $0.740 $0.002 0.2% Average Australian dollar to U.S. dollar $0.657 $0.684 ($0.027) (3.9)% As of March 31, 2024 December 31, 2023 Change Percentage Canadian dollar to U.S. dollar $0.738 $0.756 ($0.02) (2.4)% Australian dollar to U.S. dollar $0.651 $0.681 ($0.03) (4.3)% These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results. Capital Expenditures. 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. 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 $31.6 million. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity. See “Liquidity and Capital Resources ” below for further discussion of our 2024 capital expenditures. 21 Results of Operations Unless otherwise indicated, discussion of results for the three months ended March 31, 2024, is based on a comparison to the corresponding period of 2023. Results of Operations – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Three Months Ended March 31, 2024 2023 Change ($ in thousands) Revenues: Canada $ 67,160 $ 89,453 $ (22,293) Australia 91,737 76,989 14,748 Other 7,223 1,149 6,074 Total revenues 166,120 167,591 (1,471) Costs and expenses: Cost of sales and services Canada 57,257 73,905 (16,648) Australia 66,113 58,308 7,805 Other 7,075 1,301 5,774 Total cost of sales and services 130,445 133,514 (3,069) Selling, general and administrative expenses 18,640 16,190 2,450 Depreciation and amortization expense 16,770 21,662 (4,892) 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 loss (1,781) (3,904) 2,123 Interest expense, net (2,317) (3,624) 1,307 Other income 453 2,450 (1,997) Loss before income taxes (3,645) (5,078) 1,433 Income tax expense (1,551) (1,233) (318) Less: Net loss attributable to noncontrolling interest (5,196) (6,311) 1,115 Less: Net income (loss) attributable to noncontrolling interest (63) 42 (105) 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. Revenues. 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 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 22 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 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 $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 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 $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 loss increased $8.1 million in the first quarter of 2024 compared to the first quarter of 2023, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar decreased 2% in the first quarter of 2024 and remained constant in the first quarter of 2023. The Australian dollar exchange rate compared to the U.S. dollar decreased 4% in the first quarter of 2024 compared to a 1% decrease in the first quarter of 2023. 23 Segment Results of Operations – Canadian Segment Three Months Ended March 31, 2024 2023 Change Revenues ($ in thousands) Accommodation revenue (1) $ 59,787 $ 64,228 $ (4,441) Mobile facility rental revenue (2) 994 20,031 (19,037) Food service and other services revenue (3) 6,379 5,194 1,185 Total revenues $ 67,160 $ 89,453 $ (22,293) Cost of sales and services ($ in thousands) Accommodation cost $ 45,720 $ 52,098 $ (6,378) Mobile facility rental cost 2,651 14,502 (11,851) Food service and other services cost 6,140 4,774 1,366 Indirect other costs 2,746 2,531 215 Total cost of sales and services $ 57,257 $ 73,905 $ (16,648) Gross margin as a % of revenues 14.7 % 17.4 % (2.6) % Average daily rate for lodges (4) $ 98 $ 96 $ 2 Total billed rooms for lodges (5) 610,032 642,796 (32,764) Average Canadian dollar to U.S. dollar $ 0.741 $ 0.740 $ 0.002 (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 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 $1.8 million which were incurred in the first quarter of 2024, partially offset by improved margins at our lodges due to improved efficiencies. 24 Segment Results of Operations – Australian Segment Three Months Ended March 31, 2024 2023 Change Revenues ($ in thousands) Accommodation revenue (1) $ 47,107 $ 40,599 $ 6,508 Food service and other services revenue (2) 44,630 36,390 8,240 Total revenues $ 91,737 $ 76,989 $ 14,748 Cost of sales and services ($ in thousands) Accommodation cost $ 22,594 $ 20,318 $ 2,276 Food service and other services cost 40,904 35,862 5,042 Indirect other cost 2,615 2,128 487 Total cost of sales and services $ 66,113 $ 58,308 $ 7,805 Gross margin as a % of revenues 27.9 % 24.3 % 3.7 % Average daily rate for villages (3) $ 77 $ 78 $ (1) Total billed rooms for villages (4) 613,936 522,713 91,223 Average Australian dollar to U.S. dollar $ 0.657 $ 0.684 $ (0.027) (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 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 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. 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 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. 25 Liquidity and Capital Resources Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our hospitality services, developing new lodges and villages and purchasing or leasing land, to pay dividends, to repurchase common shares and for general working capital needs. In addition, capital has been used to repay debt and fund strategic business acquisitions. Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances. In the future, 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 Borrowings against revolving credit capacity (78,597) (65,554) Outstanding letters of credit (1,328) (1,353) Unused availability 120,075 133,093 Cash and cash equivalents 16,752 3,323 Total available liquidity $ 136,827 $ 136,416 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. 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. Whether planned expenditures will actually be spent in 2024 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction and return of capital to shareholders. 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 $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. 26 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 Borrowings under revolving credit facilities 81,073 Repayments of borrowings under revolving credit facilities (66,477) Translation (1,553) 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. If our plans or assumptions change, including as a result of changes in our customers' capital spending or changes in the price of and demand for natural resources, or are inaccurate, or if we make acquisitions, we may need to raise additional capital. Acquisitions have been, and our management believes acquisitions will continue to be, an element of our long-term business strategy. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances or may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders. 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). See Note 12 – Share Repurchase Programs and Dividends to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Credit Agreement As of March 31, 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. subsidiaries, as borrower; (B) a $155.0 million senior secured revolving credit facility in favor of Civeo, as borrower; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower. 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. We also had outstanding bank guarantees of A$0.8 million under the Australian facility. See Note 8 – Debt to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. 27 Dividends 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 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. Future agreements may also limit our ability to pay dividends, and we may incur incremental taxes if we are required to repatriate foreign earnings to pay such dividends. The amount per share of our dividend payments may be changed, or dividends may be suspended, without advance notice. The likelihood that dividends will be reduced or suspended is increased during periods of market weakness. There can be no assurance that we will continue to pay a dividend in the future. Critical Accounting Policies For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the audit committee of our Board. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based. 28