Civeo Corp 10-Q

ITEM 1. Financial Statements CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Service and other $ 175,968 $ 183,229 $ 529,731 $ 529,172 Rental 111 — 742 — Product 259 343 698 834 176,338 183,572 531,171 530,006 Costs and expenses: Service and other costs 138,445 130,183 409,560 394,953 Rental costs — — — — Product costs 97 113 261 282 Selling, general and administrative expenses 19,635 20,236 55,708 52,885 Depreciation and amortization expense 17,440 16,914 51,269 59,277 Impairment expense — — 7,823 — (Gain) loss on sale of McClelland Lake Lodge assets, net 171 — ( 5,817 ) — Other operating expense 506 87 992 302 176,294 167,533 519,796 507,699 Operating income 44 16,039 11,375 22,307 Interest expense ( 1,725 ) ( 3,365 ) ( 6,288 ) ( 10,625 ) Interest income 50 44 147 126 Other income (expense) 204 ( 4,709 ) 967 ( 1,832 ) Income (loss) before income taxes ( 1,427 ) 8,009 6,201 9,976 Income tax (expense) benefit ( 3,862 ) 1,214 ( 9,199 ) ( 2,897 ) Net income (loss) ( 5,289 ) 9,223 ( 2,998 ) 7,079 Less: Net income (loss) attributable to noncontrolling interest ( 198 ) 201 ( 1,001 ) ( 53 ) Net income (loss) attributable to Civeo Corporation $ ( 5,091 ) $ 9,022 $ ( 1,997 ) $ 7,132 Per Share Data (see Note 7) Basic net income (loss) per share attributable to Civeo Corporation common shareholders $ ( 0.36 ) $ 0.61 $ ( 0.14 ) $ 0.48 Diluted net income (loss) per share attributable to Civeo Corporation common shareholders $ ( 0.36 ) $ 0.61 $ ( 0.14 ) $ 0.47 Weighted average number of common shares outstanding: Basic 14,293 14,814 14,488 14,980 Diluted 14,293 14,891 14,488 15,051 Dividends per common share $ 0.25 $ 0.25 $ 0.75 $ 0.25 The accompanying notes are an integral part of these financial statements. 4 CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income (loss) $ ( 5,289 ) $ 9,223 $ ( 2,998 ) $ 7,079 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustment, net of zero taxes 7,238 ( 6,795 ) ( 1,372 ) ( 6,890 ) Total other comprehensive income (loss), net of taxes 7,238 ( 6,795 ) ( 1,372 ) ( 6,890 ) Comprehensive income (loss) 1,949 2,428 ( 4,370 ) 189 Less: Comprehensive income (loss) attributable to noncontrolling interest ( 172 ) 136 ( 1,071 ) ( 50 ) Comprehensive income (loss) attributable to Civeo Corporation $ 2,121 $ 2,292 $ ( 3,299 ) $ 239 The accompanying notes are an integral part of these financial statements. 5 CIVEO CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands, Excluding Share Amounts) September 30, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 17,910 $ 3,323 Accounts receivable, net 106,707 143,222 Inventories 8,769 6,982 Prepaid expenses 10,901 8,439 Other current assets 1,219 7,407 Assets held for sale — 5,873 Total current assets 145,506 175,246 Property, plant and equipment, net 233,864 270,563 Goodwill 7,812 7,690 Other intangible assets, net 72,426 77,999 Operating lease right-of-use assets 10,985 12,286 Other noncurrent assets 7,043 4,278 Total assets $ 477,636 $ 548,062 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 48,497 $ 58,699 Accrued liabilities 36,485 40,523 Income taxes payable 14,026 3,831 Deferred revenue 2,792 4,849 Other current liabilities 5,039 6,334 Total current liabilities 106,839 114,236 Long-term debt 50,078 65,554 Deferred income taxes 5,241 11,803 Operating lease liabilities 7,915 9,264 Other noncurrent liabilities 23,619 24,167 Total liabilities 193,692 225,024 Shareholders’ Equity: Common shares ( no par value; 46,000,000 shares authorized, 14,275,876 shares and 15,046,756 shares issued, respectively, and 13,861,802 shares and 14,680,081 shares outstanding, respectively) — — Additional paid-in capital 1,630,851 1,628,972 Accumulated deficit ( 956,545 ) ( 919,023 ) Common shares held in treasury at cost, 414,074 and 366,675 shares, respectively ( 10,130 ) ( 9,063 ) Accumulated other comprehensive loss ( 382,017 ) ( 380,715 ) Total Civeo Corporation shareholders’ equity 282,159 320,171 Noncontrolling interest 1,785 2,867 Total shareholders’ equity 283,944 323,038 Total liabilities and shareholders’ equity $ 477,636 $ 548,062 The accompanying notes are an integral part of these financial statements. 6 CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In Thousands) Attributable to Civeo Common Shares Par Value Additional Paid-in Capital Accumulated Deficit Treasury Shares Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest Total Shareholders’ Equity Balance, June 30, 2023 $ — $ 1,626,556 $ ( 939,983 ) $ ( 9,063 ) $ ( 385,350 ) $ 3,173 $ 295,333 Net income — — 9,022 — — 201 9,223 Currency translation adjustment — — — — ( 6,730 ) ( 65 ) ( 6,795 ) Dividends paid — — ( 3,731 ) — — ( 68 ) ( 3,799 ) Common shares repurchased — — ( 1,252 ) — — — ( 1,252 ) Share-based compensation — 1,253 — — — — 1,253 Balance, September 30, 2023 $ — $ 1,627,809 $ ( 935,944 ) $ ( 9,063 ) $ ( 392,080 ) $ 3,241 $ 293,963 Balance, June 30, 2024 $ — $ 1,630,130 $ ( 933,346 ) $ ( 10,130 ) $ ( 389,229 ) $ 1,963 $ 299,388 Net loss — — ( 5,091 ) — — ( 198 ) ( 5,289 ) Currency translation adjustment — — — — 7,212 26 7,238 Dividends paid — — ( 3,616 ) — — ( 6 ) ( 3,622 ) Common shares repurchased — — ( 14,208 ) — — — ( 14,208 ) Excise tax on common shares repurchased — — ( 284 ) — — — ( 284 ) Share-based compensation — 721 — — — — 721 Balance, September 30, 2024 $ — $ 1,630,851 $ ( 956,545 ) $ ( 10,130 ) $ ( 382,017 ) $ 1,785 $ 283,944 Balance, December 31, 2022 $ — $ 1,624,512 $ ( 930,123 ) $ ( 9,063 ) $ ( 385,187 ) $ 3,562 $ 303,701 Net income (loss) — — 7,132 — — ( 53 ) 7,079 Currency translation adjustment — — — — ( 6,893 ) 3 ( 6,890 ) Dividends paid — — ( 3,731 ) — — ( 271 ) ( 4,002 ) Common shares repurchased — — ( 9,222 ) — — — ( 9,222 ) Share-based compensation — 3,297 — — — — 3,297 Balance, September 30, 2023 $ — $ 1,627,809 $ ( 935,944 ) $ ( 9,063 ) $ ( 392,080 ) $ 3,241 $ 293,963 Balance, December 31, 2023 $ — $ 1,628,972 $ ( 919,023 ) $ ( 9,063 ) $ ( 380,715 ) $ 2,867 $ 323,038 Net loss — — ( 1,997 ) — — ( 1,001 ) ( 2,998 ) Currency translation adjustment — — — — ( 1,302 ) ( 70 ) ( 1,372 ) Dividends paid — — ( 10,984 ) — — ( 11 ) ( 10,995 ) Common shares repurchased — — ( 24,060 ) — — — ( 24,060 ) Excise tax on common shares repurchased — — ( 481 ) — — — ( 481 ) Share-based compensation — 1,879 — ( 1,067 ) — — 812 Balance, September 30, 2024 $ — $ 1,630,851 $ ( 956,545 ) $ ( 10,130 ) $ ( 382,017 ) $ 1,785 $ 283,944 Common Shares (in thousands) Balance, December 31, 2023 14,680 Share-based compensation 104 Common shares repurchased ( 922 ) Balance, September 30, 2024 13,862 The accompanying notes are an integral part of these financial statements. 7 CIVEO CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income (loss) $ ( 2,998 ) $ 7,079 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 51,269 59,277 Impairment charges 7,823 — Deferred income tax expense (benefit) ( 6,487 ) 2,688 Non-cash compensation charge 1,879 3,297 (Gains) losses on disposals of assets ( 6,134 ) 2,264 Provision for credit losses, net of recoveries 15 120 Other, net 1,886 1,900 Changes in operating assets and liabilities: Accounts receivable 35,771 ( 37,411 ) Inventories ( 1,690 ) 420 Accounts payable and accrued liabilities ( 13,586 ) 4,767 Taxes payable 9,681 ( 5 ) Other current and noncurrent assets and liabilities, net ( 3,415 ) 12,197 Net cash flows provided by operating activities 74,014 56,593 Cash flows from investing activities: Capital expenditures ( 18,405 ) ( 21,179 ) Proceeds from dispositions of property, plant and equipment 10,700 7,070 Other, net 183 — Net cash flows used in investing activities ( 7,522 ) ( 14,109 ) Cash flows from financing activities: Revolving credit borrowings 233,613 172,867 Revolving credit repayments ( 242,859 ) ( 179,599 ) Term loan repayments — ( 22,338 ) Debt issuance costs ( 2,976 ) — Dividends paid ( 10,984 ) ( 3,731 ) Repurchases of common shares ( 24,060 ) ( 9,222 ) Taxes paid on vested shares ( 1,067 ) — Net cash flows used in financing activities ( 48,333 ) ( 42,023 ) Effect of exchange rate changes on cash ( 3,572 ) ( 598 ) Net change in cash and cash equivalents 14,587 ( 137 ) Cash and cash equivalents, beginning of period 3,323 7,954 Cash and cash equivalents, end of period $ 17,910 $ 7,817 The accompanying notes are an integral part of these financial statements. 8 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of the Business We provide hospitality services to remote workforces in Canada and Australia, including lodging, catering and food service, housekeeping and maintenance at accommodation facilities that we or our customers own. We provide services that support the day-to-day operations of these facilities, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics. We also manage development activities for workforce accommodation facilities, including site selection, permitting, engineering and design, manufacturing management and site construction, along with providing hospitality services once the facility is constructed. We primarily operate in some of the world’s most active oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore producing regions, and our customers include major and independent oil companies, mining companies, engineering companies and oilfield and mining service companies. We operate in two principal reportable business segments – Canada and Australia. Basis of Presentation Unless otherwise stated or the context otherwise indicates: (i) all references in these consolidated financial statements to “Civeo,” “us,” “our” or “we” refer to Civeo Corporation and its consolidated subsidiaries; and (ii) all references in this report to “dollars” or “$” are to U.S. dollars. The accompanying unaudited consolidated financial statements of Civeo have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with United States (U.S.) Generally Accepted Accounting Principles (GAAP) has been condensed or omitted pursuant to those rules and regulations. The unaudited consolidated financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year. The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements. The unaudited consolidated financial statements included in this report should be read in conjunction with our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. 9 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. REVENUE The following table disaggregates our revenue by our two reportable segments (Canada and Australia) into major categories for the periods indicated (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Canada Accommodation revenues $ 48,747 $ 71,417 $ 180,793 $ 208,000 Mobile facility rental revenues 123 17,314 1,473 54,752 Food service and other services revenues 8,866 6,413 22,157 17,315 Total Canada revenues 57,736 95,144 204,423 280,067 Australia Accommodation revenues $ 51,370 $ 46,012 $ 147,391 $ 130,953 Food service and other services revenues 65,252 41,873 169,576 116,465 Total Australia revenues 116,622 87,885 316,967 247,418 Other Other revenues $ 1,980 $ 543 $ 9,781 $ 2,521 Total other revenues 1,980 543 9,781 2,521 Total revenues $ 176,338 $ 183,572 $ 531,171 $ 530,006 Our payment terms vary by the type and location of our customer and the services offered. The time between invoicing and when our performance obligations are satisfied is not significant. Payment terms are generally within 30 days and in most cases do not extend beyond 60 days. We do not have significant financing components or significant payment terms. As of September 30, 2024, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue. The table only includes revenue expected to be recognized from contracts where the quantity of service is certain (in thousands): For the years ending December 31, 2024 2025 2026 Thereafter Total Revenue expected to be recognized as of September 30, 2024 $ 47,271 $ 147,648 $ 108,393 $ 303,385 $ 606,697 We applied the practical expedient and do not disclose consideration for remaining performance obligations with an original expected duration of one year or less. In addition, we do not estimate revenues expected to be recognized related to unsatisfied performance obligations for contracts without minimum room commitments. The table above represents only a portion of our expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues. 3. IMPAIRMENT CHARGES The following summarizes pre-tax impairment charges recorded during 2024, which are included in Impairment expense in our consolidated statements of operations (in thousands): Australia U.S. Total Quarter ended March 31, 2024 Long-lived assets $ 5,749 $ 2,074 $ 7,823 Total $ 5,749 $ 2,074 $ 7,823 10 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Quarter ended March 31, 2024 . During the first quarter of 2024, we recorded impairment expense of $ 5.7 million related to various undeveloped land positions and related permitting costs in Australia. At March 31, 2024, we identified an impairment trigger related to certain of these properties due to the denial of development permit applications in Australia. Accordingly, the assets were written down to their estimated fair value of $ 0.6 million. In addition, during the first quarter of 2024, we recorded impairment expense of $ 2.1 million, related to land located in the U.S. The land was written down to its estimated fair value (less costs to sell) of $ 3.8 million. No impairment expense was recorded during the second or third quarters of 2024. 4. FAIR VALUE MEASUREMENTS Our financial instruments consist of cash and cash equivalents, receivables, payables and debt instruments. We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values. As of September 30, 2024 and December 31, 2023, we believe the carrying value of our floating-rate debt outstanding under our revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment. We estimated the fair value of our floating-rate revolving credit facilities using significant other observable inputs, representative of a Level 2 fair value measurement, including terms and credit spreads for these loans. In addition, the estimated fair value of our assets held for sale was based upon Level 2 fair value measurements, which included appraisals, broker price opinions and negotiations with third parties. During the first quarter of 2024, we wrote down certain long-lived assets to fair value. Our estimate of the fair value of undeveloped land positions in Australia that were impaired was based on appraisals from third parties. 5. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS Additional information regarding selected balance sheet accounts at September 30, 2024 and December 31, 2023 is presented below (in thousands): September 30, 2024 December 31, 2023 Accounts receivable, net: Trade $ 79,992 $ 93,527 Unbilled revenue 23,233 46,331 Other 3,700 3,563 Total accounts receivable 106,925 143,421 Allowance for credit losses ( 218 ) ( 199 ) Total accounts receivable, net $ 106,707 $ 143,222 September 30, 2024 December 31, 2023 Inventories: Finished goods and purchased products $ 7,115 $ 5,648 Raw materials 1,654 1,334 Total inventories $ 8,769 $ 6,982 11 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Estimated Useful Life (in years) September 30, 2024 December 31, 2023 Property, plant and equipment, net: Land $ 26,280 $ 27,988 Accommodations assets 3 — 15 1,374,390 1,378,408 Buildings and leasehold improvements 7 — 20 14,198 14,603 Machinery and equipment 4 — 7 14,761 13,255 Office furniture and equipment 3 — 7 69,032 67,248 Vehicles 3 — 5 9,127 10,025 Construction in progress 7,739 12,087 Total property, plant and equipment 1,515,527 1,523,614 Accumulated depreciation ( 1,281,663 ) ( 1,253,051 ) Total property, plant and equipment, net $ 233,864 $ 270,563 September 30, 2024 December 31, 2023 Accrued liabilities: Accrued compensation $ 30,511 $ 33,854 Accrued taxes, other than income taxes 3,307 3,997 Other 2,667 2,672 Total accrued liabilities $ 36,485 $ 40,523 September 30, 2024 December 31, 2023 Contract liabilities (Deferred revenue): Current contract liabilities (1) $ 2,792 $ 4,849 Noncurrent contract liabilities (1) 6,363 8,068 Total contract liabilities (Deferred revenue) $ 9,155 $ 12,917 (1) Current contract liabilities and Noncurrent contract liabilities are included in "Deferred revenue" and "Other noncurrent liabilities," respectively, in our unaudited consolidated balance sheets. Deferred revenue typically consists of upfront payments received before we satisfy the associated performance obligation. The decrease in deferred revenue from December 31, 2023 to September 30, 2024 was due to revenue recognized over the contracted terms related to advance payments received from a customer for village enhancements in Australia. 6. ASSETS HELD FOR SALE As of December 31, 2023, assets held for sale included certain assets in the U.S. These assets were recorded at the estimated fair value less costs to sell, which exceeded or equaled their carry values. In the second quarter of 2024, we sold the land at our Louisiana location for no gain. During the third quarter of 2023, we entered into a definitive agreement to sell our McClelland Lake Lodge assets for approximately $ 36 million. The related assets had no remaining carrying value. 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, we recognized the remaining $ 1.0 million in dismantle costs and received the remaining $ 7.8 million in cash proceeds. The following table summarizes the carrying amount as of September 30, 2024 and December 31, 2023 of the assets classified as held for sale (in thousands): 12 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) September 30, 2024 December 31, 2023 Assets held for sale: Property, plant and equipment, net $ — $ 5,873 Total assets held for sale $ — $ 5,873 7. EARNINGS PER SHARE We calculate our basic earnings per share by dividing net income (loss) attributable to us by the weighted average number of common shares outstanding. For diluted earnings per share, the basic shares outstanding are adjusted by adding all potentially dilutive securities. The calculation of basic and diluted earnings per share attributable to Civeo common shareholders is presented below for the periods indicated (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Numerator: Basic net income (loss) attributable to Civeo Corporation $ ( 5,091 ) $ 9,022 $ ( 1,997 ) $ 7,132 Diluted net income (loss) attributable to Civeo Corporation $ ( 5,091 ) $ 9,022 $ ( 1,997 ) $ 7,132 Denominator: Weighted average shares outstanding - basic 14,293 14,814 14,488 14,980 Dilutive shares - share-based awards — 77 — 71 Weighted average shares outstanding - diluted 14,293 14,891 14,488 15,051 Basic net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ ( 0.36 ) $ 0.61 $ ( 0.14 ) $ 0.48 Diluted net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ ( 0.36 ) $ 0.61 $ ( 0.14 ) $ 0.47 (1) Computations may reflect rounding adjustments. Share-based awards excluded from the calculation of weighted-average common shares outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2024 totaled 0.2 million shares. Share-based awards excluded from the calculation of weighted-average common shares outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2023 totaled fewer than 0.1 million shares. 13 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT As of September 30, 2024 and December 31, 2023, long-term debt consisted of the following (in thousands): September 30, 2024 December 31, 2023 U.S. revolving credit facility; weighted average interest rate of 10.4 % for the nine month period ended September 30, 2024 $ — $ — Canadian revolving credit facility; weighted average interest rate of 8.4 % for the nine month period ended September 30, 2024 50,078 65,554 Australian revolving credit facility; weighted average interest rate of 7.2 % for the nine month period ended September 30, 2024 — — Total debt $ 50,078 $ 65,554 Amended Credit Agreement As of December 31, 2023, our Syndicated Facility Agreement, (as then amended, the Credit Agreement) with Royal Bank of Canada, as Canadian administrative agent, 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. On June 28, 2024, we entered into the second amendment to the Credit Agreement, which changed the benchmark interest rate for certain Canadian dollar-denominated loans in the Canadian Revolving Facility from Canadian Dollar Offered Rate to Adjusted Term Canadian Overnight Repo Rate Average (CORRA). On August 8, 2024, we entered into the third amendment to the Credit Agreement (as so amended, the Amended Credit Agreement), which, among other things: • increased the aggregate revolving loan commitments by $ 45.0 million under the Amended Credit Agreement, to a maximum principal amount of $ 245.0 million, allocated as follows: (A) a $ 10.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers (the U.S. Facility); (B) a $ 200.0 million senior secured revolving credit facility in favor of Civeo and certain of our U.S. subsidiaries, as borrowers (the Canadian Facility); and (C) a $ 35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower, scheduled to mature on August 8, 2028; • added Civeo USA LLC as a Borrower under the Amended Credit Agreement with respect to the U.S. Facility and the Canadian Facility; • reduced the interest rate spreads above the benchmark rates by 25 basis points; • maintained the previous max net leverage ratio and max interest covenant levels; and • provided for other technical changes and amendments. 14 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) U.S. dollar amounts outstanding under the facilities provided by the Amended Credit Agreement bear interest at a variable rate equal to Adjusted Term Secured Overnight Financing Rate (SOFR), which is equal to Term SOFR plus a 10 basis point adjustment, plus a margin of 2.50 % to 3.75 %, or a base rate plus 1.50 % to 2.75 %, in each case based on a ratio of our total net debt to Consolidated EBITDA (as defined in the Amended Credit Agreement). Canadian dollar amounts outstanding bear interest at a variable rate equal to Adjusted Term CORRA (which is equal to the Term CORRA plus an adjustment of 29.547 basis points for one month terms or 32.138 basis points for three month terms) plus a margin of 2.50 % to 3.75 %, or a Canadian Prime rate plus a margin of 1.50 % to 2.75 %, in each case based on a ratio of our total net debt to Consolidated EBITDA. Australian dollar amounts outstanding under the Amended Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 2.50 % to 3.75 %, based on a ratio of our total net debt to Consolidated EBITDA. The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict: (i) indebtedness, liens and fundamental changes; (ii) asset sales; (iii) specified acquisitions; (iv) certain restrictive agreements; (v) transactions with affiliates; and (vi) investments and other restricted payments, including dividends and other distributions. In addition, we must maintain a minimum interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.00 to 1.00 and a maximum net leverage ratio, defined as the ratio of total net debt to Consolidated EBITDA, of no greater than 3.00 to 1.00. Following a qualified offering of indebtedness, we will be required to maintain a maximum leverage ratio of no greater than 3.50 to 1.00 and a maximum senior secured ratio less than 2.00 to 1.00. Each of the factors considered in the calculations of these ratios are defined in the Amended Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt discount amortization, amortization of intangibles and other non-cash charges. We were in compliance with our covenants as of September 30, 2024. Borrowings under the Amended Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries subject to customary exceptions. The obligations under the Amended Credit Agreement are guaranteed by our significant subsidiaries. As of September 30, 2024, we had seven lenders that were parties to the Amended Credit Agreement, with total revolving commitments ranging from $ 15.0 million to $ 45.0 million. As of September 30, 2024, we had outstanding letters of credit of $ 0.3 million under the U.S. facility, zero under the Australian facility and $ 0.8 million under the Canadian facility. We also had outstanding bank guarantees of A$ 1.6 million under the Australian facility. 9. INCOME TAXES Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. We operate in three jurisdictions, Canada, Australia and the U.S., where statutory tax rates range from 15 % to 30 %. Our effective tax rate will vary from period to period based on changes in earnings mix between these different jurisdictions. On January 1, 2024, the Organization for Economic Cooperation and Development Pillar Two rules became effective and established a minimum 15% tax rate on certain multinational enterprises. The Pillar Two rules have been implemented in Canada and Australia, with the U.S. still uncertain to date. The applicable tax law changes with respect to Pillar Two have been considered for the jurisdictions in which we operate, and we do not anticipate the Pillar Two rules to have a materially adverse impact on our financial results. We compute our quarterly taxes under the effective tax rate method by applying an anticipated annual effective rate to our year-to-date income, except for significant unusual or extraordinary transactions. Income taxes for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs. As of September 30, 2024, Canada and the U.S. were considered loss jurisdictions for tax accounting purposes and were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Our income tax expense for the three months ended September 30, 2024 totaled $ 3.9 million, or ( 270.6 )% of pretax loss, compared to an income tax benefit of $ 1.2 million, or ( 15.2 )% of pretax income, for the three months ended September 30, 2023. Our effective tax rate for the three months ended September 30, 2024 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. For the three months ended September 30, 2023, our effective tax rate 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. Our income tax expense for the nine months ended September 30, 2024 totaled $ 9.2 million, or 148.3 % of pretax income, compared to income tax expense of $ 2.9 million, or 29.0 % of pretax income, for the nine months ended September 30, 15 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2023. Our effective tax rate for the nine months ended September 30, 2024 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. For the nine months ended September 30, 2023, our effective tax rate 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. 10. COMMITMENTS AND CONTINGENCIES We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including warranty and product liability claims as a result of our products or operations. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. 11. ACCUMULATED OTHER COMPREHENSIVE LOSS Our accumulated other comprehensive loss increased $ 1.3 million from $ 380.7 million at December 31, 2023 to $ 382.0 million at September 30, 2024, as a result of foreign currency exchange rate fluctuations. Changes in other comprehensive loss during the nine months of 2024 were primarily driven by the Australian dollar increasing in value compared to the U.S. dollar and the Canadian dollar decreasing in value compared to the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$ 187 million and A$ 201 million, respectively, at September 30, 2024. 12. SHARE REPURCHASE PROGRAMS AND DIVIDENDS Share Repurchase Programs In 2024, 2023 and 2022, our Board of Directors (Board) authorized the repurchase of up to 5.0 % of our total common shares which were issued and outstanding, or approximately 711,000 , 742,000 and 685,000 common shares, respectively, over a twelve month period. The repurchase authorization allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. We have funded, and intend to continue to fund, repurchases through cash on hand and cash generated from operations. Any common shares repurchased are cancelled in the periods they are acquired and the payment is accounted for as an increase to accumulated deficit in our Unaudited Consolidated Statements of Changes in Shareholders’ Equity in the period the payment is made. The following table summarizes our common share repurchases for the periods presented (in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Dollar-value of shares repurchased $ 14,208 $ 1,252 $ 24,060 $ 9,222 Shares repurchased 514.8 62.3 922.0 443.2 Average price paid per share $ 27.59 $ 20.05 $ 26.08 $ 20.78 Dividends Our Board declared the following quarterly dividends for the nine months ended September 30, 2024 and 2023. The dividends are eligible dividends pursuant to the Income Tax Act (Canada). 16 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Date Declared Record Date Payment Date Per Share Amount July 30, 2024 August 26, 2024 September 16, 2024 $ 0.25 April 26, 2024 May 27, 2024 June 17, 2024 $ 0.25 February 2, 2024 February 26, 2024 March 18, 2024 $ 0.25 September 5, 2023 September 15, 2023 September 29, 2023 $ 0.25 13. SHARE-BASED COMPENSATION Certain key employees and non-employee directors participate in the Amended and Restated 2014 Equity Participation Plan of Civeo Corporation (the Civeo Plan). The Civeo Plan authorizes our Board and the Compensation Committee of our Board to approve and grant awards of options, awards of restricted shares, performance share awards, phantom share units and dividend equivalents, awards of deferred shares, and share payments to our employees and non-employee directors. Approximately 3.0 million Civeo common shares are authorized to be issued under the Civeo Plan. Outstanding Awards Phantom Share Units. On March 2, 2024, we granted 184,640 phantom share units under the Civeo Plan, which vest in three equal annual installments beginning on March 2, 2025. We also granted 84,408 phantom share units under the Canadian Long-Term Incentive Plan, which vest in three equal annual installments beginning on March 2, 2025. During the second quarter of 2024, we granted an additional 25,241 phantom share units under the Civeo Plan. During the third quarter of 2024, we granted an additional 19,971 phantom share units under the Canadian Long-Term Incentive Plan. Phantom share units are settled in cash upon vesting. During the three months ended September 30, 2024 and 2023, we recognized compensation expense associated with phantom share units totaling $ 2.1 million and $ 1.7 million, respectively. During the nine months ended September 30, 2024 and 2023, we recognized compensation expense associated with phantom share units totaling $ 5.1 million and $ 4.8 million, respectively. At September 30, 2024, unrecognized compensation cost related to phantom share units was $ 10.2 million, as remeasured at September 30, 2024, which is expected to be recognized over a weighted average period of 2.0 years. Performance Share Awards. On March 2, 2024, we granted 122,978 performance share awards under the Civeo Plan, which cliff vest after three years subject to attainment of applicable performance criteria. These awards will be earned in amounts between 0 % and 200 % of the participant’s target performance share award, based on the payout percentage associated with Civeo’s relative total shareholder return rank among a peer group of other companies and the payout percentage associated with Civeo's three year growth in EBITDA over the performance period relative to a preset 2026 EBITDA target. The portion of the performance share awards tied to the 2026 EBITDA target includes a performance-based vesting requirement. We evaluate the probability of achieving the performance criteria throughout the performance period and will adjust share-based compensation expense based on the number of shares expected to vest based on our estimate of the most probable performance outcome. No share-based compensation expense is recognized if the performance criteria are not probable of being achieved. During the three months ended September 30, 2024 and 2023, we recognized compensation expense associated with performance share awards totaling $ 0.5 million and $ 1.0 million, respectively. During the nine months ended September 30, 2024 and 2023, we recognized compensation expense associated with performance share awards totaling $ 1.1 million and $ 2.5 million, respectively. No performance share awards vested during the three months ended September 30, 2024 and 2023. The total fair value of performance share awards that vested during the nine months ended September 30, 2024 and 2023 was $ 2.8 million and zero , respectively. At September 30, 2024, unrecognized compensation cost related to performance share awards was $ 2.3 million, which is expected to be recognized over a weighted average period of 1.6 years. Restricted Share Awards / Restricted Share Units / Deferred Share Awards. On May 15, 2024, we granted 42,125 restricted share and deferred share awards to our non-employee directors, which vest in their entirety on May 14, 2025. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended September 30, 2024 and 2023 totaled $ 0.3 million and $ 0.3 million, respectively. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the nine months ended September 30, 2024 and 2023 totaled $ 0.8 million and $ 0.8 million, respectively. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the three months ended September 17 CIVEO CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 30, 2024 and 2023 was zero . The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the nine months ended September 30, 2024 and 2023 was $ 1.2 million and $ 0.9 million, respectively. At September 30, 2024, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $ 0.6 million, which is expected to be recognized over a weighted average period of 0.6 years. 14. SEGMENT AND RELATED INFORMATION In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, we have identified two reportable segments, Canada and Australia, which represent our strategic focus on hospitality services and workforce accommodations. Financial information by business segment for each of the three and nine months ended September 30, 2024 and 2023 is summarized in the following table (in thousands): Total revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets Three months ended September 30, 2024 Canada $ 57,736 $ 9,264 $ ( 8,282 ) $ 3,558 $ 737,194 Australia 116,622 8,086 12,349 3,889 218,733 Corporate, other and eliminations 1,980 90 ( 4,023 ) 29 ( 478,291 ) Total $ 176,338 $ 17,440 $ 44 $ 7,476 $ 477,636 Three months ended September 30, 2023 Canada $ 95,144 $ 9,565 $ 10,811 $ 3,006 $ 745,377 Australia 87,885 7,181 9,067 6,244 195,315 Corporate, other and eliminations 543 168 ( 3,839 ) 212 ( 384,098 ) Total $ 183,572 $ 16,914 $ 16,039 $ 9,462 $ 556,594 Nine months ended September 30, 2024 Canada $ 204,423 $ 27,912 $ ( 2,801 ) $ 6,300 $ 737,194 Australia 316,967 23,018 30,033 12,059 218,733 Corporate, other and eliminations 9,781 339 ( 15,857 ) 46 ( 478,291 ) Total $ 531,171 $ 51,269 $ 11,375 $ 18,405 $ 477,636 Nine months ended September 30, 2023 Canada $ 280,067 $ 37,067 $ 9,486 $ 7,075 $ 745,377 Australia 247,418 22,099 23,140 13,373 195,315 Corporate, other and eliminations 2,521 111 ( 10,319 ) 731 ( 384,098 ) Total $ 530,006 $ 59,277 $ 22,307 $ 21,179 $ 556,594 18 Cautionary Statement Regarding Forward-Looking Statements This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “expect,” “anticipate,” “estimate,” “continue,” “believe” or other similar words. The forward-looking statements in this report include, but are not limited to, the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to our expectations about the macroeconomic environment and industry conditions, including the volatility in the price of and demand for commodities, as well as our expectations about capital expenditures in 2024, beliefs with respect to liquidity needs and expectations with respect to growth strategies and opportunities, share repurchases and dividends. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of known material factors that could affect our results, please refer to “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023 and our subsequent SEC filings. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on these forward-looking statements, which are based only on our current expectations and are not guarantees of future performance. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except to the extent required by applicable law. In addition, in certain places in this quarterly report, we may refer to reports published by third parties that purport to describe trends or developments in the natural resources industry. We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.