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 Demand for our hospitality services is driven primarily by ongoing operations of existing natural resource projects in Australia and Canada. 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. Long-term demand for our services has been driven by natural resource production, maintenance, operation and expansion of those facilities. In general, industry capital spending programs are based on the outlook for commodity prices, production costs, economic growth, perceived political risk, global commodity supply/demand, reserve replacement requirements, estimates of resource production, annual maintenance requirements and the expectations of our customers' shareholders. As a result, demand for our hospitality services is sensitive to expected commodity prices, principally related to met (metallurgical) coal, oil, iron ore and liquefied natural gas (LNG), 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, the impact of global tariff changes and other changes to trade policies, volatility affecting the banking system and financial markets, availability of capital to the natural resource industry and regulatory changes in Australia, Canada and other markets, including governmental measures introduced to mitigate climate change. Commodity Prices There is continued uncertainty around commodity price levels, driven by many factors including global recession fears that may result from inflationary pressures and higher interest rates, an economic slowdown in China and resultant economic stimulus by the Chinese government, the impact of changes to global tariff and trade policies, actions taken by Organization of 21 the Petroleum Exporting Countries Plus (OPEC+) to adjust oil production levels, geopolitical events such as the ongoing Russia/Ukraine and Middle East conflicts, 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 delay expansionary and maintenance spending and defer additional investments in their oil sands assets and in extreme cases reduce production. Recent Commodity Prices. Recent met coal, iron ore, West Texas Intermediate (WTI) crude, and Western Canadian Select (WCS) crude pricing trends are as follows: Average Price (1) Quarter ended Hard Coking Coal (Met Coal) (per tonne) Iron Ore (per tonne) WTI Crude (per bbl) WCS Crude (per bbl) Third Quarter through July 25, 2025 175.80 94.39 67.08 54.47 6/30/2025 186.10 92.70 63.81 53.15 3/31/2025 185.13 97.25 71.47 58.27 12/31/2024 203.50 96.00 70.42 57.50 9/30/2024 210.74 94.54 75.29 59.97 6/30/2024 242.93 106.01 80.83 67.24 3/31/2024 307.68 118.54 77.01 59.48 12/31/2023 332.24 122.24 78.60 55.31 9/30/2023 260.12 111.04 82.50 66.20 6/30/2023 243.54 106.98 73.54 60.25 (1) Source: Hard coking prices are from IHS Markit, iron ore prices and WCS crude prices are from Bloomberg and WTI crude prices are from U.S. Energy Information Administration. Met Coal. In Australia, 86% of our Australian owned 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 remained subdued with negative growth in the second quarter of 2025. China, Europe and Japan all experienced negative growth during January through June 2025, while India continues to see consistent positive growth. Global tariff changes, recession fears and associated business uncertainty are weighing on current and short-term global steel production. Global steel production decreased by 2.2% for the six months through June 2025 compared to the same period of 2024. As of July 25, 2025, met coal spot prices were $174.10 per tonne. Met coal prices have remained between $168 and $198 per tonne during the first half of 2025, since dropping below $200 per tonne in late 2024. Low prices are impacted by lower steel production driven by lower demand and trader reselling of met coal inventories. In a low met coal price environment, producers are under increasing pressure to re-evaluate their production levels due to reduced operating margins. An improvement in met coal prices is contingent upon increased demand for met coal, which would be driven by improving steel production along with a tightening in supply related to producer maintenance activity and production curtailment from higher cost suppliers. Such improvements in the supply and demand fundamentals for met coal may be impacted by ongoing geopolitical tensions associated with global tariffs and trade agreements. Iron Ore. Iron ore prices declined to average $92.70 per tonne during the second quarter of 2025. Analysts expect iron ore prices to continue to be subdued for the remainder of 2025, where strong supply is maintained by the major producers against reduced steel demand and production. Further new iron ore supply to the market may be delayed and some supply rationalization is possible with continuing lower prices, as suppliers review current production levels in a low iron ore price environment. WTI Crude. In an effort to retain and recapture global market share, OPEC+ began reversing previously implemented production cuts at the beginning of the second quarter of 2025, increasing production despite flattening global demand for oil. The combined impact of these factors reduced WTI prices, which are down 9% year-to-date in 2025. OPEC+ has announced further production increases planned for August 2025 which will likely put further downward pressure on oil prices. Forecasts 22 currently have oil prices averaging $65.33 per barrel in the second half of 2025. In light of this macroeconomic backdrop, our Canadian oil sands customers are increasingly looking to reduce costs and headcounts. 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. WCS prices in the second quarter of 2025 averaged $53.15 per barrel compared to an average of $67.24 in the second quarter of 2024. The WCS Differential decreased from $13.49 per barrel at the end of the fourth quarter of 2024 to $11.67 at the end of the second quarter of 2025. Further, the U.S. Administration has implemented and amended several new tariffs over the past several months, including a 10% tariff on energy resources imported to the U. S. from Canada. Implementation of tariffs could have adverse impact on our Canadian customers profit margins, which may in turn reduce their spending on our accommodations and services. Other Qantac Acquisition . On May 6, 2025, we completed the Qantac Acquisition located in Queensland, Australia, which included four villages with 1,340 rooms in Australia’s Bowen Basin and the associated accommodation assets, land and customer contracts. See Note 6. Asset Acquisition to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Inflationary Pressures. Since 2023, price increases resulting from pandemic-related 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. Lingering inflation from the pandemic has recently been exacerbated by changes to global tariffs and trade policies. We are managing inflation risk with negotiated service scope changes and contractual protections. Although inflation resulting from global tariffs implemented or threatened by the U.S. administration, and the resulting retaliations by its trading partners, did not materially impact our cost structure in the second quarter of 2025, concerns remain that inflationary pressures could return in the second half of 2025. 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 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 (LNGC) project and related pipeline projects (specifically, the Coastal GasLink Pipeline, the pipeline constructed to transport natural gas feedstock to LNGC). Construction activity of Phase 1 of the Kitimat LNG Facility has been completed and commercial operations commenced at the end of June 2025. The Coastal GasLink Pipeline was completed in 2024. As such, we expect continued lower occupancy at our Sitka Lodge in the near-term until subsequent phases of the LNGC project are approved and commence, or additional construction activity in the region, drive increased occupancy demand. 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, we expect additional investment in LNG supply will be needed to meet the resulting expected long-term LNG demand growth. Foreign Currency Exchange Rates. Exchange rates between the U.S. dollar and each of the Australian dollar and the Canadian 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 Australia and Canada. 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 Australian dollar and the Canadian dollar: 23 Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change Percentage 2025 2024 Change Percentage Average Australian dollar to U.S. dollar $0.6410 $0.6590 ($0.018) (2.73)% $0.6343 $0.6580 ($0.024) (3.60)% Average Canadian dollar to U.S. dollar $0.7226 $0.7310 ($0.008) (1.15)% $0.7098 $0.7360 ($0.026) (3.56)% As of June 30, 2025 December 31, 2024 Change Percentage Australian dollar to U.S. dollar $0.6559 $0.6196 $0.036 5.86% Canadian dollar to U.S. dollar $0.7330 $0.6950 $0.038 5.47% These fluctuations of the Australian and Canadian dollars have had and will continue to have an impact on the translation of earnings generated from our Australian and Canadian subsidiaries and, therefore, our financial results. Capital Expenditures. We continue to monitor the global economy, commodity prices, demand for met coal, crude oil, LNG and iron ore, inflation, trade policy and the resultant impact on the capital spending plans of our customers in order to plan our business activities. We currently expect that our 2025 capital expenditures will be in the range of approximately $20 million to $25 million, compared to 2024 capital expenditures of $26.1 million. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity. See “Liquidity and Capital Resources ” below for further discussion of our 2025 capital expenditures. 24 Results of Operations Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2025, is based on a comparison to the corresponding period of 2024. Results of Operations – Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Three Months Ended June 30, 2025 2024 Change ($ in thousands) Revenues: Australia $ 112,672 $ 108,608 $ 4,064 Canada 50,022 79,527 (29,505) Other — 578 (578) Total revenues 162,694 188,713 (26,019) Costs and expenses: Cost of sales and services Australia 82,477 81,037 1,440 Canada 39,037 58,849 (19,812) Other 17 948 (931) Total cost of sales and services 121,531 140,834 (19,303) Selling, general and administrative expenses 20,470 17,433 3,037 Depreciation and amortization expense 17,827 17,059 768 Gain on sale of McClelland Lake Lodge assets, net — 87 (87) Other operating expense 66 188 (122) Total costs and expenses 159,894 175,601 (15,707) Operating income 2,800 13,112 (10,312) Interest expense, net (2,624) (2,149) (475) Other income 119 310 (191) Income before income taxes 295 11,273 (10,978) Income tax expense (3,606) (3,786) 180 Less: Net income (loss) attributable to noncontrolling interest (3,311) 7,487 (10,798) Less: Net income (loss) attributable to noncontrolling interest 3 (740) 743 Net income (loss) attributable to Civeo Corporation $ (3,314) $ 8,227 $ (11,541) We reported net loss attributable to Civeo for the quarter ended June 30, 2025 of $3.3 million, or $0.25 per diluted share. Net loss included $3.2 million of shareholder activist related costs and $0.5 million of cost saving initiatives in Canada related to two lodge closures. We reported net income attributable to Civeo for the quarter ended June 30, 2024 of $8.2 million, or $0.56 per diluted share. Revenues. Consolidated revenues decreased $26.0 million, or 14%, in the second quarter of 2025 compared to the second quarter of 2024. This decrease was primarily driven by (i) lower billed rooms at our oil sands lodges in Canada as producers in the region remain focused on reducing operating costs, (ii) reduced occupancy at our Sitka Lodge in Canada as the Kitimat LNG facility was completed and commenced operations in the second quarter of 2025 and (iii) a weaker Australian dollar relative to the U.S. dollar in the second quarter of 2025 compared to the second quarter of 2024. These items were partially offset by an increase in Australia related to the Qantac Acquisition in the second quarter of 2025 and new business in our integrated services villages in Western Australia. The assets from the Qantac Acquisition generated $4.9 million of revenues in the second quarter of 2025. 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 $19.3 million, or 14%, in the second quarter of 2025 compared to the second quarter of 2024. This decrease was primarily driven by (i) lower costs at various lodges in Canada due to reduced occupancy levels, (ii) lower costs related to the reduced mobile asset activity in Canada from pipeline projects for which final costs were incurred in the second quarter of 2024, (iii) reduced indirect costs in Canada as a result of 25 various cost reduction measures and (iv) a weaker Australian dollar relative to the U.S. dollar in the second quarter of 2025 compared to the second quarter of 2024. These items were partially offset by an increase in Australia related to the Qantac Acquisition in the second quarter of 2025 and new business in our integrated services villages in Western Australia and the associated overhead costs. See the discussion of segment results of operations below for further information. Selling, General and Administrative Expenses. SG&A expenses increased $3.0 million, or 17%, in the second quarter of 2025 compared to the second quarter of 2024. This increase was primarily due to higher professional fees of $3.6 million primarily due to shareholder activist related costs of $3.2 million, partially offset by lower office expenses of $0.4 million, lower share-based compensation expense of $0.3 million and a weaker Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2025 compared to the second quarter of 2024. Depreciation and Amortization Expense. Depreciation and amortization expense increased $0.8 million, or 5%, in the second quarter of 2025 compared to the second quarter of 2024. The increase was primarily due to additional property, plant and equipment acquired through the Qantac Acquisition, partially offset by reduced depreciation expense resulting from impairments recorded in 2024 and a weaker Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2025 compared to the second quarter of 2024. Operating Income. Consolidated operating income decreased $10.3 million, or 79%, in the second quarter of 2025 compared to the second quarter of 2024, primarily due to lower lodge occupancy in Canada in the second quarter of 2025 compared to the second quarter of 2024 and higher SG&A expense, primarily due to shareholder activist related costs, in the second quarter of 2025. These items were partially offset by higher activity levels in Australia in the second quarter of 2025 compared to the second quarter of 2024. Interest Expense, net. Net interest expense increased by $0.5 million, or 22%, in the second quarter of 2025 compared to the second quarter of 2024, primarily related to higher average debt levels, partially offset by lower interest rates on credit facility borrowings during 2025 compared to 2024. Income Tax Expense. Our income tax expense for the three months ended June 30, 2025 totaled $3.6 million, or 1222.4% of pretax income, compared to an income tax expense of $3.8 million, or 33.6% of pretax income, for the three months ended June 30, 2024. Our effective tax rate for the three months ended June 30, 2025 and 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. Other Comprehensive Income. Other comprehensive income increased $9.3 million in the second quarter of 2025 compared to the second quarter of 2024, primarily as a result of foreign currency translation adjustments due to changes in the Australian and Canadian dollar exchange rates compared to the U.S. dollar. The Australian dollar exchange rate compared to the U.S. dollar increased 5% in the second quarter of 2025 compared to a 2% increase in the second quarter of 2024. The Canadian dollar exchange rate compared to the U.S. dollar increased 5% in the second quarter of 2025 compared to a 1% decrease in the second quarter of 2024. 26 Segment Results of Operations – Australian Segment Three Months Ended June 30, 2025 2024 Change Revenues ($ in thousands) Accommodation revenue (1) $ 52,682 $ 48,914 $ 3,768 Food service and other services revenue (2) 59,990 59,694 296 Total revenues $ 112,672 $ 108,608 $ 4,064 Cost of sales and services ($ in thousands) Accommodation cost $ 25,890 $ 23,613 $ 2,277 Food service and other services cost 53,163 54,527 (1,364) Indirect other cost 3,424 2,897 527 Total cost of sales and services $ 82,477 $ 81,037 $ 1,440 Gross margin as a % of revenues 26.8 % 25.4 % 1.4 % Average daily rate for villages (3) $ 76 $ 78 $ (2) Total billed rooms for villages (4) 690,506 625,353 65,153 Average Australian dollar to U.S. dollar $ 0.641 $ 0.659 $ (0.018) (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 second quarter of 2025 that were $4.1 million, or 4%, higher than the second quarter of 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 2.7% in the second quarter of 2025 compared to the second quarter of 2024 resulted in a $3.2 million period-over-period decrease in revenues. On a constant currency basis, the Australian segment experienced a 6.7% period-over-period increase in revenues. Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by the Qantac Acquisition in the second quarter of 2025 and new business in our integrated services villages in Western Australia. Our Australian segment cost of sales and services increased $1.4 million, or 2%, in the second quarter of 2025 compared to the second quarter of 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 2.7% in the second quarter of 2025 compared to the second quarter of 2024 resulted in a $2.3 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services in the Australian segment was largely driven by the Qantac Acquisition and new business in our integrated services villages in Western Australia and the associated overhead costs. Our Australian segment gross margin as a percentage of revenues increased to 26.8% in the second quarter of 2025 from 25.4% in the second quarter of 2024. This was primarily driven by increased relative contribution from our accommodation business resulting from the Qantac Acquisition. Our accommodation business generates higher gross margins than our integrated services business, which has a service-only business model. 27 Segment Results of Operations – Canadian Segment Three Months Ended June 30, 2025 2024 Change Revenues ($ in thousands) Accommodation revenue (1) $ 42,590 $ 72,259 $ (29,669) Mobile facility rental revenue (2) 434 356 78 Food service and other services revenue (3) 6,998 6,912 86 Total revenues $ 50,022 $ 79,527 $ (29,505) Cost of sales and services ($ in thousands) Accommodation cost $ 30,618 $ 48,197 $ (17,579) Mobile facility rental cost 135 1,401 (1,266) Food service and other services cost 6,237 6,314 (77) Indirect other costs 2,047 2,937 (890) Total cost of sales and services $ 39,037 $ 58,849 $ (19,812) Gross margin as a % of revenues 22.0 % 26.0 % (4.0) % Average daily rate for lodges (4) $ 94 $ 96 $ (2) Total billed rooms for lodges (5) 449,970 752,364 (302,394) Average Canadian dollar to U.S. dollar $ 0.723 $ 0.731 $ (0.008) (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 second quarter of 2025 that were $29.5 million, or 37%, lower than the second quarter of 2024. The decrease in the Canadian segment was driven by lower billed rooms at our oil sands lodges as producers in the region remain focused on reducing operating costs and reduced occupancy at our Sitka Lodge as the Kitimat LNG facility was completed and commenced operations in the second quarter of 2025. Our Canadian segment cost of sales and services decreased $19.8 million, or 34%, in the second quarter of 2025 compared to the second quarter of 2024. The decrease in cost of sales and services in the Canadian segment was largely driven by (i) lower costs at various lodges due to reduced occupancy levels, (ii) lower demobilization costs related to mobile asset activity from pipeline projects, the final costs for which were incurred in the second quarter of 2024 and (iii) reduced indirect costs as a result of various cost reduction measures. Our Canadian segment gross margin as a percentage of revenues decreased from 26.0% in the second quarter of 2024 to 22.0% in the second quarter of 2025. This was primarily driven by reduced efficiencies at our lodges with lower occupancy levels. 28 Results of Operations – Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Six Months Ended June 30, 2025 2024 Change ($ in thousands) Revenues: Australia $ 216,318 $ 200,345 $ 15,973 Canada 90,420 146,687 (56,267) Other — 7,801 (7,801) Total revenues 306,738 354,833 (48,095) Costs and expenses: Cost of sales and services Australia 159,197 147,150 12,047 Canada 76,682 116,106 (39,424) Other 267 8,023 (7,756) Total cost of sales and services 236,146 271,279 (35,133) Selling, general and administrative expenses 38,655 36,073 2,582 Depreciation and amortization expense 34,080 33,829 251 Impairment expense — 7,823 (7,823) Gain on sale of McClelland Lake Lodge assets, net — (5,988) 5,988 Other operating expense 573 486 87 Total costs and expenses 309,454 343,502 (34,048) Operating income (loss) (2,716) 11,331 (14,047) Interest expense, net (4,217) (4,466) 249 Other income 466 763 (297) Income (loss) before income taxes (6,467) 7,628 (14,095) Income tax expense (6,694) (5,337) (1,357) Net income (loss) (13,161) 2,291 (15,452) Less: Net loss attributable to noncontrolling interest (5) (803) 798 Net income (loss) attributable to Civeo Corporation $ (13,156) $ 3,094 $ (16,250) We reported net loss attributable to Civeo for the six months ended June 30, 2025 of $13.2 million, or $0.98 per diluted share. Net loss included $3.2 million of shareholder activist related costs and $1.4 million of cost saving initiatives in Canada related to severance and two lodge closures. We reported net income attributable to Civeo for the six months ended June 30, 2024 of $3.1 million, or $0.21 per diluted share. Net income included (i) $6.0 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. Revenues. Consolidated revenues decreased $48.1 million, or 14%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This decrease was primarily driven by (i) lower billed rooms at our oil sands lodges in Canada as producers in the region remain focused on reducing operating costs, (ii) reduced occupancy at our Sitka Lodge in Canada as the Kitimat LNG facility was completed and commenced operations in the second quarter of 2025, (iii) reduced mobile asset activity in Canada from pipeline projects which were completed in the first six months of 2024 and (iv) a weaker Australia and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. These items were partially offset by an increase in Australia related to the Qantac Acquisition in the second quarter of 2025 and new business in 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 $35.1 million, or 13%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This decrease was primarily driven by (i) lower costs at various lodges in Canada due to reduced occupancy levels, (ii) lower costs related to the reduced mobile asset activity in Canada from pipeline projects for which final costs were incurred in the first six months of 2024, (iii) reduced indirect costs in Canada as a result of various cost reduction measures and (iv) a weaker Australia and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. These items were partially offset 29 by an increase in Australia related to the Qantac Acquisition in the second quarter of 2025 and new business in 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 expenses increased $2.6 million, or 7%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This increase was primarily due to higher professional fees of $3.5 million due to shareholder activist related costs of $3.2 million and higher share-based compensation expense of $0.4 million due to lower forfeitures in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. These items were partially offset by lower travel and entertainment costs of $0.7 million, down 43% year-of-year, lower compensation costs of $0.5 million and a weaker Australian and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Depreciation and Amortization Expense. Depreciation and amortization expense increased $0.3 million, or 1%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily due to additional property, plant and equipment acquired through the Qantac Acquisition, partially offset by a weaker Australian and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 and reduced depreciation expense resulting from impairments recorded in 2024. Impairment Expense. We recorded pre-tax impairment expense of $7.8 million in the six months ended June 30, 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 $6.0 million in the six months ended June 30, 2024 related to net gains associated with the sale of the McClelland Lake Lodge. Operating Income (Loss). Consolidated operating loss increased $14.0 million, or 124%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to lower lodge occupancy in Canada in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, higher SG&A expense during the 2025 period compared to the 2024 period and a net gain on sale of McClelland Lake Lodge assets in the six months ended June 30, 2024. These items were partially offset by higher activity levels in Australia in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 and impairment expenses in the six months ended June 30, 2024. Interest Expense, net. Net interest expense decreased by $0.2 million, or 6%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily related to lower interest rates on credit facility borrowings, partially offset by higher average debt levels during the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Income Tax Expense. Our income tax expense for the six months ended June 30, 2025 totaled $6.7 million, or (103.5)% of pretax loss, compared to an income tax expense of $5.3 million, or 70.0% of pretax income, for the six months ended June 30, 2024. Our effective tax rate for the six months ended June 30, 2025 and 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. Other Comprehensive Income. Other comprehensive income increased $20.6 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily as a result of foreign currency translation adjustments due to changes in the Australian and Canadian dollar exchange rates compared to the U.S. dollar. The Australian dollar exchange rate compared to the U.S. dollar increased 6% in the of six months ended June 30, 2025 compared to a 2% decrease in the six months ended June 30, 2024. The Canadian dollar exchange rate compared to the U.S. dollar increased 5% in the six months ended June 30, 2025 compared to a 3% decrease in the six months ended June 30, 2024. 30 Segment Results of Operations – Australian Segment Six Months Ended June 30, 2025 2024 Change Revenues ($ in thousands) Accommodation revenue (1) $ 99,505 $ 96,021 $ 3,484 Food service and other services revenue (2) 116,813 104,324 12,489 Total revenues $ 216,318 $ 200,345 $ 15,973 Cost of sales and services ($ in thousands) Accommodation cost $ 48,961 $ 46,207 $ 2,754 Food service and other services cost 103,814 95,431 8,383 Indirect other cost 6,422 5,512 910 Total cost of sales and services $ 159,197 $ 147,150 $ 12,047 Gross margin as a % of revenues 26.4 % 26.6 % (0.2) % Average daily rate for villages (3) $ 76 $ 77 $ (1) Total billed rooms for villages (4) 1,316,142 1,239,289 76,853 Average Australian dollar to U.S. dollar $ 0.634 $ 0.658 $ (0.024) (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 six months ended June 30, 2025 that were $16.0 million, or 8%, higher than the six months ended June 30, 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 3.6% in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 resulted in a $8.0 million period-over-period decrease in revenues. On a constant currency basis, the Australian segment experienced a 12% period-over-period increase in revenues. Excluding the impact of the weaker Australian exchange rate, the increase in the Australian segment was driven by the Qantac Acquisition in the second quarter of 2025, which generated revenues of $4.9 million in 2025, and new business in our integrated services villages in Western Australia. Our Australian segment cost of sales and services increased $12.0 million, or 8%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 3.6% in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 resulted in a $5.9 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services in the Australian segment was largely driven by the Qantac Acquisition and new business in our integrated services villages in Western Australia and the associated overhead costs. Our Australian segment gross margin as a percentage of revenues decreased to 26.4% in the six months ended June 30, 2025 from 26.6% in the six months ended June 30, 2024. This was primarily driven by an increased relative revenue contribution from our integrated services business, which has a service-only business model, and generates lower overall gross margins than our accommodation business. 31 Segment Results of Operations – Canadian Segment Six Months Ended June 30, 2025 2024 Change Revenues ($ in thousands) Accommodation revenue (1) $ 76,026 $ 132,046 $ (56,020) Mobile facility rental revenue (2) 653 1,350 (697) Food service and other services revenue (3) 13,741 13,291 450 Total revenues $ 90,420 $ 146,687 $ (56,267) Cost of sales and services ($ in thousands) Accommodation cost $ 59,483 $ 93,917 $ (34,434) Mobile facility rental cost 135 4,052 (3,917) Food service and other services cost 12,710 12,454 256 Indirect other costs 4,354 5,683 (1,329) Total cost of sales and services $ 76,682 $ 116,106 $ (39,424) Gross margin as a % of revenues 15.2 % 20.8 % (5.7) % Average daily rate for lodges (4) $ 94 $ 97 $ (3) Total billed rooms for lodges (5) 808,667 1,362,396 (553,729) Average Canadian dollar to U.S. dollar $ 0.710 $ 0.736 $ (0.026) (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 six months ended June 30, 2025 that were $56.3 million, or 38%, lower than the six months ended June 30, 2024. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3.6% in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 resulted in a $3.1 million period-over-period decrease in revenues. On a constant currency basis, the Canadian segment experienced a 36.2% period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rate, the decrease in the Canadian segment was driven by (i) lower billed rooms at our oil sands lodges as producers in the region remain focused on reducing operating costs, (ii) reduced occupancy at our Sitka Lodge as the Kitimat LNG facility was completed and commenced operations in the second quarter of 2025 and (iii) reduced mobile asset activity from pipeline projects which were completed in the first six months of 2024. Our Canadian segment cost of sales and services decreased $39.4 million, or 34%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 3.6% in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 resulted in a $2.9 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 in the Canadian segment was largely driven by (i) lower costs at various lodges due to reduced occupancy levels, (ii) lower costs related to the reduced mobile asset activity from pipeline projects for which final costs were incurred in the first six months of 2024 and (iii) reduced indirect costs as a result of various cost reduction measures. Our Canadian segment gross margin as a percentage of revenues decreased from 20.8% in the six months ended June 30, 2024 to 15.2% in the six months ended June 30, 2025. This was primarily driven by reduced efficiencies at our lodges with lower occupancy levels. 32 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 repurchase common shares, to pay dividends 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 Amended 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 June 30, 2025 and December 31, 2024 (in thousands): June 30, 2025 December 31, 2024 Lender commitments $ 265,000 $ 245,000 Reduction in availability (1) (37,291) (3,635) Borrowings against revolving credit capacity (168,672) (43,299) Outstanding letters of credit (870) (1,100) Unused availability 58,167 196,966 Cash and cash equivalents 14,638 5,204 Total available liquidity $ 72,805 $ 202,170 (1) As of June 30, 2025 and December 31, 2024, $37.3 million and $3.6 million, respectively, of our borrowing capacity under the Amended Credit Agreement could not be utilized in order to maintain compliance with the maximum leverage ratio financial covenant in the Amended Credit Agreement. Cash totaling $10.8 million was used in operations during the six months ended June 30, 2025, compared to $38.3 million provided by operations during the six months ended June 30, 2024. Net cash used in working capital was $31.3 million during the six months ended June 30, 2025 compared to net cash provided by working capital of $2.4 million during the six months ended June 30, 2024. The year-over-year increase in cash used in working capital in 2025 compared to 2024 is largely due to an increase in cash taxes paid in Australia in 2025 compared to 2024 and the collection of holdbacks in Canada related to the completion of mobile asset pipeline projects during the six months ended June 30, 2024 that did not repeat in 2025, partially offset by a decrease in cash used by accounts payable and accrued liabilities during the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Cash was used in investing activities during the six months ended June 30, 2025 in the amount of $74.4 million, compared to cash used in investing activities during the six months ended June 30, 2024 in the amount of $0.1 million. The increase in cash used in investing activities was primarily due to the Qantac Acquisition and lower proceeds from the sale of property, plant and equipment. We received net proceeds from the sale of property, plant and equipment of $0.3 million during the six months ended June 30, 2025 compared to $10.6 million during the six months ended June 30, 2024 related to the sale of our McClelland Lake Lodge accommodation assets in Canada and the sale of our Louisiana land in the U.S. Capital expenditures totaled $9.8 million and $10.9 million during the six months ended June 30, 2025 and 2024, respectively. Capital expenditures in both periods were primarily related to maintenance. In addition, our 2024 capital expenditures included approximately $2.9 million related to customer-funded infrastructure upgrades in Australia. We expect our capital expenditures for 2025 to be in the range of $20 million to $25 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts or commitments or attractive risk-adjusted economics. Whether planned expenditures will actually be spent in 2025 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 Amended 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 returning capital to shareholders. We continue to monitor the global economy, commodity prices, demand for met coal, crude oil, 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. 33 Net cash of $92.2 million was provided by financing activities during the six months ended June 30, 2025 primarily due to net borrowings under our revolving credit facilities of $119.2 million to primarily fund the Qantac Acquisition and share repurchases, partially offset by repurchases of our common shares of $22.5 million, dividend payments of $3.4 million, payments to settle tax obligations on vested shares under our share-based compensation plans of $0.6 million and debt issuance costs of $0.4 million. Net cash of $34.1 million was used in financing activities during the six months ended June 30, 2024 primarily due to net repayments under our revolving credit facilities of $15.8 million, repurchases of our common shares of $9.9 million, dividend payments of $7.4 million and payments to settle tax obligations on vested shares under our share-based compensation plans of $1.1 million. The following table summarizes the changes in debt outstanding during the six months ended June 30, 2025 (in thousands): Balance at December 31, 2024 $ 43,299 Borrowings under revolving credit facilities 232,902 Repayments of borrowings under revolving credit facilities (113,679) Translation 6,150 Balance at June 30, 2025 $ 168,672 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. Selectively pursuing strategic organic and inorganic growth opportunities that fit with our current capital allocation priorities of returning capital to shareholders has been, and our management believes will continue to be, an element of our long-term business strategy. The timing, size or success of any growth opportunities 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 September 2024, our Board authorized a common share repurchase program (the Share Repurchase Program) to repurchase up to 5.0% of our total common shares which are issued and outstanding at that date, or 0.7 million common shares, over a twelve month period. In March 2025, our Board authorized an increase to the Share Repurchase Program to repurchase up to 10.0% of our total common shares which are issued and outstanding at that date, and in April 2025, our Board authorized a further increase to repurchase up to 20% of our total common shares which are issued and outstanding at that date, or approximately 2.7 million common shares (the 2025 Share Repurchase Program). The 2025 Share Repurchase Program does not expire. In addition, our Board declared quarterly dividends of $0.25 per common share to shareholders in the first quarter of 2025. These dividends were eligible dividends pursuant to the Income Tax Act (Canada). See Dividends below and 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. 34 Credit Agreement On March 24, 2025, we amended our Syndicated Facility Agreement (as amended to date, the Amended Credit Agreement) to increase the Australian revolving commitments by $20.0 million to an aggregate amount of $55.0 million. As of June 30, 2025, the Amended Credit Agreement provided for a $265.0 million revolving credit facility scheduled to mature on August 8, 2028, allocated as follows: (A) a $10.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers; (B) a $200.0 million senior secured revolving credit facility in favor of Civeo and certain of our U.S. subsidiaries, as borrowers; and (C) a $55.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower. As of June 30, 2025, we had outstanding letters of credit of zero under the U.S. facility, zero under the Australian facility and $0.9 million under the Canadian facility. We also had outstanding bank guarantees of A$1.5 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. Dividends In April 2025, we announced the suspension by our Board of quarterly dividends on our common shares to prioritize returning capital to our shareholders through ongoing share repurchases. The declaration and amount of any 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 Amended 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. If any dividends are declared in the future, the amount per share of our dividend payments may be changed, or dividends may again 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 pay any dividends 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, 2024. 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. 35