Civeo Corp 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on management’s current expectations, estimates and projections about our business operations. Read “Cautionary Statement Regarding Forward Looking Statements.” Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in Item 1A. “Risk Factors” of this annual report. You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements in Item 8 of this annual report. This section of this annual report generally discusses key operating and financial data as of and for the years ended 2025 and 2024 and provides year-over-year comparisons for such periods. For a similar discussion and year-over-year comparisons to our 2023 results, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 27, 2025. Description of the Business We provide hospitality services to remote workforces in Australia and Canada, including catering and food service, lodging, housekeeping and maintenance at accommodation facilities that we or our customers own. We also 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 and manufacturing and site construction management, along with providing hospitality services once the facility is constructed. We primarily operate in some of the world’s most active metallurgical (met) coal, oil, iron ore and liquefied natural gas (LNG) producing regions, and our customers include mining companies, major and independent oil companies, construction, engineering companies and oilfield and mining service companies. We operate in two principal reportable business segments – Australia and Canada. 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 annual report to “dollars” or “$” are to United States (U.S.) dollars. Overview and Macroeconomic Environment Demand for the majority of 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, inclusive of turnaround 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 coal, oil, iron ore and LNG, and the resultant impact of these commodity price expectations on our customers' spending. In addition to these historical demand drivers, there is increasing demand, of relative significance, for our assets and services tied to data center construction. This is principally occurring in the U.S. but could begin to occur in Australia and Canada as well. 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 Both oil prices and met coal prices experienced swings of greater than 10% during 2025, when compared to year end 2024 prices, with each commodity testing multi-year lows during 2025. While prices for the commodities that our customers 45 produce have stabilized in late 2025 and early 2026, there is risk of future volatility. The factors that could drive such volatility and underlying activity include expectations for global macroeconomic stability and growth, inflationary pressures, higher interest rates, economic growth (or contraction) 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 the Petroleum Exporting Countries Plus (OPEC+) to adjust oil production levels, geopolitical events such as the ongoing conflicts in Russia/Ukraine, Venezuela and the Middle East, U.S. oil production levels and regulatory implications on such prices. In Canada, recent tensions between the U.S Administration and Canadian leadership have driven an increase in political support to fast-track infrastructure projects which could include pipelines for LNG or oil, carbon capture installation for oil producing operations and mining for critical minerals. 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) First Quarter through February 26, 2026 $ 237.01 $ 103.07 $ 62.24 $ 47.18 12/31/2025 198.75 100.23 59.24 46.73 9/30/2025 183.06 96.97 65.06 52.48 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 3/31/2023 341.08 117.08 75.96 56.61 (1) Source: Hard coking coal 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 quarterly year-over-year declines in each quarter of 2025. China, Europe and Japan all experienced declines in steel production in 2025, while India and the U.S. continue to see consistent positive growth over the same period. Global tariff changes, recession fears and associated business uncertainty are weighing on current and short-term global steel production. Global steel production during 2025 decreased by 2% compared with 2024. Met coal prices have remained between $169 and $217 per tonne during 2025, since dropping below $200 per tonne in late 2024. Early in the fourth quarter of 2025 met coal prices remained between $187 and $200 per tonne and increased progressively in December to end 2025 at $216 per tonne. Despite weaker steel production in late 2025, the rally in prices in December 2025 is the result of limited short-term spot market supply. As of February 26, 2026, met coal spot prices were $235.45 per tonne. With the lower met coal price environment persisting into the early part of the fourth quarter of 2025, producers continued to re-evaluate their production levels and costs. In late September 2025, several large and mid-tier producers in Queensland, Australia reported making production cuts and workforce reductions in response to pressure on operating margins. While there has been an increase in prices in late 2025, with prospective met coal supply expected to enter the market from both Australia and the U.S. in 2026, downward pressure on prices towards $200 are forecast in early 2026. Such improvements in the supply and demand fundamentals for met coal may further be impacted by ongoing geopolitical tensions associated with global tariffs and trade agreements. Iron Ore. Iron ore prices declined to average $96.79 per tonne during 2025, down from the 2024 average of $103.77 per tonne, primarily driven by demand from steel producer restocking activity. Iron ore supply late in 2025 strengthened due to 46 favorable weather conditions in Brazil and is expected to strengthen further with additional supply coming to the market in early 2026. During the fourth quarter of 2025 prices remained buoyant between $99 and $106 despite weaker steel production and increasing market supply. As further supply continues to enter the market in 2026, downward pressure on prices is forecast. 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 and continuing through the fourth quarter of 2025, increasing production despite softer global demand for oil. The combined impact of these factors reduced WTI prices, which are down approximately 25% through the end of 2025 as compared to the end of 2024. Forecasts currently have oil prices averaging below $60.00 per barrel in 2026. In light of this macroeconomic backdrop, our Canadian oil sands customers are increasingly prioritizing capital discipline, pushing for lower operating costs and headcount reductions. 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 export capacity limitations to move Canadian heavy oil production to refineries, primarily along the U.S. Gulf Coast. As a result of the U.S. government’s recent takeover of the Venezuelan oil production, there is a new a concern that Venezuelan heavy crude may displace refinery demand for Canadian heavy crude on the U.S. Gulf Coast. WCS prices in the fourth quarter of 2025 averaged $46.73 per barrel compared to an average of $57.50 in the fourth quarter of 2024. The WCS Differential decreased from $12.92 per barrel at the end of the fourth quarter of 2024 to $12.50 at the end of the fourth quarter of 2025. Further, the U.S. administration implemented and amended several new tariffs during 2025. Implementation of tariffs on oil from Canada could have an 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 1,368 rooms in Australia’s Bowen Basin and the associated accommodation assets, land and customer contracts. See Note 19. Asset Acquisition to the notes to the consolidated financial statements in Item 8 of this annual 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 2025, concerns remain that inflationary pressures could return in the future. 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. Australia’s labor market remains historically tight, with unemployment holding just above 4% and job mobility (movement of workers between different employers or businesses) at its lowest in 30 years. A persistent overhang of vacancies continues to constrain recruitment, while government stimulus has disproportionately driven job growth in healthcare, aged care, education and public services. Despite easing inflation, regulated labor costs remain high, with the Fair Work Commission decisions pushing wage increases well above Consumer Price Index changes, and statutory increases in superannuation, workers’ compensation and payroll tax are further inflating total labor costs. For hospitality, this combination of scarce labor supply, competition from government-funded sectors and rising employment costs creates sustained pressure on staffing productivity and availability. 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. 47 United States Business. In the first quarter of 2023, we sold our accommodation assets in Louisiana, and in the second quarter of 2024, we sold the land at our Louisiana location. Our remaining U.S. business, which supported completion activity in the Bakken, was closed in the fourth quarter of 2024 due to low activity levels. 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 summarizes the fluctuations in the exchange rates between the U.S. dollar and each of the Australian dollar and the Canadian dollar: Year Ended December 31, 2025 2024 Change Percentage Average Australian dollar to U.S. dollar $0.645 $0.660 (0.015) (2.3)% Average Canadian dollar to U.S. dollar $0.716 $0.730 (0.015) (2.0)% As of December 31, 2025 2024 Change Percentage Australian dollar to U.S. dollar $0.667 $0.620 0.048 7.7% Canadian dollar to U.S. dollar $0.730 $0.695 0.035 5.0% 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, oil, iron ore and LNG, 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 2026 capital expenditures will be in the range of approximately $25 million to $30 million, of which $20 million is anticipated to relate to maintenance and $10 million related to growth and strategic initiatives, including investments in information technology infrastructure to support our business. This compares to 2025 capital expenditures of $20.2 million, of which $11.2 million is associated with maintenance and $9.0 million related to growth projects, including the reactivation of our Buffalo Lodge in Canada and Wi-Fi infrastructure improvements in Australia. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity. See “Liquidity and Capital Resources ” below for further discussion on 2026 and 2025 capital expenditures. 48 Results of Operations Unless otherwise indicated, discussion of results for the year ended December 31, 2025 is based on a comparison with the corresponding period of 2024. Results of Operations – Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Year Ended December 31, 2025 2024 Change ($ in thousands) Revenues Australia $ 460,295 $ 426,956 $ 33,339 Canada 178,554 245,087 (66,533) Other — 10,079 (10,079) Total revenues 638,849 682,122 (43,273) Costs and expenses Cost of sales and services Australia 339,457 315,374 24,083 Canada 147,991 207,135 (59,144) Other 313 10,158 (9,845) Total cost of sales and services 487,761 532,667 (44,906) Selling, general and administrative expenses 75,342 73,350 1,992 Depreciation and amortization expense 72,618 68,038 4,580 Impairment expense — 11,581 (11,581) Gain on sale of McClelland Lake Lodge assets, net — (5,744) 5,744 Other operating (income) expense (987) 898 (1,885) Total costs and expenses 634,734 680,790 (46,056) Operating income 4,115 1,332 2,783 Interest expense, net (11,254) (7,786) (3,468) Other income 683 517 166 Loss before income tax (6,456) (5,937) (519) Income tax expense (13,620) (12,492) (1,128) Net loss (20,076) (18,429) (1,647) Less: Net loss attributable to noncontrolling interest (5) (1,362) 1,357 Net loss attributable to Civeo Corporation $ (20,071) $ (17,067) $ (3,004) We reported net loss attributable to Civeo for 2025 of $20.1 million, or $1.59 per diluted share. As further discussed below, net loss included $5.5 million of shareholder activist related costs and $2.2 million of cost saving initiatives in Canada related to severance, two lodge closures and other real estate rationalization efforts. We reported net loss attributable to Civeo for 2024 of $17.1 million, or $1.19 per diluted share. As further discussed below, net loss included $5.7 million of net gains associated with the sale of McClelland Lake Lodge in Canada and a $11.6 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense. Revenues. Consolidated revenues decreased $43.3 million, or 6%, in 2025 compared to 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 beginning in the third quarter of 2024 as the Kitimat LNG facility was nearing completion and subsequently commenced operations in the second quarter of 2025, (iii) reduced food service and other services revenue in Canada as client maintenance work in 2024 did not recur to the same extent in 2025 and (iv) a weaker Australian and Canadian dollar relative to the U.S. dollar in 2025 compared to 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 Queensland. The assets from the Qantac Acquisition generated $20.2 million of revenues in 2025. See below for further discussion of segment results of operations. Cost of Sales and Services. Our consolidated cost of sales and services decreased $44.9 million, or 8.4%, in 2025 compared to 2024. This decrease was primarily due to (i) lower costs at various lodges in Canada due to reduced occupancy 49 levels, (ii) reduced costs at various lodges and reduced indirect costs as a result of various cost reduction measures in Canada implemented in late 2024 and early 2025, (iii) 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, (iv) reduced food service and other services costs in Canada as client maintenance work in 2024 did not recur to the same extent in 2025 and (v) a weaker Australian and Canadian dollar relative to the U.S. dollar in 2025 compared to 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 Queensland and associated overhead costs. See below for further discussion of segment results of operations. Selling, General and Administrative Expenses. SG&A expense increased $2.0 million, or 3%, in 2025 compared to 2024. This increase was primarily due to higher professional fees of $4.9 million due to shareholder activist related costs of $5.5 million in 2025 compared to 2024, partially offset by lower travel and entertainment costs of $1.1 million, down 38% year-of-year, lower office expenses of $1.1 million, lower incentive compensation cost of $0.9 million and a weaker Australian and Canadian dollar relative to the U.S. dollar in 2025 compared to 2024. Depreciation and Amortization Expense. Depreciation and amortization expense increased $4.6 million, or 7%, in 2025 compared to 2024. The increase was primarily due to additional property, plant and equipment acquired through the Qantac Acquisition and shortening the lives on certain assets in Canada, partially offset by a weaker Australian and Canadian dollar relative to the U.S. dollar in 2025 compared to 2024 and reduced depreciation expense resulting from impairments recorded in 2024. Impairment Expense. We recorded pre-tax impairment expense of $11.6 million in 2024 associated with long-lived assets in Australia and the U.S. See Note 4 - Impairment Charges to the notes to the consolidated financial statements included in Item 8 of this annual report for further discussion. Gain on Sale of McClelland Lake Lodge Assets, net. We recorded $5.7 million in net gains associated with the sale of the McClelland Lake Lodge in 2024. Operating Income. Operating income increased $2.8 million, or 209%, in 2025 compared to 2024 primarily due to higher activity levels in Australia in 2025 compared to 2024 and impairment expenses recorded in 2024. These items were partially offset by lower lodge occupancy in Canada, higher depreciation and amortization expense and higher SG&A expense in 2025 compared to 2024. In addition, 2024 included a net gain on sale of McClelland Lake Lodge assets. Interest Expense, net. Net interest expense increased $3.5 million, or 45%, in 2025 compared to 2024, primarily related to higher average debt levels, partially offset by lower interest rates on credit facility borrowings in 2025 compared to 2024. Income Tax Expense. Our income tax expense for 2025 totaled $13.6 million, or (211.0)% of pretax loss, compared to an expense of $12.5 million, or (210.4)% of pretax loss for 2024. Our effective tax rate for 2025 and 2024 was lower than the Canadian federal statutory rate of 15% primarily due to pre-tax losses in Canada and the U.S. with no corresponding tax benefit. Full valuation allowances are maintained against net deferred tax assets in both Canada and the U.S. In 2025, the tax benefit in Canada and the U.S. was offset by an increase to the valuation allowance of $10.6 million. Other Comprehensive Income (Loss). Other comprehensive income increased $37.8 million in 2025 compared to 2024 primarily as a result of foreign currency translation adjustments due to changes in the Australian and Canadian dollar exchange rates compared to the U.S. dollar. The Australian dollar exchange rate compared to the U.S. dollar increased 7.7% in 2025 compared to a 9.0% decrease in 2024. The Canadian dollar exchange rate compared to the U.S. dollar increased 5.0% in 2025 compared to an 8.1% decrease in 2024. 50 Segment Results of Operations – Australian Segment Year Ended December 31, 2025 2024 Change Revenues ($ in thousands) Accommodation and associated services revenue (1) $ 211,761 $ 196,684 $ 15,077 Integrated services and other services revenue (2) 248,534 230,272 18,262 Total revenues $ 460,295 $ 426,956 $ 33,339 Cost of sales ($ in thousands) Accommodation and associated services cost $ 103,275 $ 94,344 $ 8,931 Integrated services and other services cost 222,259 208,627 13,632 Indirect other cost 13,923 12,403 1,520 Total cost of sales and services $ 339,457 $ 315,374 $ 24,083 Gross margin as a % of revenues 26.3 % 26.1 % 0.02 % Average daily rate for owned villages (3) $ 76 $ 78 $ (2) Total billed rooms for owned villages (4) 2,783,893 2,524,108 259,785 Australian dollar to U.S. dollar $ 0.645 $ 0.660 $ (0.015) (1) Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented. (2) Includes revenues related to food service and other services, including facilities management, for the periods presented. (3) Average daily rate is based on billed rooms and accommodation revenue in the Company's owned villages. (4) Billed rooms represents total billed days for owned assets for the periods presented. Our Australian segment reported revenues in 2025 that were $33.3 million, or 8%, higher than in 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 2.3% in 2025 compared to 2024 resulted in a $10.5 million period-over-period decrease in revenues. On a constant currency basis, the Australian segment experienced a 10.3% 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 and Queensland. Our Australian segment cost of sales and services increased $24.1 million, or 8%, in 2025 compared to 2024. The weakening of the average exchange rate for the Australian dollar relative to the U.S. dollar by 2.3% in 2025 compared to 2024 resulted in a $7.7 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Australian exchange rate, the increase in cost of sales and services in the Australian segment was largely driven by the Qantac Acquisition and new business in our integrated services villages in Western Australia and Queensland and the associated overhead costs. Our Australian segment gross margin as a percentage of revenues increased from 26.1% in 2024 to 26.3% in 2025. This was primarily driven by increased relative contribution from our accommodation business associated with the Qantac Acquisition and improved profitability across our integrated services villages in 2025. Our accommodation business generates higher gross margins than our integrated services business which has a service-only business model. 51 Segment Results of Operations – Canadian Segment Year Ended December 31, 2025 2024 Change Revenues ($ in thousands) Accommodation and associated services revenue (1) $ 150,651 $ 214,774 $ (64,123) Mobile facility rental and associated services revenue (2) 1,587 1,523 64 Integrated services and other services revenue (3) 26,316 28,790 (2,474) Total revenues $ 178,554 $ 245,087 $ (66,533) Cost of sales and services ($ in thousands) Accommodation and associated services cost $ 114,964 $ 164,089 $ (49,125) Mobile facility rental and associated services cost 345 4,940 (4,595) Integrated services and other services cost 24,489 27,201 (2,712) Indirect other cost 8,193 10,905 (2,712) Total cost of sales and services $ 147,991 $ 207,135 $ (59,144) Gross margin as a % of revenues 17.1 % 15.5 % 1.6 % Average daily rate for owned lodges (4) $ 97 $ 97 $ — Total billed rooms for owned lodges (5) 1,550,435 2,205,700 (655,265) Average Canadian dollar to U.S. dollar $ 0.716 $ 0.730 $ (0.015) (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 service, laundry and water and wastewater treatment services for the periods presented. (4) Average daily rate is based on billed rooms and accommodation revenue in the Company's owned lodges. (5) Billed rooms represents total billed days for owned assets for the periods presented. Our Canadian segment reported revenues in 2025 that were $66.5 million, or 27%, lower than 2024. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 2.0% in 2025 compared to 2024 resulted in a $3.6 million period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rate, the revenue decrease was driven by (i) lower billed rooms at our oil sands lodges, down 29% year-over-year, as producers in the region remain focused on reducing operating costs, (ii) reduced occupancy at our Sitka Lodge beginning in the third quarter of 2024 as the Kitimat LNG facility was nearing completion and subsequently commenced operations in the second quarter of 2025 and (iii) lower food service and other services revenue as client maintenance work in 2024 did not recur to the same extent in 2025. Our Canadian segment cost of sales and services decreased $59.1 million, or 29%, in 2025 compared to 2024. The weakening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 2.0% in 2025 compared to 2024 resulted in a $3.1 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Canadian exchange rate, the decrease in cost of sales and services was largely driven by (i) lower costs at various lodges due to reduced occupancy levels, (ii) reduced costs at various lodges and reduced indirect costs as a result of various cost reduction measures implemented in late 2024 and early 2025, (iii) 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 (iv) reduced food service and other services costs as client maintenance work in 2024 did not recur to the same extent in 2025. Our Canadian segment gross margin as a percentage of revenues increased from 15.5% in 2024 to 17.1% in 2025. This was primarily driven by final costs for pipeline projects in 2024 that did not recur in 2025 and various cost reduction measures implemented in late 2024 and early 2025 impacting indirect costs. 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 52 our Credit Agreement and proceeds from equity issuances. In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions or refinance debt. The following summarizes our material future cash requirements at December 31, 2025, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years (in thousands): Total Less Than 1 Year 1 – 3 Years 3 – 5 Years More Than 5 Years Debt maturities $ 182,842 $ — $ 182,842 $ — $ — Interest payments (1) 28,055 10,733 17,322 — — Purchase obligations 9,010 9,010 — — — Non-cancelable lease obligations 20,923 5,531 8,894 4,476 2,022 Asset retirement obligations – expected cash payments 64,885 2,291 3,126 3,101 56,367 Total contractual cash obligations $ 305,715 $ 27,565 $ 212,184 $ 7,577 $ 58,389 (1) Interest payments due under the Credit Agreement, which matures on August 8, 2028; based on an interest rate of 5.9% for Canadian revolver borrowings. Our debt obligations at December 31, 2025 are reflected in our consolidated balance sheet, which is a part of our consolidated financial statements in Item 8 of this annual report. We have not entered into any material leases subsequent to December 31, 2025. The following summarizes our consolidated liquidity position as of December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Lender commitments $ 265,000 $ 245,000 Reductions in availability (1) (5,344) (3,635) Borrowings against revolving credit capacity (182,842) (43,299) Outstanding letters of credit (866) (1,100) Unused availability 75,948 196,966 Cash and cash equivalents 14,439 5,204 Total available liquidity $ 90,387 $ 202,170 (1) As of December 31, 2025 and 2024, $5.3 million and $3.6 million, respectively, of our borrowing capacity under the Credit Agreement could not be utilized in order to maintain compliance with the maximum leverage ratio financial covenant in the Credit Agreement. Cash totaling $22.3 million was provided by operations during 2025 compared to $83.5 million provided by operations during 2024. During 2025 and 2024, $28.9 million was used in working capital and $31.8 million was provided by working capital, respectively. The year-over-year increase in cash used in working capital in 2025 compared to 2024 is largely due to higher cash taxes paid in Australia in 2025 compared to 2024 and the collection of receivables in Canada related to the completion of mobile asset pipeline projects 2024 that did not recur in 2025. These items were partially offset by a decrease in cash used for accounts payable and accrued liabilities during 2025 compared to 2024. Cash used in investing activities during 2025 totaled $90.1 million compared to cash used in investing activities during 2024 of $14.9 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, partially offset by lower capital expenditures. We received net proceeds from the sale of property, plant and equipment of $2.2 million during 2025 related to the sale of accommodation assets in Canada compared to $11.0 million during 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 $20.2 million and $26.1 million during 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 2026 to be in the range of $25 million to $30 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 2026 depends on industry 53 conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of 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. The table below delineates historical capital expenditures split between expansionary and maintenance spending on our lodges and villages, mobile asset spending and other capital expenditures. We classify capital expenditures for the development of rooms and central facilities at our lodges and villages as expansion capital expenditures. Other capital expenditures below relate to routine capital spending for support equipment, upgrades to infrastructure at our lodge and village properties and spending related to our manufacturing facilities, among other items. Based on management’s judgment of capital spending classifications, we believe the following represents the components of capital expenditures and the associated percentage of revenue for the years ended December 31, 2025 and 2024 (in millions): Year Ended December 31, 2025 2024 Expansion % Rev Maint % Rev Total % Rev Expansion % Rev Maint % Rev Total % Rev Lodge/village $ 5.2 0.8 % $ 9.4 1.5 % $ 14.6 2.3 % $ 7.3 1.1 % $ 13.2 1.9 % $ 20.5 3.0 % Other 3.8 0.6 1.8 0.3 5.6 0.9 3.2 0.5 2.4 0.4 5.6 0.8 Total $ 9.0 1.4 % $ 11.2 1.8 % $ 20.2 3.2 % $ 10.5 1.5 % $ 15.6 2.3 % $ 26.1 3.8 % Expansion lodge and village spending in 2025 was primarily related to final costs associated with the reactivation of our Buffalo Lodge in Canada, as well as purchases supporting new contracts at our integrated services business and the Qantac Acquisition in Australia. Expansion lodge and village spending in 2024 was primarily related to costs associated with the customer-supported reactivation of our Buffalo Lodge in Canada and customer-funded infrastructure upgrades at three Australian villages. Maintenance lodge and village spending in 2025 and 2024 was primarily associated with routine maintenance projects at our major properties. Other maintenance and expansion spending in 2025 was primarily related to Wi-Fi infrastructure at certain Australian villages, miscellaneous equipment and supplies to support the day-to-day operations at our accommodation facilities and information technology infrastructure to support our business. Other maintenance and expansion spending in 2024 was primarily related to miscellaneous equipment and supplies to support the day-to-day operations at our accommodation and laundry facilities, purchases to support new contacts at our integrated services business in Australia and information technology infrastructure to support our business. Cash provided by financing activities during 2025 of $74.7 million was primarily due to net borrowings under our revolving credit facilities of $132.8 million primarily to fund the Qantac Acquisition and share repurchases, partially offset by (i) repurchases of our common shares of $53.6 million, (ii) dividend payments of $3.4 million, (iii) payments to settle tax obligations of $0.6 million and (iv) debt issuance costs of $0.4 million. Cash used in financing activities during 2024 of $65.2 million was primarily due to (i) repurchases of our common shares of $29.6 million, (ii) net repayments under our revolving credit facilities of $17.1 million, (iii) dividend payments of $14.4 million, (iv) debt issuance costs of $3.0 million and (v) payments to settle tax obligations of $1.1 million. The following summarizes the changes in debt outstanding during 2025 (in thousands): Total Balance as of December 31, 2024 $ 43,299 Borrowings under revolving credit facilities 330,131 Repayments of borrowings under revolving credit facilities (197,295) Translation 6,707 Balance at December 31, 2025 $ 182,842 54 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, or 1.4 million common shares, and in April 2025, our Board authorized a further increase to repurchase up to 20.0% 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 beginning in the third quarter of 2023 through the first quarter of 2025. Dividend payments of $3.4 million, $14.3 million and $7.4 million were made to shareholders in 2025, 2024 and 2023, respectively. These dividends are eligible dividends pursuant to the Income Tax Act (Canada). See Note 15 – Share Repurchase Programs and Dividends to the notes to the consolidated financial statements included in Item 8 of this annual report for further discussion. Credit Agreement As of December 31, 2025, the Credit Agreement provided for: (i) 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 December 31, 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$1.4 million under the Australian facility. See Note 10 - Debt to the notes to the consolidated financial statements in Item 8 of this annual report for the terms of the Credit Agreement and further discussion regarding our debt. 55 Dividends In April 2025, our Board suspended 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 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 and Estimates Our consolidated financial statements in Item 8 of this annual report have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which require that management make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position. The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires management’s most subjective judgments in making estimates about the effect of matters that are inherently uncertain. We describe our significant accounting policies more fully in Note 2 - Summary of Significant Accounting Policies to the notes to consolidated financial statements in Item 8 of this annual report. Impairment of Definite-Lived Tangible and Intangible Assets The recoverability of the carrying values of tangible and intangible assets is assessed at an asset group level which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Whenever, in management’s judgment, we review our assets for impairment in step one when events or changes in circumstances indicate that the carrying value of such asset groups may not be recoverable based on estimated future cash flows, an asset impairment evaluation is performed. Indicators of impairment might include persistent and sustained negative economic trends affecting the markets we serve, recurring cash flow losses or significantly lowered expectations of future cash flows expected to be generated by our assets. As part of the initial step, we also reevaluate the remaining useful lives and salvage values of our assets when indicators of impairment exist. Identification of Asset Groups – The following summarizes the asset groups that we have identified in each of our reporting segments. Our Canada segment consists of numerous lodges, as well as our mobile assets. These properties are grouped in the following asset groups: • Core Region ◦ Fort McMurray Village – North Athabasca ◦ Beaver River Lodge – North Athabasca ◦ Athabasca Lodge – North Athabasca ◦ Hudson and Borealis Lodges – North Athabasca • Wapasu Creek Lodge – North Athabasca • Grey Wolf Lodge - North Athabasca • Conklin Lodge – South Athabasca • Anzac Lodge – South Athabasca • Red Earth Lodge - South Athabasca • Wabasca Lodge - South Athabasca • Sitka Lodge – Kitimat, British Columbia • Geetla camp – British Columbia • Antler River camp – Manitoba 56 • Red Earth camp – Alberta • Christina Lake camp – Alberta • Mobile assets • Various land holdings in British Columbia purchased in anticipation of potential LNG related projects In general, the lodges are operated on a lodge-by-lodge basis. However, for one set of lodges (the Core Region, including Beaver River, Athabasca, Hudson and Borealis Lodges and Fort McMurray Village), there are no identifiable cash flows largely independent of the cash flows of other assets and liabilities for such lodges, and therefore, such lodges are combined into a single asset group. Factors such as proximity to each other, commonality of customers, common monitoring by management and operating decisions being made to optimize these lodges as a group result in these lodges being treated as a single asset group for the purposes of our impairment assessments. Our Australia segment consists of various villages in several regions within the country, as well as our integrated services assets and land banked assets. These properties are grouped in the following asset groups: • Karratha – Pilbara Region, Western Australia • Integrated services – Assets held on client owned sites in Western Australia and South Australia • Gunnedah Basin ◦ Narrabri – Gunnedah Basin, New South Wales ◦ Boggabri – Gunnedah Basin, New South Wales • Bowen Basin ◦ Moranbah – Bowen Basin, Queensland ◦ Dysart – Bowen Basin, Queensland ◦ Nebo – Bowen Basin, Queensland ◦ Coppabella – Bowen Basin, Queensland ◦ Middlemount – Bowen Basin, Queensland ◦ Rosewood – Bowen Basin, Queensland ◦ Waratah – Bowen Basin, Queensland ◦ Vitrinite – Bowen Basin, Queensland ◦ Acacia – Bowen Basin, Queensland • Various non-operational sites acquired as part of Civeo’s land-banking strategy In general, the villages are operated on a village-by-village basis, except for the villages located in the Bowen Basin (Moranbah, Dysart, Nebo, Coppabella, Middlemount, Rosewood, Waratah, Vitrinite and Acacia) and the Gunnedah Basin (Narrabri and Boggabri). The villages in the Bowen and Gunnedah Basins contain significant levels of interdependency that allow these assets to be combined into cash generating units (asset groups). Factors such as commonality of customers, location, resource basins served and common monitoring by management result in the Bowen and Gunnedah Basins to be treated as single asset groups for the purposes of our impairment assessments. Integrated services assets provide catering and managed services to the mining industry in Western Australia and South Australia. U.S. consists of a lodge, land and a wastewater treatment plant (WWTP). These properties are grouped in the following asset groups: • Killdeer Lodge – North Dakota • Killdeer WWTP – this asset group represents a WWTP in Killdeer, North Dakota, which was constructed in early 2014 Recoverability Assessment – In performing an impairment analysis, the second step is to compare each asset group’s carrying value to estimates of undiscounted future direct cash flows associated with the asset group over the remaining useful life of the asset group's primary asset. We use a variety of underlying assumptions to estimate these future cash flows, including assumptions relating to future economic market conditions, rates, occupancy levels, costs and expenses and capital expenditures. The estimates are consistent with those used for purposes of our goodwill impairment test. 57 Fair Value Determination – If, based on the assessment, the carrying values of any of our asset groups are determined to not be recoverable as a result of the undiscounted future cash flows not exceeding the net book value of the asset group, we proceed to the third step. In this step, we compare the fair value of the respective asset group to its carrying value. Our estimate of the fair value requires us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future circumstances, such as industry and/or local market conditions that might directly impact each of the asset groups’ operations in the future, and are therefore uncertain. In some cases our estimate of fair value is based on appraisals from third parties. Our industry is cyclical and our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows and our determination of whether a decline in value of our investment has occurred, can have a significant impact on the carrying value of these assets and, in periods of prolonged down cycles, may result in impairment losses. If this assessment indicates that the carrying values will not be recoverable, an impairment loss is recognized equal to the excess of the carrying value over the fair value of the asset group. The fair value of the asset group is based on prices of similar assets, if available, or discounted cash flows. In estimating future cash flows, we make numerous assumptions with respect to future circumstances that might directly impact each of the asset groups’ operations in the future and are therefore uncertain. These assumptions with respect to future circumstances include future oil and coal prices, anticipated customer spending, and industry and/or local market conditions. These assumptions represent our best judgment based on the current facts and circumstances. However, different assumptions could result in a determination that the carrying values of additional asset groups are no longer recoverable based on estimated future cash flows. Our estimate of fair value is primarily calculated using the Income Approach, which derives a present value of the asset group based on the asset groups’ estimated future cash flows. We discounted our estimated future cash flows using a long-term weighted average cost of capital based on our estimate of investment returns required by a market participant. See Note 4 – Impairment Charges to the notes to consolidated financial statements in Item 8 of this annual report for further discussion of impairments of definite-lived tangible and intangible assets recorded in the years ended December 31, 2025, 2024 and 2023. Revenue and Cost Recognition We generally recognize accommodation, mobile facility rental, food service and other services revenues over time as our customers simultaneously receive and consume benefits as we serve our customers because of continuous transfer of control to the customer. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We transfer control and recognize a sale based on a periodic (usually daily) room rate each night when a customer stays in our rooms or when the services are rendered. In some contracts, rates may vary over the contract term. In these cases, revenue may be deferred and recognized on a straight-line basis over the contract term. Because of control transferring over time, the majority of our revenue is recognized based on the extent of progress towards completion of the performance obligation. At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer our customers a good or service (or bundle of goods or services) that is distinct. Our customers typically contract for hospitality services under take-or-pay contracts with terms that range from several months to multiple years. Our contract terms generally provide a rental rate for a reserved room and an occupied room rate that compensates us for services provided. We typically contract our facilities to our customers on a fee per day basis where the goods and services promised include lodging and meals. To identify the performance obligations, we consider all of the goods and services promised in the context of the contract and the pattern of transfer to our customers. Revenues exclude taxes assessed based on revenues such as sales or value added taxes. Cost of services includes labor, food, utility costs, cleaning supplies, and other costs of operating our accommodations assets. Cost of goods sold includes all direct material and labor costs and those costs related to contract performance, such as indirect labor, supplies, tools and repairs. Selling, general and administrative costs are charged to expense as incurred. Income Taxes We follow the liability method of accounting for income taxes in accordance with current accounting standards regarding the accounting for income taxes. Under this method, deferred income taxes are recorded based upon the differences between the 58 financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect at the time the underlying assets or liabilities are recovered or settled. When our earnings from foreign subsidiaries are considered to be indefinitely reinvested, no provision for Canadian income taxes is made for these earnings. If any of the subsidiaries have a distribution of earnings in the form of dividends or otherwise, we could be subject to both Canadian income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. We record a valuation allowance in each reporting period when our management believes that it is more likely than not that any recorded deferred tax asset will not be realized. Our management will continue to evaluate the appropriateness of the valuation allowance in the future, based upon our current and historical operating results and other potential sources of future taxable income. See Note 13 – Income Taxes to the notes to consolidated financial statements in Item 8 of this annual report for further discussion. In accounting for income taxes, we are required to estimate a liability for future income taxes for any uncertainty for potential income tax exposures. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in Canada and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due, including an accrual of interest and penalties, if applicable, related to the unrecognized tax benefits. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be. Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies – Recent Accounting Pronouncements to the notes to consolidated financial statements in Item 8 of this annual report for further discussion.