Civeo Corporation — 2020 Form 10-K Summary
Business and reporting period. Civeo provides workforce lodging, catering and related hospitality services to natural-resource customers in Canada, Australia and the U.S. This annual report covers the fiscal year ended December 31, 2020; the filing also reports unaudited fourth-quarter results. Amounts are U.S. dollars unless noted. Common-share and per-share figures reflect the 1-for-12 reverse split effective November 19, 2020.
Financial performance
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $529.7 million | $527.6 million |
| Operating loss | $147.2 million | $49.1 million |
| Net loss attributable to Civeo common shareholders | $136.1 million; $9.64 per diluted share | $60.3 million; $4.33 per diluted share |
| Net cash provided by operating activities | $117.4 million | $74.5 million |
| Capital expenditures | $10.1 million | $29.8 million |
| Debt outstanding at year-end, before unamortized issuance costs | $251.1 million | $359.1 million |
Fourth quarter, unaudited: Revenue was $133.4 million, gross profit was $35.2 million, and net loss attributable to Civeo was $2.3 million. In Q4 2019, those figures were $148.7 million, $46.2 million and a $32.1 million net loss, respectively. The filing does not provide a clear Q4 cash-flow figure.
Revenue and margins. Annual revenue was essentially flat: Australian revenue rose $78.4 million, primarily reflecting a full year of Action integrated-services operations and stronger Bowen Basin occupancy, while Canadian revenue fell $56.0 million and U.S. revenue fell $20.3 million. Segment gross margins were 22.4% in Canada (26.4% in 2019), 38.3% in Australia (42.9%) and negative 10.0% in the U.S. (positive 16.8%). Lower occupancy and COVID-related costs pressured Canadian results; Australia’s margin mix shifted toward lower-margin integrated services; and weak U.S. activity reduced operating efficiency.
Impairments and other notable items. The $147.2 million operating loss included $144.1 million of impairment expense: $93.6 million of Canadian goodwill and $50.5 million of Canadian and U.S. long-lived assets. Other income included $13.0 million of Canada Emergency Wage Subsidy proceeds and $4.7 million from settling a Noralta acquisition-related claim. Interest expense declined to $16.7 million from $27.4 million.
Liquidity and capital structure. Year-end cash was $6.2 million and unused revolving capacity was $99.3 million, for reported total available liquidity of $105.4 million. The amended secured credit agreement matures May 30, 2023; Civeo reported compliance with its financial covenants at year-end. It had $251.1 million of floating-rate debt; management estimated a 100-basis-point rate increase would add about $2.5 million in annual interest expense. Common-share cash dividends are not currently paid. Preferred shares carry a 2% annual dividend, which Civeo had paid in kind.
Outlook, commentary and risks
- Management expects 2021 capital expenditures of approximately $20–25 million, excluding acquisitions and uncommitted growth projects. It expects cash on hand and operating cash flow to meet anticipated liquidity needs over the coming 12 months, while noting plans may change with market conditions.
- COVID-19, the oil-price shock and reduced customer activity harmed Canadian oil-sands and U.S. results. Management reported Australian occupancy had not materially declined due to COVID-19 or the China-Australia trade dispute; it anticipated support for several iron-ore growth projects in Western Australia in 2021, while major Australian met-coal expansions appeared less likely in the near term.
- Contracted Coastal GasLink and Sitka Lodge work was expected to run into early 2022, but timing and revenue remained exposed to project delays and blockades. Civeo planned to complete its U.S. mobile-asset exit from the Bakken and reduction in the Rockies during the first half of 2021.
- Principal risks include commodity-price and customer-spending volatility, COVID-19 effects, customer concentration and contract renewals, regional concentration, debt and covenant constraints, foreign-exchange movements, impairment risk, weather and environmental regulation. The Australian coal trade dispute and Canadian oil takeaway capacity and policy changes are additional demand risks.
- The company recorded $15.0 million of balance-sheet asset-retirement obligations; estimated expected future cash payments totaled $79.8 million, mostly more than five years out. Management said pending litigation was not expected to materially affect financial position, results or liquidity, while acknowledging outcomes are uncertain.
Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified long-lived-asset impairment valuation and asset-retirement-obligation estimates as critical audit matters.
Key facts for investors to verify
- How occupancy, rates and customer commitments develop in Canadian oil sands, Australian villages and U.S. operations, and whether recovery supports asset values.
- The assumptions behind the $144.1 million impairment charge and potential for further impairments, particularly given the sensitivity to occupancy, rates, margins and discount rates.
- Cash-flow durability and liquidity headroom relative to debt maturities, floating-rate exposure and credit-agreement covenants.
- Execution and timing of Coastal GasLink/Sitka commitments, 2021 capital spending and U.S. mobile-asset repositioning.
- Customer concentration, contract renewal exposure, the Australian coal trade dispute, and the timing and cost of asset-retirement obligations.